The defense establishment and the National Cyber Bureau in the Prime Minister's Office are considering a change in the order mandating supervision over exports of cyber systems in an attempt to soothe the heads of the companies doing business in this field. The draft order under which the Ministry of Defense will supervise exports of some cyber systems developed and produced in Israel was revealed last week in "Globes," creating waves in Israeli cyber companies. According to Defense Export Controls Agency director Dubi Lavi, "It is fairly certain that the final version of the supervision order will be changed. At the same time, we will not suspend measures in this matter, because there is an important need for this supervision. In the framework of changes in the wording, we will sharpen the definitions and issue clarifications." Lavi did not specify the items in the order in which changes would be made.
Lavi today appeared before dozens of senior cyber company officials gathered in what was called an "emergency conference" held by the Herzog, Fox & Ne'eman law firm's Homeland Security, Cyber, and Regulation division. Senior officials from the National Cyber Bureau involved in formulating the controversial draft order (together with professionals from the Ministry of Foreign Affairs and the National Security Council) also took part in the conference. Under the draft order, exports of cyber systems with intelligence gathering or offensive capabilities will require a special license from the Defense Export Controls Agency. The process for obtaining the license will be the same as for defense companies seeking to export weapon systems to foreign countries.
The emergency conference was closed to reporters at the demand of the defense establishment. Lavi and senior National Cyber Bureau officials wanted to deliver soothing messages to the company leaders, in view of their concern in recent days that Ministry of Defense regulation would bring some of the activity in the sector to a standstill, end investments in the companies, and cause the transfer of some of the companies' business to other countries that do not have regulation like that planned in Israel.
At the conference, Lavi said, "Supervision is expected to apply only to critical matters, and 99% of the systems relating to defense will not require supervision. Supervision itself will be carried out for system involving collection and attack - products used for all intents and purposes as weapons. Here, too, the supervision order will apply only to matters critical to national security."
One of the main arguments made in recent days by leading figures in the cyber sector, including at the conference, is that Israeli is likely to enforce the world's strictest supervision rules on cyber companies. Commenting on this claim, Lavi told "Globes, "The Ministries of Defense and Foreign Affairs and the National Cyber Bureau realize that supervision is required for some of the activities in the sector, mainly because of the stunning capabilities of the advanced systems created by the industry, which for all practical purposes are weapons. Are we ahead of the rest of the world in this regulation? We are ahead of the world in other things, too, such as defensive anti-missile systems. We'll be ahead of them on this also. It isn't so bad. The vast majority of cyber systems will not be supervised. Many companies will be unaffected by supervision, and their outlook will remain as rosy as it has been up until now.
Data revealed by the Ministry of Defense at the conference show that over the past three years, the Defense Export Controls Agency issued no fewer than 900 export licenses for cyber products. Lavi stated, "Some cyber companies are prospering because of security supervision. A license from the Ministry of Defense is an advantage for a company, because it is a certificate of quality for Israeli industry and confirmation that the regulator will not stop exports." Lavi added that the Ministry of Defense planned to establish a special fast track mechanism for granting licenses to cyber companies that would take the dynamic nature of this business into account.
"Put the idea aside now"
Herzog, Fox & Ne'eman's Homeland Security, Cyber, and Regulation division partner Dr. Nimrod Kozlovski severely criticized the order at the conference. "We should all be worried," he said, adding, "Instead of realizing how essential this industry is for us, we have become confused, and think that all of it needs regulation. There is absolutely no security interest in this measure. It is necessary to understand how supervision of the industry by the Israeli Ministry of Defense looks to the rest of the world."
Kozlovski brought up a past case in which the Israel Security Agency tried to enforce its supervision on the Tel Aviv Stock Exchange (TASE). "The TASE director general explained the significance of supervision: if companies know that they are supervised by the Israel Security Agency, they will be scared to go anywhere near the TASE. The problem was understood, and supervision of the TASE was entrusted to the Ministry of Finance, a civilian agency," Kozlovski related, adding, "We spend so much time and effort persuading companies to do business in Israel. There are 290 multinational companies that have established their development center here. If they have to meet someone from the Ministry of Defense, they'll die of fright. I want to see what company will let the Ministry of Defense go through its software. Put this idea aside now. If there's a real need, we'll come back to it. I know it takes courage, after spending years on this order. Right now, the idea is causing damage, and I see no benefit from it."
The Israel Export and International Cooperation Institute also called on the Ministry of Defense to revise the order in cooperation with the industry along the lines of the comments made up until now. In view of these comments and the discontent in the cyber industry, the Ministry of Defense has extended the period for responding to the order until the end of March. "We want to see a supportive environment for this industry that will avoid people and companies leaving Israel," Export Institute director general Ofer Sachs said, after holding a special discussion on the subject in recent days with representatives of 15 leading cyber companies.
Published by Globes [online], Israel business news - www.globes-online.com - on January 21, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016