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The EU is facing questions on competitiveness and innovation in the artificial intelligence (AI) sector and the risk of stifling the technology’s growth in the trading bloc. 

Two members of the European Parliament (MEPs), Andreas Schwab and Arba Kokalari from the European People’s Party (PPE), have  concerns over the potential impact of the EU's proposed AI Liability Directive. 

In a written question to the European Commission, the centre-right MEPs highlighted the need to balance regulatory safeguards with fostering competitiveness and innovation, particularly in the context of small and medium-sized enterprises (SMEs) and start-ups.

The AI Liability Directive,  in 2022, aims to modernise liability rules to account for harm caused by AI systems, ensuring uniform protection across the EU. 

The directive was introduced alongside the AI Act, which came into force in August 2024. 

The AI Act employs a risk-based approach to regulating AI systems, while the updated product directive extends liability to software, including AI applications.

In light of these developments, Schwab, a German MEP who has previously served as parliament’s negotiator for the Digital Markets Act (which oversees regulation of big tech platforms) and Kokalari, a Swedish MEP who has served on the parliamentary committee overseeing consumer protection and the internal market, have called on the Commission to reassess the directive’s approach.

“The new Commission has committed to following the overarching objective of legislative simplification and reduction of administrative burdens that hinders EU competitiveness,” the MEPs point out in their new submission. 

Key questions

The MEPs’ inquiry posed three key questions to the Commission, reflecting concerns about the directive's potential impact on EU businesses and innovation. 

First, they asked whether the AI Liability Directive would be re-evaluated to prioritise competitiveness and foster innovation within the EU, reflecting growing concerns that overly stringent regulations could stifle progress in the AI sector.

Second, they sought clarification on what measures the Commission plans to implement to ensure that the directive does not disproportionately affect SMEs and start-ups.

Third, they questioned how the Commission intends to address the risk of overregulation in a rapidly growing AI sector, particularly one facing intense competition on the global stage. 

The legislators warned that additional regulatory hurdles could put European companies at a disadvantage compared to their international counterparts, potentially undermining the EU's ambition to be a leader in AI development.

Pushing at an open door

Schwab and Kokalari may find the Commission receptive on this issue — its president, Ursula Von Der Leyen, has previously  hope that the EU will “become a global leader in AI innovation”. 

In addition, her cabinet member and long time commissioner Valdis Dombrovskis  during his parliamentary confirmation hearing that the EU needs “simpler rules that are easier to implement.”

He committed to reduce reporting obligations for companies by at least 25 percent, or 35 percent for SMEs, stating that all existing rules would be stress tested and their impact on competitiveness and SMEs properly assessed.

However, there is a fissure between the left and right of the European Parliament on AI.

������covered by 91����ԭ��, in October 2024, centre-left MEP Eero Heinäluoma called for tighter environmental disclosure rules for companies using AI. 

He cited media reports about the substantial energy consumption and rising carbon footprint of AI development, which may be an obstacle to the growth of the technology.