The AI Liability Puzzle and A Fund-Based Work-Around

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Olivia J. Erdelyi
Gabor Erdelyi


Confidence in the regulatory environment is crucial to enable responsible AI innovation and foster the social acceptance of these powerful new technologies. One notable source of uncertainty is, however, that the existing legal liability system is unable to assign responsibility where a potentially harmful conduct and/or the harm itself are unforeseeable, yet some instantiations of AI and/or the harms they may trigger are not foreseeable in the legal sense. The unpredictability of how courts would handle such cases makes the risks involved in the investment and use of AI difficult to calculate with confidence, creating an environment that is not conducive to innovation and may deprive society of some benefits AI could provide. To tackle this problem, we propose to draw insights from financial regulatory best practices and establish a system of AI guarantee schemes. We envisage the system to form part of the broader market-structuring regulatory frameworks, with the primary function to provide a readily available, clear, and transparent funding mechanism to compensate claims that are either extremely hard or impossible to realize via conventional litigation. We propose it to be at least partially industry-funded. Funding arrangements should depend on whether it would pursue other potential policy goals aimed more broadly at controlling the trajectory of AI innovation to increase economic and social welfare worldwide. Because of the global relevance of the issue, rather than focusing on any particular legal system, we trace relevant developments across multiple jurisdictions and engage in a high-level, comparative conceptual debate around the suitability of the foreseeability concept to limit legal liability. The paper also refrains from confronting the intricacies of the case law of specific jurisdictions for now and—recognizing the importance of this task—leaves this to further research in support of the legal system’s incremental adaptation to the novel challenges of present and future AI technologies.

This article appears in the special track on AI and Society.

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