The law and economics of AI liability

The employment of AI systems presents challenges for liability rules. This paper identifies these challenges and evaluates how liability rules should be adapted in response. The paper discusses the gaps in liability that arise when AI systems are unpredictable or act (semi)-autonomously. It considers the problems in proving fault and causality when errors in AI systems are difficult to foresee for producers, and monitoring duties of users are difficult to define. From an economic perspective, the paper considers what liability rules would minimise costs of harm related to AI. Based on the analysis of risks and optimal liability rules, the paper evaluates the recently published EU proposals for a Product Liability Directive and for an AI Liability Directive.