Legal risks of hosting data offshore highlighted

Compliance and cost the major risk factors with offshore Cloud providers

Australian Cloud providers have been given a boost following warnings from a legal expert on the risks associated with hosting data offshore.

Connie Carnabuci, a partner of law firm Freshfields Bruckhaus Deringer said data stored offshore remained subject to the laws of the country in which it is stored, requiring local customers to submit to a US court, for example, in the event of litigation.

“Hosting data in the US can also make domestic legal and regulatory compliance difficult because it has no national privacy regime that is similar to the Australian National Privacy Principles,” Carnabuci said.

As a result, if a company hosts data in the US, it will need to ensure that data will not be used in a way that is inconsistent with the National Privacy Principles.

Carnabuci added that another risk associated with offshore data hosting was that US government agencies often had greater powers than domestic agencies to access private data for national security reasons due to the US Patriot Act.

“There is also a mutual agreement between the US and Australian governments giving law enforcement agencies in both countries the right to access data,” she said.

Carnabuci's comments follow the release of a whitepaper, The Cloud and US Cross-Border Risks, sponsored by Macquarie Telecom, into the legal risks of hosting data offshore.

Macquarie Telecom regulatory and government national executive, Matt Healy, said that when companies assess where to host data it should take these risks into account.

“It may be better for the company to go into Cloud computing via an onshore arrangement where the controls and arrangements are more transparent. They will also fit with existing Australian laws,” he said.

Healey said there was the potential for Australia to become a global go to place for Cloud hosting.

“If we get our privacy issues in order and the National Broadband Network (NBN) goes ahead, these things can come together.”

Frost and Sullivan ICT practice research director, Arun Chandrasekaran, agreed that Australia has the potential to become a Cloud computing hub similar to Hong Kong once the NBN is rolled out.

“When Amazon set up its first data centre in Asia Pacific, they chose Singapore because of its strong legal system and fibre connectivity,” he said.

However, he said Australian Cloud providers would do better to target local companies first rather than diving into offshoring as many countries, such as those in the European Union, have complex data hosting laws.

“In my opinion, the rollout of the NBN will increase adoption of cloud based services in Australia and that can only be a good thing,” he said.

The whitepaper follows the release by the Australian Government of a draft strategy paper on Cloud adoption by government agencies. The paper aims to educate agencies about the Cloud delivery model.

Follow Hamish Barwick on Twitter: @HamishBarwick

Follow Computerworld Australia on Twitter: @ComputerworldAU

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