The Legality of Data Residency Requirements: How Can the Trans-Pacific Partnership Help?

Journal of World Trade 51, no. 2 (2017): 183–204.

31 Pages Posted: 2 May 2017

See all articles by Shin-yi Peng

Shin-yi Peng

National Tsing Hua University

Han-Wei Liu

Monash University

Date Written: April 15, 2017


Article 14.13 of the Trans-Pacific Partnership (TPP) Agreement – the data localization (DL) clause – represents the first time that a far-reaching preferential trade agreement (PTA) seeks to reduce protectionism arising from data residency (DR) requirements. The DL clause, however, is linked to a loose GATT Article XX-like exception: Article 14.13(3)(b), which allows the parties to maintain DR measures to achieve a legitimate public policy objective as long as the measure in question can satisfy the ‘necessity test.’ The ambiguity of the DL exception will be clarified by TPP tribunals when a real dispute occurs. After examining the rationales of the DR measures in the context of the necessity test, we find that the responding party invoking a DL exception will have strong arguments, especially when defending Types II and III of the DR measures. Arguments could be made that there is a genuine relationship between the ends, i.e., privacy protection, and the means, i.e., the DR measures. In addition, the responding party invoking a DL exception in a potential dispute would undoubtedly argue that the Mutual Legal Assistance Treaty (MLAT) cannot qualify as a ‘genuine alternative’, because the proposed measure must not only be ‘less trade restrictive’ than the DR measures, but should also ‘preserve for (the responding party’s) right to achieve its desired level of protection’ with respect to law enforcement or a criminal investigation. Based upon our findings, we argue that with regard to TiSA and TTIP negotiations on e-commerce, the major challenge of trade negotiators is the disciplinary fragmentation of global economic regulation. The DR issues in question confirm that international economic law (IEL) correlates to other areas of law. Future negotiations require more collaborative and interdisciplinary solutions through productive dialogue with experts in private international law and criminal procedure law. True and substantial changes in the theories and practices of Internet jurisdiction would allow us to argue for a more narrow interpretation of the DL exception – rendering it more difficult to satisfy the necessity test.

Keywords: data localization, data residency requirements, cross-border data flow, the necessity test

Suggested Citation

Peng, Shin-yi and Liu, Han-Wei, The Legality of Data Residency Requirements: How Can the Trans-Pacific Partnership Help? (April 15, 2017). Journal of World Trade 51, no. 2 (2017): 183–204., Available at SSRN:

Shin-yi Peng (Contact Author)

National Tsing Hua University ( email )

101, Section 2, Kuang Fu Road
Hsinchu, Taiwan 300


Han-Wei Liu

Monash University ( email )

900 Dandenong Road
Caulfield, Victoria 3145

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