This On the Subject outlines why hospitals and financial services and communications companies should pay attention to the recent executive order entitled “Improving Critical Infrastructure Cybersecurity.”

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On February 12, 2013, shortly before he delivered his annual State of the Union address, President Obama signed an executive order entitled “Improving Critical Infrastructure Cybersecurity.”  Anyone who believes this executive order answers the most important questions regarding its implementation vis-à-vis private-sector entities is mistaken.  In many ways, the executive order raises more questions than it answers:  How precisely will the administration designate “critical infrastructure”?  Will the administration cast a wide or narrow net?  Will participation in the Critical Infrastructure Cybersecurity Program truly be “voluntary”?  Or, as some suggest, will private-sector entities that choose not to participate in such a program be susceptible to a “name and shame” process by the federal government?

The one thing that is certainly clear from the executive order is that it is not the last word in the area of cybersecurity.  In fact, the executive order explicitly invites Congress to pass cybersecurity legislation that could affect a wide range of industries.  And, not to be outdone, Congress is already considering cybersecurity legislation, which is described more fully below. 

“I Run a Hospital/Financial Services Company/IT Company.  Are We Critical Infrastructure?”

Under the administration’s executive order, the answer to this question is “yes, maybe.”  Section 9 (Identification of Critical Infrastructure at Greatest Risk) directs the secretary of the U.S. Department of Homeland Security (DHS) within 150 days of the executive order “to use a risk-based approach to identify critical infrastructure where a cybersecurity incident could reasonably result in catastrophic regional or national effects on public health or safety, economic security, or national security.”

The executive order does not define “catastrophic regional or national effects.”  However, Section 2 defines “critical infrastructure” as “systems and assets, whether physical or virtual, so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters.”

Among other things, the secretary of DHS is directed to apply consistent, objective criteria in identifying critical infrastructure, and to notify owners and operators of critical infrastructure confidentially.

At present, it is unclear whether the federal government will cast a wide net in designating “critical infrastructure” under this executive order.  It is not inconceivable, however, that an owner or operator of a medical facility or financial services or communications company whose importance to public health and safety or economic or national security is critical to its region could be designated “critical infrastructure” under this executive order.

“What Does It Mean If My Private-Sector Company Is Designated Critical Infrastructure?”

The executive order directs the director of the National Institute of Standards and Technology (NIST) to develop a framework to reduce cyber risks to critical infrastructure, and to publish a preliminary version of this framework within 240 days and a final version within one year of the date of the executive order.  This framework “shall incorporate voluntary consensus standards and industry best practices to the fullest extent possible.”  NIST is accepting public comment on this framework until April 8, 2013.

Thereafter, the secretary of DHS is directed to establish a “voluntary program” to support the adoption of the final cybersecurity framework by owners and operators of critical infrastructure and other interested entities.  Some in the business community believe that this program will in fact not be voluntary, but rather is an effort by the federal government to impose onerous regulation on private-sector entities.  In particular, some point to Section 8(c), which requires sector-specific agencies to “report annually to the President on the extent to which owners and operators notified under section 9 of this order are participating in the Program.”  Furthermore, Section 8(d) directs the secretary to “coordinate establishment of a set of incentives designed to promote participation in the Program.”  The secretaries of DHS, the U.S Department of the Treasury and the U.S. Department of Commerce also are directed to make recommendations to the president regarding the benefits and effectiveness of such incentives, and whether the incentives would require legislation or could be provided under existing law.

Other Key Provisions of the Executive Order

Two other provisions of the executive order deserve mention.  First, the order calls for the “timely production of unclassified reports of cyber threats . . . that identify a specific targeted entity.”  The order also calls for a process to disseminate “classified reports to critical infrastructure entities authorized to receive them.”  This provision is intended to address a key concern of industry—that it does not always have access to important threat intelligence.

Second, the executive order directs agencies to “ensure that privacy and civil liberties protections are incorporated” in their cybersecurity activities.  The chief privacy officer and officer of civil rights and civil liberties of DHS are directed to assess the privacy and civil liberties risks of the functions and programs undertaken by DHS, and to recommend ways to minimize and mitigate such risks.  The executive order does not include liability protections for private-sector entities that share information with the government.  Such protections would require an act of Congress.

Congress Welcomes the Open Invitation to Legislate on Cybersecurity

It would be a mistake to believe the administration’s executive order on cybersecurity to be the last word on this topic.  Rather, it appears to be the opening salvo in a more protracted debate.  Several bills on cybersecurity have been introduced during the first three months of the 113th Congress, the most important of which are the following:

  • Cyber Intelligence Sharing and Protection Act (H.R. 624):  This legislation, which was introduced by the chair and ranking Democrat on the House Select Committee on Intelligence (Reps. Mike Rogers (R-MI) and Dutch Ruppersberger (D-MD), respectively), is expected to be on the House floor in mid-April 2013.  A similar version passed the House in 2012 by a vote of 248–168.  This bill is specifically intended to facilitate information-sharing by and between the federal government and private-sector entities.  Among other things, the bill would permit the federal government to share cyber threat information (including classified intelligence) with private-sector entities if they are “certified entities” or have the appropriate security clearance to receive such information.  The bill also provides liability protection for those who, in good faith, use cybersecurity systems to identify or obtain cyber threat information or share such information.
  • Cybersecurity Enhancement Act of 2013 (H.R. 756):  This bipartisan bill was introduced by Rep. Mike McCaul (R-TX), the chair of the Homeland Security Committee.  In general, the thrust of this bill is to enhance national cybersecurity research and development.
  • Cybersecurity and American Cyber Competitiveness Act (S. 21):  This legislation, which was introduced by Sen. Jay Rockefeller (D-WV), the chairman of the Senate Commerce Committee, appears mostly to be a placeholder for future legislation.  The bill itself contains findings and “sense of the Congress” provisions but no substantive proposals.  Sen. Tom Carper (D-DE), the chairman of the Senate Homeland Security Committee, is one of seven co-sponsors.  Sens. Rockefeller and Carper were deeply involved in cybersecurity legislation in the last Congress and held a joint Committee hearing on March 7, 2013.

Conclusion

The administration’s executive order on cybersecurity was triggered by Congress’ failure to act in this area in 2011–12.  This failure to act on cybersecurity is largely attributable to disagreement over whether the federal government should attempt to regulate private-sector entities and whether it should provide them with liability protections if they share cyber threat information with the federal government.

Furthermore, there has been no explicit acknowledgement by members of Congress that the designation “critical infrastructure” may (and perhaps should) carry concomitant benefits and burdens.  This is mostly because members of Congress (particularly Democrats) do not want to acknowledge that cybersecurity legislation may lead to additional regulatory requirements.  Thus, for now, they favor “voluntary” programs and standards.  One political path forward, however, may require critical infrastructure to accept some regulatory burden while also receiving some benefit (e.g., the certainty that critical infrastructure will receive the electricity or fuel it needs to operate in an emergency).

Private-sector entities—particularly those in the health care, financial/banking or communications industries—should pay very close attention to this evolving debate, because they could be designated “critical infrastructure.”  Private-sector entities also should pay very close attention to any attempt by the federal government, under either the executive order or subsequent legislation, to impose regulatory burdens upon them.

Finally, private-sector entities should be mindful that in the event of a serious cyber attack on the United States (e.g., disruptions to the electrical grid or to the banking or communications systems), partisan disagreement in Congress is likely to dissipate and give way to bipartisan consensus, including a possible consensus on regulatory requirements that today are politically infeasible.