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.

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.

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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.