The leaders in Berlin, Paris and Brussels were hardly any different from the public – they followed the rapid development of events in Russia over the weekend and tried to put things into perspective.
Many effects, such as the absence of the experienced Wagner fighters at the front in Ukraine, will only become apparent in the coming days and weeks. What seems clear, however: The 36-hour loss of control in his country has not strengthened Putin’s position. In a system like Russia’s, such a power vacuum is particularly dangerous for the rulers.
News of the mutiny by Wagner chief Yevgeny Prigozhin burst into a meeting of high-ranking diplomats from the G7 countries with representatives of Brazil, India, South Africa, Saudi Arabia and Turkey. The meeting in Copenhagen is intended as a prelude to further talks in the coming weeks and months on the war in Ukraine, and possibly to prepare the ground for a peace summit.
Russia, Ukraine and the situation in the Kremlin will also be the dominant topics at Monday’s meeting of foreign ministers in Luxembourg and at the regular European Council of heads of state and government on Thursday.
The week in Europe will also be hot in other respects. On Tuesday, the vote on the controversial Nature Restoration Law in the Environment Committee goes into the second round. In the Council, Frans Timmermanns surprisingly managed to organize a majority for his proposal with a lot of money up his sleeve. With the prospect of billions from the EU’s funds, Viktor Orban and other Eastern European heads of government, who were actually opposed to the proposal, raised their hands after all. Let’s see if Pascal Canfin, head of the Environment Committee in Parliament, can come up with something to break the stalemate and organize a majority for the rapporteur’s much more far-reaching proposal.
Have a good start to the week
Mr. Große Entrup, the Coalition has been arguing about the Building Energy Act for months. Are the wrong issues debated in Berlin?
It is possible. Above all, the debates are taking too long. In the major restructuring, companies need planning certainty now, not in two or four years. Yes, the federal government has done a good job of getting the country through the first winter of this crisis. But it is important how we secure the nation’s future viability and location. The external challenges have become even more demanding. The decisive factor is whether policymakers recognize the signs of the times or whether we continue to spin in circles.
How do you address this in Berlin?
We have endless discussions at all levels. And the companies from the industry are now raising the issues directly in the constituencies with the members of Parliament: These are our considerations, this is the economic power at this location, this is the most important company, these are your voters. For us, the walk across the villages means an enormous effort, but we realize that our messages are otherwise not getting through in Berlin.
How acute is the loss of confidence in the industry?
It must be clear to those responsible: Decisions on investments will be made now, not sometime during the legislative period. Large companies like BASF are already saying they are shutting down production in Germany because of energy prices and other issues. Lanxess has just shaken up the stock market with a profit warning and also justified this with the situation here at the site. In this situation, US states are coming in and offering to pay companies not only the investment costs under the Inflation Reduction Act but also the operating costs for the next five years, and they are also guaranteeing the price of electricity. No company can simply say: Wait a minute, but we are a traditional German company.
The German Economics Minister wants to set a subsidized industrial electricity price, the Finance Minister is against it, and so is the Chancellor although he was previously in favor of it. How do you deal with this?
We have taken a clear position as an association: We believe that an industrial electricity price is the right thing to do. As self-confessed market economists, we have struggled with this for a long time because we are not crying out for subsidies. We know that someone has to pay for it – namely the citizens in the end. But we also have to be clear that we are in international competition. The price of electricity in China is two to three to four cents, and similar in the USA. In Germany, it’s around 20 cents. We also have over 40 percent higher electricity prices in Germany compared to other European countries. As an export industry, we have no chance of surviving like this. An industrial electricity price should also only be a temporary bridge until we produce enough cheap renewable energy here.
Is it realistic to cover the gigantic electricity demand of your industry with renewables in Germany?
It’s a massive feat of strength. Germany’s new pace is a slow train so far. We need five to six new wind turbines a day – at the moment we are at one a day. If we electrify completely, we need roughly the entire amount of electricity generated in the Federal Republic of Germany today in our industry alone. And that, of course, as green electricity. In the end, the world will have to help us.
And how?
We need French nuclear power – without any question. But we will also need renewable energies in the future and other sources such as hydrogen from other countries – Africa and southern Europe are a big issue here. And we have to get to the point where we don’t solve our problems in Germany at the expense of the world.
What do you mean by that?
We are switching off nuclear power in our country, but are happy to import nuclear power from France. We don’t want fracking in Germany, but we do want gas from the USA that was extracted by fracking. We reject CCS, but the Norwegians are welcome to do it at home. This is a form of the Saint Florian principle that simply won’t work in the long run.
So you’re advocating carbon storage not only in the North Sea but also on land in the Federal Republic?
Yes, we have to preserve these options. These are topics we need to discuss.
So far, the federal states have been blocking this. What would have to happen to enable more CCS?
This is one of many issues where we as a nation must face realities. CCS is a tough issue because it is obvious that the parliaments and the parties have positioned themselves so clearly against it over the years that there is really hardly any turning back. But we need a new social discourse about it.
How do you intend to conduct this discourse?
By talking in concrete terms about Germany’s vision as a place to do business. Where do we want to go as a society, how do we want to maintain our prosperity in the future? Sure, we want to be greenhouse gas neutral, but hopefully, we also want to preserve the industry. Germany’s industrial core has generally helped us extremely in the past, especially through many crises. We should support this. To do that, we need 12,000 kilometers of new overhead power lines, for example – otherwise, there will be no electricity in the south and, as a result, a different BMW and a different Siemens, for example.
You mentioned the Inflation Reduction Act. The approach is not exactly market-based – and yet a blueprint for Europe?
Of course not. The European pots are even bigger than the IRA pot but insanely bureaucratic. I know large companies that have 30 or 40 people working on generating documents for an IPCEI process that then takes two years. That kind of thing is happening much faster in the USA at the moment. What we need in response to the IRA is an RRA – a Regulation Reduction Act. There is enough money, there is willing entrepreneurship, but the entrepreneurs are not getting anywhere in the processes and are losing hope.
So the instruments presented by Commission President von der Leyen in response to the IRA don’t help much?
According to our calculations, the entire Green Deal produces 14,000 pages of regulation. You can’t explain that to an entrepreneur thinking about expanding his production facilities in East Westphalia-Lippe. Much of what is coming, the PFAS regulation, the chemicals legislation, the supply chain law: This robs companies of the confidence that they can still act reasonably here.
Who is your main contact for these issues?
Economics Minister Habeck, of course, with the support of the Chancellor, who has a different view of the issues. And of course, the Brussels level is extremely important. What we actually expect from the federal government is a clear positioning in Brussels. Germany does not take place in Brussels.
France is vehemently defending the interests of its nuclear industry.
Exactly. That is the difference. Paris plays the keyboard of the European Union for France as a location. Take the example of taxonomy: nuclear power is classified as green. And our entrepreneurs go to the Volksbank in Minden for a loan and are told: As a chemical company, you’re brown, you can’t get a loan, unfortunately.
Seriously, this is happening?
That is what’s happening, and it is happening in anticipatory obedience to what is coming about the EU taxonomy now.
Would you like to see the CDU Commission President put more restraint on her Vice President Frans Timmermanns?
In Brussels, one word is being relearned: competitiveness. This comes via the EPP Group, for example, in the nature conservation package, albeit unfortunately rather late. It would be important to set more goals instead of describing every centimeter on the way there in detail. That doesn’t help us, it blocks us. The EU needs more trust in entrepreneurial action again instead of millimeter-precise guidance. That takes away the industry’s breathing space and faith in the future of the location.
Negotiators from the Commission, Council and EU Parliament are preparing for a lengthy session on the Data Act on Tuesday evening. It will probably be the last trilogue negotiation. This is because almost all sides want to reach an agreement under the Swedish Council presidency. France, like Germany, is still dissatisfied with the regulation on the protection of trade secrets. But Germany does not want its agreement to fail on this point. This is not so clear in the case of France.
Both countries want better protection for trade secrets. This means that companies should have more opportunities to refuse to hand over data on the grounds of trade secrets. However, Germany sees little chance that the other member states will budge and that the majority will change.
The Data Act is intended to promote the use of data in the EU to enable innovative business models and services. This is not about the treatment of personal data which is already regulated in the GDPR. Rather, it is about data from networked devices, such as those collected by sensors in machines, cars or aircraft. Harmonized regulations are intended to ensure a fair exchange of data between companies and also between companies and the state. Trade secrets remain protected. However, protection should not go so far that no data is released at all.
The Swedish Council Presidency’s compromise draft of June 20, available to Europa.Table, states that Parliament wants to limit the data holder’s right to refuse data sharing to exceptional cases. Disclosure should be standard. The Council’s mandate, in turn, provides for a fine balance between the protection of trade secrets and the main objectives of the data law.
In the Council, the interests of the individual states diverge widely. Member states with larger service sectors want as much data as possible to be shared. Member states with strong industrial players are more opposed. But even within the industry associations, there is no unanimity.
On the one hand, manufacturers such as Airbus or Siemens fear for their innovative strength if they have to share data from their aircraft or machines with users or third parties to which they previously had exclusive access. On the other hand, Lufthansa and other service providers are just waiting to finally get access so they can offer their customers better service.
A similar rift is also running through the automotive industry: While car manufacturers would like to use the data from the vehicles exclusively, suppliers such as Bosch, navigation service providers or even weather services see things quite differently.
The German Association of the Automotive Industry (VDA) is also practicing diplomacy. The VDA supports the Data Act, the association says. “It is of central importance that we in Europe have rules for the access and use of data.” However, in the VDA’s view, compelling adjustments are necessary, “particularly with regard to clear legal certainty in the transfer of data, improvements in the protection of trade secrets and consideration of the necessary cybersecurity measures.” These adjustments are essential to ensure that the German and European automotive industry can maintain its international leadership in intelligent and connected vehicles in the future.
The VDA also relies on its own solutions for sharing data and points out that it has long been proactively involved with a concept. The ADAXO (Automotive Data Access, Extended and Open) concept guarantees data sovereignty for customers, fair data sharing with service providers and secure vehicle operation.
But it is also about market power and size. It is about the interests of globally active companies and established medium-sized enterprises that have big data treasures at their disposal, and start-ups on the other side that have a wide variety of ideas about how to develop innovative products and services from this data.
“Concerns about the possible violation of trade secrets should not prevail,” warns Niclas Vogt, spokesman for the Start-up Association. “Excessive loopholes for the established industry would hinder rather than promote innovation – in the worst case, they would prevent any data sharing.” There is a lot of potential lying dormant, especially in the SME sector, says Vogt. “We hope the Data Act will provide clear rules so we can tap into that potential.”
According to the compromise paper of the Swedish Council Presidency, the following points are still to be clarified on Tuesday in addition to the issue of trade secrets:
So the negotiators still have a larger workload ahead of them.
After 18 months, more than 40 technical meetings and around 90 recitals, the AI Act cleared a major hurdle with the EU Parliament’s vote. The entire European AI industry is watching closely what happens next. Because for many young tech companies in particular, this is a matter of existence. As founder and CEO of a research-based AI start-up, I am thus watching the AI Act with particular interest.
First of all, it is very positive that the EU politicians have recognized the signs of the times and have dedicated themselves intensively to the topic (especially for such a complex institution). From the point of view of a German start-up, this is a refreshing change of perspective, as we have unfortunately had to experience over the past decades how much necessary future-oriented shaping has simply been slept through, among other things, in digitalization.
Another very important point: If the EU passes the AI Act, it will be the world’s first comprehensive AI regulation. This also sets a claim on a global level and shows the European will to shape. Due to the anchoring effect, it can also be expected that Europe will set the tone globally in AI legislation – comparable to the international effect that the GDPR has had. In a survey by the German Start-ups Association 2021, around 47 percent of German AI start-ups thus even rated European regulation as a confidence-building measure that can become a USP (unique selling point) in international competition.
In addition, the AI Act also demonstrates Europe’s commitment and claim to its values: for the first time, rules for the protection of human rights were combined with rules for product safety in the AI Act with its risk-based approach. It is thus also good that the Act draws red lines and, for example, explicitly prohibits social scoring technologies.
This may fall on fertile ground in the German tech scene. After all, sensitivity and willingness to take ethical positions is also one of the dominant trends among German AI start-ups: In 2021, for example, more than 80 percent of respondents found that ethical issues should be considered in AI development; and nearly 90 percent agreed with the statement that AI start-ups should be aware of their social significance and responsibility.
Nevertheless, from the perspective of an AI start-up, there are three major challenges in particular that the AI Act must still overcome in the final and decisive phase.
First, regulation must not only further cement the already existing monopolies of large corporations. This is because new requirements often have a much greater impact on younger and smaller companies than on established big players. For this reason, the perspectives of SMEs and start-ups should also be included in the necessary definition of standards. Regulatory sandboxes tailored to start-ups can additionally provide room for new developments and thus support the innovative power of young AI companies.
The second point is also linked to this: Specifications resulting from the AI Act must also be implementable in practice for start-ups. Therefore, not only should abstract rules be formulated but the implementation should also be considered. After all, AI development should not be prevented completely but steered along sensible paths so that people and companies in the EU can benefit from it in the long term.
The third challenge concerns the AI Act itself – and the communication about it. (Legal) uncertainties must be avoided as much as possible. There is still a great deal of uncertainty in the industry about who would be affected, to what extent, and what requirements would apply to whom. This not only inhibits development on the part of start-ups but also creates enormous uncertainty for investors.
The mood among VCs (venture capital funds) is already that they would put European AI start-ups at a disadvantage when investing because of the AI Act. In this context, it is probably not so much the fact of whether there would really be serious restrictions and limitations for companies because of the AI Act that is decisive. Instead, the communication climate is crucial: How clearly is the AI Act communicated at all levels? To what extent do companies and investors feel educated (for example, through best practices examples)?
From the perspective of a young AI company, a legislative text alone is thus not enough. EU lawmakers need to put the AI Act in the larger context and think from different perspectives. In parallel, EU governments should also put money in hand to support Europe’s indigenous AI industry – looking in particular at start-ups as they act as agile drivers of innovation.
Leif-Nissen Lundbæk is co-founder and CEO of AI company Xayn and a Forbes 30Under30 visionary since 2021. With a Ph.D. in computer science, he specializes in cybersecurity as well as privacy-friendly algorithms and artificial intelligence. Together with Michael Huth and Felix Hahmann, he founded the privacy tech company in 2017 as a continuation of his research project on privacy and AI. Xayn is a European research-based AI company based in Berlin that develops privacy-friendly and energy-efficient personalization for businesses.
The leaders in Berlin, Paris and Brussels were hardly any different from the public – they followed the rapid development of events in Russia over the weekend and tried to put things into perspective.
Many effects, such as the absence of the experienced Wagner fighters at the front in Ukraine, will only become apparent in the coming days and weeks. What seems clear, however: The 36-hour loss of control in his country has not strengthened Putin’s position. In a system like Russia’s, such a power vacuum is particularly dangerous for the rulers.
News of the mutiny by Wagner chief Yevgeny Prigozhin burst into a meeting of high-ranking diplomats from the G7 countries with representatives of Brazil, India, South Africa, Saudi Arabia and Turkey. The meeting in Copenhagen is intended as a prelude to further talks in the coming weeks and months on the war in Ukraine, and possibly to prepare the ground for a peace summit.
Russia, Ukraine and the situation in the Kremlin will also be the dominant topics at Monday’s meeting of foreign ministers in Luxembourg and at the regular European Council of heads of state and government on Thursday.
The week in Europe will also be hot in other respects. On Tuesday, the vote on the controversial Nature Restoration Law in the Environment Committee goes into the second round. In the Council, Frans Timmermanns surprisingly managed to organize a majority for his proposal with a lot of money up his sleeve. With the prospect of billions from the EU’s funds, Viktor Orban and other Eastern European heads of government, who were actually opposed to the proposal, raised their hands after all. Let’s see if Pascal Canfin, head of the Environment Committee in Parliament, can come up with something to break the stalemate and organize a majority for the rapporteur’s much more far-reaching proposal.
Have a good start to the week
Mr. Große Entrup, the Coalition has been arguing about the Building Energy Act for months. Are the wrong issues debated in Berlin?
It is possible. Above all, the debates are taking too long. In the major restructuring, companies need planning certainty now, not in two or four years. Yes, the federal government has done a good job of getting the country through the first winter of this crisis. But it is important how we secure the nation’s future viability and location. The external challenges have become even more demanding. The decisive factor is whether policymakers recognize the signs of the times or whether we continue to spin in circles.
How do you address this in Berlin?
We have endless discussions at all levels. And the companies from the industry are now raising the issues directly in the constituencies with the members of Parliament: These are our considerations, this is the economic power at this location, this is the most important company, these are your voters. For us, the walk across the villages means an enormous effort, but we realize that our messages are otherwise not getting through in Berlin.
How acute is the loss of confidence in the industry?
It must be clear to those responsible: Decisions on investments will be made now, not sometime during the legislative period. Large companies like BASF are already saying they are shutting down production in Germany because of energy prices and other issues. Lanxess has just shaken up the stock market with a profit warning and also justified this with the situation here at the site. In this situation, US states are coming in and offering to pay companies not only the investment costs under the Inflation Reduction Act but also the operating costs for the next five years, and they are also guaranteeing the price of electricity. No company can simply say: Wait a minute, but we are a traditional German company.
The German Economics Minister wants to set a subsidized industrial electricity price, the Finance Minister is against it, and so is the Chancellor although he was previously in favor of it. How do you deal with this?
We have taken a clear position as an association: We believe that an industrial electricity price is the right thing to do. As self-confessed market economists, we have struggled with this for a long time because we are not crying out for subsidies. We know that someone has to pay for it – namely the citizens in the end. But we also have to be clear that we are in international competition. The price of electricity in China is two to three to four cents, and similar in the USA. In Germany, it’s around 20 cents. We also have over 40 percent higher electricity prices in Germany compared to other European countries. As an export industry, we have no chance of surviving like this. An industrial electricity price should also only be a temporary bridge until we produce enough cheap renewable energy here.
Is it realistic to cover the gigantic electricity demand of your industry with renewables in Germany?
It’s a massive feat of strength. Germany’s new pace is a slow train so far. We need five to six new wind turbines a day – at the moment we are at one a day. If we electrify completely, we need roughly the entire amount of electricity generated in the Federal Republic of Germany today in our industry alone. And that, of course, as green electricity. In the end, the world will have to help us.
And how?
We need French nuclear power – without any question. But we will also need renewable energies in the future and other sources such as hydrogen from other countries – Africa and southern Europe are a big issue here. And we have to get to the point where we don’t solve our problems in Germany at the expense of the world.
What do you mean by that?
We are switching off nuclear power in our country, but are happy to import nuclear power from France. We don’t want fracking in Germany, but we do want gas from the USA that was extracted by fracking. We reject CCS, but the Norwegians are welcome to do it at home. This is a form of the Saint Florian principle that simply won’t work in the long run.
So you’re advocating carbon storage not only in the North Sea but also on land in the Federal Republic?
Yes, we have to preserve these options. These are topics we need to discuss.
So far, the federal states have been blocking this. What would have to happen to enable more CCS?
This is one of many issues where we as a nation must face realities. CCS is a tough issue because it is obvious that the parliaments and the parties have positioned themselves so clearly against it over the years that there is really hardly any turning back. But we need a new social discourse about it.
How do you intend to conduct this discourse?
By talking in concrete terms about Germany’s vision as a place to do business. Where do we want to go as a society, how do we want to maintain our prosperity in the future? Sure, we want to be greenhouse gas neutral, but hopefully, we also want to preserve the industry. Germany’s industrial core has generally helped us extremely in the past, especially through many crises. We should support this. To do that, we need 12,000 kilometers of new overhead power lines, for example – otherwise, there will be no electricity in the south and, as a result, a different BMW and a different Siemens, for example.
You mentioned the Inflation Reduction Act. The approach is not exactly market-based – and yet a blueprint for Europe?
Of course not. The European pots are even bigger than the IRA pot but insanely bureaucratic. I know large companies that have 30 or 40 people working on generating documents for an IPCEI process that then takes two years. That kind of thing is happening much faster in the USA at the moment. What we need in response to the IRA is an RRA – a Regulation Reduction Act. There is enough money, there is willing entrepreneurship, but the entrepreneurs are not getting anywhere in the processes and are losing hope.
So the instruments presented by Commission President von der Leyen in response to the IRA don’t help much?
According to our calculations, the entire Green Deal produces 14,000 pages of regulation. You can’t explain that to an entrepreneur thinking about expanding his production facilities in East Westphalia-Lippe. Much of what is coming, the PFAS regulation, the chemicals legislation, the supply chain law: This robs companies of the confidence that they can still act reasonably here.
Who is your main contact for these issues?
Economics Minister Habeck, of course, with the support of the Chancellor, who has a different view of the issues. And of course, the Brussels level is extremely important. What we actually expect from the federal government is a clear positioning in Brussels. Germany does not take place in Brussels.
France is vehemently defending the interests of its nuclear industry.
Exactly. That is the difference. Paris plays the keyboard of the European Union for France as a location. Take the example of taxonomy: nuclear power is classified as green. And our entrepreneurs go to the Volksbank in Minden for a loan and are told: As a chemical company, you’re brown, you can’t get a loan, unfortunately.
Seriously, this is happening?
That is what’s happening, and it is happening in anticipatory obedience to what is coming about the EU taxonomy now.
Would you like to see the CDU Commission President put more restraint on her Vice President Frans Timmermanns?
In Brussels, one word is being relearned: competitiveness. This comes via the EPP Group, for example, in the nature conservation package, albeit unfortunately rather late. It would be important to set more goals instead of describing every centimeter on the way there in detail. That doesn’t help us, it blocks us. The EU needs more trust in entrepreneurial action again instead of millimeter-precise guidance. That takes away the industry’s breathing space and faith in the future of the location.
Negotiators from the Commission, Council and EU Parliament are preparing for a lengthy session on the Data Act on Tuesday evening. It will probably be the last trilogue negotiation. This is because almost all sides want to reach an agreement under the Swedish Council presidency. France, like Germany, is still dissatisfied with the regulation on the protection of trade secrets. But Germany does not want its agreement to fail on this point. This is not so clear in the case of France.
Both countries want better protection for trade secrets. This means that companies should have more opportunities to refuse to hand over data on the grounds of trade secrets. However, Germany sees little chance that the other member states will budge and that the majority will change.
The Data Act is intended to promote the use of data in the EU to enable innovative business models and services. This is not about the treatment of personal data which is already regulated in the GDPR. Rather, it is about data from networked devices, such as those collected by sensors in machines, cars or aircraft. Harmonized regulations are intended to ensure a fair exchange of data between companies and also between companies and the state. Trade secrets remain protected. However, protection should not go so far that no data is released at all.
The Swedish Council Presidency’s compromise draft of June 20, available to Europa.Table, states that Parliament wants to limit the data holder’s right to refuse data sharing to exceptional cases. Disclosure should be standard. The Council’s mandate, in turn, provides for a fine balance between the protection of trade secrets and the main objectives of the data law.
In the Council, the interests of the individual states diverge widely. Member states with larger service sectors want as much data as possible to be shared. Member states with strong industrial players are more opposed. But even within the industry associations, there is no unanimity.
On the one hand, manufacturers such as Airbus or Siemens fear for their innovative strength if they have to share data from their aircraft or machines with users or third parties to which they previously had exclusive access. On the other hand, Lufthansa and other service providers are just waiting to finally get access so they can offer their customers better service.
A similar rift is also running through the automotive industry: While car manufacturers would like to use the data from the vehicles exclusively, suppliers such as Bosch, navigation service providers or even weather services see things quite differently.
The German Association of the Automotive Industry (VDA) is also practicing diplomacy. The VDA supports the Data Act, the association says. “It is of central importance that we in Europe have rules for the access and use of data.” However, in the VDA’s view, compelling adjustments are necessary, “particularly with regard to clear legal certainty in the transfer of data, improvements in the protection of trade secrets and consideration of the necessary cybersecurity measures.” These adjustments are essential to ensure that the German and European automotive industry can maintain its international leadership in intelligent and connected vehicles in the future.
The VDA also relies on its own solutions for sharing data and points out that it has long been proactively involved with a concept. The ADAXO (Automotive Data Access, Extended and Open) concept guarantees data sovereignty for customers, fair data sharing with service providers and secure vehicle operation.
But it is also about market power and size. It is about the interests of globally active companies and established medium-sized enterprises that have big data treasures at their disposal, and start-ups on the other side that have a wide variety of ideas about how to develop innovative products and services from this data.
“Concerns about the possible violation of trade secrets should not prevail,” warns Niclas Vogt, spokesman for the Start-up Association. “Excessive loopholes for the established industry would hinder rather than promote innovation – in the worst case, they would prevent any data sharing.” There is a lot of potential lying dormant, especially in the SME sector, says Vogt. “We hope the Data Act will provide clear rules so we can tap into that potential.”
According to the compromise paper of the Swedish Council Presidency, the following points are still to be clarified on Tuesday in addition to the issue of trade secrets:
So the negotiators still have a larger workload ahead of them.
After 18 months, more than 40 technical meetings and around 90 recitals, the AI Act cleared a major hurdle with the EU Parliament’s vote. The entire European AI industry is watching closely what happens next. Because for many young tech companies in particular, this is a matter of existence. As founder and CEO of a research-based AI start-up, I am thus watching the AI Act with particular interest.
First of all, it is very positive that the EU politicians have recognized the signs of the times and have dedicated themselves intensively to the topic (especially for such a complex institution). From the point of view of a German start-up, this is a refreshing change of perspective, as we have unfortunately had to experience over the past decades how much necessary future-oriented shaping has simply been slept through, among other things, in digitalization.
Another very important point: If the EU passes the AI Act, it will be the world’s first comprehensive AI regulation. This also sets a claim on a global level and shows the European will to shape. Due to the anchoring effect, it can also be expected that Europe will set the tone globally in AI legislation – comparable to the international effect that the GDPR has had. In a survey by the German Start-ups Association 2021, around 47 percent of German AI start-ups thus even rated European regulation as a confidence-building measure that can become a USP (unique selling point) in international competition.
In addition, the AI Act also demonstrates Europe’s commitment and claim to its values: for the first time, rules for the protection of human rights were combined with rules for product safety in the AI Act with its risk-based approach. It is thus also good that the Act draws red lines and, for example, explicitly prohibits social scoring technologies.
This may fall on fertile ground in the German tech scene. After all, sensitivity and willingness to take ethical positions is also one of the dominant trends among German AI start-ups: In 2021, for example, more than 80 percent of respondents found that ethical issues should be considered in AI development; and nearly 90 percent agreed with the statement that AI start-ups should be aware of their social significance and responsibility.
Nevertheless, from the perspective of an AI start-up, there are three major challenges in particular that the AI Act must still overcome in the final and decisive phase.
First, regulation must not only further cement the already existing monopolies of large corporations. This is because new requirements often have a much greater impact on younger and smaller companies than on established big players. For this reason, the perspectives of SMEs and start-ups should also be included in the necessary definition of standards. Regulatory sandboxes tailored to start-ups can additionally provide room for new developments and thus support the innovative power of young AI companies.
The second point is also linked to this: Specifications resulting from the AI Act must also be implementable in practice for start-ups. Therefore, not only should abstract rules be formulated but the implementation should also be considered. After all, AI development should not be prevented completely but steered along sensible paths so that people and companies in the EU can benefit from it in the long term.
The third challenge concerns the AI Act itself – and the communication about it. (Legal) uncertainties must be avoided as much as possible. There is still a great deal of uncertainty in the industry about who would be affected, to what extent, and what requirements would apply to whom. This not only inhibits development on the part of start-ups but also creates enormous uncertainty for investors.
The mood among VCs (venture capital funds) is already that they would put European AI start-ups at a disadvantage when investing because of the AI Act. In this context, it is probably not so much the fact of whether there would really be serious restrictions and limitations for companies because of the AI Act that is decisive. Instead, the communication climate is crucial: How clearly is the AI Act communicated at all levels? To what extent do companies and investors feel educated (for example, through best practices examples)?
From the perspective of a young AI company, a legislative text alone is thus not enough. EU lawmakers need to put the AI Act in the larger context and think from different perspectives. In parallel, EU governments should also put money in hand to support Europe’s indigenous AI industry – looking in particular at start-ups as they act as agile drivers of innovation.
Leif-Nissen Lundbæk is co-founder and CEO of AI company Xayn and a Forbes 30Under30 visionary since 2021. With a Ph.D. in computer science, he specializes in cybersecurity as well as privacy-friendly algorithms and artificial intelligence. Together with Michael Huth and Felix Hahmann, he founded the privacy tech company in 2017 as a continuation of his research project on privacy and AI. Xayn is a European research-based AI company based in Berlin that develops privacy-friendly and energy-efficient personalization for businesses.
