The Loper Decision and the Future of AI Regulation | McCarter & English, LLP

AI is poised to rapidly transform nearly every aspect of society. But it also brings with it new risks. As governments work to develop and implement laws that mitigate these evolving threats, expert regulatory oversight will be essential. While the EU has already passed a comprehensive AI Act that invokes a significant risk-based regulatory regime, the United States has not yet done so. The way the United States approaches AI will inevitably involve regulatory oversight because of the complex technical nature of AI, its rapid advances, and the numerous ways in which it can be applied.

Against this background, the recent decision of the Supreme Court in the case stands out Loper Bright Enterprises v. Raimondo. At first glance, it raises serious concerns about the future ability of agencies to exercise their traditional discretion to interpret statutory ambiguity to resolve unforeseen or unintended gaps. This issue becomes even more critical in areas where technical expertise is required to fully evaluate and assess implications that are beyond the reach of those not familiar with the matter.

IN Drifterthe court held that the Administrative Procedure Act (APA) requires courts to exercise their independent judgment in determining the limits of an agency’s statutory authority, and courts may not defer to their own interpretation of the scope of an agency’s statutory authority simply because the challenged provision is ambiguous. This overturned the court’s 1984 decision in Chevron USA Inc. v. Natural Resources Defense Councilin which it ruled that in the event of statutory ambiguities, courts should rely on the authority’s interpretation if the authority’s interpretation is credible, even if there are other likely interpretations.

Some early comments suggest, Drifter leaves the administrative state to die. To paraphrase Mark Tawin, reports of its demise are greatly exaggerated. What Drifter does not reverse previous court decisions based on Chevron doctrine, nor does it deprive an agency of the authority to exercise powers delegated by Congress through legislation or reasoned findings of fact by the agency.

Addressing the issue of technical competence directly, the Supreme Court rejected the notion that deference should be given to agencies because they are technically better equipped to deal with issues arising from statutory ambiguity, stating that “When the ambiguity involves a technicality, it does not mean that Congress has taken away from the courts the power to authoritatively interpret the statute and given it to an agency.“This does not mean that technical competence is irrelevant. Citing precedent, the court finds that “… although an agency’s interpretation of a statute “cannot bind a court,” it can be particularly instructive “to the extent that it is based on factual considerations within the agency’s expertise”“and further explains that “(S)uch specialist knowledge has always been one of the factors that can give the executive power a special “power to persuade if it lacks the power to control”.’”

In the context of regulations on artificial intelligence, an undoubtedly technical area, Drifter does little to complicate regulatory authority to ensure safety and mitigate threats. Instead, it requires Congress to be more explicit about the authority it wants to delegate to one or more agencies. Drifter applies to what Congress failed to specify, whether by accident, lack of foresight, or intent. It rejects the presumption that statutory imprecision means that Congress intended to delegate power when it clearly could have done so.

Undoubtedly, Drifter will be more challenging and slower to act. However, adherence to the procedural rigors of the APA should provide agencies with a framework to justify persuasive deference from courts. In Mayo Foundation for Medical Education and Research v. United States (2011)The Supreme Court referred to Chevron in the ruling for the IRS on Treasury regulations, but pointed to the IRS’s adherence to full notice-and-comment procedures as “AND a significant sign that this principle deserves Chevron’s respect.” By Chevron is dead by name, it is very likely that Chevron principles can find new life in Drifter making the decision not as a determinative factor leading to the respect of a blank check, but as giving special weight to the agency’s procedural fidelity to the APA.

Finally, the Supreme Court theoretically calls on Congress to authorize agencies by express delegation. However, this provision has its own limitations under Article I, Section 1 of the United States Constitution and the doctrine of nondelegation. In West Virginia vs. Environmental Protection Agency (2022) The Supreme Court attempted to clarify the limits of legislative delegation by referring to the doctrine of principal questions, stating that “Decision(s) of such scale and importance are the responsibility of Congress alone or of an agency acting under the express authority of that representative body..” Therefore, delegation of authority requires precision, especially when important policies are at stake.

Generally speaking, however Drifter changes the rules of the game, Drifter does not substantially change the actual powers of an agency if Congress takes care to authorize the agency and if agencies comply with the APA. Drifter is merely a call to Congress to be more precise in carrying out its work, and the technical approach remains convincing when carried out in accordance with the rigorous requirements of administrative procedure.

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