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Bad Robot? Employing Artificial Intelligence in the Rush to Replace LIBOR

Federal regulators have recommended that banks cease entering into new contracts using the London Interbank Offered Rate (“LIBOR”) as a reference rate by December 31, 2021.  Additionally, the administrator of LIBOR will cease publishing one-week and two-month LIBOR on December 31, 2021 and the remaining tenors (overnight, one-month, three-month, six-month and 12-month) on June 30, 2023. To ensure a smooth transition from LIBOR to an alternate benchmark rate (the Secured Overnight Financing Rate (SOFR) being the leading contender), commercial banks and investment banks are in the process of identifying their outstanding LIBOR-based financial obligations and, if necessary, preparing amendments to the underlying contracts. To further this endeavor, most banks have produced standardized forms of benchmark replacement language for use in amending existing contracts. Even with this form language, however, the process of identifying LIBOR-based financial obligations, reviewing the underlying contracts, preparing amendments and negotiating the terms with the counterparties can be complicated and time-consuming for banks and their attorneys. Given the sheer volume of LIBOR-based financial obligations that are outstanding, as well as the approaching deadlines for the phasing out of LIBOR, some banks are looking for ways to streamline the legal work associated with this document review. Enter the robots!

As part of the solution to scaling the mountain of legal work involved in the LIBOR transition, some banks are employing forms of artificial intelligence (“AI”), computer algorithms and LIBOR-analyzing software to identify the affected financial obligations and the underlying contracts.  In one example, an algorithm sifts through the contracts for LIBOR provisions, outlines the process (if any) by which the financial obligation will transition to a replacement rate and determines whether amendments are necessary. Human lawyers are still needed to check the work of these “robots” (ensuring that nothing was missed), advise bank clients on legal issues and negotiate specific terms with the counterparties. Nevertheless, for monumental undertakings like the LIBOR transition, AI has the potential to expedite at least part of the process, serving as a time-saving tool to compliment, but not wholly replace, the work of lawyers.

Beyond the LIBOR transition, AI software systems capable of updating and thinking by themselves are also being used to facilitate legal services more broadly. For example, DoNotPay, a subscription-based online platform, describes itself as the world’s first robot lawyer. It uses AI-driven software to assist users not only with preparing legal documents, but also providing step-by-step guidance for pursuing a vast array of legal processes, including appealing parking tickets, instituting breach of contract claims, cancelling services or subscriptions, creating powers of attorney, submitting demand letters, obtaining refunds on flight tickets and hotel bookings and filing claims in small claims court. DoNotPay remains a self-help platform, however, with express disclaimers to the effect that it is not a lawyer and the offered services do not constitute legal advice. In any event, the DoNotPay anecdote should serve as a reminder for attorneys using AI technology, with respect to the LIBOR transition or otherwise, to review the Rules of Professional Conduct in their jurisdictions as to the impact of AI on the obligations of competent representation, diligence, and the like.

The LIBOR transition presents an interesting test case for using AI to expedite the more rote aspects of large-scale document review and similar administrative tasks associated with legal representation generally. Nevertheless, AI can only go so far, with lawyers needed to provide the legal analysis and advice necessary to complete the process. Readers are encouraged to contact Neal Pandozzi at or Patrick Coyne at with any questions.

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About The Authors

Patrick Coyne

Patrick is a member of the firm’s Business & Corporate Law Group. His practice involves commercial finance, commercial real estate transactions,… Read More

Neal R. Pandozzi

Neal Pandozzi is Co-Chair of the firm’s Public Finance group.  Neal has over two decades of experience in New England public… Read More

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