Digital Trade Agreement – Achievement or Course of Action
Author: Julia Semenii
Source: IT Ukraine, 16 December 2022

At the end of November 2022, Ukraine and The United Kingdom negotiated to conclude an Agreement on digital trade. The interaction of the economies of the two countries is expected to be simplified by the more active use of digital tools, reduce costs for businesses thanks to the absence of digital content customs duties and simplification of the foreign economic activities administration, simplification of the information exchange and better customer protection. Undoubtedly, digital trade is a positive phenomenon and now we understand the importance of its development more than ever. Although the pandemic and the War are examples that we could dispense with.

This will be the second such agreement for the United Kingdom. The first was the Digital Economy Agreement with Singapore, which was signed on February 25 and came into effect on June 14, 2022. While Singapore already has four such agreements in addition to the UK, with Chile and New Zealand, Australia and South Korea. Moreover, Singapore emphasizes that it expects to further expand its digital partnership and aims to constantly improve its digital trade agreements. This is important, otherwise the legislation will hopelessly lag behind the industry. 

And so, Ukraine is on trend, and the current experience of cooperation and integration with businesses of other countries really proves that we are "digital guys". But what exactly should we expect?

There is no text of the agreement yet. You can read about the general directions of regulation (and you probably have already) in official releases, in particular, from the Ministry of Economy and on the GOV.UK portal. You can also refer to the agreement with Singapore (USDEA), as we expect that our agreement with the UK will be similar. 

In many respects, the agreement should be a framework one. Is it bad? No, because a good framework that makes it possible to fill and develop it with the involvement of specialized professionals (since the agreement covers quite different and specific issues) is a promising format. However, concrete implementation actions will be required, and it is important that they are not delayed. Find some examples below.

We sign digitally

One of the important elements of trade facilitation is an electronic signature. Currently, Ukrainian business widely uses it both in domestic and foreign economic agreements. However, a so-called simple electronic signature is usually used. It cannot be invalidated due to its electronic form, though it is not an analogue of a handwritten signature. In other words, the agreement certified by such a signature will not be invalid, but in case of a conflict, it may be necessary to prove the validity of the signature.

The USDEA defines an electronic signature as data in electronic form that can be used to identify the signer and confirm his approval of certain electronic information (or rather, "electronic data message"). Although parties to the USDEA may attach greater legal significance to a signature that meets certain requirements, more specifically, consider it to be a confirmation of the immutability of the data or identity of the signer. At the same time, the USDEA contains fairly general provisions regarding electronic authentication and electronic signature.

Specifically, it is stipulated that none of the Parties shall consider a signature invalid only because of its electronic form and shall not prevent the parties to an electronic agreement from mutually agreeing on the format of the signature or proving to the authorities that such a signature meets the requirements of the law. Each Party has the right to demand the use of certain methods of electronic authentication or signature for specific categories of transactions, in particular its certification, but the Parties will cooperate in the direction of mutual recognition of electronic authentication and EDS. 

So, if we assume that the provisions of the agreement on digital trade between Ukraine and the United Kingdom are similar, then they will not become revolutionary, since most of them are already reflected in our national legislation. Automatic recognition of electronic signatures will not occur, this will require additional implementation. Interestingly, the summaries published by the Ministry of Economy (explains the joint recognition of electronic authentication and signatures) and on the British governmental portal (here they talk discreetly about the "promotion" of mutual recognition of electronic signatures) differ here.

Data exchange - we simplify carefully

In general, a digital trade agreement is about simplifying and increasing data sharing. However, it is already clear from the summary of the agreement on digital trade between Ukraine and the United Kingdom that the protection of personal data is a special case and so additional restrictions (of course, justifiably) may be applied to them. This is consistent with the European trend of strengthening the personal data protection. And, as you know, although the UK is no longer an EU country, it has the UK GDPR, which does not massively differ from the general European regulation.

If we look again at the USDEA, we will see the general conditions on the need to adopt or maintain legislation on the protection of personal data, including such basic principles as limitations on data collection, data quality, purpose determination, restrictions on use, security guarantees, transparency, participation of the subject of personal data and responsibility; introduction of non-discriminatory practices regarding the protection of personal data; publication of information regarding the protection of personal data in relation to physical entity involved in digital trade, as well as cooperation to ensure the compatibility of data protection regimes.

So, the issue of updating the national legislation arises again. The process has already started, but it is taking a long time. The next draft of the "On the protection of personal data" law (No. 8153) was submitted to the Verkhovna Rada of Ukraine in October 2022 and is currently being processed by the specialized committee. There is no secret that the issue of personal data can at least slow down and complicate, or even block, business operation with Ukraine. In particular, for the export of personal data from the EU to Ukraine, it is necessary to carry out an assessment of the impact of data transfer, in particular in the context of the possibility of state authorities to access large data sets (we recall the Schrems II decision). And the Ukrainian side, as a rule, is expected to fill out extensive questionnaires, which, given the difference between Ukrainian and European legislation and practice, becomes a non-trivial task. So, the digital trade agreement as another push for personal data protection reform is a good thing. But it will not replace the reform itself.

Where is the server?

Another issue related to the previous one is the requirements for data storage location. Ukrainian legislation makes such demands in individual cases. The Digital Trade Agreement is expected to help get rid of unreasonable bans on data transfers. But if you look at the USDEA, there is both a general ban on requiring local processing of data for conducting business within the country, and the possibility to introduce exceptions to this rule, if they are justified and fit for purpose.

For example, currently Ukrainian legislation requires the organizer of gambling games to process information in its system exclusively on the territory of Ukraine. Will such a rule be justified if the agreement between Ukraine and the United Kingdom is going to contain a similar approach?

Final clauses 

We hope to get answers to this and other questions over time. Currently, we are waiting for the development of events and hope to inform the business about the details promptly. The final (for this post) example is from the USDEA. The Agreement provides that each Party will establish a public website with up-to-date information on the Agreement, including its text, a brief summary and any other information useful to SMEs in the context of obtaining the benefits of this Agreement. I am sure that there will be such a provision in the Ukrainian-British agreement. So, we are monitoring the situation.

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