DISPUTE RESOLUTION AND COMMERCIAL LITIGATION

EU proposal to regulate Artificial Intelligence

Regulation of the European Parliament and of the Council COM(2021) 206 final.

Artificial Intelligence has bubbled under the surface of public consciousness for some time. AI was a niche issue – known to some and ignored by most. That situation has changed. With the Advent of AI systems such as CHAT GPT, the issue of AI gained further traction. Now, with the AI ‘interview’ of Michael Schumacher in Die Aktuelle 15.04.2023, and AI generated ‘songs by’ The Weekend, the issue of AI is mainstream news.The EU has its own proposals to regulate AI. Two problems are raised by these proposals. The first is what power does the Treaty on the Functioning of the EU (TFEU) give to the EU to get involved? The second is whether the proposals ‘fit’ within the powers. To a constitutional lawyer, the questions are of interest.

TFEU came into force on 1 December 2009. In 2009, it was not envisaged by the parties to TFEU that AI would become what it is. As AI has developed into what it is now, the Commission and the Member States were faced with a problem. How do you shoehorn something which was not envisaged into the framework of an existing Treaty. Either you can amend the Treaty or you can ‘fit’ the issue into a category of powers which pre-exists within the framework. Any attempt to amend the Treaty would require unanimity by all the Member States. Each Member State would then need to ratify the new Treaty. In some countries, this would mean referendums.

The issues that some countries had in trying to ratify TFEU is outside of the scope of this note. Treaty negotiations have also been seen as an invitation by Member States to hold out for their own special interests.

The second option is to shoehorn a new issue into an existing framework. That is the option chosen by the EU Parliament.

If we look at the proposal itself, we can see the Title heading chosen is that dealing with the Internal Market.

‘The legal basis for the proposal is in the first place Article 114 of the Treaty on the Functioning of the European Union (TFEU), which provides for the adoption of measures to ensure the establishment and functioning of the internal market’

The Proposal continues;

‘This proposal constitutes a core part of the EU digital single market strategy. The primary objective of this proposal is to ensure the proper functioning of the internal market by setting harmonised rules in particular on the development, placing on the Union market and the use of products and services making use of AI technologies or provided as stand-alone AI systems.’

With respect to the drafters of the Proposal: humbug.

The European Council itself stated;

‘[T]he Council further highlighted the importance of ensuring that European citizens’ rights are fully respected and called for a review of the existing relevant legislation to make it fit for purpose for the new opportunities and challenges raised by AI. The European Council has also called for a clear determination of the AI applications that should be considered high-risk Council of the European Union, Artificial intelligence b) Conclusions on the coordinated plan on artificial intelligence-Adoption  6177/19, 2019.’

We can see from the outset, the Organs of the EU saw the challenges and opportunities as going beyond the regulation of the internal market.

The Proposal’s framework expressly go beyond the internal market. The Commission puts the following specific objectives for the Proposal:

  • ensure that AI systems placed on the Union market and used are safe and respect existing law on fundamental rights and Union values;
  • ensure legal certainty to facilitate investment and innovation in AI;
  • enhance governance and effective enforcement of existing law on fundamental rights and safety requirements applicable to AI systems;
  • facilitate the development of a single market for lawful, safe and trustworthy AI applications and prevent market fragmentation.

The Proposed Regulation follows what it calls ‘a risk-based approach, differentiating between uses of AI that create (i) an unacceptable risk, (ii) a high risk, and (iii) low or minimal risk’

Again, I would invite readers to draw their own conclusions whether measures limited to the regulation of the internal market can ever be said to contain ‘an unacceptable risk’.

Looking at Title III: the Proposal is aimed at AI systems which in the opinion of those drafting the Proposed Regulation,

‘pose a risk of harm to the health and safety, or a risk of adverse impact on fundamental rights, that is, in respect of its severity and probability of occurrence, equivalent to or greater than the risk of harm or of adverse impact posed by the high-risk AI systems already referred to in Annex III’

Briefly we must look at Annex III. This Annex includes references to

7. Migration, asylum and border control management:

(a) AI systems intended to be used by competent public authorities as polygraphs and similar tools or to detect the emotional state of a natural person;

(b) AI systems intended to be used by competent public authorities to assess a risk, including a security risk, a risk of irregular immigration, or a health risk, posed by a natural person who intends to enter or has entered into the territory of a Member State;

(c) AI systems intended to be used by competent public authorities for the verification of the authenticity of travel documents and supporting documentation of natural persons and detect non-authentic documents by checking their security features;

(d) AI systems intended to assist competent public authorities for the examination of applications for asylum, visa and residence permits and associated complaints with regard to the eligibility of the natural persons applying for a status.

8. Administration of justice and democratic processes:

(a) AI systems intended to assist a judicial authority in researching and interpreting facts and the law and in applying the law to a concrete set of facts.

To seek to argue that any element of the above parts of Annex III can fall within Article 114 TFEU is not intellectually honest. Art 114 is as follows:

Article 114

(ex Article 95 TEC)

1.Save where otherwise provided in the Treaties, the following provisions shall apply for the achievement of the objectives set out in Article 26. The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market (emphasis added).

I gently query what immigration and the administration of justice has to do with the internal market.
I do not say that AI should not be regulated. I do say that the existing framework of Art 114 does not provide the legal basis for some of what is set out in the Proposal.

About the authors


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Jonathan Compton

Partner

Specialist in commercial disputes, banking and finance, regulatory and anti-trust/competition law.

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