"We don't pay that anymore": How AI is tipping the balance of power between law firms and legal departments

The pressure is rising - and comes from within

What was quietly foreshadowed by a few legal tech start-ups is now becoming a real turning point: Large companies are increasingly using artificial intelligence - directly in their legal departments. The tenor at Legal Tech Day 2025, where lawyers from Coca Cola, Haribo, Flix and Hugo Boss spoke plainly, was clear: law firms need to dress warmly.

While lawyers in dark suits used to present routine clauses at expensive hourly rates, chatbots, contract generators and AI-supported analysis tools are now taking over - directly within the company. Frustration over exorbitant costs and non-transparent services is openly breaking out. The new motto: "Either you do it cheaper - or we'll do it ourselves."

The role of in-house counsel is changing radically

AI has long since ceased to be an abstract gimmick. It is part of everyday life - even in law. Legal departments use AI tools to check contracts, create drafts and assess legal risks. This is also changing the way in-house lawyers see themselves: they are no longer just legal controllers, but strategic advisors with IT expertise.

Lorenz Erik Wittjen (Flix) says openly: "Legal knowledge is no longer the core. It's about judgment and strategy." Those who no longer write every paragraph of a 20-page contract themselves have more time to think about the deal as a whole.

This also means that traditional entry-level jobs, in which young lawyers could work their way up with standard contracts and clause comparisons, are increasingly disappearing. Nevertheless, the development is not only seen as negative - with AI, a company can grow faster and even create new jobs, says Haribo lawyer Sebastian Altmann.

The message to law firms is clear: Don't play along? Get kicked out.

One example from Hugo Boss was particularly impressive: a law firm charged 60,000 euros for an audit that involved share purchase programs for employees - an issue that is regularly reviewed. The company's response: we can do this ourselves more cheaply with AI. The message: those who still bill for routine issues as they used to will be replaced.

Silke Engel (Coca Cola) also called for more honesty in billing: What exactly are we paying for here? Law firms should clearly disclose how much time, personnel and perhaps even AI was used for a mandate. "Strategic advice? Sure. But when it comes to routine work, we want cost transparency and efficiency."

This means that the value contribution of external law firms is shifting massively - away from mass legal work towards genuine strategic support, especially where specific know-how or international experience is required.

Legal profession also under pressure from AI

It was only a matter of time before companies said: "Why should we pay you for something that a tool can do in seconds?" For far too long, the market for legal advice has relied on supposed exclusivity - with lots of paper, long footnotes and calculated uncertainties. But AI is challenging this system - with speed, efficiency and transparency.

Legal work will not disappear, but it will change radically. Only those who abandon the idea that every legal act is a tailor-made one-off will still be needed in the future. The good ones - the strategic thinkers, the digitally savvy ones who communicate with clients on an equal footing - will be more important than ever.