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Public Policy 18 October 2018

Splintering the Internet: The Unintended Consequence of Regulation

Konstantinos Komaitis
By Konstantinos KomaitisDirector, Policy Development

In early 2000, two Paris-based, anti-racism groups sued Yahoo on the basis that its auction’s site was exposing French people to more than 1,000 objects of Nazi memorabilia. In May of that year, a French court confirmed the illegal nature of the sale under French law, claiming that the company had offended France’s “collective memory.” More importantly, the judge also ordered Yahoo to identify ways to block French users from its Nazi auction site or other Yahoo sites with content deemed to be racist.

The case attracted significant attention, due to the legal precedent it could set on the right of one country to reach across borders and impose its own laws on online material stored in other countries. At the time, Yahoo’s lawyer expressed his hope that “other countries [wouldn’t] take the same route.”

Fast forward 18 years and today’s Internet is going through an intense phase of regulation with similar effects to those of the Yahoo case. Almost every country in the world is currently in the business of “regulating the Internet.” A clarification is important at this stage. “Internet regulation” is a somewhat loaded and misguided phrase. In reality, what most state actors seek to address are issues of anticompetitive behavior, content moderation, or the handling of personal data. None of these issues takes place “on the Internet.”. Instead, they occur at the applications’ layer of the Internet – what we refer as the World Wide Web. But, this is a discussion deserving of a whole different note.

But regulation of the Internet can have unintended consequences. One such consequence is extra-territorial application. It’s particularly important for what it means for a resilient, global Internet. The Internet was not designed to recognize physical boundaries or to comply with only one actor’s rules. It wasn’t being anti-conformist – it just wasn’t relevant. Resiliency is ensured through diversity of infrastructure and this diversity comes from nodes located globally, in different parts of the world. The more there is a push to try to make the Internet fit within national borders or to make it comply with one nation’s regulatory thinking for the sake of maintaining some sense of control, the more we risk sabotaging the diversity that is critical for its resilient and global nature. Extra-territorial application of laws can provide the wrong incentives for state actors to engage in a regulatory race that will only result in a fractured, less resilient Internet.

Courts, international lawyers and academic scholars are familiar with the notion of extra-territoriality as an evolving manifestation of state sovereignty, which, historically, has gone through a constant transformation seeking to adapt to an ever-changing international system. With the Internet, the pace of this has intensified.

The main challenge here is that the Internet is global, so regulations and court decisions that affect it may have extra-territorial effects. There are two questions we seek to advance as part of our concept note on “The Internet and Extra-Territorial Effect of Laws.”

  • How mindful are states about avoiding harmful and unnecessary impact outside their borders?
  • How can they minimize such negative effects?

As this concept note uses the term, extra-territoriality refers to the applications of the laws of one country to persons, conduct, or relationships outside of that country. Globalization has intensified both the quantity of transnational interactions and the interest of states in regulating them. But, when it comes to the Internet, things are a bit more complex; although by accident, globalization is an Internet feature, not a bug, and legal systems everywhere should recognize this, not try to “fix” it. We must make decisions that exert jurisdiction extra-territorially in ways that allow the Internet to evolve as an open, globally-connected, secure, and trustworthy technology for everyone. But, when a law does not specify its geographic reach, what limits (if any) could courts place on its application?

In order to answer this question, we need to first understand the causal link between social and economic progress and the Internet. The Internet is premised upon a set of fundamental properties, including openness, innovation, permission-less innovation, interoperability, collaboration, and competition. These properties allow the Internet to be a driver for new economies to emerge, for bringing societies closer together, and for allowing novel forms of political expression. These are known as the “Internet invariants” because without them, the Internet would not be like the one we know and use today.

Unfortunately, in many cases, decision-makers are imposing rules that spill over on the Internet elsewhere, hampering innovation, deterring investment in their own countries, and risking a new digital divide. You only need to look at the annex of the concept note to see how overwhelming the regulatory activity currently is.

The concept note does not suggest that regulation should not happen. Regulation is the prerogative of nation states and state actors have the responsibility to defend the interests of their citizens. However, there is a valid argument that many of the problems associated with the extra-territorial application of laws can be mitigated if stakeholders encourage decentralized, collaborative approaches, including international norms development processes. Such processes and structures can create better outcomes because they have broader participation and are more politically responsive and economically sustainable than some top down approaches.

We often talk about the importance of collaboration in the Internet. In this specific case, we must collaborate to avoid such things like inconsistency, uncoordinated action, fragmentation, and international tension, to name a few. Our thinking has shown that all these unintended consequences can be real in an environment where nation states seek to regulate the global Internet.

Read “The Internet and Extra-Territorial Effect of Laws.” The concept note is also available in French and Spanish.

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