19:18, June 02 452 0 law.com

2017-06-02 19:18:05
4 Things Corporate Counsel Should Know About China’s Cybersecurity Law

Unlike the slow deployment and growing awareness surrounding the EU’s General Data Protection Regulation, China’s cybersecurity law has created some surprise. The law, which officially came into effect June 1, was crafted and passed at such relatively quick pace that many in the legal tech industry were unfamiliar with its existence in early 2017.

But apprehension over the law’s effects has grown as well, as many have begun understand its scope and provisions. Much concern has been expressed, for example, over the severe criminal penalties facing companies that fail to comply.

Dan Whitaker, managing director of Consilio’s China operations, told Legaltech News that “public surveillance, imprisonment, and the death penalty are all listed as possibilities for violating the state secrets provision of the Cybersecurity Law.”

Though there are many specifics of the law that still need to be determined by government agencies, there are a few areas corporate counsel should be familiar with in order to best protect and prepare their organizations:

1. The Law May Affect a Broad Range of Organizations

When first drafted, the majority of China’s cybersecurity law only affected what it deemed “critical information infrastructure operators” (CIIOs), which the law defines as including telecommunications and broadcasting companies, public service and critical infrastructure industries, military and government agencies, and large network and internet providers.

But the full extent of what else can constitute CIIOs is not yet entirely clear, given that they can refer to any company that handles or collect personally identifiable information and what the law vaguely terms as “important business information.”

“In terms of ‘important information,’ the thought is trade secrets, intellectual property or national security information, but the law does not make it clear,” said Everett Monroe, a data privacy and IP Attorney at Hanson Bridgett. He added that many are “waiting for additional interpretation by administrative agencies” on this point.

In April 2017, China also released “Draft Measures” to clarify the cybersecurity law, which expanded companies covered by the law to include “network operators” as well as CIIOs. Tiana Zhang, an attorney at Kirkland & Ellis’s Shanghai offices, told Legaltech News that this term is “broadly defined as any network owners, administrators, and network service providers.”

Monroe cautioned that the interpretation of what constitutes a network operator “is dependent on the administrative agencies, but the law can be read very broadly. [Network operators] really can be any anybody who is running a local network for their business.”

2. Each Covered Group Has its Specific Cybersecurity Responsibilities

Figuring out whether one is classified as a CIIO or network operator is pivotal given that each group has have different levels of cybersecurity obligations.

Network operators for example, “have to have a data security plan in place and really adopt what we in the U.S. and Europe would call technical organizational and administrative measures to protect the network,” Monroe said.

He added while this is not an unusual requirement for cybersecurity regulations, “what is different [with China’s law] is the amount of verbose detail the cybersecurity law goes into. [Network operators] are to adopt measures such as data classification and backup and consider the use of encryption, and things like that.”

In addition, CIIOs have to meet the same cybersecurity standards as well as additional obligations, such as creating an “incident response plan and coordinating with government agencies and other organizations to address issues of business continuity, systematic failure, leak containment and communication” after a cyberattack or breach, Monroe explained.

There is also the requirement for CIIOs that “any sort of device that are on the network, things like routers or switchers, have to be approved by some sort of security certification program or through a government agency,” he added. “The law does not make clear exactly which agencies or groups they are, but we assume that they would be state-certified groups.”

3. Certain Data Must be Kept In-Country, With Caveats

Under the cybersecurity law, Chinese citizens’ PII and “important business information” created and collected in the country must be stored on local servers. Such a requirement may force local and multinational companies to revamp their IT infrastructure and depend on local storage providers for assistance.

“China is a fan of the cloud—as long as it’s a Chinese cloud,” Whitaker told Legaltech News. “This means increased dependence on providers with a presence in China and experience in working in the market here. For enterprises, this means increased review of the types of data flowing in and out of the country.”

The data localization requirement, however, is not absolute. Companies can transfer data out of the country when necessary for business purposes, but must first conduct a security self-assessment to review if the transfer is in fact needed, if proper protections exist around the transfer, and the risk of data being breached, destroyed or leaked.

When data transfers meet certain criteria, such as those that exceed 1000 GBs, have the PPI of over 500,000 citizens, or contain information relating to national security or the security of a CIIO, a yet-to-be-defined government agency has to conduct its own security assessment before the transfer can proceed.

4. PII is Regulated Similar to Other Global Data Privacy Laws

China’s cybersecurity also law follows in the footsteps of the EU’s GDPR by mandating that companies must obtain the consent of Chinese citizens before collecting, handling or processing their PII.

“There are several restrictions on how the PII is used, how it is collected and making sure it is not misused,” Monroe said. “According to the law, if a user finds the data has been misused, the user can go back to that company and demand the deletion off their data. And if it’s inaccurate, they can demand the correction of that data as well.”

Copyright Legaltech News. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.