Data Sovereignty: Definition, Requirements and How to Ensure It

Massive amounts of data are generated globally every second, making their wrongful use and distribution across the digital landscape inevitable. As a result, it can be difficult to manage business-critical data. In addition, the widespread adoption of cloud computing services along with new data storage approaches have eroded the geopolitical barriers significantly.

This has resulted in a surge of uneasiness among data regulators round the globe concerning data privacy and security. The rise of recent high-profile data breaches and cyberattacks have propelled governments to take extra measures to prevent citizens from falling victim to these threats that are not limited by countries, regions or borders. This is where the concept of data sovereignty becomes crucial.

In this blog, we’ll dive deep into the notion of data sovereignty, understand its significance, benefits and challenges, explore the concept of data sovereignty as it relates to cloud computing and SaaS applications, and see how Spanning Backup can effectively tackle the issue of data sovereignty for your critical cloud-resident data.

What is data sovereignty?

Data sovereignty refers to the idea that the data collected, stored or processed by an organization is under the jurisdiction of the nation where it’s collected. In simple terms, the government can regulate how the data originating within its territory gets collected, stored, processed and distributed.

This means a business has to store the personal data of its customers in a way that complies with the data privacy regulations and guidelines of the host country. Failing to do so can result in heavy fines or forcing the company to fulfill the requirements in another way.

Why is data sovereignty important?

As more and more data gets generated and collected via various channels, such as ecommerce, mobile devices and social media, there is a high chance of chaos and confusion when safeguarding this massive pile of digital information. Bad actors can quickly take advantage of this confusion to wreak havoc. With an evolving presence in laws and regulations across countries, nations and states, data sovereignty ensures sensitive data, like personal information or trade secrets, aren’t easily abused by cybercriminals. It also helps businesses access their data in the event of a disaster or disruption. Keeping data within their jurisdiction allows businesses to recover it quickly when needed.

Data sovereignty can also provide a competitive advantage to companies willing to comply with local regulations. This demonstrates a commitment to protecting customer data, building trust with customers and gaining an edge over those who disregard data security.

How does data sovereignty work?

Data sovereignty is the concept that data is subject to the jurisdiction of the nation where it’s collected, not the law or regulation itself. So, a business based in the U.S. will still have to comply with the General Data Protection Regulation (GDPR) of the European Union (EU), along with any other local law, if customer data is collected from France.

If the same company collects data from Canada, it must comply with Canadian data sovereignty laws. Therefore, organizations operating across international borders in terms of data collection and processing face a higher degree of complexity while dealing with data.

What is an example of data sovereignty?

Today, the data sovereignty landscape is complex, with multiple legislative bodies touching this area. One such prominent institution is the Australian Privacy Principles (APPs), which govern how a business deals with and stores personal data. According to this set of principles, personal data kept in Australia must meet the 13 standards specified by APP, including how to use and collect data and a person’s right to access the data.

Another such institution, the Canadian Consumer Privacy Protection Act (CCPPA) provides control of the data to the customers and is very transparent about how an organization uses data containing personal identifiers.

So, when it comes to data protection, things can get complicated quickly. Private users and companies using cloud services and external servers are often unaware of their role in the ownership of the data. This is where data sovereignty comes into play.

What is the difference between data sovereignty and data residency?

Data sovereignty often gets confused with “data residency,” particularly by organizations managing cross-border data flows. Although both are part of the same basic concept, it’s crucial to know the differences between them and how they impact the organization’s data and business operations.

Data residency refers to the physical location where a company decides to store its data. Data residency requirements are mainly because of policy- or regulation-related reasons. One such scenario of regulation-related data residency requirements is when businesses store data in a specific country because of tax advantages. To leverage the tax advantage, the businesses ensure they do most of their operations within the nation’s borders. That’s why data is stored in a geographical location within the borders. Whereas data sovereignty refers to designating the geographical location where data is stored and being the subject of that nation’s law.

While data residency ensures data stays within the specific geographical boundary, data sovereignty sees that the information is subject to the jurisdiction and legal protection of the country where it’s physically stored.

Then comes the idea of data localization, which involves ensuring certain types of data get stored and processed within a particular country.

In a nutshell, data sovereignty is a broad term comprising data localization and data residency. From a business perspective, all three concepts should be considered when managing data.

What are the benefits of data sovereignty?

Data sovereignty can be instrumental in stimulating the digital economy and provide multiple benefits such as:

• Individuals can easily switch providers, enabling their data to be commercialized by businesses.
• Companies can trade more securely, easily and cost-effectively with other organizations.
• There will be more digital competition since customers are no longer locked in with their data.
• Faster commercial innovation is encouraged.

From an ethical perspective, data sovereignty is also crucial because companies must respect their customers’ data and its privacy and sensitivity.

What is the problem with data sovereignty?

Data sovereignty law/requirements differ from place to place, making it difficult to understand and navigate. Here are some of the challenges related to achieving compliance:

• Relatively new kid on the block — Data sovereignty is a new concept and does carry a bit of uncertainty with staying intact. Laws tend to evolve quickly since countries make changes in policies. So, changes in legal frameworks and geopolitical situations can impact data sovereignty requirements, making the environment challenging for businesses.
• Cross-border data flows — For businesses who want to expand beyond their borders, things become more complicated. There’s an increase in the cost and complexity of handling data since it becomes difficult to determine which data sovereignty laws the business should abide by.
• Operational costs — Data sovereignty laws can result in higher operational costs. For example, it might be necessary to change the way of collecting, storing and processing data to ensure all the relevant rules and regulations are accommodated. Companies might have to make repeated changes to this to maintain compliance as the laws are rapidly evolving. This can increase the cost heavily.
• Data mobility — Data mobility can be affected by data sovereignty laws. It can restrict how a business moves its data from one point to another. It also means that specific cloud locations and services cannot be used. Even certain forms of encryption and security arrangements will not be permitted.
• Cybersecurity risks — To prove compliance with data sovereignty laws, organizations need to mention in detail how they handle clients’ sensitive data. This can be exploited by cybercriminals to target and compromise data, resulting in severe financial and reputational consequences.
• Software-as-a-Service (SaaS) and cloud infrastructure — SaaS and cloud services are often distributed in multiple locations, making data sovereignty an issue. The challenge depends on where the provider is based and where and how it will be collecting, storing and processing the data.

What are the requirements for data sovereignty?

With more than 100 countries now enforcing laws related to data sovereignty, things are bound to get complicated. Balancing the protection of corporate data, personal data and a strong market position will be difficult. That’s why understanding the legal frameworks — consisting of both individual contract agreements between clients and service providers as well as national and international data protection regulations — is essential. This allows users to be aware of how their personal data gets processed. Simultaneously, the analysis of user data is also crucial.

Thorough knowledge of how and where the data gets stored is a primary consideration of data sovereignty. It helps to understand the region where data is stored and the regulatory requirements of that region.

When the data is in transit, the following considerations can come in handy:

• The type of data typically transferred
• From where to where the data gets transferred
• How often does the data get transferred between geographical regions

Being aware of the source and destination region helps determine any legal issues and adjust data flow accordingly to comply with the appropriate legal jurisdiction. Also, there should be a privacy policy that will transparently communicate the measures taken to securely process data.

Does the U.S. have data sovereignty laws?

The U.S. data security measures are far behind those of European counterparts. Although the federal laws in the U.S. do little to protect their citizens from data misuse, certain states have started implementing laws of their own, regulating the handling of data.

California was the first state to pass a data privacy law modeled after the European GDPR. As per GDPR, any company collecting or processing the personal data of EU citizens must store the data within the EU or somewhere with similar levels of data protection. The California Consumer Privacy Act (CCPA) takes a cue from this framework.

One of the most common laws related to data sovereignty in the U.S. is the U.S. Patriot Act, according to which the American government has the authority to access data physically stored within the country, regardless of its origins. This means a European citizen’s data is exposed to the U.S. government if the information is physically stored within the U.S. borders.

In June 2022, the U.S. House of Representatives Committee on Energy and Commerce voted in favor of the American Data and Privacy Protection Act (ADPPA) that would provide federal protection of personal data. However, it’s yet to be implemented as it still needs approval from higher authorities.

What is data sovereignty in the cloud?

Many countries have limitations on data transmission outside their borders, whereas many have privacy laws restricting the disclosure of personal data to third parties. So, companies conducting business in these countries could be prohibited from transferring or sending data to third-party cloud providers for storage or processing.

Data stored by the companies in the cloud might come under the jurisdiction of more than one countries’ law. So, there will be different legal requirements regarding data security, privacy and breach notification. This is even more complicated for companies using hybrid cloud strategies, where each cloud deployment must adhere to separate, local legal requirements — an extra layer of confusion to an already challenging concept.

Therefore, companies using cloud infrastructure must address data sovereignty concerns holistically by incorporating every department in risk management and governance processes.

When it comes to the three major cloud providers, let’s see how each of them tackles this issue:

• In the case of Microsoft Cloud Infrastructure, data sovereignty revolves around how Microsoft manages and restricts access to customer data, including legal policies for government and law enforcement requests for data.
• Google Cloud has come up with Digital Sovereignty Explorer, which is designed to take individuals through a set of questions about their organizations’ data sovereignty requirements.
• One of the easiest ways to address this issue is to implement a Cloud Data Protection Gateway. When deployed with a specific form of Salesforce Tokenization technology, it allows sensitive data to stay physically on-site and only sends replacement values to the Salesforce Cloud.

How do you ensure data sovereignty in the cloud?

Implementing cloud data sovereignty best practices can help simplify this challenging concept. At the same time, companies need to be aware of the legal and regulatory environment while maintaining full compliance.

Keeping things simple

When dealing with such a complex set of laws, rules and regulations, it’s crucial to simplify. Organizations can uniformly implement measures that comply with the strongest data protection laws. This includes conducting a comprehensive audit of their data and staying up to date with changes in data protection laws and regulations in the countries they operate.

Keeping track of backups

Data sovereignty applies to backup as well. So, understanding how an organization backs up its data is important — on-premises, using public cloud services like Amazon S3 or dedicated cloud services like Dropbox or Google Drive. Evaluation of these backup options ensures they align with the respective region’s data sovereignty requirements.

Using cloud providers with data residency options

Organizations can safely rely on major cloud providers like AWS and Microsoft for data sovereignty compliance. Many of these providers operate in-country data centers and come with various other features, including data encryption and security services, ultimately helping customers achieve compliance with local data laws.

Blindly relying on cloud providers for compliance is not an ideal option. Opting for a third-party cloud provider that ensures the data is stored and processed in specific regions or jurisdictions is necessary.

Ensure data protection and sovereignty in the cloud with Spanning Backup

At Spanning, we take the security, privacy and compliance of our customers seriously. We enable organizations and industries to adhere to data sovereignty and compliance by simplifying the process of encryption and data access. Our recently launched data center in Canada is an effort to enable Canada-based organizations to store backups in-country. With this launch, Spanning now supports four global regions: the U.S., Europe (Dublin), APAC (Australia) and Canada.

To ensure foolproof data protection, Spanning Backup for Microsoft 365, Google Workspace and Salesforce fill the gaps in native functionality and protect critical data from common causes of data loss. It automates backup and recovery, making it easier for organizations to track backups and evaluate the backup options efficiently.

Request a demo today to find out why Spanning is the leading cloud-to-cloud backup solution for SaaS application data.