The European Union has enacted its much-anticipated Artificial Intelligence (AI) Act, which officially came into effect on April 1, 2025. This landmark legislation seeks to enhance privacy protections for individuals while also providing legal clarity for businesses operating within the EU’s member states. Despite these positive intentions, experts and leaders from the Czech industry are raising alarms about the potential consequences of this regulation. They warn that, while aiming to protect citizens, the AI Act might inadvertently stifle innovation and deter investment from flowing into the region, thereby hampering technological advancement.

What exactly does the AI Act do?

The newly established regulation imposes stringent rules on AI applications, categorizing them based on their associated risk levels. Particularly concerning is the prohibition of certain high-risk AI functionalities, including real-time facial recognition technologies as well as automated screening of CVs for job applicants. The Act divides AI systems into four distinct categories based on the level of risk they pose, emphasizing the need for careful scrutiny of both high-risk AI systems and those that are outright prohibited.

Crucially, the regulation bans AI systems that are designed to manipulate or deceive individuals, unjustly exploit vulnerabilities, or discriminate based on race, gender, or other attributes. It further prohibits the use of AI systems that assess an individual’s criminal risk based on personality traits, utilize biometric data without consent, or analyze emotional states in contexts where such assessments could lead to discriminatory practices.

Furthermore, the regulation places restrictions on real-time biometric identification in public settings by law enforcement agencies, allowing its use only under specific, high-risk scenarios. The act’s enforcement measures are rigorous; non-compliance may result in substantial financial penalties, with fines reaching up to EUR 35 million (approximately CZK 874 million) or up to 7 percent of a company’s annual global revenue, a significant risk for organizations trying to navigate this complex regulatory landscape.

Supporters of the AI Act assert that the legislation is a necessary measure to safeguard individuals’ rights within the EU. As Petra Stupková from the Czech Association of Artificial Intelligence articulated in an interview with Czech media outlet iDnes.cz, “We do not want a social scoring system like the one implemented in China. The AI Act is essential for preventing that from happening.” Nevertheless, she acknowledged the necessity of periodically revisiting certain restrictions in order to ensure they do not hinder research and innovation in the technological sector.

Despite the assurances offered by proponents, critics of the AI Act voice concerns about adding another layer of bureaucracy that could repel investment in Europe. The disparity is evident; last year, U.S. enterprises allocated approximately USD 100 billion (roughly CZK 2.3 trillion) toward AI development, a figure tenfold greater than that of Europe. Moreover, regional players from the Middle East and countries like China are rapidly advancing in AI adoption and investment, effectively outpacing the EU.

Jan Romportl, an artificial intelligence expert, pointed out that the EU currently lacks its own foundational AI models, social media platforms, and distribution channels, stating, “We are already falling behind, and the introduction of further regulations could exacerbate this concerning trend.”

A critical anxiety surrounding the AI Act pertains to the potential loopholes that may allow restricted applications of AI, such as facial recognition technology, to emerge in narrowly defined contexts. For example, Václav Havel Airport in Prague has already employed AI-driven security cameras, igniting discussions among lawmakers about extending such measures to enhance safety in public venues, such as sports stadiums. However, this could set a troubling precedent, with experts cautioning that it might lead to widespread misuse.

Patrik Nacher, a senior member of the Czech parliament, supports the notion of using such technologies for security purposes, yet expresses reservations about their broader implementation. He stated, “I wouldn’t want this to become a slippery slope, where facial recognition expands from stadiums to nightclubs and eventually into restaurants.”

Concerns about the AI Act extend beyond startups; large technology firms might rethink their participation in the European and Czech markets due to the significant financial burden of regulatory compliance. The penalties outlined in the AI Act are substantial, calculated as a percentage of the total turnover of a company, which poses a daunting challenge for organizations trying to adhere to evolving legislation.

“One day, even tech giants like Meta might decide enough is enough,” expressed Zdeněk Valut, the director at YDEAL Group. This sentiment was echoed by Patrik Tovaryš of Meta, who pointed out that rigid regulations tend to act as barriers rather than catalysts for innovation within Europe. These developments create an atmosphere where Western companies might slow their operations, leaving the door open for the Chinese market to assert its dominance, potentially increasing foreign influence over European AI infrastructures. “China often offers investments in digital governance in exchange for access to its AI tools,” cautioned Valut, highlighting the potential risk of European data falling into the hands of foreign governments.

In the midst of these complex regulations and shifting landscapes, companies can benefit significantly from tools like the AI legalese decoder. This platform is designed to translate complex legal jargon and regulatory language into easily understandable terms, helping businesses navigate the intricacies of the AI Act with greater confidence. By simplifying legal texts, the AI legalese decoder enables companies to fully comprehend their obligations under the new regulations, ensuring compliance while also fostering an environment conducive to innovation.

Moreover, the AI legalese decoder can provide tailored interpretations and insights specific to different sectors within the AI industry. This personalized approach equips businesses with the knowledge they need to identify potential pitfalls and capitalize on opportunities within the regulatory framework. In a realm fraught with uncertainty and potential penalties, leveraging this technology can ultimately lead to more informed decision-making and a proactive stance in the face of evolving legislation.