What is data sovereignty?

Data sovereignty refers to the principle that data generated or collected within a specific country is subject to the laws of that location. That includes almost all data types, such as personal information, financial records, or intellectual property.

This concept operates through many different privacy regulations. Some aim to ensure data physically stays within the jurisdiction in which it’s created. Others seek to guarantee the same legal protections will apply to data generated in one location but stored in another.

How does sovereignty impact data privacy and security?

Notably, sovereignty is intrinsically linked to data privacy. Why? Because it ensures that data is governed by the jurisdictional rules of the nation in which it resides and where its users are citizens. This means organizations must adhere to local data privacy laws, which often include restrictions for:

• Data collection
• Data processing
• Data sharing
• Data storage
• Data access
• Data governance

Sovereignty also has a significant impact on data security. Privacy laws typically emphasize data protection, mandating robust security measures – encryption, access control, continuous monitoring, and more. That means foreign organizations are subject to local regulation if they handle data that originates within the legal jurisdiction.

Example: The General Data Protection Regulation (GDPR)

The General Data Protection Regulation is often considered the world’s most comprehensive data privacy law. Any entity that processes the personal data of individuals within the European Union (EU), regardless of where the organization is based, must comply with the GDPR.

For example, imagine a multinational cloud service provider based in the United States but operating in France. According to the GDPR’s data sovereignty requirements, this company must comply with the following rules, among others:

• Data collection: The cloud provider must obtain explicit consent before collecting or processing any EU citizen’s personal data.
• Data storage: The company must store citizens’ personal information in a data center within the EU.
• Data access: It must implement strict access control mechanisms to mitigate the risk of a data breach. Likewise, citizens should be able to exercise their privacy rights, such as accessing their data, correcting inaccuracies, and requesting deletion of their personal information.

On top of these laws, the same cloud service provider is also subject to regulations in any other location where it processes personal information.

Example: The California Consumer Privacy Act (CCPA)

The CCPA and its successor – the California Privacy Rights Act (CPRA) – are the two most significant data sovereignty laws in the U.S. Generally, it applies to businesses that collect personal data from California residents and meet specific revenue thresholds.

Let’s say an e-commerce company based in France serves Californian consumers. Under the CCPA’s data privacy requirements, this business must comply with its regulations, including:

• Data collection: The business must inform residents before or at the point of data collection about the categories of personal information it’s collecting.
• Data sharing: It also must give consumers a clear and conspicuous link on its website allowing them to opt out of the sale of their data.
• Data access: The company must give residents access to all personal information collected over the past 12 months.

Notably, this French business is also subject to the GDPR if it processes personal data for EU citizens. This creates a complex and often conflicting entanglement of regulatory compliance requirements.

Data sovereignty vs. data localization vs. data residency

Data localization and data residency are related but distinct concepts underneath the overarching sovereignty umbrella. Let’s break down the key differences:

1. Data sovereignty: A legal principle stipulating that data is subject to the laws of the country where it’s collected. Sovereignty focuses on jurisdictional control and compliance with local privacy regulations.
2. Data localization: A data storage practice in which organizations keep data within the physical boundaries of where it originates. This helps enforce and maintain compliance with data sovereignty laws. For instance, data localization is often used to ensure sensitive information – like banking details or medical records – is protected by local regulation.
3. Data residency: Refers to the exact physical location where data is stored, typically involving data center infrastructure. Organizations choose data residency options based on regulatory compliance, latency, and disaster recovery needs. A data center in one country may make more logistical and legal sense than storing information elsewhere.

In summary, sovereignty encompasses both related concepts. But, organizations must consider all three when managing data flows and navigating regulations.

Data sovereignty is important for national security because it allows governments to regulate the storage and processing of sensitive data, and to restrict the transfer of certain types of data across borders. This can help prevent security breaches and unauthorized access by foreign entities.

Simultaneously, consumers are growing increasingly conscious of how organizations handle their personal data. A 2023 survey found that 68% of people globally are either somewhat or very concerned about online privacy. As concerns rise, it’s more necessary than ever for enterprises to transparently and appropriately enact data governance – especially as new regulations raise the stakes for regulatory compliance.

Benefits of proper data sovereignty

Organizations that understand and properly adhere to data sovereignty requirements ultimately benefit in several ways:

• Stronger compliance: Failure to comply with regulations can have significant consequences, including hefty fines and criminal penalties. Violating the GDPR, for instance, can incur fees up to €20 million or 4% of global turnover, whichever is higher. Sovereignty compels effective data governance, which can help minimize legal risks.
• Better data security: Sovereignty allows businesses to maintain control over their sensitive data, ensuring it’s safe from unauthorized access. Local data storage practices improve oversight and enhance access management, encryption, and other security measures. Plus, by concentrating resources within a particular jurisdiction, incident response processes happen faster and can be tailored to the applicable legal framework.
• Increased customer trust: Demonstrating a commitment to customer data protection can build trust among target audiences. Not only does this strengthen customer relationships, but it also gains a competitive edge over companies with lackluster security postures.
• Greater business continuity: Principles like data residency ensure enterprises can access sensitive data if a disaster or disruption occurs. Keeping information within a particular jurisdiction makes it easier to bring key services back online and complete recovery.

Achieving sovereignty is easier said than done. Along the way, you may encounter several daunting obstacles:

1. Complex regulations
   Sovereignty becomes exponentially more difficult as you expand into multiple jurisdictions. If you’re a multinational corporation, you must understand how each operational location’s laws intersect, overlap, and diverge.
   Additionally, some regulations may conflict with others, especially when data moves across borders. This creates legal uncertainty and confusion, which could increase the risk of non-compliance.
   To complicate matters, data privacy regulations are changing all the time. Businesses must stay updated on the latest developments and changes to adapt their practices accordingly.
2. Cloud computing
   The borderless nature of cloud computing can create a problem for multinational companies. Cloud services are often dispersed across multiple countries with different regulations. For example, some jurisdictions may limit your choice of cloud provider by restricting where data can be processed or stored.
3. Infrastructure costs
   Data sovereignty can come at a high cost. For instance, you may need to establish and maintain new data centers to accommodate another country’s data localization requirements. You may also have to upgrade your data security posture with new baseline protections.

Eventually, the ongoing cost of infrastructure, maintenance, and compliance can add up to a big sum. For smaller organizations, these factors may be prohibitively expensive.

Worried about overcoming these challenges? Here are some steps you can take to start your data sovereignty journey on the right foot:

Conduct a data audit

Knowing where your data is collected, stored, processed, and transmitted is essential to maintaining compliance. After all, you can’t adhere to regulations if you don’t understand which ones apply to your business. Conduct an audit and map cross-border data flows to identify your relevant jurisdictions.

Understand your compliance landscape

It’s also important to thoroughly research and comprehend the exact data privacy laws in each country where you operate. This includes understanding specific requirements for data collection, storage, processing, etc.

Consulting with legal experts or hiring a compliance officer with expertise in international data protection laws can help navigate these complexities. This foundational knowledge is crucial for developing effective data management strategies that align with local legal frameworks.

Use local data centers

A data center may be expensive, but it can help you comply with data localization requirements. This ensures information remains within reach of the local authorities.

For multinational companies, this might involve setting up multiple data centers in different regions, which can be coordinated through a hybrid cloud approach to balance local compliance with operational efficiency.

Implement data governance policies

Developing and implementing comprehensive data governance policies is essential for ensuring data sovereignty. These policies should outline procedures for data management, including data classification, access controls, data handling protocols, and compliance monitoring.

Establish an oversight framework that assigns clear responsibilities for data protection and compliance. Regularly review and update these policies to adapt to changing regulations and business needs, ensuring all aspects are compliant and secure.

Leverage the right solutions

Advanced data security capabilities can help you meet data sovereignty requirements more effectively. A robust identity and access management (IAM) platform can offer several control mechanisms, such as multi-factor authentication (MFA) and risk-based adaptive authentication, to restrict data access to authorized personnel only.

From encryption and authentication to hardware security modules (HSMs) and public key infrastructure (PKI), Entrust provides a whole suite of solutions to help you meet your many compliance requirements.