Spain has embarked on a pioneering initiative within the European Union by introducing an AI sandbox aimed at helping tech startups adapt to the forthcoming EU AI Act. However, the Spanish government has decided against offering financial support to these startups, sparking concerns among some entrepreneurs about the potential burden of compliance.
EU AI Act regulations on the horizon
The EU’s AI Act is set to take effect in 2025, introducing regulations that could influence the decisions of AI startup founders. Some entrepreneurs fear these regulations may incentivize companies to relocate to the United States, where they could potentially avoid the additional bureaucratic hurdles imposed by the EU legislation.
Enthusiasm and interest in the AI sandbox
Spain’s AI Minister, Carme Artigas, has revealed that 52 organizations, including startups, have shown interest in participating in the inaugural round of the AI sandbox. This six-month program has also attracted the involvement of 137 independent experts, a development described by Artigas as a “great success.”
Resource allocation concerns for startups
However, not all startup founders are equally enthusiastic. Some have expressed concerns about the potentially time-consuming and costly nature of dealing with the paperwork required to comply with the EU AI Act. For instance, Nico de Luis, CEO of Madrid-based Shakers, an AI-powered recruitment startup, believes that financial support could be vital for managing the increased workload effectively.
“When you get involved in something like this, you need to allocate resources, hours, and effort, and it’s true that if we had some financial support we would be able to hire one more person to help us deal with the paperwork and the communications with the government,” de Luis explains.
Sandbox focuses on high-risk AI systems
The AI sandbox primarily targets AI companies working on foundational models and high-risk AI systems, particularly those with the potential to impact safety or fundamental rights negatively. The EU’s draft legislation places significant obligations on developers of high-risk AI systems, including the requirement to conduct fundamental rights impact assessments and ensure awareness of the risk of confirmation bias among human operators.
Support for compliance
To assist companies in adhering to the new EU rules, the Spanish Ministry of Economic Affairs and Digital Transformation will offer participating businesses legal support through a new AI advisory council. This initiative also provides companies with an opportunity to share their perspectives to create implementation guidelines that other EU nations could adopt.
Potential for a pan-European AI sandbox
The European Commission has indicated that other EU member states may join Spain in this AI regulatory sandbox initiative, potentially leading to the establishment of a pan-European framework for AI regulation.
Challenges for small startups
Smaller startups with limited resources anticipate challenges in complying with the regulatory demands of the AI Act. Companies like TalentFY, an eight-person Barcelona-based firm that uses AI algorithms for candidate scoring, are concerned about the absence of legal expertise within their teams.
Antonio Tripiana, tech lead at Barcelona-based fintech Deale, which uses AI to match investors with companies, echoes this sentiment, emphasizing the difficulty of simultaneously developing AI models, integrating them with their platform, and managing regulatory aspects.
Calls for government support
Justo Hidalgo, Chief AI Officer at Spain’s tech lobby group Adigital, predicts that compliance with the AI Act will be a tough, expensive, and lengthy process, particularly for startups. He suggests that government subsidies could alleviate the financial burden on companies, preventing them from taking fewer risks or relocating outside of Europe.
Hidalgo also proposes the possibility of quality certification for companies that demonstrate full compliance with the regulations.
Government’s stance on financial support
Despite these calls for financial support, AI Minister Carme Artigas has firmly ruled out government subsidies for participating startups. She argues that offering subsidies would be discriminatory and believes involvement in the sandbox will give companies a competitive advantage.
“The sandbox is voluntary, and it will give a competitive advantage to those companies, which will be able to get ahead of the market before the rules come into force,” Artigas asserts. “What is required from them is to allocate people and time; if someone can’t allocate them, they shouldn’t take part in the sandbox.”
As Spain takes the lead in establishing an AI sandbox to navigate the impending EU AI regulations, startups face the challenge of balancing compliance with limited resources. The outcome of this initiative may serve as a precedent for other EU countries considering similar regulatory frameworks.
