The European Union and the Battle for Data Sovereignty: How Is It Reshaping the Global Era of Artificial Intelligence (AI)?

At the core of the accelerating global AI race, the European Union stands out as an exceptional regulatory force. Rather than simply keeping pace with technological innovations, the EU has chosen a strategic path based on "data sovereignty" as a pivotal tool for shaping and creating the digital future. This strategy, which goes beyond protecting individual privacy, represents an ambitious attempt to redistribute power and value in digital supply chains, particularly in the field of artificial intelligence, and strongly influences global players, including influential technological powers such as Israel.

First - Building the European Digital Empire - The "Brussels Effect" Strategy

The European Union has always been aware that data is the "oil of the 21st century," and from this point on, it embarked on a journey to build a solid foundation for digital sovereignty. This journey began with legislation such as the General Data Protection Regulation (GDPR), which was not just a step toward protecting privacy, but rather a declaration of fundamental rights in the digital age, imposing a global standard that most countries and regions find difficult to ignore.

But the European Union's ambitions did not stop there. Through what is known as the "Brussels Effect"—its ability to impose its standards and values ​​on the global stage—it began drafting laws that will play a crucial role in shaping the future of artificial intelligence. These include:

1- The Data Act: This came into effect in September 2025 and serves as a "constitution for industrial data." This law grants individuals and companies the right to access the data generated by their connected devices, breaking the monopoly of manufacturers and opening the door to new competition and innovation in vital sectors such as manufacturing and automotive.

2- The AI ​​Act: ChatGPT said this law is undoubtedly the cornerstone of the European Union's strategy. It entered into force in August 2024, setting clear rules for the development and deployment of AI systems by classifying them according to risk levels and imposing strict requirements on high-risk systems. By August 2025, the General Purpose AI Model Obligations (GPAI) came into effect, requiring greater transparency regarding training data and risk management mechanisms. This approach has not only impacted the European market; it has also prompted many global companies to align their technologies with these standards, recognizing that the "European standard" could become the global standard.

3- Digital Markets Act (DMA) and Digital Services Act (DSA): These laws regulate the power of major technology platforms, ensuring fair competition and limiting the monopoly of digital channels, thereby impacting how AI services reach users.

4- Enhancing Cybersecurity: Through legislation such as the NIS2 Directive, the EU is strengthening the security resilience of digital infrastructure, ensuring greater reliability for AI-based systems.

Second: Restructuring Power – Global Influence and Player Response

This ambitious EU regulatory framework is not only intended to protect its citizens, but is a serious attempt to reshape the balance of power in the global digital economy. Through it, Europe seeks to:

1. Limit data monopolies: By granting users greater rights over the data they generate, the EU aims to break the dominance of large tech companies that possess vast amounts of data.

2. Steer innovation: The AI ​​law sets an international precedent for the responsible and ethical development and deployment of AI. Companies wishing to enter or cooperate with the European market must adhere to these principles.

3. Build technological independence: By supporting initiatives such as the European Data Space (EHDS) and European cloud projects, the EU seeks to build an independent digital infrastructure that reduces dependence on foreign technology.

Global companies, particularly the largest ones, face a dual challenge: complying with the complex regulations imposed by the EU while maintaining their competitiveness. This reality has prompted them to reevaluate their strategies for data collection, model development, and service distribution. For example, Microsoft and Google have modified their AI systems to comply with transparency and risk management rules imposed by European Union law, clearly reflecting the power of the "Brussels effect" in reshaping the global market.

Third: Israel as a Model – Adapting to Global Regulatory Shifts

With its thriving technology sector and reputation for innovation, Israel is a prominent example of how countries are responding to global regulatory shifts. As the European Union seeks to impose its standards, Israeli companies find themselves required to respond and act with strategic flexibility.

1- Responding to European Legislation

• Strengthening Data Protection:

Israel seeks to improve its data protection system through amendments inspired by the General Data Protection Regulation (GDPR), to ensure the preservation of adequacy and ease of data transfer to the European Union. This status is critical to the national economy, given that the technology sector accounts for approximately 20% of GDP and 53% of exports, according to recent Israeli reports.

• Compliance with the Artificial Intelligence Act (AI Act):

Several Israeli companies have begun adapting their products to ensure compliance with EU law requirements:

- Mobileye developed the world's first "Vision-only ISA" (Intelligent Speed ​​Assistance) system based solely on cameras. It has been certified as compliant with European standards, allowing it to be applied to existing car models without requiring hardware modifications.

- In addition, the company launched the Mobileye Drive robotaxi system in collaboration with Volkswagen and Uber, with expectations of increased demand in European markets.

• Transparency Rules for Generative AI:

New rules went into effect on August 2, 2025, requiring generative intelligence developers to disclose the sources of training data, ensure intellectual property rights, and indicate AI-generated content. Israeli companies operating in this field have two options: using licensed data or building advanced tracking tools such as blockchain to track rights.

2- Initiatives and Development Approach

• Flexible Sectoral Approach

Israel adopts a regulatory approach based on addressing each sector individually rather than enacting comprehensive legislation covering all areas of artificial intelligence. This is evident in the launch of "Regulatory Sandboxes," which allow companies to test their innovations in a regulatory environment, enabling innovation to flourish while ensuring levels of transparency and accountability.

• National AI Policy

In 2023, the Israeli Ministry of Innovation and Science issued a National AI Policy document, aimed at encouraging responsible innovation by establishing general guidelines and sector-specific regulatory frameworks (White & Case). This policy is designed to provide a gradual response to technological developments, with the potential to later transition to more specialized legislation covering specific sectors when necessary.

I chose Israel as a model for studying how to respond to global regulatory transformations, not to focus on them in themselves, but rather to reflect on where they have progressed and how they have adapted to this new environment. We then compare this to our Arab reality, identifying gaps and identifying opportunities that we can leverage to build our own path.

3- Comparison with the Arab reality

• Lack of a clear legislative framework: While the European Union has adopted comprehensive laws, Israel has developed sector-specific policies. Flexible, most Arab countries still lack specialized AI legislation.
• External dependence: While Europe strives for digital independence, and Israel builds a national innovation ecosystem adapted to the European market, Arab countries rely heavily on imported solutions and technologies.
• Weak R&D centers: Israel has allocated regulatory funds and national initiatives for innovation, while Arab investments in AI and research remain modest and fragmented.
• The Arab opportunity: Despite this gap, the Arab region possesses tremendous potential (a young market, financial resources, and a growing demand for digital transformation), giving it the opportunity to chart a different course if serious national and regional strategies are developed.

Conclusion: The Next Battle – Digital Sovereignty

The European Union's strategy for data sovereignty in the age of AI goes beyond being a purely technical issue. It represents a geopolitical and economic battle through which Brussels seeks to rewrite the rules of the global digital order in accordance with its own values ​​and vision. While countries like Israel find themselves required to adapt to these regulatory shifts to ensure their continued integration into European markets, Arab countries are facing a pivotal moment. The challenge is not simply to comply with external standards, but rather to develop national and regional strategies that reflect their interests and enable them to be influential players in shaping the future of global AI, rather than merely a recipient of its outcomes.