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Regulating AI – what Irish business needs to know ahead of new European Union legislation 17 January 2023

Enforcement for non-compliance with the AI Act includes fines of up to €30m or 6pc of global turnover

As artificial intelligence (AI) pervades every element of our lives, the EU has released a series of new legislative proposals which will have significant impacts for consumers and businesses .

The AI Act

The AI Act is an EU regulation that introduces a new rulebook for AI. Essentially, it is the GDPR for AI and seeks to make the EU the global leader in AI technology regulation. The AI Act will deal with the development and use of “high risk” AI systems by establishing rules and obligations for providers and users of AI technologies and place an outright ban on certain other AI systems which are harmful to humans.

The legislation will affect up to 35pc of AI systems used in Europe, applying to banking systems, healthcare, toy safety, recruitment, and behavioural manipulation.

The regulation has international scope, as regardless of where an organisation is based, if they wish to make a high-risk AI system available on the EU, they will need to comply with the AI Act.

Enforcement for non-compliance includes fines of up to €30m or 6pc of the provider/users’ global turnover. The infringing AI system could also be pulled from the EU market.

​The Act is expected to enter into force in late 2023 or early 2024 (there will be a transitional period of 18 months).

AI Liability Directive & the Product Liability Directive

On September 28, the European Commission published its proposal for an Artificial Intelligence Liability Directive (AILD). The purpose of the AILD is to set down new liability rules for damage caused where AI systems are involved.

Current liability rules do not cater for the complex nature of AI and the inherent difficulties associated with trying to identify fault.

In a big change, the proposal contains a provision that presumes a causal link in the event of fault with respect to damage caused by AI systems. The purpose of this provision is to provide people with an easier and effective avenue to claim compensation. Normally in a civil case, the burden of proof lies with the victim, but under the proposal, the defendant will need to prove their AI did not cause the damage.

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

The PLD now covers all digital products, and the rules are modified to work for new and emerging technologies. The PLD creates new liability risk for cybersecurity issues, and a failure to provide necessary software updates will be considered a “defect” for the purposes of product liability cases.

Irish organisations

Organisations need to firstly assess whether or not the systems they are providing or using fall within the scope of the legislation, and which obligations apply.

If the AI Act applies to them, businesses will need to carry out continuous risk assessments, post-market monitoring, and strict record keeping requirements. The AI systems themselves will need to be transparent by design.

Organisations will need to identify possible misuses of their high-risk AI systems. Any organisation using or providing high-risk AI systems will need to review their contracts and licensing agreements to ensure that they have adequate legal protection.

The new liability legislation will increase risk for businesses which incorporate AI systems into their products and services. Again, such organisations will need to reconsider their contracts.​

Barry Scannell is an AI specialist in William Fry’s technology department

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