Chief Legal Officers, Get Ready for This Conversation

CEOs are beginning to give their Chief Legal Officers and General Counsel a blunt directive:

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I expect you to lower our outside counsel fees by 40% or 50% this year.

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And if there is any push back, a Chief Legal Officer (CLOs) should expect to face the following questions.

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Why are we still paying for associate hours that AI should have reduced or replaced?

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Why are we accepting 10% or 15% lower fees on legal work that now takes half the time?

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For decades, outside counsel has avoided the market discipline applied to almost every other supplier. Marketing gets squeezed. Software gets benchmarked. Consultants get cut. Outside counsel sends a rate increase letter.

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Part of that is justified. Legal advice involves trust, judgment, confidentiality, and real risk.

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But let’s not be naive. CLOs and outside counsel often have relationships insulated from normal market pressure. They went to the same schools. They trained at the same firms. They trust the same partners.

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That can be good.

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It can also mean the client is the last to benefit.

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The best CLOs will lead this conversation. They will tell outside counsel: we value your judgment, but we are no longer paying for hours AI eliminated.

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The CLOs who resist that conversation may soon face a different one with their CEOs. As in “You are being replaced by a new Chief Legal Officer who is willing to negotiate down our outside counsel fees by half”.

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What Clients Should Ask Outside Counsel Now

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Stop asking the soft question:

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“Do you use AI?”

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Every external law firm knows how to answer that.

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Ask better questions:

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How exactly will AI be used on this matter, and which tasks will it reduce or eliminate?

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How is that reflected in the budget — not just the rate, but the actual hours?

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What work still requires senior lawyer judgment?

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Will you agree to a fixed fee, collar, blended model, or other structure that shares the savings?

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Will you disclose specifically what associate-heavy work has been replaced by AI workflows?

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Why is this still billed by the hour?

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Outside lawyers genuinely delivering better, faster, cheaper work should welcome those questions.

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Lawyers trying to preserve the old model will not.

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At PAG Law we built a law firm primed for the Age of AI. We are already passing the savings of AI to our clients.

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^{Juan Pablo Cappello is a Founding Partner at PAG Law PLLC, where his practice focuses on M&A, venture capital, and corporate counsel for founders, funds, and family offices across Latin America and the United States. He was named ACQ5’s Lawyer of the Year 2026.}

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^{Disclaimer: This publication is provided by PAG Law PLLC for general informational purposes only and does not constitute legal advice or create an attorney-client relationship between PAG Law and the reader. The content reflects the views of the author as of the date of publication and may not reflect subsequent developments in law, regulation, or policy. Readers should not act or refrain from acting on the basis of any information contained herein without seeking professional legal counsel tailored to their specific circumstances and jurisdiction. PAG Law expressly disclaims all liability with respect to actions taken or not taken based on any or all of the contents of this publication. This material may be considered attorney advertising in some jurisdictions.}

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