Breakthrough in AI Legislation: The European Union Strikes a Historic Deal

The highly-anticipated European ‘Artificial Intelligence Act’ was given its political approval by the Council of the European Union and the European Parliament on December 8, 2023, following an intensive series of negotiations. This Act is the first-ever worldwide legal framework specifically made for AI technologies. Though some technical aspects are still due for finalization in the coming weeks, a clear image of the landmark AI act is now beginning to emerge. This Act pledges to protect the fundamental rights of EU citizens, provide confidence for businesses involved in AI while maintaining accountability for high-risk AI applications.

What is the AI Act?

A crucial feature of the AI Act is its intent to standardize AI regulations across the single market of the 27 EU Member States. The Act also exhibits significant extraterritorial implications, covering all AI systems affecting individuals residing within the EU, regardless of the developmental or deployment location. The enforcement of the Act will adopt a phased approach, initially focusing on prohibited AI systems from mid to late 2025, and progressively extending to all AI systems in scope by mid to late 2026.

Will the AI Act affect my business? 

The Act assigns comprehensive compliance obligations based on the degree of risk an AI system presents to safety, security, or the essential rights of individuals in the EU. The legislation implements a tiered compliance structure applicable to various levels of the AI value chain. The Act sets rigorous standards especially for providers, distributors, and users of AI systems categorized as “high-risk” and on general-purpose AI systems, including foundational models and generative AI systems deemed to pose “systemic risks”.

Non-compliance consequences are severe, with penalties reaching up to 35 million euros or 7% of the total worldwide annual turnover from the preceding financial year, whichever is higher. Consequently, this landmark legislation makes it essential for businesses engaged in any segment of AI to closely review and amend their policies and operations.

When played right, the AI Act brings huge opportunities

In light of these transformative changes, it is high time to begin aligning your AI strategies with the new rules. At EY Law, your business growth and legal security remain our paramount concern. Our team is ready to assist you in navigating these legislative changes and ensuring seamless compliance.