Data localisation in Russia: A self-imposed sanction

Cross-border data flows are an integral mechanism of today's economy, impacting a country's competitiveness and growth. All economic sectors rely on secure, cost-efficient and real-time access to data. A requirement that all data-related business processes must take place within a country does not only affect social networks and e-commerce, but any business directly or indirectly. The Russian privacy legislation (the "OPD Law") has been amended by a new law (FZ-242) that includes a clear data localisation requirement. Article 18 §5 of the law requires data operators to ensure that any collection or use of personal data of Russian citizens is made using databases located inside Russia. Data localisation leads to productivity losses as firms may not be able to use services provided from abroad, or must set up their own domestic data centres inside Russia. Experience shows that the data-intensive service industry will pass on new costs from regulatory compliance to other sectors of the economy, and the productivity loss it generates leads to lower returns of investment. (...)