DSA business presence requirements
On October 4, the Council of the European Union approved la Digital Services Law (Digital Services Act or DSA for its acronym in English) which aims to regulate the responsibility of companies regarding content moderation, increase transparency, protect the privacy of users and regulate other services that take place in the digital realm.
This law deserves to be analyzed and discussed because some of its points – which are usually presented in this type of regulation – propose control over the digital territory. One of these issues, which will be discussed in this blog, is pertinent to article 11 that regulates the requirements of local presence in European territory.
Let's see:
"Intermediary service providers established in a third country that offer services in the Union must designate a legal representative in the Union sufficiently empowered and provide information regarding their legal representatives, so that supervision is possible and, where appropriate, the effective implementation of this Regulation in relation to said providers. It should also be possible for the legal representative functions as a point of contact, provided that the relevant requirements of this Regulation are met” (highlighting is my own).
Simplifying, it could be said that the discussion points of this article are: (i) the obligation to designate a local representative; (ii) the duty to provide information regarding legal representatives, to facilitate supervision; and (iii) that the legal representative must function as a point of contact.
As was analyzed in this In an article by CELE, for a certain sector of civil society and specialized academia, the obligation to designate a local representative entails the risk that companies will be subjected to the arbitrariness of a government and, for this reason, they have been designated as hostel clauses, that is to say: "clauses designed to retain the representatives and force them through that personal jurisdiction to execute and implement local orders of all kinds, including orders contrary to human rights." We can assume something of this from reading the second paragraph of article 11 of the DSA:
“Intermediary service providers shall direct that their legal representatives be approached, in addition to the provider or instead of the provider, by the authorities of the Member States, the Commission and the Board in all matters necessary for the receipt, compliance and execution of the decisions issued in relation to this Regulation. Intermediation service providers will provide their legal representative with the necessary powers and resources to cooperate with the authorities of the Member States., the Commission and the Board and comply with such decisions” (highlighting is my own).
It is along these lines that some have expressed concerns regarding this type of regulations by allowing possible arbitrariness empowered by this type of newsroom on content moderation. Additionally, if they do not comply with the established obligations, the third paragraph of article 11 of the Digital Services Law provides that:
"The designated legal representative may be held responsible for non-compliance with the obligations set forth in this Regulation, without prejudice to the responsibilities and legal actions that could be initiated against the provider of intermediation services”.
As you can see, this paragraph attributes responsibility to the designated representative for the refusal to cooperate with the requests of the different States of the European Union (this personal responsibility on the part of the representative is what has given it the name of clauses hostage o host).
Importantly, the requirement for social media companies to have a local presence seems to be becoming a global trend. As a representative example of the phenomenon, we can mention some cases such as the Netz DG in Germany. The section 5 of said standard determines the obligation of companies to designate a local representative, as observed in article 11 of the DSA. Likewise, the German norm provides for fines for those platforms that block or eliminate openly discriminatory content or hate speech. This can be problematic in terms of freedom of expression, because it can reach protected speeches, not necessarily discriminatory, but that the government interprets as violating the law. Consequently, the right to demonstrate without interference and to use any type of media to disseminate their expressions could be affected.
In addition to being considered possible censorship, this type of government action could impede access to any type of information, affecting the right of citizens to be constantly informed and to receive all types of ideas, opinions or thoughts from whoever disseminates this type of content. Therefore, companies would be subject to making decisions that will harm the rights and freedoms of their users and the possible sanctions that may affect them by the State.
On the other hand, in Brazil, for example, a initiative whose regulation also requires the appointment of a local representative and, in addition, establishes responsibilities for companies specialized in social networks or private direct messaging providers that have more than two million registered users, whether or not they are based in said country. One of the points under discussion is the one related to the obligation imposed on companies to provide state authorities with the data found in direct messaging applications, to be used in criminal investigation procedures by means of a court order, subjecting between the sword and the wall to companies with judicial sanctions as happened against the vice president for Latin America of the social networking company Facebook, Diego dzodan Arrested for refusing to share WhatsApp messages sent by suspected drug traffickers with police, only to be released by a judge, calling his arrest "illegal coercion."
This is not an isolated phenomenon since there are cases in which government authorities tend to abuse the processing of data that is hosted in this type of application to take measures that repress the rights of citizens in favor of a defined policy, mainly affecting companies as a tool to affect these rights .
In any case, the issue is not settled and the requirement to designate a local representative for the provision of certain services in the territory of a country does not seem to be unreasonable either. Without going any further, in Argentina, Law No. 24.653 on Automotive Cargo Transport of Argentina, in its art. 7.a, establishes that, in order to provide services in the country, companies have the obligation to have their legal seat of administration located in the territory of the Argentine Republic, in addition to requiring the registration and registration of vehicles.
However, the commercial requirement or demand cannot be judged in isolation from the "respect for the rule of law" of each country. In other words, this requirement cannot be analyzed in the same way as how it develops from a country with a good rule of law to one that has a bad rule of law. A basic condition, which is worth studying because it can affect the way in which we should evaluate this type of requirements.
Other possible consequences of forcing companies to appoint a local representative
In addition to the potential human rights violations mentioned above, the possibility of imposing fines on companies that do not comply with these requirements or with the orders issued by a government can represent great losses for companies. For this same reason, there is the possibility that, given these new obligations, foreign companies decide to stop providing services in the country, losing business opportunities that, in turn, affect local or smaller companies that draw on that ecosystem.
Faced with this, we must not ignore the fact that small and medium-sized companies have benefited the most from the platforms and that in economic matters it can be more productive and beneficial than paying for advertising in other media such as radio, television, or even online. through fences. Hence, if digital platform companies decide to withdraw (as happened in Russia with LinkedIn) by this type of regulation, small and medium-sized companies would also be seriously affected.
Finally, and although we will not address this issue here, these types of regulations could in turn be contrary to international economic law since there is a possibility that they are incompatible with obligations assumed by each country in specific trade agreements.
For all of the above, it seems important to us that when addressing the preparation and drafting of this type of measures, the criticisms and possible risks outlined by academia and civil society are taken into account to fully assess the compatibility of these measures. measures with international human rights law, international trade law and their possible economic impacts.
