Legal & Risk: What Businesses Need to Watch

Legal & Risk: What Businesses Need to Watch

2026-06-06

This week’s news underscores the growing interplay between AI adoption and regulatory compliance, particularly in critical infrastructure and high-stakes data processing. Two stories highlight legal risks businesses in South Africa, the UK, or Europe must address.

1. AI-Driven Energy Pipelines: EU AI Act Compliance and Data Localization

Source: [6] Smart pipelines: Can AI protect the world’s energy lifelines?

As aging energy infrastructure increasingly relies on AI for monitoring and safety (e.g., Euronews’ report on smart pipelines), businesses must evaluate compliance with the EU’s AI Act. The AI Act classifies AI systems managing critical infrastructure (like pipelines) as “high-risk,” requiring strict adherence to transparency, human oversight, and data minimization. For instance, AI used to monitor pipeline integrity must ensure that data processing does not breach EU GDPR principles, especially for EU citizen data. Non-compliance could result in penalties under the AI Act or data localization requirements, forcing companies to reevaluate cross-border data transfers. Additionally, South African firms handling EU-related energy projects must ensure compliance with the Protection of Personal Information Act (POPIA) if AI systems process personal data locally.

2. High-Price AI Services: Contractual and Data Privacy Risks

Source: [3] AI gurus charge $25,000/day for corporate use

The rise of AI “gurus” offering premium services raises legal questions about data handling, IP ownership, and liability. Businesses engaging such providers must scrutinize contracts to ensure AI systems comply with POPIA and GDPR. For example, if an AI tool processes employee productivity data (common in South Africa’s growing AI adoption), the contract must specify how data is anonymized, stored, and used. Poorly drafted clauses could expose businesses to liability under POPIA for unsecured data or under the UK GDPR for non-compliance with data subject rights. Additionally, IP ownership clauses are critical: businesses should ensure they retain full rights to AI-generated insights, not just licensing.

Compliance Actions for CLOs

• Audit AI Systems for Regulatory Classification: Determine if AI tools in use fall under the EU AI Act’s high-risk category and implement required safeguards (e.g., human oversight).
• Review AI Contracts for Data and IP Clauses: Ensure agreements with AI providers outline data anonymization, cross-border transfer rules, and IP ownership.
• Train Teams on Data Localization Requirements: If handling EU data, update practices to align with the AI Act and GDPR, including secure data storage solutions.

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