Last week, the Irish High Court made a judgement on transatlantic data flows that could have far reaching implications for US tech firms and point the way towards economic disaster for the UK.
Yes, it might not have received much coverage at the time, but the court’s decision was a biggie.
It asked the European Union Court of Justice (CJEU) to scrutinise the mechanism by which Facebook and many other firms transfer data: standard contractual clauses (SCCs).
Why? Because Austrian law student Max Schrems is still not happy that his personal data could theoretically be snooped on by the US authorities whilst residing in Facebook datacentres over there. His previous battle with Facebook over this issue led to the collapse of the Safe Harbour agreement between the EU and US.
Its replacement, Privacy Shield, is the other main legal mechanism – aside from SCCs – that govern data transfers outside the US.
“In simple terms, US law requires Facebook to help the NSA with mass surveillance and EU law prohibits just that,” Schrems said in a written statement following the court’s decision. “As Facebook is subject to both jurisdictions, they got themselves in a legal dilemma that they cannot possibly solve in the long run.”
Emily Taylor, CEO of Oxford Innovation Labs and Chatham House associate fellow, took time out to discuss the issue with me.
“The reference to the CJEU is no surprise, and the fact that the US government applied to be joined as party shows how high the stakes are on all sides – for governments, for big data platforms like Facebook, and for individuals,” she told me.
“The case shows that the Snowden revelations continue to reverberate on both sides of the Atlantic. The CJEU has taken a consistently hard line against mass data collection and retention, and increasingly relies on the EU Charter of Fundamental Rights. The Charter allows for ‘more extensive protection’ of fundamental rights such as privacy, compared with the more familiar European Convention.”
That spells some uncertain times ahead for Silicon Valley, especially with Privacy Shield also facing an uncertain future.
That’s not all though. The case tells us much about what may happen to post-Brexit Britain.
Our digital economy is worth around £160bn and responsible for over 1.5m jobs, by some estimates. That makes it a vital part of the economy, and means unhindered data transfers with the EU – our biggest trading partner and the largest trading bloc in the world – are absolutely essential.
So how do we square the EU’s requirements around strong privacy protections for citizens, with the round hole of the UK’s brand spanking new Investigatory Powers Act? Also known as the Snoopers’ Charter, the new law has given the UK authorities probably more power than any country on earth – save for China and North Korea – to snoop on their own citizens.
“It is difficult to see how the UK’s mass data collection requirements under the Investigatory Powers Act could satisfy the EU Charter and this could have a severe impact on EU-UK data flows, potentially damaging UK business interests post-Brexit,” Taylor concluded.
That should be getting people in all sorts of high places very nervous indeed.
It’s hard to find an optimist in the cyber security industry in these post-referendum days. I spoke to a fair few for an upcoming feature for Infosecurity Magazine and the consensus seems to be that a Brexit will be bad for staffing, the digital economy and the financial stability of UK-based security vendors.
That’s not even to mention the legal and compliance implications. Chatham House associate fellow, Emily Taylor, recommended firms continue on the road to compliance with the European General Data Protection Regulation. Aside from the fact that any firms with EU customers will still need to comply with the far-reaching law, she reckons that if we want to protect the free flow of digital information between the EU and UK, we’ll need to continue following European laws in this area.
Snoopers gonna snoop
However, a Brexit would cause other problems, notably in that the current Snooper’s Charter looks like it will enshrine in legislation the principle of bulk surveillance – the very thing which effectively led to the scrapping of the Safe Harbour agreement between the US and EU. If this bill goes through as is and we go out of Europe but stay in the single market, we’ll have to change that bit, Taylor told me.
“A case brought by David Davis and Tom Watson questioning the legality of bulk surveillance powers under the old DRIPA laws is currently being considered by the CJEU,” she explained.
“It’s not clear which way the CJEU will go on this, because many member states have lined up to support the British approach. However, if CJEU follows its recent decisions, it could strike down bulk data collection. If we wanted to stay in the single market, we’d have to amend our IP Bill in response.”
Even if we broke away from Europe completely and adopted the status of a “third country” like the US, we’d still have to adopt measures “to give equivalent protection to EU citizens’ data as they enjoy within the EU,” she argued. And bulk surveillance would certainly be a no-no in this scenario.
The uncertainty – which could continue potentially for years while Brexit deals are worked out – is also viewed by many as damaging to the cyber security industry, and tech in general. Immigration lawyer and partner at MediVisas, Victoria Sharkey, claimed firms may be unwilling to employ skilled workers if there’s a chance they might have to leave in a couple of years’ time.
“This is certainly going to be the case where significant training and investment is involved,” she added.
In fact, EU nationals are apparently already packing their bags.
“I am already seeing EU nationals who have been here for years make plans to leave and either go home or go to another EU country. They are worried for their jobs, are worried that they will be told to leave and so would rather leave on their own terms, and they are also being made to feel unwelcome,” Sharkey continued.
“I feel that when we do leave that it is going to become significantly harder for UK employers to encourage the best in their industry to come and work in the UK.”
This, for an industry which has always struggled with skills gaps and shortages, is potentially catastrophic.
Can we overcome?
Philip Letts, CEO of global enterprise services platform blur Group, has run businesses in Silicon Valley and the UK. He also pointed out the potential damage that political and financial uncertainty could have on the industry.
“The politicians are in unchartered territory. We don’t yet have a clear timetable for the triggering of Article 50, nor the trade deals that are going to have to be negotiated. There is a political vacuum. Business confidence is low and many will hunker down, try to avoid risk and wait for this to play out,” he told me.
“Globally, the US tech heavyweights will want to remain in the UK and the EU, and they will do both, operating across different European centres. But the EU market is more lucrative than the UK, so things may shift over time.”
So is the tech and cyber security sector really doomed? Not so, according to KPMG UK head of technology, Tudor Aw.
“I believe the resilient UK tech sector can withstand the challenges of Brexit and thrive,” he told me.
“Technology is increasingly a key sector that underpins all other sectors – whether it be back office systems or strategic enablers such as IoT and data analytics. Companies will need to invest in technology to drive efficiencies and strategic growth – one only has to look at developments across a diverse range of sectors such as healthcare, automotive, property, retail and the military to see that technology spend will only increase regardless of Brexit.”
It’s a moot point now, but I wonder how much better it could have thrived had we not voted out on 23 June.
I don’t often cover India’s outsourcing market but an interesting piece of news emerged this week when local media reported that the EU has found some notable gaps in the country’s data protection legislation which could scupper a major trade agreement between the two.
Basically the two have been trying to thrash out the Broad-based Trade and Investment Agreement since 2006.
The idea is that India opens up more of its vast market for EU firms and vice versa, but with one of India’s biggest industries in Business Process Outsourcing, a key demand from that side was that the country be recognised as a “data secure destination” by Europe.
According to the Data Security Council of India (DSCI), this single accreditation could propel outsourcing revenues from European customers from $20bn to $50bn in no time at all.
Sadly for India, the EU Justice Department decided to launch a consultation on India’s data security credentials and now the mutterings are it doesn’t like what it sees.
Any further delays which require legislative amendments could take years – not exactly what IT services giants like Infosys, Mahindra and Unisys want.
However, Forrester security analyst Manatosh Das told me all may not be quite as bad as it seems.
For starters, he said, India is taking information security a lot more seriously nowadays since recent high profile cyber attacks.
With the proposed electronic surveillance Central Monitoring System, the country is apparently planning for stringent privacy laws, while the DSCI, set up by Nasscom, has a strict remit to monitor data security and privacy in the IT and BPO industries, he said.
“I really don’t think in the current scenario outsourcing will take a back seat,” Das added.
“Private organisations in India follow international security frameworks like ISO 27001, PCI DSS, SOX, HIPAA. They have strong contractual agreements with their clients. Clients have the right to audit the vendors as per the agreement.”
However, he did admit that the IT Amendment Act 2008 lacks enforcement and needs amending again to “remove ambiguity” and create specific exceptions.
As a side note, I’m sure the recent “landmark” agreement between the UK and India on data security will also help reassure European customers considering offloading some services to Indian firms.
As always though, rigorous planning and due diligence and early involvement from the IT department should be a given to prevent any unexpected outsourcing problems down the line.