AI and the law: How to navigate the AI Act, contracts and liability

Spencer West Partner Andrew Sparrow recently advised a longstanding UK-based software development and consultancy client on the legal complexities of deploying an artificial intelligence (AI) system in the European Union.

The project

The client was tasked with the unique opportunity to develop and deploy an interactive AI system intended to enhance a European public space. The AI-powered tool would serve as a digital guide, using adaptive and inferential technologies to take prompts from and learn about individual visitors as they moved through the space, offering a personalised and tailored experience.

Although the system was considered low risk in terms of privacy and sensitive information, it would interact directly with the public and process some forms of personal data – making it subject to AI legislation in the EU.

Understanding the landscape

While the UK currently lacks specific AI legislation, the EU is at the forefront with its AI Act, the first comprehensive legal framework in the world governing the use of AI, which is currently being rolled out in phases. Despite being based in the UK, our client’s deployment of an AI system in the EU brought it within the scope of this new regulation.

Having advised on various matters involving the internet and emerging technologies for almost three decades, Andrew brought his experience in the legal implications of such technologies to bear, analysing the AI Act and its relevance to our client’s role as a subcontractor in the wider deployment chain.

Andrew maintains that while the UK currently lacks AI legislation and is no longer part of the European Union, the EU’s leadership in this area provides an early look into the key considerations one should have when unpacking the legal hurdles of AI models. These include two key guiding principles:

• Assessing the level of risk associated with the AI system (e.g. the use of personal data or biometric identifiers).
• Clarifying the client’s role within the deployment chain – whether as a developer, deployer, distributor or producer – which directly impacts their legal obligations and potential liabilities.

Finding contractual clarity

With minimal precedent to guide negotiations, Andrew worked closely with the client to define their responsibilities within the wider project.

Andrew provided practical guidance on:

• Determining liability events and allocating them between parties
• Data protection considerations under GDPR and the AI Act
• Intellectual property rights, particularly around how the AI was trained and whether it might generate original content or inventions
• Monitoring and human oversight, as required under evolving regulatory expectations

Agile legal mindset to match emerging technology

Andrew attributes the matter’s success to finding solid ground in the fundamentals, using it as a platform for more creative and imaginative thinking.

“This was a great example of how AI law is forcing us to think laterally,” Andrew said.

“Technology will always outpace regulation. What we can do is apply core legal fundamentals and anticipate likely risks to help our clients make informed, strategic decisions now – not later.”

“The underlying legal principles – product liability, data protection, contract law, intellectual property – aren’t new, but how they apply in an AI context is. You can’t take a copy-paste approach to advice in this area.”

Andrew emphasised the importance of understanding the AI system itself, its function, and its operational context before offering advice.

“You need to take a forensic look at what it’s doing, to whom, and who’s involved in building and deploying it. From there, you tailor the legal framework to match.”

Looking ahead

As more clients explore AI-led projects and international deployments, Spencer West remains ready to support with forward-thinking, technically informed legal advice. Whether it’s contract design, regulatory compliance, or risk management, our technology and AI specialists bring clarity and structure to complex, novel legal questions.