The problem is hosts like the one in the story
Cyberbunker, a Dutch web host which states it will host anything with the exception of child pornography or terrorism-related material.
This is how pirates, spammers, etc. are able to flourish.
If it's illegal, any host allowing it should be shut down.
If countries/governments actively encourage it (e.g. China, etc.) then they should be fire-walled from the rest of the net.