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The Paradox of AI Regulation: Navigating Uncharted Terrains

Introduction

The overnight success of ChatGPT and GPT-4, PaLM 2 (Bison-001), Claude v1, etc. marks an obvious turning point for artificial intelligence. It also marks an inflection point for public debate about the risks and benefits of AI for our society. The AI market will grow by 19.6% each year and reach $500 billion this year. i The pace of technology progress in Generative AI is staggering. AI is here to stay.

In a world increasingly fueled by generative AI models, the call for comprehensive AI regulation is growing stronger. Unfortunately, at the heart of this global cry for regulation lies a paradox: the very essence that makes AI a transformative force, its rapid evolution, also makes it a formidable entity to regulate. Will it be used to expand national power or stifle it to avoid its risks? Governments and organizations are grappling with the delicate balance between fostering innovation and ensuring the ethical deployment of AI technology. This dance is further complicated by the disparities in the approach to regulation across different nations, creating a fragmented landscape where global agreement seems like a distant dream. If we are going to make significant progress in regulation, we must move past the traditional concepts of sovereignty.

At the forefront of the regulatory paradox is the challenge of securing a global agreement on AI governance. The fragmented nature of the current regulatory landscape is a testament to the complexities involved in achieving international consensus. Different nations harbor varied perspectives on the deployment and control of AI technologies, influenced by their unique socio-political and economic contexts. While some countries advocate for stringent regulations to mitigate potential misuse and uphold ethical standards, others pursue a laissez-faire approach, fostering innovation and development at the risk of potential ethical transgressions.ii

International Regulatory Efforts

European Union AI Regulation Efforts

The EU AI Act is a proposed law by the European Commission to regulate the development and use of AI systems, particularly focusing on high-risk AI systems in industries such as HR, banking, and education. It aims to be the first comprehensive law worldwide that addresses AI regulation. Like the GDPR, the AI Act will impose heavy penalties for non-compliance and has an extra-territorial scope, affecting any enterprise operating in or selling into Europe. Organizations need to be prepared and ensure compliance with the Act’s provisions.

The regulation categorizes AI systems based on risk levels, including low or minimal risk, limited risk, high risk, and unacceptable risk. Low-risk systems, such as spam filters or AI- enabled video games, are already commonly used in the market. High-risk systems, which have a significant impact on users’ life chances, are subject to specific requirements. Examples of high-risk systems include those used in biometrics, critical infrastructure, education, employment, and access to essential services.

As of December 2022, the EU ministers have given the official green light to adopt a general approach to the AI Act. Negotiations between the European Council and Parliament will take place, and a deal is expected by February 2024. The European Commission has also requested that European standards organizations develop technical standards for AI Act compliance, with completion expected by 2024. The EU AI Act is expected to establish the global benchmark for AI regulation, focusing specifically on governing high-risk systems.

There may also be some contention between understanding where AI is being regulated in silo (EU AI Act) and how it is also being regulated through other pieces of legislation, both existing laws and those that have recently come into effect (i.e., the Digital Services Act and the Digital Markets Act).

United States AI Regulation Efforts

In recent years, the United States has made significant efforts to regulate AI and ensure its safety. One notable initiative is the publication of the Blueprint for an AI Bill of Rights iiiby the White House. Although nonbinding, this framework provides guidelines to designers, developers, and deployers of AI systems to protect against potential harm. The blueprint addresses principles such as safe and effective systems, algorithmic discrimination protection, data privacy, notice and explanation, and human alternatives and fallback options. However, it is currently a voluntary framework, rather than enforceable regulation.

The National Institute of Standards and Technology (NIST) also plays a crucial role in AI regulation. In line with an executive order, NIST has the responsibility for evaluating and assessing AI deployed or used by federal agencies to ensure consistency with American values and laws. NIST establishes benchmarks and develops AI standards. They will shape frameworks guiding government uses of AI based on their evaluation of public use cases.

The Federal Trade Commission (FTC) is expected to become a major player in regulating AI. The FTC has been investigating and holding companies accountable for their use or development of algorithms. They have brought complaints against companies like Facebook (now Meta) and Everalbum for violating privacy and deceptive practices. The FTC’s focus on dark patterns and deceptive technology aligns with their commitment to

protecting consumer rights. They are likely to continue addressing these issues and enforcing regulations in 2023, with potential civil penalties for violators.

The United States has seen state-level initiatives to regulate AI and address its potential harms. Although enforcement may be delayed sometimes, various states have passed legislation to mitigate risks associated with AI systems. However, the state-level landscape indicates that progress differs across states.

China AI Regulation Efforts

China has implemented several efforts to regulate AI. One of these is the Deep Synthesis Provisions,iv which came into effect in January 2023. These provisions apply to deep synthesis service providers and users, aiming to regulate the creation, duplication, publishing, and transfer of information generated by deep synthesis technologies. This comprehensive regulation covers every stage, from creation to dissemination, potentially influencing the development of deepfake regulation in other jurisdictions.

Another regulation is the Internet Information Service Algorithmic Recommendation Management Provisionsv. Enforced from March 2022, these provisions require providers of AI-based personalized recommendations in mobile applications to protect user rights, including minors, and allow users to control and delete personal characteristics tags.

These provisions forbid the algorithmic generation of fake news and impose special licensing requirements for online service providers operating in online news.

In September 2022, the Shanghai Regulations on Promoting the Development of the AI Industry were passed. These regulations establish a graded management system and sandbox supervision for testing and exploring AI technologies. They also offer flexibility regarding minor infractions, encouraging innovation without burdening companies with strict regulation. In addition, an Ethics Council is established to increase ethical awareness in the AI field and maintain checks and balances.

In Shenzhen, the Regulations on Promoting Artificial Intelligence Industry were passed to encourage governmental organizations to lead AI adoption and development. This regulation adopts a risk-management approach, allowing low-risk AI services and products to continue trials and testing even without local norms, as long as international standards are complied with. The development and management of a risk classification system, as well as emphasis on AI ethics and risk assessments, are key features of this regulation.

China’s efforts to regulate AI also aim to set global norms and standards. With a focus on the implications of digital services, recommender systems, and black box technology, China is making strides in addressing algorithmic harms and transparency. Through initiatives like the Algorithm Registry, China is at the forefront of understanding and

regulating AI algorithms. As global efforts to tackle algorithmic harms increase, other jurisdictions may look to China as a precedent in AI regulation.

United Kingdom AI Regulation Efforts

The United Kingdom (UK) has not yet proposed specific legislation to regulate the use of AI. However, the UK government has shown support for AI regulation through policy papers, frameworks, and strategies. The UK’s approach is context specific, meaning that AI regulation will be based on the use and impact of the technology, with responsibility for enforcement strategies delegated to the appropriate regulator(s). The government will provide broad definitions and principles for AI, including transparency, fairness, safety, security, privacy, accountability, and mechanisms for redress or contestability.

Regulators will have the freedom to define AI in their relevant sectors or domains.

Efforts in the UK include the establishment of The Algorithmic Transparency Recording Hub, which focuses on transparency in AI governance for public sector organizations. It helps these organizations provide clear information about the algorithmic tools they use. The Bank of England has also opened a consultation on its model risk management framework for banks, with a focus on managing the risks associated with the use of AI and machine learning in the financial sector.

The UK financial services industry is a significant case for regulating AI through existing legislation. Firms in this industry must ensure that their AI aligns with rules and guidelines set by regulatory bodies such as the Financial Conduct Authority (FCA) and the UK Equality Act, which prohibits discrimination based on protected characteristics. AI applications such as creditworthiness assessments and algorithmic trading are subject to scrutiny to avoid adverse outcomes and market distortions.

The UK government aims to cement the country’s role as an AI superpower in the next ten years. Emphasizing cooperation among government departments, consultation with technical experts, investment in infrastructure and education, and a dynamic approach, further advancements in AI governance are expected. While the current sectorial approach has been successful in relying on industry experts for regulation, there may be gaps in addressing the direct harms of AI without a central regulatory body. The UK’s approach tries to balance encouraging innovation, promoting transparency, and protecting consumers.

National Interest vs Global Progress Dilemma

There is a dichotomy between pursuing national strategic advantages and the potential impediment of progress. Nations are embroiled in a race to establish supremacy in the AI domain, viewing advancements in artificial intelligence as a pathway to economic prosperity and geopolitical influence. This competitive stance often clashes with the broader aim of fostering collaboration and knowledge sharing in the AI community. The tension between

individual national interests and global progression forms a complex nexus where the potential for cooperative evolution is continually being tested. Besides this problem, is the technical problem of AI Drift. “Drift” refers to when large language models (LLMs) behave in unexpected ways that stray away from the original parameters. This may happen because attempts to improve parts of complicated AI models cause other parts to perform worse. Models that meet regulatory standards today might drift in a direction that makes them non-compliant tomorrow. Adding to this dilemma is the unspoken fact that large AI companies now yield the same power as individual countries and must be part of any negotiated solution.

Opportunities for a Nuanced Approach to International Regulation of AI

Across this complex web of regulatory paradoxes lies an opportunity to create a path that embraces the multifaceted nature of AI. A nuanced approach to regulation might foster an environment that encourages innovation while upholding stringent ethical standards.

  1. Multi-stakeholder involvement: Recognize the importance of involving multiple stakeholders, including governments, tech companies, academic institutions, civil society organizations, and mediators from diverse backgrounds. Their perspectives can contribute to a more comprehensive and inclusive regulatory framework.
  2. Ethical guidelines: Emphasize the development of universal ethical guidelines for AI. Encourage countries and organizations to adopt ethical principles such as fairness, transparency, accountability, privacy, and safety. These guidelines can serve as a foundation for the responsible use and development of AI technologies.
  3. Flexibility and adaptability: Acknowledge the rapid pace of AI advancements and the need for regulatory frameworks to be flexible and adaptable. Establish mechanisms that facilitate regular reviews and updates to ensure the regulations remain relevant and effective in a fast-evolving AI landscape.

By fostering dialogues that bridge the gaps between different stakeholders, a collaborative framework can be envisioned. Like most international standards efforts, this will take time and commitment.

In conclusion, the paradox of AI regulation presents an intricate puzzle that demands a concerted effort from all stakeholders involved. As the world stands at the cusp of an AI revolution, the urgency to navigate the complexities of regulation becomes paramount. Through collaboration and a willingness to transcend individual interests, a balanced pathway that navigates the paradoxes of AI regulation might be forged. This pathway would foster an environment where innovation thrives alongside ethical considerations, steering the world towards a future where AI serves as a force for good, ushering in an era of unprecedented progress and prosperity.vi

i https://www.holisticai.com/papers/the-state-of-ai-regulations-in-2023

ii Ian Bremmer and Mustafa Suleyman, The AI Power Paradox, Foreign Affairs, September/October 2023 (26-43)

iii https://www.whitehouse.gov/ostp/ai-bill-of-rights/

iv https://www.loc.gov/item/global-legal-monitor/2023-04-25/china-provisions-on-deep-synthesis-technology- enter-into-effect/

v https://digichina.stanford.edu/work/translation-internet-information-service-algorithmic-recommendation- management-provisions-effective-march-1-2022/

vi https://press.un.org/en/2023/sc15359.doc.htm

                        author

Robert Bergman

Robert Bergman with Next Level Mediation provides full mediation services - including proprietary and confidential Decision Science (DS) analysis that assists each party in understanding their true litigation priorities as aligned with their business objectives. Each party receives a one-time user license to access our exclusive DS Application Cloud. We… MORE >

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