What Is Data Sovereignty?

Data sovereignty is the concept that data is under the authority of the nation in which it is located. It gives countries control over the data generated within their borders, allowing them to enact laws and policies regarding how data can be transferred, processed, and stored. With the exponential growth of data worldwide, data sovereignty enables countries to protect the sensitive data and intellectual property of their citizens and organizations.

Data sovereignty is becoming increasingly important. In the U.S., for example, over 353 million people were affected by data security incidents in 2023.¹ In this blog, we’ll discuss what data sovereignty is, why it matters for your business, and best practices to help ensure data sovereignty in the cloud.

Why Is Data Sovereignty Important for Businesses?

Data sovereignty has become crucial for businesses to consider, particularly as processing and storing data increasingly occur in the cloud. There are several key reasons why sovereignty matters for modern businesses:

Legal and Regulatory Compliance

Around 71% of countries have established legislation for data protection and privacy.² Following data sovereignty requirements helps businesses comply with varying data protection laws and regulations, such as PIPEDA in Canada and GDPR in the European Union. Adhering to these laws is essential for avoiding significant fines and penalties.

Data Security and Protection

Data sovereignty supports the security and protection of sensitive data. By maintaining data within a jurisdiction, businesses have full control over its management and access to prevent unauthorized use while enabling greater control and transparency.

Business Continuity

Keeping customer data within clearly defined legal jurisdictions helps avoid disruptions to business operations. Organizations can ensure reliable, timely access to data when needed, which is critical for business continuity.

Competitive Advantage

65% of customers say they would lose trust in a business that misuses personal data.³ By demonstrating a commitment to data protection and compliance, companies can build customer trust and attract more business in regulated industries like healthcare and finance.

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How Does Data Sovereignty Work?

Data sovereignty means data falls under the legal requirements of the country where it's located, which can impact organizations that transfer data across borders or process it in foreign jurisdictions.

Generally, data sovereignty rules state that:

Data is subject to the laws and regulations of the country in which it is collected and stored. The country where data originates has governing rights over that data.
If data moves across borders, the destination country may also have jurisdiction over that data. This means it may be subject to multiple regulations.
Businesses must comply with the data regulations in all applicable jurisdictions when handling information that crosses borders, including the originating and receiving countries.

Ensuring Data Sovereignty in Cloud Computing

Meeting data sovereignty requirements is more complex with cloud computing, where data may be globally distributed across local data centers in many regions. Primary challenges include:

Lack of Visibility

Pinpointing the physical location of data stored in cloud computing services can be difficult. Cloud providers use distributed infrastructure across regions, and data is often replicated and moved between data centers. Without knowing exactly where data resides, companies may not know which countries' privacy laws and regulations apply.

Multinational Regulations

With cloud-based data potentially dispersed across data centers around the globe, the local laws of many countries may apply to that data simultaneously. This makes ensuring compliance with all applicable laws complicated, with companies struggling to implement governance processes that address conflicting or inconsistent requirements between each geographic location.

Cross-Border Transfers

In the cloud, data often flows between data centers in different countries to provide redundancy and ensure availability. However, this data movement can easily lead to accidental violations of data sovereignty laws if transfers across borders aren't carefully controlled, monitored, and reported.

Data Sovereignty vs. Data Residency vs. Data Localization

Data sovereignty, data residency, and data localization are related concepts but have several important distinctions. Here are the primary differences:

Data Sovereignty

Data sovereignty refers to the overarching concept that data is subject to the laws and regulations of the country where it's located. It provides nations with authority and jurisdiction over data within their borders, establishing that data must comply with the country's regulations.

Data Residency

Data residency is the physical or geographic location where a business stores data at any given time. It provides insight into data sovereignty obligations and jurisdictions that apply, making data residency management essential for businesses that operate globally.

Data Localization

Data localization is a specific policy application of data sovereignty principles that legally mandates certain data types remain within national borders. It aims to increase protection and control over sensitive data by preventing it from leaving a country or region.

What Are the Challenges of Data Sovereignty?

While critical for data protection, data sovereignty rules can also create several challenges for businesses. Common challenges include:

Mandatory Localization

Some countries require that certain categories of data – often sensitive and personal data – be stored and processed only within their jurisdictions through data localization requirements. This can force multinational organizations to establish in-country data centers, servers, and infrastructure specifically to house localized data, significantly increasing IT costs and operational complexity.

Compliance Complexities

Different countries' varying data protection and privacy regulations create major compliance challenges. As businesses expand operations globally, they must implement more complex governance processes to try and comply with frequently inconsistent, conflicting laws and regulations across many nations at once.

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Security Risks

While distributing data across jurisdictions does increase complexity, centralizing data related to a specific country within that nation's borders can also create risk. This approach makes data an easier and more enticing target for cybercriminals and state-sponsored attacks, which increased by 95% worldwide in 2022.⁴

Data Sharing Initiatives

When data protection laws vary greatly between nations, it can create obstacles for international data-sharing agreements and joint initiatives. For example, Open Data projects rely on the ability to freely share data across borders, which conflicts with data localization policies. This can hinder innovation, research efforts, and public-private partnerships that depend on such data.

5 Data Sovereignty Best Practices

To address these challenges, consider implementing best practices such as:

1. Conduct Regular Data Audits

Frequently audit where your organizational data is stored, processed, and transmitted. Map data flows across cloud infrastructure, services, servers, data centers, and geographic locations and identify high-risk data subject to regulations. Conducting regular audits makes it easier to fully understand your data environment, locate compliance gaps, and ensure alignment with evolving sovereignty laws.

2. Implement Data Localization Policies

Where data localization is mandated by law, keep regulated data types within the jurisdiction where they were collected. Limit access and transfers of localized data and implement policies, procedures, and access controls to enforce data residency requirements based on classification and geographic restrictions.

3. Deploy Encryption and Access Controls

Deploy data security measures like encryption, multi-factor access controls, detailed activity logging, and least-privilege data access rules. Conduct frequent security reviews to identify and mitigate potential compliance risks through advanced protections.

4. Maintain Data Governance Programs

Establish data governance frameworks addressing sovereignty considerations across the full data lifecycle. Document data flows, map data to regulations, outline governance policies, provide staff training, and implement oversight controls to embed sovereignty into your data management practices.

5. Choose Cloud Providers With Location Control

Carefully vet cloud providers based on data residency and localization capabilities. Select services that provide visibility into data locations and granular controls over data movement, and review providers frequently to ensure continued alignment with evolving sovereignty needs.

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Ensure Data Sovereignty With eStruxture's Data Centers

Data sovereignty is crucial as data crosses borders in our digital global economy – especially as cloud adoption accelerates. By establishing effective data sovereignty practices now, your business can confidently expand operations globally while respecting national data regulations. Unfortunately, maintaining sovereignty can be difficult if you're not sure where to start.

As a leading provider of data center services across Canada, eStruxture offers best-in-class security to safeguard your data and infrastructure. Each of our fifteen facilities undergo yearly third-party audits to ensure we maintain compliance with industry best practices, so you can rest easier knowing we'll help your business meet even the most rigorous compliance and data protection protocols. And the biggest advantage for Canadian businesses? Your data is physically stored within Canadian borders. Contact our experts today to get started on your data sovereignty journey.

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