The Wrong Test: “Not American” Is Not A Sovereignty Standard

European policymakers have implicitly shifted their sovereignty assessment criteria, now relying on whether a company is ‘not American’ rather than its legal or operational compliance. This shift highlights the complexities involved. This change, while seemingly straightforward, masks complex legal realities and geopolitical considerations, especially regarding data protection and national security.

Recent statements in Europe suggest a de facto standard where a company’s nationality—specifically, whether it is American—is used as a proxy for sovereignty and legal compliance. This approach gained prominence after European officials highlighted that Canadian-incorporated AI firm Cohere, which is not subject to the US CLOUD Act, might be viewed differently from US-based providers like Amazon or Microsoft.

Legal analysis confirms that the CLOUD Act applies only to US-incorporated entities and their subsidiaries, not Canadian companies. Canada has not signed a bilateral CLOUD Act agreement, and its courts have explicitly rejected US third-party doctrine principles, making US data access standards less applicable to Canadian firms. Furthermore, Canada’s data protections, such as those under PIPEDA and the Supreme Court’s rulings, are more restrictive than US laws, especially concerning foreign data and surveillance.

Despite the legal distinctions, the European stance appears to conflate nationality with sovereignty, effectively using ‘not American’ as a shortcut for legal and operational independence. This shift has implications for procurement, trade, and the regulation of AI and data services, as it simplifies complex legal realities into a binary classification.

Implications of Using ‘Not American’ as a Sovereignty Proxy

This development matters because it influences European procurement policies and international data flow standards. By adopting ‘not American’ as a sovereignty criterion, Europe may inadvertently overlook the nuanced legal protections and operational realities of foreign companies, especially those from Canada and other allies. It risks creating a simplified, potentially misleading framework that could affect trust, security, and legal compliance in AI and data ecosystems.

Such a proxy-based approach might also lead to misjudgments in security assessments, procurement decisions, and international cooperation, as it neglects the detailed legal and oversight structures that govern data and intelligence sharing. It underscores the importance of precise, measurement-based standards over broad nationality-based proxies.

Legal and Geopolitical Foundations of Data Sovereignty

The legal landscape surrounding data sovereignty is complex. The CLOUD Act, enacted in 2018, compels US-based providers to disclose data to US authorities, but only applies to US-incorporated entities and their subsidiaries. Canada, by contrast, has not signed a CLOUD Act agreement with the US, and its Supreme Court has rejected the US third-party doctrine, affirming that data handed to service providers retains constitutional protections.

Canada’s data protections, such as PIPEDA, and its oversight mechanisms, including the role of the independent Intelligence Commissioner and review by NSIRA, create a legal environment that is more restrictive than US law. Canada’s status as a Five Eyes partner further complicates the narrative, as it shares intelligence with allies under strict legal and oversight frameworks, with clear restrictions on targeting Canadians or residents in Canada.

Europe’s reliance on the ‘not American’ proxy emerged amid broader debates about AI sovereignty and data security, but this approach overlooks the detailed legal distinctions that define actual sovereignty and operational independence in digital spaces.

“CSE does not target Canadians or anyone in Canada, and our oversight mechanisms are among the most rigorous in the world.”

— CSE official

Legal and Political Risks of the ‘Not American’ Standard

It remains unclear how European policymakers will reconcile their reliance on the ‘not American’ proxy with the complex legal realities of data sovereignty. There is ongoing debate about whether this approach will be formalized into policy or remain a de facto standard, and how it might impact international data sharing and security cooperation.

Potential Policy Shifts and International Negotiations

European authorities are expected to clarify or formalize their sovereignty criteria in upcoming regulations or procurement policies. Meanwhile, Canada and other allies may continue to advocate for measurement-based standards rooted in legal realities, potentially leading to negotiations or adjustments in international data agreements. The debate over sovereignty proxies is likely to influence global AI and data governance frameworks in the coming months.

Key Questions

Why does Europe consider ‘not American’ as a sovereignty measure?

Europe has adopted this proxy to simplify sovereignty assessments, believing that US laws like the CLOUD Act pose unique risks. However, this approach overlooks legal distinctions and the protections offered by non-US jurisdictions like Canada.

Is Canada truly less subject to US data laws than US companies?

Yes. Canada’s legal framework explicitly limits US access to Canadian data, and Canada has not signed a CLOUD Act agreement. Its courts have also rejected US legal principles that would allow easier data access.

Could this ‘not American’ standard impact international AI procurement?

Yes. It may lead to biased or simplified assessments that overlook actual legal protections, potentially affecting trust and security in AI supply chains.

What are the risks of relying on nationality as a proxy for sovereignty?

This approach risks misjudging legal protections, oversight, and operational independence, leading to flawed security and compliance assessments.

Source: ThorstenMeyerAI.com