EU Grants Final Approval of AI Act, Effective 2026

AI Regulation | May 24, 2024

Image: Freepik

The Council of the European Union greenlights the first Artificial Intelligence (AI Act) Regulation

The Artificial Intelligence Act (AI Act) was given final approval on May 21, 2024 by the Council of the European Union, possibly setting a new global standard for AI regulation.  This regulation aims to protect the fundamental rights of the EU citizens while supporting innovation and the development of AI technologies.  The Act exclusively applies under the EU legal framework with some exemptions for military, defence, and research applications.

Here's the timeline of events...

• The Act on the AI, proposed by the European Commission under the aegis of Thierry Breton, was submitted in April 2021
• On 8 December 2023, a provisional agreement between the co-legislators (the European Parliament and the Council) was reached
• On 21 May 2024, the EU Council concluded its deliberations on the AI Act

Risk-Based Approach in AI Regulation

The AI Act is based on a 'risk-based' approach and classifies AI systems in three groups, considering the potential harm they could cause to society.

See:  Australia to Regulate High-Risk Artificial Intelligence

1. If an AI System is determined to be a 'Limited Risk', limited transparency obligations will apply.
2. If the AI System is categorized as 'High-Risk', it will be able to operate but under strict requirements and obligations.
3. The AI system will be considered falling into one of the 'Prohibited AI Practices' if in other words, the practice will result in banning and the same is causing unacceptable risks, including cognitive-behavior manipulation, social scoring, predictive policing rooted in profiling, and systems that classify users based on race, religion, or sexual orientation using biometric data.

Governance and Enforcement

• AI Office representing the European Commission where the rules get applied
• A Scientific Panel of independent professionals who will provide enforcement support
• An AI Board to advise and assist the Commission and the Member States on the consistent application of the AI Act
• An Advisory Forum comprised of technical experts who will advise the AI Board and the Commission

Penalties for Non-Compliance

Fines for non-compliance will be either the maximum value of a percentage of the company's annual global turnover (for the previous financial year), or a predetermined amount, whichever is higher.

See:  EU: MiCA, DORA, Open Finance Framework, and Digital Euro

Fines are meant to be a serious deterrent, especially for larger organizations.  Smaller companies and startups will receive proportional fines and relatively to their financial capacity.

Next Steps

After the assent, the AI Act still needs to be signed by both the presidents of the European Parliament and Council, and to be published in the EU's Official Journal with the regulation taking effect twenty days after its publication in the journal and with implementation starting two years later in 2026, except for a few provisions.  This is global regulatory milestone that will hopefully result in responsible AI development and innovation to the benefit of society worldwide.

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