Natalia Chumak discusses whether the UK is leading the way in creating a pro-innovation business environment and legal sector in The Law Society Gazette

The UK is currently the third largest AI market in the world. The UK Government admits that AI could be its single biggest lever to deliver its five missions under its Plan for Change, especially its pledge to kickstart broad-based economic growth. For legal professionals, it is crucial to keep an eye on the steps public bodies are taking to support business growth in the UK.

Safety is central to the success of implementing AI systems, and the UK is at the forefront of AI safety and cyber security initiatives.

In April 2023 the UK was the first country to establish an AI safety taskforce, the AI Safety Institute (“AISI”). This initiative gained significant momentum when then-Prime Minister Rishi Sunak secured commitments from OpenAI, DeepMind and Anthropic to provide pre-release access to their frontier AI models for safety evaluation. There are now similar organisations emerging in other countries across the globe.

In March 2025, the UK launched another world-first initiative, the Challenge Fund, led by the AISI. Under this initiative, researchers who cover AI security threats can apply for funding of up to GBP 200,000 per project to address critical AI security challenges, primarily cyber-attacks and AI misuse. The total funding pool is GBP 8.5m.  By tackling security risks head on, the government aims to boost public trust in AI, helping to remove barriers for those looking to adopt the technology to drive forward growth.

The Challenge Fund initiative is consistent with the objectives of the AI Opportunities Action Plan (“Plan”), the UK’s national AI plan, which was published in January 2025 and which is described by PM Sir Keir Starmer as ‘a plan to make our country an AI superpower.’ The UK is among 34 countries which have a national AI plan. By the Government’s own admission, the Plan is ambitious. Cloaked in political language, the Plan includes goals to increase investment in world-class computing, data infrastructure and talent; cross-adoption of AI between the public and private sectors; encouraging the growth of UK national AI businesses – the UK must be an AI maker, not an AI taker. The Plan includes specific targets, but there is no explanation how those targets have been arrived at.

The UK is also one of the co-founders of the International Coalition on Cybersecurity Workforces launched in January 2025 and it launched a new AI Code of Practice (the “Code”) in January to support directors and board members of UK businesses in overseeing cyber risk management.

The Government labels the Code as a “World-leading AI cyber security standard” and claims that it will equip organisations with “the tools they need to thrive in the age of AI”. Alongside the Code, there is also a Cyber Security and Resilience Draft Bill which is currently under consideration in the Parliament.

The UK legal services industry is a substantial contributor to the economy, with direct and indirect contributions amounting to GBP 74.4 billion in 2023. Promoting innovation specifically in the legal industry is, therefore, part of the UK Government’s plan for economic growth. The UK LawTech initiative – funded by the Ministry of Justice – is dedicated to driving digital innovation, including AI, in the legal sector.

The Government’s objective to attract AI investment is also reflected in its approach towards AI regulation. The Government has consistently resisted statutory AI regulation, instead favouring an adaptable and principles-based approach. This position mirrors the US’s approach and is in stark contrast to the EU’s approach where its AI Act has established a comprehensive regulatory regime, imposing strict legal obligations on AI developers and users.

However, the reintroduction of the Artificial Intelligence (Regulation) Bill [HL] (2025) in March, after it failed to progress into law before the dissolution of Parliament ahead of the last general election, is an important development. Whilst the AI Bill is a Private Member’s Bill, i.e. it was introduced by an individual peer rather than the government, it should not be dismissed as being bound to fail. It proposes a statutory AI authority and codified principles which, if adopted, will be a significant change to the current voluntary and sector-specific approach.

Against this backdrop of public sector support for AI development, how does the legal sector respond to the opportunities and challenges presented by the rapid development of AI tools?

The pace of integrating AI technologies in the legal sector is inevitably increasing. For commercial disputes, there is a range of tasks which AI tools can assist with, such as research, drafting, summarising and transcribing. If used correctly, AI will enhance efficiency.  There is ongoing debate about the extent to which AI will change the long-established business model of providing legal services in the UK.

The increased integration of AI in litigation is reflected in the evolution of the AI Guidance for the judiciary, which was originally published in December 2023 and revised last month. The revisions mainly comprise the introduction of additional AI-related terminology and the introduction of Microsoft’s Copilot Chat, a secure AI tool available to judges through eJudiciary.

In international arbitration, there is evidence that the AI-related soft law issued by arbitral institutions is starting to evolve from the principle-based approach (such as in AI Guidelines published by the Silicon Valley Arbitration and Mediation Center and the Stockholm Chamber of Commerce in 2024) to more detailed guidance (such as in AI Guidelines published by the Chartered Institute of Arbitrators in March 2025). Broadly speaking, the guidelines establish a framework that supports informed decision-making and assist practical efforts to mitigate some of the risk to the integrity of the arbitration process, parties’ procedural rights, and the enforceability of any ensuing award or settlement agreement. More transparent and collaborative thought leadership across the industry is needed to help develop market-wide understanding and hopefully consensus on what challenges and opportunities lie ahead for practitioners.

Natalia Chumak, partner, Signature Litigation. Natalia’s current role is centred on strategic development of the firm’s international arbitration practice across all its offices, as well as on strategic legal innovations including AI.