AI Act, the regulation of Artificial Intelligence in Europe

Artificial Intelligence (AI) is reshaping the economy, but its rapid rise comes with major risks, ranging from discriminatory biases to violations of fundamental rights. To address these challenges, the European Union has introduced the AI Act, a strict regulation designed to oversee the use of AI while ensuring the protection of citizens.

Why regulate AI?

Artificial Intelligence (AI) presents a significant opportunity for businesses, with applications ranging from the automation of repetitive tasks to large-scale data analysis. However, its deployment raises major concerns regarding fairness and security.

Limiting discriminatory biases and protecting fundamental ights 

AI systems can reproduce and amplify discriminatory biases, whether due to the data used or the design choices of algorithms. These biases, whether implicit or explicit, pose a significant problem when AI is applied in critical areas such as recruitment or performance evaluation. A common example is the incorrect association between income and job performance, reflecting historical discriminations with no factual basis.

These risks of algorithmic injustice call for regulation to protect fundamental rights such as privacy and equal treatment. It is crucial to ensure that AI systems do not become tools of discrimination or violations of citizens’ rights.

Ensuring the security and reliability of critical systems

AI systems also raise security concerns, particularly those used in critical fields such as healthcare, autonomous vehicles, or the justice system. This means that malfunctions can have serious consequences for people’s safety and lives. Beyond functional risks, AI system security must also account for cyberattacks, such as « data poisoning, » where data is manipulated to influence outcomes.

Since AI is often perceived as a black box, understanding and explaining how certain decisions are made becomes challenging. This lack of transparency raises accountability issues, making it even more essential to implement regulations that promote the explainability of AI systems.

The AI Act is a European regulation designed to oversee the development and use of artificial intelligence (AI) technologies. In response to the rapid growth of AI and increasing concerns about risks to fundamental rights, this legislation establishes strict governance to prevent potential abuses.

This regulation applies not only to companies based in the European Union but also to any foreign company wishing to sell or distribute AI systems within the EU. As a result, any entity that designs, develops, deploys, or markets AI systems in the European market is subject to the AI Act, even if it operates outside the EU.

Main objectives of the AI Act: security, ethics, and controlled Innovation

• Protecting citizens by ensuring that AI systems respect fundamental rights such as privacy and freedom of expression.
• Encouraging ethical innovation by creating a framework that supports technological development while enforcing strict rules to prevent abuses.
• Ensuring a single market by harmonizing regulations across EU member states to promote fair and healthy competition in the AI sector.

Classification of AI systems by risk level

To achieve its objectives, the AI Act classifies AI systems into four categories based on their level of risk:

• Unacceptable risk: Systems that pose serious threats to fundamental rights, such as cognitive manipulation, are prohibited.
  Example: A social scoring system that evaluates individuals based on their behavior or interactions.

• High risk: AI systems used in sensitive areas, such as human resources, justice, or healthcare, are subject to strict requirements (risk assessment, transparency, data quality, etc.).
  Example: An automated recruitment system must ensure it does not discriminate against certain groups based on biased criteria such as gender or ethnicity.

• Limited risk: AI systems with limited risk are subject to fewer constraints, such as the obligation to inform users that content has been generated by AI.
  Example: A customer service chatbot must clearly indicate that it is AI-driven to ensure transparency in communication.

• Minimal risk: Low-risk AI systems are not subject to specific regulations.
  Example: A movie recommendation algorithm on a streaming platform is considered a minimal-risk system, as it does not significantly impact users’ rights or safety.

This classification allows legal obligations to be adjusted according to the level of risk associated with each AI application.

The AI Act imposes new legal obligations on businesses, particularly regarding compliance, documentation, and monitoring of AI systems. These requirements vary depending on the risk level associated with each system.

Compliance with the AI Act: risk management and audits

For high-risk systems, companies must implement risk management processes, conduct regular audits, and ensure algorithmic transparency. The goal is to make AI-driven decisions understandable and justifiable, thereby strengthening user trust, especially in sensitive areas such as healthcare and human resources.

AI system documentation: A requirement to prove compliance

Businesses must prepare for increased documentation requirements. Each AI system must be accompanied by detailed documentation proving its compliance with regulatory standards. This documentation will include:

• Bias management 
• Data quality assessments
• Regular risk evaluations for each system 

Specific responsibilities based on business roles

The implications of the AI Act vary depending on a company’s role in the AI development and deployment chain:

• AI Developers: They must ensure transparency, explainability, and data quality in their systems. They are also responsible for creating comprehensive technical documentation proving their algorithms’ compliance before market release.
• AI Distributors: Any company distributing or selling AI systems in the European Union, even if based outside the EU, must ensure compliance with the regulation. Distributors face penalties if the systems they market do not meet regulatory standards. 
• AI Users (Businesses or Organizations Using AI): They must monitor AI system performance to prevent discrimination or risks to fundamental rights. Users are also required to ensure transparency with customers by disclosing when interactions or content are AI-generated.

Penalties for non-compliance

Failure to comply with the AI Act exposes businesses to financial penalties of up to 6% of their global annual revenue. This is comparable to fines under the GDPR, highlighting the EU’s commitment to preventing AI-related abuses.

Beyond financial sanctions, non-compliant companies risk market bans on their AI-based products or services. Such restrictions could have significant economic consequences, blocking access to the European market—one of the largest in the world.

Additionally, non-compliance can severely damage a company’s reputation. In industries affecting fundamental rights (such as privacy and discrimination), failing to meet regulatory requirements could result in a loss of customer and partner trust, ultimately harming long-term competitiveness.