The offshore Web storage company HavenCo will be subject to the government's controversial Regulation of Investigatory Powers Bill, it emerged this week.
The Sealand-based company - a fortress 12 miles off the coast of Felixstowe - was established earlier this year as a datastore for firms wishing to store files outside the reach of the RIP legislation and UK e-commerce laws.
HavenCo insists that it lies outside UK territory and should not be subject to UK tax or laws. However, the Home Office does not recognise Sealand as an independent state. And the Inland Revenue said that as HavenCo was within 12 miles of UK territorial waters it was subject to UK tax laws.
This means that HavenCo could have to hand over encryption keys to law enforcement agencies and risk breaching client commercial confidentiality. HavenCo, an Anguilla-registered corporation, expects to offer a full service in the autumn.
Chief executive Sean Hasting said it had not been contacted by the UK government and added that demand for its service had been strong.
"The companies approaching us are mostly from the financial services and e-commerce sector," he said. "They are both established and start-ups. There is clearly a gap in the market."