Partners at A&O Shearman have agreed to invest more than 5 per cent of its annual revenue over the next five years to build out its AI strategy.

The magic circle firm said on Thursday it has committed $1.1bn (£816m) over five years to reflect “a firm-wide step change, enabled by AI, in how legal work is designed and delivered to clients and in how the firm trains its people.”

As part of this strategy, each of the firm’s practices will be expected to spend at least three per cent of its billable hours building “specialist” AI tools and services which fall within its area of law.

David Wakeling, global head of AI at A&O Shearman, said the firm’s approach to designing AI is “open and transparent” and that it designs each AI solution with the client. He added: “We want to have more upfront client conversations about how the work, the relationship and the economics can evolve with AI.”

This follows the City firm, which turned over $3.7bn (£2.8bn) in the recent financial year, being one of the earliest law firms to take the tech on board as legal AI firm Harvey AI’s first customer.

The magic circle firm said after testing different approaches to how it deploys AI over the last four years, it found the tech “has the most meaningful impact” when its legal teams “embed deep product expertise into AI systems that can then be systemised across a particular area of law.”

“This significant investment signals where we intend to take the firm over the next decade,” said Hervé Ekué, A&O Shearman’s global managing partner.

Ekué added that AI allows the law firm to “bring an enhanced skillset to our clients’ work, however complex, on a global scale and in a way that wasn’t possible before.”

“It opens new ways to deliver value and sharpens how we compete. The firm that leads will combine exceptional legal judgment with the speed and scale to apply it consistently, anywhere in the world. We intend to be that firm, and that is what this investment accelerates,” Ekué added.

Competitor Freshfields partners with Anthropic

This follows fellow magic circle competitor Freshfields’ announcement in April that it signed a multi-year agreement with AI giant Anthropic, giving the firm easy access to Anthropic’s latest AI models and enabling collaboration to help design Anthropic’s next-generation offerings.

As part of the deal, Freshfields rolled out Anthropic’s Claude models to its entire global workforce of 5,700 users across 33 offices, and within the first six weeks of implementation, it said it saw a 500 per cent increase in usage.