In 2023, Meta and its affiliated entities incurred the largest GDPR fine among Europe’s top twenty penalties. Specifically, in Ireland, they faced a €1.2 billion penalty for inadequately safeguarding the transfer of European residents’ data to the USA. Similarly, other prominent firms such as Amazon and TikTok also faced fines of varying magnitudes for non-compliance with GDPR regulations governing personal data protection. This enforcement underscores the seriousness with which the GDPR is upheld, signaling that regulatory authorities are steadfast in penalizing violations.
Remarkably, achieving compliance with data sovereignty laws is a feasible endeavor. With proper guidance, any organization can navigate these requirements effectively, avoiding costly penalties altogether. This article delves into the intricacies of GDPR’s data sovereignty provisions and elucidates how InCountry can facilitate seamless compliance. Ultimately, prioritizing adherence to regulations proves far more economical than grappling with legal disputes and hefty fines.
What is data sovereignty?
Data sovereignty is the concept that the personal data stored in a location or country is subject to the data privacy laws applicable in that country. Consequently, all personal data stored within the EU is subject to the GDPR, regardless of which country the data was originally gathered from.
The concept of data sovereignty has its roots in the principles of sovereignty and jurisdiction in international law. In this sense, sovereignty refers to the supreme authority of a state to govern itself and its territory without external interference. This concept has evolved to encompass various aspects of governance, including control over resources, laws, and regulations.
With the advancements of the digital age and the proliferation of data-driven technologies, the question of who controls data and how it should be governed has become increasingly important. Data sovereignty emerged as a response to this question, asserting that nations should have the authority to regulate and control data within their borders, similar to how they govern other aspects of their territory. They should be able to demand data sovereignty compliance from companies operating in their territory. This is the goal of data sovereignty.
Why is EU data sovereignty important?
Data sovereignty is very key in the European Union for the following reasons:
- Data protection & privacy
The EU prioritizes data sovereignty because it prioritizes safeguarding its citizens’ data privacy rights. Through the GDPR, it establishes what is acceptable in the collection, processing, and storage of personal data. EU data sovereignty guarantees the enforcement of these regulations, ensuring robust protection of EU citizens’ data, irrespective of its processing or storage location.
- Data security
The EU’s jurisdiction over data allows authorities to enforce security protocols and standards that protect sensitive information from unauthorized access, breaches, or exploitation. Furthermore, they can also institute rigorous security measures and ensure organizations are responsible for shielding data from cyber threats and other potential hazards. That is another valid reason for data sovereignty in GDPR.
- Economic & technological dependence
Data is increasingly recognized as a valuable resource fueling innovation, economic advancement, and competitiveness. By asserting data sovereignty, the European Union seeks to stimulate domestic innovation and entrepreneurship while lessening dependence on foreign technology suppliers. This involves fostering the growth of European data infrastructure, nurturing data-centric industries, and endorsing initiatives for digital sovereignty.
- Strategic autonomy
A significant portion of the global data storage and processing infrastructure is controlled by companies outside the EU. This raises the concern about dependence on foreign entities. Data sovereignty grants the EU greater authority over its digital infrastructure, enabling it to diminish reliance on external providers.
In summary, the EU data sovereignty regulations are critical in safeguarding data protection rights, ensuring adherence to legal standards, improving cybersecurity measures, fostering economic independence, and ensuring reasonable autonomy in the digital era.
Key concerns and challenges covering data sovereignty in the EU
Although the data sovereignty stand of the GDPR remains beneficial to the EU, it also comes with some challenges. In this section, we shall highlight some of those challenges.
- Fragmentation of data regulations
Although the GDPR establishes a complete framework for data protection throughout the EU, its interpretation and enforcement may differ among member states. A significant cause of this difference in application may be the existence of other enforcement authorities across Europe and the existence of other supporting data privacy laws. For instance, Germany has a local data privacy law (The BDSG) that complements the GDPR. The same applies in France with the Loi Informatique et Libertés. These differences can pose challenges for businesses operating across different European countries, as they must contend with varying legal obligations and compliance criteria.
- Challenges with cross-border data transfer
Although the GDPR does not ban cross-border transfers, the stringent requirements it places could pose a challenge for cross-border data transfers, which is very important in this globalized economy. Businesses operating in multiple regions may struggle with compliance with different data governance rules.
- Challenges for small and medium enterprises (SMEs)
Compliance with the GDPR can be challenging for SMEs with limited resources and expertise. Meeting regulatory requirements may require significant investments in data protection infrastructure, which SMEs seem to lack and could disproportionately affect in the long run.
- Technological complexity
Enforcing data sovereignty faces hurdles due to rapid technological advancements. Emerging technologies like cloud computing, artificial intelligence, and the Internet of Things (IoT) bring up inquiries regarding data ownership, control, and jurisdiction, which complicates the regulation of data sovereignty.
- Data localization requirements
Some EU member states have suggested or enforced data localization mandates on companies operating within their borders. These countries require that specific data types must remain stored or processed within national boundaries. Advocates claim this strengthens data security and sovereignty, yet detractors caution it may fragment the digital single market, raise expenses for businesses, and impede innovation.
Addressing these challenges requires a coordinated effort involving policymakers, businesses, civil society organizations, and other stakeholders. This entails ensuring the effective implementation and enforcement of existing regulations, fostering cross-border collaboration, nurturing technological progress, and maintaining a robust legal and regulatory framework that upholds data protection principles while facilitating responsible data usage and innovation. Exploring cloud data sovereignty could also be helpful here.
GDPR data sovereignty requirements
The General Data Protection Regulation is a European data privacy law that was enforced in May 2018. It was designed to set acceptable standards for collecting, processing, and storing the personal information of EU residents. It has also helped to ensure a high level of uniformity in data privacy practices across Europe. Beyond the success recorded in Europe, the GDPR has served as a guide to other data privacy laws enacted afterward. It has served as a template to guide other data privacy laws that came after in countries like India, South Korea, South Africa, etc.
This section will discuss some essential data sovereignty requirements under the GDPR.
- Territorial scope of the GDPR
Article 3 of the GDPR clarifies the scope of coverage and application of the GDPR. It proposes that the GDPR applies to the processing of personal information of individuals located in the EU, regardless of where the data controller or processor is located. Consequently, organizations outside the EU handling the personal information of EU residents must comply with the requirements of the GDPR.
- Data processing principles
Article 5 of the GDPR outlines the critical principles for processing personal data. These principles form the basis for data protection under the GDPR and ensure individuals have greater control over their personal information. These principles are as follows:
- Lawfulness, fairness, and transparency must be ensured in the lawful processing of personal data. That is, the personal information of EU residents or within the EU must be processed according to established policies, in transparency, and in fairness.
- Data controllers are required to process personal data to ensure its security, integrity, and confidentiality, as well as to demonstrate compliance with GDPR principles.
- Other principles include data minimization, purpose limitation, storage limitation, integrity and confidentiality, etc.
- Lawful basis for processing data
This concept is discussed in Article 6 of the GDPR. It ensures that there is a legal basis for processing the personal information of EU residents. According to Article 6, data processing must be based on any of the lawful grounds specified in the GDPR, and they are as follows:
- the data subject’s consent,
- the performance of a contract,
- compliance with legal obligations,
- protection of vital interests,
- The performance of a task carried out in the public interest or the legitimate interests pursued by the data controller or a third party.
- Data subject rights
Data subjects are individuals whose personal data is collected, processed, and stored by businesses while carrying out their business activities. Chapter 3 of the GDPR extensively discusses the rights of data subjects, and all companies operating within the EU or handling the private data of EU residents are mandated to respect these rights. The following are the rights of data subjects protected by the GDPR:
- Right to access data.
- Right to erase data.
- Right to edit personal information.
- Right to restrict processing.
- Right to data portability.
- Right to object data processing.
- Cross-border data transfers
Data transfers to countries outside the EU (third countries) are subject to restrictions to ensure adequate data protection. The GDPR allows transfers to countries with an adequacy decision by the European Commission based on their data protection laws and practices. Without an adequacy decision, organizations must use appropriate safeguards, such as standard contractual clauses, binding corporate rules, or approved codes of conduct. Chapter 5 of the GDPR discusses this extensively.
- Data Protection Impact Assessments (DPIAs)
The GDPR mandates organizations to perform Data Protection Impact Assessments (DPIAs) for data processing activities that are likely to pose significant risks to the rights and freedoms of individuals. That is, DPIAs must be performed whenever a company wishes to perform a data processing activity that places the data of EU residents at risk. The goal of the DPIAs is to identify and mitigate possible risks that may be identified with that data processing activity.
- Data breach notification
This is another critical GDPR data sovereignty requirement. It is properly articulated in articles 33 and 34. It posits that data controllers must notify data subjects and the relevant supervisory authorities of a data breach within 72 hours after it is identified. Failing to comply with this requirement will attract penalties and trigger lawsuits from affected data subjects.
How InCountry helps companies stay compliant with GDPR data sovereignty requirements
Managing cross-border data transfers outside the EU can pose challenges for international enterprises, particularly amidst varying privacy regulations across jurisdictions. At InCountry, we recognize this complexity and have developed a sophisticated cloud-based solution tailored to address these concerns. Our Data-Residency-as-a-Service enables secure client data storage within the EU while facilitating global accessibility.
In addition to seamless access, our solution is fortified by state-of-the-art data security protocols, ensuring robust protection for your critical business information. European-based companies, with no necessity for international data transfers, can also benefit from our comprehensive security measures, meticulously implemented across all our global data vaults. Our stringent encryption and tokenization methods render data unreadable to unauthorized entities, further bolstered by formidable firewalls safeguarding against unauthorized access attempts.
Furthermore, our dedicated team of experts remains at your disposal, and ready to address any inquiries or requirements throughout our partnership.
Get in touch and let’s discuss your needs and show you how much value we can contribute to your business!