Microsoft president and chief lawyer Brad Smith has said governments and major companies will not want to store data in Australia’s anymore. Smith says the country’s new encryption legislation means organizations are “no longer comfortable”.

Speaking today, Smith said customers have already reached out to Microsoft. He says they want the company to relocate its Azure data centers in the region outside Australia.

Last year, the Australian government passed new data encryption laws. A first of its kind in the world, the legislation was created in an effort to stop crime and terrorism. Critics have said the laws could have a worse impact on security and will compromise user privacy.

Under the law, tech companies are mandated to give authorities access to their encrypted messages. For example, a service like WhatsApp uses end-to-end encryption, which means only the sender and the recipient see message content. Not even WhatsApp sees it. Lawmakers in Australia believe this gives terrorists and criminals a perfect platform to network with each other.

With the new framework, law enforcement and intelligence agencies in Australia can force companies to create backdoors into their services to read encrypted messages, without the user knowing.

Systemic Weakness

Speaking to the Committee for the Economic Development of Australia in Canberra, Microsoft’s Brad Smith warned the move is asking companies to create “systemic weaknesses” in their services. He argued Australia had been place companies were comfortable storing data in, but that has now changed.

“But when I travel to other countries I hear companies and governments say ‘we are no longer comfortable putting our data in Australia’.

“So they are asking us to build more data centres in other countries, and we’ll have to sort through those issues.”

Experts say there is no way to create a backdoor for an individual user, so companies would need to create one for an entire system. This backdoor could then be exploited by cybercriminals. Australia has said such backdoors will not be created if they create a systemic weakness, but Smith argues the country has left this issue “undefined”.