Abe Sung is a partner in the banking and capital department of Lee and Li, Attorneys- at-Law. His main practice areas are capital market, banking and structured finance. He advised several foreign companies and underwriters in their initial public offerings (IPOs) and offerings of Taiwan Depositary Receipt in Taiwan, including the IPO of Integrated Memory Logic and AirTAC and TDR offerings of Wang Wang Holding, Super Coffee, Digital China and SIMTech. Mr Sung has also been actively involved in many securitisation deals in Taiwan and led his colleagues in several pioneering cases, including a number of real estate investment trusts issuings, securitisation on cards receivable and auto loans, and the first cross-border securitisation deal ever done by a Taiwanese issuer. According to Chambers Asia’s survey, clients commend him for combining ‘commercial sense with an open mind’ and consider him as ‘the first choice’ for structured finance.
Eddie Hsiung is licensed to practise law in Taiwan and New York, and is also a certified public accountant in Washington state. He is familiar with legal issues regarding the application of new technologies such as fintech, blockchain AI and data protection and is often invited to participate in public hearings, seminars and panel discussions in these areas. His practice focuses on M&A, securities and financial services, cross-border investments, general corporate and commercial, start-ups, among other things. He has participated in many corporate transactions spanning a broad range of industries. He regularly advises leading banks, securities firms, payment service companies, among others, on transactional, licensing and regulatory or compliance matters as well as internal investigation.
1 What is the current state of the law and regulation governing AI in your jurisdiction? How would you compare the level of regulation with that in other jurisdictions?
According to our observations, Taiwan’s government sector is aware of the AI trends and has proceeded to explore whether any adjustment to the current regulatory regimes in multiple aspects would be needed. In early 2018, to promote fintech services and companies, the legislators in Taiwan passed the Financial Technology Development and Innovative Experimentation Act (the Fintech Sandbox Act), which was enacted to allow fintech businesses to test their financial technologies in a controlled regulatory environment. Although the Fintech Sandbox Act is not specifically designed for AI, the creators of new financial-related business models with AI technology may test their new ideas and applications under such a mechanism while enjoying exemptions from certain laws and regulations.
Adopting a similar spirit to the Fintech Sandbox Act, the legislators in Taiwan passed another sandbox law for autonomous and self-driving vehicles, the Unmanned Vehicle Technology Innovation and Experiment Act (the Unmanned Vehicle Sandbox Act), in late 2018, which took effect from June 2019. The Act is to provide a friendlier environment to test the applications of AI and the internet of things in transportation. ‘Vehicle’, as defined in this act, covers cars, aircraft, ships or boats, and any combination thereof.
In addition to the above-mentioned legislation, the impacts on the current regulatory regimes as a result of the application of AI technologies have also been widely discussed, such as whether AI technology can be protected by intellectual property rights, what would be the consequences of and how to mitigate algorithmic bias in AI systems, whether data protection issues will be triggered when personal data are shared for the purpose of AI-related developments, among other things. However, as at the time of writing, no explicit court precedents or rulings have been issued on such topics.
It is also worth noting that, according to the Taiwan AI Action Plan, announced by the Executive Yuan in 2018, the Taiwan government has been evaluating relevant issues so as to further determine whether any laws need to be enacted or amended to address AI development. Such issues include, among others, the rights and obligations derived from the application of AI technology (eg, whether AI should be considered a ‘person’ from the perspective of certain legal fields, whether there will be intellectual property rights in an AI-created work, among other things), open data, restrictions on AI applications, government procurement (eg, the outsourcing concerning AI issues), industry regulatory challenges and approaches to AI, among other things. Given this, we think that Taiwan has been actively examining the current regulatory regime in relation to AI in order to establish a good foundation for developments of AI technology.
2 Has the government released a national strategy on AI? Are there any national efforts to create data sharing arrangements?
The Executive Yuan announced the Digital Nation and Innovative Economic Development Plan and the Taiwan AI Action Plan in 2016 and 2018 to declare Taiwan’s goal to become an important partner in the value chain of global AI technology and intelligence systems and to leverage the advantages in software and hardware techniques to promote AI technology across industries with, among others, test fields, regulations and a data-sharing environment. According to the Taiwan AI Action Plan, the government’s view is that Taiwan is well positioned to take advantage of the opportunities in developing AI-related industries.
Furthermore, according to relevant news report in 2022, the next phase of the Taiwan AI Action Plan would focus on explainable and trustworthy AI, as well as the development of advanced technologies for small or medium size enterprises such as joint learning, automated machine learning (AutoML) tools, self-supervised learning, and migration learning, and low-code platforms to accelerate AI development. What is more, the Industrial Technology Research Institute (ITRI) is dedicated to establish the infrastructure of AI governance, such as an AI testing and evaluation centre to measure AI risk, model performance and robustness. ITRI will also set up an AI product validation mechanism which aims to promote the development of industry.
In addition, the Taiwan government views AI as having an indispensable role in the 5+2 Industrial Innovation Plan (the 5+2 Plan), as declared by the Taiwan government in 2018. The 5+2 Plan is considered the core generator for Taiwan’s next generation of industrial development, which mainly focuses on seven industries: intelligent machinery, Asia Silicon Valley, green energy, biomedicine, national defence and aerospace, new agriculture and the circular economy. To facilitate the 5+2 Plan, the government has launched the AI Talent Programme, which aims to:
- cultivate 1,000 high-calibre talented persons in intelligent technologies;
- train 5,000 talented persons in practical intelligent technologies; and
- attract foreign professionals by the year 2021.
With respect to data sharing, the National Development Council prescribed the Guidelines for Trial Operation of Data Interface on MyData Platform to promote personalised digital services called MyData in February 2020. The main purpose of this service, in a similar to ‘open data’ and ‘open banking’, is to create a platform for individuals to authorise the government or the participating companies to collect their personal data in order for the government and such companies to develop and render more personalised services to the individuals with such data.
3 What is the government policy and strategy for managing the ethical and human rights issues raised by the deployment of AI?
The Ministry of Science and Technology under the Executive Yuan announced the AI Technology R&D Guidelines in September 2019 to demonstrate the Taiwan government’s commitment to improve Taiwan’s AI R&D environment. Pursuant to the AI Technology R&D Guidelines, considering that AI developments may bring changes to various aspects of human existence, the Taiwan government expects the participants to always pay attention to when conducting relevant activities and endeavouring to build an AI-embedded society with three core values: human-centred values, sustainable developments and diversity and inclusion.
Deriving from the three core values, eight guidelines were given under the AI Technology R&D Guidelines for all AI participants to follow so that a solid AI R&D environment and society that connects to the global AI trends may be established.
The eight guidelines are:
- common good and well-being;
- fairness and non-discrimination;
- autonomy and control;
- privacy and data governance;
- transparency and traceability;
- explainability; and
- accountability and communication.
4 What is the government policy and strategy for managing the national security and trade implications of AI? Are there any trade restrictions that may apply to AI-based products?
To date, no laws or regulations have been specifically promulgated or amended to deal with the national security and trade implications of AI. These matters are still handled in accordance with the existing regulatory regime (eg, the National Security Act, Cyber Security Management Act, trade regulations, among others).
5 How are AI-related data protection and privacy issues being addressed? Have these issues affected data sharing arrangements in any way?
In Taiwan, personal data is protected by Taiwan’s Personal Data Protection Act (PDPA). The collection, processing and use of any personal data are generally subject to notice and consent requirements under the PDPA. Pursuant to the PDPA, ‘personal data’ is defined broadly as the name, date of birth, ID card number, passport number, characteristics, fingerprints, marital status, family information, education, occupation, medical record, medical treatment and health examination information, genetic information, information about sex life, criminal record, contact information, financial conditions, social activities and other information that may directly or indirectly identify an individual.
Under the PDPA, unless otherwise specified under law, a company is generally required to give notice to (notice requirement) and obtain consent from (consent requirement) an individual before collecting, processing or using any of said individual’s personal data, subject to certain exemptions. To satisfy the notice requirement, certain matters must be communicated to the individual, such as the purposes for which his or her data is collected, the type of the personal data and the term, area and persons authorised to use the data, among other things.
AI technology has not changed the said requirements. If a company wishes to collect, process and use any individual’s personal data using AI technology or exploring the data with AI technology, it will be subject to the obligations under the PDPA as advised above. Note that the MyData platform described in question 2 should also be subject to the PDPA regime.
6 How are government authorities enforcing and monitoring compliance with AI legislation, regulations and practice guidance? Which entities are issuing and enforcing regulations, strategies and frameworks with respect to AI?
In the past few years, the Executive Yuan has published several guidelines and plans for AI developments, such as the Digital Nation and Innovative Economic Development Plan, the Taiwan AI Action Plan, the AI Technology R&D Guidelines and the 5+2 Plan, as stated in the answers to previous questions.
However, considering AI is more of a ‘technology’, which could be applied in various industries, there is no single central competent authority for the actual enforcement and monitoring of AI technology and such enforcement and supervisory tasks fall under the jurisdictions of relevant competent authorities. For example, the Ministry of Economic Affairs is assigned as the competent authority for the Unmanned Vehicle Sandbox Act, while the Financial Supervisory Commission is the authority for the FinTech Sandbox Act
7 Has your jurisdiction participated in any international frameworks for AI?
To our knowledge, the Taiwan government has not participated in any international frameworks for AI. However, according to the relevant public announcement by the Ministry of Science and Technology, the AI Technology R&D Guidelines, as outlined in question 3, were set out to, among other things, follow the international trends with respect to AI developments and were prescribed by referencing the relevant principles and guidelines of the European Union, Japan and the Organisation for Economic Co-operation and Development, among others.
8 What have been the most noteworthy AI-related developments over the past year in your jurisdiction?
Taiwan is well known for its information and communications technology and semiconductor industry, and it is reported that there have been AI-related developments in these areas, such as AI-related chips, integrated circuit design, systems, software and relevant peripheral products. In recent years, there have been also certain AI and data analysis-focused start-ups reportedly having the potential to become the next ‘unicorns’, with main products used in the areas of digital marketing, advertising and video analytics, among others. It is also noteworthy that there are more and more associations and non-profit organisations offering educational and training programmes and courses to various industry players that are interested in exploring the possibility of exerting AI as a tool for improving their existing products or operations or to create new applications or business models with AI as underlying technology.
In August 2022, the Ministry of Digital Affairs (MDA) (which is under the Executive Yuan) was formally established for matters in relation to facilitating Taiwan’s digital development of its telecommunications, information, cybersecurity, internet and communications industries, coordinating national digital policies, supervising national cybersecurity policies, managing communications and digital resources and assisting digital transformation. There are two subordinate agencies under the MDA — the Administration of Digital Industries and the Administration of Cyber Security — which were established to plan and implement policies to facilitating the development of digital economy related industries as well as reviewing and supervising national cybersecurity programmes. According to the Organization Act of the Administration for Digital Industries, Ministry of Digital Affairs, the Administration of Digital Industries is in charge of providing guidance and incentives for interdisciplinary digital innovation of AI, big data, platform economy, or other digital economy related industries.
9 Which industry sectors have seen the most development in AI-based products and services in your jurisdiction?
In addition to those stated in question 8, see below the recent trends relating to developments of AI-based products and services in Taiwan.
As mentioned above, the aim of the Unmanned Vehicle Sandbox Act is to provide a friendlier environment for testing the application of AI in transportation. Pursuant to the news releases in November 2019, the Ministry of Economic Affairs plans to invest around US$8 million in four years to expedite the industrialisation of unmanned vehicle technology. As at 29 July 2022, 13 innovative experimentations have been approved to enter the sandbox.
The Ministry of Science and Technology has driven the ‘AI for Health’ plan, which assisted major medical research institutions in Taiwan in developing AI algorithms to be used for cardiovascular risk assessment, diagnosing cancer lesions at an early stage, accelerating the image recognition, among other things. Furthermore, as the Medical Device Act took effect in 2021, the Taiwan Food and Drug Administration set up a project office aiming to assist with matters regarding medical devices using AI technology and reviewing the laws and regulations to explore the possibility of amending existing rules in order to establish a more friendly regulatory environment for ‘AI for Health’.
The main application of AI in financial business in Taiwan involves correspondence with clients, such as ChatBot and Robo-Adviser Services. In June 2017, the Securities Investment Trust and Consulting Association of Taiwan, the self-disciplinary organisation of the asset management industry, issued Operating Rules for Securities Investment Consulting Enterprises Using Automated Tools to Provide Consulting Service (the Robo-Adviser Rules). Pursuant to the Robo-Adviser Rules, securities investment consulting enterprises may provide online securities investment consulting services by using automated tools through algorithms (Robo-Adviser Services). Furthermore, it was reported that the Financial Supervisory Commission, the financial regulator in Taiwan, is considering relaxing the current regulations regarding robo-advisers, and once the regulations are amended, securities investment consulting enterprises would be permitted to provide portfolio management services.
10 Are there any pending or proposed legislative or regulatory initiatives in relation to AI?
As indicated in question 1, according to the Taiwan AI Action Plan, the Taiwan government is still evaluating the following issues so as to further determine whether any laws need to be enacted or amended to address AI development:
- the impact on employment and the labour market;
- the rights and obligations derived from the application of AI technology (eg, whether AI should be considered a ‘person’ from the perspective of certain legal fields, whether there will be intellectual property rights in an AI-created work);
- applying AI in the government;
- open data;
- consumer protection for AI applications;
- restrictions on AI applications;
- the legal system of the regulatory sandbox;
- spectrum resource allocations;
- government procurement (eg, the outsourcing concerning AI issues); and
- industry regulatory challenges and approaches to AI.
In addition to the above, some legislators proposed the draft Basic Act for Developments of Artificial Intelligence in 2019 and 2020, which is intended to set out fundamental principles for AI developments, to drive the government to promote the development of AI technologies. The draft is still under review by the Legislative Yuan and it is uncertain whether this draft will be passed.
11 What best practices would you recommend to assess and manage risks arising in the deployment of AI?
As stated in question 1, Taiwan promulgated two regulatory sandbox laws, the FinTech Sandbox Act and the Unmanned Vehicle Sandbox Act. These regulatory sandbox laws were enacted to allow the relevant businesses to test their new ideas and technologies within a safe harbour. After completion of the approved experiments, the relevant competent authority will analyse the result of the experiment. If the result is positive, the relevant competent authority will actively examine the existing laws and regulations to explore the possibility of amending them with a view to making feasible the business models or activities previously tested in the sandbox. Therefore, for any business models that will involve the application of AI, relevant risks, especially legal risks, may be mitigated in case they are tested under either of the two sandbox laws.
As to any proposed business models or activities not falling within the sandbox scope permitted by the above sandbox laws, we would recommend that relevant risks, especially legal risks, be analysed as early as possible, and certainly well before the time any product is officially launched. The application of AI technology or AI-related products may involve various issues under traditional as well as emerging legal areas such as potential liabilities under civil and criminal laws, the ownership of AI products-related IP rights, privacy, among others. With respect to any products to be sold to end customers, more detailed analysis on issues such as consumer protection and product liabilities, product inspection and testing, and liability insurance are also advised.
The Inside Track
What skills and experiences have helped you to navigate AI issues as a lawyer?
We were engaged by the National Development Council to conduct a research project, focusing on exploring the necessary adjustments to the existing legal regime to create a more friendly environment for AI developments. As to AI technology and its applications and its various areas of legal practice, Lee and Li, known for expertise in all legal fields and offering a full range of services, has the competitive advantage in offering valuable insight and best solutions from a Taiwan law perspective in every legal practice area.
Which areas of AI development are you most excited about and which do you think will offer the greatest opportunities?
AI applications may be used across many industries. As lawyers, what we are most excited about is that we may see industry experts come up with creative ideas associated with the technology and assist clients in exploring how to put technology innovations and actual AI applications into practical use in the real world. With respect to Taiwan, Taiwan’s well-known information and communications technology has established a good foundation for AI development. Taiwan has also been one of the major players in the semiconductor manufacturing industry. Given this, we think Taiwan has great opportunities to play an important role in AI trends.
What do you see as the greatest challenges facing both developers and society as a whole in relation to the deployment of AI?
We think an important challenge facing the developers would be how to commercialise AI technology and make AI applications address the needs of industry players and the general public. From the perspective of wider society, the greatest challenge might be the replacement of human resources. Take the legal profession as an example, where topics widely discussed include how AI may impact the legal profession (eg, whether AI will replace some of the jobs that lawyers do). One can imagine AI applications to replace some jobs in multiple professional settings in many industries. Where AI applications can replace most of the jobs currently done by humans, it would be inevitable that the whole of society would have to face issues arising from human resource surplus.