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European Union: New AI Regulation Agreement by Germany, France and Italy

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In brief

We would like to bring to your attention an important development in the field of Artificial Intelligence (AI) regulation in Europe. On 18 November 2023, Germany, France, and Italy reached a significant agreement on the future of AI regulation, marking a step forward in shaping the AI landscape within the European Union (EU).

Key Highlights

1. Collaborative efforts: The joint paper reflects the collaborative efforts of three major European economies, Germany, France, and Italy, to establish a unified approach to AI regulation. This alliance signifies a commitment to fostering innovation and ensuring responsible AI adoption within the EU.

2. Mandatory self-regulation for foundation models: The joint paper pushes for mandatory self-regulation for foundation models. Foundation models refer to the core AI algorithms and architectures that underpin various AI applications. Germany, France, and Italy advocate for stringent control over AI’s foundational models, aiming to enhance accountability and transparency in AI development. According to the paper, developers of foundation models should define model cards, providing information to understand the model’s functionality, its capabilities, and its limitations.

3. Reaching smaller companies: The three governments endorse commitments that are binding on AI providers in the EU that sign up to them. They propose mandatory self-regulation to all AI providing companies, irrespective of size. While the discussion in the context of the EU’s AI Act initially targeted major AI providers only, the joint paper now advocates for a universal adherence to avoid compromising trust in the security of smaller EU companies.

4. No imposition of sanctions: Immediate sanctions are not part of the three nations’ position. However, there is consideration for a future sanction system if violations of codes of conduct emerge. A European authority would monitor compliance with the standards.

5. Regulating AI application: The focus is on regulating the application of AI, not the AI technology itself. The paper aims to balance the opportunities and risks of AI, recognizing the potential damage of over-regulation to innovation and the risks of under-regulation to security. Therefore, the development process of AI models should not be subject to regulation.

Implications for Businesses

This agreement by Germany, France, and Italy on AI regulation has several implications for businesses operating in the EU:

1. Compliance alignment: Businesses should closely monitor the developments stemming from this agreement, especially regarding the regulation of AI application and the treatment of foundation models. Alignment with these emerging regulations will be crucial.

2. Ethical considerations: Emphasis on ethical AI development, mandatory self-regulation for foundation models, and a balanced approach for smaller companies highlight the importance of transparency, accountability, and fairness in AI systems.

3. Competitive advantage: Companies engaged in AI research and development can benefit from the incentives and support proposed in the joint paper and the evolving regulations.

In conclusion, the agreement reached by the three governments represents a step towards unified AI regulation within the EU, with a particular focus on mandatory self-regulation for foundation models. Negotiations on the draft of the EU AI Act currently appear to be at a standstill. However, the new joint paper may accelerate ongoing trilogue discussions between the European Parliament, Council and Commission, aiming to position the EU in this evolving domain. Businesses should remain vigilant, adapt to evolving regulatory requirements, and consider the ethical implications of their AI systems.

Should you require further information or assistance in navigating these regulatory developments, please do not hesitate to contact us.

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Author

Anahita Thoms heads Baker McKenzie's International Trade Practice in Germany and is a member of our EMEA Steering Committee for Compliance & Investigations. Anahita is Global Lead Sustainability Partner for our Industrials, Manufacturing and Transportation Industry Group. She serves as an Advisory Board Member in profit and non-profit organizations, such as Atlantik-Brücke, and is an elected National Committee Member at UNICEF Germany. She has served for three consecutive terms as the ABA Co-chair of the Export Controls and Economic Sanctions Committee and as the ABA Vice-Chair of the International Human Rights Committee. Anahita has also been an Advisory Board Member (Beirätin) of the Sustainable Finance Advisory Council of the German Government.

Anahita has won various accolades for her work, including 100 Most Influential Women in German Business (manager magazin), Top Lawyer (Wirtschaftswoche), Winner of the Strive Awards in the category Sustainability, Pioneer in the area of sustainability (Juve), International Trade Lawyer of the Year (Germany) 2020 ILO Client Choice Awards, Young Global Leader of the World Economic Forum, Capital 40 under 40, International Trade Lawyer of the Year (New York) 2016 ILO Client Choice Awards. In 2023, Handelsblatt recognized her as one of Germany’s Dealmaker and “most sought after advisors of the country” in the field of sustainability.

Author

Dr. Alexander Ehrle is a member of the Firm's International Trade Practice in Baker McKenzie's Berlin office. Alexander studied law at the Universities of Heidelberg, Montpellier (France), Mainz, Munich and New York (NYU) specializing in Public International and European Law. He worked as advisor and member of a delegation of a developing country at the United Nations before qualifying for the German bar. He spent his clerkship with the Higher Regional Court in Berlin, the German Ministry of Foreign Affairs in Berlin and Tokyo as well as an international law firm in Frankfurt and Milan. He wrote his doctoral dissertation on the structural changes of public international law and their conceptualization in academic discourse basing his research on the governance of areas beyond national jurisdiction. Alexander is admitted to practice in Germany and New York. 

Alexander co-chairs the Business & Human Rights Committee of the American Bar Association’s International Law Section and has been recognized as one of 40 under 40 lawyers worldwide for foreign investment control by the Global Competition Review.

Author

Kimberley Fischer is a member of the International Trade Practice in Baker McKenzie's Berlin office. She joined the Firm in 2022. Kimberley studied law at the Ruprecht Karls University of Heidelberg and the Universidad de Deusto (Spain), with a focus on public international law and human rights. Prior to joining the Firm, Kimberley completed her legal traineeship at the Higher Regional Court of Frankfurt am Main, the German Federal Foreign Office in Berlin and at an international law firm in Brussels and Frankfurt am Main. She also gained significant experience in public (international) law as a research assistant at the University of Heidelberg and at a reputable law firm.

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