How difficult is AI regulation? 

June 6, 2023
James Burnie


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James Burnie, a FinTech Partner and Meghan Millward, a gunnercooke trainee solicitor, have shared their insights on the latest in AI regulation.  

How difficult is it for AI companies to comply with GDPR and other rules when regulators are actively re-interpreting them to keep up with the technology?  

Whilst rules are intended to be technology agnostic, all rules are based on intrinsic assumptions regarding the ecosystem in which they operate. As such, particularly in faster moving areas, companies do find that rules are unable to cater for advances in technology – and, once a rule is created, it can be slow to adapt.  

We are seeing a particular nuance here between the UK regulatory structure, where there is a current shift towards giving the UK regulators greater ability to move swiftly and dynamically to changing circumstances, and the position in the EU where a harmonised rulebook necessarily slows down the process given the need for the different member states to agree.  

It will be interesting to see how this pans out, and indeed one-way forwards may be for AI companies to trial new concepts in the UK, before moving them, with a proven track record into the mass EU market.  

How much dialogue is there between companies and regulators to avoid future issues?  

We are seeing increasing dialogue in the UK, particularly in the context of AI and blockchain, where there is perceived to be a greater need for communication between the regulators and the companies.  

This was in some ways kick started by the FCA sandbox, which was specifically designed as a “safe space” in which new AI products can be tested before going to market – much like how new pharmaceutical drugs are tested on a group before being made widely available.  

What is going to be exciting is also seeking how regulators are now increasingly using AI tech to achieve their aims, and the ability of AI to enhance regulatory protections.  

How difficult is it for smaller AI startups to maintain compliance, compared to the army of lawyers at the disposal of large technology businesses? 

Larger firms will have larger legal and compliance teams, however at the same time, due to size, will also have more compliance issues to deal with – to take an example, a smaller firm will not have to worry about potential competition issues the way a larger firm does.  

More broadly, countries have different approaches towards encouraging start-ups. The UK sees itself as an innovation hub, and therefore has specifically been designed to help start-ups, for example through tax credits, and to some extent this helps counteract some of the disadvantages of being smaller.  

There is of course always going to be a difficult balancing act here, and it is worth noting that one of the objectives of the FCA is the competition objective, which in part is about encouraging a playing field that enables small firms to enter the market, so that there is better consumer protection through greater choice.  

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