Definition
A liability chain refers to the allocation of responsibility among different actors involved in running a particular system or the conducting a particular activity. In the context of AI, which functions through an ecosystem consisting of multiple actors, the concept helps identify whether responsibility lies with the developer, data provider, deployer, platform operator or end user, depending upon the degree of control and contribution attributable to each actor in the ecosystem.1
Commentary
Origin of the term
The concept of liability chain draws from the broader idea of supply chain liability, where responsibility may extend beyond the entity causing harm to the entity empowered to control or prevent such harm. In traditional supply chains, the issue arises in cases of harm caused by subsidiaries or suppliers, where the lead company may have the resources to prevent or control the harm through due diligence initiatives.2 The term has gained renewed relevance in the AI age because of the involvement of multiple actors across the AI ecosystem.
Operation in Practice
In practice, the idea of a liability chain can be embedded in governance frameworks to create a traceable chain of actors, with their respective contributions, to understand and identify the actors behind any non-compliance with greater exactitude. This would be particularly useful in possible AI governance tools like blockchain tracking and smart contracts, etc., where the assignment of unique identities or technology artefacts could help augment the quality of risk management and ease liability allocation.3
Sector
The concept of a liability chain is relevant across multiple sectors, including AI-driven ecosystems, digital platforms, digital governance and manufacturing and logistics.
Relevance vis-a-vis Competition Law
The concept assumes relevance, especially in the context of digital competition law, as it can help identify the actor and corresponding contribution in conduct such as algorithmic coordination, hub-and-spoke cartels, or other exclusionary practices that may arise through such ecosystems. It also prevents firms from avoiding responsibility merely by outsourcing functions to subsidiaries, suppliers, platform partners or downstream deployers.
Alternative Nomenclature
The concept is also referred to as Responsibility Chain, Accountability Chain, Chain of Liability or Liability Allocation Framework.
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Ministry of Electronics and Information Technology, Report on AI Governance Guidelines Development (Government of India, January 2025) https://indiaai.s3.ap-south-1.amazonaws.com/docs/subcommittee-report-dec26.pdf accessed 12 August 2026.↩︎
Carsten Koenig, 'An Economic Analysis of Supply Chain Liability' (SSRN, 30 April 2024) https://ssrn.com/abstract=4819667 accessed 12 August 2026.↩︎
Ministry of Electronics and Information Technology (n 1).↩︎
