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EU AI Act: Arbitration and dispute resolution strategies for AI-related M&A, risk allocation and drafting considerations

Published on: 10 January 2025

Published by a Law360 reporter

Legal News

Article summary

EU AI Act could drive a rise in M&A arbitration activity

As the EU Artificial Intelligence Act (EU AI Act) begins to take hold, parties that prefer arbitration for resolving disputes in their M&A agreements would be well advised to weigh how that choice can function as a tool for risk management and mitigation in practice. Accordingly, deal participants selecting arbitration in their M&A deal agreement should take time to consider its use as a means of risk management.

EU AI Act

The long-awaited EU AI Act entered into force on 1 August 2024, with the bulk of its rules commencing in August 2026. The legislation is wide in scope and broadly affects EU-based companies that use or supply AI systems anywhere, international companies operating in the EU, and any company producing AI content that is used within the EU.

The Act sorts AI systems into risk tiers:

Unacceptable risk, e.g., cognitive-behavioural manipulation of individuals, for which the system is banned;
High risk, e.g., systems deployed in education or law enforcement, where a suite of regulatory safeguards applies, including record-keeping and transparency obligations;
Specific transparency risk, where a transparency duty applies;
Minimal risk, where no obligations apply.

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