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What Legal Tech Pros Must Know About China's New Cybersecurity Law

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By William Vogeler, Esq. on March 22, 2017 7:00 AM

Don't know about China's new cybersecurity law set to take effect in June?

Well, they say that what you don't know won't hurt you, but that is not true when it comes to China's cybersecurity law. According to a recent survey, about 75 percent of legal technology professionals didn't know about it. What's troubling is that only 14 percent of the respondents said they were "very concerned" about it.

Legal tech professionals should be concerned because the law requires foreign companies doing business in China to store their data on Chinese servers and to help government officials police the internet. Oh, and failure to abide by the law may result in civil and criminal penalties -- including death.

You read that right. Let's sum it up in two words: kong huang. It means "panic now."

Critical Information

"China is now the world's second largest economy, and for global corporations and those that aspire to be global, it is critical for them to have a full understanding of the data requirements and regulatory landscape of that region," said Dan Whitaker, a managing director for Consilio, which conducted the legal tech survey.

The survey included 118 legal technology professionals, including in-house law departments, law firms and government affiliated entities. Consilio, which provides document review and legal consulting services, conducted the survey at a legal tech conference in February.

Despite a lack of knowledge about China's new law, most of the respondents had at least one matter in China in the past two years. This included internal or government investigations, litigation and mergers and acquisitions.

"Since 2012, cyber walls have been going up in multiple regions around the world, and as countries continue to create new regulations, organizations must continually educate themselves on the quickly evolving nuances of data privacy laws in every jurisdiction, specifically as it relates to the ability to move data in and out of the countries in question," Whitaker said.

Chinese Penalties

China's cybersecurity law reserves its harshest penalty for egregious cases involving breaches of state secrets. For lesser offenses, penalties range from civil fines to the loss of doing business in the country.

The law was passed in December 2016, and quickly drew criticism from foreign companies concerned that they would have to house intellectual property in China and trade market access for helping the government fight its security issues.

"China is an internet power, and as one of the countries that faces the greatest internet security risks, urgently needs to establish and perfect network security legal systems," said Yang Heqing with the National People's Congress.

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