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What is data sovereignty and why does it matter now more than ever?

11 / 04 / 2024

Article by: Thomas Castermans

Understanding the nuances and intricacies of data sovereignty is key for businesses to ensure streamlined operations in the evolving digital landscape.

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In the ever-expanding digital landscape, the discourse around data and digital sovereignty has reached a fever pitch. As globalisation tightens connections between nations, the movement of data across borders sparks crucial conversations about who controls it and why it matters. Governments worldwide are introducing new regulatory frameworks that aim at ensuring digital autonomy and address the complexities of data management and the challenges posed by multinational corporations. Understanding the nuances and intricacies of data sovereignty is key for businesses to ensure streamlined operations amidst these changes. So, what exactly is this concept, and why is it so important for organisations navigating the digital age?

What is digital sovereignty?

Before exploring the meaning and impact of data sovereignty, it's essential to grasp a broader concept — digital sovereignty. Digital sovereignty pertains to a state's management and authority over the technology and services used within its borders. Its focus lies in safeguarding sensitive data and empowering businesses, institutions and individuals to maintain autonomy over their digital resources and information. In essence, it entails regulating the location, flow and ownership of data. 

Digital sovereignty unfolds along three primary dimensions:

  • Operational sovereignty: transparency and control over operational processes, aiming at preserving the accessibility and quality of data.
  • Software and hardware sovereignty: freedom to store and execute workloads wherever desired, optimising performance, flexibility and overall resilience. This involves the selection of cloud or on-premise hardware, network components, virtual hardware, data centre components, and more.
  • Data sovereignty: regulations and architectural frameworks essential for upholding some of the fundamental principles of digital sovereignty, such as data residency, autonomy and mobility.

Data sovereignty: a closer look

Data sovereignty addresses a spectrum of legal, privacy, security, and governance issues related to the storage, processing and transfer of data. While often used interchangeably, data residency, data localisation and data sovereignty each have a distinct meaning. Data data residency is the physical location of data; data localisation refers to the requirements put in place to ensure that data does not leave a designated jurisdiction; and data sovereignty encompasses the capacity to exercise control, make decisions and uphold legal and regulatory obligations regardless of the data's physical whereabouts.

Across different nations, data sovereignty regulations impose various constraints on data, with certain countries imposing restrictions on its transfer beyond their borders. Companies operating within defined legal boundaries may even find themselves legally barred from entrusting data to third-party cloud providers for storage or processing if their practices do not comply with local legislation. Furthermore, privacy laws in certain countries restrict the disclosure of personal data to external parties.

Key challenges and complexities

Governments worldwide are increasingly concerned about reliance on foreign cloud infrastructure providers, prompting various initiatives aimed at asserting digital sovereignty within national boundaries. According to UNCTAD statistics, approximately 71% of countries have enacted legislation to safeguard data and privacy, while 9% are in the process of drafting laws.

The jurisdictional complexities of data stored in cloud computing services compound compliance challenges for organisations. Hybrid-cloud strategies exacerbate these challenges, as each deployment must navigate distinct legal requirements regarding data security and privacy across various jurisdictions.

In the context of the cloud's shared responsibility model, there is a clear distinction between cloud users and providers regarding accountability for different aspects of deployment. Cloud providers manage services and infrastructure, while users are responsible for safeguarding data to ensure compliance with local laws — a fundamental aspect of data sovereignty. Organisations must understand that if their data fails to comply with local data jurisdiction laws, it remains their responsibility, not that of the cloud provider.

Here are two key challenges that data sovereignty poses for businesses in 2024:

  • Some countries mandate certain data types to be stored and processed within their borders, creating complications for entities with operations across multiple regions.
  • Ensuring compliance with local data protection regulations is becoming increasingly challenging, given the divergent regulatory landscapes across countries.

Enterprise data sovereignty — a rapidly developing trend

Today, many enterprises strive to establish data sovereignty within their own organisation, ensuring full ownership and preventing unauthorised data access. One of the main catalysts for this trend was the introduction of the 2018 US CLOUD Act, which raised privacy and security concerns for users of US cloud platforms. This legislation grants specific rights to US law enforcement, allowing them access to US companies’ and their clients’ data even if it is stored in a different country.

Another reason for the growing popularity of enterprise data sovereignty policies is the objective to achieve more autonomy in the way data is collected, processed, stored and transferred to minimise the risk of compliance slip-ups, data loss and reputational damages. Operating in a dynamic international geopolitical and socioeconomic environment requires increased caution and safeguards when dealing with sensitive data. At Valarian, we are observing a growing awareness among organisations regarding their data governance strategies. They are increasingly prioritising granular data access management, data localisation, encryption key ownership, as well as comprehensive data visibility and oversight. All of this to gain more control and sovereignty over their valuable digital assets and ensure business continuity in situations like security breaches, system outages and other critical disruptions.

As businesses and governments grapple with the realities of a hyper-connected world, the imperative to assert control over digital assets becomes undeniable. Beyond mere compliance, data sovereignty emerges as a cornerstone of trust, security and resilience in the digital era. By embracing full ownership and control over their data, organisations can not only safeguard their integrity and autonomy but also pave the way for a future where data flows freely, yet securely, fostering innovation and progress.