Legal professional privilege and AI: where the real risk sits.

For a managing partner, the question that matters is where the risk to privilege actually sits. The answer is more specific than most commentary suggests: transmission and third-party access.

Privilege and confidentiality are different things

Client legal privilege under the Evidence Act 1995 (Cth) and its common law counterpart protects confidential communications made for the dominant purpose of legal advice or litigation. Confidentiality is broader: rule 9 of the Australian Solicitors' Conduct Rules binds practitioners to keep client information confidential regardless of whether privilege attaches. AI use can put pressure on both, but through the same mechanism: disclosure beyond the circle of confidence.

What the regulators have actually said

This is no longer speculative territory. In December 2024, the Law Society of NSW, the Victorian Legal Services Board and Commissioner and the Legal Practice Board of Western Australia issued a joint statement on AI in legal practice, stating that practitioners cannot safely enter confidential, sensitive or privileged client information into public AI chatbots (joint statement, VLSB+C). The Law Society of NSW followed with a solicitor's guide to responsible AI use (Law Society of NSW), and several supreme courts have issued practice notes restricting AI use in evidence preparation. The direction is consistent: the duty of confidentiality applies to AI exactly as it applies to any other disclosure. Our plain-English series on the regulators’ guidance covers each obligation in detail.

Where waiver risk actually arises

Privilege depends on confidentiality being maintained. The contested question for cloud AI is whether transmitting privileged material to a service provider, on the provider's terms, with the provider's retention and access rights, is consistent with maintaining it. Enterprise agreements improve the position; they do not make the transmission disappear. For a no-egress unit the question does not arise, because no third party receives the communication at all.

Questions to put to any AI vendor

The practical takeaway

Nothing in the current guidance says a law firm cannot use AI. All of it says the confidentiality analysis cannot be outsourced to a vendor's marketing page. Firms are resolving the tension in one of two defensible ways: strict no-client-data policies for cloud tools, or moving the AI inside the building so the productive path and the compliant path are the same path. Our law firm page covers what the second option looks like in practice.

Common questions