US cyber security cos warning Israel on regulation

cyber security

Israeli and foreign firms are planning to file objections to a new draft order requiring export licenses for some cyber technologies.

American cyber security companies without a presence in Israel are considering petitioning Israel's Ministry of Defense in the coming days over the planned regulation of exports of cyber systems with offensive and intelligence gathering capabilities according to Adv. Daniel Reisner, the resident cyber and homeland security and compliance expert at Herzog Fox & Neeman.

The move towards regulating the Israeli cyber sector raised grave concerns among big US cyber security companies. They worry the regulation advanced in Israel will be adopted by the American government, and they are considering petitioning the defense establishment to explain what they had said last time the US government considered regulating the export of these systems, said Reisner.

Reisner believes the US administration had previously tried to regulate the export of cyber security systems. The plan was shelved for a deeper exploration of its consequences under pressure from cyber security firms.

Ministry of Defense sources told Globes they were not aware of any reservations on the issue from foreign companies. The end of next week is the deadline for submitting any objections or comments over the draft of the new regulation to the Defense Export Controls Agency (DECA). The new regulation will require Israeli companies to receive a license from the Ministry of Defense to export some cyber security systems specifically, those with offensive and intelligence gathering capabilities.

If a company wished to export such technology, it would undergo a similar process to that faced by defense firms that sell weapons systems to foreign clients. The formulation of the new regulation took nearly three years, with input from the head of the National Cyber Bureau at the Prime Ministers Office as well representatives of the Ministry of Foreign Affairs and Ministry of Economy.

The draft order was first reported by Globes in early January and stirred considerable concern among cyber security firms. The companies responded with a series of emergency conferences warning that Israel would become the first country in the world to regulate the export of cyber security firms in a manner which could hurt their growth in the country either by forcing them to transfer their operations abroad or by damaging the motivation of foreign and local investors to back new ventures in a sector which grows considerably each year.

Cyber security officials are also incensed that Israel will significantly expand the limitations on the sales of cyber technologies as defined in the Wassenaar Arrangement a multilateral export control regime for weapons and dual-use technologies.

Adv. Reisner, who represents some of the Israeli cyber security firms seeking to voice their concerns to the new draft order, told Globes that there will be dozens of objections to the draft order by next week, some have already been filed, by companies both big and small.

The draft order needs amending

After sending an urgent letter to Prime Minister Benjamin Netanyahu at the top of the week requesting he cancel the draft order, Shraga Brosh the head of the Manufacturers Association of Israel met on Thuesday with DECA director Dubi Lavi. Israel Export Institute chairman Ramzi Gabbay and representatives of cyber security firms also participated in the meeting.

Lavi addressed the industrys concerns: We understand the draft order as currently worded needs to undergo changes; in some sections there will be substantial changes. We are considering establishing a joint committee with officials from the Ministry of Defense, the National Cyber Bureau at the Prime Ministers Office, and the manufacturers in order to draft a better order to minimize any damage to the industry.

At the meeting, representatives of the firms warned that discussions were already being held by their boards over transferring their operations to other countries in which they will not be regulated.

According to Brosh, The country must understand that any additional regulation of the industry pushes us closer to moving abroad; in the cyber sector its as simple as picking up the computer and getting on a plane. The state needs to stop this move and sit down with the companies. You want to have regulation which address the security concerns of the country on one hand, but on the other hand you do not hold back the cyber sector which is making massive strides and adding immense value to the Israeli economy.

Defense officials told Globes in the past that the central actors in the Israeli cyber sector were consulted before the process towards regulation began.

On Thursday, defense officials said even if a joint committee is established to soften the draft order, it will be held simultaneously as the hearings over the objections filed by the cyber companies by the end of next week.

In recent weeks, DECA head Lavi tried to allay the concerns of cyber companies by saying the vast majority of cyber technologies would not fall under the jurisdiction of the regulation and the companies will not be affected by the new draft order.

Adv. Reisner, for his part, is not convinced. Just because the head of DECA says the majority of companies will be able to export their systems without license does not mean those companies wont have to verify that. Getting an answer for that could take months; meanwhile the companies are stuck. The Ministry of Defense said it would establish a new mechanism to provide real time answers. I am not so sure it will work.

Published by Globes [online], Israel business news - - on February 26, 2016

Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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