Quebec Law 25 and AI: What Businesses Need to Know in 2026
Quebec Law 25 imposes strict AI transparency and data protection requirements. Understand compliance obligations, penalties up to 4% revenue, and infrastructure choices.
Quebec's Law 25 has fundamentally changed how businesses must approach AI systems and data processing. Under sections 12.1 and 14 of Law 25, organizations using AI for automated decision-making must provide explicit transparency about the logic involved and obtain manifestly informed and explicit consent for personal information processing. Administrative monetary penalties under section 91 can reach 4% of worldwide revenue or C$25 million, making compliance a board-level concern. For businesses deploying AI systems in Quebec, understanding these requirements isn't optional—it's essential for avoiding significant regulatory exposure.
Understanding Law 25's AI-specific provisions
Quebec's Act respecting the protection of personal information in the private sector (Law 25) includes specific provisions that directly impact how businesses can deploy and operate AI systems.
Section 12.1 requires organizations to inform individuals when a decision is made exclusively through automated processing, including AI systems. This isn't a generic disclosure—you must explain the logic involved and the possible consequences for the individual.
The transparency requirement applies to any automated decision that "produces legal effects concerning him or similarly significantly affects him." This covers hiring algorithms, credit scoring models, insurance underwriting systems, or customer service chatbots making account decisions.
Under section 12.1 of Law 25, organizations must provide meaningful information about AI decision-making logic and consequences—generic privacy notices cannot satisfy Quebec's transparency requirements for automated processing systems.
Section 14 adds another layer, requiring that consent for AI processing be "manifestly informed and explicit." This means individuals must understand not just that you're using AI, but how their personal information will be processed within AI systems.
Section 3.3 mandates Privacy Impact Assessments for AI systems that present "high risk to the protection of personal information," which typically includes automated decision-making systems.
Real-world compliance scenarios
Consider a Montreal-based insurance company using AI to assess claims. Under sections 12.1 and 14 of Law 25, they must inform claimants that AI is involved in the assessment, explain how the system evaluates claims data, and obtain explicit consent for processing personal information through the AI system.
A Quebec retailer using AI-powered recommendation engines faces similar obligations. If the AI processes purchase history to make product suggestions that could be considered "decisions," transparency requirements under section 12.1 apply.
Financial institutions have additional complexity. A credit union in Quebec City using AI for loan approvals must satisfy Law 25's transparency requirements while also meeting federal banking regulations and PIPEDA's Principle 4.8 regarding individual access rights.
The key distinction is that Law 25 doesn't just require privacy notices—it requires functional transparency about AI decision-making processes under section 12.1.
Penalty structure and enforcement reality
The Commission d'accès à l'information du Québec (CAI) has significant enforcement powers under Law 25's penalty framework outlined in sections 91-93.
Administrative monetary penalties for enterprises range from C$15,000 to C$25,000,000, or up to 4% of worldwide turnover—whichever is higher. For individuals within organizations, penalties range from C$1,000 to C$10,000 per violation under section 92.
The CAI can also issue compliance orders under section 89 requiring specific remedial actions and publication orders under section 90 requiring public disclosure of violations. These non-monetary penalties often carry more reputational impact than fines.
The CAI's enforcement approach under sections 89-93 of Law 25 focuses on systematic compliance failures rather than isolated incidents—organizations with poor AI governance face escalating penalties from compliance orders to maximum monetary sanctions.
Recent CAI guidance suggests they're particularly focused on organizations that implement AI systems without conducting proper privacy impact assessments under section 3.3 or obtaining appropriate consent for automated decision-making under section 14.
Federal-provincial regulatory interaction
Quebec businesses must navigate both Law 25 and federal privacy laws, creating a complex compliance environment.
PIPEDA applies to federally regulated organizations and interprovincial commerce under section 4 of the Personal Information Protection and Electronic Documents Act, while Law 25 covers Quebec-based private sector organizations. Many businesses fall under both frameworks simultaneously.
The Privacy Commissioner of Canada has issued guidance on AI and automated decision-making under PIPEDA's Principle 4.1.3 (accountability) and Principle 4.8 (individual access), emphasizing transparency obligations. However, Law 25's section 12.1 requirements are more prescriptive and stringent.
For AI systems, this means conducting privacy impact assessments that satisfy both PIPEDA's accountability principle and Law 25's section 3.3 requirements, implementing consent mechanisms that meet Law 25's "manifestly informed and explicit" standard under section 14, and maintaining documentation that demonstrates compliance with both frameworks.
Organizations subject to both laws must implement the higher standard where requirements differ.
Infrastructure considerations for compliance
Law 25's consent and transparency requirements create practical challenges for businesses using AI platforms with complex data processing arrangements.
Many popular AI services process data through US-based infrastructure or corporate entities, creating additional disclosure obligations under section 17 of Law 25. Organizations must inform individuals about cross-border data transfers and obtain consent for these transfers.
The CLOUD Act adds another layer of complexity. US-based AI providers may be subject to US government data access demands, which could conflict with Law 25's security safeguards requirements under section 8.
Infrastructure choices directly impact compliance obligations under section 17 of Law 25—AI systems with US-based data processing require extensive consent mechanisms and cross-border transfer disclosures that Canadian sovereign infrastructure eliminates entirely.
Businesses increasingly recognize that sovereign AI infrastructure simplifies compliance by eliminating cross-border transfer issues under section 17 and foreign legal exposure.
Augure's approach addresses these challenges by maintaining 100% Canadian data residency and avoiding US corporate structures that trigger CLOUD Act exposure, providing organizations with a compliant foundation for AI operations under Law 25.
Practical compliance implementation
Building Law 25 compliance into AI operations requires systematic approach across legal, technical, and operational domains.
Start with a privacy impact assessment under section 3.3 that specifically addresses AI decision-making processes. Law 25 requires these assessments for any processing that presents "high risk to the protection of personal information"—automated decision-making typically qualifies.
Implement consent mechanisms under section 14 that clearly explain AI involvement in decision-making. Generic privacy policies won't satisfy Law 25's "manifestly informed and explicit" consent requirements—you need specific disclosures about AI logic and consequences as required by section 12.1.
Develop procedures for handling individual rights requests related to AI systems. Under section 27 of Law 25, individuals can request explanations of automated decisions and challenge AI-driven outcomes.
Document your AI governance processes. The CAI's enforcement approach under sections 89-93 emphasizes accountability—organizations that can demonstrate proactive compliance efforts face better regulatory outcomes.
Looking ahead: Enforcement trends and best practices
The CAI's enforcement pattern suggests they're building expertise in AI-related privacy violations under Law 25's framework.
Organizations should expect increased scrutiny of AI systems that process sensitive personal information or make consequential decisions about individuals. Healthcare AI, financial services algorithms, and HR technology face particular regulatory attention under sections 12.1 and 14.
Best practice involves implementing privacy-by-design principles in AI development, conducting regular compliance audits of AI systems under section 3.3, and maintaining clear governance frameworks for AI deployment decisions.
Proactive compliance with sections 12.1, 14, and 3.3 of Law 25 demonstrates good faith to the CAI—organizations that wait for enforcement action face penalties up to 4% of worldwide revenue and more prescriptive remedial requirements under sections 89-93.
The regulatory environment continues evolving, but the fundamental Law 25 requirements for AI transparency and consent remain consistent under sections 12.1 and 14. Organizations that build compliance into their AI infrastructure and operations create sustainable competitive advantages.
For businesses serious about Quebec compliance, the path forward involves choosing AI infrastructure that supports rather than complicates regulatory obligations. Augure's sovereign approach eliminates many compliance complexities while providing the AI capabilities modern organizations require.
Learn more about compliant AI infrastructure at augureai.ca.
About Augure
Augure is a sovereign AI platform for regulated Canadian organizations. Chat, knowledge base, and compliance tools — all running on Canadian infrastructure.
