The European Union has taken a historic step with the entry into force of the AI Act, the world's first comprehensive legislation on artificial intelligence. This revolutionary act, which puts Europe at the forefront of AI governance, establishes a risk-based regulatory framework that aims to balance innovation and the protection of fundamental rights. However, the regulation is also yet another manifestation of the so-called “Brussels Effect”—the EU's tendency to impose its own rules on a global scale through the power of its market, without necessarily driving technological innovation.

While the US and China are leading AI development with massive public and private investment (45% and 30% of global investment in 2024, respectively), Europe has attracted only 10% of global AI investment. In response, the EU seeks to compensate for its technological lag through regulation, imposing standards that end up influencing the entire global ecosystem.

The central question is: is Europe creating an environment that promotes responsible innovation, or is it simply exporting bureaucracy to a sector where it cannot compete?

The AI Act applies not only to European companies, but also to those operating on the European market or whose AI systems have an impact on EU citizens. This extraterritorial jurisdiction is particularly evident in the provisions relating to GPAI models, where recital 106 of the Act states that suppliers must respect EU copyright “regardless of the jurisdiction where the training of the models takes place.”

This approach has been strongly criticized by some observers, who see it as an attempt by the EU to impose its own rules on companies that are not based in its territory. According to critics, this could create a rift in the global technology ecosystem, with companies forced to develop separate versions of their products for the European market or adopt European standards for all markets to avoid additional compliance costs.

Multinational technology companies are therefore in a difficult position: ignoring the European market is not a viable option, but complying with the AI Act requires significant investment and could limit opportunities for innovation. This effect is further amplified by the ambitious implementation timeline and the interpretative uncertainty of many provisions.

The AI Act entered into force on August 1, 2024, but its application will follow a phased timetable:

The regulation adopts a risk-based approach, classifying AI systems into four categories: unacceptable risk (prohibited), high risk (subject to strict requirements), limited risk (with transparency obligations), and minimal or no risk (free use). This categorization determines the specific obligations for developers, suppliers, and users.

One of the most significant innovations of the AI Act concerns transparency requirements, which aim to address the “black box” nature of AI systems. These requirements include:

These requirements, while designed to protect citizens' rights, could place a significant burden on businesses, particularly innovative startups and SMEs. The need to document development processes, training data, and decision-making logic in detail could slow down innovation cycles and increase development costs, putting European companies at a disadvantage compared to competitors in other regions with less stringent regulations.

The judgment in Case C-203/22 highlights how companies initially resist transparency mandates. The defendant, a telecommunications provider, argued that revealing the logic behind its credit scoring algorithm would disclose trade secrets, jeopardizing its competitive advantage⁶. The CJEU rejected this argument, stating that Article 22 of the GDPR entitles individuals to an explanation of the “criteria and logic” underlying automated decisions, even if simplified⁶.

Under the AI Act's two-tier system, most generative AI models fall under Tier 1, requiring compliance with EU copyright law and summaries of training data². To avoid copyright infringement claims, companies such as OpenAI have switched to synthetic data or licensed content, but gaps in documentation remain.

The AI Act contains specific provisions on copyright that extend the EU's regulatory influence far beyond its borders. GPAI model providers must:

Recital 106 of the AI Act states that providers must respect EU copyright, “regardless of the jurisdiction where the training of the models takes place.” This extraterritorial approach raises questions about compatibility with the territoriality principles of copyright and could create regulatory conflicts with other jurisdictions.

For global technology companies, the AI Act presents a fundamental strategic choice: adapt to the “Brussels Effect” and comply with European standards globally, or develop differentiated approaches for different markets? Several strategies have emerged:

Some large technology companies are developing a “dual model” of operation:

This approach, although costly, allows companies to maintain a presence in the European market without compromising global innovation. However, this fragmentation could lead to a growing technological divide, with European users having access to less advanced technologies than those in other regions.

The European AI Act represents a turning point in AI regulation, but its complexity and interpretative ambiguities create a climate of uncertainty that could negatively affect innovation and investment in the sector. Companies face several challenges:

The ever-changing regulatory landscape poses a significant risk for companies. The interpretation of key concepts such as “sufficiently detailed summary” or the classification of “high-risk” systems remains ambiguous. This uncertainty could result in:

The debate on the “Brussels Effect” is part of the broader context of European technological sovereignty. The EU finds itself in the difficult position of having to balance the need to promote internal innovation with the need to regulate technologies developed mainly by non-European actors.

In 2024, European companies attracted only 10% of global investment in AI, while the US and China dominated the sector with a combination of massive public and private investment, innovation-friendly policies, and access to large amounts of data. Europe, with its linguistic, cultural, and regulatory fragmentation, struggles to produce technological “champions” capable of competing globally.

Critics argue that Europe's regulation-focused approach risks further stifling innovation and deterring investment, while supporters believe that creating a reliable regulatory framework can actually stimulate the development of ethical and secure AI “by design,” creating a long-term competitive advantage.

The “Brussels Effect” of the AI Act highlights a fundamental tension in the European approach to technology: the ability to set global standards through regulation is not matched by corresponding leadership in technological innovation. This asymmetry raises questions about the long-term sustainability of this approach.

If Europe continues to regulate technologies that it does not develop, it risks finding itself in a position of increasing technological dependence, where its rules could become increasingly irrelevant in a rapidly evolving global ecosystem. Furthermore, non-European companies could gradually withdraw from the European market or offer limited versions of their products, creating a “digital fortress Europe” increasingly isolated from global progress.

On the other hand, if the EU manages to balance its regulatory approach with an effective strategy to promote innovation, it could effectively define a “third way” between American capitalism and Chinese state control, placing human rights and democratic values at the heart of technological development. Vaste programme, as they would say in France.

The future of AI in Europe will depend not only on the effectiveness of the AI Act in protecting fundamental rights, but also on Europe's ability to accompany regulation with adequate investment in innovation and to simplify the regulatory framework to make it less burdensome. Otherwise, Europe risks finding itself in a paradoxical situation: a world leader in AI regulation, but marginal in its development and application.

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