EU AI Act raises global compliance stakes

The EU’s Artificial Intelligence Act came into full effect on Aug. 2, establishing what is described as the most comprehensive and strictest AI regulatory framework yet. Organizations that fail to comply face potential fines of as much as €35 million (SR153 million), or 7 percent of global revenue, and the law applies beyond Europe to entities whose AI systems are used in the EU or affect citizens or organizations in the 27 member states.

The law is already extending the “Brussels effect” to AI governance. Thomson Reuters Foundation’s AI Company Data Initiative, drawing on more than 100,000 data points from almost 3,000 organizations, found that about 47 percent of organizations citing the rules in governance disclosures are headquartered outside the EU. The tech sector accounts for nearly 40 percent of non-EU firms citing the law, while communication services and financial services total a combined 29 percent; in the US, tech firms rise to 53 percent.

The framework uses a risk-based, tiered model, with the toughest rules for systems posing the greatest risks to health, safety, and human rights. It adds data disclosure requirements, restricts facial recognition except for narrow law enforcement uses, bans AI for “social scoring,” prohibits systems that manipulate human behavior to bypass free will, and bars exploitation of vulnerable people based on age, disability, or economic situation.

Major companies including Google, Microsoft, xAI, and OpenAI have voluntarily adopted key parts of the framework to maintain access to the EU market. At the same time, the bloc continues to face criticism that heavier regulation may complicate its goal of improving tech-led innovation, productivity, and global competitiveness.