The European Union's artificial intelligence law is set to come into force on August 1 and while it will help safeguard the EU pillars, it will also increase compliance costs for foreign companies looking to do business with the EU.
Chinese companies in particular expect to have to spend more time and money to stay compliant with AI laws.
Since OpenAI released its useful AI tool ChatGPT in 2022, AI innovation has outpaced regulation, with many countries and trading blocs rushing to enact laws regulating how and where AI can be used.
Protecting Democracy
The AI law aims to protect democracy, fundamental rights, environmental sustainability and the rule of law from “high-risk” AI. But Partick Tu, co-founder and CEO of Hong Kong-based Dayta AI, said he expects his company's costs to increase by 20% to 40% (via SCMP).
The Act aims to regulate AI across 12 major titles, including prohibited acts, high-risk systems, governance, post-market surveillance, information sharing, and transparency obligations for market oversight, etc. However, the Act does not regulate AI systems and models used in scientific research and development, so as not to hinder groundbreaking impact on this field.
Companies that do not comply with the law face fines in the tens of millions of euros, with administrative penalties reaching a maximum of 35 million euros ($38 million) or up to 7 percent of a company's worldwide annual turnover for the previous year, whichever is greater.
Commenting on the bill's introduction, Emma Wright, partner at law firm Harbottle & Lewis, said: “The EU AI Bill is a major first attempt to regulate AI anywhere in the world. It remains to be seen whether compliance costs will stifle innovation, or whether the AI governance model it establishes will become a signature EU export.”
“Given the pace of technological change, as shown by the introduction of generative AI last year, there may be an even greater risk that EU AI law will quickly become outdated, particularly given the timeframes for implementation,” Wright concluded.
