With the March 2016 arrest of a Facebook executive in Brazil, however brief, related to local judicial authorities’ demand for the opening privacy information for an accused, various experts are now proposing the implementation of international treaties to resolve these data privacy disputes in a consistent basis while allowing governmental access to privacy data. However, that approach is easier said than done. Bilateral treaties cannot be ratified overnight. As a comparison, the United States has been negotiating tax treaties for many decades and has only executed 67 tax treaties so far, less than a third of available countries, in a planet with 196 nations.
And the Facebooks, Googles, and the Cloudera type companies cannot seem to acknowledge that digital data is easily conveyed across international borders. Once it crosses that invisible international boundary, that data becomes the province of other countries with their own laws and data policies. The senior executives coming from an engineering background cannot comprehend why should that data, that information, should be subjected to some other regulations outside of their domestic operations. But data is no different from a piece of furniture, farm produce or any other tangible product being moved across borders. (And what about the “physical presence” determination on data collection and transmission rules to warrant international tax exposure? — another important issue related to data collection and transmissions. Not germane here but will soon show its ugly head.)
Maybe another industry can help. Telecommunications, the far distant cousin to Internet networks, have had decades of experience in dealing with international operations, for a phone call is not much different than conveying data through satellites and fiber optic networks. Data uses the same network. These telecommunication carriers recognize the sovereignty of these countries and are able to negotiate some bilateral relationship to share revenues.
International treaties, on the other hand, are not simple agreements. Many lawyers, businesses, politicians, and lobbyists all get involved in the final version. I have sat through tax treaty discussion in Washington, D.C., and not one attorney at these meetings seems to be in a hurry to lock up these accords with time frames measured in years. Battles begin and demarcation lines are formed over a few words in a treaty that not even U.S. legal experts cannot understand. In the international tax world, one looks at bilateral double taxation, foreign direct investments, and multinational enterprises, which become the subject of nitpicking. Then, finally, Congress has to ratify that treaty to make the accord enforceable. Imagine what would happen to data and underlying information. Will the data be subjected to tax? It might well be. Can the local judicial warrants can access that data? That seems to have been the conclusion in Brazil. How long should that data be stored? And where can it be sent? – the subject of the Safe Harbor Treaty already undergoing transformation and continuous legal challenges. So I cannot envision that international data disputes will be resolved in my lifetime.
In my earlier blogs, I have hinted about the complexities of international transactions not normally encountered in the U.S. As General Counsel for a telecom company, I had to deal with daily issues regarding foreign operations, hiring foreign counsels, and coordinating with accountants and lawyers to mitigate tax exposures. Every day was a learning experience and every day I had to start again with a clean slate, expecting new issues. And all the time, my concern was my fiduciary duty to shareholders/investors so that my decision tree always sought to minimize all unnecessary expenses and improved the operating margins.
So the so-called experts expecting to begin a bunch of bilateral data treaties should be more realistic as to the time frame for completion. We are talking about decades just to ratify bilateral data treaties with developed and developing countries. And the high tech executives should be more realistic about the many legal and regulatory hurdles they will have to handle for the time being in view of the long disposition to treaty ratifications.