Following the imposition of the controversial National Security Law in Hong Kong on June 30 2020, the region has witnessed weeks of continuous violence and arbitrary arrests by the Hong Kong police department. Amongst these, the most talked about is the recent arrest of Hong Kong’s business tycoon and activist Jimmy Lai, a UK citizen, for allegedly colluding with foreign forces.
Any person (including a foreigner) who criticises the government, from anywhere in the world can be held criminally liable under the law.  This has been borne out by the arrest of Jimmy Lai.
The chilling effect of the law also extends to companies, especially media (including social media) and internet-related companies. The police has been granted wide powers, including the authority to conduct searches in company offices without a warrant and to obtain user related information (identification record and decrypted information of users) from media/internet companies. If any company fails to provide such information, it is liable for a fine of $12,903 (100,000 Hong Kong dollars) and imprisonment for six months.
The extra-territorial operation of the law, however, lacks clarity. For instance, it is not clear whether the Hong Kong police department has the authority to conduct searches in the offices or to obtain user-related information from companies which do not have an office/operations in Hong Kong. Clarity on these aspects is expected only after the government publishes detailed rules or when such cases come up.
Nevertheless, such provisions put the companies which have data centres in Hong Kong, at risk of being raided by the law enforcement agencies.
Following the enactment of the law, Facebook (including Whatsapp), Twitter, Telegram, etc. have paused processing data requests from law enforcement agencies in Hong Kong, citing concerns of privacy and freedom of expression. Apple has not followed suit, stating that it is still assessing the new law.
In such an unpredictable environment, the multinationals would have to eventually contemplate shifting their data centres outside of Hong Kong. This would ultimately kill the growth of Hong Kong as the hub of data centres.
India is the second fastest digitising nation in the world, whose data centre market is expected to reach about $4 billion in value by 2024. The Government of India is shortly expected to come out with a policy to enable the private sector to build data centre parks across the country. Some state governments, like those of Maharashtra and Telangana, already offer a host of attractive incentives like tax exemptions, providing land at subsidised cost, permission to set-up data centres even in residential and no-development zones, etc. to entice companies to set up their data centres in their states. Such policies reduce the cost of storing data in India considerably.
This is already paying dividends. In January 2019, the Adani Group signed an MoU with the Government of Telangana to invest Rs. 70,000 crores ($935 million) for setting up data centre parks in the state. The Hiranandani Group has set-up a Rs. 1,000 crore ($13.3 million) data centre in Maharashtra, with plans to expand to other metros. International players like Oracle, Amazon, Google, etc. also have cloud data centres in India. Additionally, Amazon Web Services will reportedly be investing around $1.5 billion to set up data centres in India.
The unpredictable environment in Hong Kong where tech companies are grappling with the arbitrary enforcement of the new law, has definitely opened opportunities for countries like India to promote themselves as an alternative to Hong Kong for companies to set up their data centres.
Lakshesh Sihag is an intern at Gateway House. He is pursuing his final year in B.A.LLB from the Rajiv Gandhi National University of Law, Punjab, Patiala, with specialization in Constitutional Law.
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 Separatism/Secession (Article 20), including aiding, assisting, assisting or funding separatism (Article 21), Hong Kong National Security Law. Available at https://www.chinalawtranslate.com/en/bilingual-hong-kong-national-security-law/
 Subversion of state power (Article 22), including aiding, assisting, or funding subversion etc. (Article 23, Hong Kong National Security Law. Available at https://www.chinalawtranslate.com/en/bilingual-hong-kong-national-security-law/
 Terrorism (Article 24), including leading or participating in terrorist organizations (Article 25), criminal support for terrorism (Article 26) and advocating terrorism (Article 27), Hong Kong National Security Law. Available at https://www.chinalawtranslate.com/en/bilingual-hong-kong-national-security-law/
 Collusion with foreign and Taiwan forces (Article 29), Hong Kong National Security Law. Available at https://www.chinalawtranslate.com/en/bilingual-hong-kong-national-security-law/
 Article 36-39, Hong Kong National Security Law. Available at https://www.chinalawtranslate.com/en/bilingual-hong-kong-national-security-law/.
 Article 43(1), Hong Kong National Security Law. Available at https://www.chinalawtranslate.com/en/bilingual-hong-kong-national-security-law/
 Article 43(4), Hong Kong National Security Law. Available at https://www.chinalawtranslate.com/en/bilingual-hong-kong-national-security-law/
Rule 4, Para 2, Implementation Rules for Article 43 of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region. Available at https://www.info.gov.hk/gia/general/202007/06/P2020070600784.htm#:~:text=The%20Implementation%20Rules%20provide%20for,measures%2C%20so%20as%20to%20improve
 Rule 7, Para 2, Implementation Rules for Article 43 of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region. Available at https://www.info.gov.hk/gia/general/202007/06/P2020070600784.htm#:~:text=The%20Implementation%20Rules%20provide%20for,measures%2C%20so%20as%20to%20improve
 Naver, South Korea’s largest internet portal has already shifted its data centre from Hong Kong to Singapore citing privacy concerns under the national security law. https://www.ft.com/content/4fa8d97e-7231-4459-90ff-3ba3773a3124.
 According to a Report by Research and Markets. https://www.businesswire.com/news/home/20190124005357/en/4-Billion-Data-Center-Market-India–
 IT/ITES Policy 2015, Government of Maharashtra. https://www.maharashtra.gov.in/PDF/Web_Marathi_IT-ITES_Policy_2015.pdf
 Data Centres Policy, 2016, Government of Telangana. https://www.telangana.gov.in/PDFDocuments/Telangana-Data centres-Policy.PDF
The policy provides for setting up of Data Centres Campus, which shall host data of companies irrespective of their size. The incentives under the policy include, reduced tariff for power consumption, rebate on building fee, , partial reimbursement on internet charges for initial years, etc.