The risks of risk-based AI regulation: taking liability seriously

19 Pages Posted: 29 Nov 2023

See all articles by Martin Kretschmer

Martin Kretschmer

University of Glasgow - School of Law

Tobias Kretschmer

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management); Centre for Economic Policy Research (CEPR)

Alexander Peukert

Goethe University Frankfurt - Faculty of Law

Christian Peukert

University of Lausanne (HEC)

Date Written: September 27, 2023

Abstract

The development and regulation of multi-purpose, large ``foundation models'' of AI seems to have reached a critical stage, with major investments and new applications announced every other day. Some experts are calling for a moratorium on the training of AI systems more powerful than GPT-4. Legislators globally compete to set the blueprint for a new regulatory regime. This paper analyses the most advanced legal proposal, the European Union’s AI Act currently in the stage of final ``trilogue'' negotiations between the EU institutions. This legislation will likely have extra-territorial implications, sometimes called ``the Brussels effect''. It also constitutes a radical departure from conventional information and communications technology policy by regulating AI ex-ante through a risk-based approach that seeks to prevent certain harmful outcomes based on product safety principles. We offer a review and critique, specifically discussing the AI Act’s problematic obligations regarding data quality and human oversight. Our proposal is to take liability seriously as the key regulatory mechanism. This signals to industry that if a breach of law occurs, firms are required to know in particular what their inputs were and how to retrain the system to remedy the breach. Moreover, we suggest differentiating between endogenous and exogenous sources of potential harm, which can be mitigated by carefully allocating liability between developers and deployers of AI technology.

Keywords: Regulation, AI, Brussels Effect

Suggested Citation

Kretschmer, Martin and Kretschmer, Tobias and Peukert, Alexander and Peukert, Christian, The risks of risk-based AI regulation: taking liability seriously (September 27, 2023). Available at SSRN: https://ssrn.com/abstract=4622405 or http://dx.doi.org/10.2139/ssrn.4622405

Martin Kretschmer (Contact Author)

University of Glasgow - School of Law ( email )

CREATe, School of Law
10 The Square
Glasgow, G12 8QQ
United Kingdom

Tobias Kretschmer

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Alexander Peukert

Goethe University Frankfurt - Faculty of Law ( email )

Frankfurt
Germany

Christian Peukert

University of Lausanne (HEC) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

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