Proposed EU Ban on Forced Data Localisation: What It Means

This post originally appeared on the Blogactiv Guest Blog.

Last week, European Commission Vice President, Andrus Ansip, called for an end to forced data localisation within the EU’s Single Market. This new proposal, expected on 30 November, will ask EU Member States to not enact unjustified data localisation requirements. But how will this proposal impact Europe’s environment, security, privacy, consumers and businesses?

Boosting the EU’s Single Market

The EU’s perhaps most praised achievement is its Single Market where goods, services, people and capital can flow freely. Yet, economic studies have repeatedly shown fragmentation when it comes to the digital dimension of the Single Market. Two-thirds of all demand for “ICT-related” services are for instance sourced nationally rather than from other EU countries according to OECD numbers. The EU is therefore keen to avoid that its member states introduce new digital barriers such as, forced data localisation requirements, which would hinder the free flow of data within the EU Single Market.

Reducing IT costs for consumers

The cost of data storage various hugely between EU Member States. As virtually all industries depend on digitally delivered services, the cost is passed on, directly and indirectly to private consumers and companies. Conversely, a real digital single market, without data localisation, would boost competitiveness and “contribute around EUR 415 billion to the GDP of the EU-28”, according to a recent European Parliament report.

Enabling European SMEs to go cross-border

Vice President Ansip clarified in his speech that the “vast majority” of national data localisation rules have to do with “company data, tax data, book-keeping data, financial and all health data”. European companies are indeed faced with a patchwork of national rules for the handling of their company files, such as invoices. This is especially a barrier for small European firms trying to do business in other EU countries. The EU proposal will help remove barriers across the 28 EU Member States and enable businesses to easily store and access their data electronically. Similarly, startups won’t have to “open 28 data centres” in each member state, according to Ansip.

Benefits for the environment

Data localisation means lack of scale. The European Commission has previously warned that today’s situation will “force companies to invest in multiple data centres and have negative economic and environmental footprints.” Europe is currently experiencing a data boom which will continue to grow with big data and industrial-generated data. It is in Europe’s environmental interest to avoid data centers in 28 locations in favor of modern centres in the most efficient and greenest locations.

Reinforcing the EU’s data protection regulation

The proposal is completely in line with and won’t change a comma in the EU’s recently adopted data protection regulation. The latter regulation clearly and repeatedly states that: “The proper functioning of the internal market requires that the free movement of personal data within the Union is not restricted or prohibited.” Nor will the new proposal impact EU data transfers to third countries. It will merely clarify existing EU law in a non-transparent market where companies are often met by dubious demands to store data locally. It will also benefit security, as customers will be able to store their data in the location or locations within the EU they find safest.

What level of ambition?

The value of the EU’s proposal will rely on the level of ambition in the European Commission’s proposal and the following negotiations between the European Parliament and the Member States. The EP has repeatedly called for a curb on forced data localisation and earlier this year, ministers from 14 EU Member States urged that “data can move freely across borders … by removing all unjustified barriers to the free flow of data.” Thus the European Commission has a strong mandate to present an ambitious proposal in November.

This proposal could become the most important attempt to future-proof the EU Single Market, with clear benefits for Europe’s environment, small businesses and consumers.

Danielle Jacobs is the Chairman of the Board of the International Telecommunications Users Group & General Manager of BELTUG.