What Is the Impact of the EU AI Act on Global Businesses?
Regulating AI is crucial because it impacts various aspects of our lives, from the content we see online to healthcare and law enforcement. AI applications shape our online experiences by predicting and personalising content, analysing data from faces for various purposes, and contributing to medical diagnoses and treatments like cancer detection.
Similar to the impact of the General Data Protection Regulation (GDPR), the EU AI Act could set a global standard for how AI is used, ensuring its positive effects outweigh the negative ones, regardless of geographical location. The EU's AI regulation is already attracting international attention. For instance, in late September 2021, Brazil's Congress passed a bill creating a legal framework for artificial intelligence, with potential implications for global AI governance pending approval by the country's Senate.
Effective regulation of AI is essential to safeguard individuals' rights, ensure ethical and responsible use of technology, and create innovation that benefits society as a whole. By establishing clear guidelines and standards, we can harness the potential of AI while minimising its risks and pitfalls.
What Is the AI Act?
The AI Act, recently negotiated by Members of the European Parliament and the Council, aims to establish a comprehensive regulatory framework for artificial intelligence (AI) in Europe. This legislation seeks to balance the promotion of innovation with the protection of fundamental rights and AI safety.
Key provisions of the AI Act include the prohibition of certain AI applications deemed harmful to citizens' rights and democracy. This includes banning biometric categorisation systems based on sensitive characteristics like political beliefs, religion, sexual orientation, and race. Additionally, the Act prohibits untargeted scraping of facial images for facial recognition databases, emotion recognition in workplaces and educational institutions, and social scoring based on personal characteristics.
The regulation also addresses the use of AI in law enforcement, with strict measures and exemptions with specific safeguards. Biometric identification systems used in publicly accessible spaces for law enforcement purposes require prior judicial authorisation. The use of real-time biometric identification is limited to specific scenarios such as preventing terrorist threats or localising individuals suspected of specific crimes.
Overall, the AI Act seeks to regulate AI applications to ensure they are safe, respectful of human rights, and contribute to the advancement of society.
The Impact on Global Businesses
The impact of the AI Act extends beyond EU borders, affecting businesses worldwide, including those in the U.S. Developing or providing AI systems on a global scale requires compliance with the provisions of this legislation.
While the U.S. has made strides in AI governance at the state level and through executive orders, a consensus at the federal level is yet to be reached. The EU's AI Act sets a new standard, emphasising the need for oversight and regulation to balance innovation with consumer protection and national security.
Here are some key points that global businesses need to consider when thinking about the impact of the AI Act:
1. Compliance: Global businesses must ensure compliance with the AI Act's regulations, especially if they offer AI systems or services in the EU market. This may involve adjusting their products or operations to meet the Act's standards for risk categorisation and regulatory requirements. In addition, this will require updating key staff members and internal policies to reflect the changes.
2. Market Access: Compliance with the AI Act is necessary for accessing the EU market, which is one of the world's largest consumer markets. Failure to comply may result in restricted market access or penalties, potentially impacting revenue and growth opportunities for global businesses. Not only this, but companies that don’t properly consider the Act may suffer reputational damage amongst customers, third-party suppliers and stakeholders.
3. Innovation and Development: The AI Act's regulatory framework may influence the direction of AI innovation and development globally. Businesses may need to adapt their research and development strategies to align with the Act's requirements and standards, affecting the pace and nature of technological advancements. This can also assist productivity and efficiency levels which can help to strengthen competitive advantage.
4. Competition: Compliance with the AI Act may differentiate businesses in the global market, signaling a commitment to ethical and responsible AI practices. This could influence consumer trust and preference, impacting the competitive landscape for AI-related products and services.
5. Legal and Regulatory Risks: Non-compliance with the AI Act poses legal and regulatory risks for global businesses, including potential fines, reputational damage, and legal challenges. Proactive measures to ensure compliance are essential to mitigate these risks and maintain business continuity.
Compliance with these regulations is not only a legal requirement but also a strategic imperative for businesses seeking to operate in an increasingly regulated and competitive global marketplace.
How Can Gerrish Legal Help?
Gerrish Legal is a dynamic digital law firm. We pride ourselves on giving high-quality and expert legal advice to our valued clients. We specialise in many aspects of digital law such as GDPR, data privacy, digital and technology law, commercial law, and intellectual property.
We give companies the support they need to successfully and confidently run their businesses whilst complying with legal regulations without the burdens of keeping up with ever-changing digital requirements.
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