Currently, it seems that a start-up company only needs to hint that it is working on artificial intelligence (AI) to significantly improve its chances of getting investors on board. Europe has enacted numerous laws and regulations regarding AI, and some suggest that it could have a Brexit advantage if the UK is outside the EU and therefore not as tightly regulated. However, the question is, assuming it is real, how long could such a Brexit advantage last?
The EU approach to AI regulation
The Artificial Intelligence Act (AI Act), passed by the European Parliament on March 13, 2024, is the first and certainly one of the world’s most comprehensive legal frameworks for AI and provides EU-wide rules on data quality, transparency, human oversight and responsibility. Violations could result in fines of up to 35 million euros or 7% of annual global turnover (whichever is greater). Therefore, the EU AI law, when fully enacted, will have a profound impact on AI companies doing business in the European Union.
Risk-based approach
EU regulations take a risk-based approach, with different requirements depending on the perceived risk.
- Unacceptable risk AI systems are banned as a clear threat to fundamental rights. This could include AI systems that manipulate human behavior or exploit individuals’ vulnerabilities, as well as biometric systems, such as emotion recognition systems in the workplace or real-time categorization of people.
- High risk AI systems In application areas such as energy and transport, medical devices and systems that determine access to educational institutions or workplaces, strict requirements must be met, including risk reduction and human supervision.
- Limited risk AI systems intended to interact directly with humans, such as chatbots, must be designed and developed so that individuals are aware that they are interacting with an AI system and are informed when content has been artificially generated or manipulated ( Deep fakes).
- Minimal risk AI systems such as AI-powered video games or spam filters fall outside the scope of EU rules, but companies can commit to voluntary codes of conduct.
The UK approach to AI regulation
The UK Government’s position was set out in February 2024 in its consultation response to the March 2023 White Paper on an innovation-friendly approach to regulating artificial intelligence. This response reiterates that there will be no new AI legislation for the UK. Existing regulators will use their current powers. This is similar to the US approach. In the absence of overarching regulation in the United States, AI is currently regulated by a mix of federal government through presidential executive orders, state governments, the industry itself, and the courts.
No legal obligation for UK regulators
The UK Government’s AI White Paper of March 2023 set out a decentralized approach to regulatory oversight of AI, proposing high-level principles for ensuring trustworthy AI to guide regulators. These principles include security and robustness, appropriate transparency and explainability, fairness, accountability and governance, and contestability and redressability. However, the government’s desire to maintain flexibility and what it calls “critical adaptability” means that regulators are not legally required to take these high-level principles into account. The current UK government’s approach to regulating AI remains very light, with a focus on creating an innovation-friendly regulatory landscape, in stark contrast to the EU AI law.
The Brexit advantage could be short-lived
The broader domestic political perspective in the UK is, of course, the upcoming general election, which is widely expected to elect a new Labor government. Currently, the Labor Party appears to be taking the position that no major AI-specific legislation is planned, but that commitments in various areas should be enshrined in law. And while there is no interest in reviving the Brexit debate, a closer, more harmonious relationship with the European Union is clearly also a priority for a new Labor government.
But even without a change of government, any apparent Brexit advantage could be short-lived as there remains a strong, market-driven possibility that compliance with EU AI law will become the de facto standard for AI innovators everywhere want to have markets in Europe beyond the UK.
Whatever the AI regulatory landscape looks like over the next few years, Motion Paradox’s team of start-up companies and legal advisors based in London and Los Angeles can provide you with legal advice and guidance, as well as support to ensure your business this does attractive to investors and remains compliant, resilient and profitable.
