Cyber cos concerned about export restrictions

cyber security

Israeli cyber companies will hold an emergency conference next week to protest planned cyber exports supervision.

Israeli cyber companies are concerned and uneasy, following the publication of a draft supervisory order formulated by the defense establishment making cyber system exports contingent on obtaining a license, similar to arms deals. The draft order was reported exclusively last Monday in "Globes."

Dozens of cyber companies and concerns active in the sector are expected to take part in an emergency conference next week to be conducted by the cyber and internal security department of the Herzog, Fox & Ne'eman law firm. Sources active in the sector asserted that increasing supervision of cyber system exports in the manner proposed in the draft would cause cyber companies to shift their business overseas. Others warned of the possibilities that "companies will collapse or transfer some of their business currently conducted in Israel overseas."

The draft order was drawn up over three years. In addition to the heads of the Ministry of Defense Defense Export Controls Agency (DECA), representatives of the Ministries of Foreign Affairs and Economy and Industry, the National Security Council, and the National Cyber Bureau in the Prime Minister's Office took part in writing the order. "At the end of three years of discussions on the subject, Israel plans to put many of the cyber systems developed and produced by Israeli companies on the list of military equipment. Although no country has done this, Israel is likely to become the country with the most cyber regulation," Herzog, Fox & Ne'eman Public International Law, Defense and Homeland Security partner. Adv. Daniel Reisner told "Globes" today. "The cyber industry is frightened, and at two levels. There is a general concern that supervision will become tighter - the motivation of entrepreneurs in the sector to found companies in Israel will wane, and the connection between these things has been proven. Regulation also has a chilling effect: the more regulation, the fewer sales."

Defense Export Controls Agency director Dubi Lavi is also slated to take part in next week's emergency conference. The concerns operating in the Israeli cyber industry have three weeks to file objections to the draft order, which has been recently published for public response. Many of those involved in the sector told "Globes" over the past two days that they were studying the new order and its possible effects on the volume of activity in the sector. Many of those involved in the cyber industry agree that supervision of exports of systems with offensive capabilities is necessary, but believe that supervision should be more restrained than what is proposed in the draft supervision order. "I understand the idea, and I don’t want cyber systems developed in Israel to be used at some stage to attack Israel," says Israel Association of Electronics and Software Industries director general Shlomo Waxe. "At the same time, the definitions at the moment are very broad, and will require companies active in the sector to constantly run to the Ministry of Defense to find out what they are allowed and not allowed to export. This order requires clarifications and as much precision as possible; otherwise, the industry will face many obstacles that will kill it. In the current form of the order, concern exists that the competitiveness of many companies in the sector will be affected."

Senior cyber industry figures have warned in recent days that the new order goes too far, compared with the regulation being introduced in the field in other countries. According to Reisner, an attempt to introduce extensive supervision of exports of such systems developed in the US was halted, following strong opposition from major companies, including Google. He added that many countries recognized the need to supervise cyber exports under an amendment to the Wassenaar Arrangement (an agreement by a number of countries to supervise imports of conventional weapons and items and technologies that can be used for civilian purposes, but which can also be converted for military use). An amendment to the Wassenaar Arrangement in recent years included cyber systems with offensive capabilities. "The US government extended supervision beyond the Wassenaar Arrangement, but before the supervision went into effect, the relevant order was transferred to US industry for comment. 264 companies filed their comments with the administration, most of them based on the argument that extensive regulation would cause serious to very serious damage to the ability of US cyber companies to operate in the field. The US administration accepted the comments, rescinded the measure, and halted it for reconsideration. Since last summer, the administration has held a number of discussions on the subject. As of now, the US proposal is not progressing, and will probably not go ahead in 2016," Reisner declared, adding, "In Israel, after a joint inter-ministerial team discussed the matter for three years, it submitted a proposal for regulation that would in effect put cyber systems on the supervision list for military equipment - something that no other country in the world has done. If this order becomes effective, Israel will be the country with the most cyber regulation in the world. It would be well to ask why we need to be the pioneer among all the countries in the world in this supervision, and why we shouldn't wait and perhaps learn from others' mistakes before testing it on our industry."

The cyber industry is also critical of the method for supervising exports of products in the sector through the Ministry of Defense, while other countries introducing supervision of this type are using civilian agencies for the purpose. Cyber companies regard supervision by defense agencies as aggressive and inflexible. The defense establishment explained at the beginning of the week that the opinions of leading cyber companies were heard in the course of formulating the draft order, and that the proposed arrangement was designed to create a balance that would not harm exporters operating legally, and would even help them clarify what was permitted and forbidden in this matter.

Published by Globes [online], Israel business news - www.globes-online.com - on January 13, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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