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Uses of Artificial intelligence (AI) are continuing to diversify and evolve, and the defence industry is no exception. AI can be implemented to transform anything from radar systems and unmanned vehicles to strategic decision-making and cybersecurity. The critical question for those who manufacture and procure such systems is how far the reliability of AI can be guaranteed in a hostile environment, where any error could have catastrophic consequences. This article from Richard Tall Partner at Faegre Drinker, Hans-Christian Mehrens Associate at Faegre Drinker and Emily Evans Trainee at Faegre Drinker explores this new technology.

Contractual Safeguards

There is understandable concern about the difficulties of utilising AI in the defence sector. It is widely understood that any form of AI deployed in a hostile environment must abide by the rules of engagement but ensuring that this is the case is another matter. From a legal perspective, contractual clauses can be adapted to provide some comfort and regulate any AI decision-making. As a first step, compliance with law clauses, typically covering laws on AI, data protection, health & safety and product marketing, can be extended to include international law, certain national defence policies and guidance, and specific rules of engagement. Care will be needed when drafting such clauses to ensure that they are fit for the specific purpose of the AI system’s deployment; contracts will also be required to ensure that there is some degree of flexibility in the programming of the AI system, allowing adaptation to the environment – and its related rules of engagement – in which it is deployed.

Contracts should include a business continuity clause and should specify that critical fail-safes must be incorporated into the AI system itself. Human-in-the-loop integration is crucial – and should be contractually agreed and operationally implemented – allowing a human operator to override any incorrect decision-making. While requirements for human oversight are already built into various AI legislations across the world, their importance, understandably, in the defence context is of paramount importance.

Suppliers should be required to provide evidence of security standards, technical safeguards and disaster recovery plans as part of the due diligence and procurement process. Alongside this, audit and monitoring mechanisms which can be regularly triggered should also be built into contracts to ensure accountability throughout the supply chain.

Effective oversight is essential to maintaining the integrity and security of supply chains in the defence sector. Many of the concerns around the use of AI models can be addressed through ensuring transparency in their operation. The same is true in relation to minimizing and mitigating any disruption in the supply chain. Transparency provisions in any supply contract should include documentation requirements in relation to the AI system’s decision-making process. Access to data logs and clear reporting protocols throughout the supply chain should also be mandated, and audit rights flowed down across the supply chain.

Cross-Border Compliance

Operating a cross-border supply chain is likely to cause more headaches than normal if it involves AI. Regulation of AI systems is relatively new, and many jurisdictions are only in the early stages of developing and implementing such legislation, with the legal landscape looking set to significantly evolve over the next decade. The most comprehensive piece of AI legislation – the EU AI Act – carves out AI systems used exclusively for “military, defence or national security purposes” from its scope. Care must be taken to ensure that products fall within this exclusion, otherwise onerous obligations will apply.

Meanwhile, the UK has not introduced any AI legislation and the US has adopted a patchwork approach, implementing only sector-specific regulations across some US states but not others. For manufacturers operating in these jurisdictions, compliance with laws clauses in supply contracts could be extended to encompass the various AI-related strategies, ethical principles and policies which have been introduced.

A Boost for the UK?

In recent weeks it has been widely reported that Europe is stepping up military investment. Increasingly strained trade and an aversion to being over-reliant on the US for its military capabilities could mean that EU countries turn to the UK’s defence manufacturing sector. Examples abound, but the UK’s Tempest fighter jet may, in future, become a viable alternative to the US’s F-35, and Franco-British collaboration on next-generation cruise missiles demonstrates a renewed momentum towards non-US aligned systems.

US manufacturing is at the mercy of frequently changing regulations and far-reaching export controls and Europe is gradually starting to look for non-ITAR (International Traffic in Arms Regulations) options. The UK can provide relative regulatory stability and is politically aligned with Europe’s defence strategy, without being subject to European procurement constraints. This could lead to exciting opportunities for UK manufacturers.

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Post written by: Vicky Maggiani

Vicky has worked in media for over 25 years and has a wealth of experience in editing and creating copy for a variety of sectors.

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