Microsoft’s UAE Deal May Transfer Key U.S. Tech Abroad

Microsoft (MSFT) opens new tab President Brad Smith said the tech company’s high-profile transaction with UAE-backed AI firm G42 could involve the transfer of advanced processors and tools

Smith stated in an interview with Reuters this week that the sales agreement, of which numerous details are being disclosed here for the first time, could advance to a second phase involving the export of critical AI technology components, including model weights, the crown jewel of AI systems that determine their power. Smith stated that the second phase has no definitive schedule.

According to U.S. officials, artificial intelligence (AI) systems may present threats to national security. For instance, they may facilitate the development of chemical, biological, and nuclear weapons. In October, the Biden administration mandated that the developers of the most advanced artificial intelligence systems disclose comprehensive information regarding them to the United States government. 

The agreement would need the endorsement of the United States Department of Commerce to progress. Microsoft executives stated that the deal contains safeguards to prevent Chinese entities from using Microsoft’s technology to train AI systems.

However, confident lawmakers in the United States have doubted the efficacy of these measures due to their lack of disclosure. 

The secretive nature of the negotiations between two private corporations over the conditions and security measures for transferring American technology has alarmed some lawmakers.

“The executive branch has yet to provide Congress with a comprehensive briefing on this agreement, despite its significant implications for national security,” Michael McCaul, the Republican chairman of the foreign affairs committee in the U.S. House of Representatives, told Reuters.

Exporting AI processors internationally necessitates notifications and, in several regions, export licenses from the Commerce Department. However, the Microsoft-G42 agreement brings deficiencies in United States legislation to light as regulatory bodies strive to adapt to rapidly evolving technologies. 

As an illustration, there is currently no regulation limiting the export of AI models; however, McCaul and a bipartisan group of legislators introduced legislation this week that would explicitly grant authority to U.S. officials to export such models.

Microsoft has stated that it is open to discussions regarding a novel legal structure that regulates the transmission of artificial intelligence (AI) technology. Furthermore, the agreement with G42 mandates that the UAE firm adhere to evolving U.S. regulations. 

“Fundamentally, what we’re focused on is trying to ensure that American technology can move around the world safely and securely,” according to Smith. 

OUTSIDE UAE

Amid strategic competition with China, the agreement between Microsoft and G42 was touted last month as bringing G42 closer to the United States and expanding the technological influence of the United States. In addition to investing $1.5 billion in G42, Microsoft President Smith will also serve on the company’s board. 

The companies refrained from providing information regarding the specific technologies that could be transferred to the UAE or other nations and the security measures that would be implemented. Sure, these particulars are being presented here for the very first time. 

Microsoft and G42 intend to cooperatively introduce AI technology to regions where both could only do so effectively and independently. This is the overarching purpose of the agreement. An early illustration can be found in the agreement between the two companies, which was disclosed on Wednesday in Kenya. 

Although the Microsoft-G42 agreement requires both companies to offer security guarantees to their respective home governments, there is no direct agreement between the United States and the United Arab Emirates that governs the transfer of sensitive technologies.

Microsoft executives stated that the two companies might attempt to transfer those technologies to markets other than the UAE, such as Turkey and Egypt. 

Smith stated that there are still several unresolved aspects of the agreement, such as safeguarding AI “model weights,” which determine the model’s responses to inquiries or queries. In many cases, training an AI model with enormous quantities of data at a high cost is required to obtain these weights. 

At present, encryption of model weights during use is not feasible. Smith estimates that viable technical methods to achieve this capability will not be available for at least a year. 

Smith stated that Microsoft had contemplated several alternative methods for safeguarding its technology, including a “vault within a vault” that physically separates and restricts physical access to sections of data centers housing AI processors and model weights. 

“I suspect by the time we’re done, we’re going to end up with a regulatory regime or trade export control approach that will be applicable broadly and not just to Microsoft and G42,” according to Smith. 

G42 will also adhere to a “know your customer” policy to ascertain the users of Microsoft’s technology and prohibit Chinese companies from employing it for AI model training, according to Microsoft executives, as part of the agreement. U.S. regulators have proposed similar regulations, but they still need to be implemented. 

“We have made a strategic commercial decision to collaborate with American companies on cutting-edge technologies.” “And we are crystal clear that to do so, we will need to comply with government regulatory requirements or export control regulations, as well as those of our partners,” Talal Al Kaissi, an executive in charge of partnerships for G42’s AI work, told Reuters. 

Microsoft stated that under the terms of the agreement, it would have the authority to levy monetary sanctions against G42 and enforce those sanctions in London arbitration tribunals.

According to Microsoft, this would eliminate the need for the company to navigate the UAE legal system in order to ensure G42’s compliance with its obligations. Should G42 be discovered to be in breach of the agreement, Microsoft could confiscate assets in several countries. 

Uncertain is the precise manner in which U.S. Commerce Secretary Gina Raimondo will permit the agreement to proceed. Smith stated that the provisions are “informal” and that “one can pretty much ascertain with this Secretary of Commerce whether something is approved or rejected.” 

A Commerce Department spokesperson stated that export controls would govern all technology transfers, including “licensing requirements currently in effect” for AI chips and “potential future controls.”