Information about the Author
Mgr. Hovsep Kocharyan, Ph.D., is Co-founder and Head of the Legal Department at Artlex Consult s.r.o. (Prague) and a member of the Metaverse Bar Association (Ontario). He specializes in FinTech law, including PSD2, crypto regulation, GDPR, AML/CFT compliance, and corporate law across multiple jurisdictions. He is also a legal scholar at Palacký University Olomouc, focusing on EU and international law, particularly data protection and digital rights.
1. Introduction
Traditional international law is grounded in the idea that a State exercises sovereignty over a defined physical territory. Territory has long been understood as a geographical space—including land, airspace, and waters—under state control. This concept underpins state recognition, jurisdiction, and conflict resolution.
However, digitalization challenges this model. In cyberspace, data flows instantly across borders, infrastructure is globally dispersed, and interactions are no longer tied to physical location. This raises a fundamental question: can a digital state exist under international law, and can it satisfy the classical criteria of statehood defined in the Montevideo Convention (1933)?
This analysis adopts the declarative theory of recognition, viewing statehood as dependent on objective criteria rather than external recognition. The Montevideo Convention remains the key framework for assessing such criteria.
2. The Montevideo Criteria of Statehood
Article 1 of the Montevideo Convention defines four requirements:
1) Permanent population;
2) Defined territory;
3) Government;
4) Capacity to enter into relations with other states.
While seemingly clear, each element is contested — especially “defined territory” in the digital age.
2.1. Rethinking Territory in the Digital Era
Traditionally, territory is a fixed geographical area under sovereign control. However, digital space introduces a dual-layered concept:
Physical layer: infrastructure (servers, cables, data centers) located in specific jurisdictions
Digital layer: a “secondary space” of legal norms, rights, and interactions independent of physical location
This transforms territory in three ways:
1) From geography to jurisdiction;
2) From borders to rights;
3) From fixity to mobility.
As a result, multiple legal systems may simultaneously apply to a single digital activity.
2.2. Key Challenges
1) Conflict of laws: GDPR, U.S. surveillance laws, and data localization regimes often clash;
2) Politicization: digital regulation becomes a geopolitical tool;
3) Internet fragmentation: emergence of “sovereign internets” (e.g., China, Russia).
3. Human Rights and Digital Extraterritoriality
The EU’s “right to be forgotten” illustrates how jurisdiction extends beyond territory. Courts have required global data removal to protect EU citizens, regardless of server location.
This reflects a shift: sovereignty is increasingly tied to protection of citizens’ rights, not just territorial control. Laws like the GDPR and U.S. CLOUD Act demonstrate the growing extraterritorial reach of digital regulation.
4. Legal Uncertainty in Cyberspace
Digitalization blurs traditional jurisdictional boundaries. Decentralized Autonomous Organizations (DAOs) and digital platforms lack clear legal status:
1) No fixed location;
2) Participants across multiple jurisdictions;
3) Often anonymous governance.
This raises unresolved issues:
1) Which law applies?
2) Who is liable for harm?
3) How are disputes resolved?
Similarly, digital citizenship initiatives (for example, Estonia’s e-Residency) also challenge traditional notions of citizenship and state affiliation.
5. Reinterpreting the Remaining Criteria
5.1. Permanent Population
Digital communities form around platforms, DAOs, and virtual environments rather than geography. However, questions remain:
1) What defines digital citizenship?
2) Do such populations have enforceable rights and obligations?
5.2. Government
Governance ranges from centralized platforms to decentralized DAOs. While DAOs offer participatory models, they face challenges:
1) Accountability gaps;
2) Lack of dispute resolution mechanisms;
3) Dependence on code rather than legal institutions.
5.3. International Relations Capacity
Digital platforms increasingly influence global governance by setting standards and entering agreements. However, they are not recognized as subjects of international law, raising questions about their evolving role.
6. Conclusion: Toward a New Concept of Territory
Digitalization transforms the concept of territory into a multi-layered construct:
1) Physical infrastructure remains relevant;
2) Legal and digital spaces are mobile and extraterritorial.
Modern sovereignty is no longer defined solely by control over land, but also by the ability to regulate and protect citizens in digital environments.
The central question is shifting from whether digital states can exist to whether international law will adapt to recognize them. As digital communities grow and traditional legal frameworks lag behind, the emergence of new forms of statehood may become inevitable.