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

TL;DR

This paper discusses the challenges of legal liability for AI harms due to unpredictability and proposes a fund-based system inspired by financial regulation to provide clear compensation mechanisms, fostering responsible AI innovation.

Contribution

It introduces a novel fund-based approach to AI liability, drawing from financial regulation practices to address legal uncertainty and promote responsible AI development.

Findings

Proposes a market-structured AI guarantee scheme.

Suggests industry-funded funding arrangements.

Highlights the need for legal system adaptation.

Abstract

Certainty around 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 inapt 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 incalculable, creating an environment that is not conducive to innovation and may deprive society of some of the 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 framework, 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, with funding arrangements depending on whether it would pursue other potential policy goals. We aim to engage in a high-level, comparative conceptual debate around the suitability of the foreseeability concept to limit legal liability rather than confronting the intricacies of the case law of specific jurisdictions. Recognizing the importance of the latter task, we leave this to further research in support of the legal system's incremental adaptation to the novel challenges of present and future AI technologies.