The European Union (EU) has passed new data localization laws that will have a major impact on how businesses store and process data. As a business leader, it is critical to understand these new regulations and how your company needs to adapt. In this comprehensive guide, I will provide an in-depth look at the key aspects of the new EU data localization laws and what businesses need to do to comply.
Overview of the New EU Data Localization Laws
The EU’s General Data Protection Regulation (GDPR) first came into effect in 2018. The GDPR imposed strict new requirements around data privacy and security. Now, the EU has gone a step further by passing two new major data localization laws:
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The Data Governance Act (DGA) – Passed in November 2022, the DGA aims to create a single market for data within the EU. A key provision is that certain sensitive data can only be stored and processed within the EU.
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The Data Act – Expected to be finalized in 2023, the Data Act will give users more control over their data. It is also likely to contain data localization provisions.
Together, these new laws will require more data to be kept within the borders of EU countries. Data will not be allowed to freely flow out of the EU.
Key Data Localization Provisions
The new DGA and forthcoming Data Act will implement several key data localization rules:
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Sensitive data must remain in the EU – Data relating to health, government, publicly-funded research, and other highly sensitive areas will need to be stored and processed only within EU states.
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Limits on data transfer outside the EU – Stricter rules will govern transfer of other types of data outside the EU. Companies may face restrictions on sending data to third countries.
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Mandates around cloud data storage – Where cloud storage is used, EU data will need to be hosted on cloud servers physically located within the EU. Major cloud providers like AWS and Microsoft Azure will be impacted.
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New compliance mechanisms – Businesses will need to allow EU regulators to assess localization measures. Fines for non-compliance will be increased substantially under the DGA.
Impacts on Businesses
The new localization laws will have far-reaching implications for companies:
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Data storage – On-premise and cloud data storage will need to be re-evaluated. EU data will need to be stored on local servers.
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Data transfers – Sending data outside the EU will become more complex at minimum, and could be blocked completely for sensitive data.
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Supply chains – Use of third-party processors outside the EU will be curtailed. Supply chains will require overhaul.
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Compliance costs – New compliance mechanisms will make data localization more expensive in terms of oversight and potential fines.
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Data access – Accessing EU data from outside the region will become harder. This could disrupt businesses and analytics.
Key Steps for Businesses
To prepare for the new laws, businesses should take the following steps:
- Conduct audits to identify EU data and storage locations
- Assess third-party vendor contracts and supply chains
- Evaluate on-premise and cloud data storage setups
- Develop data transfer impact assessments and minimization plans
- Update data protection policies and consent procedures
- Train staff on new compliance processes
- Closely track developments as final Data Act text emerges
Proactive preparation will be crucial to minimizing business disruption when the new laws take effect.
Outlook Going Forward
Data localization is a growing trend globally. Alongside the EU regulations, countries like China, Russia, and Indonesia are also passing laws to keep data within their borders.
This poses a challenge for multi-national businesses that need flexible data flows. There are concerns that excessive data localization could fragment the internet and stifle innovation.
However, the EU argues that data localization helps protect privacy and EU economic interests. The new laws are unlikely to be repealed. Businesses will need to accept the new reality and adjust their data strategies accordingly.
Careful planning and EU data management will reduce compliance costs and risks. However, operating in the EU market will require more consideration of data localization than ever before.
Conclusion
The EU’s new data localization laws will bring massive changes to how businesses handle EU data. Although compliance will be complex, taking proactive steps to understand and prepare for the regulations will help minimize disruption to operations. Assessing data storage, transfers, supply chains, policies, and cloud services will be essential. With the right focus and investment, businesses can adapt to the EU’s more localized data environment.
