The Russian Duma passed an amendment regarding the regulation of personal data. The law will likely require all domestic and foreign companies to store data on servers physically located in Russia to stay in compliance with new regulations, and the law is anticipated to take effect in September of 2016. Russian equivalent of the FCC Roskomnadzor announced it will require ISPs to block services that violate new regulations.
Some speculate that the purpose of the amendment is to bypass NSA practices rather than address issues with identity theft, piracy, and Russian security. The construction of new data centers across Russia might not be feasible for numerous reasons aside from cost, even for companies with cash to spare such as Google and Facebook. However, international trade regulations do not currently dictate whether or not a country can impose additional regulations on internet commerce and usage on foreign companies. Russia is currently able to pass Internet regulations that do not violate specific trade agreements under international law.
Numerous experts suspect Russia of creating malware, and new data centers built per Russian standards could be a security threat to foreign countries and their customers. Russia might be on the fast track to annexing itself from the global online marketplace. However, the country can pass regulations that essentially make it incompatible with current Internet communication and commerce if it chooses.
What the New Regulations Mean for International and E-Commerce Companies
Executives of major corporations often do not want to risk public trust by violating legal statutes. It might be easier for e-commerce sites, social media networks, and search engine giants to stop operations in Russia altogether. The second option is to comply with the new hosting standards and hope for the best. Corporations that choose to ignore the law risk a security breach, a public relations nightmare, or the possibility of personal imprisonment, depending on how the amendment is written and enacted.
Russian law can be upheld in foreign courts. Similarly, corporations that are currently publically traded or wish to be publically traded in the future may not want to risk a foreign conviction that could upset shareholders now or in the future. On a related note, current shareholders might not be thrilled about the prospect of investing in new data centers across Russia due to security concerns, and stock prices could subsequently take a hit.
New Data Centers, Cloud Based Hosting, and Regulations Under a New Jurisdiction
Another issue that complicates Russia’s regulatory practices of having all data centers abide by Russian government-imposed storage conditions is what government agency has jurisdiction over violations. It is relatively straightforward to allow inspectors to physically look at Russian data center storage conditions to ensure that they are in compliance. However, the increased popularity of cloud based hosting options can make all aspects of operations more difficult.
Outlawing the use of cloud based hosting when transmitting data from individuals or corporations in Russia can be difficult to enforce for Russian authorities and viewed as high-risk by corporations. There is no clear authority that currently regulates hosting practices on a global scale. The jurisdiction under which corporations or individuals would be prosecuted is unclear in many circumstances. When regulation becomes too difficult to understand or abide by, legitimate corporations tend to pull out rather than risk potential damages.
Will Other Countries Follow Russia’s Example?
Internet regulation is not particularly new in major countries. For example, Google has recently become largely unavailable in China due to extensive government regulations. Smaller countries such as Vietnam also impose stringent regulations on Internet usage. In many ways, countries with strict regulations are unattractive business prospects for numerous corporations, no matter how large market share in specific countries may be.
Trade agreements such as NAFTA and EU regulations make it difficult for applicable countries to impose regulation that limits trade online. It is unlikely that countries with trade agreements would be able to impose strict regulations similar to Russia without a substantial backlash. International commerce is promoted by trade agreements, both online and offline. However, countries with less incentive to promote easy or fair trade might like the idea of creating additional regulations.
Current Offshore Hosting Providers for Casinos That Circumvent Gambling Laws
Offshore casino hosting is not legal for all end users. However, regulatory agencies tend not to care about what would be labeled illegal gambling on a small scale. The damages tend to be minimal, and regulation is not always practical. Technically, offshore hosting providers could be charged or shut down. Realistically, numerous authorities in the United States and abroad have more pressing issues to address such as illegal pornography, identity theft, and piracy.
Offshore hosting for piracy websites such as The Pirate Bay have gained continual international attention, and the site has been in continual legal trouble. Various members of the anti-copyright organization have faced multiple lawsuits and criminal charges from a variety of private and public entities, despite that the site was initially hosted in Sweden.
In one notable suit, the Motion Picture Association of America partnered with the Swedish government to track down the cyber criminals. They were apprehended along with a stash of evidence. Fredrik Neij, Gottfrid Svartholm, Peter Sunde, and Carl Lundström were tried and convicted of criminal and civil copyright infringement by the government of Sweden. All faced jail time in addition to fines. Interestingly, The Pirate Bay has moved its servers to Belgium and Russia in the event of another raid.
The Reality of International Law and the Impact Regulations May Have on the World Wide Web
In reality, most law-abiding individuals break numerous American laws daily without realizing it. The damages are not substantial enough for regulatory agencies to care, and life goes on as normal. However, corporations need to be more cognizant of impacts on reputations that may result from violating Russian internet regulations. Perhaps the new amendment will take Russia off the map as a major player in global and online commerce for the time being.
A host of future ramifications remain unknown. Other countries could follow suit. Businesses could determine that the cost and risk of continuing to abide by Russian regulations is worth it. However, the most immediate impact will likely be growing mistrust of countries without formal trade agreements in online commerce and transactions.A number of hosting experts have proposed to create a regulatory agency specifically for hosting solutions on the World Wide Web. Perhaps that is the only lasting solution to currently fragmented and somewhat bizarre country-specific regulations.
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