Regulation of Data Localization and How the Legal Profession Can Play a Role

• Author: Kaitlyn Tsai
• Position: J.D., Georgetown University Law Center (expected May 2022); B.S., University of California, Berkeley (2015)
• Pages: 1355-1381

Regulation of Data Localization and How the Legal

Profession Can Play a Role

KAITLYN TSAI*

INTRODUCTION

In the last few decades, the significant growth of the Internet and other digi-

tal technologies has given rise to numerous industries that rely heavily on the

ability to collect, aggregate, process, and transfer information across borders.

1

Concurrently, traditional industries, such as manufacturing and agriculture,

have grown more dependent on access to data to monitor supply chains, sup-

port products in the field in real time, and manage workforces.

2

Cross-border

data flows, accordingly, have become crucial in enabling international trade,

which can lead to increased innovation, productivity, and economic growth.

3

In the coming years, as the world continues to increase its dependence on tech-

nology, cross-border data flows are expected to grow at a rate faster than the

overall rate of global trade.

4

Despite the obvious importance of cross-border data flows, recently countries

scattered throughout the world have begun enacting varying degrees of data re-

strictive regulation to limit the flow of data outside their borders.

5

Data localiza-

tion measures are one such way of restricting data flows. Data localization

measures are any legal limitation on the ability of data to move globally and can

encompass a wide range of requirements including the localization of data servers

and providers, local content policies, and consent mandates for data transfers, for

* J.D., Georgetown University Law Center (expected May 2022); B.S., University of California, Berkeley

(2015). © 2021, Kaitlyn Tsai.

1. Susannah Hodson, Applying WTO and FTA Disciplines to Data Localization Measures, 18 WORLD

TRADE REV. 579, 579–80 (2018).

2. See NIGEL CORY, INFO. TECHNOLOGY & INNOVATION FOUND., CROSS-BORDER DATA FLOWS: WHERE

ARE THE BARRIERS, AND WHAT DO THEY COST, INFORMATION TECHNOLOGY & INNOVATION FOUND. 1, 1.

(2017), https://itif.org/publications/2017/05/01/cross-border-data-flows-where-are-barriers-and-what-do-they-

cost [https://perma.cc/KH7T-XFDB].

3. See MICHAEL MANDEL, PROGRESSIVE POL’Y INST., DATA, TRADE AND GROWTH 2 (2014) (quoting Joshua

Meltzer, BROOKINGS INST., THE INTERNET, CROSS-BORDER DATA FLOWS, AND INTERNATIONAL TRADE, (Feb.

2013)), https://www.progressivepolicy.org/wp-content/uploads/2014/04/2014.04-Mandel_Data-Trade-and-

Growth.pdf [https://perma.cc/7WC5-27H4].

4. See CORY, supra note 2.

5. See generally JOSHUA P. MELTZER & PETER LOVELOCK, GLOBAL ECON. AND DEV. AT BROOKINGS,

REGULATING FOR A DIGITAL ECONOMY: UNDERSTANDING THE IMPORTANCE OF CROSS-BORDER DATA FLOWS IN

ASIA, (Mar. 2018), https://www.brookings.edu/wp-content/uploads/2018/03/digital-economy_meltzer_lovelock_

web.pdf [https://perma.cc/7M3F-3K3U].

1355

example.

6

In the last decade, there has been a proliferation of data localization

measures as a growing number of countries impose rules forcing data to be kept

within their own borders.

7

Governments cite a variety of reasons for utilizing data localization measures,

including protecting national security interests, protecting privacy of their citi-

zenry, ensuring greater economic opportunities for domestic digital players, and

maintaining public order.

8

Yet, it remains unclear just how effective these meas-

ures are at helping governments achieve their public policy goals.

9

What is clear,

however, is that data localization stands at odds with the modern-day digital

economy that depends on the ability of data to move “expeditiously and effi-

ciently” across countries—or, in other words, the free flow of data.

10

The move-

ment of many countries towards more stringent data localization measures risks

potentially devastating consequences. One major concern is that data localization

may impede trade in services and hinder continual economic integration.

Furthermore, data localization can raise the cost of doing business, slow down

innovation, and could eventually balkanize the Internet.

11

At the moment, there are few specific rules targeting data flows on the interna-

tional level to effectively safeguard against overreaching data localization meas-

ures. Some experts have suggested that the WTO is the proper institution to

provide an adequate framework to address cross-border data flow issues.

12

This

Note argues that the WTO is inadequate as a venue and as a source of norms to

prevent future data localization measures. Rather, given the complexity and the

competing interests that drive the implementation of data localization measures,

a diverse set of novel solutions created with the coordination of various stake-

holders, including lawyers, would more effectively address the problem. These

solutions include creating a data flow framework, establishing an independent

dispute settlement body to assess the legality of data restrictive measures, involv-

ing lawyers to help companies navigate data localization measures, and utilizing

the broader legal community to help lawyers better navigate changes in data flow

policy.

6. See Anupam Chander & Uye

ˆn P. Le

ˆ, Data Nationalism, 64 EMORY L.J. 677, 680 (2015).

7. Joshua P. Meltzer, Data and the Transformation of International Trade, BROOKINGS INST. (Mar. 6,

2020), https://www.brookings.edu/blog/up-front/2020/03/06/data-and-the-transformation-of-international-

trade/ [https://perma.cc/C7PL-QW3W]; MARTINA F. FERRACANE , RESTRICTIONS ON CROSS-BORDER DATA

FLOWS: A TAXONOMY 2 (2017); Benjamin Wong, Data Localization and ASEAN Economic Community, 10

ASIAN J. INT’L L. 158, 159 (2020).

8. Id.

9. See Adrian Shahbaz, Allie Funk, Andrea Hackl, User Privacy or Cyber Sovereignty? Assessing the

Human Rights Implications of Data Localization, FREEDOM HOUSE (July 2020), https://freedomhouse.org/

report/special-report/2020/user-privacy-or-cyber-sovereignty [https://perma.cc/6FZC-FU8D].

10. Andrew D. Mitchell & Neha Mishra, Regulating Cross-Border Data Flows in a Data-Driven World:

How the WTO Law Can Contribute, 22 J. INT’L ECON L. 389, 390 (2019).

11. See Wong, supra note 7, at 159; Shahbaz et al., supra note 9.

12. See e.g., Andrew D. Mitchell & Jarrod Hepburn, Don’t Fence Be In: Reforming Trade and Investment

Law to Better Facilitate Cross-Border Data Transfer, 19 YALE L.J. & TECH. 182, 186 (2017).

1356 THE GEORGETOWN JOURNAL OF LEGAL ETHICS [Vol. 34:1355