Centre for Internet and Society

Submission to the Committee of Experts on a Data Protection Framework for India

amber — 2018-02-05T13:39:00Z

This submission presents comments by the Centre for Internet and Society, India (“CIS”) on the ‘White Paper of the Committee of Experts on a Data Protection Framework for India’ (“White Paper”) released by the Ministry of Electronics and Information Technology. The White paper was drafted by a Committee of Expert (“Committee”) constituted by the Ministry. CIS has conducted research on the issues of privacy, data protection and data security since 2010 and is thankful for the opportunity to put forth its views. The submission was made on January 31, 2018.

For more details visit https://cis-india.org/internet-governance/submission-to-the-committee-of-experts-on-a-data-protection-framework-for-india

RBI Consultation Paper on P2P Lending: Data Security and Privacy Concerns

vipul — 2016-06-01T11:41:17Z

On April 28, 2016 the Reserve Bank of India published a consultation paper on P2P Lending and invited comments from the public on the same. The Paper discusses what P2P lending is, the various regulatory practices that govern P2P lending in different jurisdictions and lists our arguments for and against regulating P2P lending platforms.

Arguments against Regulation

The arguments against regulation of P2p lending companies as set out in the paper are (briefly):

Regulating an exempt or nascent sector may be perceived as rubber stamping the industry through regulation, thus lending credibility to the P2P lending which could attract ill informed lenders to the sector who may not understand all the risks associated with the industry. In this way Regulation may cause more harm than good.
Regulations may also be perceived as too stringent, thus stifling the growth of an innovative, efficient and accessible industry.
The P2P lending market is currently in a nascent stage and does not pose an immediate systemic risk meriting regulation.

Arguments in favour of Regulation

The arguments for regulating the market on the other hand are:

Considering the significance of the online industry and the impact which it can have on the traditional banking channels/NBFC sector, it would be prudent to regulate this emerging industry.
The, the importance of these methods of financing, specially in sectors where formal lending cannot reach, needs to be acknowledged.
If the sector is left unregulated altogether, there is the risk of unhealthy practices being adopted by one or more players, which may have deleterious consequences.
Section 45S of RBI Act prohibits an individual or a firm or an unincorporated association of individuals from accepting deposits “if its business wholly or partly includes any of the activities specified in clause (c) of section 45-I (i.e. activities of a financial institution); or if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner. Contravention of Section 45S is an offence punishable under section 58B (5A) of RBI Act. As per the Act, ‘‘deposit’’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does not include any amount received from an individual or a firm or an association of individuals not being a body corporate, registered under any enactment relating to money lending which is for the time being in force in any State. Since the borrowers and lenders brought together by a P2P platform could fall within these prohibitions, absence of regulation may lead to perpetrating an illegality.”

After listing out the arguments, the paper adopts the approach of regulating this industry and proposes to bring P2P lending platforms under the purview of RBI’s regulation by defining them as Non Banking Financial Companies (NBFCs) under section 45-I(f)(iii) of the RBI Act. Once notified as NBFCs, RBI can issue regulations under sections 45JA and 45L. Though there is scope to comment on many aspects of the consultation paper our comments here will be limited to the data security and privacy aspects of the recommendations.

Data Security and Privacy Concerns

While the understanding of potential borrowers, specially those who have had experiences with commercial financial institutions, is that the more amount of information they provide, the better their chances become of getting a loan. This perception emanates from the fact that any potential borrower is asked for a myriad of documents, including personally identifying documents before a request for a loan is considered, infact for almost all financial institutions it is part of their core prudential norms to ask for identity documents before disbursing a loan. Getting as much information as possible from the borrower is not just a quirk of the financial institutions but it makes business sense for them, since it is those institutions who bear the risk of recovery of their money. There is no reason why the same logic or allowing creditors all the information about the borrower should not be applicable to P2P lending platforms, as far as the principle of prudential business practices is concerned. However, the key difference between disclosing information to P2P lending platforms as opposed to financial institutions is that whilst the information supplied to financial institutions stays limited to the institution and its employees, a large amount of the information (though not necessarily all) given to P2P platforms is made available to all potential creditors, which in P2P lending translates to any internet user who registers as a potential creditor. In this way the potential for the information to reach a wider group of people is much higher and therefore privacy and data security risks require special attention in P2P lending.

In section 5.3(v) of the Paper it is recommended that “Confidentiality of the customer data and data security would be the responsibility of the Platform. Transparency in operations, adequate measures for data confidentiality and minimum disclosures to borrowers and lenders would also be mandated through a fair practices code.” Whilst the fair practices code has not yet been developed or at least not yet made publicly available, as companies in the P2P lending industry are body corporates, these fair practice codes should be in line with and satisfy the requirements of section 43A of the Information Technology Act, 2000 (“IT Act”) as well as the Guidelines issued by the RBI’s Guidelines on Information security, Electronic Banking, Technology risk management and cyber frauds [1].

The minimum standards for data protection in Indian law have been laid down by section 43A of the IT Act and the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 (“Rules”) issued under section 43A. As per Rule 4 of the Rules P2P platforms would be required to have a privacy policy to deal with sensitive personal data, which includes any details regarding financial information such bank account, credit/debit cards, etc [2].

This policy would have to be published on the website of the platforms and would provide for a number of things such as (i) Clear and easily accessible statements of its practices and policies; (ii) type of personal or sensitive personal data or information collected; (iii) purpose of collection and usage of such information; (iv) disclosure of information including sensitive personal data or information; (v) reasonable security practices and procedures for the data. The other requirements of the Rules as regards consent before usage of the information, collection limitations, imparting information/notice to the consumer (information provider), retention limitation, purpose limitation, opt-out option, disclosure, etc. will also be applicable to P2P platforms and the fair practices code that the RBI would issue for this purpose will have to take all these issues into account.

The Rules also provide that body corporates will be considered to have complied with reasonable security practices if they have implemented such security practices and standards and have a comprehensive documented information security programme and information security policies that contain managerial, technical, operational and physical security control measures that are commensurate with the information assets being protected with the nature of business. Although there are no such practices which have been endorsed by any governmental body for P2P lending platforms, however the Department of Banking Supervision, Reserve Bank of India, has issued guidelines on “Information security, Electronic Banking, Technology risk management and cyber frauds" [3]. which could be relied upon until a fair practices code is put into place. The major privacy and data security provisions of these guidelines are given below:

Security Baselines: The guidelines require banks to be proactive in identifying and specifying the minimum security baselines to be adhered to by the service providers to ensure confidentiality and security of data;
Back up records: A cloud computing system must ensure backup of all its clients' information;
Security steps: An institution may take the following steps to ensure that risks with respect to confidentiality and security of data are adequately mitigated: (i) Address, agree, and document specific responsibilities of the respective parties in outsourcing; (ii) Discuss and agree on the instances where customer data shall be accessed; (iii) Ensure that service provider employees are adequately aware and informed on the security and privacy policies.
Confidentiality: Agreements should provide for maintaining confidentiality of customer's information even after the contract expires or is terminated by either party and specify the liability in case of security breach or leakage.
Encryption: Normally, a minimum of 128-bit SSL encryption is expected. Banks should only select encryption algorithms which are well established international standards.
Fraud Risk Management: It is also necessary that customer confidential information and other data/information available with banks is secured adequately to ensure that fraudsters do not access it to perpetrate fraudulent transactions.

Although inclusion of the above principles in the fair practices code would be helpful, however since the workings of P2P platforms are quite unique, therefore it would be counterproductive to restrict the security and privacy protocols to only those applied to regular banking transactions and the fair practices code should take into account these unique problems of P2P lending rather than seek to apply the existing norms blindly.

Endnotes

[1] See: https://rbidocs.rbi.org.in/rdocs/content/PDFs/GBS300411F.pdf.

[2] The Rules define “sensitive personal data or information” as information relating to: "(i) password, (ii) financial information such as Bank account or credit card or debit card or other payment instrument details, (iii) physical, physiological and mental health condition, (iv) sexual orientation, (v) medical records and history, (vi) Biometric information, (vii) any detail relating to the above clauses as provided to body corporate for providing service, and (viii) any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise."

[3] See: http://rbidocs.rbi.org.in/rdocs/content/PDFs/GBS300411F.pdf.

For more details visit https://cis-india.org/raw/rbi-consultation-paper-on-p2p-lending

Comments on the RBI's Consultation Paper on Peer to Peer Lending

sumandro — 2016-06-01T20:21:13Z

The Reserve Bank of India published a Consultation Paper on Peer to Peer Lending on April 28, 2016, and invited comments from the public. CIS submitted the following response, authored by Elonnai Hickok, Pavishka Mittal, Sumandro Chattapadhyay, Vidushi Marda, and Vipul Kharbanda.

1. Preliminary

1.1. This submission presents comments and recommendations by the Centre for Internet and Society (“CIS”) on the Consultation Paper on Peer to Peer Lending (“the consultation paper”) by the Reserve Bank of India (“RBI”) [1].

2. The Centre for Internet and Society

2.1. The Centre for Internet and Society, CIS [2], is a non-profit organisation that undertakes interdisciplinary research on internet and digital technologies from policy and academic perspectives. The areas of focus include digital accessibility for persons with diverse abilities, access to knowledge, intellectual property rights, openness (including open data, free and open source software, open standards, open access, open educational resources, and open video), internet governance, telecommunication reform, digital privacy, and cyber-security. The academic research at CIS seeks to understand the reconfiguration of social processes and structures through the internet and digital media technologies, and vice versa.

2.2. This submission is consistent with CIS’ commitment to safeguarding general public interest, and the interests and rights of various stakeholders involved. The comments in this submission aim to further the concerns of citizens’ and users’ rights in the context of products, services, and transactions facilitated by digital media technologies, the , the principle that regulation should be defined around functions of the acts concerned, and not the technologies of delivery. Our comments are limited to the clauses that most directly have an impact on these concerns.

3. Response

3.1. Whether there is a felt need for regulating peer to peer lending platforms?

3.1.1. Peer to peer (“P2P”) lenders are platforms serving as marketplaces for the lenders and the borrowers of funds to connect. Their very business model does not render them as a provider of finance, as they aspire to function as pure intermediaries to enable lending and borrowing.

3.1.2. The Section 45I.(f)(iii) of the RBI Act, 1935 [3], provides RBI the authority to classify any financial institution as a non-banking financial company (“NBFC”) “with the previous approval of the Central Government and by notification in the Official Gazette.” Since the P2P lending platforms do not provide any finance themselves, undertake acquisition of financial instruments, deliver financial and/or insurance services, or collect financial resources directly, the only ground for classifying such companies as “financial institutions” [4] appears to be their involvement in “managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto” [5]. P2P lending platforms can be considered to be brokers and thus there are other aspects that merit scrutiny such as antitrust issues, obligations of either party, company activities and the transactional system involved, as we will discuss in this document.

3.1.3. The consultation paper itself states that the balance sheet of the platform cannot indicate any borrowing / lending activity, which entails that the platform cannot itself provide finance or receive any funds for the provision of loans to others. Platforms are not allowed to determine the interest rates as they are not a party to the transaction. Neither would they be liable in cases of default by the borrower. These rules, standard for P2P platforms in other jurisdictions as well, confirm the assumption that the platform itself is not providing finance and thus, cannot be entrusted with any liability, obligation from the transaction.

3.1.4. Further, with RBI raising the threshold asset size for an NBFC to be considered systemically important (NBFC-ND-SI) from Rs. 100 Crores to Rs. 500 Crores [6], and Economic Times reporting that one of the biggest Indian P2P lending platform’s enterprise valuation (which can be taken as indicative of its net assets) is Rs 50 Crores [7], we may assume that most P2P lending platforms will have net assets worth less than 500 crore, at least in the near future; although there is a possibility for exponential growth with some companies.

3.1.5. Given the limited sphere of operation, restricted ability (by design) of these platforms to shape interest rates and other features of financial instruments, and their generally non-systemically-important nature, we would submit that the regulation of such P2P lending platforms are kept to an absolute minimum, so that their economic viability is not undermined, and at the same time the key risks associated with their operations are addressed by RBI.

3.2. Is the assessment of P2P lending and risks associated with it adequate?

3.2.1. CIS observes that the following are the key risks involved with the operations of the P2P lending platforms, and these are being respectively addressed by, or can be addressed by RBI in the following manners.

Insufficient information about the conditions of lending, leading to defrauding of the borrower: The borrower may not receive appropriate information about the terms of the loan, and/or the P2P lending platform may not act in a “fair” manner (say, in case of collusion between the P2P lending platform and the lender, or the lending platform and the borrower), which may lead to defrauding and/or economic loss of either party. By classifying P2P lending platforms as NBFCs, RBI will ensure that these companies follow the Guidelines on Fair Practices Code for NBFCs [8], which extensively addresses concerns related to this type of risks.
Insufficient information about the borrower, or her/his ability to repay the loan, may lead to non-repayment and economic loss of the lender: If the P2P lending platform allows the lender to offer loans to borrowers without acquiring and/or providing sufficient information to the lender about the borrower’s credit history and/or ability to repay the loan, modes of formulating security for loans, this may heighten the risks of non-repayment of loans. By classifying P2P lending platforms as NBFCs, RBI will ensure that these companies follow the Master Circular – 'Know Your Customer' (KYC) Guidelines – Anti Money Laundering Standards (AML) - Prevention of Money Laundering Act, 2002 - Obligations of NBFCs [9], which extensively addresses concerns related to this type of risks.
Credit-related information of the lenders and the borrowers collected by P2P lending platforms may not be made available to other financial institutions and that will lead asymmetry in credit information available across various actors in the sector: Credit information, related to both lending and borrowing practices of entities using the platform concerned, is a key asset of the P2P lending platforms. Lack of sharing of such information with Credit Information Companies, for economic reasons or otherwise, may however, lead to information asymmetry within the financial sector, which will structurally weaken the entire sector (with pieces of credit information being distributed across actors and not being shared internally). By classifying P2P lending platforms as NBFCs, RBI will ensure that these companies follow the Credit Information Companies (Regulation) Act, 2005 [10], which extensively addresses concerns related to this type of risks.
P2P lending platforms diversifying their financial operations without informing RBI and hence without appropriate regulatory control: It is possible that P2P lending platforms may decide to diversify their activities. There have been similar examples in other related sectors, say e-commerce marketplaces, that have started their own product re/selling companies that use the same online marketplace concerned. By classifying P2P lending platforms as NBFCs, RBI will ensure that these companies provide RBI with detailed and regular reports of their economic activities and investments, which is expected to address concerns related to this type of risks.

3.3. Are there any other risks which ought to be addressed?

3.3.1. CIS observes that as part of the usual transaction related activities of the P2P lending platforms, the companies will come into possession of what has been defined as “sensitive personal data or information” by the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 [11]. The concerns related to this type of risk is directly addressed by the Rules concerned, and may not require additional attention from the RBI.

3.3.2. CIS observes that as borrowers and lenders start using specific P2P lending platforms, the data regarding their credit histories and/or “financial reputation” will be owned by these companies. While such information might be shared internally within the financial sector through the Credit Information Companies, the borrowers and lenders themselves may not get direct access to such data. Hence, the borrowers and lenders will not be able to move easily and smoothly to a new P2P lending platform and make use of their existing credit information and/or “financial reputation” when accessing services offered via the new P2P lending platform. In other words, the borrowers and lenders may face a service provider lock-in, and inability to move between P2P lending platforms easily, without explicit access to their own credit history/reputation, and will not have the ability to migrate such information from one P2P lending platform to another (or to any other agency, for that matter). CIS submits that RBI must provide a mechanism to allow users to migrate between platforms as it has not been discussed in the consultation paper.

3.4. Is the proposed approach to regulating these platforms adequate?

3.4.1. CIS observes that while classification of P2P lending platforms will appropriately address key risks associated with their operations (as listed in 3.2.1. A-D), it will not address a major risk emerging out of their operations that is unique to the technological basis of the business concerned (as mentioned in 3.3.2.), and further, it will impose substantial financial and management obligations that have a very high probability of undermining the economic viability of this emerging and niche sector of intermediated direct lending and borrowing.

3.4.2. CIS observes that these financial and management obligations may involve the following topics among others discussed: 1) minimum net worth requirement for registration, 2) minimum investments required to be made government securities, 3) transferring of minimum percentage of net profits to RBI, 4) guidelines regarding corporate governance [12], etc.

3.4.3. Given this, CIS submits that instead of classifying P2P lending platforms as “Misc NBFCs,” a new sub-classification is created under the category of NBFC for such platforms, that directly addresses the key risks associated with businesses of P2P lending platforms, and protects lenders as well as borrowers while enhancing transparency in operations. This new sub-classification of P2P lending companies should also be divided into systemically-important and non-systemically-important like other NBFCs, and requirements regarding financial operations and corporate management should only be enforced for the former category of P2P lending companies.

3.5. Any other relevant issues pertaining to P2P lending

Beyond the issues already discussed above, CIS seek clarity from the RBI around the following aspects:

Transactional system pertaining to P2P lending:
1. What are the requirements and prerequisites for mandating the collection of user identity?
2. Establishing a maximum sum that can be transferred per transaction.
Company activities:
1. Fees that can be charged by platforms.
2. How data security can be best addressed.
3. How the financial transactions are brokered.
4. Modes of redressal.
5. Restitution to users if something goes amiss in the transaction.
6. Insurance that the company has to buy or capital on hand to support.

Endnotes

[1] See: https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3164.

[2] See: http://cis-india.org/.

[3] See: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIA1934170510.pdf.

[4] See Section 45I.(c) of RBI Act, 1923, last amended on January 07, 2013.

[5] See Section 45I.(c)(v) of RBI Act, 1923, last amended on January 07, 2013.

[6] See: https://rbidocs.rbi.org.in/rdocs/content/pdfs/PNNBFC200315.pdf.

[7] See: http://economictimes.indiatimes.com/small-biz/startups/faircent-com-raises-pre-series-a-funding-of-250k/articleshow/47630279.cms.

[8] See: https://rbi.org.in/scripts/NotificationUser.aspx?Id=7866.

[9] See: https://rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8168.

[10] See: http://www.incometaxindia.gov.in/Pages/acts/credit-information-companies-act.aspx.

[11] See: http://deity.gov.in/sites/upload_files/dit/files/GSR313E_10511%281%29.pdf.

[12] See: https://www.rbi.org.in/scripts/BS_NBFCNotificationView.aspx?Id=3706.

For more details visit https://cis-india.org/raw/comments-on-the-rbi-consultation-paper-on-peer-to-peer-lending

Trans Pacific Partnership and Digital 2 Dozen: Implications for Data Protection and Digital Privacy

Shubhangi Heda — 2016-07-12T07:56:24Z

In this essay, Shubhangi Heda explores the concerns related to data protection and digital privacy under the Trans Pacific Partnership (TPP) agreement signed recently between United States of America and eleven countries located around the pacific ocean region, across South America, Australia, and Asia. TPP is a free trade agreement (FTA) that emphasises, among other things, the need for liberalising global digital economy. The essay also analyses the critical document titled ‘Digital 2 Dozen’ (D2D), which compiles the key action items within TPP addressing liberalisation of digital economy, and sets up the relevant goals for the member nations.

1. Introduction

2. Analysis of TPP and D2D

2.1. Trans Pacific Partnership (TPP)

2.2. Digital 2 Dozen (D2D)

3. Major Criticisms of the Digital Agenda of TPP

3.1. Data Protection

3.2. Digital Privacy

4. Implications of TPP for RCEP

5. Implications of TPP in the Context of EU Safe Harbour Judgement

6. Implications of TPP for India after US-India Cyber Relationship Agreement

7. Conclusion

8. Endnotes

9. Author Profile

1. Introduction

This essay explores the concerns related to data protection and digital privacy under the Trans Pacific Partnership (TPP) agreement signed recently between United States of America and eleven countries located around the pacific ocean region, across South America, Australia, and Asia [1]. TPP is a free trade agreement (FTA) that emphasises, among other things, the need for liberalising global digital economy. The essay also analyses the critical document titled ‘Digital 2 Dozen’ (D2D), which compiles the key action items within TPP addressing liberalisation of digital economy, and sets up the relevant goals for the member nations. TPP requires the member countries to facilitate unhindered digital data flow across nations, for commercial and governmental purposes, which evidently have major implications for national and regional data protection and privacy regimes. These implications must also be seen in the context the recent judgement by the EU Court of Justice against the validity of the EU-USA data transfer agreement of 2000. Further, the essay discusses the potential impacts that TPP/D2D might have on India, in the context of the ongoing USA-India Cyber Relationship dialogue. If the privacy concerns are not raised right now TPP might act as a model framework for future FTAs which will fail to encompass proper data protection and digital privacy regime within it.

2. Analysis of TPP and D2D

2.1. Trans Pacific Partnership (TPP)

Trans Pacific Partnership (TPP) is a large multi-partner free trade agreement amongst twelve Asia-Pacific countries, which is closely led by geo-political and economic strategies of the USA. Countries started the negotiation of TPP in 2008 when USA joined Pacific Four (P-4) negotiations and in 2015 negotiations of TPP was concluded and text was released. Ministers from the member countries signed the agreement on February 4, 2016 [2]. The main aim of TPP is to liberalise trade and investment beyond what is provided for within the WTO. It is also considered to be a strategic move by the US to counter the trade linkages that are being established in the Asian region. TPP largely covers topics of market access, and rules on various related issues such as intellectual property rights, labour laws, and environment standards [3].

Between 1992 -2012 there has been an upsurge in bilateral trade agreements being signed in Asia from 25 to 103 and the effect of these FTAs is called the ‘noodle bowl effect’. TPP is seen as framework which will replace these FTAs which are causing the ‘noodle bowl effect’.While these FTAs are being replaced but with TPP being signed there are various bilateral arrangements signed along with TPP. USA has also stated that TPP will not affect the already existing NAFTA [4]. While TPP is being concluded there is another free trade agreement being negotiated between USA and EU , which is Trans Trade and Investment Partnership (TTIP). Both TPP and TTIP and are considered to be serving similar objective which is to deal with new and modern trade issues. Also both the agreements are US led and since negotiation for TPP are now finalised it may have a significant impact on TTIP [5].

TPP is one of the first document which deals specifically with digital economy and applies across borders. The main aims of TPP are to promote free flow of data across borders without data localisation. It aims to remove national clouts and regional internets. It also includes provisions to combat theft of trade secrets. It allows you to create transparent regulatory process with inputs from various stakeholders. It also aims to provide access to tools and procedures for conduct of e-commerce [6].

Some of the major criticism to TPP were regarding the issues related to [7]:

environment, wherein it does not address the issue of climate change and the language used in the agreement is very weak;
labour rights provision mandates parties to adhere to the ILO provision but it does not seem to provide for effective framework and might not bring the desired change;
investment chapter is seen to be controversial because of the investor state dispute settlement clause which will allow foreign investor to sue government over policies that might cause harm to them;
e-commerce and telecommunication chapter raises major privacy concerns;
intellectual property chapter wherein it includes controversial rules regarding pharmaceutical companies and data exclusivity apart from the privacy concerns.

2.2 Digital 2 Dozen (D2D)

D2D is set of rules and aims which is specifically drafted to be followed for the trade agreements related to open internet and digital economy. More specific aims of TPP as provided within the ‘Digital 2 Dozen,’ aiming for more liberalised trade in digital goods and services, are [8]:

promoting free and open internet,
prohibiting digital custom duties,
securing basic non-discrimination principles,
enabling cross-border data flows,
preventing localization barriers,
barring forced technology transfers,
advancing innovative authentication methods,
delivering enforceable consumer protections,
safeguarding network competition,
fostering innovative encryption products, and
building an adaptable framework.

Strategic goal of the US in introducing D2D as goals of TPP has been to set up a trend within Asian region for all the trade agreements. It is expected to ensure that if TPP is a success, similar goals and policy frameworks will be followed for other trade agreements as we. For example, the USA-India partnership also enshrines similar aims and so does the USA-Korea partnership. Hence while India is not part of TPP, USA is nonetheless trying to get India into a partnership which is similar to the TPP. The language proposed by the USA in TPP negotiations has always been supportive for cross border data flows as it claims that companies have mechanism to keep a privacy check and privacy would not be undermined, but countries like New Zealand and Australia which have strong privacy protection laws nationally have raised concerns which will be discussed in further sections [9]. Also not only in privacy rights but Digital Dozen initiative also affects other digital rights related to - excessive copyright terms TPP proposed to extend the term of copyright to hundred years which deprive access to knowledge; as in the U.S motive to give more power to private entities , the ISP obligations enumerated within TPP which puts freedom of expression and privacy at risk as ISPs are allowed to check for copyright infringement and TPP does not put any privacy restriction in this regard; introduction of new fair use rules; ban on circumvention of digital locks or DRMs; no compulsory limitation for persons with disabilities; lack of fair use for journalistic right; while net neutrality is major issue is many developing nations in Asia no effective provision for net neutrality is aimed at in the D2D initiative; prohibits open source mandates which puts barrier for countries which want to release any software as open source as a policy decision [10].

3. Major Issues Related to Data Protection and Privacy in the TPP

3.1. Data Protection

One of the major concern raised against TPP is regarding data protection provisions that have been integrated within the E- Commerce chapter of the agreement. Article 14.11 and Article 14 .13 are the ones that deal with data flow related to consumer information.Article 14.11 in the agreement puts a requirement on the member states to allow transfer of data across border and Article 14.13 does not allow the companies to host data on local servers. Concerns were raised in few member states for instance, Australian Privacy Foundation raised concerns over Article 14.11 which requires transfers to be allowed in context of business activities of service suppliers. It claimed that exception to this provision is very narrow and the repercussion for not following the exception is that investor state dispute settlement proceedings can be initiated, which is not sufficient to protect privacy. Also, it highlighted the issue that with the narrow exception provided under Article 14.13 which relates to prohibition on data localisation, it might have adverse effect on the implementation of national privacy laws within Australia [11].

Another provision which is of major concern is Article 14.13 which prohibit data localisation. It will raise problems for countries like Indonesia and China which will have to change their local laws to implement the provision [12]. Since there already has been a major concern with regard to USA- EU Safe Harbour Agreement which was later made subject to the ECJ’s ruling on data protection, which invalidated any arrangement which provides voluntary enterprises responsibility to enforce privacy. But both the USA and EU are in process of renegotiating the agreement.The major concern was that in EU data protection is a fundamental right while in USA data protection is more consumer centric. When similar concerns were raised in TPP negotiations, they were rebutted as USA claimed that FTA does not concern itself with data protection [13].

In 2012 Australia proposed an alternative language to TPP which allowed countries to place restriction on data flow as long as it was not a barrier to trade. U.S responded to concerns raised by the Australia through a side letter which ensured Australia that U.S and Australia have a mutual understanding in relation to privacy and U.S will ensure the privacy of data with regards to Australia. While Australia’s concern was given acknowledgement other countries which raised similar issues were not given any assurances [14]. US instead proposed ad- hoc strategy that gave private companies power to form privacy policy with implementation through state machinery [15].

3.2. Digital Privacy

Article 14.8 in the E- Commerce chapter of the agreement states that countries can form legal framework for the protection of rights but the kind of ‘legal framework’ is not defined. Also, nowhere it states that the privacy protection or data protection laws are expressly exempted, rather it states that any such policy implemented by member states will be put under review of TPP standards. The standards which TPP proposes to follow are based on the underlying idea that any such policy should not hinder free trade in any way. This test will be applied by tribunals which are experts in trade and investment and not on data protection or human rights [16]. While Article 14.8 provides for protection of private information of consumers but the footnote to the provision renders it ineffective. The footnote states that member countries can adopt legal framework for the protection of data which can be done by self-regulation by industry and does not provide for any comprehensive data protection obligation upon the member states [17]. Similar to this Article 13.4 of the telecommunications chapter under TPP also states that the countries can apply regulation regarding confidentiality of the messages as long as it is not “a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade in services" [18].

Another chapter which raises major concerns about the privacy rights is intellectual property. It affects privacy through the provisions related to technological protective measures and the provision that regulate ISP’s liability. Regarding the TPM provision, the TPP follows the DMCA model whereby the exception to anti- circumvention provision is very narrow and does not apply to anti- trafficking provision. The exception allows user to circumvent TPM if it affect the user's privacy in any way, although this provision does not apply to ant- trafficking of TPM. The provision regarding ISP’s liability states that there should be cooperation between ISPs and rights holders and it does not prohibit ISPs to monitor its users. Also TPP proposes the notice for takedown and identification of the infringer by the ISP but this provision is not in consonance with laws of member states, like that of Peru which does not have any copyright law on ISP . Also many countries have tried to introduce proper privacy laws along with implementation of ISP liability but that is not done within the TPP [19]. TPP as whole aims to give greater power to private regulators without providing for minimum standard for protection of privacy.

Although TPP is not a data protection agreement but it consequently deals with various aspects of data protection, hence it is prospective model for privacy and data protection practices in future trade agreements. If positive obligations are included within the free trade agreements it will have an advancing impact on the data protection regime.

4.Implications of TPP for RCEP

While TPP has such lacunas similar provision are proposed in RCEP to which India is a party and which will have serious implication as many of the countries have inadequate data protection laws nationally and with the introduction of such an FTA the exploitation of privacy rights will be rampant [20]. To avoid this EU directive on data protection should be taken into consideration in the negotiations of such FTAs. But for the RCEP negotiations are still going on and in India many companies like Flipkart, Snapdeal etc. have started preparing for the changing norms. The government claims that it is going to accept best practices in the region which indicates that it is going to have same policies as that of TPP. Although people from industry have raised concerns that while there are national laws but it is difficult to check third party involvement within the business and it is becoming increasingly difficult to keep the consumer data confidential [21].

5. Implications of TPP in the Context of EU Safe-Harbour Judgement

Mr. Maximillian Schrems, an Austrian National residing in Austria, has been a user of the Facebook social network since 2008. Any person residing in EU who wishes to use Facebook is required to conclude, at the time of his registration, a contract with Facebook Ireland (a subsidiary of Facebook Inc. which itself is established in Unites States). Some or all of the personal data of the Facebook Ireland’s users who residing in EU is transferred to servers belonging to Facebook Inc. that are located in United States, where it undergoes processing. On 25 June 2013 Mr Schrems made a complaint to the commissioner by which he in essence asked the latter to exercise his statutory powers by prohibiting Facebook Ireland from transferring his personal data to Unites States, and this led to the Maximillian Schrems v Data Protection Commissioner case [22]. He contended that in his complaint that the law and practice in force in that country did not ensure adequate protection of the personal data held in its territory against the surveillance activities that were engaged in thereby by the public authorities. Mr Schrems referred in this regard to the revelations made by Edward Snowden concerning the activities of the United States intelligence services, in particular those of the NSA.(para 26, 27, 28). The case came in the court ruled that “that a third country which ensures an adequate level of protection, does not prevent a supervisory authority of a Member State, within the meaning of Article 28 of the EU 94/46 directive as amended, from examining the claim of a person concerning the protection of his rights and freedoms in regard to the processing of personal data relating to him which has been transferred from a Member State to that third country when that person contends that the law and practices in force in the third country do not ensure an adequate level of protection. The ruling implies that personal data cannot be transferred to third country which does not provide adequate level of protection.

EU safe harbour judgment and EU directive on privacy provide contrasting rules related to privacy. While TPP gives power to private entities to formulate rules regarding privacy while the recent ECJ judgment invalidated giving such power to private entities under EU-US Safe Harbour Agreement. Also in context of the same judgment Hamburg’s Commissioner for Data Privacy And Freedom of Information announced an investigation into the data transfer taking place through Facebook and Google to U.S. Hence in the light of the recent judgment member states within EU are not allowed to permit cross border data flow, in contrast to this one of the main goals of TPP is to maintain free flow of data across border [23]. EU is this regard has also set forth the proposal to introduce General Data Protection Regulation. (GDPR). Although U.S and EU are trying to renegotiate the agreement but the privacy concerns raised cannot be ignored. Hence following the same model as was invalidate under the ECJ judgment lets US exploit privacy of member states under TPP. Similar concerns as raised within the judgment are also raised in India as it also following the same model within U.S-India Cyber Relationship Agreement and in RCEP negotiations.

6. Implications of TPP in the context of USA-India Cyber Relationship

While India is not part of TPP but it might have an effect on the U.S India Cyber Relationship Agreement. In August 2015 there was re- initiation of the India-U.S cyber dialogue to address common concerns related to cybersecurity and to develop better partnerships between public and private sector for betterment of digital economy [24]. One of the key aim of this agreement is free flow of information between two nations, which suffers from similar problem that it will put privacy of the citizens at risk. Also India does not have any bilateral treaty which ensures cyber data protection in such a scenario the only solution is data localisation, but this agreement will put data at risk [25]. Hence while the TPP negotiations were going on and also RCEP is being discussed the concerns about privacy and data protection need to be raised as mention in earlier section regarding implications of TPP on RCEP, the USA-India Cyber Relationship also faces the same implications..Although the aim of USA-India Cyber Relationship is to ensure cybersecurity. After the cases of Muzaffarnagar riots, upheaval in North -Eastern states and Gujarat riots, India has realised it is important to ensure compliance from the social media companies. India sees the USA-India Cyber Relationship as an opportunity to achieve this goal. The Google Transparency Report states that that India made around three thousand requests to Google for user data [26], which indicate at the country's interest in having a common data understanding with the major social media companies (almost all of which are located in USA) about requesting and sharing of user activity data. While this concern is being addressed through the agreement, it is difficult to ignore the clause related to free flow of information, and if the meaning of the term is extended and adopted from TPP itself will put digital privacy of Indian citizens at risk [27].

7. Conclusion

Even though TPP negotiation are completed but the ratification of the agreement is still underway. TPP is being seen as one of a kind trade agreement because it is the first time that countries across the globe have come together as a whole to address concerns of modern trade. Although it fails to address some of the key concerns related to privacy and data protection which are becoming increasingly important. Data protection and privacy issues cannot be seen in isolation and needs to merged within the modern day trade agreements. The D2D component by the USA is strategic move to have trade dominance in Asia and to compete with China’s growth . TPP has privacy and data protection lacunae within the e- commerce , telecommunications and intellectual property discussion.Although it might have serious implications on RCEP negotiation and USA- India Cyber Relationship Dialogue. Similar concern regarding data protection has already been addressed by ECJ judgment invalidating USA-EU Safe Harbour Agreement but the similar ad - hoc strategy has been incorporated within TPP. Since TPP might be considered as best practice model for future FTAs in the Asian region it is important to raise and address these privacy concerns now.

8. Endnotes

[1] The signatory countries include Australia, Canada, Japan, Malaysia, Mexico, Peru, United States of America, Vietnam, Chile, Brunei, Singapore, New Zealand. "The Trans-Pacific Partnership," http://www.ustr.gov/tpp (last visited Jul 7, 2016).

[2] "The Origins and Evolution of the Trans-Pacific Partnership (TPP)," Global Research, http://www.globalresearch.ca/the-origins-and-evolution-of-the-trans-pacific-partnership-tpp/5357495 (last visited Jul 7, 2016).

[3] Fergusson, Ian F., Mark A. McMinimy & Brock R. Williams, "The Trans-Pacific Partnership (TPP): In Brief," (2015), http://digitalcommons.ilr.cornell.edu/key_workplace/1477/ (last visited Jul 1, 2016).

[4] Gajdos, Lukas, The Trans-Pacific Partnership and its impact on EU trade, Policy Department, Directorate-General for External Policies, Policy Briefing (2013), http://www.europarl.europa.eu/RegData/etudes/briefing_note/join/2013/491479/EXPO-INTA_SP(2013)491479_EN.pdf.

[5] Twining, Daniel, Hans Kundnani & Peter Sparding, Trans-Pacific Partnership: geopolitical implications for EU-US relations, Policy Department, Directorate-General for External Policies, June 24 (2016), http://www.europarl.europa.eu/RegData/etudes/STUD/2016/535008/EXPO_STU(2016)535008_EN.pdf.

[6] USTR, "Remarks by Deputy U.S. Trade Representative Robert Holleyman to the New Democrat Network," https://ustr.gov/about-us/policy-offices/press-office/speechestranscripts/2015/may/remarks-deputy-us-trade (last visited Jul 4, 2016).

[7] Murphy, Katharine, "Trans-Pacific Partnership: four key issues to watch out for," The Guardian, November 6, 2015, https://www.theguardian.com/business/2015/nov/06/trans-pacific-partnership-four-key-issues-to-watch-out-for (last visited Jul 7, 2016).

[8] USTR, "The Digital 2 Dozen" (2016), https://ustr.gov/sites/default/files/Digital-2-Dozen-Final.pdf (last visited Jul 1, 2016).

[9] Fergusson, Ian F.m Mark A. McMinimy & Brock R. Williams, "The Trans-Pacific Partnership (TPP) negotiations and issues for congress," (2015), http://digitalcommons.ilr.cornell.edu/key_workplace/1412/ (last visited Jul 8, 2016).

[10] "How the TPP Will Affect You and Your Digital Rights," Electronic Frontier Foundation (2015), https://www.eff.org/deeplinks/2015/12/how-tpp-will-affect-you-and-your-digital-rights (last visited Jul 7, 2016).

[11] Australian Privacy Foundation (APF), Trans Pacific Partnership Agreement (2016), https://www.privacy.org.au/Papers/Parlt-TPP-160310.pdf.

[12] Greenleaf, Graham, "The TPP & Other Free Trade Agreements: Faustian Bargains for Privacy?," SSRN (2016), http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2732386 (last visited Jul 1, 2016).

[13] "GED-Project: Transatlantic Data Flows and Data Protection," GED Blog (2015), https://ged-project.de/topics/competitiveness/transatlantic-data-flows-and-data-protection-the-state-of-the-debate/ (last visited Jul 1, 2016).

[14] Geist, Michael, "The Trouble with the TPP, Day 14: No U.S. Assurances for Canada on Privacy," (2016), http://www.michaelgeist.ca/2016/01/the-trouble-with-the-tpp-day-14-no-u-s-assurances-for-canada-on-privacy/ (last visited Jul 4, 2016).

[15] Aaronson, Susan Ariel, "What does TPP mean for the Open Internet?" From Policy Brief on Trade Agreements and Internet Governance Prepared for the Global Commission on Internet Governance (2015), https://www.gwu.edu/~iiep/events/DigitalTrade2016/TPPPolicyBrief.pdf (last visited Jul 5, 2016).

[16] Lomas, Natasha, "TPP Trade Agreement Slammed For Eroding Online Rights," TechCrunch, http://social.techcrunch.com/2015/11/05/tpp-vs-privacy/ (last visited Jun 30, 2016).

[17] "Q&A: The Trans-Pacific Partnership," Human Rights Watch (2016), https://www.hrw.org/news/2016/01/12/qa-trans-pacific-partnership (last visited Jul 1, 2016).

[18] "TPP Full Text Released," People Over Politics (2015), http://peopleoverpolitics.org/2015/11/07/tpp-just-as-bad-as-you-thought/ (last visited Jul 7, 2016).

[19] "Right to Privacy in Trans-Pacific Partnership (TPP ) Negotiations," Knowledge Ecology International, http://keionline.org/node/1164 (last visited Jul 1, 2016).

[20] Asian Trade Centre, "E-Commerce and Digital Trade Proposals for RCEP (2016)," http://static1.squarespace.com/static/5393d501e4b0643446abd228/t/575a654c86db438e86009fa1/1465541967821/RCEP+E-commerce+June+2016.pdf (last visited Jul 1, 2016).

[21] "E-commerce companies like Flipkart, Snapdeal to beef up data security to meet RCEP norms," The Economic Times, http://economictimes.indiatimes.com//articleshow/49068419.cms (last visited Jul 1, 2016).

[22] ECLI:EU:C:2015:650 (C -362/14)

[23] King et al., "Privacy law, cross-border data flows, and the Trans Pacific Partnership Agreement: what counsel need to know," Lexology, http://www.lexology.com/library/detail.aspx?g=b5c0b400-8161-4439-a4b7-131552ad5209 (last visited Jul 4, 2016).

[24] "U.S.-India Business Council Applauds Resumption of Cybersecurity Dialogue," U.S.-India Business Council (2015), http://www.usibc.com/press-release/us-india-business-council-applauds-resumption-cybersecurity-dialogue (last visited Jul 5, 2016).

[25] Sukumar, Arun Mohan, "India Is Coming up Against the Limits of Its Strategic Partnership With the United States," The Wire (2016), http://thewire.in/40403/india-is-coming-up-against-the-limits-of-its-strategic-partnership-with-the-united-states/ (last visited Jul 4, 2016).

[26] Countries – Google Transparency Report, https://www.google.com/transparencyreport/userdatarequests/countries/ (last visited Jul 8, 2016).

[27] Sukumar, Arun Mohan, "A case for the Net’s Ctrl+Alt+Del," The Hindu, September 5, 2015, http://www.thehindu.com/opinion/op-ed/a-case-for-the-nets-ctrlaltdel/article7616355.ece (last visited Jul 5, 2016).

9. Author Profile

Shubhangi Heda is a Student of Jindal Global Law School, O.P Jindal Global University. She has completed her fourth year. She gives due importance to popular culture in her life and loves to read fiction and like to watch TV-shows, her favorite being 'White Collar'.

For more details visit https://cis-india.org/internet-governance/blog/tpp-and-d2-implications-for-data-protection-and-digital-privacy