Malaysia: Cloud services to be licensed from 1 January 2022 - Updates

In brief

Subsequent to our client alert issued in November 2021 in relation to cloud service regulation in Malaysia, the Malaysian Communications and Multimedia Commission ("MCMC") has since shed light on the scope of the licensing regime and the availability of a grace period until 31 March 2022 to those affected to fully comply with the new licensing requirement.


Contents

In more detail

From 1 January 2022, cloud service providers ("CSPs") must apply for an applications service provider class licence ("ASP(C) Licence") from the MCMC.

This requirement was first announced on 15 October 2021 via an advisory notice issued by the MCMC. Whilst the advisory notice suggested that foreign CSPs who are not using local data centres may need to be licensed, the MCMC has published a revised FAQ and a new information paper on 17 December 2021 clarifying that the licensing regime is intended to capture only CSPs with a local presence i.e., CSPs who are locally incorporated or established in Malaysia and excludes the local branches of foreign CSPs. Where a foreign CSP delivers cloud services via a local data centre in Malaysia, the obligation to obtain a licence appears to fall upon the local data centre.

The licensing regime excludes:

  1. software providers who provide software solutions in reliance on other cloud service platforms and infrastructure; and
  2. resellers of cloud services who do not have full control over the cloud service products.

Existing ASP(C) Licence holders who are providing cloud services may continue to do so, provided they include cloud service activities as one of the licensable activities undertaken during the annual re-registration of their licence.

The MCMC has also stated that no legislative amendments will be made in relation to the licensing requirements as the current framework under the Malaysian Communications and Multimedia (Licensing) Regulations 2000 is wide enough to encompass all applications services that are not explicitly exempted under current regulations.

A grace period from 1 January 2022 until 31 March 2022 will be given for relevant CSPs to submit their applications for a licence before the regulation comes into full force. CSPs should note that provision of licensable activities without a licence is an offence under the Malaysian Communications and Multimedia Act 1998, punishable upon conviction with a fine of up to MYR 500,000 (~ USD 120,000) and/or imprisonment for up to five years.

In light of these developments, CSPs are advised to conduct a careful assessment as to whether their activities will require an ASP(C) Licence in Malaysia.

*****

LOGO Malaysia_Wong & Partners_KualaLumpur

This client alert was issued by Wong & Partners, a member firm of Baker McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner or equivalent in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. 

Contact Information

Copyright © 2022 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.