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Guidelines for Contractual Terms for Cloud Service Providers

By: Probal Bose

The Ministry of Electronics and Information Technology, Government of India has issued guidelines in the last week of March earlier this year, for government departments on contractual terms related to cloud services (“Guidelines”). These Guidelines are framed to promote the government’s MeghRaj Policy or Cloud Initiative undertaken in order to utilise and harness the benefits of cloud computing and provide strategic direction for adoption of cloud services by the government. The Guidelines provide draft clauses that have to be included in such contracts with cloud service providers (“CSPs”).

We take a look at some of the salient aspects brought about in the Guidelines as follows:

  1. Different types of cloud services

The government has invited CSPs for provisional empanelment of the following types of cloud services:

  1. Infrastructure as a service;

  2. Platform as a service;

  3. Disaster Recovery as a service;

  4. Development/Test Environment as a service; and

  5. Virtual Desktop as a service.

While most platforms/infrastructure CSPs have integrated software for disaster recovery, testing and virtual display, the separate categories provided above will facilitate the specific requirements of different government departments. The term for provisional empanelment of cloud service offerings shall initially be for a period of two years and the CSPs have the option to comply with the full fledged guidelines as and when such guidelines are issued.

  1. Certification & Compliance requirements

The CSPs are required to be compliant with the requirements under the Information Technology Act, 2000, including ISO-27001 standard, ISO/IEC 27017:2015 Code for information security controls, ISO-27018 Code of practice for personally identifiable information etc. The contracts with the CSPs must provide for clauses to meet these specific information security criteria. These provisions are standard requirements for software certification that adopt a process approach for establishing, implementing, operating, monitoring, reviewing, maintaining, and improving an organisation’s information security management system.  Typically, most CSPs follow these standards globally.

  1. Privacy and Security Safeguards

For data classified as “very sensitive”, a clause is to be included in the contracts whereby the data is encrypted as a part of the standard security process. Though the Guidelines do not delve into a definition, data pertaining to defence has been cited as an example for very sensitive data. The CSP is also required to notify promptly the respective government departments in case of any security incidents or intrusions or even in case of requests for data from foreign government agencies. In this context, it will augur well if a time period of say 12 to 24 hours is provided for such prompt notification as and when the Guidelines come into effect. The CSPs are also required to ensure that the data is not recoverable after the termination of the contracts. The Guidelines specify that the contract must provide abundant provisions for data encryption and that the CSPs treat any data received by them as classified.

  1. Confidentiality

For highly sensitive information such as that relating to defence, a non-disclosure agreement must be executed with the CSPs whereby the CSPs and the subcontractors, if any, must only use the data for the purposes laid down in the contract.

  1. Location of Data

The terms and conditions of the empanelment of CSPs specify that all data stored by CSPs in respect of services being provided to government departments must be located in India. While it is understandable that all government data will be required to be stored in India, it will be interesting to see how CSP players who do not yet have any of their servers located in India, deal with such a provision. Based on these Guidelines, CSPs have to either establish servers to have the data located in India, or take a call to not participate in government RFPs.

  1. Law Enforcement Request

The onus is on the CSP to perform all due diligence before releasing any data to any law enforcement agency. While such due diligence requirements shall be ideally in terms of verification of the agencies seeking such information, there is still a need for a specific framework to clarify the exact nuances to be considered for such due diligence procedures.

  1. Audit

The departments shall ensure that the CSP’s services are duly audited and certified. The CSPs are required to comply with requisite audit requirements. This will not be a significant concern; as such audit requirements are in fact specified under the security standards followed under the Information Technology Act.

  1. Transitioning and Exit

A contract with a CSP must lay down the CSPs obligation upon exit/transition. The CSP cannot delete any data without the written permission from the government department for at least 45 days after termination of the contract. An “Exit Management Plan” must be devised within the contract terms. The Guidelines specify certain roles for “MSP” (which should refer to Migration Service Providers) with regard to transition to new infrastructure/platform and exit management services from the old infrastructure/platform. 

  1. Dispute Resolution

The Guidelines provides the requirement to specify the governing law and jurisdiction clauses in such contracts. The dispute resolution mechanism suggested in the Guidelines provides mediation as the first step to resolve disputes, followed by 3-member panel of experts adjudicating the dispute, in case mediation fails. If the dispute is still unresolved it may then be referred to a sole arbitrator, as per the provisions of the Arbitration and Conciliation Act, 1996.

It is pertinent to note here that these are just guidelines and are not binding in their scope. Therefore, it remains to be seen whether the provisions are in fact implemented to fulfill the objective of the Guidelines. As this Guideline is a road-map for other state and sector specific guidelines to consider, the key is to incorporate an elaborate enforceable mechanism whereby all CSPs are deterred by significant penal provisions for non-compliances.


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