The EU’s new data legislation will significantly reform the business environment by creating a framework and rules for the data-driven society and economy of the future. A new single market for data, one that is based on European values, can help realise the benefits of data in various areas of society.
Sitra’s new working paper, EU regulation builds a fairer data economy – the opportunities of the Big Five proposals for businesses, individuals and the public sector, analyses the European Commission’s five new data legislation proposals that will put the European strategy for data into action. The working paper was written in collaboration with the law firm Bird & Bird.
The same rules for companies large and small
The new legislative proposals aim to provide all companies with a level playing field, rein in the power of the digital giants and enhance competitiveness. The new data legislation will have an impact on everyone, from small enterprises to the public sector and from individuals to organisations.
“The new data regulations can be seen as a new ‘GSM moment’ for Finnish companies. The regulations require that data moves without stating how. There is now demand for Finnish leadership in this regard,” says Laura Halenius, Project Director of the Roadmap for a Fair Data Economy project at Sitra.
The sharing of data between different parties and organisations can be compared to the transformation of the telecommunications market, when the rules changed to allow callers using different operators to call each other. The GSM standard was adopted to enable interoperability and the sharing of databases of subscribers and guests on the networks. A similar transformation is now imminent with the data economy.
“The more Finnish companies are engaged in creating new rules, the greater the likelihood that those new rules will constitute the foundation for EU-level rules and standards. This benefits companies,” Halenius points out.
According to the working paper, the new legislative proposals effectively promote the objectives of the European strategy for data, which include strengthening Europe’s technological leadership. The starting point is that all companies, regardless of their size and home country, are subject to the same rules. The legislative proposals also aim to support the EU’s digital and green transition.
However, compliance with complex regulations will require a great deal of effort from companies. Those that have the ability to quickly adjust to the new regulatory environment will have an advantage.
“The regulations that are now being created will create opportunities for European companies. For these opportunities to be seized, it is necessary to support the SME sector in particular,” says Halenius.
New solutions for managing personal data
The working paper focuses on the following proposals that are making their way through the EU’s legislative process:
- the Data Governance Act
- the Digital Markets Act
- the Digital Services Act
- the Artificial Intelligence Act
- the Data Act.
The proposals will harmonise the EU’s regulatory framework, which is currently fragmented. The aim is to create a competitive model for data economy regulation that could serve as an example to other countries. The EU aims to have a similar impact on data regulation as it had with the GDPR, which has shaped the data protection landscape worldwide.
The Big Five legislative package introduces new rights for individuals and strengthens their existing rights. At the same time, it represents a paradigm shift from the current model, in which individuals are the object or source of data for the benefit of the industry.
The Data Act, for example, creates an obligation for companies to provide users with access to the data generated by their connected IoT devices, whether those users are individuals or other companies. This would give users greater choice between service providers and thereby increase competition in the market.
For example, a car manufacturer could be required to allow access to data generated during the use of a car. The user of the car could benefit from this data portability when choosing a car maintenance service provider, for instance.
Until now, the lack of a regulatory framework for secure sharing has been a problem that has reduced various parties’ interest in sharing data. Even many non-profit projects may fail to be implemented if it is not possible to access various data sources securely. This could have an impact on the data-driven development of innovations in medicine or public services, for example. This will change under the new regulations.
Facilitating fair and equal contracts; introducing new rules for the use of AI in the public sector
While data provides SMEs with new business opportunities, SMEs have thus far been the weaker party in the context of contracts concerning data. The new regulations will establish more equal and fair contractual terms in B2B relationships. They will also make it easier to switch between cloud service providers, for example.
In the public sector, the lack of clear rules and a legal basis has limited the use of AI in public services. The new legislation will make this easier by laying down the rules governing the purposes for which AI can be used.
The new legislation will also facilitate the sharing of data collected by the public sector between the government and individuals. This type of data can also be reused to develop personalised medicine, advance research or improve public services.
The working paper also discusses the types of new services that may be introduced as the data economy develops, what kinds of civic skills are necessary for participating in the data economy and whether companies and the public sector are prepared to seize the new opportunities.
According to the study, the opportunities created by the proposed European model for a data economy can only be grasped if regulation is complemented by investment, research and upskilling.
Four recommendations on how Finland should move forward
The working paper presents a set of recommendations for Finland to extract the full benefit of the opportunities created by the regulatory reforms.
- Finland needs to be recognisable as an attractive model country in the data economy. The regulatory environment must be made clear, and investments need to provide incentives for seizing new opportunities. Developments in key peer countries need to be monitored to apply the best practices in Finland.
- The public and private sectors need to have a shared vision of a fair data economy. Long-term co-operation needs to be sought through national co-ordination. The public and private sectors need to work more closely together to promote the necessary measures.
- Data regulation should be influenced at the earliest stage possible. It is important to keep an eye on the overall picture of data regulation. The openness of data in the public sector needs to be developed.
- Understanding the basics of the data economy needs to become a new civic skill, and skills need to be developed on a broad front. Individuals need to recognise the value of their data (for example, personal data is comparable to paying in money) and their rights as data economy participants.
The working paper also underscores the importance of educating specialists and data experts. A shortage of skilled professionals could compromise the goals of the European strategy for data and weaken Finland’s position in the digital economy.
The working paper is a follow-up to Sitra’s memorandum (in Finnish) on Finland’s strengths, challenges and opportunities in the development of the data economy, and what Finland can learn from the leading data economy countries. The memorandum was published in January 2022 and highlighted infrastructure, skills, collaborative networks, regulation and accountability as priority areas in which Finland should pursue national co-operation to develop the data economy.
The working paper was written as part of Sitra’s Roadmap for a Fair Data Economy project, which helps various parties recognise opportunities in the data-driven economy of the future. The reports prepared under the project provide a situational picture of the development of the data economy and build a foundation for the national roadmap effort that is being initiated as part of the project.
Sitra held a publication event for the new working paper on 7 June. The title of the event was “EU regulation builds a fair data economy – Sitra’s recommendations for seizing the opportunities in Finland”.