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Posted on 13 August 2024 in News > > Insurance

The insolvency of FWU Life Insurance Lux S.A. – a first stress test of the enhanced triangle of security?

In a rare occurrence in the insurance sector, the Commissariat aux Assurances (CAA) issued a news item dated 19 July 2024 which was published on its website (the CAA publication) to inform the public of the insolvency of the Luxembourg life insurance company FWU Life Insurance Lux S.A. (FLL).

This is only the second Luxembourg insurance undertaking to experience such difficulties, the first being Excell Life International S.A. (Excell Life), which was placed into judicial liquidation following a judgment on 12 July 2012 and had its authorisation to conduct insurance business withdrawn by ministerial order of 5 June 2012.

FLL is a wholly owned subsidiary of FWU AG, whose holding company is based in Munich (the group).

FLL’s difficulties are not unrelated to those of its parent company, as the group encountered critical liquidity problems and decided to cease its insurance activities in the European Union. This decision would require selling the group’s main entities, including FLL, over the next 9 to 12 months. The group has also been declared insolvent by a German tribunal due to its excessive debt. FLL has a claim of up to 50 million euros against the group.

FLL’s Board of Directors requested the transfer of 30 million euros to alleviate its liquidity problems from the group, which was unable to respond due to its own insolvency proceedings. Without the support of its sole shareholder, FLL stated that it is unable to meet its liquidity needs and its liabilities far exceed its available assets. As of 22 July 2024, FLL had assets of 1,095,926,823.28 euros and liabilities of 1,107,410,316.56 euros. According to FLL’s projections, the company would have been unable to pay its debts from the end of July if no measures had been taken.

During July, the CAA triggered an initial protection mechanism of the triangle of security aiming at protecting customers of Luxembourg insurance companies.

If FLL is wound up, this could well lead to the very first practical implementation of the triangle of security, as reformed and reinforced by the law of 10 August 2018 (the 2018 law) implementing the Insurance Distribution Directive and amending the law of 7 December 2015 on the insurance sector (the LIS).

 

The CAA publication

On 19 July 2024, FLL informed the CAA that it no longer complied with the Minimum Capital Requirement (MCR) and the Solvency Capital Requirement (SCR), as specifically required by the LIS.

Following this notification, the CAA decided on 23 July 2024 to freeze FLL’s assets matching technical provisions with the credit institutions to protect the interests of policyholders and beneficiaries (in accordance with Article 116 of the LIS) and prohibited FLL from paying any contractual benefits.

FLL was also instructed to submit a realistic short-term finance scheme to the CAA within a month (i.e. by 19 August 2024), for the CAA’s approval. The scheme would have to cover FLL’s plans to restore, within three months, the eligible basic own funds, at least to the level of the MCR.

FLL’s failure to submit a realistic finance scheme or to comply with such a scheme would lead to a procedure by the CAA to withdraw FLL’s authorisation to conduct insurance business (Article 113 (2) of the LIS).

 

The SOP judgment

In the meantime, on 24 July 2024, FLL also applied to the Luxembourg District Court to benefit from a stay of payment (SOP) as provided for in Articles 244 et seq. of the LIS.

A stay of payment may be ordered by the Luxembourg courts on the request of either the CAA or insurance undertaking itself in the following cases:

  1. when the insurance undertaking’s credit is impaired or it faces a liquidity deficit, and whether or not cessation of payments has occurred;
  2. when full performance of the insurance undertaking’s commitments is compromised; or
  3. when the insurance undertaking’s authorisation has been withdrawn but the decision is not yet final.

The purpose of a stay of payment is to allow the insurance company to suspend its payment obligations to most of its creditors, in order to allow it to seek a solution to improve its solvency during the stay. It also ensures that all payments are subject to the prior verification and approval of a supervisory commissioner.

The stay of payment proceeding is a reorganisation measure which is defined as “measures involving any intervention by the administrative or judicial authorities which are intended to preserve or restore the financial situation of an insurance undertaking and which affect pre-existing rights of parties other than the insurance undertaking itself, including but not limited to measures involving the possibility of a suspension of payments, suspension of enforcement measures or reduction of claims” (Article 229 2. of the LIS).

In a judgment rendered on 2 August 2024, docket number TAL-2024-06048 (the SOP judgment), the Luxembourg District Court granted FLL’s request and ordered the SOP which provides for the appointment of a supervisory commissioner and a 6-month stay of payment.

Under penalty of ity, the written authorisation of the supervisory commissioner is now required for all acts and decisions of FLL.

 

Risk of a judicial liquidation proceeding

The purpose of a stay of payment scheme, as mentioned above, is to restore the financial situation of an insurance company and thus avoid further judicial actions, particularly the commencement of a judicial liquidation proceeding with all its consequences. The stay of payment proceeding can be a (non-mandatory) prelude to a judicial liquidation which may be ordered in the following cases:

  • the stay of payment scheme was not capable of remedying the situation for which the scheme was introduced;
  • the insurance company’s financial position is undermined to the extent that it is no longer able to meet its commitments; and/or
  • the insurance company’s approval has been withdrawn by the CAA and the decision has become final.

As set out above, it follows from the SOP judgment that the stay of payment was ordered by the court mainly on the basis of FLL’s inability to satisfy its liquidity needs, which was partly due to the fact that the group could not honour the request for 30 million euros. FLL further stated to the court that it is in a liquidity crisis and/or that its creditworthiness is impaired. FLL also acknowledged that without a stay of payment scheme it would most certainly have been unable to meet its debts by the end of July.

Unless FLL improves its financial situation in the context of the SOP, it would appear that the sole outcome will be the commencement of judicial liquidation proceeding. Indeed, in light of the information available, it seems that at least the first condition for the commencement of winding-up proceedings would then be met, without prejudice to the other potential conditions for doing the same.

 

Reinforced triangle of security and holders of insurance claims’ protection

The LIS, however, provides for protection of insured parties, policyholders or beneficiaries (policyholders) and their insurance claims.

The most prominent protection of insurance claims, more commonly known as the “triangle of security”, is characterised by the conclusion of a tripartite custody agreement between the CAA, a custodian bank and the insurance undertaking and aims to enforce the principle of segregation of assets and ensure the availability of the assets, and thus the enforcement of the super-privilege granted by law to policyholders.

Firstly, the LIS provides that each insurance company must establish technical provisions with respect to all their obligations resulting from insurance contracts. To guarantee the payment of insurance claims, insurance companies must then segregate assets to a value at least equivalent to the technical provisions, known as assets matching technical provisions, and register the latter in a permanent inventory of matching assets.

Policyholders further benefit from a super-privilege as they have a preferential right on the segregated assets which takes precedence over any other preferential rights, including claims held by creditors such as public authorities. In the event of a winding-up of an insurance company, policyholders – as first-tier creditors – will therefore be paid preferentially from the proceeds of the liquidation of all matching assets allocated to their claim which cannot be used to repay other creditors.

Under the enhanced triangle of security mechanism as reformed by the 2018 law, unit-linked life insurance contracts and life insurance contracts with guaranteed rates correspond to separate pools of assets. In other words, the unit-linked pool will primarily be reserved for the execution of the commitments of the corresponding unit-linked life insurance contracts. In the case of an insurance company being wound up, policyholders of unit-linked insurance policies have a first lien on the proceeds from the realisation of the underlying assets. In practice, this would present itself as follows: consider a specific underlying asset – all policyholders whose contracts are linked to that asset will enjoy a joint first-ranking claim over the value of the asset held by the insurance company once liquidated. This asset’s liquidation proceeds are then allocated to these policyholders in accordance with the number of units that were linked to their contracts.

In case the underlying assets comprise unquoted assets, Luxembourg law allows liquidators to transfer the assets in kind (to the extent that the insurance contract so provides, or with the agreement of the policyholder) to the policyholders.

Beside this super-privilege, policyholders are also protected in case the assets covering the technical provisions are insufficient to guarantee payment of their claims, in which case they benefit from a lower ranking privilege to the company’s assets for outstanding amounts.

Through the custodian agreement, assets matching technical provisions are not only clearly segregated from the insurance company’s assets from a legal point of view, but also from a material standpoint, as the insurer is prohibited from holding these assets matching technical provisions itself and has to deposit such assets with a custodian bank.

The triangle of security has already been actioned by the CAA when it ordered the freezing of assets matching technical provisions with the custodian banks on 23 July 2024.

The triangle of security offers strong protection to FLL’s policyholders for the payment of their insurance claims.

 

And now?

The CAA has created a dedicated page on its website allowing the public to follow developments in the situation with FLL. This page can be consulted by following this link: https://www.caa.lu/fr/consommateurs/insolvabilite-de-fwu-life-insurance-lux-sa.

Please contact our team for any questions you may have in relation to FLL’s potential insolvency.

Posted on 25 July 2024 in News > > Media, Data, Technologies & IP

Running into the Future: How AI-Enhanced Wearables Are Redefining Paris Olympics

The Paris Olympics are just around the corner which give us a great opportunity to explore artificial intelligence used by connected devices in sport to highlight underlying legal issues.

Already during the Rugby World Cup in 2023, connected devices embedded in players’ jerseys revolutionised performance monitoring and injury prevention. Such technologies, and others like GPS vests in football (e.g. Barça GPS Tracker and CityPlay), have paved the way for even more sophisticated applications in sports.

The Paris Olympic Games are no exception. Athletes will not only be in the spotlight for their exceptional skills but also as early adopters of AI-enhanced wearable technology. These devices are transforming how athletes train, compete, and improve. They track everything from heart rates and oxygen levels to stride patterns and fatigue, offering insights that were once the domain of high-tech labs.

This brings up an important question: now that the Data Act Regulation (EU) 2023/2854 on harmonised rules on fair access to and use of data, and the AI Act Regulation (EU) 2024/1689 laying down harmonised rules on artificial intelligence are in force, amid the current sweltering summer temperatures, is it just as challenging to identify the new applicable obligations and to categorise the risk levels of the AI systems used by Olympic athletes?

 

1. Delving into the AI Act:

The AI Act ensures that artificial intelligence systems (or “AI systems”) used in the EU are safe, transparent, and respect people’s fundamental rights. This applies to all AI systems, whether or not integrated into technology, such as a wearable device.

The AI Act also introduces a risk-based approach, which means that the applicable rules depend on the systems’ risk levels.

AI systems are therefore classified into three or four levels of risk:

  • low-risk AI systems,
  • high-risk AI systems,
  • prohibited AI practices that are considered unacceptable, and
  • certain AI systems that are subject to transparency obligations (e.g. when it may be unclear if users are interacting with an AI system or a human).

The use of AI systems at the Paris Olympics poses various challenges with regards to the athletes’ privacy, protection of sensitive data, and transparency of algorithms. At the same time, identifying the categories of AI systems being used, and understanding the rules that apply to them, has become increasingly important.

While low-risk AI systems are mostly not covered by the AI Act and only need to meet transparency requirements whenever necessary, high-risk AI systems must comply with various requirements, including:

  • A risk management system to spot and assess health and safety risks,
  • Detailed technical documents,
  • Automatic record-keeping of the AI system’s activities throughout its life,
  • Clear instructions for those setting up the AI system, and
  • Tools that properly allow for controlling the AI system, etc.

We believe that AI systems used for the Paris Olympics will mainly be categorised as low or high-risk, requiring strict security and personal data protection controls, in the context of:

  • Performance analysis: AI systems can analyse athletes’ biomechanical and physiological data in real-time to optimise their training. Sensors integrated into sports equipment can collect detailed data on movements and efforts, helping trainers to adjust training programs in a personalised way. These systems are likely to be generally classified in the low-risk category, as they influence users’ decisions without impacting their safety or fundamental rights.
  • Injury prevention: AI algorithms can analyse health data and past injury records to predict injury risks and suggest preventive measures. This approach enables athletes to stay in better shape and avoids interruptions in their preparation. These AI systems will be classified as high-risk since they process sensitive personal data and have a direct impact on the health and safety of athletes.
  • Nutrition and recovery: AI and connected devices can also play a role in managing athletes’ nutrition and recovery. By analysing athletes’ nutritional needs and optimal recovery periods, AI systems can recommend tailored diet plans and recovery programs. Currently, these systems are generally low-risk AI systems. However, they may be subject to transparency obligations and requirements concerning the content they generate. Moreover, if these systems process sensitive health data or substantially influence athletes’ performance and physical recovery, they could also be classified as high-risk.

Data on health, nutrition, and recovery collected by wearable devices could subsequently be shared by the company selling or renting the devices, including with emergency and first aid services, as well as with insurance companies that provide coverage to athletes. The Data Act governs how this data is managed and shared with these entities.

 

2. Delving into the Data Act:

The Data Act aims to set up a harmonised framework for sharing and using data across all business areas within the EU. It ensures that all types of data (personal and non-personal data alike) are shared fairly, securely and in a way that respects individual rights.

For example, during training, connected devices gather a lot of athletes’ data, which helps optimise their overall performance. This data may be shared with many different stakeholders for processing. This data may be shared in various contexts, such as:

  • Business to consumer data sharing,
  • Business to business data sharing, and
  • Business to public sector data sharing (a public sector body, or an EU institution).

In this regard, the Data Act requires data collected by devices and shared with others to adhere to strict measures, ensuring sensitive information is secure and correctly used:

  • The company selling or renting the device must inform users what data it collects, including the data types and volume,
  • Users must be able to access their data quickly and without paying anything for such access,
  • If rules are not followed, users can complain to specific authorities,
  • Users can ask that their data be shared with a third party (e.g. an insurance company), and
  • The third parties that receive data can only use it for the agreed reasons, etc.

 

We believe that the use of AI in connected devices will be an integral part of these Olympic Games. This will undoubtedly mark an important milestone in the eyes of the public in terms of the undeniable benefits that AI can provide.

The flip side of the coin is the need for these technologies to comply with the AI Act, the Data Act and finally the GDPR, which leads to the conclusion that robots must, in their own way, pass an anti-doping test!

The legal framework applicable to new technologies and the protection of data, either personal or not, is complex – and an area in which MOLITOR’s Media, Data, Technology, and IP team can offer comprehensive expertise.

Please contact us if you require our legal assistance in complying with and navigating the complexities of the GDPR, and the AI Act and the Data Act Regulations.

 

Posted on 21 June 2024 in News > > Real Estate, Construction & Urban Planning

Adapting to changes in the real estate and construction market

Stéphanie Juan, Partner and head of the “Real estate, construction and urban planning” department of the law firm MOLITOR Avocats à la Cour in Luxembourg, shares her perspective on the real estate and construction market.

This year, you are celebrating your 18-year work anniversary. Such loyalty to a company is increasingly rare these days. How have you achieved this?

I began my professional career with our firm in 2006 after obtaining my doctorate in public law at the University of Metz. Having always been interested in legal matters, becoming a lawyer was a natural choice from my first experience with the profession.

My loyalty is based on different pillars. Above all, it is linked to full adherence to the fundamental values ​​of the firm: service excellence, integrity and trust, teamwork, and approachability. These values ​​motivate my commitment to our clients and colleagues and promote an environment conducive to professional development.

Added to these values ​​are independence of mind and freedom of initiative, which are two strong markers of our firm. I have had the opportunity to be in charge of the real estate department for more than 10 years, to leave my mark on it, and to build a dedicated team.

Finally, giving great importance to the quality of work rather than essentially quantitative objectives is in line with my professional tenets.

Your expertise is in real estate law and construction. Beyond the crisis the sector is currently going through, what trends do you predict for 2024/2025?

Like many European countries, the Luxembourg real estate and construction sector has indeed come to a significant halt since the end of 2021 due to a combination of factors that no longer need to be explained.

These factors have led to the freezing of development projects as well as financial difficulties for players in the construction market and an increase in the number of bankruptcies.

This crisis has naturally affected the transactional aspect of our real estate practice, whereas our support for clients in matters of leases and real estate litigation is conversely sustained.

Finally, we observe two growing trends in parallel. The first relates to the importance of ESG criteria for industry stakeholders. In this context, securing contractual documents (leases, sales contracts, construction contracts) is essential.

The second trend concerns a new real estate offering. Having already emerged in other European countries (Netherlands, France and Belgium), “co-living” is materialising in Luxembourg. Based on an economy of shared living spaces, co-living is aimed at young professionals, as well as people on secondment, or people who do not wish to live alone. Such residences are developing in the Grand Duchy, providing a solution to the problems of tension in the real estate market and diversification of investments.

How does MOLITOR support its clients in this unstable environment?

I could talk to you again about our entrepreneurial spirit or the quality of our teams, which are of course important elements. However, what characterises us and what we instil in our teams is the desire to understand the real needs of clients as well as the constraints they face. Listen, obviously, but above all, ask questions. Being authentically interested allows us to create a lasting and trusting relationship.

Added to this is a conception of time that I would describe as long term. We are not looking at a relationship over the next 6, 12 or 24 months but over the next 3, 5 or even 10 years, reflecting the seniority of our partners and certain members of our teams.

Brand Voice 21rst June 2024 – Paperjam & Delano – Luxembourg

Posted on 18 June 2024 in News > > German Desk

Besteuerung der Überstunden von Grenzgängern mit Wohnsitz in Deutschland

 

Am 11. Januar 2024 haben Luxemburg und Deutschland eine Konsultationsvereinbarung unterzeichnet (die „Konsultationsvereinbarung “), um die Anwendungsmethode des Abkommens zur Vermeidung der Doppelbesteuerung und zur Verhinderung von Steuerhinterziehung auf dem Gebiet der Steuern vom Einkommen und vom Vermögen zu klären, das zwischen den beiden genannten Ländern am 23. April 2012, in der geänderten Fassung, unterzeichnet wurde (das “Abkommen“).

Das Abkommen sieht die Möglichkeit vor, dass Deutschland Einkommen oder ein Teil der Einkommen besteuern kann, die normalerweise nur in Luxemburg steuerpflichtig sind und in Deutschland steuerfrei bleiben. Diese Besteuerung erfolgt jedoch nur, wenn Luxemburg keine Steuer auf diese Einkommen erhebt.

Gemäß den Bestimmungen der Konsultationsvereinbarung wird Deutschland nun Überstundenlöhne von Grenzgängern, die in Deutschland ansässig sind, besteuern, auch wenn diese Überstunden in Luxemburg geleistet wurden. Diese Regelung gilt selbst dann, wenn das Grundgehalt dieser Grenzgänger vollständig in Luxemburg steuerpflichtig ist, was zutrifft, wenn der Grenzgänger ausschließlich auf luxemburgischem Gebiet gearbeitet hat oder die Toleranzgrenze von 34 Arbeitstagen außerhalb des Großherzogtums Luxemburg nicht überschritten hat.

Zur Erinnerung: Nach der derzeitigen luxemburgischen Steuergesetzgebung sind Überstundenlöhne vollständig von der Einkommensteuer befreit. Solange Luxemburg diese Überstunden von der Einkommensteuer befreit, werden sie für Grenzgänger, die in Deutschland leben, in Deutschland steuerpflichtig sein.

Es ist wichtig, darauf hinzuweisen, dass gemäß Punkt VIII. 2. der Konsultationsvereinbarung diese Bestimmungen für alle Fälle gelten, die zum Zeitpunkt des Inkrafttretens der Konsultationsvereinbarung noch nicht endgültig abgeschlossen oder Gegenstand eines Schlichtungsverfahrens zwischen den Steuerbehörden der beiden Länder sind, was in einigen Fällen zu einer rückwirkenden Besteuerung führen kann.

Es bleibt jedoch unklar, ob die deutschen Steuerbehörden auch andere Einkommen oder Einkommensbestandteile besteuern werden, die in Luxemburg vollständig steuerfrei sind, wie z.B. Abfindungen, Essensgutscheine oder Zinszuschüsse, da die Konsultationsvereinbarung im Gegensatz zum dem Thema Überstunden hierzu keine Regelungen trifft.

Es kann jedoch festgehalten werden, dass gemäß Punkt VII.1. der Konsultationsvereinbarung andere Vergütungsbestandteile, die nur teilweise von der Einkommensteuer in Luxemburg befreit sind, wie Nacht-, Sonntags- und Feiertagszuschläge, von diesen neuen Bestimmungen nicht betroffen sein werden, da die Konsultationsvereinbarung klarstellt, dass diese Bestandteile vollständig in Luxemburg besteuert werden sollen.

Diese Problematik und die in der Praxis festgestellten Anwendungsschwierigkeiten sind derzeit Gegenstand zahlreicher Debatten und Initiativen seitens der luxemburgischen Gewerkschaften und Arbeitgeberverbänden.

In diesem Zusammenhang hat das luxemburgische Finanzministerium in einer Stellungnahme vom 4. April 2024 zum Verzicht auf die Anwendung eines im deutschen Steuerrecht vorgesehenen spezifischen Freibetrags klargestellt, dass die luxemburgischen und deutschen Behörden einen engen Austausch über die Anwendung des Abkommens zur Vermeidung der Doppelbesteuerung pflegen werden.

 

 

 

 

Posted on 29 February 2024 in News > > Banking & Finance > Business & Commercial > Employment, Pensions & Immigration > Insurance > Litigation & Dispute Resolution

MOLITOR Avocats à la Cour celebrates its 25th anniversary

Since our creation just over 25 years ago (28 to be precise), we have focused on advising companies and their founders or shareholders, both locally and internationally.

What are the foundations of your firm, which has just celebrated its 25th anniversary?

To put it succinctly: we are a firm of entrepreneurs for entrepreneurs. On a day-to-day basis, we put this approach into practice by relying on our four values: integrity and trust, service excellence, teamwork and approachability.

Our aim was to establish a highly respected and sought-after practice by adopting an approach that is demanding of ourselves and tolerant of others, while preserving the independence intrinsic to the legal profession.

These solid foundations have enabled us to evolve and to be called upon for all matters relating to business law in Luxembourg – from employment law and real estate/construction law to insurance, corporate M&A and banking law – as regards both providing advice and/or assisting with litigation.

How have you grown over the past 28 years?

Our development has been and still is based on building an international network. These partnerships abroad are a considerable asset, both for advising foreigners investing in Luxembourg and for serving our clients with confidence when they are faced with issues abroad, whatever the jurisdiction.

At the same time, we have gradually diversified and expanded our teams in order to enhance our range of services, exclusively dedicated to the business world, to the point where we have become a ‘full service’ firm. In recent years, we have set up an IP/IT media department and a tax department.

Finally, an important guiding principle has been ongoing investment in technological solutions. Our constant concern is to provide all team members with relevant tools so that they can work efficiently while focusing on the quality of their work. We are currently testing a number of artificial intelligence-based solutions, some of which are aimed at knowledge management, while others focus on practical issues that make life easier for our team on a day-to-day basis.

A few words about the future?

We will certainly remain uncompromising about our values. We take pride in them every day in our interactions with our clients and within our team.

Having said that, what is our vision for the future? To continue our growth by keeping abreast of changes in legislation, our clients’ needs and the sometimes rapid changes taking place in our national and international environment.

So we are, and always will be, seeking to adapt, bearing in mind that the future must be inspired by our past.

 

Brand Voice 29th February 2024 – Paperjam & Delano Luxembourg

Posted on 31 January 2024 in News > > Media, Data, Technologies & IP

FROM MINIMAL RISK TO PROHIBITED PRACTICES: THE AI ACT RISK SPECTRUM FOR AI SYSTEMS

Join us as we uncover the latest insights into the European Union’s (the ‘EU’) ground-breaking Artificial Intelligence Act, in the wake of the leak of its most recent consolidated version on 26 January 2024 [i]. We delve herein into the core objectives, risk-based categorisation, and key provisions of this text, originally proposed by the European Commission on 21 April 2021 and now nearing adoption (the ‘AI Act’).

Starting with its primary objective, the AI Act aims to enhance the functioning of the internal market by establishing a uniform legal framework for the development, marketing, and use of artificial intelligence systems (the ‘AI systems’) within the EU. This framework is to be applied in accordance with EU values, to ensure a high level of protection of health, safety and fundamental rights enshrined in the Charter of Fundamental Rights of the EU.

The AI Act introduces a risk-based approach for AI systems, similar to the GDPR’s data protection rules. This approach distinguishes three AI systems, based on the risk posed by their usage: Low or Minimal Risk AI Systems, High-Risk AI Systems, and Prohibited (or unacceptable) AI Systems. Occasionally, a fourth level is also mentioned in some papers published online: the ‘transparency risk’ or ‘limited risk’.

This risk differentiation stands out from Recital (14) of the AI Act, which currently states the following:

“It is therefore necessary to prohibit certain unacceptable artificial intelligence practices, to lay down requirements for high-risk AI systems and obligations for the relevant operators, and to lay down transparency obligations for certain AI systems”.

Below is a table detailing the three risk levels of AI systems, along with examples of AI systems for each risk level, and listing some requirements and obligations associated with each of those levels.

Tableau-1.png (682×449)

Tableau-2.png (682×925)

 

Tableau-4.png (682×897)

Tableau-5.png (682×600)

 

The AI Act also briefly touches upon the so-called general-purpose AI systems.

These AI systems are based on or integrate a general-purpose AI model with the capability of serving a variety of purposes (Article 3(44e) AI Act; Recital (60d) AI Act). However, the AI Act contains no specific requirement or obligation for general-purpose AI systems. Instead, it focuses on general-purpose AI models, which serve as a foundation of these general-purpose AI systems. This may include some of OpenAI’s ChatGPT models.

A general-purpose AI model may be placed on the market in various ways, including through libraries, application programming interfaces (APIs) or as a direct download (Recital (60a) AI Act). They allow for flexible generation of content (such as text, audio, images, or video) and can readily accommodate a wide range of tasks (Recital (60c) AI Act).

General-purpose AI models are essential components of some AI systems, but they do not constitute AI systems on their own – notably because they lack further components to be considered as such, for example, a user interface (Recital (60a) AI Act). Therefore, contrary to what some papers may suggest, they are not inherently an AI system, nor do they fall in one of the existing three risk categories of AI systems.

Providers of general-purpose AI models are nevertheless subject to specific requirements and obligations (Article 52c AI Act), including draw up technical documentation, a policy to respect EU copyright law, and a detailed summary about the content used for training. Furthermore, since general-purpose AI models may be integrated or form part of many different AI systems (including high-risk AI systems), they may pose a systemic risk. In such cases where the AI model meets the criteria to be classified as having a systemic risk, providers are subject to additional obligations (Articles 52d and 52e AI Act).

When the provider of a general-purpose AI model integrates their model into their own AI system, the obligations provided for general-purpose AI models may apply in addition to those for AI systems (Recital (60a) AI Act).

In conclusion, the EU’s AI Act represents a significant step forward in the regulation of AI systems. Its goal is to bring the rules for the development, marketing, and use of these systems into uniformity within the EU while maintaining a high level of protection for health, safety, and fundamental rights of EU citizens.

It also presents new opportunities and challenges, for which MOLITOR’s Media, Data, Technology, and IP team can offer its comprehensive expertise. On the one hand, we can assist clients in understanding and complying with the AI Act, particularly with high-risk AI systems and transparency obligations. On the other hand, we can assist you in either exercising your personal data rights or complying with the GDPR’s obligations relating to personal data in the AI field. This includes the drafting of terms and conditions for the deployment and usage of AI systems, as well as privacy policies and data processing agreements.

Please contact us should you require our assistance in complying with and navigating the complexities of AI regulations.

[i] Consolidated version dated 26 January 2024 of the Artificial Intelligence Act

Posted on 21 December 2023 in News > > Media, Data, Technologies & IP

IP News: All that glitters is not gold

While glitter may be perfect for festive make-up and adds a bit of shine to our lives, these sparkles are extremely harmful to the environment. Regulations governing cosmetics in the European Union are set to evolve, bringing new compliance obligations. Our team recognizes the challenges this transition poses for the cosmetic industry and is ready to support you in this context.

For several years, the Council has urged the Commission to propose measures to reduce plastic debris in the marine environment, including banning polymers in cosmetic products[1]. In response, the Commission adopted a plastics strategy in January 2018[2], reaffirmed in the European Green Deal[3] in December 2019, the new Circular Economy Action Plan in March 2020[4], and the Zero Pollution Action Plan in May 2021[5], with the goal of reducing microplastic pollution by 30% by 2030.

To combat this pollution whilst preserving market unity, the Commission asked the European Chemicals Agency (ECHA) to assess the risks related to microplastics which are intentionally added to products[6]. ECHA’s findings advocated the introduction of a limitation[7], and armed with this scientific data, the Commission proposed a restriction under the REACH regulation[8]. This proposal garnered support from EU Member States, passed through the European Parliament and Council successfully and was ultimately adopted[9].

On 25 September 2023[10], the European Commission took a significant step towards environmental protection by adopting measures restricting the intentional use of microplastics[11] in products. This directly impacts our cosmetics, especially those using microplastics for various purposes such as exfoliants (microbeads) or for specific texture, fragrance, or colour properties[12].

In practical terms, as of 16 October 2023[13], loose glitter and products containing certain types of microbeads can no longer be sold in the European Union. Unlike our German neighbours, there’s no need to rush to stock up on glitter[14]. In addition to the possibility of sourcing from the United Kingdom, where the ban does not apply, various ecological alternatives exist.

As for the glitter in our make-up products, lipsticks, and nail polish, the sales ban will take effect after an extended period of 12 years[15]. Due to the costs of formulating these products and their less significant contribution to overall plastic emissions, the 12-year transitional period before they are banned is designed to ensure an adequate timeframe for the development of suitable alternatives while limiting costs for the industry.

As mentioned earlier, the EU’s goal is not to eliminate all glitter but rather to substitute it with eco-friendly alternatives, in line with the aim to make Europe the first carbon-neutral continent by 2050[16]. In this context, we offer specific expertise to guide you in adapting to the new regulations while preserving your competitiveness. From advising on developing environmentally-friendly alternatives to ensuring compliance with European standards, we can help you with ensuring that your company’s star shines bright in this glittering world. So, ready to shine while staying green?

The MOLITOR Media, Data, Technologies & IP team wishes you a Merry Christmas and a happy holiday season!

Virginie, Caroline and Ruben

[1] https://www.consilium.europa.eu/media/24073/st_7348_2017_rev_1_en.pdf

[2] Communication from the Commission to the European Parliament, the Council, the European

Economic and Social Committee and the Committee of the Regions: A European Strategy for Plastics

in a Circular Economy (COM/2018/028 final).

[3] Communication from the Commission to the European Parliament, the European Council, the Council,

the European Economic and Social Committee and the Committee of the Regions: The European Green

Deal (COM/2019/640 final).

[4] Communication from the Commission to the European Parliament, the Council, the European

Economic and Social Committee and the Committee of the Regions: A new Circular Economy Action

Plan for a cleaner and more competitive Europe (COM/2020/98 final).

[5] Communication from the Commission to the European Parliament, the Council, the European

Economic and Social Committee and the Committee of the Regions: Pathway to a Healthy Planet for

All EU Action Plan: ‘Towards Zero Pollution for Air, Water and Soil’ (COM/2021/400 final).

[6]Commission request of 9 November 2017 asking the European Chemicals Agency to prepare a

restriction proposal conforming to the requirements of Annex XVII to REACH.

https://echa.europa.eu/documents/10162/5c8be037-3f81-266a-d71b-1a67ec01cbf9

[7]https://echa.europa.eu/documents/10162/db081bde-ea3e-ab53-3135-8aaffe66d0cb

[8] https://eur-lex.europa.eu/legal-content/FR/TXT/?uri=CELEX%3A02006R1907-20140410

[9]https://single-market-economy.ec.europa.eu/system/files/2023-09/C_2023_6419_F1_COMMISSION_REGULATION_UNDER_ECT_EN_V5_P1_2620969.PDF

[10]https://france.representation.ec.europa.eu/informations/protection-de-lenvironnement-et-de-la-sante-la-commission-adopte-des-mesures-pour-limiter-les-2023-09-25_fr

[11] Microplastics include all organic particles of synthetic polymers less than 5 mm in size, insoluble and resistant to degradation.

[12]Recital 21 – C(2023) 6419 – Commission Regulation (EU) …/… amending Annex XVII to Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) as regards synthetic polymer microparticles.

[13]Article 2 – C(2023) 6419 – Commission Regulation (EU) …/… amending Annex XVII to Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) as regards synthetic polymer microparticles.

[14] https://www.forbes.fr/politique/interdiction-des-paillettes-en-europe-lue-sattaque-aux-plastiques/

[15]Recital 35 – C(2023) 6419 – Commission Regulation (EU) …/… amending Annex XVII to Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) as regards synthetic polymer microparticles

[16]https://www.consilium.europa.eu/en/policies/green-deal/#:~:text=The%20European%20Green%20Deal%20is%20a%20package%20of%20policy%20initiatives,a%20modern%20and%20competitive%20economy.

Posted on 19 December 2023 in News > > Media, Data, Technologies & IP

IP News : Où sont passées les paillettes ?

Les paillettes, idéales pour un make-up festif, voient leur éclat s’obscurcir dans l’Union Européenne. Si les paillettes ajoutent un peu d’éclat à notre vie, ces pépites scintillantes sont extrêmement néfastes pour l’environnement.

La réglementation cosmétique à vocation à évoluer et occasionnera de nouvelles obligations de mise en conformité. Notre équipe reconnaît les défis que cette transition impliquera pour les acteurs de l’industrie cosmétique et répondra présente pour vous accompagner dans ce contexte.

Depuis plusieurs années, le Conseil a incité la Commission à proposer des mesures visant à réduire les rejets de débris plastiques dans le milieu marin, notamment en interdisant les polymères dans les produits cosmétiques[1]. En réponse, la Commission a adopté une stratégie sur les plastiques en janvier 2018[2], réaffirmée dans le Green Deal Européen[3] en décembre 2019, du nouveau plan d’action pour l’économie circulaire en mars 2020[4] et du plan d’action pour une pollution zéro en mai 2021[5], fixant l’objectif de réduire la pollution par les microplastiques de 30 % d’ici à 2030.

Pour mener cette lutte tout en préservant l’unité du marché, la Commission a confié à l’Agence européenne des produits chimiques (ECHA) le mandat d’évaluer les risques liés aux microplastiques intentionnellement ajoutés aux produits[6]. Les conclusions de l’ECHA ont plaidé en faveur de leur restriction[7], et la Commission, armée de ces données scientifiques, a formulé une proposition de restriction en vertu du règlement REACH[8]. Cette proposition a obtenu le soutien des États membres de l’UE, a franchi avec succès l’examen du Parlement européen et du Conseil, pour finalement être adoptée[9].

 

Le 25 septembre 2023[10], la Commission Européenne a franchi une étape importante pour la protection environnementale en adoptant des mesures restreignant l’utilisation intentionnelle des microplastiques[11] dans les produits. Cela impacte directement nos cosmétiques, notamment ceux utilisant des microplastiques à des fins multiples, tels que les exfoliants (microbilles) ou pour des propriétés de texture, parfum, ou couleur spécifiques[12].

Concrètement, depuis le 16 octobre 2023[13], les paillettes en vrac[14] et les produits contenant certains types de microbilles ne peuvent plus être vendus dans l’Union Européenne. Contrairement à nos voisins allemands, pas besoin de se précipiter pour faire le plein de paillettes[15] : en plus de la possibilité d’approvisionnement au Royaume-Uni, où l’interdiction ne s’applique pas, diverses alternatives écologiques existent.

En ce qui concerne les paillettes présentes dans nos produits de maquillage, rouges à lèvres, et vernis à ongles, l’interdiction de vente prendra effet après une période plus étendue[16]. En raison des coûts de reformulation de ces produits et de leur contribution moindre aux émissions globales de plastiques, une période transitoire de 12 ans est accordée pour l’interdiction de la mise sur le marché de ces produits, assurant ainsi un délai adéquat pour le développement d’alternatives appropriées tout en limitant les coûts pour l’industrie.

Comme évoqué précédemment, l’objectif de l’Union Européenne n’est pas d’éliminer toutes les paillettes, mais plutôt de les substituer par des alternatives écologiques, alignées sur la volonté de faire de l’Europe le premier continent neutre en carbone d’ici 2050[17]. Dans ce contexte, nous offrons une expertise spécifique pour vous guider dans l’adaptation aux nouvelles réglementations, tout en préservant votre compétitivité. Du développement d’alternatives respectueuses de l’environnement à l’assurance de la conformité aux normes européennes, nous pouvons vous assister pour que votre entreprise demeure la star incontestée du monde pailleté. Alors, prêts à briller tout en restant green ?

L’équipe Media, Data, Technologies & IP de MOLITOR vous souhaite un joyeux Noël et de belles fêtes de fin d’année !

Virginie Caroline et Ruben.

 

[1]  https://www.consilium.europa.eu/media/24073/st_7348_2017_rev_1_en.pdf

[2] Communication from the Commission to the European Parliament, the Council, the European

Economic and Social Committee and the Committee of the Regions: A European Strategy for Plastics

in a Circular Economy (COM/2018/028 final).

[3] Communication from the Commission to the European Parliament, the European Council, the Council,

the European Economic and Social Committee and the Committee of the Regions: The European Green

Deal (COM/2019/640 final).

[4] Communication from the Commission to the European Parliament, the Council, the European

Economic and Social Committee and the Committee of the Regions: A new Circular Economy Action

Plan for a cleaner and more competitive Europe (COM/2020/98 final).

[5] Communication from the Commission to the European Parliament, the Council, the European

Economic and Social Committee and the Committee of the Regions: Pathway to a Healthy Planet for

All EU Action Plan: ‘Towards Zero Pollution for Air, Water and Soil’ (COM/2021/400 final).

[6] Commission request of 9 November 2017 asking the European Chemicals Agency to prepare a

restriction proposal conforming to the requirements of Annex XVII to REACH.

https://echa.europa.eu/documents/10162/5c8be037-3f81-266a-d71b-1a67ec01cbf9

[7] https://echa.europa.eu/documents/10162/db081bde-ea3e-ab53-3135-8aaffe66d0cb

[8] https://eur-lex.europa.eu/legal-content/FR/TXT/HTML/?uri=CELEX:02006R1907-20150601&from=FR

[9] https://single-market-economy.ec.europa.eu/system/files/2023-09/C_2023_6419_F1_COMMISSION_REGULATION_UNDER_ECT_EN_V5_P1_2620969.PDF

[10] https://france.representation.ec.europa.eu/informations/protection-de-lenvironnement-et-de-la-sante-la-commission-adopte-des-mesures-pour-limiter-les-2023-09-25_fr

[11] Les microplastiques englobent toutes les particules organiques de polymères synthétiques de moins de 5 mm, insolubles et résistantes à la dégradation.

[12] Considérant 21 – C(2023) 6419 – Commission Regulation (EU) …/… amending Annex XVII to Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) as regards synthetic polymer microparticles.

[13] Article 2 – C(2023) 6419 – Commission Regulation (EU) …/… amending Annex XVII to Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) as regards synthetic polymer microparticles.

 [15] https://www.forbes.fr/politique/interdiction-des-paillettes-en-europe-lue-sattaque-aux-plastiques/

[16] Considérant 35 – C(2023) 6419 – Commission Regulation (EU) …/… amending Annex XVII to Regulation (EC) No 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) as regards synthetic polymer microparticles

[17] https://www.consilium.europa.eu/en/policies/green-deal/#:~:text=The%20European%20Green%20Deal%20is%20a%20package%20of%20policy%20initiatives,a%20modern%20and%20competitive%20economy.

Posted on 26 October 2023 in News > > Media, Data, Technologies & IP

Empowering Consumers for a Green Tomorrow

Towards sustainable choices: navigating the EU’s green transition strategies

Sustainability is a crucial asset for modern businesses, with 56% of European consumers being influenced by environmental factors to varying degrees when purchasing goods and services[1]. However, despite the emphasis on ecological considerations, misleading advertising remains a persistent concern for European consumers. This deceptive practice, known as greenwashing, involves organisations creating a false impression of ecological responsibility, often by using brand names or unsubstantiated environmental claims. Several fashion brands, including H&M[2], Nike[3], Boohoo, ASOS and Asda[4], have found themselves under the greenwashing radar in recent years. The increasing number of such cases indicate a pressing requirement for more straightforward guidelines for businesses and the legal system.

On 19 September 2023, the Council and the Parliament reached a provisional political agreement[5] on the proposal for a directive to empower consumers for a green transition. While the detailed content of this agreement is not yet available, it is anticipated the directive will enable the EU consumers to:

  • Access Reliable Information: Consumers will have access to reliable information, facilitating informed decisions regarding making green choices;
  • Protection Against Unfair Green Claims: Measures will be implemented to shield consumers against unfair green claims better; and
  • Product Repairability Information: Consumers will receive improved information about the repairability of products before making a purchase.

Additionally, the directive will introduce a harmonised label displaying information about producers’ commercial durability guarantee.

The Council affirms that this compromise agreement seamlessly aligns with the core objectives outlined in the Commission’s initial proposal of 30 March 2022[6]. The proposal demonstrates a pivotal effort to bolster consumers’ rights by amending the unfair commercial practices directives (2005/29/CE[7]) and the consumer rights directive (2011/83/EU[8]), tailoring them to propel the green transition.

Rooted in the vision of a circular, clean, and sustainable European economy, these objectives empower consumers to make ecologically informed choices. This agreement signifies a significant stride toward cultivating a marketplace in which environmental awareness guides consumer decisions, marking a crucial advancement in pursuing an eco-conscious society.

Next steps: green consumer empowerment ahead

The Parliament and the Council must formally endorse and adopt the provisional agreement to complete the legislative process. The Parliament is anticipated to take a decision during a plenary session in November 2023. Subsequently, member states will have a two year period to transpose the directive into their national laws.

The interconnected initiatives driving sustainability

It is crucial to emphasise that this directive is not an isolated effort but is embedded within a broader framework of European initiatives. The proposal constitutes one of the initiatives outlined in the Commission’s 2020 New Consumer Agenda and 2020 Circular Economy Action Plan, building upon the principles of the European Green Deal. It operates within a comprehensive package of four proposals, complemented by the eco-design regulation[9] and the directive proposals addressing green claims[10] and the right to repair[11]. These initiatives represent a cohesive strategy to foster a sustainable, circular, and environmentally conscious European economy.


[1]European Commission, Key consumer data: The European Commission is providing new information to assess consumers’ needs in the Single Market and their response to multiple crises, 27 March 2023.

[2]https://www.thesustainablefashionforum.com/pages/hm-is-being-sued-for-misleading-sustainability-marketing-what-does-this-mean-for-the-future-of-greenwashing

[3] https://www.retaildive.com/news/nike-faces-lawsuit-greenwashing-claims/650282/

[4]https://www.gov.uk/cma-cases/asos-boohoo-and-asda-greenwashing-investigation

[5]Council of the EU, Council and Parliament reach a provisional agreement to empower consumers for the green transition, Press release, 19 September 2023.

[6]https://data.consilium.europa.eu/doc/document/ST-7808-2022-INIT/en/pdf

[7]Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005, concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’) (Text with EEA relevance).

[8]Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011, on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council Text with EEA relevance.

[9]https://environment.ec.europa.eu/publications/proposal-ecodesign-sustainable-products-regulation

[10]https://environment.ec.europa.eu/publications/proposal-directive-green-claims_en

[11]https://commission.europa.eu/law/law-topic/consumer-protection-law/consumer-contract-law/rules-promoting-repair-goods_en

 

Posted on 24 October 2023 in News > > Media, Data, Technologies & IP

AI Act and GDPR: managing the world of data in the world of privacy

Article published with INPLP.

Contrary to some persisting beliefs that the AI Act and GDPR are inherently incompatible, GDPR may in fact be interpreted in a way that concords with the purposes of the AI Act. Processing personal data through an artificial intelligence (AI) system’s algorithm triggers the application of GDPR.

I systems are designed to operate with a certain level of autonomy, that is, without human involvement (Recital (6) AI Act).

They infer how to achieve a given set of objectives without being explicitly programmed to attain it, thanks to machine learning, logic-based approaches and knowledge-based methods (Article 3 AI Act).

An AI system requires the training of a computational model to perform specific tasks or to make predictions based on data that has been collected, cleaned, normalised, extracted and validated.

Some AI systems may be trained with data to:

– play a board game,

– to drive vehicles,

– to execute simple voice commands, and

– to generate text-based content.

To that end, AI systems, particularly those rooted in deep learning, rely on vast amounts of data to efficiently:

– identify patterns,

– develop probabilistic models, and

– deliver accurate results.

Data used to train AI systems or provided to them as input often includes personal data, including sensitive personal data, which presents significant privacy concerns and must therefore be compliant with GDPR.

THE QUESTION WE MIGHT ASK IS WHETHER THE AI ACT AND GDPR ARE COMPATIBLE?

The current version of the AI Act explicitly provides that GDPR principles apply to training, validation, and testing datasets of AI systems (Recital (44a) AI Act). Moreover, it underscores that the AI Act in no way affects the obligations of AI providers/users as data controllers or processors (Recital (58a) AI Act). But it is a major challenge for AI system providers to comply with GDPR principles. We will mainly focus on the principle of lawfulness as an exercise to understand whether it is possible to comply with one key GDPR principle.

The principle of lawfulness essentially provides that personal data must be processed in a lawful, fair, and transparent manner (Art. 5.1(a) GDPR). Prior to undertaking data processing, any person or organisation (company, non-profit organisation, foundation, etc.) must therefore identify a legal basis for it from the six bases provided by the GDPR (Art. 6.1 GDPR):

– consent,

– performance of a contract,

– legal obligation,

– vital interests,

– public task, and

– legitimate interests.

Establishing a legal basis for processing personal data can give rise to a complex conundrum within the realm of AI.

(i) Processing based on ‘consent’ (Art. 6.1(a) GDPR): this is only an appropriate lawful basis if the data subject is genuinely offered control and a choice with regard to accepting or declining the terms offered, without any detriment.

The individual’s consent to the processing of their personal data is naturally a highly valued legal basis because it reflects the values of a democratic society. It may indeed seem reasonable to ask the data subject whether they wish to have their personal data processed by another entity.

However, within the context of AI systems:

– ensuring ‘informed consent’ may not always be viable, especially with regards to complex machine learning algorithms whose results are often generated through processes that are not yet fully understood (e.g., the “black box” problem).

– obtaining ‘unambiguous consent’ from every single data subject may also be an impractical approach because of the large datasets, of various categories, originating from countless sources. This issue is exacerbated when data has not been directly obtained from data subjects themselves but has been scraped from websites or obtained through an intermediary instead – including data pools.

– granting data subjects the ‘right to withdraw’: Managing and implementing this right can pose technical difficulties due to the vast quantities of words, images, or sounds. This complexity extends to the fact that each word is processed in a tokenized form within an AI system, either as a single element or broken into multiple separated elements, and only becomes correlated with others when vectorized in a pre-trained machine learning model.

(ii) The ‘performance of a contract’ (Art. 6.1(b) GDPR): this lawful basis for the processing of personal data could be a solution, particularly whenever an existing contract governs the relationship between the provider of an AI system and the end user.

(iii) A legal obligation to which the controller is subject (Art. 6.1(c) GDPR): this is, to the best of our knowledge, not a valid legal basis as there is no law yet requiring the data controller to use AI to meet its legal obligation.

(iv) Alternative legal basis may not always be valid. These specific legal bases require establishing the necessity of the processing for a specific aim that often remains unmet with AI-related processing (Art. 6.1(c), (d) & (e) GDPR).

A processing based on ‘public task’ or to protect ‘vital interests’ may not be valid, particularly when using AI systems for commercial purposes, for instance.

(v) More generally, providers of AI systems could potentially rely on the ‘legitimate interests’ legal basis as a last resort (Art. 6.1(f) GDPR).

This basis would require a careful assessment and may only apply when no other basis finds application (Recital (47) GDPR).

Furthermore, opting for this legal basis demands a careful balance between the interests of providers of AI systems and the data subject’s fundamental rights and freedoms (Art. 6.1(f) GDPR; Recital (47) GDPR).

In any event, an AI system cannot be trained and be designed to operate based on data collected illegally.

Personal data collected in violation of GDPR rules, or any data type that has been indiscriminately scraped from websites, in contravention of a website’s terms of use or of protected databases (see Directive 96/9/EC), could potentially lead to the AI system being banned.

The road to determining an appropriate legal basis for AI solution may be winding and tricky but it does not seem impossible – which is good news.

Other questions are also of great importance when analysing GDPR principles for AI systems. For example, the processing of personal data for purposes other than those for which the personal data have been collected is essential to AI (in particular, for statistical analytics), due to the vast and diverse repositories of data and methodologies deployed to discover correlations and/or potential causal relationships.

In the context of AI, compliance with GDPR principles is crucial to ensure ethical and legal personal data processing. The misuse or illegal collection of data may lead to serious consequences, including a potential prohibition of AI systems. It is also essential to balance the benefits of AI with the fundamental rights of data subjects to foster responsible development of AI and maintain the privacy and freedoms of individuals in the digital era.

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