data havens

This page considers notions of cyberhavens, essentially visions of evading censorship, intellectual property, taxation and other restrictions by locating servers in a 'virtual state'.

It covers -

• introduction - what is a data haven
• precursors - pirate radio and other models
• proposals - some proposals for establishment of cyber-havens
• reception - responses by enthusiasts and the mass media
• practicalities - questions about law and logistics

     introduction

Some online communities have embraced the idea of creating their own state - typically one so small that it does not need much cleaning and close enough to civilisation for deliveries of pizza - as a way of evading irksome restrictions regarding intellectual property, censorship and taxation.

Enthusiasm for the idea mingles unawareness of law, disregard for logistics challenges, romanticism about pirates as an embodiment of funkiness and freedom, and commercial opportunism (because promoters of such schemes have to recover set-up costs and running expenses, even if not aiming for a substantial tax free profit).

An example was online chatter in January 2007 about a supposed US$2 billion bid from Sweden's The Pirate Bay for "the micronation of Sealand", with a Pirate Bay spokesperson saying "We would love to move there and move all our servers there" - after the group's filesharing site was shut down by the Swedish Police in mid 2006.

Visions of creating a country to facilitate access to adult content and unauthorised copies of intellectual property (eg software, music and video), avoid taxation and erode restrictions on hatespeech are distinctly utopian.

Traditional tax havens distinguish themselves by enacting legislation that provides corporations and individuals with some degree of shelter from the domestic governments of those entities, whether through low (or zero) tax rates or through anonymity. Such havens have usually had political and economic stability, are supported by a large international market, are within easy reach of a major financial centre (eg Switzerland, Liechtenstein or the Caribbean havens) and have advanced communication facilities.

Walter Diamond thus indicated that the ongoing success of major havens has been based on rule of law (including guarantees against expropriation and security of property rights), expectations of fair treatment by government and low corruption, favourable taxes and investment concessions, political and economic stability, strong secrecy regimes alongside tax treaties with the major nations, minimal restrictions on capital imports and exports, excellent transport and communication infrastructure and promotion by the haven's government. It is not expected that all users of the haven will actually live in the nation (as citizens or guests) but some of those users and their agents can be expected to visit.

     precursors

Havens from authority have a long tradition in western history, with particular locations providing refuge for individuals and bases for commercial or other activity.

That might reflect exemptions under the law of a particular jurisdiction (eg sanctuaries in pre-modern London that were exploited by publishers, debtors and people accused of assault). It might instead reflect disagreements between two or more jurisdictions over control of the particular location, whose inhabitants enjoyed unusual freedom pending resolution of those disagreements or an act that provoked unilateral intervention by a particular state.

Havens might also reflect administrative incapacity. 'Free cities' such as the international quarters of Shanghai during the 1930s for example offering a more laissez faire regime than Tokyo or London. Pirate havens in the Caribbean or Barbary Coast survived for many decades because naviews were not on hand to eliminate them. That has inspired contemporary mythologies such as William S Burroughs' homoerotic fantasies about pirate republics (buffed boys and bondage on the briny) and works by Neal Stephenson on libertarian cyber enclaves.

Restrictions on commercial radio broadcasting in the Netherlands, UK and other jurisdictions during the 1960s and 1970s saw some broadcasters place their equipment offshore with the expectation that they would be able to exploit inadequacies in legislation or merely be beyond the reach of law enforcement agencies.

That might involve oceangoing vessels (eg former lightships and converted fishing vessels), abandoned offshore platforms (typically manmade gun emplacements from WWI and WWII) and even small purpose-built islets. Examples of what has variously been characterised as pirate radio, free radio and offshore radio were Radio Nordsee International (RNI), Radio Veronica, Radio Atlantis, Radio City and Radio Caroline in Europe and Radio Hauraki off New Zealand, some of which have since lucratively migrated back to shore.

Responses by government agencies took three forms.

Firstly, they progressively revised existing legislation to ensure that unlicensed broadcasting from territorial waters was an offence and that assisting the operation of such stations was an offence. The UK Marine Broadcasting Offences Act for example crimped stations directed at the English market through restrictions on marketing in the UK by the stations and provision of supplies.

Some drew on existing provisions in customs and other law, for example authorisation for interdiction of shipments to/from vessels 'hovering' just beyond the nation's territorial limits. Some nations amended their navigation rules, reflecting complaints that platforms or vessels were interfering with marine traffic or legitimate radio transmissions. They also initiated tax investigations, consistent with policies regarding where income is earned (for example in the UK mainland rather than in a boat or platform offshore). Bureaucratic unhappiness about offshore misbehaviour appears to have fed moves to secure oil, gas and other seabed resources by extending territorial waters and exclusive economic zones (for example the UK in 1988)

Secondly, government representatives asserted their authority through seizure of vessels or equipment and through forcible entry to vessels or platforms. That action is contrary to folklore, which generally depicts pirates as blithely ignoring British, Dutch and Swedish regulators and attributes the apparent gentleness of official responses to acknowledgement of the pirates' legitimacy.

Thirdly, governments deregulated their broadcasting regimes by allowing commercial broadcasting from onshore stations. That change reflected consumer demand, the deregulatory zeitgeist of the period that was evident in much privatisation, and recognition that licencing fees would provide substantial revenue. The pirate radio industry essentially disappeared.

Pirate broadcasters typically argued that they were outside a particular nation's jurisdiction - in international waters - and therefore not subject to action in its courts or by its police and customs officials. They did not consistently assert that the ship or platform was an independent nation, one with its own currency, tax regime, citizenship and recognition by major states.

One exception was the putative Principality of Sealand, a structure off the coast of England that had been constructed during the Second World War as an artillery and aerial observation platform. Along with similar platforms it had been sporadically used for pirate broadcasting and seen fights between competing groups of squatters. The UK government had not renounced ownership of the platform and arguably it is still crown property, despite occupation by the Bates family and their associates from 1967 onwards.

Paddy Roy Bates announced that he

proclaimed the island his own state ... bestowed upon himself the title of Prince and the title of Princess to his wife and subsequently made the state the Principality of Sealand. Roy Bates, henceforth Roy of Sealand, exerted state authority on the island and thus was an absolute sovereign.

The supposed independent principality claimed to issue citizenship papers and passports (a claim that, as mentioned earlier in this note, was rejected by a German court in 1978) and of course to be outside the jurisdiction of the UK Revenue Office.

The Bates family, however, appear to have continued to travel on UK passports, retain UK nationality and otherwise behave as British citizens.

Sealand is clearly within UK territorial waters. Assertions that interaction with the UK government represents recognition by that government of Sealand's independence are absurd. Sealand has of course not gained recognition from the United Nations General Assembly and international bodies such as the ISO and ITU.

The notion of floating republics or sovereign states on manmade island seems to be a wet dream that never dies.

In 2008 Arstechnica enthused about the Seasteading Institute (SI), "an audacious new project" aimed at "creating new competition for the world's sovereign nations" through development of

self-sufficient deep-sea platforms that would empower individuals to break free of the cozy cartel of 190-odd world governments and start their own autonomous societies. ... a future in which any group of people dissatisfied with its current government would be able to start a new one by purchasing some floating platforms—called seasteads—and build a new community in the open ocean.

     data haven proposals

Several of the projects highlighted on the preceding page featured plans to provide data processing and financial facilities that would ostensibly not be subject to scrutiny by the US government and its peers. It appears that those plans did not eventuate.

In the late 1990s, amid dot-com delirium, Sealand's occupants leased space in the platform to HavenCo for an ambitious data haven program. Promoters of that program aimed to gain substantial revenue through secure data archiving and hosting for corporations and other entities - "the world's most secure managed servers in the world's only true free market environment, the Principality of Sealand". The program included plans for a gold-backed anonymous digital currency.

It appears that statements by the promoters, uncritically accepted by some journalists, were not always consistent with reality. Supposed freedom from "regulatory hindrances" does not appear to have enthused major electronic commerce businesses, unsurprising given uncertainties about the legal status of Sealand, difficulties with payment and infrastructure, the proliferation of high quality hosting facilities across the world and past media coverage of raids on Sealand (complete with kidnapping of Prince Michael). Problems were exacerbated by disagreements within HavenCo and with the Bates family. The vision of HavenCo as a dominant player in the world of hosting thus evaporated with the dot-com bubble.

Jonathan Zittrain's 2003 Be Careful What You Ask For: Reconciling a Global Internet and Local Law (PDF) noted

the fact that Sealand itself must get its network connectivity somewhere - and could be at risk of losing it should its own Internet service providers reject its activities, or be pressured by nearby governments to do so. Further, the benefits to a would-be defendant of safeguarding data there for jurisdictionally evasive purposes are limited by the defendant's location.

In a more tongue in cheek comment he drily noted that

Unless a person is willing to move to Sealand, he or she would still be within another sovereign's physical and therefore legal reach and would thus risk being personally penalized should undesired activities taking place on Sealand under the defendant's direction not cease, or sought after data secured there not be produced.

Moving to a very small platform (one without capacity to grow its own food) in an attempt to evade prosecution is not practical: from our perspective Sealand is potentially less of a haven for people on the run than a rather claustrophobic prison island.

A new vision - another round of hype - appeared in 2006, with suggestions that Sealand was on the market for some US$2 billion and might be acquired by The Pirate Bay, the Swedish filesharing group whose site is claimed to be a leading facilitator of unauthorised access to video, audio and other content.

Swedish authorities had seized the group's server and frozen its accounts over breaches of intellectual property law. The group had failed to gain power by fielding candidates for a Pirate Bay party during Sweden's 2006 national election, gaining 0.62% of the vote and thus missing the 1% required for state assistance with printing ballots and funding staff in the next election.

One spokesperson, of course anonymous, is reported to have explained interest in developing Sealand as a cyberhaven by saying

It's not only about Pirate Bay, it's more about having a nation with no copyright laws. For Pirate Bay it would be awesome to have no copyright law. All countries today are based on the old economy and old ideas and we want to do something new ...

We would love to move there and move all our servers there. ... We would love Sealand because its history is perfect for us as pirate radio used to be broadcast from there. If we don't get enough money for Sealand we are going to try for a small island somewhere

That is an echo of the US Free State Project (FSP), a "Live Free or Die" group that has made noise about "Liberty in our Lifetime" through

organising a political migration to New Hampshire in hopes of creating a freer society along libertarian lines.

and the European Free State Project (EFS), decorated with slogans about "aversion of the autochthon population".

     reception

The group established buysealand.com to raise funds to buy Sealand (or merely gain more publicity), undeterred by questions about the legitimacy of buying a principality, fictive or otherwise.

Suggestions that "pirates" would form "the world's smallest country" inevitably gained global media attention during the 'slow news period' in January 2007 and support in online fora such as Australia's Whirlpool broadband forum, with enthusiasts forecasting use of satellite links (or a sealand satellite), wave-generated power and Mission Impossible-style attacks by the CIA.

It is difficult to escape the conclusion that the supposed Pirate Bay bid shows the same mixture of delusion and media cooption evident creation of many virtual states. Sealand would not provide an effective data haven.

The inevitable schism occurred, with the people behind FreeNation Foundation declaring that

Sealand, while having the benefit of a degree of established respect as a sovereign nation, was too small and aesthetically displeasing ...

A number of the supporters preferred the more practical and realistic idea of a free nation and branched from the community, becoming known as the FreeNation Foundation. These people formed what became known as 'core', a title that caused many misconceptions as to their nature, mainly elitism and secrecy.

And so it goes.

     practicalities

Nicholas Negroponte famously forecast that the nation state would shortly evaporate like a mothball exposed to warm dry air. As of 2007 the state appears to be going strong and, as noted in works such as Who Controls The Internet? - Illusions Of A Borderless World (New York: Oxford Uni Press 2006) by Jack Goldsmith & Tim Wu, appears likely to survive for many decades to come. Visions of cyberhavens prove less durable when faced with practicalities.

The essential difficulty for proponents of Sealand and other data havens is that those facilities are typically located within the territorial waters or on terra firma claimed by one of the major nations.

They are subject to taxation law, intellectual property law, customs regimes, national security and censorship law, and even administrative impediments such as occupational health & safety law.

Sealand for example is not a state; paying US$2 billion (or US$2) will not convert it into a nation. Moving servers from Sweden or the Netherlands to concrete silos in the North Sea will not provide immunity from copyright or other law and not secure support from the United Nations. Contrary to assertions by Sealand enthusiasts, the platform is within British waters, Under English law the UK government would be able to interdict Sealand. That would be consistent with international law and would presumably gain endorsement by the European Commission and individual members of the European Union.

At US$2 billion for a small chunk of real estate within UK jurisdiction Sealand is grotesquely overpriced. The same sum would buy a substantial oceangoing vessel or a more commodious platform to be parked in international waters, particularly in a region where the geeks could get a tan.

Is a floating 'pirate haven' feasible? Arguably the answer is no. Ships and platforms cost money to run: without a flow of money from subscribers, advertisers or publishers the 'gift economy' shuts down. Payment systems are a fundamental vulnerability for such a haven and for online gambling ventures. Governments would presumably seek to inhibit support from legitimate banks, credit card and alternative payment services such as PayPal and iBill. Personal and corporate assets might be frozen under proceeds of crime legislation. Major service suppliers might be deterred through threats of litigation regarding facilitation of child pornography, money laundering, terrorism, drug trafficking and other offences.









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