The European Commission is further developing its Digital Single Market strategy. The strategy envisions to (i) provide better access to digital goods, (ii) create a good environment for digital networks and innovative services, (iii) maximise growth of a European Digital Economy. Earlier this month, the Commission published its Inception Impact Assessment titled ‘European free flow of data initiative within the Digital Single Market, which reiterates the detriment to the Digital Economy when data is required to stay local. The European Free Flow of Data Initiative is a key component of the Digital Single Market strategy which complements other actions of the Commission exampled by the launch of a European Cloud Initiative. The European Free Flow of Data Initiative will impact sectors like the health sector, the financial sector but as well the legal sector.

The Inception Impact Assessment follows a web-based public consultation on the regulatory environment for data and cloud computing which was concluded at the beginning of January 2016. The public consultation highlighted the need to address data location restrictions, legal and technical restrictions to the free flow of data. It also highlighted the need to create new frameworks for ‘data liability’ and to provide guidance on merging issues around data access and associated mechanisms, data ownership, data usage, and data transfers. After the public consultation, a consultation workshop specified to the free flow of data was held to further focus on these issues.

Aside from the legal uncertainty of emerging concepts which are currently often constructed by contractual means, the Inception Impact Assessment details four problem drivers for the free movement of data:

  • Problem 1: Diverging data location restrictions and approach in the Member States,.
  • Problem 2: Unjustified or disproportionate data location restrictions in specific sectors or situations.
  • Problem 3: The lack of European defined standards and practices on network, information security, prevention and investigation is causing data location restrictions.
  • Problem 4: Commercial users apply self-imposed data location restrictions in light of legal uncertainty and the lack of transparent requirements.

The Commission report indicates that the focus of the regulatory intervention is directed at tackling data location restrictions and that emerging issues will only be dealt with in a Communication at this point.

Although it is still an open question if intervention would be preferred under a legislative instrument or if soft-law approaches are recommended to reduce data location restrictions, it is clear that – when mapping the options for the European Commission to take action – data location restrictions, fragmentation and weakness in sectoral policies would remain in existence without EU action.

The Inception Impact Assessment only announces the very start of the Commission’s decision-making process which will be followed by a legislative proposal and an accompanying Impact Assessment. In the meantime the Inception Impact Assessment remains open for feedback.