By: Natasha Allen of Foley & Lardner LLP
Understanding the need for responsible AI, the European Union (EU) has enacted the EU AI Act, a groundbreaking legal framework designed to regulate AI systems operating within its jurisdiction. While the objectives are clear, the implementation and impact of the Act are still being debated.
Key Provisions of the EU AI Act
The EU AI Act, which officially entered into force in August 2024, aims to regulate the development and use of AI systems, particularly those deemed “high-risk.” The primary goal is to ensure that AI is safe, ethical, and transparent. Enforcement formally began on February 2, 2025, following the deadline for specific prohibitions.
Noncompliance carries significant financial penalties. Companies in violation may face fines ranging from €7.5 million ($7.8 million) to €35 million ($35.8 million), or 1% to 7% of their global annual revenue.
Risk Classification System
A crucial element of the AI Act is its risk classification system, which categorizes AI systems as follows:
- Prohibited AI practices: These include systems like biometric technologies based on sensitive characteristics, manipulative AI, and certain predictive policing applications.
- High-risk AI systems: Permitted, but subject to rigorous compliance measures, including risk assessments, data governance, and transparency obligations.
- Limited transparency risk AI systems: Subject to transparency obligations requiring companies to inform users when they are interacting with an AI system.
- Minimal to no risk AI systems: Not regulated by the Act.
Challenges and Perspectives
The EU AI Act has generated opposition from various quarters. Tech companies, in particular, argue that these stringent regulations could stifle innovation, hindering the competitiveness of European startups. Critics are also concerned that the high compliance burden could drive AI development to less-regulated regions, impacting the continent’s technological advancement.
In response to some of this pressure, the EU has made some adjustments, such as repealing the proposed EU AI Liability Directive. The EU faces the challenge of protecting citizens’ rights while simultaneously fostering technological progress.
A Step in the Right Direction?
It remains to be seen whether the EU AI Act will set a precedent for global AI regulation. There will undoubtedly be challenges and the legislation will require refinement, but overall, the framework represents a necessary starting point. The current framework is not perfect, but provides the foundation for a global discussion on the responsible use of AI.
