Sector: Government Relations and Public Affairs

Since generative artificial intelligence models like ChatGPT and Bard hit the mainstream at the beginning of this year, governments around the world are grappling with the complex question of how to regulate AI.

Developments are coming thick and fast. This week, MEPs working on the EU’s landmark Artificial Intelligence Act published an open letter, promising to introduce new laws that will curtail the powers of ‘very powerful AI’, ensuring instead that it will develop in a ‘human-centric, safe, and trustworthy direction’. Last week, the US Commerce Department launched a public consultation that will seek to understand what policies will help businesses, government and the public be able to trust that AI systems ‘work as claimed, and without causing harm’. Alan Davidson, Assistant Commerce Secretary, said that while his government believed in the promise of AI, there are concerns that AI was not being rolled out safely. In China, new laws will require companies using generative AI to submit their technology to government regulators for a security assessment.

A different direction: Assessing the UK’s approach to AI regulation

The proposals from the US, Europe and China throw the approach taken by the UK government into sharp relief. It has now been almost a month since the long-awaited launch of the UK’s AI white paper, which set out that the government has no plans for new legislation, or to create a new regulator to oversee AI in its entirety. Instead, existing regulators including Ofcom, the ICO and the CMA will be encouraged to ensure AI companies follow a set of five core principles, including safety and security, transparency, fairness, accountability, and contestability. The government stresses that this will ‘help create the right environment for artificial intelligence to flourish safely in the UK’ whilst avoiding ‘heavy-handed legislation which could stifle innovation’.

However, with other countries putting more robust measures in place, will this light touch approach hold out?

AI experts have raised concerns that the UK’s approach carries ‘significant gaps’. The Ada Lovelace Institute criticised the White Paper for not setting new legal obligations on regulators, developers, or users of AI systems, with just a minimal duty on regulators expected in future. It noted that the approach raised ‘more questions than it answers on cutting-edge, general-purpose AI systems like GPT-4 and Bard, and how AI will be applied in contexts like recruitment, education and employment, which are not comprehensively regulated…  The government’s timeline of a year or more for implementation will leave risks unaddressed just as AI systems are being integrated at pace into our daily lives, from search engines to office suite software.’

Looking to the future

With the election looming in 2024, how would a Labour government approach AI regulation? Upon the release of the White Paper, Lucy Powell criticised the government for ‘reinforcing gaps in [the] existing regulatory system and making the system hugely complex for businesses and citizens to navigate’. She has also, however, described herself as a ‘tech optimist’ and called regulation a means to ‘enable good practice’.

Labour is currently developing its approach to tech and the wider digital economy, which will be set out in a paper due for publication in May. Until then, we cannot yet be certain about the approach that Labour will take. But one thing we can safely assume is that the AI landscape, and how we interact with it, will have evolved significantly by the time the next election rolls around.

It has, after all, taken just a few months from its launch in November for ChatGPT to become thoroughly embedded into our online lives, being used by millions every day to do everything from writing recipes and workout plans, to drafting complex pieces of code. It is continually advancing and will soon be integrated into all Microsoft Office tools. The most recent version, ChatGPT4, is even faster and smarter than its predecessor, and capable of more advanced tasks like suggesting recipes from a picture of an open fridge and using a rough sketch in a notepad as a basis for writing code for a website.

OpenAI (just one of the many companies working in the AI space) is already working on ChatGPT5. Early speculation has suggested that this new model could reach Artificial General Intelligence, at which point it will be, on average, smarter than humans. While the Co-Founder of Open AI, Sam Altman has said that AGI will ‘benefit all of humanity’; others are less sure.

This includes Altman’s former colleague and fellow Co-Founder of OpenAI, Elon Musk, who recently signed an open letter along with over 1,000 other AI experts and researchers, calling for a moratorium on the development of large language models like ChatGPT and Google’s Bard.  “Powerful AI systems should be developed only once we are confident that their effects will be positive, and their risks will be manageable”, the letter says, adding that if researchers do not pause their work on AI models more powerful than GPT-4, then “governments should step in”.

While we shouldn’t expect an immediate shift in the position taken by government towards AI regulation, organisations working in and with AI should expect continuing and growing tension between the government’s desire for a light-touch regulatory approach to AI and the need to prevent consumer harm, and ongoing debate across the political and media sphere about AI ethics and the appropriate regulatory approach.

Recent debates around online safety have shown there are lessons to be learned from a failure to act proactively – with companies who did not sufficiently safeguard children from online harms suffering reputational damage as a result. From a reputational and regulatory standpoint, organisations working in AI should therefore consider taking steps to self-regulate, both to protect their own reputation, and to comply with potential future regulations.

If you’d like to understand more about the political and regulatory landscape in relation to AI and the wider technology sector, then please contact Vic Wilkinson at victoria.wilkinson@grayling.com

Grayling, the global integrated communications agency with the most extensive public affairs network in Europe, has announced the appointment of Jessica Brobald as Managing Director, Brussels. Jessica will lead the growth and development of the Brussels office, overseeing day-to-day operations and driving further integration with the rest of its European network.

“We are thrilled to formally welcome Jessica to Grayling,” said Richard Jukes, Grayling Executive Chairman. “She brings enormous value to our business and significant EU experience, having counselled and run successful advocacy campaigns in Brussels for national and international companies, NGOs and Associations. With a new EU term approaching, I am confident she will deliver strategic and political insight for our clients and drive continued growth within our Brussels team.”

Jessica joins Grayling from Ketchum, where she was Head of Public Affairs and Advocacy and helped lead the integration of Ketchum and Porter Novelli into PNKetchum+.

Jessica has held several senior consultancy and in-house positions, with extensive experience working with EU institutions across a wide range of policy areas – including science and innovation, chemicals, circular economy, agri-food and environmental policies, and healthcare.

“Brussels is a key element of Grayling’s extensive European and global network. At a time of uncertain and challenging geo-political and economic outlook, Brussels will remain a focal point for organisations looking to influence EU and international policy. Our office here has a great group of public affairs and communications experts, and I am convinced that we will continue rising to that challenge. Grayling’s European footprint and creative capabilities puts us in a unique position to offer critical policy expertise and counsel with best-in-class communications services.”

2,440 days since the UK voted to leave the European Union, Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen announced the much anticipated “Windsor Framework” – an agreement which looks to reset the UK/EU trading relationship, underpin the integrity of the European Single Market and crucially, answer the concerns of unionists around a border in the Irish Sea which held back the resumption of power-sharing at Stormont.

Today’s announcement will be hailed in the UK as a political victory for a Prime Minister under pressure. Rishi Sunak has accomplished something which eluded his immediate predecessors – reaching a new agreement without the need to unilaterally break international law, whilst resetting UK/EU relations in the process.

The framework has already received praise from various quarters, with Irish Tánaiste and Foreign Minister Micheál Martin TD calling it “very welcome”, while Northern Ireland Minister and staunch Brexiteer Steve Baker MP said the agreement is “great news.” Downing Street will be hoping that détente with the EU on the Northern Ireland Protocol will unlock progress in other areas, including scientific research funding, co-operation with France on cross-Channel migration and further action to support Ukraine.

The prospect of agreement is also likely to significantly improve the UK’s relationship with the United States at a critical time for trade negotiations, with President Joe Biden having repeatedly stressed that any efforts from the UK Government to unilaterally amend the Northern Ireland Protocol would not create a conducive environment for a trade deal. The long-rumored state visit of the President to the UK and Ireland in early April, timed to coincide with the 25th anniversary of the Belfast-Good Friday Agreement, is now more possible.

While a political victory is in sight for the Prime Minister, the deal must pass through both the UK and European Parliaments. All eyes now are focused on the Democratic Unionist Party’s (DUP) assessment of the deal, and whether the new framework does enough to assuage its concerns around Northern Ireland’s place within the UK. The DUP has publicly set out seven tests against which it will measure any deal, and its decision making may be affected by issues closer to home, including the potential of it being outflanked to the right by smaller unionist parties in upcoming council elections and the prospect of a DUP Deputy First Minister serving with a Sinn Féin First Minister in Stormont for the first time if power-sharing is restored.

Ultimately, a new framework which unites Brussels, London and Dublin is central to the Prime Minister’s attempt to be seen as the details-driven leader his predecessors failed to be. And with business leaders uniting in praise over his efforts to usher in a new era of stability and certainty, Rishi Sunak may look back on the Windsor Framework as the moment which cemented his place as the leader who finally put to bed the recurring nightmare which haunted Cameron, May, Johnson and Truss – by getting Brexit done.

Executive Summary of Key Announcements

Red Lanes & Green Lanes
Goods entering Northern Ireland from Great Britain, that are destined to stay within Northern Ireland, can use a “Green Lane” that requires minimal customs checks. Goods moving through Northern Ireland to enter the EU Single Market will still be required to use a “Red Lane” involving significant checks.

Governance & The ECG
Large amounts of EU law have been removed from applying in Northern Ireland, reducing the role of the European Courts of Justice (ECJ). Rules in significant areas will therefore be interpreted primarily by Northern Irish and British courts.

VAT, State Aid & Excise
These taxation and spending powers were limited in the original Protocol, but the new Agreement gives the UK full authority to use them in Northern Ireland without being limited by EU law.

The Stormont Brake
The Agreement described a new mechanism for the Northern Ireland Assembly to prevent EU laws from being applied in Northern Ireland – this “Stormont Brake” will allow MLAs to suspend a piece of legislation if 30 MLAs from two or more parties agree to do so, with EU-UK agreement required to enforce it once the brake has been applied.

New EU-UK Institutions & Structures
The EU and UK have committed to further consultations on areas of law before they are applied to Northern Ireland, with the UK Government committing to consult further with Northern Irish political parties on amendments to the Northern Ireland Act 1998 in order to achieve this.

Medicines
Northern Ireland has been exempted from EU requirements for new medicines to be approved by the European Medicines Agency (EMA), ensuring an uninterrupted flow of medicines between Great Britain and Northern Ireland. Veterinary medicines have also been safeguarded until the end of 2025.

To discuss how we can help your organisation navigate the complexities of the new agreement, contact our Alan Boyd-Hall, Head of Public Affairs, at alan.boyd-hall@grayling.com.

The story so far…

In April 2022, the then Economic Secretary to the Treasury, John Glen MP, set out plans for the UK to become a global hub for cryptoasset technology. Since then, rapid developments in the sector – climaxing in the collapse of FTX – have resulted in a significant stock take on the direction of UK crypto regulation. The upshot of recent market turbulence has seen the UK Government dialling up efforts to regulate the industry, supported by an eagerness to strike the right balance between facilitating technological innovation, upholding consumer protection and ensuring market integrity. The link between cryptocurreny and economic growth has also been severed following recent turbulence.

The publications of the government’s long-awaited proposals to regulate a broad suite of cryptoasset activities marks the latest stage in the development of regulation in the sector. The measures – which build on previous HM Treasury proposals regarding stablecoins and the financial promotions of cryptoassets – are aimed at delivering a framework that will mitigate the most significant risks of cryptoassets, while harnessing their  contribution to economic growth.  This will build on the legislative foundations to bring fiat-backed stablecoins into financial services regulation under the Financial Services and Markets Bill.

Most recently, the Law Commission was asked by the government to make recommendations on legal reform to accommodate crypto tokens, which is expected to significantly shape government thinking on crypto alongside the latest consultation. After months of industry calls on the government to deliver clarity for business and consumers, demands have been met to an extent. But, there remains a long way to go before regulation sets in and many an opportunity to raise concerns with the government’s existing plans before reaching that point.

So what’s new?

Overall, the government has confirmed that regulation of cryptoasset activities will be consistent with the existing regulatory approach to traditional finance. This means rules for crypto regulation will likely be subject to prudential, consumer protection, operational resilience and disclosure requirements, among others. The government will temporarily backtrack on a previous pledge to align crypto regulation with standards applied to stocks, shares and insurance products.

The regulatory parameters will be extended to cover assets including stablecoins, crypto-backed tokens and fan tokens. The plans are designed to target misleading cryptoasset promotions, enhance data-reporting requirements and attempt to stamp out ‘pump and dump’ where an individual intentionally inflate the value of a cryptoasset before selling it.

The clear impetus behind many of the policy levers detailed is safeguarding consumers. Similarly, HM Treasury accepts that there is a need to prioritise operational resilience and market conduct in the wake of recent events and in order to position the UK as a leader in crypto on the global stage.

There is also a marked shift in responsibilities under the proposals. Much of the burden appears to be placed on crypto trading platforms themselves. Under the proposals, crypto traders will need to define the demands that a currency must meet before being admitted for trading and they will also, among other detail, have to keep customers’ assets secure.

The government intends to include the financial services regulation of cryptoassets within the regulatory framework established by the UK’s Financial Services

and Markets Act 2000 (FSMA). This will allow HM Treasury to provide secondary legislation to bring activities within the regulator perimeter.

In terms of issuance and distribution of cryptoassets, the consultation proposes to follow a similar approach to that for securities, and apply regulation when the asset is being admitted to trading on a regulated cryptoasset trading venue.

Separately, in a continued effort to brand itself as the custodian of environmental safety, the government is seeking views on energy intensity information that should be made available to consumers, clearly setting out the environmental impact of their investment.

What comes next?

Ahead of the consultation deadline on 30^th April 2023, implicated firms will need to mull over the expected impact of the proposals before taking a view on whether to submit. Due to the vast scope of the consultation questions, we are expecting to see a number of joint consultation responses put forward. After that point, the government will consider feedback and work to set out its consultation response.

Once legislation is laid, the Financial Conduct Authority (FCA) will consult on its detailed rules for the sector and businesses should consider this upcoming regulatory focus ahead of future engagement.

With seismic regulatory change in the pipeline, Grayling can support clients in getting cut through among key political circles, positioning your business as a trusted partner to policymakers and regulators as you navigate new waters ahead. We offer a range of skills and expertise that enable us to determine the best course of action, develop insightful strategies and orchestrate effective campaigns.

The team at Grayling has a wealth of experience helping financial services companies understand and navigate the regulatory landscape. If you would like to better understand the political landscape and what this means for your business, please contact Alan Boyd-Hall, Head of Public Affairs, at alan.boyd-hall@grayling.com.

What can users and businesses expect from the EU’s bold new legislation that seeks to tackle Big Tech’s dominance in the digital market? Our factsheet provides all the information you need to understand the Digital Markets Act, and how it stands to change the digital world as we know it.

To learn more about the Digital Markets Act, please contact emma.omahony@grayling.com.

While Westminster-watchers have been glued to the high drama playing out in Downing Street and the House of Commons over the past 48 hours, businesses and campaign groups up and down the country are seeking to understand what the change of Prime Minister will mean in practice. Here’s our take on what happens next. 

Leadership process
PM Boris Johnson has today announced that he will step down as soon as a new leader is in post. The Conservative Party will swing into action with a rapid leadership contest. The timetable for this will be published early next week, but at present, we are expecting that the party’s 1922 Committee will move to start and end the parliamentary element of the leadership process, where MPs nominate candidates, before summer recess in three weeks’ time.

Reports suggest that the threshold for candidates, currently set as a proposer, seconder and ten supporters from the Conservative parliamentary party, will be raised in order to prevent a broad field of candidates, as MPs will need to whittle down the nominees to a final two to be presented to the membership. In this stage, members of the Conservative Party will be asked to choose between these final two candidates, and this process is likely to take 4-6 weeks. We should expect a new Conservative leader to be in place ahead of Party Conference in Birmingham in early October. 

Bills and legislation
The almost unprecedented raft of ministerial resignations since 6pm on Tuesday have effectively paralysed Government business in the House of Commons in particular. On Thursday, three Bill Committees were cancelled owing to a lack of Ministers. Twenty-three Bills are currently making their way through both Houses of Parliament, from the Product Safety and Telecommunications Infrastructure Bill, which is close to finishing its passage through the Lords before Royal Assent, to the Energy Bill [HL], a crucial piece of legislation to bolster Britain’s energy security, which had just been introduced on Wednesday. 

The Government’s legislative programme, pre-leadership crisis, was already acknowledged to be ambitious and was already behind schedule, so the further delays caused this week are likely to lead to a re-phasing of legislation once Parliament returns post-Summer Recess, as a new Prime Minister moves to get Government back on course. This could go much further, with Bills being dropped and new legislation introduced if a new Prime Minister wants to signal a change in direction from the Johnson premiership. 

Runners and riders
At this stage, a small number of candidates have definitively thrown their hat into the ring – Attorney-General Suella Braverman announced live on ITV’s Peston on Wednesday night that she would be standing for the Conservative Party leadership, while arch-Brexiteer and chair of Conservative Way Forward Steve Baker said on Thursday morning that he is likely to put himself forward. Other likely runners and riders include Nadhim Zahawi, Chancellor of the Exchequer since Tuesday night, who is understood to have been working with external advisers to build a campaign plan over the past few months, as well as his predecessors Sajid Javid and Rishi Sunak. Both Foreign Secretary Liz Truss and International Trade Minister Penny Mordaunt rank highly with Conservative members and have long been rumoured to be interested in standing for the top job, but remaining in their posts during the slew of resignations may hurt their chances of progressing through the parliamentary shortlisting stage of the leadership process.  

Defence Secretary Ben Wallace currently tops ConservativeHome’s membership survey of favoured leaders, but has kept his distance from the ongoing political parlour games. Health and Social Care Committee Chair Jeremy Hunt, who lost the last leadership election to Boris Johnson, is clearly positioning himself for another campaign. 

But what about Labour?
At the same time, the main opposition party may be about to face its own leadership crisis. Both Leader of the Opposition Keir Starmer and Deputy Leader Angela Rayner have promised to resign if fined by Durham police for breaking Covid rules. In this situation, Labour’s National Executive Committee is mandated to order a ballot of party members, and in consultation with the Shadow Cabinet may choose to appoint a current Shadow Cabinet member to serve as party leader in the interim. 

What this means for businesses
In the short term, our advice to businesses and campaign groups is to let the high politics play out. MPs and peers from both main parties will be preoccupied with the internal politics, and on how their parties are presenting themselves to voters over the coming weeks. Any immediate requests to parliamentarians should be time-sensitive and absolutely critical. 

Over the leadership contest, there will be plenty of opportunities to offer visits and photo opportunities to candidates who will be keen to tour the country and demonstrate their appeal. Building and strengthening relationships with key parliamentary allies of the leadership contenders will also help to position organisations effectively with a new administration. 

In the meantime, civil servants will be keeping the day-to-day operations of Government going. At a time when Ministers and their special advisers may change roles very quickly, building strong working relationships with relevant civil servants should help to provide continuity and certainty for business. 

This year’s party conferences will be crucial in helping to understand how both the Conservative and Labour parties will position themselves for the next election, and we expect to see a significant rise in attendance for both conferences. 

If you would like to discuss what the changes in Government mean for your organisation, please get in touch with Alan Boyd-Hall or Christine Quigley from our UK Public Affairs team.

Our Brussels and Paris offices assess the results from the French Presidency of the Council of the European Union which took place from January – June 2022.

Grounded on three key principles, namely “recovery, power and belonging”, the programme of the French Presidency was set up to achieve “a more sovereign Europe” and foster its strategic autonomy. So, what was achieved in the past 6 months and how will it impact the EU?

“Europe of January 2022 is not the same as Europe of June 2022”
French President Emmanuel Macron after the last European Council Summit under the French Presidency (24 June 2022)

Most EU experts agree that the programme of the French Presidency was ambitious; perhaps too ambitious. The 6-month period was disturbed by major crises, with the return of war on the European continent and a looming economic, energy and food crisis. With over 400 events held, more than 130 agreements reached, and over 2000 meetings of EU officials, French diplomats undeniably managed to make their presidential term a dynamic one. Overall, Paris achieved some big political wins, but also suffered some drawbacks

Significant progress on key legislative files

Some the of the presidency’s major achievements related to digital policy. The Digital Markets Act (DMA), which was fully agreed upon on 24 March, and the Digital Services Act (DSA), for which a provisional political agreement was found on 23 April. While the DMA creates competition rules for online commerce, the DSA regulates the responsibility of digital platforms in the dissemination of online content. Moreover, a proposal regarding the enforcement of the EU’s Artificial Intelligence Act was endorsed and a general approach on the governance framework for digital transformation was reached. Paris also succeeded in passing a new tool promoting reciprocity in access to international public contracts, ensuring fairer access for European companies competing in tenders abroad.

On the environmental front, the Council reached an agreement on most of the key files of the Fit for 55 package, allowing the European Parliament and the Council to begin negotiations in September. A general approach was agreed upon for the Carbon Border Adjustment Mechanism (CBAM) on 15 March, on the alternative infrastructure regulation (AFIR), the FuelEU Maritime and ReFuelEU Aviation directives on 2 June, and on the revision of the energy efficiency directive (EED) and of the renewable energy directive (RED) on 27 June. The reform of the Emissions Trading System (ETS) also passed in the Council on 28 June. However, with France racing to conclude negotiations before handing over the Presidency to the Czech Republic on 1 July, some Member States complained that Paris was overly cautious and too willing to water down some of the texts. Indeed, most of the agreements are largely aligned with the Commission’s initial proposals, and in some cases include exemptions and derogations, while the European Parliament has essentially been pushing for greater ambition. Against this background, the upcoming trilogue negotiations on most of these files are expected to be challenging.

The winding path towards a more geopolitical, democratic, and social EU

France’s ambition to make the EU a true geopolitical power only partially materialised. The Presidency did manage to conclude the work on the Strategic Compass, the white paper for European defence and security that was endorsed by the European Council on 24 and 25 March 2022. Some progress was also achieved on the flagship directive on minimum wages, with a provisional agreement reached with the European Parliament on 7 June. However, Central and Eastern European countries, especially Poland and Hungary, remain suspicious and are not fully convinced. Along the same lines, the proposal to impose a minimum 15% tax rate for multinationals across the EU was stalled, with some countries using it as a bargaining chip in other negotiations.

The French Presidency also opened the debate on including a rule of law conditionality regulation, now in force, which provides for the adoption of measures against any violation in this area that affects the EU budget. On migration, the Schengen Council was created but the Presidency struggled to pass any substantial asylum reforms. The French Presidency also oversaw the conclusion of the Conference on the Future of Europe with a report featuring citizens’ proposals being submitted to the European Parliament on 9 May. Paris gathered support regarding the possible revision of the EU treaties, a necessity according to President Macron, but the aftermath of the Conference remains uncertain.

A war and a presidential election to handle all at the same time

In the context of the war in Ukraine, the French Presidency successfully managed to maintain the Union’s unity and to conclude negotiations on several packages of sanctions against Russia, despite Hungary’s veto on a Russian oil embargo. The war also triggered major breakthroughs regarding EU defence such as delivering lethal weapons to the Ukrainian armed forces through the European Peace Facility. Moreover, at the Versailles Summit, France provided political support for the REPowerEU package, including measures to phase out the EU’s dependency on Russian fossil fuels.

Nonetheless, despite his personal involvement in the Ukrainian war, President Macron was unable to obtain any meaningful concessions such as a ceasefire from Russian President Putin. His willingness to keep the “channel of negotiations” open with the Kremlin as well as his various statements on the need to avoid “humiliating Russia” were not well received by Central and Eastern European countries. Even though the last Council Summit under the French Presidency saw the EU granting candidate status to Ukraine and Moldova, the ambiguous French position triggered distrust among several EU Member States. The French Presidency also failed to overcome Bulgaria’s veto over the accession of North Macedonia and other Balkan countries to the EU. In the end, national preferences could not always be overcome.

Finally, the French Presidential and legislative elections somewhat overshadowed the Presidency, with some critics suggesting that President Macron instrumentalised his role for electoral purposes. The Presidency got off to a strong start, but notably slowed down in the spring, when several members of the French government were busy campaigning. Furthermore, President Macron suffered a blow during the legislative elections in June, with his party losing its majority in Parliament – and an opposition dominated by two Euroskeptic political parties –, somewhat weakening his position as a leader on the EU stage

The Czech Presidency, whose new mandate starts on 1July, will now have to build on the French achievements of past months. With the stalemate in Ukraine and the risk of a looming economic crisis, it will undoubtedly face several major challenges. Its priorities, stated in its political programme, relate mainly to the human, military, economic and energy consequences of the war. They indicate some kind of continuity, but several stakeholders in Brussels are already worried that they might limit progress on important environmental and climate legislation.

For more information, please get in touch at pa@grayling.com and affairespubliques@grayling.com. You can also follow us on Twitter @TheEULobby