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REGULATORY ALERT: UNDERSTANDING THE EUROPEAN UNION ARTIFICIAL INTELLIGENCE ACT 2023
Setyawati Fitrianggraeni, Sri Purnama, Jericho Xavier Ralf[1]
BACKGROUND
The European Union (EU) has pioneered Artificial Intelligence (AI) regulation by introducing the Artificial Intelligence Act.[2][3] This groundbreaking legislation, the first of its kind globally, is part of the EU’s comprehensive digital strategy to manage the development and application of AI technologies.[4] With AI’s potential spanning various sectors, including healthcare, transportation, manufacturing, and energy, this Act is a crucial framework for ensuring safe, transparent, and ethical AI usage.[5]
KEY REQUIREMENTS
The AI Act classifies AI systems based on the level of risk they present, establishing distinct regulations for each category. The Act identifies four levels of risk: unacceptable, high, limited, and minimal.[6] Systems with unacceptable risks, like manipulative AI or real-time biometric identification, are generally prohibited. High-risk AI systems, encompassing areas like biometric identification, law enforcement, and critical infrastructure, are subject to stringent assessment and regulatory compliance. Limited-risk AI systems require minimal transparency obligations, while minimal-risk AI, like spam filters, face the least regulatory burden.
IMPLICATIONS
EU has been a trailblazer in digital regulation, exemplified by initiatives like the General Data Protection Regulation (GDPR); their AI Act sets a precedent likely to influence global standards in AI governance. Therefore, it is prudent for stakeholders worldwide to proactively understand and align with these standards.[7] The Act’s comprehensive reach across AI applications makes its awareness and compliance essential for businesses, regardless of their direct use within the EU market. The Act’s wide-reaching implications affect various aspects of AI deployment:
- Operational Impact: Companies using AI systems must align with the EU’s regulatory framework, adjusting their AI strategies accordingly.[8]
- Financial Impact: Potential financial implications include compliance costs and penalties for non-adherence.[9]
- Legal Impact: Non-compliance risks include significant fines and legal repercussions, emphasising the need for robust legal strategies and compliance mechanisms.[10]
CONSIDER
- Compliance Strategy: Indonesian and international firms should develop comprehensive strategies to align with the AI Act, mainly if they operate in or are associated with the EU market.
- Legal and Technical Consultation: Engaging with legal and AI experts will be vital in navigating the complexities of the Act and ensuring compliance.
- Monitoring Developments: Staying abreast of ongoing negotiations and amendments to the AI Act is crucial for timely and effective adaptation.
CONCLUSION
The EU’s AI Act represents a significant milestone in the global regulation of AI technologies. Its implications extend beyond European borders, affecting international businesses and stakeholders, including those in Indonesia. As the legislative process evolves, it is imperative for companies to closely monitor developments and proactively adapt to ensure compliance and maintain operational efficiency.
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Anggraeni and Partners, an Indonesian law practice with a worldwide vision, provides comprehensive legal solutions using forward-thinking strategies. We help clients manage legal risk and resolve disputes on admiralty and maritime law, complicated energy and commercial issues, arbitration and litigation, tortious claims handling, and cyber tech law.
S.F. Anggraeni
Managing Partner
Sri Purnama
Junior Legal Research Analyst
Jericho Xafier Ralf
Junior Associate
[1] Setyawati Fitrianggraeni holds the position of Managing Partner at Anggraeni and Partners in Indonesia. She also serves as an Assistant Professor at the Faculty of Law, University of Indonesia, and is currently pursuing a PhD at the World Maritime University in Malmo, Sweden. This article is co-authored by Sri Purnama, Junior Legal Research and Jericho Xafier Ralf, Trainee Associate Analyst at Anggraeni and Partners.
[2] The Draft Act referenced in this document pertains to the version dated June 2023, as obtained from the official website of the European Parliament, accessible at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52021PC0206. Please note that subsequent amendments or updates to the Draft may have occurred after this date. Readers are advised to consult the latest version of the document for the most current information.
[3] The journey towards the EU’s AI Act began in April 2021 when the European Commission (EC) first proposed this pioneering regulatory framework. By June 2023, significant progress had been made with the European Parliament adopting its negotiating position on the AI Act. The objective is to reach a consensus and finalize the Act by the end of 2023. Once enacted, the AI Act will become the first comprehensive law of its kind globally, setting a benchmark for AI regulation. Its enactment will not only influence the European market but is also expected to have a far-reaching impact on global AI governance, similar to the effect of the General Data Protection Regulation (GDPR). European Parliament. “EU AI Act: first regulation on artificial intelligence”. https://www.europarl.europa.eu/news/en/headlines/society/20230601STO93804/eu-ai-act-first-regulation-on-artificial-intelligence. Accessed on 15 November 2023.
[4] Ibid.
[5] Article 288 of the Treaty on the Functioning of the European Union (TFEU) states that EU regulations are directly applicable: they come into force and are legally binding without any action on part of the member states. Under this Article, the AI Act is directly applicable and legally binding in all EU member states without the need for national legislation. This regulation harmonises AI governance across the EU, essential for the digital single market. While it becomes law automatically upon adoption, member states may have specific roles in compliance, especially where the Act intersects with national laws.
[6] Artificial Intelligence Act, pp. 4. Accessed on 15 November 2023.
[7] Ibid, pp. 6.
[8] Ibid, pp. 38 para. 88.
[9] Ibid, pp. 90.
[10] Ibid, Art. 71, pp. 82.
