A few quick ideas come to mind...
AI should not be used for the following:
Inflict or direct harm (physical or otherwise) on someone
Invade the privacy of someone.
Imitate the likeness of someone without their consent (likeness defined as to where it can be confused as the person in question) .
Used to generated content that is claimed to factual but is actually to the contrary. (think false information, propaganda, revenge, or the term "fake news").
Used to act as multiple individuals for the purpose to get gain (think bots to win a poll, facilitate a scam, bias a survey, social engineering an election or policy).
These would need apply to everyone (even those in the government).

At this point it may be cheaper to pay a UK fine then back out of the deal. It could backfire for the UK and Microsoft just rolls in the costs of the fines to all UK customers purchases.

Wow this is basically leaving out the millions of steam deck users. I guess they also leave out switch users as well, so is nothing new.