Asia Internet Coalition urges Nepal to pause social media platform registrations amidst regulatory concerns

KATHMANDU: In a formal letter addressed to Nepal’s Minister of Communication and Information Technology, Rekha Sharma, the Asia Internet Coalition (AIC) has again appealed for an immediate revision of the provisions related to the registration of social media platforms in the country.

The coalition is calling for a moratorium on these registrations until the finalization of the Social Media (Use and Regulation) Bill.

Last year too, the AIC requested the government to amend the necessary provisions in the social media legislation in Nepal.

Expressing deep concerns, the AIC highlights potential challenges that the current provisions pose to the digital economy of Nepal.

The coalition asserts that the proposed legislation may compel social media companies to divulge extensive private information to the Nepalese government, potentially creating obstacles for both large and small platforms operating in Nepal.

Jeff Paine, Managing Director of the AIC, emphasized the need for comprehensive addressing of the proposed legislation’s challenges to prevent adverse impacts on Nepal’s digital growth.

The coalition, acknowledging the government’s efforts to regulate social media platforms, expressed disappointment over the lack of resolution to concerns raised during face-to-face engagements on January 19, 2024.

Of notable concern is the AIC’s belief that the directive outlined in the proposed legislation exceeds the government’s powers granted under the Electronic Transactions Act, 2006, making it ultra vires.

The AIC argues that the proposed registration process imposes significant administrative hurdles, requiring the submission of sensitive documents such as user statistics, platform activities, security measures, and tax information.

The coalition further underscores uncertainties surrounding compliance with the proposed registration and renewal requirements, resembling license-based models that may impede competition, innovation, and investments in Nepal’s digital ecosystem.

The AIC also raises human rights concerns, citing unclear definitions, proactive monitoring obligations, fixed content removal timelines, and the absence of procedural requirements for the issuance of Take-Down Requests (TDRs).

In addition, the AIC warns against mandating a local presence for internet companies, emphasizing potential unintended consequences such as increased operational costs, barriers for smaller players, and a limitation on innovation. The coalition asserts that such a requirement contradicts the concept of “permissionless innovation” and deviates from international norms.

AIC, comprising industry giants such as Google, Apple, Meta, Amazon, Yahoo, LinkedIn, Rakuten, and Spotify, emphasized the need for transparent and fair regulation processes. The coalition asserted that the government’s move to implement the ‘Guidelines for Regulating the Use of Social Networks, 2023’ without industry and civil society discussions could discourage foreign direct investment in Nepal.

AIC Concerns over Nepal ‘Directive Relating to the Management of Use of Social Media’ (‘Directive’)

● Ultra Vires: The Directive goes beyond the powers granted to the Government of Nepal to enact implementing regulation under the Electronic Transactions Act, 2006. Hence making the Directive ultra vires (beyond the scope of authority) granted to the Government under law.

● Registration and Licensing: Registration does not require establishing an entity in Nepal. Nevertheless, this could potentially limit any jurisdictional defences for noncompliance AIC Members may have in Nepal, and expose us to local court proceedings.

● Local Employees/Office: Social Media Platforms are given a choice to either: (i) establish an office in Nepal; or (ii) appoint a POC based in Nepal. If a POC is appointed, they will be responsible for (i) blocking unlawful content in accordance with the Directive; and (ii) to provide public information regarding the proper use of social media services. Additionally, for Social Media Platforms having more than 100,000 users in Nepal, a grievance officer must also be appointed to resolve any complaints against platforms.

● TDR Authority: The MOCIT will establish a Social Media Management Unit which will have legal authority to direct social media providers to remove content that is locally unlawful. The Directive does not impose any procedural requirements on the MOCIT when issuing such TDRs (for example, a notice to the user, duty to give reasons etc.). AIC Members would have limited arguments to push back on such TDRs based on due process grounds. Furthermore, the lack of procedural requirements means that the MOCIT would have to do very little due diligence on their part before sending us TDRs, creating a risk of high volumes being sent.

● Fixed Turnaround Times: Social Media Platforms will have to remove or block unlawful content reported to them within 24 hours of receipt of a TDR by the MOCIT.

● Intermediary Liability: The Directive is silent on intermediary liability/safe harbour for internet service providers. The sole provision concerning penalties for non-compliance states that the MOCIT will write to the Nepal Telecommunication Authority informing them that an offense has been committed under the prevailing laws of Nepal.

● Categories of Unlawful Content: 10 categories of content are deemed unlawful under the Directive. There are no clear definitions provided for many of the broad and vague terms in the Directive, which creates a risk of these provisions being misused to over enforce against legitimate speech, and creating definitional disputes between the government and companies.

● Proactive Monitoring: Platforms are required to implement systems that prevent the publication and broadcasting of unlawful content. Such an obligation, to exercise editorial control over new content, would be practically unfeasible for platforms to comply with as it would fundamentally alter the nature of the platform.

● Risk & Penalties: The only penalty provided in the Directive relates to a platform failing to register with the MOCIT. In which case, it may be immediately blocked. There is no penalty specified in the Directive for the violation of any other provision, however given that the Directive has been enacted under the Electronic Transactions Act, penalties under the ETA could be imposed. These range from a fine of up to 100,000 rupees (apprx 750 USD) or imprisonment of up to 3 years, or both. For companies with no physical presence in Nepal, traditional penalties like fines and criminal proceedings are not practically enforceable against it as the government of Nepal would have to file proceedings before a court in the US or home country to do so. As such, the government would likely focus its efforts on disrupting platforms’ services within the country through actions like throttling servers or blocking platforms entirely.