A company of about seventy people in New York, without an office in the European Union, sells a research and drafting assistant for lawyers. The product is built on the interface of a large model provider, carries the company's own name, and is used by law firms in the Netherlands and, on trial, by a notary office. In September a Dutch customer of forty lawyers sends a questionnaire of six pages and wants answers before its partners meet. The sales team forwards it to the chief technology officer with a request to fill it in.
The customer has taken its questions almost word for word from the recommendations that the Nederlandse Orde van Advocaten published at the end of 2025. A firm must know where data is stored and processed, in which country, with which subcontractors and under what security, and it must check what the contract says about ownership of data, intellectual property, liability and exit. The notary office adds a question from the framework of the Koninklijke Notariële Beroepsorganisatie of 2025: whether the system is located in Europe and also managed from Europe.
The company also has duties of its own. The European Union Artificial Intelligence Act applies to providers that place a system on the Union market wherever they are established, and to providers in a third country when the output of the system is used in the Union. A company that has a system developed and sells it under its own name is a provider under the definitions of the act, and its Dutch customers are deployers. Since 2 August 2026 the transparency duties apply. For a system that generates text and was on the market before that date, the provider must have the output marked in a machine readable way by 2 December 2026, unless the system only assists with standard editing or leaves the user's input substantially unaltered. The company needs a written position on that exception. The rules for high risk systems apply from 2 December 2027. They cover systems intended to assist courts or to be used in a similar way in alternative dispute resolution, and a provider outside the Union that offers one must first appoint an authorised representative in the Union.
The usual response to the questionnaire is the pack of certificates and a sentence that data stays in a European region. Harvey and Legora, the large platforms in this market, already state that customers can keep processing or storage in the European Union. The customer's partners will read past that sentence to two things it leaves open.
The first is the chain of subcontractors. Anthropic's own documentation states that its interface offers inference in the United States or globally and has no European option, so European processing of its models runs through the European region of a cloud provider. OpenAI offers residency for Europe and by default keeps abuse monitoring logs for up to 30 days. Arrangements for zero retention exist at both, and each has exceptions that the supplier must be able to name. The second is jurisdiction. The General Court of the European Union upheld the Data Privacy Framework on 3 September 2025, so transfers to the United States are lawful today, on a decision that the Commission may suspend or repeal. A European region changes where the data sits and leaves the company under the law of its home state.
A chief technology officer can answer this by building the product so that the customer chooses the route. There are three: the supplier's own service in a European region under contract, a deployment inside the customer's own cloud environment, and an installation on the customer's premises with a model whose licence allows it. The third route has a cost that belongs in the sales conversation: the models that run on a customer's own hardware are measurably behind the best hosted ones.
The governance is the same on each route, and most of it is engineering. It starts with a current list of every model and subcontractor and a data flow sheet per route that a lawyer can read. Logs per customer show which user sent which document where. A test set built from the customer's kind of work checks every cited ruling against its source. The public database of court decisions on fabricated citations held 2,150 entries on 5 October 2026, and in 848 of them the party at fault was a lawyer. A breach procedure must reach the customer without undue delay, since the customer then has 72 hours to notify its authority. The fine ceilings of the General Data Protection Regulation are 10 million euro or 2 percent of worldwide turnover for failures of security and notification, and 20 million euro or 4 percent for unlawful transfers.
By next month the chief technology officer should have five documents in one place: the list of subcontractors, the data flow sheet for each route on offer, a contract annex that answers the contract points of the Orde, the written position on marking ahead of 2 December 2026, and a paragraph on intended purpose that says whether the product is meant for courts or arbitration. The AI Guys can review that file against the Dutch and European texts before it goes to a customer.