The AI Act Is Starting To Take Shape
But also — Stability and Growth Pact, Brexit, Pharma
Hi! This is Tuesday, 2 May 2023, and here’s the EU news you need this week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and Linkedin.
The Briefing
On April 27, MEPs reached a political agreement on the long-awaited Regulation on Artificial Intelligence (AI Act). Although the AI act had been proposed by the European Commission back in 2021, it has recently come back to the forefront after several "giant language models" like ChatGPT came into our lives.
FOUNDATION • The European Parliament's version cuts through several Gordian knots that remained under discussion until the last moments of the negotiations, according to Euractiv. At issue was the fate of a subcategory of AI: "foundation models", which are AIs trained on large volumes of data to give them high levels of adaptability.
In line with the direction taken earlier by MEPs, these foundation models — including ChatGPT or Midjourney — would be subject to a stricter regime than that initially foreseen for general purpose AI systems.
In a last-minute change, generative AIs — that is, AIs made to generate content — would be required to be designed in accordance with European Union law and values, in particular freedom of expression.
RISKS • According to the draft regulation, artificial intelligence systems will also be classified by different levels of risk to which graduated rules will apply: minimal, limited, high-risk, and unacceptable risks.
This logic has given rise to much debate, particularly on what the "high risk" and "unacceptable" usage perimeters should cover. Indeed, once the text is in force — probably by 2025 — important constraints will weigh on AIs falling into these categories.
On the one hand, "high-risk" uses will have to comply with stricter obligations regarding data governance, transparency and risk management. Faced with the risk of including too many AI systems in this category and thus hindering European innovation, MEPs have introduced a new criterion of "significant risk" to health, safety or fundamental rights.
Some AIs will also be presumed to be high-risk, such as the recommendation systems of the large platforms regulated under Digital Services Act.
BANS • On the other hand, AI systems with risks considered "unacceptable" will unsurprisingly be banned, be it social credit or real-time biometric identification.
On the other hand, the ban on the use of AI for the surveillance of interpersonal communications was finally not retained following the opposition of the EPP group, which in exchange had to concede the prohibition of a case of use hitherto spared, namely ex post biometric identification — even if its use was only considered for serious crimes and only after judicial authorization.
COPYRIGHTS • The issue of intellectual property has divided MEPs for the past two weeks. Several of them wanted to ban outright the use of copyrighted content to train AIs — which would de facto prevent the development of "giant language models", which are now being trained from entire sections of the Internet without regard to intellectual property rights.
A more innovation-friendly compromise has been found. Companies developing generative AI will have to be transparent about any copyrighted content used to train their models.
"Against conservative wishes for more surveillance and leftist fantasies of over-regulation, parliament found a solid compromise that would regulate AI proportionately, protect citizens' rights, as well as foster innovation and boost the economy," said MEP Svenja Hahn. For Macquarie analyst Fred Havemeyer, the legislative proposal is more tactful than the "ban first, and ask questions later" approach that has been advocated by some.
WHAT NEXT? • The version retained by the Parliament could still be subject to minor amendments - the EPP group still hopes to go back on the ban on processing biometric data ex post in the context of judicial investigations - between now and the vote in committee scheduled for May 11. A plenary vote is scheduled for June, before the start of the trilogues, which are not expected to be easy.
In Case You Missed It
BUDGET • On April 26, the European Commission presented its legislative proposals to reform the European budgetary rules of the Stability and Growth Pact — the 60% public debt rule and the 3% deficit ratio. These rules were temporarily set aside in the wake of Covid-19, which caused a significant increase of public debt in the EU.
With this reform, the European executive wants to move towards more flexible rules adapted to each country, thus moving away from the budgetary orthodoxy that has characterised its position on the subject until now.
But this position is not to the liking of all member states, especially Germany, which has been very critical of the Commission.
The Commission's final proposal attempts to strike a balance between German criticism and southern countries' fears of overly strict rules, without satisfying either side.
"The result is very balanced. I don't know exactly what should have won the consensus of this country or another, but I think the changes we have decided are minor and that we are basically consistent," Economy Commissioner Paolo Gentiloni told Politico.
The Commission's proposal will now have to be discussed in the Council and the Parliament, although it is not certain that both institutions will manage to adopt the reform before the next European elections.
BREXIT • The Retained EU Laws Bill — the bill to reform or repeal the entirety of EU law preserved in domestic law in the UK by the end of the year — has just been significantly eased, much to the dismay of hard Brexiteers.
As a reminder, the UK's Withdrawal from the EU Act 2018 had copied and pasted all EU laws into the UK's body of law, creating the category of retained EU laws. This act ensured legal continuity after Brexit.
The Retained EU Laws Bill was originally intended to reform or repeal the approximately 4,000 EU laws by the end of 2023. A sunset clause provided that all EU laws that were not retained or amended would disappear from UK law by 1 January 2024.
But concerns from the Trade Union Congress (TUC) about the legal uncertainty that this time trial would create — particularly in relation to workplace safety and collective relations — led Enterprise and Trade Minister Kemi Badenoch to scale back the ambition of the text.
She finally announced that the majority of European laws would remain in force for the time being and that the end-of-2023 target would only concern the repeal/revision of 800 laws.
Tory Eurosceptics, such as Jacob Rees Mogg, have denounced a "betrayal" of Brexit, blaming the unwillingness of civil servants to carry out the review of laws within the deadline.
PHARMA • After repeated delays, the Commission has presented its legislative package — one directive and one regulation — to overhaul the bloc's pharmaceutical legislation.
Designed to address drug shortages, unequal access to essential medicines and to foster innovation, the EU's proposed pharmaceutical policy overhaul is primarily built around incentives for drug manufacturers.
First, the Commission wants to limit the drug shortages that have affected Europe this winter. Manufacturers will have to notify the authorities at least 6 months in advance of potential production problems.
The European Medicines Agency (EMA) will also be responsible for closely monitoring supply chains and will publish a document by the end of the year listing "critical" medicines for which security of supply is essential. Finally, the Commission wants to impose minimum stocks for certain medicines.
The Commission also intends to promote innovation and access to medicines. To do this, it proposes new incentive mechanisms. The Commission intends to reduce the period of exclusivity for manufacturers from 10 to 8 years. However, manufacturers will be able to benefit from an additional two years of exclusivity provided that they launch their drug in all 27 member states — a proposal that has been criticised by industrials, which believes that it is difficult to achieve.
According to Stella Kyriadides, European Commissioner for Health, these incentive mechanisms could give "70 million citizens access to new medicines compared to today".
The Commission also wants to reduce the length of the scientific evaluation and authorization of medicines. The authorization procedures of the European Medicines Agency would take 180 days instead of the current average of 400.
On the environmental front, the EMA will now be able to refuse to authorise medicines that do not sufficiently specify the potential environmental risks associated with their production.
Finally, the Commission wants to tackle antibiotic resistance, considered by the Commission's Health Emergency Response and Preparedness Authority (HERA) as one of the three main threats to health, alongside "pathogens with high pandemic potential" — including the family of respiratory RNA viruses — and "chemical, biological, radiological and nuclear threats".
The Commission therefore wants to encourage antibiotic producers to produce drugs that work differently from those already on the market.
What we’ve been reading
For the ECIPE, Fredrik Erixon and Oscar Guinea call for reinvigorating the European pharmaceutical industry, which faces stiff competition from both the United States and China.
Who rules Georgia? asks Andrew Cockburn in the London Review of Books. An Yeltsin-era oligarch may be the most ostensible suspect here, but much more will appear to the eyes of the careful reader.
This week’s newsletter is brought to you by Clément Albaret, Julie Houillon-Leonis, Marwan Ben Moussa, Augustin Bourleaud and Maxence de la Rochère. See you next Monday!