A key component of any online business—perhaps the MOST important—is the website.
A website is a combination of computer code and data that allows visitors to the website to retrieve information about the business, sign up for accounts, place orders, and many other functions.
To make the website available to their visitors, the website must be hosted on a server which is connected to the Internet. Businesses will contact a hosting provider to provide this service.
In any case, choosing where the server will be hosted has ramifications as it will be subject to the laws of that jurisdiction.
This service can be provided in a variety of ways with a variety of features and prices:
- The website could be hosted using a shared hosting account. A shared hosting account is a service that combines websites from multiple customers on a single server. This is often the cheapest service option. It also provides the smallest amount of storage space and the lowest level of website performance.
- The website could be hosted on a virtual private server (VPS). A VPS is a service that gives you a "virtual" server to run your websites, segregated from other customers. Multiple VPS instances will be running on a single physical system. This model is more expensive than shared hosting but also provides more storage space and better website performance.
- The website could be hosted on a separate physical server. This server would be completely dedicated to one customer. This option costs much more than the other two options but provides exponentially more storage and better performance for a customer's websites.
Regardless of the option a business chooses, their website will be hosted on a physical server in a data center somewhere in the world.
And like any other physical location, the jurisdiction of the data center determines the law enforcement jurisdiction for anything running on that server.
Web hosting in the US is cheap and plentiful.
There are hosting services in the US that provide a full-featured service for less than US$10 per month. This, along with the incredibly robust US Internet infrastructure, is why so many people host their websites in the US.
There is a catch, however.
Using a US-based hosting provider puts your web presence under the jurisdiction of US law. Laws like the Digital Millennium Copyright Act (DMCA).
The DMCA is a wide-reaching law that gives people and organizations who hold copyrights in the US a strong legal hammer to remove any content online that they believe violates their copyright.
This legal hammer is usually delivered in the form of a legal request known as a "DMCA takedown notice."
The DMCA also provides greatly limited legal liability for hosting providers if they remove offending material immediately. Because of this, most hosting providers will react to DMCA takedown notices quickly, removing web pages or even entire websites to comply with the notice. This is often done before contacting the business that owns the website.
The primary issue is that the law is often misused.
In 2009, Google made a claim that 57% of the takedown notices it received were from businesses targeting their competitors . Worse still, 37% of the notices were not even valid claims!
Just imagine if your competitors could take your e-commerce website offline with a simple legal notice, preventing your customers from placing orders and halting all of your revenue.
This threat is not limited to the DMCA. Major intellectual property holders, including major media companies, have been sponsoring legislation like the PROTECT IP Act (PIPA) and Stop Online Piracy Act (SOPA) bills, which prescribe even more serious powers and draconian punishments for potential IP infringement. While these bills have thus far been defeated in the US Congress, I expect that backers of these bills will reintroduce legislation in the future.
Internationalizing Your Server to Protect Your Business
To avoid risking your business to abusive laws, you should look to host your business website elsewhere in the world than in the US. This can protect your website from false claims from intellectual property (IP) holders who would look to take down part or all of your web presence. It can even protect you if your home government oversteps its bounds.
So where might someone from an English-speaking jurisdiction look to internationalize their web hosting? Some popular options include:
Switzerland: Being in the center of Europe, Switzerland has excellent internet connectivity and a large number of well-run English-speaking hosting providers. There are no laws quite like the DMCA. Since there is no legal liability protection for content takedown in Switzerland, hosting providers must evaluate takedowns more carefully. Taking down a customer's website without proper investigation could open up the hosting provider to breach of contract and other civil claims.
Hong Kong: This is another option, especially for businesses wanting to reach customers who are primarily in Asia. Hong Kong is a popular landing site for underwater Internet cables from Japan, the US, Australia, and of course mainland China. There are a large number of hosting providers who speak English. Foreign takedown notices will generally be disregarded.
Other jurisdictions that are known for international hosting providers are Panama, Malaysia, and Iceland.
The cost and quality of the hosting providers can vary wildly, as can their English language skills, so shop around and ask plenty of questions.
But Not Just Anywhere…
There are some jurisdictions which are good to avoid, however, as the legal environment may not be much better than the US.
Australia, China, Japan, South Africa and United Kingdom are known to more readily comply with foreign takedown requests.
In July 2013, The European Commission proposed a new directive that will implement procedures very similar to the takedown notices from the DMCA. This would harmonize laws across the European Union.
Internationalize Your Digital Presence
It is critical to understand that the concept of diversifying your political risk through internationalization applies here just as it does with your savings, yourself, and your income.
You can obtain political diversification benefits for yourself and your business by spreading your digital presence across multiple friendly jurisdictions. One of the most important parts of doing that is internationalizing your website's server.
UPDATE: Offshoring your web or server hosting for your online business only provides additional protection if there rest of your business is also offshore. Any one piece of the business left in the US adds incredible jurisdictional risk to your enterprise. Please see here and here for more details.
About the Author: Kyle Gonzales is a self-taught, self-made business professional with 14 years of experience in the IT industry. Over that time, he has assumed leadership positions ranging from corporate networking to technical sales. He launched JumpShip Services, a firm that offers "multi-flagged" and offshore internet solutions that offer enhanced security, privacy, and peace of mind for your digital communications.