Regulating AI – what Irish companies need to know ahead of new European Union legislation

As artificial intelligence (AI) pervades every aspect of our lives, the EU has published a series of new legislative proposals that will have a major impact on consumers and businesses.

The AI ​​Law

The AI ​​law is an EU regulation that introduces a new set of rules for AI. Essentially, it is the GDPR for AI and aims to make the EU the global leader in regulating AI technologies. The AI ​​Act will address the development and use of “high risk” AI systems by establishing rules and obligations for providers and users of AI technologies and certain other AI systems that are harmful to humans, completely forbidden.

The legislation will affect up to 35 percent of the AI ​​systems used in Europe and will apply to banking systems, healthcare, toy safety, recruitment and behavioral manipulation.

The regulation has international scope because no matter where an organization is based, if it wants to make a high-risk AI system available in the EU, it must comply with the AI ​​Act.

Enforcement for non-compliance includes fines of up to €30 million or 6 percent of the provider/user’s worldwide revenue. The offending AI system could also be taken off the EU market.

​The law is expected to come into force in late 2023 or early 2024 (a transition period of 18 months applies).

AI Liability Policy & Product Liability Policy

On September 28, the European Commission published its proposal for a Directive on Liability for Artificial Intelligence (AILD). The aim of the AILD is to define new liability rules for damages that arise in connection with AI systems.

The current liability rules do not take into account the complex nature of AI and the inherent difficulties involved in trying to identify errors.

As a major innovation, the proposal contains a regulation that assumes a causal connection in the event of damage caused by AI systems in the event of fault. The purpose of this provision is to provide people with an easier and more effective way to claim damages. Normally, in a civil case, the burden of proof lies with the victim, but the proposal requires the defendant to prove that their AI did not cause the damage.

On the same day, the Commission proposed a new Product Liability Directive (PLD). Its purpose is to modernize the rules and provide an effective compensation system at EU level for those who suffer bodily harm or property damage as a result of defective products.

The PLD now covers all digital products and the rules have been changed to work for new and emerging technologies. The PLD creates a new liability risk for cybersecurity issues, and a failure to provide necessary software updates is considered a “fault” for the purposes of product liability cases.

Irish organizations

Organizations must first assess whether the systems they provide or use fall within the scope of the legislation and what obligations apply.

If the AI ​​law applies to them, companies must conduct continuous risk assessments, post-market surveillance and strict record-keeping requirements. The AI ​​systems themselves must be inherently transparent.

Organizations need to identify potential misuse of their high-risk AI systems. Any organization using or deploying high-risk AI systems must review their contracts and license agreements to ensure they have adequate legal protections.

The new liability legislation increases the risk for companies that integrate AI systems into their products and services. Again, such organizations need to reconsider their contracts

Barry Scannell is an AI Specialist in William Fry’s Technology Department Regulating AI – what Irish companies need to know ahead of new European Union legislation

Fry Electronics Team

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