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EU: AI Act signed by Presidents of the Parliament and Council

On June 13, 2024, the President of the European Parliament and the President of the Council of the European Union signed the Proposal for a Regulation of the European Parliament and of the Council Laying Down Harmonised Rules on Artificial Intelligence (the AI Act).

Scope

The AI Act would apply to:

  • providers placing on the market or putting into service artificial intelligence (AI) systems or placing on the market general-purpose AI (GPAI) models in the EU, irrespective of whether those providers are established or located within the EU or in a third country;
  • deployers of AI systems that have their place of establishment or are located within the EU;
  • providers and deployers of AI systems that have their place of establishment or are located in a third country, where the output produced by the AI system is used in the EU;
  • importers and distributors of AI systems;
  • product manufacturers placing on the market or putting into service an AI system together with their product and under their own name or trademark;
  • authorized representatives of providers, which are not established in the EU; and
  • affected persons in the EU.

The AI Act provides certain exemptions, including for systems used exclusively for military and defense as well as for research purposes.

Classification of AI systems

The AI Act takes a risk-based approach and prohibits certain AI practices, including cognitive behavioral manipulation, social scoring, AI for predictive policing based on profiling, and systems that use biometric data to categorize people according to specific categories such as race, religion, or sexual orientation.

Further, the AI Act classifies certain AI systems as high-risk and specifies requirements for high-risk AI systems, including the obligations of different entities. Notably, high-risk AI systems deployed by some entities providing public services would require a fundamental rights impact assessment.

The AI Act also regulates GPAI systems, and systems not posing systemic risks will be subject to limited requirements, for example with regard to transparency. However, those with systemic risks will have to comply with additional rules.

Enforcement and penalties

The AI Act would set up the following governing bodies:

  • an AI Office within the Commission to enforce the common rules across the EU;
  • a scientific panel of independent experts to support the enforcement activities;
  • an AI Board with Member States' representatives to advise and assist the Commission and Member States on consistent and effective application of the AI Act; and
  • an advisory forum for stakeholders to provide technical expertise to the AI Board and the Commission.

The AI Act provides different thresholds for fines and is set as a percentage of the company's global annual turnover in the previous financial year or a predetermined amount, whichever is higher. Small and medium-sized enterprises (SMEs) and start-ups are subject to proportional administrative fines. Specifically, non-compliance with the prohibition of the AI practices referred to in Article 5 of the AI Act would be subject to administrative fines of up to €35 million or, if the offender is an undertaking, up to 7% of its total worldwide annual turnover for the preceding financial year, whichever is higher.

Next steps

The AI Act must now be published in the EU's Official Journal, after which it will enter into force 20 days after its publication and will apply two years after its entry into force, with some exceptions for specific provisions.

You can access the AI Act here and track its progress here.