UK: Cloud Computing - What Are You Signing Up To? An Analysis Of Standard Terms And Conditions

Last Updated: 22 March 2011
Article by Stephen Critchley

The benefits of cloud services are often cited. They're low cost. They're scalable. They're permanently state-of-the-art.

However, at least with traditional IT outsourcing, the customer can negotiate a balanced, even a customer-friendly contract. Cloud customers usually have little option but to accept standard T&Cs. It is a utility model, where multiple users each buy a slice of the same pre-existing service. Providers tend to have the "take it or leave it" mentality of a gas or electricity company, with little appetite for negotiating, even with large customers.

Researchers at Queen Mary University, London have studied the T&Cs of 31 cloud computing services, and found remarkable consistency. An analysis of their findings can be downloaded here.

We will not regurgitate all the findings, but the following were of particular interest.

Applicable Law, Jurisdiction and Limitation

Traditional outsourcing contracts usually stipulate the customer's law and jurisdiction. Typically it is the same as the provider's, so there is no argument.

Cloud service providers are not geographically tied to their customers, and tend to prefer their own law and jurisdiction. 15 of the 31 T&Cs chose a US State law. Only 10 stipulated English law for English customers; for various reasons. Only two of the 10 were because the T&Cs elected the customer's law.

Many had short limitation periods for bringing a claim. IBM, two years. Apple, one year. ADrive, six months.

Warranties for Performance of the Service

The paper said that this was perhaps the area where all 31 T&Cs were most similar.

Almost without exception, every provider went to considerable - and in some cases extraordinary - lengths to deny that any such warranty existed.

The paper quotes GoGrid's disclaimer which was fuller than, but not fundamentally different from others:

GoGrid does not warrant that the Service will be uninterrupted, error-free, or free from viruses or other harmful components. The Service is provided with no warranties regarding security, reliability, protection from attacks, data integrity, or data availability.

Many providers including GoGrid, Facebook and Amazon also exclude warranties of fitness for purpose or merchantable quality. Such disclaimers may be invalid if they conflict with the applicable law, but the previous heading notes that the customers' domestic law may not apply. Furthermore, some providers applying an EU law (including Apple) disclaimed warranties even though the disclaimer conflicted with EU law.

Data Location / Transfer

Perhaps the main concern about cloud services is the data protection implications of cross-border transfer and processing outside the customer's control. There is little guidance at present as to how cloud customers can ensure compliance with data protection laws. The Information Commissioner's Code did little more than acknowledge the problem.

The issue is largely outside the scope of the University's paper too. However, it is the first of a series of papers by the University's "Cloud Legal Project", and data protection will be the subject of a future one. Also, the paper does at least touch on the issue insofar as it reviews T&Cs concerning data location and transfer.

Surprisingly given the level of concern, 15 of the 31 T&Cs made no reference to the issue at all. Of the rest, only seven (presumably American) providers claimed to meet the criteria for "US Safe Harbor" status agreed between the EU and the US, certifying that a US company meets the more rigorous data protection requirements of EU law. The paper notes that, where the provider is itself based in the EU:

the EU Data Protection regime acts as a strong brake on unfettered transfer of many sorts of data out of Europe.

Data Integrity

Data integrity - both in terms of accidental loss of a customer's data and unauthorised access to it by a third party - is a key concern of many customers; but, to quote the report:

Our survey found however that most providers not only avoided giving undertakings in respect of data integrity but actually disclaimed liability for it.

Several T&Cs suggested that customers:

  • combat unauthorised access by encrypting their data, or
  • hedge against data loss by making "separate backup arrangements", even when the service most likely is the customer's "separate backup arrangement"!

The T&Cs of two data backup services, Symantec's Norton Online and Iron Mountain, do not mention data integrity at all.

Data Preservation upon Termination of Contract

There are two issues here. Whether the data will be deleted and, if not, whether the customer can access it. The paper says that providers fall broadly into three camps:

  1. Those who commit to preserve the data for a set time, during which the customer may access it, sometimes for a charge.
  2. Those who reserve the right to delete it immediately.
  3. Those who commit neither to preserving nor deleting it.

Specific assurances that data will be deleted post-contract for customer security and privacy were not common. The paper only mentions one provider who offered it.

Acceptable Use Policy

All 31 T&Cs had an AUP, and they were remarkably consistent; prohibiting use of services for:

  • spamming,
  • fraud,
  • gambling,
  • hacking other systems, or
  • hosting content that was obscene, defamatory, discriminatory or tending to incite hatred.

There were some more specific restrictions relevant to the service on offer. For example, Iron Mountain offers a business data backup service, and prohibits its use for any other purpose and Facebook prohibits use by sex offenders.

Those of you involved in the proliferation of weapons of mass destruction are, unfortunately, prohibited from using Rackspace!

Variation of T&Cs

The paper found significant differences here. At one extreme, 8 of the 31 T&Cs made no reference to variation at all, making it unclear on what basis a variation could bind an existing customer. At the other extreme, 13 of the providers reserved the right to vary the contract unilaterally simply by posting new T&Cs on their website, with no duty to inform customers.

Conclusion

It may be difficult to negotiate bespoke terms with cloud providers, but the paper highlights differences between standard T&Cs, so it is a useful reference for customers wanting to know how normal an unfavourable term is, and whether it is worth shopping around. The market is in its infancy, and it was to be expected that early T&Cs would be biased towards the provider. Whether the balance shifts will depend upon the diligence with which customers study competing T&Cs and vote with their feet.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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