E.U. Agrees on Landmark AI Act: is the balance right - Risk vs Innovation?

Adetoyese Adedokun

11 Dec 2023

Great Step Forward or Missed Opportunity.

After two and a half years of intense negotiations and lobbying, the European Union has finalized its AI Act, setting a global precedent with the world's first comprehensive AI law. The AI Act aims to mitigate harm in critical areas like healthcare, education, border surveillance, and public services by categorizing "high risk" AI systems that require strict adherence to rules like risk mitigation, high-quality data sets, enhanced documentation, and human oversight. However, the majority of AI applications, such as recommender systems and spam filters, will not be subjected to these stringent regulations. The Act also introduces legally binding rules, requiring tech companies to inform people when they're interacting with chatbots or AI systems like biometric categorization or emotion recognition systems, and to label deepfakes and AI-generated content.

The Act also sets stringent obligations for general-purpose AI systems, requiring them to adhere to transparency requirements, including technical documentation, compliance with EU copyright law, and providing detailed summaries of the content used for training. High-impact general-purpose AI models with systemic risk must conduct evaluations, assess and mitigate systemic risks, and ensure cybersecurity, among other obligations. To support innovation and small and medium-sized enterprises (SMEs), the Act promotes regulatory sandboxes and real-world testing. Non-compliance with the rules can result in hefty fines, ranging from 35 million euros or 7% of global turnover to 7.5 million euros or 1.5% of turnover, depending on the infringement and the size of the company.

However, French President Emmanuel Macron criticized the new Artificial Intelligence Act, saying,

“We can decide to regulate much faster and much stronger than our major competitors. But we will regulate things that we will no longer produce or invent. This is never a good idea.”

His statement reflects a concern that the EU's focus on regulating AI's risks rather than its rewards could hinder innovation and the development of new technologies. This sentiment echoes the views of some industry observers who believe that the EU AI Act may have missed an opportunity to prioritize innovation, instead emphasizing the potential dangers of AI rather than its potential benefits.

For certain, this is just the beginning. As the EU takes a pioneering step with its AI Act, other major players like the United States, China, the UK, and other jurisdictions are closely watching..