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It sounds like you’re encountering an issue with external partners being unable to change or remove the "External" label from files, even though they have been assigned owner rights on the label. This is a common challenge when working with Microsoft Purview Information Protection and sensitivity labels, especially when guest or external users are involved.
Here are few considerations to check which might help you:
Assign them as internal users - If possible, convert their accounts to internal users within your organization, which would grant them the necessary permissions to manage sensitivity labels.
Review Label Policy Settings - Ensure that your label policies allow external users to modify or remove labels. There might be restrictions in place that prevent guest users from altering labels, even if they have owner rights.
Permissions beyond Owner Rights - While granting owner rights on the label gives them some control, it might not be sufficient for them to modify or remove labels. You may need to adjust permissions to allow external users to perform these actions on labeled files.
Access Control - Even if they have access to the file, make sure their permissions are configured correctly both at the label level and at the file access level. There could be access control settings that prevent them from altering the label.
Test with a New External User - Sometimes, the issue may stem from specific configurations or the way external users are set up. Testing with a new external user might help identify if it’s a broader issue with guest user permissions.
For additional information, please refer the following Microsoft documentations:
I hope this information helps. Please do let us know if you have any further queries.
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