Europe has the potential to take the lead in legal AI by establishing stricter regulations than other regions.

      Do you recall the movie Dodgeball? That ludicrous moment when the coach makes his team dash across a busy highway? The reasoning: “If you can dodge traffic, you can dodge a ball.”

      Europe’s strategy regarding AI seems somewhat analogous: if you can navigate our complex array of regulations, you can thrive anywhere.

      Discussions with European firms about AI seldom start with “What is its potential?” Instead, they typically begin with a sigh and the question, “Are we allowed to use this?”

      This mentality can stifle creativity in many sectors, but legal professionals excel in environments filled with regulations. Europe’s regulatory challenges are positioned to become its competitive advantage.

      The irony: red tape as a source of growth.

      The intricate regulations surrounding AI haven't hindered advancements in legal technology. In 2024 alone, AI law tech startups garnered nearly $2.2 billion, representing about 79% of all investment in legal-related startups.

      Conventional wisdom suggests that regulations stifle innovation. However, in European legal AI, the situation is reversed, partly because the industry is already steeped in compliance and partly due to the reluctance of non-European entities to engage with this intricacy.

      Whether one appreciates it or not, the General Data Protection Regulation (GDPR) has emerged as the unofficial model for privacy legislation, influencing European laws, business practices, and digital trade standards since 2018. It has shaped data privacy regulations beyond Europe, impacting Brazil’s LGPD and China’s PIPL, as well as frameworks in Japan and India, and even legislation in US states like California, Virginia, and Colorado. As the EU continues to set global standards, legal AI systems developed in Europe will appear more “export-ready.”

      In this light, regulation becomes the product, as European attorneys market their expertise in the very rules that others find burdensome. If your AI solutions can review contracts, conduct due diligence, or pinpoint data protection issues under GDPR, they can be applicable anywhere. Legal professional standards, confidentiality, and privilege are thus safeguarded by the regulatory framework.

      Beyond LLMs

      The market is also evolving. A 2025 Axiom report reveals that 66% of law organizations are in the “developing” phase of AI readiness: teams are trying proofs of concept while increasingly adopting AI. Only 21% report being in a “mature” phase, actively applying AI in client work and significantly expanding its use.

      Firms are starting to understand that general-purpose LLMs are insufficient for achieving AI maturity; products customized for specific, established internal processes are vital. While generic LLMs work well for straightforward tasks like personal organization and basic fact-finding, they falter under the pressures of compliance when navigating intricate workflows while ensuring complete data privacy. How can lawyers justify their billable hours, which are the financial foundation of firms and can range from $500 to $1,500 per hour, if they rely on ineffective generic LLMs?

      The legal sector thrives on carefully curated datasets, strict parameters, and meticulous accuracy. Only rigorous, “compliance-by-design” legal AI, shaped by stringent governance, can operate effectively. Regulatory requirements ensure that companies do not cut corners, even if those shortcuts seem as simple as walking in a straight line.

      Hardened technology

      So, what advantages does Europe hold over its competitors in developing legal AI?

      First: there is trust in the technology because it is constructed within a vast framework defined by over 6,000 pages of legislation. Beyond the AI Act, the EU's General Product Safety Regulation (GPSR), implemented in December 2024, has extended its reach to various AI-powered products, despite focusing mainly on physical goods. Ensuring user safety is a primary concern in the EU.

      While the high standards may sound commendable, they are upheld because EU laws and regulations often deter unserious startups (and even some reputable ones), as well as malicious actors in the field. Clients who prioritize compliance are willing to pay a premium for tools that carry the “We survived Brussels!” endorsement.

      Second: the EU’s AI Act compels businesses to focus on their competitive advantages right from the outset, making them robustly fortified. The Act seeks to establish regulations, identify high-risk AI systems, and create specific provisions for general-purpose AI models. It distinguishes between AI systems that simply assist lawyers (considered low risk) and those that influence the administration of justice (deemed higher risk).

      Third: while data regulations can be a daily headache for AI engineers, they transform privacy into a selling point. The GDPR’s “privacy by design” principle may intimidate companies outside the EU. However, businesses within the EU have typically navigated this complexity by the time their products reach the marketplace.

      Europe’s regulation-first approach could either serve as a global model or a cautionary example. Only time will reveal whether the Dodgeball logic of crossing a busy highway was instrumental in securing victory or merely an absurd initiation