Epochal struggle: digital sovereignty and the EU

January 2022  |  FEATURE | DATA PRIVACY

Financier Worldwide Magazine

January 2022 Issue

With data increasingly being treated as a commodity – that can be owned, controlled and protected – the concept of ‘digital sovereignty’ has become a key component of policy discourses on digital issues in recent years, with countries across the globe pushing to claim authority over their data.

While the term ‘digital sovereignty’ is open to a number of interpretations and associations, the World Economic Forum (WEF) defines the concept “as the ability to have control over your own digital destiny – the data, hardware and software that we rely on and create”.

The 2021 research report ‘Data sovereignty: A review’, which reviewed 602 papers discussing sovereignty in the digital context, concluded that ‘data sovereignty’ is typically employed to refer “in some way to meaningful control, ownership, and other claims to data or data infrastructures”. Additional data sovereignty issues include restrictions on data flow, internet filtering and censorship, and data localisation requirements, such the requirements to utilise certain technologies.

However, according to the 2021 Hinrich Foundation report ‘Digital Sovereignty: protectionism or autonomy?’, as an emerging policy area, digital sovereignty is by nature a “fuzzy” concept. “Those who speak of the issue tend to use the term interchangeably with other terms like cyber sovereignty,” states the report. “As implied in the term, digital sovereignty combines two subject areas – that of the digital realm and that of sovereignty, a term indicating supreme authority over a geographic space.

“Usually, the term ‘sovereignty’ ties that authority to a specific jurisdiction or territory, and describes self-determinism exercised by individual states,” continues the report. “The concept of digital sovereignty blends these previously unconnected concepts, describing a situation in which a government claims supreme authority over the non-territorial realm of cyber space.”

In the view of Henry Gao, associate professor of law at Singapore Management University, there are some who dismiss the concept of data sovereignty as an oxymoron. “Data, by its nature, transcends borders, while sovereignty traditionally has been understood to be confined to within borders,” he explains. “Further complications would arise when the data is generated, processed, stored and disseminated in different jurisdictions, as has become commonplace in cyber space these days.”

What cannot be disputed is that a vast amount of data is created and stored each year. According to the 2020 Oliver Wyman report ‘European Digital Sovereignty: Syncing values and value’, the quantity of global data processed is expected to increase from around 50 zettabytes (50 trillion gigabytes) to 175 zettabytes by 2025, implying a compound annual growth rate of 27 percent – growth that will be enabled by 5G networks and the internet of things (IoT).

In terms of Europe, the digital economy is expected to add 1.1 percentage points annually to the European Union’s (EU’s) economic growth and to boost gross domestic product (GDP) by more than 14 percent by 2030, implying an extra €2 trillion of GDP by 2030, similar to Italy’s current GDP.

Across the EU

Due largely to its prominence in Germany, France and on the European level, the issue of digital sovereignty has become a concern for many European (EU) policymakers, who feel there is too much control ceded to too few places, too little choice in the technology market and too much power in the hands of a small number of large technology companies.

Upon taking office in December 2019, Ursula Gertrud von der Leyen, president of the European Commission (EC), pledged to enhance digital capabilities across the EU, characterising it as a top priority. In a statement just prior to her appointment as president, Ms von der Leyen called for Europe to achieve “technological sovereignty in some critical technology areas”. Adding his voice to the EC president’s, Peter Altmaier, German economy minister, equated the storage abroad of European data by US cloud-services companies to a loss of sovereignty.

“In authoritarian and semi-authoritarian countries such as China and Russia, governments have long striven for more sovereignty in the digital sphere,” says Dr Julia Pohle, research fellow in the Politics of Digitalization Research Group at the WZB Berlin Social Science Center. “Under the umbrella term of digital sovereignty, we have witnessed a number of claims and calls, all seeking to increase the independence, autonomy and decision-making capacity of European states, companies and citizens with regard to the digital sphere.”

Calls for more self-determination in the digital sphere started to emerge in 2013 after the Snowden revelations and have increased over the years due to general discomfort with the current US-dominated form of the platform economy and the growing power of Chinese companies in the digital economy.

In 2020, this discomfort was underlined by the decision of the Court of Justice of the European Union (CJEU) to invalidate the EU-US Data Protection Shield – a 2016 agreement to regulate the transfer of the data of European users to processors in the US for commercial purposes. In short, the CJEU concluded that the US had not offered sufficient guarantees about the surveillance and security of personal data.

“Today, the digital environment, including the way in which digital data is and can be used, is much more heavily regulated than in the first decades of the internet, and attempts by state actors and supranational institutions, such as the EU, to shape and enforce new regulations continues to increase,” asserts Ms Pohle. “In this sense, the calls for digital sovereignty just give a discursive frame to a regulatory development which is already well advanced.

“In my opinion, states are not losing control over their data or their capacity to shape and enforce legislation,” she continues. “They have never had this control as the internet and its governance system was intentionally built to avoid interference by single states. Instead, states are increasingly claiming and gaining this control.”

Rallying call

In March 2021, uniting behind a rallying call that it was “time for Europe to be digitally sovereign”, the leaders of four EU countries – Germany, Denmark, Estonia and Finland – put their names to a joint letter stating a need to foster the digital single market in all its dimensions.

Boiled down, the heads of state desire a market where innovation can thrive and data can flow freely, competition and market access are effectively safeguarded, and critical infrastructures and technologies are in place to assist the EU to become resilient and secure in the use of its data.

“It is time for the digitalisation of governments in order to build trust and foster digital innovation,” stated the quartet. “We want to develop our capacities and competencies in areas where we want to be more self-determined with democratic partners around the world and building on a strong transatlantic relationship.

“At the same time, we want to strengthen and further develop mutual cooperation and synergies,” they continued. “Digital sovereignty is about building on strengths and reducing strategic weaknesses, not about excluding others, or taking a protectionist approach. We are part of a global world with global supply chains that we want to develop in the interests of us all.”

To address the challenges Europe faces in controlling its digital destiny, the leaders highlighted three key action areas: (i) identifying Europe’s potential strengths and strategic weaknesses in the technology sphere; (ii) widening the use of open markets and supply chains to avoid an overreliance on proprietary systems; and (iii) creating an evaluation framework to ensure technology use remains in line with broad European ideals of delivering social, scientific and economic benefits.

The key concern around digital sovereignty is the control large technology companies exert over massive amounts of user data (the WEF estimates that 92 percent of all the data in the Western world is stored on US-owned servers). This concern is driving calls for a rules-based system that allows for greater ownership of vital technology assets at a local, national and regional level.

In the view of Ms Pohle, in a globally interconnected world, it is impossible to gain complete control over sovereignty in data. “The aim to strengthen digital sovereignty can therefore only be a means, never the final goal, to increase our capacity of self-determination,” she explains. “In order to achieve a higher level of self-determination, a very coherent strategy, which includes clear goals, is fundamentally important. Therefore, a digital action plan is certainly the right step on this path.”

Ahead of the curve

With Europe’s technological capacity and its ability to establish values ​​and rules in a technology-centred world presently dominated by other countries, the EU’s mission is to speed up the drive for digital sovereignty and get ahead of the curve.

“The calls for digital sovereignty are increasingly linked to the idea of protecting ‘European’ or ‘democratic’ values, and to shape a digital transformation that is based on these values,” says Ms Pohle. “I expect that this rhetoric will continue to increase and that the notion of digital sovereignty will further be related to concepts such as sustainability, public good and welfare. However, this framing needs to be treated with caution, as it often seems to hide among other interests, such as economic and security.”

Moreover, protecting ‘European values’ will certainly be costly. According to the Oliver Wyman report, the cost of achieving digital sovereignty and increasing the scale of Europe’s digital industry is likely to be more than €500bn: €130bn for 5G, €200bn to build a distributed cloud and edge infrastructure, €100bn to boost artificial intelligence and €100bn to improve cyber security defences.

“The funds will have to come from both public and private sources,” states the report. “If spent judiciously, they could propel Europe’s digital economy forward much faster than is currently projected. These investments will lead to the creation of high value-added jobs and can help shorten the gap in digital skills while feeding a virtuous circle.”

In this, technologies such as 5G represent a turning point, giving Europe the chance to change the structure of the digital world. Success will need rapid, large-scale action and, while investing more will be important, it will not be sufficient.

Ultimately, in its quest for digital sovereignty, the EU must develop a path aligned with its values of cooperation and security and rely on its digital assets: a momentous task that, at least for the moment, is very much an epochal struggle.

© Financier Worldwide

BY

Fraser Tennant