Personal Data is the New Oil

All the superpower states, such as China, the US and Russia, have recently understood that in the internet era, personal data is the new oil, the defining natural resource that makes our lifestyle rise and fall. Consequently, these states have increased their interest in the personal data of their citizens and in the use of that data in business and commerce.

The US is by far the leader in the competition to collect, use and control the use of personal data, mainly thanks to large American internet and social media companies and legislation that grants extensive information rights to the state. However, China is not far behind.

Recently Russia has also taken some major steps in the field by enacting new legislative amendments restricting companies’ use of Russian citizens’ data.

Restrictions to Processing Data of Russian Citizens Abroad

In Russia, a set of new legislative amendments will come into force on 1 September 2015. The amendments are primarily aimed at restricting the processing of Russian citizens’ personal data on servers located outside of Russia. They also develop state supervision procedures and empower the Russian Data Protection Authority (Roscomnadzor), under certain conditions, to block access to websites where personal data violations take place.

From the perspective of data operators, it will be illegal to collect personal data of Russian citizens and directly send it to servers located outside of Russia without processing the data ‘with the use of’ a database installed on a Russia-based server or computer.

However, the amendments contain several exceptions. One of them could be interpreted as being applicable to Russian employees of international companies. The obligation to process data in Russian databases may not be applicable if personal data is processed either for purposes stipulated by an international agreement of the Russian Federation, for purposes set out in law or for exercising the powers or performing the functions and obligations of data operators under Russian law. The purposes for which employers process the data of their employees are in fact defined by law and, thus, may fall into the second category.

Websites Containing Illegally Processed Personal Data May Be Shut Down

Under the amendments, Roscomnadzor will be given powers to block access to websites containing illegally processed personal data in Russian territory. For this purpose, Roscomnadzor will enter the banned domain names, network addresses and other details in a special state register.

A website can be blocked only on the grounds of a court act. The website owner will be informed of the violation of personal data laws and asked to rectify the violation voluntarily prior to the website being blocked. If the violation is not rectified, the website will be blocked not later than in three days.

The website owner will have the right to apply for the removal of its website from the state register after all personal data violations have been rectified or if a court reverses the act blocking of the website. These rules can be construed as being applicable only to websites containing illegally processed personal data, including social networks, public databases, address books and blogs. On the other hand, Roscomnadzor may interpret the new rules broadly and try to apply them to all websites used in any way that violates any of the Russian legal requirements concerning personal data.

Practical Solutions to Legal Challenges

How, then, should one react to these new regulations and prevent localisation politics for affecting business? From a formal point of view, it will be necessary to relocate databases containing information about Russian clients, partners and, arguably, employees to Russia. If a company ignores data privacy requirements, it may be subject to several fines for various violations.

However, the legislative changes do not apply to cross-border data transfers. This fact provides certain loopholes for reorganisation of global ICT systems used by international companies. There will be no need to completely disconnect Russian offices or websites from the corporate networks. Keeping in mind that the amendments enter into legal force in less than five months, it is a good time to start assessing possible ways of modifying the ICT systems.

The strategic importance of oil has not prevented it from being an important commodity in international trade. Similarly, increased state interest in personal data is in no way an obstacle to continuing business. The importance of personal data for commercial actors is, indeed, one of the main factors that also make it interesting for any state.

In order to not let variable legislation affect your business in Russia, it’s better to consider possible options for complying with the new amendments and start preparations now.