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The EU's leading the way in AI regulation

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The EU's AI Act will change how artificial intelligence is used, developed, and regulated. It's a major shift that will influence not just EU-based companies but also non-EU entities operating within the EU.

The Act is complex, so it presents compliance challenges this means more demand for legal guidance. Lawyers will be needed by anyone using AI (which is most companies now), especially given the significant penalties for non-compliance.

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The EU's leading the way in AI regulation

GIF by European Commission

Credit: Giphy

What's going on here?

The EU sets the worlds first comprehensive rules for the use of AI.

What does this mean?

EU officials have provisionally agreed the new rules for the use of artificial intelligence (AI).

The AI Act aims to protect the rights and interests of EU citizens and consumers who interact with AI systems. It sets out rules for the development, deployment and use of AI systems in the EU.

EU Commissioner Thierry Breton called the decision an historic agreement that will be a launchpad for EU startups and researchers to lead the global AI race.

Who does it affect?

It will affect companies who develop, deploy or even use AI systems within the EU (so not just EU companies).

How do the rules work?

The Act creates four risk-based categories based on potential harm the AI poses to the safety of citizens:

  1. minimal risk (e.g. AI recommendations systems) these will have no obligations.

  2. limited risk (e.g. an AI chatbot) these will have transparency obligations like letting a user know theyre speaking to an AI.

  3. high risk (e.g. AI used in industries like education, recruitment, medical devices, utilities) this will be subject to strict rules.

  4. unacceptable risk (AI systems that are a clear threat to peoples rights, e.g. a system of social scoring by governments) this will be banned.

This AI Act cheat sheet by Oliver Patel is super useful as a summary 儭

Do other countries have their own AI regulations?

The UK, US and China are all in the process of preparing their own AI guidelines (heres a great article on the approach to AI regulations around the globe).

The EUs AI Act will influence these other countries when making their own rules too. They might use the EUs approach either as a model for their own regulations or try to align to the EUs standards to help cross-border trade and cooperation.

Claire Edwards, a partner at Addleshaw Goddard said that it is likely that lawmakers and other organisations working on these will pay close attention to the draft EU Act and assess its strengths and weaknesses.

Is the Act agreed and in force now?

Nope its just in a provisionally agreed form.

Fritz-Ulli Pieper, a partner at Taylor Wessing (Germany) says: "No one knows how the final wording will look like and if or how you can really push the current agreement in a final law text."

The next step is for the European Parliament and European Council to vote on the Acts details next year. The changes wont come into effect until at least 2026.

Why should law firms care?

The EUs AI Act is complex its probably the most challenging tech regulation since GDPR. Even with a grace period for companies to get to grips with it, compliance poses a challenge for those that use AI (which, nowadays, is pretty much every company!).

These businesses will turn to commercial lawyers to help them stay compliant with the rules:

  • If its an established business, itll want its processes reviewed to make sure the processes are compliant.

  • If its a startup with a new bold idea, itll need advice to make sure the way they execute the idea is compliant.

  • If its a company acquiring another company, itd need regulatory experts to make sure the target company is compliant.

especially because the penalties for failing to comply are so high!

Remember the impact of the AI Act will be felt far beyond the borders of the EU. The Act even applies to companies based outside the EU if they operate AI systems within the EU.

So if youre a non-EU lawyer, youll still need to know about this.

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IN OTHER NEWS

  • 唐兜EY is closing its Hong Kong legal arm, LC Lawyers, this January. This follows other cutbacks, including shutting down EY Riverview Law in Manchester and slashing jobs in the UK. The Hong Kong firm, known for its IPO and M&A expertise, is a small team with just five lawyers. This move reflects EY's larger strategy shift after dropping a plan to separate its consulting and audit divisions.

  • The UK's Competition and Markets Authority (CMA) is probing into Microsoft's partnership with OpenAI, developers of ChatGPT. This follows recent the leadership changes at OpenAI, raising questions about Microsoft's influence. The CMA's inquiry aims to determine if Microsoft's involvement could be seen as controlling OpenAI. The investigation is part of a wider scrutiny on big tech's role in the AI sector.

  • The European Union is putting the brakes on Amazon's $1.4bn (瞿1.1bn) deal to acquire Roomba maker iRobot Corp. EU's interim competition chief, Didier Reynders, insists Amazon must make sure that rival robot vacuums rank fairly on Amazons site. This follows the EU Commission's objections, fearing Amazon might favour its products, potentially blocking or demoting competitors. While Amazon hasn't responded yet, they're expected to address these competition concerns to avoid the deal being vetoed.

  • US company Nvidia is facing stiff competition from Huawei, a rising star in AI chip development. Nvidia, heavily reliant on the Chinese market, sees Huawei as a major threat, especially as the US tries to reduce tech exports to China. Huawei's recent successes in chipmaking and expanding into electric vehicles and smartphones are challenging Nvidia's dominance and could reshape the tech industry landscape.

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