EU's AI Act launched

Prepared by Peter Lichang Kuo

An old proverb said: “A virtuous person is with a contract, but an unvirtuous person drags an ox cart.” It meant that the talented people can make a living with just a contract, while those incompetent people can drag their trailers until it sinks to the mud and still have no food and clothing. The world is experiencing a mania for artificial intelligence (AI). The European Union has formulated the world’s first detailed Artificial Intelligence Act (AI Act), which contains 13 chapters and 113 articles, plus 13 annexes, and 180 recitals. The coverage is really all-encompassing.

* The EU’s “AI Act” is on the road

The United States, Japan and Taiwan, which have the greatest potential for developing AI technologies and products in the world, as well as Southeast Asian countries that are making rapid progress, are all major economies in APEC (Asia Pacific Economic Cooperation). The GDP of APEC economies has exceeded “USD 60 trillion”, which is three times that of the EU; however, it seems that APEC must learn from the EU in terms of AI legal sources.

* The GDP of APEC has exceeded US$60 trillion

The EU is mainly composed of seven major organizational structures, including “the European Parliament”, which represents citizens, “the Council” (or The Council of Ministers), which represents member states, and “the European Commission”, the executive body that safeguards the overall interests of the EU. Those are the three most important institutions. The “Artificial Intelligence Act” (AI Act) was proposed by the European Commission on April 21, 2021, passed by the European Parliament on March 13, 2024, and accepted by the European Council on May 21. The Act aims to introduce a common regulatory and legal framework for artificial intelligence. In addition to military uses, the scope of the bill covers all types of AI. The laws and regulations have been implemented one by one since early August.

The broad scope of "AI Act" can be seen from "Article 3: Definitions". ‘AI system’ means a ‘machine-based system’ that is designed to operate with varying levels of autonomy and that may exhibit adaptiveness after deployment, and that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments; it should be closely aligned with the work of international organisations working on AI to ensure legal certainty, facilitate international convergence and wide acceptance, while providing the flexibility to accommodate the rapid technological developments in this field.

It was pointed out at the outset that the purpose of this regulation is to improve the operation of the internal market by formulating a unified legal framework, especially the development, placing on the market, putting into service and use of artificial intelligence systems (AI systems). Meanwhile, it ensures a high level of protection of health, safety and fundamental rights contained in “the Charter of Fundamental Rights of the European Union” (the Charter). Protecting EU from the harmful effects of artificial intelligence systems and supporting innovation. The Act ensures the free movement of goods and services based on artificial intelligence across borders, thereby preventing Member States from imposing restrictions on the development, marketing and use of artificial intelligence systems unless expressly authorized by this Act.

The European Parliament’s requirements for artificial intelligence legislation are as follows:

1. Parliament's priority is to make sure that AI systems used in the EU are safe, transparent, traceable, non-discriminatory and environmentally friendly. AI systems should be overseen by people, rather than by automation, to prevent harmful outcomes. The purpose of this Regulation is to promote the uptake of “human-centric” and trustworthy artificial intelligence (AI), while ensuring a high level of protection of health, safety, fundamental rights enshrined in “the Charter”, including democracy, the rule of law and environmental protection, against the harmful effects of AI systems in the Union and supporting innovation.

2. Parliament also wants to establish a technology-neutral, uniform definition for AI that could be applied to future AI systems.

In April 2021, the European Commission proposed ‘the First EU Regulatory Framework for AI’. It says that AI systems that can be used in different applications are analysed and classified according to the risk they pose to users. The different risk levels will mean more or less regulation.

As part of its “digital strategy”, the EU wants to regulate artificial intelligence (AI) to ensure better conditions for the development and use of this innovative technology. AI can create many benefits, such as better healthcare; safer and cleaner transport; more efficient manufacturing; and cheaper and more sustainable energy.

The European Commission established the “Artificial Intelligence Office” (AI Office). This is a total new agency that will coordinate the implementation of the AI Act in all member states and oversee the compliance of general AI providers.

The EU has formulated an "AI Act" with different rules based on different risk levels:

The new rules establish obligations for providers and users depending on the level of risk from artificial intelligence, which divided into four levels according to "minimal risk, limited risk, high risk and unacceptable risk." While many believe that the risks posed by AI systems are minimal, they still require in-depth evaluation.

* Four levels of risk for AI systems

A. Unacceptable risk:

The highest level is “unacceptable risk” AI systems are systems considered a threat to people and will be banned. They include:

* Cognitive behavioural manipulation of people or specific vulnerable groups: for example voice-activated toys that encourage dangerous behaviour in children;

* Social scoring: classifying people based on behaviour, socio-economic status or personal characteristics;

* Biometric identification and categorisation of people;

* Real-time and remote biometric identification systems, such as facial recognition;

Some exceptions may be allowed for law enforcement purposes. “Real-time” remote biometric identification systems will be allowed in a limited number of serious cases, while “post” remote biometric identification systems, where identification occurs after a significant delay, will be allowed to prosecute serious crimes and only after court approval.

B. High risk:

AI systems that negatively affect safety or fundamental rights will be considered “high risk” and will be divided into two categories:

1) AI systems that are used in products falling under “the EU’s product safety legislation.” This includes toys, aviation, cars, medical devices and lifts.

2) AI systems falling into specific areas that will have to be registered in an EU database:

* Management and operation of critical infrastructure;

* Education and vocational training;

* Employment, worker management and access to self-employment;

* Access to and enjoyment of essential private services and public services and benefits;

* Law enforcement;

* Migration, asylum and border control management;

* Assistance in legal interpretation and application of the law.

All high-risk AI systems will be assessed before being put on the market and also throughout their lifecycle. People will have the right to file complaints about AI systems to designated national authorities. Generative AI, like “ChatGPT”, will not be classified as high-risk, but will have to comply with transparency requirements and EU copyright law.

C. Limited risk:

The AI system is intended to perform a “narrow procedural task”, such as an AI system that transforms unstructured data into structured data, an AI system that classifies incoming documents into categories or an AI system that is used to detect duplicates among a large number of applications. Those tasks are of such narrow and limited nature that they pose only “limited risks” which are not increased through the use of an AI system in a context that is listed as a high-risk use in an annex to this Regulation.

D. Minimal risk:

The task performed by the AI system is intended to improve the result of a previously completed human activity that may be relevant for the purposes of the high-risk uses listed in an annex to this Regulation. Considering those characteristics, the AI system provides only an additional layer to a human activity with consequently “lowered risk”. That condition would, for example, apply to AI systems that are intended to improve the language used in previously drafted documents, for example in relation to professional tone, academic style of language or by aligning text to a certain brand messaging.

The “AI Act” is supporting innovation

The law aims to offer start-ups and small and medium-sized enterprises opportunities to develop and train AI models before their release to the general public. That is why “AI Act” requires that national authorities provide companies with a testing environment that simulates conditions close to the real world.

From the "Annex I: List of Union Harmonisation Legislation", we can see the directives of the European Parliament and the Council on machinery since 2006, the directive on toy safety of 2009. The 2014 Directive on recreational craft and personal watercraft, the 2014 Directive on lifts and lift safety components, as well as the unifying Member State Directive on the market supply of radio equipment in 2014, the regulations and directives on personal protective equipment, and the revision of regulations on medical equipment Directives, common rules in the field of civil aviation security, regulations concerning two- or three-wheeled vehicles and quadricycles; production and placing on the market of aircraft, involving unmanned aircraft and their engines, propellers, parts and remote control equipment . All are included in the "AI Act".

The “Artificial Intelligence Act” (AI Act), which will gradually take effect in August 2024, is the EU's first comprehensive law regulating AI technology. This law aims to promote the safe, transparent and responsible use of AI technology and provide hierarchical supervision of the development and application of AI systems. For those who invest in AI researchers, this bill may have the following impacts:

1. Increased compliance costs

The AI Act requires AI systems to be classified according to risk levels and imposes strict compliance requirements on high-risk systems (such as medical, transportation and other fields). This may “increase the company's compliance costs”, including implementing necessary compliance measures, conducting risk assessments and audits, etc., thereby affecting return on investment.

2. Barriers to market access

For AI technology developers involved in high-risk areas, the requirements of the AI Act may set up higher “market entry barriers”. This could impact startups' ability to raise capital and enter the market. Investors need to consider these potential obstacles and assess whether the business can effectively comply with regulatory requirements.

3. Promote the development of compliance AI technology

The implementation of the Act will promote the development of AI technology towards higher “compliance and ethical standards”. This could present opportunities for businesses focused on compliance and ethical AI technology. Investors may see more opportunities to invest in these areas, especially in compliance tools, risk management solutions, and ethical AI technology.

4. Strengthen consumer trust

The implementation of the AI Act aims to improve the "transparency and security" of AI systems, which may enhance consumer trust in AI technology. This will be good news for AI technology companies focused on building trust. Investors may consider investing in businesses that can leverage this trust to gain market share.

5. Promote international cooperation and standardization

The AI Act may prompt more international cooperation and standardization, especially in "cross-border" AI technology applications and compliance. Investors can expect to see more international collaboration opportunities and standardized solutions, which will help expand market opportunities.

6. Balance of risks and opportunities

Investors need to find a balance between the compliance challenges and potential opportunities posed by the AI Act, including intellectual property rights. The implementation of the law may change the development of AI technology and market dynamics, so investment strategies need to be adjusted to "maximize returns and reduce risks". So legal people are needed in the working team.

In summary, after 50 years of development, AI has now been identified as a major trend in the future, and some people have shouted that "The business opportunities are worth hundreds of trillions of dollars!" (The current total GDP of the world is only about USD 100 trillion) With the gradual implementation of various articles and provisions of the EU "AI Act", it will inevitably affect the development and application of AI technology and may affect investment strategies. Investors should pay close attention to these changes and adjust investment strategies in accordance with the requirements of the Act to seize new opportunities and manage potential risks.

Peter Lichang Kuo, the author created

Taiwan

's Precision Industry in his early years. He was a representative of the APEC CEO Summit and an expert in the third sector. He advocated "anti-corruption (AC)/cashless/e-commerce (E-Com)/ICT/IPR/IIA-TES / Micro-Business (MB)…and etc." to win the international bills and regulations.

External Links:

https://patents.google.com/patent/US6304796 (VAM)

https://patents.google.com/patent/US20030197061 (Shopping System)

http://plckbooks.blogspot.com/2018/08/k-horn-science-inc.html (K-Horn Science Inc.)

http://pkforac.blogspot.com/2018/08/anti-corruption-in-lima.html (Lima Anti-Corruption)

https://ldinventions.blogspot.com/2022/01/127.html (A Universal Cashless System)

https://khornhb.blogspot.com/2023/10/1011.html (K-Horn Science Inc.)

https://khornhb.blogspot.com/2023/10/1013.html (K-Horn’s Cashless System)

https://khornhb.blogspot.com/2023/11/1110.html (K-Horn & APEC)

https://khornhb.blogspot.com/2023/12/1208.html (K-Horn’s SRI)

https://khornhb.blogspot.com/2024/01/105.html (K-Horn’s PCM)

https://khornhb.blogspot.com/2024/03/326.html (Tree's Whiskers)