Could the recently enacted data localization requirements in Russia backfire?

In the wake of ex-NSA contractor Edward Snowden’s surveillance revelations to the global public, and despite an unimpeded cross-border data flow and knowledge transfer being a pre-requisite for the development of the digital economy, governments around the world are increasingly tending to resort to mandatory local data storage and to restrictions and bans on data transfers in a rather drastic attempt to protect their citizens’ data security and privacy. This paper discusses the legal and economic aspects of the recently enacted data localization requirements in the Russian Federation, as well as the consequences for costs, uncertainty, and the hampering of business activities that may arise if they are applied unaltered. The principal conclusion reached is that a less extreme solution that adheres to or builds upon the existing global practices and takes into account non-economic goals should be considered.