The EU AI Act: Legal Compliance, Risks & Strategic Guidance for Businesses

Why the EU AI Act Matters for All Companies

The EU Artificial Intelligence Act is the first major regulatory framework for AI—and its impact will extend far beyond the tech sector. Whether you're using AI to screen job candidates, forecast supply chain needs, personalize marketing, or automate logistics, your company is already exposed to AI compliance obligations.

Even if you’re not building AI systems yourself, you are still responsible for their use. That means risk management, legal documentation, and oversight cannot be left to chance.

Business Risks of Non-Compliance with the EU AI Act

Under the EU AI Act, companies face serious consequences if they fail to meet compliance obligations:

• Fines of up to €35 million or 7% of global annual turnover

• Suspension of AI systems

• Legal claims from customers or employees

• Reputational damage due to unethical or opaque AI use

• Loss of trust among partners, suppliers, and investors

Practical Compliance Strategies for Businesses

To reduce risk and ensure readiness, companies should:

• Map current AI use across all departments — from HR to operations

• Review all third-party AI systems for hidden compliance risks

• Update contracts to include AI-related warranties and audit rights

• Train legal, procurement, and IT teams on AI governance and documentation

• Establish internal AI policies defining approval processes and responsibilities

AI Compliance Clauses: A Must-Have in Contracts

To protect your business legally and financially, contracts with AI vendors and service providers should include:

✅ AI Compliance Warranties

• Vendor confirms EU AI Act compliance

• Risk assessments conducted

• Prohibited AI practices excluded

✅ Audit and Transparency Rights

• Right to request documentation

• Regular audits allowed

• Real-time explanation of AI decisions

✅ Liability Provisions

• Vendor assumes liability for non-compliance

• Indemnification clauses for damages and fines

• Immediate contract termination for violations

These clauses are particularly critical in regulated sectors such as finance, health, insurance, and logistics.

What Boards Should Discuss About AI Risk and Governance

The responsibility doesn’t end with legal and compliance teams. Boards must take an active role in AI oversight and risk mitigation. Here are 5 key questions every board should ask:

1. What AI systems are we currently using?

2. Are our vendors contractually bound to comply with the EU AI Act?

3. Do we have an internal process to identify and manage AI risks?

4. Are our teams trained on the risks and obligations of AI use?

5. Do we have a clear policy on responsible and ethical AI?

Board-level leadership is crucial in building long-term trust and resilience in an AI-powered business landscape.

Conclusion: Turning Compliance Into Competitive Advantage

AI can transform your business—but only if used responsibly and compliantly. The EU AI Act isn’t just a legal requirement; it’s an opportunity to embed trust, ethics, and accountability into your operations.

At LKOS Law Office, we help companies navigate AI risks, revise contracts, and develop strategic compliance frameworks tailored to their industries and jurisdictions.

📩 Need support drafting AI-compliant contracts and safeguarding your business?
Our legal team at LKOS Law Office is here to help you navigate the EU AI Act and embed compliance into every agreement.

👉 Contact us today to ensure your contracts protect—not expose—your business.