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A lack of consistency over the way Asian regulators approach data privacy issues has led to a slow take-up of cloud services by businesses in the region, an expert has said.

Hong Kong-based outsourcing contracts expert Peter Bullock of Pinsent Masons, the law firm behind Out-Law.com, said that cloud providers are not offering business customers services that account for the fragmented regulatory approach to cross-border transfers of personal data.

Bullock said EU firms benefit from "a level of consistency" on how data privacy issues are dealt with by regulators in the trading bloc. "This is not the case across Asia Pacific," he said.

He added that companies selling cloud services in Asia have admitted that it has been difficult to demonstrate that the use of cloud in outsourcing arrangements leads to "demonstrable cost savings".

At a recent roundtable event hosted by Pinsent Masons, business executives said that because Asian firms are used to sweating their assets there is often less scope for cost savings to be made by switching to cloud solutions.

Bullock said that another underlying concern of Asian businesses in using cloud services is the "fragmentary nature" of the regulatory regime in operation across the region on the issue of cross-border personal data transfers.

"Most of the data protecting nations of Asia, do not have a good track record in regulating data flows across their borders," Bullock said. "Hong Kong, for instance, enacted a law requiring adequate provision for the protection of personal data leaving its shores in 1996, but to this day the provision has still not been brought into force."

Other jurisdictions, including Indonesia and Thailand, each with vast populations and burgeoning telecommunications and social media networks, currently have no data protection law whatsoever, he said.

"It is therefore left to businesses to regulate this themselves in their own best interests and with one eye on the relevant regulators, who may be in the EU or US," he added.

Current EU data protection laws prevent companies sending personal data outside of the European Economic Area (EEA) except where adequate protections have been put in place or in circumstances where the destination country has been pre-approved as having adequate data protection.

Only a handful of countries, including Argentina, Canada and Switzerland, have qualified as having adequate protection. The EEA includes all 27 EU member states, Iceland, Norway and Liechtenstein.

There are a number of legal mechanisms that firms within the EU can put in place to meet the adequacy standards, such as agreeing "binding corporate rules" (BCRs) with regulators to govern the international transfer for personal data, or by using model clauses within outsourcing contracts to compel non-EEA data processors to abide by EU data protection standards.

Bullock said that BCRs have "yet to catch on in the Asia-Pacific region". He said that although the issue of BCRs is approached very differently by businesses in the EU, those firms benefit from "a level of consistency" on how data privacy issues are dealt with by regulators in the trading bloc. "This is not the case across Asia Pacific," he said.

"Each jurisdiction has its own laws, often produced in response to local sensitivities – culture, political, or sometimes simply down to market behaviours and who has got caught doing what, and when," Bullock said. "This does not make it easy to plan a region-wide approach to data privacy compliance."

"Also, the regulators are much less experienced than their EU counterparts and whilst this makes some of them less interventionist, it also means that they are often less predictable than their western equivalents.

"This all goes to uncertainty of the risk profile for data protection in individual jurisdictions. Cloud providers do not seem to be sensitive to these difficulties and shortcomings," he added.

Copyright © 2013, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

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