Taiwan enacts Cyber Security Management Act

by Michael Fahey

Taiwan’s legislature enacted the Cyber Security Management Act (the “Act”) in early May 2018. The Act was published by the Presidential Office in June and will take force on a date to be announced by the Executive Yuan.

This introduction to the Act begins with a discussion of the background, policies and definitions in the general principles chapter of the Act. That discussion is followed by a brief look at the Act’s chapter on public agencies and a more detailed look at the chapter on the private sector focusing on critical infrastructure operators.

The objectives of the Act are to implement a national information security policy and to build a secure information environment to protect national security and the public’s welfare. Act §1. According to the Executive Yuan, there were 360 security incidents at Taiwanese public agencies in 2017. While most were less serious Level 1 and Level 2 incidents, 12 were Level 3 incidents.

The Act’s competent authority or regulator is the Executive Yuan. Act §2. The designation of a single regulator was made relatively late in the legislative process due to concerns that dispersed regulation of different sectors by sectorial authorities would be ineffective.[1] In practice, the Executive Yuan’s Department of Cyber Security will lead the Executive Yuan’s regulatory effort.

The Act’s key definitions include definitions of information systems, information security, information security incidents, and critical infrastructure. Act §3. These definitions closely track similar definitions in relevant U.S. law. For example, the Act defines information security as “protecting information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction in order to ensure the confidentiality, integrity, and usability of information systems.” Act §(3)(1). This definition is a slightly simplified version of the definition of information security given in 44 U.S. Code §3542.

The Act defines critical infrastructure as “…a physical or virtual asset, system, or network in sectors to be periodically reviewed and announced by the competent authority where there is a likelihood that the cessation or diminishment of the asset, system, or network would have a serious impact on national security, the public interest, or the life and economic activities of citizens .”[2] Act §3(7). There have been concerns that this very broad definition of critical infrastructure might subject internet services such as social media or widely used messaging platforms to regulation under the Act.

Public Sector Information Security

Chapter II of the Act sets out the duties of public agencies to maintain the security of their information systems. Public agencies must put in place information security policies and appoint chief information security officers. Act §§10-11. They are also required to report information security incidents to any superior agency, if any, and the Executive Yuan. Act §14.

Private Sector Information Security

Regulation of the private sector is generally limited to designated critical infrastructure operators.[3] Act Chapter III §§16-18. To designate a private entity as a critical infrastructure operator subject to regulation under the Act, the operator’s sectorial regulator will consult with personnel from public agencies, private sector representatives, and experts. For example, the Ministry of Economic Affairs will designate which power plants are critical infrastructure in consultation with the public agencies, the private sector, and experts because the Ministry of Economic Affairs is the sectorial regulator for energy producers. Act §16(1).

Like public agencies, designated critical infrastructure operators will be required to implement information security policies. Act §16(2). Implementation of information security policies must be reported to the critical infrastructure operator’s sectorial regulator. Act §16(3). For example, a designated power plant would be required to report its information security policy to the Ministry of Economic Affairs.

A designated critical infrastructure operator’s sectorial regulator is required to audit the critical infrastructure operator’s implementation of its information security policy. Act §16(4). This audit requirement was introduced during the legislative process in response to the Executive Yuan’s original draft that controversially gave government agencies the power to conduct on-site inspections.

A designated critical infrastructure operator will also be required to file an improvement report in the event that a deficiency or need for improvement in its information security policy is identified. Act §16(5). Sectorial regulators are required to issue regulations governing information security policies as well as related auditing, reporting, and compliance requirements. Act §16(6).

Article 18 of the Act requires designated critical infrastructure operators to set up reporting and response mechanisms for security incidents. Act §18(1). In the event of a security incident, the critical infrastructure operator must first report the incident to its sectorial regulator and then file a separate post-incident improvement report regarding the security incident at a later date.[4] Act §§18(2)-(3). In turn, the sectorial regulator has a duty to report security incidents to the Executive Yuan. In the case of significant security incidents, the sectorial regulator is also required to send the critical infrastructure operator’s improvement report to the Executive Yuan. Act §18(3). The Executive Yuan or sectorial regulator has the power to announce significant security incidents and the response thereto to the public. Act §18(5).

Fines of NT$100,000 to NT$1 million (c. US$3,300 to US$33,000) can be imposed on designated critical infrastructure operators for the following categories of violations:

  1. violation of rules governing information security policies;
  2. failure to implement a reporting and response mechanism for security incidents; or
  3. failure to file reports on the investigation, handling, and remediation of security incidents or the filing of an incomplete security incident report. Act §20(1)(1)-(3).

Failure to report a security incident will result in a fine of NT$300,000 to NT$5 million and an order to report. This fine can be imposed multiple times if the critical infrastructure operator does not comply with the order to report. Act §21.

Like many Taiwanese laws, the Cyber Security Act sets out broad principles and leaves many of the key details to regulations issued by the regulator. As of this writing, the Executive Yuan’s Department of Cyber Security has drafted six regulations under the Act. Of these, four are relevant to designated critical infrastructure operators:

  1. The Cyber Security Act Enforcement Rules,
  2. The Regulations for Classification of Cyber Security Responsibility,
  3. The Regulations for Reporting and Responding to Cyber Security Incidents, and
  4. The Regulations for Inspecting Implementation Status of Special Non-official Agencies’ Cyber Security Maintenance Programs.

These draft regulations have been announced for public comment on the Executive Yuan’s online platform for public policy (in Chinese). The public comment period ends on 23 August 2018. The Department of Cyber Security has already revised the draft regulations once following a series of seminars held in April and May of this year for public agencies, critical infrastructure operators, and experts to provide preliminary commentary. The 7 May seminar in Taipei for potential critical infrastructure operators was of particular interest. A complete transcript (in Chinese) of the seminar may be found here along with transcripts of other seminars for experts and public agencies.

The Department of Cyber Security has indicated in the Taiwanese media that that Act will take effect in two phases. The Department expects that the Act will come into force for public agencies starting around 1 January 2019. It further expects to put the Act into force for private entities including designated critical infrastructure operators in June 2019.

[1] There is perception among experts in Taiwan that Taiwan’s dispersed regulatory model for data protection has hampered effective enforcement of the Personal Information Protection Act.

[2] This definition of critical infrastructure is quite similar to the one given in the US Code of Federal Regulations 31 C.F.R. § 800.208.

[3] The other ‘private sector’ entities subject to regulation under the Act are state enterprises and publicly funded foundations. Act §6.

[4] The reporting requirement is similar to that in Article 14 of the EU’s 2016 NIS Directive.