Don't Fence Me In: Reforming Trade and Investment Law to Better Facilitate Cross-Border Data Transfer

By Mitchell, Andrew D.; Hepburn, Jarrod | Yale Journal of Law & Technology, Annual 2017 | Go to article overview

Don't Fence Me In: Reforming Trade and Investment Law to Better Facilitate Cross-Border Data Transfer


Mitchell, Andrew D., Hepburn, Jarrod, Yale Journal of Law & Technology


Table of Contents  I Introduction II Restrictions on Cross-Border Data Transfers and their Underlying Rationales   A Storing Data Locally to Protect National Security   B Preventing Access to Certain Online Content to   Protect Public Morals or Public Order   C Data Transfer Restrictions to Protect Privacy: EU   US Safe Harbor and Privacy Shield III Data Flows under International Trade Law   A Uncertain Application of WTO Law to Restrictions   on Cross-Border Data Transfer     1 Problematic Classification under GATS: Mode of Supply     and Sector     2 Most-Favored-Nation Treatment (GATS Art II):     Preferential Treatment     3 Domestic Regulation (GATS Art VI): Burdensome     Privacy-Based Requirements     4 Market Access (GATS Art XVI): The Problem of Zero     Quotas     5 General Exceptions (GATS Art XIV): Central to WTO-     Consistency     6 National Security Exceptions (GATS Art XIVbis):     Limited Relevance     7 Conclusion   B Remaining Gaps in TPP Provisions on Cross-Border   Data Transfer     1 Scope of Chapter 14 and Underlying Rationale     2 Parties Shall Allow Cross-Border Data Transfer (TPP Art     14.11)     3 Parties Shall Not Require Local Computing Facilities     (TPP Art 14.13)     4 Exclusion of Financial Institutions from TPP Arts 14.11     and 14.13     5 Legal Framework for Protecting Personal Information     (TPP Art 14.8)     6 Conclusion   C Developments in TTIP and TiSA: EU Position   Precludes Data Flow Provisions IV Data Flows under International Investment Law   A Threshold Requirements: Complicated But Likely   Met     1 Existence of an 'Investment' under the ICSID Convention     and the IIA     2 Investment "in the Territory of the Host State"   B Core Obligations: No Obvious Breach But Case-Dependent     1 No Indirect Expropriation     2 Fair and Equitable Treatment     3 Non-Discrimination   C Key Exceptions     1 General Exceptions: More Restricted Than in the Trade     Context     2 Exceptions for National Security: Rare and Uncertain     Application to Data Transfer     3 The Customary Defense of Necessity: A High Threshold   D Specific Rules on Data Transfer in the TPP:   Inapplicable V Reforming Trade and Investment Law to Facilitate Data Transfers: Normative Issues and Policy Options   A Internal Engagement: Creating Synergies in Trade   and Investment Disciplines   B External Engagement: Achieving Coherence with   Other Disciplines VI Conclusion 

I Introduction

The unprecedented growth of digital information has resulted in the expansion of new-age business models that rely on the ability to collect, aggregate, process, and transfer information across borders via the Internet to generate revenues and new business opportunities. (1) The rapid development of the Internet as a business platform has thus led to significant increases in international trade, (2) innovation, (3) and business productivity, as data transfer capabilities help reduce transaction costs and enhance real-time resource management. (4) Importantly, cross-border data flows add value not only to services and e-commerce industries, but also to manufacturing. A study by McKinsey Global Institute in 2011 found that 75% of the value added by the Internet goes to the traditional manufacturing sector. (5) Another study by the McKinsey Global Institute in 2016 estimated that all forms of global flows (such as goods, services and capital flows) increased global GDP by at least 10% (which amounted to USD 7.8 trillion), of which Internet data flows made up USD 2.8 trillion. (6) These figures highlight the broad economic potential of the Internet as a business platform for many aspects of international trade and foreign investment. (7)

Although international data transfer assists both businesses and consumers, while generating benefits for the economy at large, several countries (both developing and developed) have imposed restrictions on the cross-border flow of data. (8) The proffered justifications for such restrictions include policy concerns like safeguarding privacy and security, (9) but digital protectionism may also be at play, (10) entailing for example the promotion of the local information and communications technology industry either directly by providing preferential treatment in government procurement to domestic cloud computing companies, or indirectly by coercing foreign companies to locate their servers domestically. …

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