Using Public AI Tools at Work Could Cost Your Business Legal Privilege

Businesses using public AI tools to handle legal or sensitive information are facing a risk that most boardrooms have not fully accounted for: the potential loss of legal professional privilege (LPP). Judiciary guidance issued in October 2025 states that organizations should treat all public AI tools as being capable of making public anything entered into them, meaning confidentiality is considered lost the moment privileged information is uploaded.

The warning comes from Louise Wilson, Partner in Dispute Resolution at law firm Freeths. Employees across roles, including finance leaders and operations staff, are already using consumer AI tools like ChatGPT and Claude to review contracts, assess legal positions, and draft responses to complaints, often without involving the legal team.

Key Takeaways

• LPP loss is irreversible: Once privileged information enters a public AI platform, that legal protection is undermined. This affects not only the immediate document but also the organization's broader litigation strategy, potentially requiring disclosure of internal communications to opposing parties, prosecutors, and regulators.
• Satellite privilege disputes carry real costs: Beyond the litigation exposure, a privilege dispute triggered by AI misuse can consume significant time and legal budget, and damage the organization's risk profile with shareholders.
• Governance is a board-level responsibility: Wilson's view is that the fault does not lie with individual employees acting in good faith. The liability sits with business leaders who have not established clear AI governance policies.

For organizations without a formal AI governance policy covering information handling, the risk is active today. The playbook: classify which data categories may not enter public AI tools, train staff at onboarding, and give employees a clear escalation path to the legal team.

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