AI in the EU: What’s new in 2026 and beyond

When the European Union passed the AI Act in 2024, it became the world’s first comprehensive legal framework for artificial intelligence. At the time, it was largely a topic for policy specialists and forward-looking compliance officers. Fast forward to 2026, and the AI Act is a business reality for any organization operating in or selling to the EU — including those deploying AI within Contract Lifecycle Management (CLM) and legal technology platforms.

Read on to learn about what’s new for the AI regulatory landscape in Europe in 2026 and what it means for your contracting.

A brief recap: What the EU’s AI Act really does

The European Union (EU)’s AI Act takes a risk-based approach to regulating artificial intelligence, classifying AI systems into four tiers based on their potential to cause harm. Regulatory requirements scale proportionately: minimal-risk applications face few obligations, while high-risk systems must meet stringent documentation, oversight, and conformity requirements. Beyond these four tiers, General-Purpose AI models (GPAIs) such as Large Language Models (LLMs) follow a separate regulatory framework given their growing role across industries.

The Act also has extraterritorial reach. If a company’s AI outputs are used in the EU, the company must comply with the AI Act, regardless of their physical location (much like GDPR). For legal, procurement, and contract management professionals at multinational organizations, this is not just about regional compliance; it’s global, too.

The enforcement timeline for the EU’s AI Act in 2026

Once a distant concern, the AI Act has now been actively rolling out in phases since early 2025.

A few key dates to consider:

• Prohibitions on “unacceptable risk” and AI literacy obligations took effect on 2 February 2 2025.
• Governance rules for general-purpose AI models became applicable on 2 August 2 2025.
• The Act becomes fully applicable for most operators (including core high-risk obligations) on 2 August 2026.

One important caveat: the European Commission’s Digital Omnibus proposal, introduced in November 2025, could potentially delay high-risk obligations for certain systems until December 2027. However, compliance experts uniformly advise treating August 2026 as the binding deadline until any legislative changes are finalized. Organizations banking on an extension are taking a significant compliance risk.

The penalties for non-compliance will be steep. Violations of prohibited practices can result in fines up to €35 million or 7% of worldwide annual turnover. Other infringements carry fines up to €15 million or 3%, and supplying incorrect information to regulators can result in fines up to €7.5 million or 1%, applying to companies operating within and beyond the EU.

The four risk tiers, explained

Unacceptable risk (prohibited)

Banned since February 2025, prohibited AI includes manipulative techniques designed to distort behavior, social scoring by public authorities, and real-time remote biometric identification in public spaces for law enforcement. These prohibitions are already in force.

High risk

AI applications that significantly impact individual rights or safety fall under this category, including employment screening, credit scoring, medical diagnostics, and — key for the Legal industry — AI used in the administration of justice and legal decision-making. These systems must meet stringent documentation, human oversight, and conformity assessment requirements.

Limited and minimal risk

Most AI tools fall into these lower tiers. Limited-risk systems, such as chatbots, require basic transparency to ensure users know they’re interacting with AI. Minimal-risk systems, like spam filters, face no specific obligations. The vast majority of AI features in commercial software fall here, but context matters enormously.

What risk tier is AI-enhanced CLM software?

Most AI features inside CLM platforms, such as contract metadata extraction, clause suggestions, automated routing, risk scoring, and summary generation—likely fall into the limited or minimal risk categories. These tools assist human decision-making without making autonomous determinations that directly affect individuals’ legal rights.

According to a JD Supra analysis of the Act’s legal tech implications, AI tools used in document review and legal data analysis must comply with the Act when they involve high-risk systems, with requirements covering data accuracy, fairness, and human oversight.

The picture shifts depending on context. Where AI contributes to decisions about employment, vendor qualification, or access to services, risk classification may escalate to high-risk under Annex III. The European Commission has indicated additional guidance on Annex III classification is expected in 2026, which will be particularly significant for legal tech vendors and their enterprise customers. In the meantime, organizations should evaluate use cases carefully rather than assuming default minimal-risk classification.

AI tools in administration of justice contexts — where AI influences legal determinations rather than simply supporting human review — are explicitly listed as high-risk under the Act. CLM platforms helping legal teams review, analyze, and route contracts fall well short of this threshold in most implementations. However, any automated decision-making that affects workers’ rights, access to essential services, or legal status warrants careful assessment before deployment.

General purpose AI in legal tech: A separate track

Many legal technology platforms, including CLM vendors, deploy LLMs for contract analysis, clause drafting suggestions, and conversational AI features. These tools follow a separate regulatory pathway. GPAI providers must maintain technical documentation, publish summaries of training content, and implement EU copyright compliance measures. High-impact GPAI models must undergo thorough evaluations and report serious incidents to the European Commission.

A key question for legal tech platforms is how much they customise or fine-tune underlying GPAI models. Companies that substantially modify existing models become providers themselves, meaning all obligations that apply to original GPAI developers also apply to them. This creates important vendor due diligence obligations for enterprise buyers: verify that CLM vendors have assessed their GPAI obligations, maintain appropriate technical documentation, and can demonstrate compliance. Vendor contracts should reflect these obligations explicitly.

National variation: Implementation isn’t uniform

Even within the EU, the Act doesn’t apply uniformly. Each EU member state will establish its own national AI regulator responsible for enforcement within its jurisdiction, and some countries may layer additional AI obligations on top of the Act, particularly in Finance, healthcare, and defense. According to JD Supra’s analysis, some EU countries may adopt more innovation-friendly approaches while others prioritize stricter consumer protection and ethical AI governance.

For multinational organizations managing contracts across EU jurisdictions, this creates compliance complexity that a single static policy cannot address. Each member state must establish at least one AI regulatory sandbox by August 2026 — providing opportunities for organizations to test innovative AI applications in a controlled regulatory environment before broad deployment.

What organisations should do about the AI Act in 2026

Even as regulatory details continue to evolve, .the practical compliance steps are clear:

• First, conduct an AI inventory: document every AI tool in use across legal, contract management, and procurement functions. Understand whether your organization acts as provider, deployer, or both for each system.
• Second, assess risk classifications for each tool against the Act’s criteria—most CLM features will fall into limited or minimal risk, but use cases involving employment contracts, worker management, or access to services warrant review against Annex III.
• Third, review vendor contracts to ensure AI product agreements reflect the Act’s requirements, including documentation, oversight, and compliance obligations.
• Finally, prioritize AI literacy across teams deploying AI tools. The AI literacy obligation—requiring companies to ensure adequate AI literacy among employees involved in AI deployment—has been enforceable since February 2025. This isn’t aspirational; it’s a current legal requirement with penalties attached.

First, conduct an AI inventory: document every AI tool in use across legal, contract management, and procurement functions. Understand whether your organization acts as provider, deployer, or both for each system.

Second, assess risk classifications for each tool against the Act’s criteria—most CLM features will fall into limited or minimal risk, but use cases involving employment contracts, worker management, or access to services warrant review against Annex III.

Third, review vendor contracts to ensure AI product agreements reflect the Act’s requirements, including documentation, oversight, and compliance obligations.

Finally, prioritize AI literacy across teams deploying AI tools. The AI literacy obligation requiring companies to ensure adequate AI literacy among employees involved in AI deployment has been enforceable since February 2025. AI literacy isn’t aspirational; it’s a current legal requirement with penalties attached.

Looking ahead: Building what’s next to come for AI in the EU

The EU AI Act represents the beginning of AI regulation in Europe, not the end. Organizations that build adaptive AI governance frameworks now will absorb future regulatory changes more readily than those scrambling to achieve point-in-time compliance.

CLM platforms with transparent, auditable AI capabilities will be better positioned to support compliance than black-box solutions that cannot explain how their outputs are generated. Agiloft’s “white box” AI approach provides complete transparency into AI reasoning—allowing users to see exactly how and where an AI output was derived within a contract document. This aligns directly with the EU AI Act’s transparency and human oversight requirements. As regulatory scrutiny of AI in legal technology intensifies, the ability to audit AI outputs becomes not just a competitive differentiator but a compliance necessity.

Are you confident your CLM platform is compliant with evolving regulations? Contact our team to discuss how Agiloft’s CLM can support your AI governance strategy in Europe and beyond.