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AIs could soon run businesses – it’s a chance to make sure these ‘artificial individuals’ follow the law

Only “individuals” can engage with the legal system – for instance, by signing contracts or filing lawsuits. There are two major categories of individuals: humans, termed “natural individuals,” and creations of the law, termed “artificial individuals.” These include corporations, nonprofit organizations and limited liability firms (LLCs).

Up to now, artificial individuals have served the aim of helping humans achieve certain goals. For example, people can pool assets in a company and limit their liability vis-à-vis customers or other individuals who interact with the corporation. But a brand new form of artificial person is poised to enter the scene – artificial intelligence systems, they usually won’t necessarily serve human interests.

As scholars who study AI and law we imagine that this moment presents a big challenge to the legal system: the best way to regulate AI inside existing legal frameworks to cut back undesirable behaviors, and the best way to assign obligation for autonomous actions of AIs.

One solution is teaching AIs to be law-abiding entities.

This is way from a philosophical query. The laws governing LLCs in several U.S. states don’t require that humans oversee the operations of an LLC. In fact, in some states it is feasible to have an LLC with no human owner, or “member” – for instance, in cases where the entire partners have died. Though legislators probably weren’t pondering of AI after they crafted the LLC laws, the chance for zero-member LLCs opens the door to creating LLCs operated by AIs.

Many functions inside small and enormous firms have already been delegated to AI partly, including financial operations, human resources and network management, to call just three. AIs can now perform many tasks in addition to humans do. For example, AIs can read medical X-rays and do other medical tasks, and perform tasks that require legal reasoning. This process is more likely to speed up on account of innovation and economic interests.

A special form of person

Humans have occasionally included nonhuman entities like animals, lakes and rivers, in addition to corporations, as legal subjects. Though in some cases these entities might be held accountable for their actions, the law only allows humans to totally take part in the legal system.

One major barrier to full access to the legal system by nonhuman entities has been the role of language as a uniquely human invention and an important element within the legal system. Language enables humans to know norms and institutions that constitute the legal framework. But humans are not any longer the one entities using human language.

The recent development of AI’s ability to know human language unlocks its potential to interact with the legal system. AI has demonstrated proficiency in various legal tasks, akin to tax law advice, lobbying, contract drafting and legal reasoning.

Would you do business with an AI that didn’t know the law?
SM/AIUEO/The Image Bank via Getty Images

An LLC established in a jurisdiction that permits it to operate without human members could trade in digital currencies settled on blockchains, allowing the AI running the LLC to operate autonomously and in a decentralized manner that makes it difficult to control. Under a legal principle referred to as the inner affairs doctrine, even when just one U.S. state allowed AI-operated LLCs, that entity could operate nationwide – and possibly worldwide. This is because courts look to the law of the state of incorporation for rules governing the inner affairs of a company entity.

We imagine the most effective path forward, due to this fact, is aligning AI with existing laws, as a substitute of making a separate algorithm for AI. Additional law might be layered on top for artificial agents, but AI ought to be subject to a minimum of all of the laws a human is subject to.

Building the law into AI

We suggest a research direction of integrating law into AI agents to assist ensure adherence to legal standards. Researchers could train AI systems to learn methods for internalizing the spirit of the law. The training would use data generated by legal processes and tools of law, including methods of lawmaking, statutory interpretation, contract drafting, applications of legal standards and legal reasoning.

In addition to embedding law into AI agents, researchers can develop AI compliance agents – AIs designed to assist a corporation robotically follow the law. These specialized AI systems would supply third-party legal guardrails.

Researchers can develop higher AI legal compliance by fine-tuning large language models with supervised learning on labeled legal task completions. Another approach is reinforcement learning, which uses feedback to inform an AI if it’s doing an excellent or bad job – on this case, attorneys interacting with language models. And legal experts could design prompting schemes – ways of interacting with a language model – to elicit higher responses from language models which are more consistent with legal standards.

Law-abiding (artificial) business owners

If an LLC were operated by an AI, it might should obey the law like all other LLC, and courts could order it to pay damages, or stop doing something by issuing an injunction. An AI tasked with operating the LLC and, amongst other things, maintaining proper business insurance would have an incentive to know applicable laws and comply. Having minimum business liability insurance policies is a typical requirement that almost all businesses impose on each other to interact in industrial relationships.

The incentives to determine AI-operated LLCs are there. Fortunately, we imagine it is feasible and desirable to do the work to embed the law – what has until now been human law – into AI, and AI-powered automated compliance guardrails.


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