Regulatory Sandboxes and The EU AI Act
AI Regulations

Regulatory Sandboxes and The EU AI Act

July 19, 2022

The EU Artificial Intelligence (AI) Act is aiming to lead the world in the governance of AI, requiring impact assessments to identify the risk associated with the use AI systems, and continuous management and mitigation of this risk. One of the major contributions of the proposed Act is the creation of regulatory sandboxes, which would provide participants of the initiative the opportunity to undertake controlled experiments and testing of their products under the supervision of relevant authorities. The sandboxes therefore provide an environment for providers to test the compliance of their product before it is launched on the market.

What is the EU AI Act regulatory sandboxes

The EU Act gives priority access to the sandboxes to small and medium sized enterprises (SMEs), including start-ups, supposedly removing some of the barriers that they may face when launching their product. However, participants of the sandbox are still liable from any harm inflicted on third-parties that results from experiments taking place within the sandbox, meaning that not all risk is removed.

The Act encourages member states to develop regulatory sandboxes to facilitate the EU’s vision, and calls for common rules to be established to promote more standardised approaches across the member states, and to facilitate cooperation between overseeing authorities. To this end, Spain has recently announced that they will be piloting a regulatory sandbox aimed at testing the requirements of the legislation, as well as how conformity assessments and post-market activities may be overseen.

Deliverables from this pilot include documentation of obligations and how they can be implemented, and methods for controlling and following-up that can be applied by those supervising national authorities responsible for implementing the regulation.

Timelines of EU AI Act regulatory sandboxes pilot

Reflecting the cross-state approach desired by the Act, other member states will be able to follow or join the pilot. The pilot is expected to begin in October 2022 and results published by the end of 2023. With a budget of 4.3 million euros, the pilot will be financed by the Spanish government’s recovery and resilience funds as part of the Spanish National AI strategy.

Sandboxes are expected to have benefits to both businesses or providers, who are able to develop and test their products in a realistic environment to ensure that they meet the appropriate regulations, and to regulators, who are better able to understand the products they are regulating. This can result in a shorter time to market, with the products that are released potentially being safer for consumers.

However, sandboxes can also have limitations, including the risk of abuse. For example, those with harmful intentions could misuse the sandboxes, meaning that the regulation is made less stringent as a result, potentially resulting in harmful products being released on the market. Further, the use of sandboxes could delay innovation from private actors if the actions of regulators harm their research and development processes.

Notwithstanding these concerns, the presentation of this first regulatory sandbox likely signals what is to come: other Member States may develop and pilot their own sandboxes, or this initiative may become pan-European and the default sandbox for providers and regulators.

Written by Airlie Hilliard, Senior Researcher at Holistic AI. Follow her on Linkedin.

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