US-China fallout over Internet, data and regulation may raise legal issues for businesses, says DBS chief

DBS Bank chief executive Piyush Gupta (right) said the souring of relations has already started to split the internet into opposing camps. PHOTO: MINLAW

SINGAPORE - The ongoing stand-off between the United States and China over a range of issues threatens to upend the open and united nature of the internet and entangle banks and other firms in legal problems in the years ahead, noted DBS Bank chief executive Piyush Gupta.

Mr Gupta said the souring of relations has already started to split the Internet into opposing camps, while recent regulatory moves by China on data show signs of protectionist tendencies, he said on Wednesday (Sept 8).

"In the technology world, you are beginning to see a bit of a split Internet," he added.

"So you have the Alibaba and WeChat world, which runs on Huawei technology et cetera and you have a Western world or US-centric world of Facebook, Google, et cetera."

Mr Gupta, who was speaking at the UN Commission on International Trade Law (Uncitral) Academy, a two-day mostly online conference headlining the Singapore Convention Week, noted that more important and immediate challenges will emerge out of the splitting of legal frameworks of the two countries.

"So the US has a sanctions regime, for example, and they have come up with a whole bunch of sanctions protocols, including blacklisting individuals. At the same time, China has created a new set of laws essentially saying that if you participate in the US sanctions regime, then you are subject to legal action in China."

Mr Gupta said such opposing sets of legal and regulatory regimes mean commercial entities, especially banks, are likely to be caught in the middle of some difficult situations in years to come.

Legal issues may also emerge from data localisation and data nationalism.

"A lot of countries are beginning to recognise that data as a real and meaningful asset and as an asset category they want to try and ring-fence it to the extent possible - sometimes for security reasons and sometimes just for protectionism reasons and the infant industry argument and perhaps for privacy reasons as well."

He said the regulatory actions in China over the last several months reflect a rethink in the Chinese administration on the importance of data and the need to be able to corral and control it, not just within the borders of the country but in the hands of the state in some cases.

Other countries including India and Indonesia have also taken action on data ownership.

"This is a thorny issue because the truth is that it is not easy to corral and control data because data flows. The fact that the server lies in the country does not mean that the actual data cannot be replicated or cannot exist in alternate servers. I suspect this is going to throw up a lot of legal issues over time."

Mr Gupta said DBS customers are already asking questions about data localisation and infrastructure localisation, adding that privacy concerns and emerging regulations on digital trade of services may also become a source of litigation.

The issue of government regulation on technology companies was also raised by Ms Sunny Park, the assistant general counsel and Asia-Pacific regional director of corporate, external and legal affairs at Microsoft.

Ms Park noted at a separate session at the Uncitral event on Tuesday (Sept 7) that increased digital adoption has also heightened scrutiny over data privacy and cyber security and the risk is that governments may over-regulate and stifle innovation.

"We are seeing a lot of movement in terms of the regulations towards privacy, and companies are really struggling a bit in terms of various different regulatory compliance they have to work with," she said.

"Regulation needs to happen but it needs to have the right balance to make sure that innovation also happens," she said.

"If we have a heavy hand in regulating first before innovation happens, it could really block many of the enterprises that are trying to transform themselves."

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