WILL EUROPE'S RETREAT FROM AI LIABILITY RULES LEAVE VICTIMS UNCOMPENSATED?

BRUSSELS, BELGIUM • The EU was hailed for its groundbreaking AI Act, the world's first comprehensive legislation to regulate artificial intelligence. However, concerns are mounting that the abandonment of a proposed directive on AI liability could leave individuals harmed by this technology without effective legal recourse or compensation.

Brussels, Belgium, March 4, 2025 – 4:30 PM CET – The AI Act, which came into force in the EU in August 2024, defines four levels of risk for AI systems: unacceptable, high, limited, and minimal. Eight practices are prohibited as unacceptable based on behavior or personal characteristics, and these prohibitions came into effect this month.

Many other potential risks stem from AI to health, safety, and fundamental rights, and the proposed directive aimed to create a harmonized legal approach among Member States for those seeking compensation. But the specific directive is now at serious risk.

"The European Commission published its work plan for 2025 a few weeks ago, and the directive was among those to be withdrawn. They believe it hasn't made sufficient progress and won't in the coming months," explains Cynthia Kroet, who monitors EU tech policy for Euronews.

Loopholes in Existing Protections?

While some argue that consumers could still invoke the Product Liability Directive, "there's a big difference because this directive only covers defective products, material damages. AI liability would cover errors made, for example, by an algorithm that would lead to discriminatory outcomes by an AI system," according to Kroet.

Citizens interviewed by Euronews in Madrid and Budapest seem to expect a legal safety net. "I think it's an extremely interesting technology, but also very dangerous if it's not adequately regulated," stated a resident of the Spanish capital.

"Surely we should make legal decisions that prohibit, for instance, a young child from harming or harassing another with artificial intelligence," suggested a Budapest resident.

Does Over-Regulation Hinder Competitiveness?

Abandoning the AI liability directive could indicate that the European Commission is listening to critics who argue that excessive regulation harms industrial competitiveness.

To address this, President Ursula von der Leyen announced a new fund during the AI Global Summit in Paris in early February. InvestAI will mobilize €200 billion to finance four future AI gigafactories in the EU. A dozen smaller units are also planned, allowing companies to test their AI models.

Brando Benifei, an Italian center-left MEP and rapporteur for the AI Act, called the directive's withdrawal a "disappointing choice because it creates legal uncertainty." He does not include regulation in the list of factors that harm competitiveness.

"We have less access to capital for investments in the digital sector. We need more IT infrastructure and simple, clear rules. But we cannot give up protecting our citizens, our businesses, our public institutions, our democracy from the risks of discrimination, disinformation, and harm caused by the misuse of AI," he told Euronews.

While the European Commission is open to finding a solution, the legislator believes a specific liability directive would be the "best solution" and describes it as "light legislation, capable of creating a common minimum standard."

Benifei asserts that mere "recommendations" would be ignored by some Member States, and amending existing product liability legislation could prove complicated.

The full application of the AI Act is expected by 2027. In the meantime, the EU aims to remain at the forefront of innovation. But can the Union successfully balance its desire to be an AI powerhouse with safeguarding its citizens' rights?