Published : Aug. 23, 2016 - 13:44
The digital age has complicated conventional rules of national jurisdiction. National jurisdiction under international law is drawn along the physical boundaries of a state, and looks at who or what is located inside the boundaries. The “borderless” nature of cyber activities has made this traditional rule outdated and detached from reality. Cyber activities have virtually no relevance to national boundaries. But the law is the law, and states have to find a territorial hook to exercise jurisdiction for cyber activities.
One such hook is the location of a server. It is indeed a physical item located in one state, so fits with the conventional rules. Thus, now the location of a server dictates the national jurisdiction, including taxation issues. Digital companies pay their corporate taxes where their servers are located. Concerns are being raised that this traditional rule creates loopholes for internet-based companies. But suggestions for new rules are still on the drawing board. Until then, conventional rules remain the standard.
One major anxiety over the perceived loophole is to do with the disadvantages for domestic digital corporations. While domestic providers are subject to a web of regulation including taxation and everything, their foreign competitors with foreign servers are basically not. So, regulatory restrictions for foreign companies are sometimes perceived (erroneously) as a counterweight to level the playing field.
Speculations have arisen whether these two practical considerations may have underpinned the debates over Google’s June 1 request for a permission to transfer the digital mapping data from Korea to its foreign servers. The data on point is 1:5,000 scale map data compiled by the National Geographic Information Institute, information in great demand for digital commercial services. The statutory deadline for a decision is Wednesday. A pan-governmental committee is scheduled to mull over the request one final time before it issues a decision.
Over the summer, it has been reported that a national security concern is the issue of contention. The digital information requested is the same information provided to Korean service providers (such as SK Telecom’s T-Map), but exporting it to outside locations may let it fall into the wrong hands in terms of national security, the government cautions.
Information on the locations of key facilities is already available online from various mapping service providers and satellite image companies. People marvel at the level of resolution and graphic detail of the images of structures and facilities available on the internet for free or that they can purchase. The question then is, what additional security risk does this provision reduce? There may be some, but extra efforts need to be made to explain it with all these digital images already stacked up and updated in public domain.
So, realization of this reality has fueled the said speculation. If the hidden agenda is the taxation issue for the global digital company, this may not be the best way to find a solution. The rule, for better or worse, is still based on the location of servers. Foreign corporations pay their corporate taxes when they have permanent establishments in Korea. The OECD has been contemplating introducing new rules here but they are slow in coming. Some countries are trying new rules, but there are still many things to be clarified.
If, on the other hand, the underlying reason is to somehow favor domestic service providers, it seems more problematic. Market competition through non-discriminatory treatment is the cardinal rule countries have agreed to. Dominant Korean service providers in this sector do not provide their mapping service in English, leaving a sizable segment of people -- foreign residents and tourists -- outside the service coverage. Competition may help change their service model.
Again, this is just speculation raised over the summer debates, so they may not reflect the situation accurately. Obviously, there may be other valid reasons that make the government cautious and hesitant here. But at least the upcoming committee deliberation is a misplaced forum to cater to these two considerations.
By Lee Jae-min
Lee Jae-min is a professor of law at Seoul National University. -- Ed