Excerpt from SCMP Article, Published on July 15, 2024
The implementation of the world’s first comprehensive artificial intelligence (AI) rules by the European Union (EU) on August 1 is projected to significantly increase compliance and assessment costs for Chinese tech companies operating within the bloc’s 27 member states. The Artificial Intelligence Act, passed into law by the European Parliament in March and approved by the EU Council in May, aims to safeguard fundamental rights, democracy, rule of law, and environmental sustainability from high-risk AI, while promoting innovation and establishing Europe as a technological leader.
Hong Kong-based Dayta AI, a provider of retail analytics software, expects compliance and assessment requirements under the EU regulation to hike their research and development costs by 20-40%, according to CEO Patrick Tu. This increase will cover additional documentation, audits, and technological measures. The new regulations highlight the global push to create AI guardrails amidst the generative AI boom since OpenAI’s release of ChatGPT in November 2022.
Tanguy Van Overstraeten, a partner at Linklaters, noted that the EU aims to foster an environment of trust with the AI Act, despite perceptions of overregulation. The regulation imposes obligations based on the potential risks and impact of AI technologies and includes 12 main titles covering prohibited practices, high-risk systems, transparency obligations, governance, post-market monitoring, information sharing, and market surveillance.
Non-compliance can result in fines up to 35 million euros or 7% of the offending firm’s total worldwide annual turnover, whichever is higher. The Act also requires regulatory sandboxes for real-world testing at the national level, although it exempts AI systems developed solely for scientific research.
Dayta AI’s Tu emphasized that the EU’s focus on data quality and user rights will enhance the performance and fairness of AI solutions, in contrast to China and Hong Kong’s regulations, which prioritize technological progress and government strategic priorities.
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