18 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 MARCH 2024 first batch of projects listed on data exchanges in various regions are also projects that are relatively safe.” “At present, two types of data are highly controversial. One is personal information and the other is public data related to smart cities, also known as government data,” says Wang. “The remaining data that are relatively easy to trade or be recorded on the balance sheet are mainly industry- or financerelated, which are mostly generated by enterprises themselves. The data already listed on the market include those for shipping and transport, corporate services, finance and taxation, etc. Given stringent listing requirements at present, these projects are meant as trials to pave the way for data with stronger commercial attributes to gradually enter the trading market in the future.” To Jiang Xiangyu, senior partner of Co-effort Law Firm, the recent acceleration of the pace of recording data assets in the balance sheet will drive activities of exchange data trading in 2024. “Many listed companies have quickly realized the value and significance of recording data assets in their balance sheets and are already carrying out concrete work which will be reflected in first quarter reports of 2024. This January, the Ministry of Finance issued the Guiding Opinions on Strengthening Data Asset Management, which helps to promote the entry of data assets into the balance sheets of SOEs. Some non-listed SOEs have also made rapid progress. For example, our team has assisted Beijing CBD Xinlian Technology, a wholly owned subsidiary of CBD International Group, in completing the listing of a data product called ‘Enterprise Big Data Risk Management Platform’ on the Shanghai Data Exchange.” “Once data assets are included in the balance sheet, the value of exchange data trading will increase dramatically. For example, after data products subject to mandatory compliance assessment are listed on a data exchange, the listed companies have already achieved confirmation of their ownership of the data products which can be quickly included in balance sheets. Further, those with demand for such products can also quickly include the transaction prices in balance sheets,” says Jiang. ROLE OF LAWYERS Compliance, rights confirmation, and assetization are known as the “trilogy” of realizing the value of data, and legal professionals play important roles in all three steps. First, in terms of compliance and rights confirmation, lawyers say that these are currently areas where they are most heavily involved in practice. “According to definitions in the 20 Articles on Data, data assets refer to data resources that are legally owned or controlled and can generate future returns. This is premised on the basis that an enterprise or a data rights holder has clear, lawful and sufficient authorization in the earlier stages for data acquisition and collection. Lawyers can confirm the legality of relevant activities in this respect,” says Zou. Jiang also points to the important role lawyers play in rights confirmation and compliance for data trading. He and his team have accumulated a lot of experience in research and practice in this field. For example, they publish the annual Legal Report on Data Transaction Compliance, and “has been among the first to participate in the compliance assessment of data products listed on the Shanghai Data Exchange and the Shenzhen Data Exchange, including the compliance assessment of six out of the first 20 products of the Shanghai Data Exchange in 2021, and later participated in such assessment of multiple financial and transport data products.” Data compliance has been one of the most popular legal services areas in the past few years. So, what are the similarities and differences between regular data compliance services and that for data trading? According to Wang, if a company has previously carried out data compliance work for the purpose of listing, especially overseas listing, relevant requirements would be on par with the basic requirements of a data exchange; however, “if a company’s data compliance system is built for more routine purpose, it may not necessarily meet the compliance requirements for data trading.” In addition, compliance work related to data trading also has certain peculiarities. “First, the data compliance services provided by lawyers will include some data segmentation work, such as separating controversial and high-risk data from enterprise data,” says Wang. “Second, trading-related compliance work involves more coordination with accounting, IT and other departments. For example, to record data assets in the balance sheet, those assets must correspond to relevant costs in accounting terms. In addition, the management of internal data in many enterprises is decentralized, with data being held by different business units. Therefore, if you want to include only some data in balance sheets or use them for transactions, you also need to consider whether there is feasible IT technical support within the enterprise. Only by working together with accounting and IT departments can we truly confirm the ownership of some data and achieve compliance, and from there we can move onto the next step of assetization.” Once compliance and rights confirmation are completed, lawyers should also play an important role in the trading stage. Zou says that whether it is data asset trading or financial operation after data assetization, such as using data assets for fund-raising, lawyers are needed to provide corresponding legal services for deal structuring, transaction document drafting, etc. For example, Zou and her team are currently supporting the study of the product structure of a data asset trust. In Wang’s view, the difficulty of data assetization also lies in coordinating the opinions of, and winning support from, all sides. “At present, there is a lack of mature precedents in data trading. Most deals require case-by-case discussions, which also makes our work special: we need approval from other departments in every matter, and in turn, other departments also need the approval of lawyers.” FULL OF CHALLENGES Although data assetization has brought more business opportunities for lawyers, DATA COMPLIANCE
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