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

Certainty around the regulatory environment is crucial to facilitate responsible AI innovation and its social acceptance. However, 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 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 at least partial industry-funding, with funding arrangements depending on whether it would pursue other potential policy goals.