Data residency compliance requirements present a significant issue for legal departments and other organizations, especially in a globalized economy. Today, businesses span international borders, and corporate legal departments must collect data to manage their relationships and the contracts they enter. However, data residency requirements complicate data collection because they change based on the locale of corporate branches and headquarters.
Attorneys cannot apply a single data residency standard. Instead, they must manage each client relationship based on the laws that govern their territory. Familiarizing oneself with the most common requirements is the first step. The next is to leverage the right technology, like software-as-a-service cloud products and artificial intelligence, to ensure compliance with these requirements.
Understanding Data Residency Requirements by Country
Data residency requirements relate to where the information garnered from clients must be stored. In some cases, servers storing data must reside in the resident's geographical location. In others, data itself must remain inside a country's borders. Management can be very tricky when handling international business. Here are some of the most common data residency requirements businesses will encounter.
Australia |
Canada |
China |
European Union |
India |
|
Businesses must know where data is stored and if the third party is compliant with rules established under Australian Privacy Principles. Health records have much higher protective burdens than other kinds of information. |
Only British Columbia and Nova Scotia have strict data residency requirements in place. Ontario has limited restrictions related to the storage and transmission of personal health information. |
China's data residency restrictions are among the most stringent in the world, especially regarding financial information. This personal data must remain on servers in the country and, in some cases, cannot be transmitted out. |
Data residency requirements are covered under the General Data Protection Regulation law. It does not specify any particular data locations, though a supplement is likely in the future. Both France and Germany have some additional limits. |
While India has no specific laws in place, it is crucial to stay up to date on this country as they continue to push through the Personal Data Protection Bill. This bill would be similar to the GDPR and would provide additional protections— including the framework for future data residency laws. |
Indonesia |
Russia |
South Korea |
United Arab Emirates |
Vietnam |
|
There are no strict laws in place that impact all businesses. However, companies that offer public services must keep their data centers within the country's geographical borders. |
Any company involved in the collection, processing, and storage of Russian citizen data must keep this information on servers located in the country. They may use third parties, provided those third parties keep their data storage in Russia. |
South Korean privacy laws are covered under the Personal Information Protection Act 2011. Data residency requirements apply specifically to geospatial and map data as opposed to residents. |
Rules related to data residency can vary by region and business type. Restricted records are typically associated with criminal and penal records, medical information, and electronic payments. |
Vietnam data residency regulations can be extremely confusing because there's no single act. The regulations are spread out among a series of rules related to specific industries like e-transactions, cybersecurity, consumer rights, and more. |
It may surprise many that the U.S. is not included in the above table. That is because the U.S. does not have a single, centralized data privacy law at the federal level. As such, there's no single data residency law either. However, a U.S. firm doing business in another country will have to comply with local data residency requirements.
Ensuring Compliance With Technology
Contracts that cross borders must recognize data residency requirements, but this can be challenging when dealing with multinational companies and parties where data laws can differ significantly. The first step to ensure compliance is to establish the correct contractual language.
AI-powered contract review can assist in this process by redlining proposed contracts and making suggestions that ensure all language is in line with required laws. It could, for example, highlight an area where European Union protection should be mentioned and then suggest contract addendums to ensure compliance.
Cloud services represent another necessary tool. Companies can ensure compliance with their various regulations by working with a software-as-a-service provider to guarantee the proper storage standards within geographic borders. This can be a simple process when compared to the actual management of contracts, as it's a service provided by the SaaS vendor. These companies will maintain various data centers around the world to hold and manage specific data residency requirements.
One of the most significant issues with data residency requirements isn't complying with them; it's identifying that they are needed in the first place. Artificial intelligence in the legal sector can help legal departments keep track of these situations and ensure the correct data residency requirements are reflected in contracts.
Learn how LexCheck applies AI for data residency requirements in contract management across borders. Request a demo or contact us at sales@lexcheck.com for more information.