Introduction
Data sovereignty and data localisation regulations are becoming increasingly important as data flows across borders. With many countries enacting laws to control data within their jurisdictions, multinational companies need to understand how to comply. This article provides an in-depth look at key concepts, regulatory frameworks, and best practices for navigating data sovereignty and localisation requirements.
What is Data Sovereignty?
Data sovereignty refers to the concept that data is subject to the laws and governance structures of the nation it is collected in. It stems from the idea that data is an asset and extension of a country’s sovereignty.
Some key principles of data sovereignty include:
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Data is subject to the laws of the country it originated in – Regardless of where data is transferred or processed, it is still under the legal jurisdiction of the source country.
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Nations can enact laws to govern data within their borders – Countries have a right to regulate data activities and flows involving data subjects or infrastructure within their jurisdiction.
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Countries want control over their data for economic, privacy and security reasons – Data is an asset and controlling it provides economic benefits, helps safeguard sensitive information, and protects national security interests.
Why Data Localisation is Required
Data localisation refers to regulations requiring data to be stored and processed within the borders of a particular country. It is a policy measure to assert data sovereignty.
Some of the key drivers behind data localisation mandates include:
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Privacy and security – Storing citizen data locally helps meet privacy legislation and prevents foreign surveillance.
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Law enforcement access – Local data storage makes it easier for law enforcement to access data when required.
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Economic development – Fostering local data infrastructure provides economic benefits and tech sector growth.
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Trade protectionism – Data localisation erects barriers that favour domestic tech companies over foreign ones.
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Geopolitical control – Keeping data flows domestic reinforces digital autonomy and reduces foreign reliance.
Major Data Sovereignty Regulations
Many major economies have implemented data sovereignty and localisation laws. Some notable examples include:
European Union
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GDPR – Sweeping privacy legislation that imposes restrictions on transferring EU citizen data outside the region. Fines for non-compliance can be up to 4% of global revenue.
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NIS Directive – Cybersecurity rules requiring critical infrastructure operators to assess foreign data transfers risks and take mitigation measures.
United States
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Cloud Act – Allows US law enforcement to compel production of data stored abroad by US companies. Supersedes data localisation efforts.
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CISA – Rules for companies providing critical infrastructure requiring threat and incident data to be stored domestically.
China
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Cybersecurity Law – Comprehensive legislation localising many categories of data within China and imposing security reviews of transfers.
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Data Security Law – Further provisions controlling overseas data transfers including export bans on certain data types. Fines up to $7.6 million.
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Personal Information Protection Law – Local storage mandated for personal information with only approved transfers allowed.
India
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RBI Data Localisation – Central bank rules requiring payments data to be stored exclusively in India.
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PDPB Localisation Requirements – Upcoming personal data protection law expected to mandate local mirrors for sensitive personal data.
Russia
- Data Localisation Law – Requires data on Russian citizens to be stored on servers located in Russia. Fines up to ₽6 million.
Complying with Data Sovereignty Regulations
Companies handling data subject to multiple jurisdictions must develop compliance strategies. Here are some best practices:
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Data mapping – Catalogue data types, origins and flows to identify sovereignty touchpoints.
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Local storage – Where required, house data within jurisdiction of origin via local data centre or cloud.
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Minimisation – Only collect, process and transfer the minimum data necessary to fulfill purpose.
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Access controls – Limit data access to necessary staff and implement robust cybersecurity.
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Legal reviews – Assess transfers and third-party contracts to ensure they satisfy local laws.
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Consent – Obtain explicit consent from data subjects when transferring data across borders.
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Compliance staffing – Have trained staff responsible for monitoring regulatory changes and ensuring ongoing compliance.
Outlook for the Future
Data sovereignty is a crucial issue that will continue growing in importance. Companies must track developments in key markets and adjust strategies accordingly. With the accelerating pace of new regulations, maintaining compliance will only become more complex. Those who navigate wisely will sustain access to data that fuels business, while avoiding penalties from non-compliance. Weighing data sovereignty against operational efficiency will be an ongoing balancing act for multinationals.
Conclusion
As data becomes more central to business and geopolitics, data sovereignty will have an expanding impact. Firms reliant on data flows across borders must deeply understand regional regulations and implement thoughtful compliance programs. With regulatory divergence across markets, there are no universal solutions. However, through robust data management and governance, companies can successfully adapt despite greater balkanisation of data. Data sovereignty presents challenges, but prudent firms can turn it into a competitive advantage.
