Extraterritorial Application in Data Privacy: Lessons for India’s DPDP Act

Ayndri
Ayndri
Research Analyst - Policy & Advocacy, CyberPeace
PUBLISHED ON
Mar 6, 2025
10

Modern international trade heavily relies on data transfers for the exchange of digital goods and services. User data travels across multiple jurisdictions and legal regimes, each with different rules for processing it. Since international treaties and standards for data protection are inadequate, states, in an effort to protect their citizens' data, have begun extending their domestic privacy laws beyond their borders. However, this opens a Pandora's box of legal and administrative complexities for both, the data protection authorities and data processors. The former must balance the harmonization of domestic data protection laws with their extraterritorial enforcement, without overreaching into the sovereignty of other states. The latter must comply with the data privacy laws in all states where it collects, stores, and processes data. While the international legal community continues to grapple with these challenges, India can draw valuable lessons to refine the Digital Personal Data Protection Act, 2023 (DPDP) in a way that effectively addresses these complexities.

Why Extraterritorial Application? 

Since data moves freely across borders and entities collecting such data from users in multiple states can misuse it or use it to gain an unfair competitive advantage in local markets, data privacy laws carry a clause on their extraterritorial application. Thus, this principle is utilized by states to frame laws that can ensure comprehensive data protection for their citizens, irrespective of the data’s location.  The foremost example of this is the European Union’s (EU) General Data Protection Regulation (GDPR), 2016,  which applies to any entity that processes the personal data of its citizens, regardless of its location. Recently, India has enacted the DPDP Act of 2023, which includes a clause on extraterritorial application.

The Extraterritorial Approach: GDPR and DPDP Act

The GDPR is considered the toughest data privacy law in the world and sets a global standard in data protection. According to Article 3, its provisions apply not only to data processors within the EU but also to those established outside its territory, if they offer goods and services to and conduct behavioural monitoring of data subjects within the EU. The enforcement of this regulation relies on heavy penalties for non-compliance in the form of fines up to €20 million or 4% of the company’s global turnover, whichever is higher, in case of severe violations. As a result, corporations based in the USA, like Meta and Clearview AI, have been fined over  €1.5 billion and €5.5 million respectively, under the GDPR. 

Like the GDPR, the DPDP Act extends its jurisdiction to foreign companies dealing with personal data of data principles within Indian territory under section 3(b). It has a similar extraterritorial reach and prescribes a penalty of up to Rs 250 crores in case of breaches. However, the Act or DPDP Rules, 2025, which are currently under deliberation, do not elaborate on an enforcement mechanism through which foreign companies can be held accountable. 

Lessons for India’s DPDP on Managing Extraterritorial Application 

  1. Clarity in Definitions: GDPR clearly defines ‘personal data’, covering direct information such as name and identification number,  indirect identifiers like location data, and, online identifiers that can be used to identify the physical, physiological, genetic, mental, economic, cultural, or social identity of a natural person. It also prohibits revealing special categories of personal data like religious beliefs and biometric data to protect the fundamental rights and freedoms of the subjects. On the other hand, the DPDP Act/ Rules define ‘personal data’ vaguely, leaving a broad scope for Big Tech and ad-tech firms to bypass obligations. 
  2. International Cooperation: Compliance is complex for companies due to varying data protection laws in different countries. The success of regulatory measures in such a scenario depends on international cooperation for governing cross-border data flows and enforcement. For DPDP to be effective, India will have to foster cooperation frameworks with other nations. 
  3. Adequate Safeguards for Data Transfers: The GDPR regulates data transfers outside the EU via pre-approved legal mechanisms such as standard contractual clauses or binding corporate rules to ensure that the same level of protection applies to EU citizens’ data even when it is processed outside the EU. The DPDP should adopt similar safeguards to ensure that Indian citizens’ data is protected when processed abroad.
  4. Revised Penalty Structure: The GDPR mandates a penalty structure that must be effective, proportionate, and dissuasive. The supervisory authority in each member state has the power to impose administrative fines as per these principles, up to an upper limit set by the GDPR. On the other hand, the DPDP’s penalty structure is simplistic and will disproportionately impact smaller businesses. It must take into regard factors such as nature, gravity, and duration of the infringement, its consequences, compliance measures taken, etc.
  5. Governance Structure: The GDPR envisages a multi-tiered governance structure comprising of   
  • National-level Data Protection Authorities (DPAs) for enforcing national data protection laws and the GDPR, 
  • European Data Protection Supervisor (EDPS) for monitoring the processing of personal data by EU institutions and bodies,  
  • European Commission (EC) for developing GDPR legislation
  • European Data Protection Board (EDPB) for enabling coordination between the EC, EDPS, and DPAs

In contrast, the Data Protection Board (DPB) under DPDP will be a single, centralized body overseeing compliance and enforcement. Since its members are to be appointed by the Central Government, it raises questions about the Board’s autonomy and ability to apply regulations consistently. Further, its investigative and enforcement capabilities are not well defined.

Conclusion 

The protection of the human right to privacy ( under the International Covenant on Civil and Political Rights and the Universal Declaration of Human Rights) in today’s increasingly interconnected digital economy warrants international standard-setting on cross-border data protection. In the meantime, States relying on the extraterritorial application of domestic laws is unavoidable. While India’s DPDP takes measures towards this, they must be refined to ensure clarity regarding implementation mechanisms. They should push for alignment with data protection laws of other States, and account for the complexity of enforcement in cases involving extraterritorial jurisdiction. As India sets out to position itself as a global digital leader, a well-crafted extraterritorial framework under the DPDP Act will be essential to promote international trust in India’s data governance regime.

Sources

PUBLISHED ON
Mar 6, 2025
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