Source: Simmons & Simmons

An analysis by the law firm Simmons & Simmons highlights the extensive extraterritorial scope of the European Union's AI Act, a critical consideration for businesses operating globally. The article explains that the regulation's obligations extend far beyond the EU's borders. Specifically, the Act applies to AI system providers and deployers located outside the Union if the output produced by their AI system is intended for use within the EU. This "Brussels Effect" means that companies worldwide may be subject to the Act's stringent rules.

This has significant compliance implications for international technology companies, particularly those based in North America and Asia that offer AI-powered services or products to European customers. Such companies will need to conduct thorough assessments to determine if their systems fall under the Act's jurisdiction, especially its rules for high-risk AI. If so, they may be required to appoint a legal representative within the EU and ensure their products meet the Act's requirements for transparency, data governance, and risk management to avoid substantial penalties.