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Cyprus Proposes Fines Of Up To €35 Million For AI Law Violations

A proposed legal framework for implementing EU artificial intelligence rules in Cyprus could introduce fines of up to €35 million for the most serious violations. Public consultation on the legislation will remain open until September 16.

New Rules And AI Oversight

Two bills have been drafted to implement EU Regulation 2024/1689, which establishes harmonised AI rules across the bloc. Cyprus’ Office of the Commissioner for Electronic Communications and Postal Regulation (OCECPR) would become the main AI regulator, notifying authority and central point of contact.

Feedback can be submitted through the e-consultation platform. A proposed AI Regulatory Sandbox would also give startups and researchers a controlled environment to test innovative AI applications.

For high-risk AI systems, OCECPR would work with authorities responsible for specific sectors. The Personal Data Protection Commissioner would oversee relevant systems involving personal data, while the Central Bank of Cyprus would supervise high-risk AI used by financial institutions.

Inspections And Penalties

Authorised officials could inspect business premises, request information and summon individuals to provide statements. Obstructing an official could become a criminal offence punishable by up to six months in prison, a fine of up to €10,000, or both. Administrative measures could include written warnings, orders to stop violations and the withdrawal or recall of AI systems.

Minor offences could result in fines of up to €30,000, rising to €60,000 for repeat violations. Serious breaches involving prohibited AI practices could carry penalties of up to €35 million or 7% of a company’s global annual turnover, whichever is higher.

Providers, authorised representatives, importers and distributors could face fines of up to €15 million or 3% of global turnover.

Complaints And Cyprus’ AI Strategy

Any individual or legal entity would be able to file a complaint about a suspected violation. Those who believe they have been harmed by an official decision could also appeal to the Administrative Court.

Cyprus recently unveiled its National AI Strategy 2032, which aims to modernise public administration, strengthen economic competitiveness and establish the country as a regional AI hub.

According to the strategy, the global AI market could grow from $189 billion in 2023 to $4.8 trillion by 2033, while AI and automation are expected to reshape businesses across a wide range of sectors.

Copyright Law Struggles To Keep Up With AI Training

Courts Are Still Applying Old Copyright Rules To AI

AI companies train models on enormous amounts of published material, including books, articles and academic research. Whether using that content without authors’ permission violates copyright law remains unresolved.

Much of the debate centres on fair use, which allows copyrighted material to be used without permission in certain circumstances. Courts consider factors such as the purpose of the use, how much material was involved and its impact on the original market.

Anthropic Case Sets An Important Precedent

A major case involving Anthropic and a group of authors provided one of the clearest rulings so far. Judge William Alsup found that using copyrighted books to train AI models was lawful, comparing the process to people reading and studying literature before creating something new.

Anthropic was nevertheless ordered to pay $1.5 billion in a settlement. The penalty concerned books the company had obtained from illegal online libraries rather than the AI training itself.

For AI companies, that distinction could prove significant because it separates studying copyrighted material from directly copying it.

Competition Could Be The Key Issue

A case involving Thomson Reuters and Ross Intelligence offers a different perspective. A court ruled that Ross could not claim fair use after using Reuters’ copyrighted material to develop a competing AI-powered legal research platform.

The decision suggests courts may be less willing to consider AI training fair use when copyrighted content is used to build a product that directly competes with the original.

For authors, an unresolved question is whether AI-generated content should be considered competition for the works used to train these models.

The Law Has Yet To Catch Up

US copyright law predates generative AI by decades, leaving courts to apply old principles to new technology. Questions also remain over copyright protection for AI-generated works. In Thaler v. Perlmutter, a court ruled that material created entirely by AI cannot receive copyright protection.

Major AI companies remain involved in copyright litigation, and different courts could reach different conclusions. For now, there is no universal rule: the legality of AI training will depend on the circumstances of each case and how courts ultimately interpret copyright and fair use.

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