At the moment it seems that a start-up firm only has to hint at involvement in Artificial Intelligence (AI) for its chances of getting investors on board to dramatically improve. Europe has imposed a lot of laws and regulations on AI, and some suggest that there could be a Brexit benefit in the UK being outside of the EU, and therefore not as tightly regulated. The question however is, assuming it is real, just how long might such a Brexit benefit last?
The EU Approach to AI Regulation
The Artificial Intelligence Act (AI Act), adopted by the European Parliament on March 13, 2024, is the first, and certainly one of the world’s most comprehensive, legal frameworks for AI, providing for EU-wide rules on data quality, transparency, human oversight and accountability. Contravention could result in fines of up to 35 million euros or 7% of global annual revenue (whichever is higher), so the EU AI Act when it comes fully into force will have a profound impact on AI companies conducting business in the European Union.
Risk-Based Approach
The EU regulations adopt a risk-based approach, with different requirements applying dependent on the perceived level of risk.
- Unacceptable risk AI systems are prohibited as a clear threat to fundamental rights. These could include AI systems that manipulate human behaviour or exploit individuals’ vulnerabilities and biometric systems, such as emotion recognition systems in the workplace or real-time categorisation of individuals.
- High-risk AI systems in application areas such as energy and transport, medical devices, and systems that determine access to educational institutions or jobs will be required to comply with strict requirements, including risk-mitigation and human oversight.
- Limited risk AI systems intended to directly interact with human beings, such as chatbots, will have to be designed and developed so that individuals are aware they are interacting with an AI system and are informed if any content has been artificially generated or manipulated (deep fakes).
- Minimal-risk AI systems, such as AI-enabled video games or spam filters do not fall within the ambit of EU regulations, however companies may commit to voluntary codes of conduct.
The UK Approach to AI Regulation
The UK government’s position was set out in Feb 2024 in its consultation response to the March 2023 white paper on a pro-innovation approach to artificial intelligence regulation. That response reasserts that there will be no new AI legislation for the UK. Existing regulators will use their current powers. This is similar to the approach adopted by the USA. In the absence of overarching regulation in the United States, AI is currently governed by a mix of the federal government through Presidential Executive Orders, state governments, industry itself, and the courts.
No Statutory Duty for UK Regulators
The UK government’s AI white paper of March 2023 set out a decentralised approach to regulatory oversight of AI, which proposed high-level principles to ensure trustworthy AI as a guide for regulators. Those principles being security and robustness, appropriate transparency and explainability, fairness, accountability and governance, and contestability and redress. However, the government’s desire to retain flexibility and what it terms ‘critical adaptability’ means that regulators will not have a statutory duty to have regard to these high-level principles. The present UK government’s approach to regulating AI remains very light touch, with the emphasis on creating an innovation-friendly regulatory landscape, in stark contrast to the EU AI Act.
Brexit Benefit May Be Short Lived
The wider domestic perspective in the UK of course is the upcoming general election, when it is widely expected that a new Labour government will be elected. At present, the Labour party’s position appears to be that major AI-specific legislation is not planned, but obligations in various areas will be made statutory. And while there is no appetite for resurrecting the Brexit debate, a closer, more harmonious relationship with the European Union is also clearly a priority for an incoming Labour government.
However, even without a change of government, any apparent Brexit benefit may be short-lived as there remains the strong, market-driven, possibility that compliance with the EU’s AI Act becomes the de facto standard for AI innovators who want to access markets throughout Europe beyond just the UK.
Whatever the regulatory landscape for AI may be in the next few years, the Motion Paradox team of start-up business and legal consultants, based in London and Los Angeles, can give you legal advice and guidance as well as assistance to ensure your firm is attractive to investors and remains compliant, resilient and profitable.
