Canada Has No AI Law. What Applies Instead.
The federal AI bill died in January 2025. That does not mean nothing governs how you use these systems, and the rules that do apply are the ones most businesses have not read.
Canada spent two years working toward federal AI legislation. The Artificial Intelligence and Data Act, part of Bill C-27, would have created risk based obligations on high impact systems, a new AI and Data Commissioner, and penalties reaching twenty five million dollars or five percent of global revenue.
It never passed. Parliament was prorogued on 6 January 2025 and the bill died on the order paper. A replacement is expected, and as things stand there is no federal AI statute in force.
Which produces a common and expensive misreading: that nothing applies.
What actually governs you
Plenty, and none of it is new.
Quebec’s Law 25, if you operate here. It finished phasing in on 22 September 2024 and covers consent, retention, incident logging, and the right of an individual to know what personal information you hold. Using AI does not create an exemption from any of it. If a system processes personal information, the obligations attach.
Federal privacy law for organisations outside Quebec, which continues to apply to commercial activity regardless of what technology is involved.
Professional and sector regulation. If your profession has rules about advice, record keeping or supervision, those apply to work produced with assistance exactly as they apply to work produced without it.
Ordinary contract and consumer law. A commitment made by your system is a commitment made by your business. There is no category of promise that becomes non binding because software generated it.
Why the absence of an AI act changes less than people expect
Most of what a dedicated statute would have addressed is already covered by rules about outcomes rather than about technology.
Privacy law does not ask how you processed personal information. Consumer law does not ask what drafted a misleading claim. A professional body does not ask what produced advice that turned out to be wrong. In each case the obligation attaches to what happened and to whom it is attributable, and that is your business.
The practical consequence is that the compliance work is the same with or without an AI act. Know what your systems can reach, decide what leaves without review, and keep a record.
What the failed bill tells you about direction
Worth reading, because a replacement is coming and the shape is unlikely to change entirely.
The approach was risk based, meaning obligations scaled with the consequence of a system being wrong rather than applying uniformly. It focused on systems making or materially influencing decisions about people. And it placed responsibility on the organisation deploying the system rather than on whoever built the underlying technology.
That last point is the one to internalise now, because it is also the position of every framework published elsewhere and of ordinary law today. Accountability sits with the business whose name is on the output.
The European position, for context
The European Union’s AI Act entered into force on 1 August 2024 and applies in phases, with prohibitions and AI literacy obligations from 2 February 2025.
It is not binding on a Canadian business unless you place systems on the European market or your output reaches people there. It matters because your clients may be subject to it, which can make your systems part of their compliance picture, and because it signals where regulation generally settles.
What to do while the law is unsettled
Treat Law 25 as the operative regime if you are in Quebec. It is in force, it is specific, and it covers most of what matters.
Know what each system can reach. Permissions carried through to the AI layer, so nobody can query material they are not entitled to.
Decide what leaves without a person. By consequence rather than by volume. Anything creating an obligation gets reviewed.
Keep the record. What was asked, what it drew on, what it produced, who approved it. This cannot be built retrospectively.
Write the one page policy, and give it to everybody.
Businesses that do those five will meet whatever arrives, because every framework published so far asks for versions of the same things.
Where AI Optimize sits on this
We build the permissions, the review boundaries and the logging into the system rather than writing them into a policy afterwards. That is not a compliance product, it is what makes a system defensible if somebody asks how an output was produced.
It also happens to be how you get systems people trust internally, which is the more immediate benefit. That work sits under Custom AI Integrations.
This is not legal advice. Take the specifics to a Canadian privacy lawyer.
What clients are starting to ask for
Regulation is not the only thing that reaches you. Increasingly it arrives through procurement.
Larger clients, particularly those with European exposure or in regulated sectors, have begun adding questions to their supplier processes. What AI do you use in delivering this work. Where is our information processed. Who reviews output before it reaches us. Can you produce a record of how something was produced.
Those questions are contractual rather than statutory, and they bind you just as firmly. A business that can answer them clearly wins work from businesses that cannot, which is a considerably more immediate incentive than any pending legislation.
Do not wait for certainty
The temptation while law is unsettled is to postpone. It is the wrong reading.
Every framework published anywhere, and every procurement questionnaire now circulating, asks for versions of the same five things: know what your systems can reach, decide what leaves without review, keep a record, tell people when they are dealing with automation, and name somebody responsible.
None of those depend on which statute eventually passes. A business that does them now is ready for whatever arrives, and gets the operational benefit in the meantime.
Sources
Fasken, “Prorogation’s Digital Impact: Canada’s Digital Bills Set to Die on the Order Paper’’, January 2025, on the fate of Bill C-27 following the prorogation of Parliament on 6 January 2025.
European Commission, Regulatory framework for AI, in force 1 August 2024 with phased application from 2 February 2025.
Related reading
Who Is Responsible When AI Gets It Wrong
Regulation is arriving on a schedule and most of it will not apply to you directly. The accountability question underneath it will, and it is worth settling before anything goes wrong.
What Quebec's Law 25 Means for Your Client Data
The final phase of Law 25 came into force in September 2024. Most of what it requires is not legal work. It is knowing where personal information sits and being able to act on it.
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