The EU AI Act: Everything We Know till Now

The EU AI Act applies to providers, importers, distributors, and users of AI systems placed on the market or put into service in the EU. Some AI systems and use cases, such as military AI systems or the use of AI systems for purely personal purposes are exempt.

The political deal on the EU AI Act between the European co-legislators, the European Parliament and the Council of the EU, was reached on December 8th, 2023. The formal adoption of the Act is expected to take place in early 2024, although there will then be a 2-year general implementation period and 6-month and 12-month implementation periods for prohibited AI systems and the rules on general-purpose AI systems, respectively, before the provisions of the Act become effective.

Fines up to €35M or 7% of global annual turnover for breaches, subject to changes depending on the nature of the non-compliance and the size of the respective entity, have been outlined in the latest political agreement although these amounts are not yet finalized.

AI brings benefits but also new challenges. Scandals have revealed that issues such as bias can have real-world impacts, and the question of whether there is a need to interfere to balance innovation and protection of fundamental rights has been raised. The European Commission, in order to strike that balance and prevent the emergence of divergence national regulations that may disrupt the efficiency in the EU single market, initiated the legislative procedure to adopt the EU AI Act.

Enterprises should proactively establish AI risk management frameworks to mitigate legal, reputational, and financial damage from non-compliance. The rules and principles embodied in the Act as well as standards prepared according to it are likely to emerge as the industry standard. Hence, enterprises aiming at getting ahead and having competitive advantage should consider following the developments surrounding the EU AI Act and get involved with the voluntary commitment schemes to be introduced during the implementation period of the Act.