After the European Court of Justice ("ECJ")
declared the 2000/520/EC Safe Harbor decision of the European
Commission (the "Safe Harbor") to be invalid, there was
considerable uncertainty as to whether alternative measures of
protection to legalize the transfer of personal data from the EU to
the U.S., such as Standard Contractual Clauses and Binding
Corporate Rules, were available. The uncertainty was further fueled
when one German State Data Protection Authority
(Schleswig-Holstein) recently issued a statement that it considers data transfers on
the basis of Standard Contractual Clauses to the U.S. to be no
longer permitted. This statement came despite clear indications
that the EU Commission and the Article 29 Working Party (the EU
independent advisory body on data protection matters consisting of
representatives from the national Data Protection Authorities, the
European Data Protection Supervisor, and the European Commission)
(the "Working Party") were expected to issue further
guidance on the matter.
The Working Party has now issued a joint statement providing the eagerly awaited
guidance on the practical consequences of the Safe Harbor
invalidation for companies, and it indicated that alternative
adequacy measures like Standard Contractual Clauses and Binding
Corporate Rules can be applied. This is of particular importance
for the more than 4,400 companies that were allowed to transfer EU
personal data to the U.S. under the Safe Harbor program.
"New" Safe Harbor Could Be Part of the Solution
As a starting point, the Working Party confirmed that, as a direct result of the invalidation of the Safe Harbor, personal data transfers to the U.S. based on the Safe Harbor have become unlawful. Therefore, alternative solutions must be implemented to secure such data transfers. In this context, the Working Party called on the Member States and the EU institutions, in concert with U.S, authorities, to find "... political, legal and technical solutions enabling data transfers to the territory of the United States that respect fundamental rights...." According to the Working Party, a "new Safe Harbor," which is currently in discussions, "could be a part of the solution." However, these discussions have been ongoing for some time, and it remains to be seen whether the U.S. government and its European counterparts will expedite discussions to finalize and quickly implement the so-called "New" Safe Harbor. U.S. Secretary of Commerce Penny Pritzker was reported on October 16, 2015 to have urged quick action on improving the Safe Harbor while speaking at the National Foreign Trade Council's annual dinner.
Standard Contractual Clauses and Binding Corporate Rules Confirmed (for an Interim Period)
Most importantly, the Working Party expects that a suitable
framework for transferring data to the U.S. will be finalized by
the end of January 2016. Until then, the Working Party has said it
will continue investigating the consequences of the ECJ ruling on
other tools available for transferring personal data outside of the
European Economic Area, namely Standard Contractual Clauses and
Binding Corporate Rules. Thus, the Working Party has indicated the
possibility that the ECJ ruling may also affect these alternative
measures of protection for international personal data transfers to
the U.S.
For the interim period until the end of January 2016, the Working
Party confirmed that the Data Protection Authorities in the Member
States will consider Standard Contractual Clauses as well as
Binding Corporate Rules a viable basis for data transfers to the
U.S. This does not, however, preclude authorities from
investigating individual cases, for example, if a complaint has
been lodged. In this context, it is important to understand that
the Standard Contractual Clauses contain provisions allowing Data
Protection Authorities to suspend transfers in individual cases,
and thus this should be considered when implementing the Standard
Contractual Clauses.
The Standard Contractual Clauses for transfers to processors
(2010/87/EU), for example, allow for a suspension (see
Art. 4(1)(a)):
in cases where it is established that the law to which the data importer or a sub-processor is subject imposes upon him requirements to derogate from the applicable data protection law which go beyond the restrictions necessary in a democratic society as provided for in Article 13 of Directive 95/46/EC where those requirements are likely to have a substantial adverse effect on the guarantees provided by the applicable data protection law and the standard contractual clauses.
This might leave a door open for more aggressive Data Protection
Authorities to reference the EJC's reasoning and declare
invalid personal data transfers to the U.S. Nevertheless, a simple
reference to the reasoning of the ECJ ruling should not be
sufficient to justify suspension on this basis because a detailed
analysis of the national law of the U.S. seems required, and a
substantial adverse effect would need to be established in the
individual case.
Also, the Working Party did not address other viable means of
legally permitting international personal data transfers, such as
data subject consent and further relevant derogations from the
requirement to ensure an adequate level of protection, including
that the transfer is necessary for the performance of a contract.
These would remain available and should be considered, where
appropriate, to legalize EU personal data transfers to the U.S.
Practical Steps To Be Taken
A first practical consequence of the Safe Harbor invalidation is
that companies that were relying on the Safe Harbor for their data
transfer to the U.S. must urgently implement alternative legal
solutions. Given the time it takes to adopt and obtain approvals
for Binding Corporate Rules, the Standard Contractual Clauses
appear to be the best and most expedient solution in the short
term. However, the heightened scrutiny of the Data Protection
Authorities applied with respect to such solutions requires
companies to select the right set of clauses (including a correct
differentiation between controller-to-controller and
controller-to-processor transfers) and verify if the applicable
national data protection law imposes additional administrative
requirements (e.g., notification and registrations).
Companies will also need to identify where in the data transfer
chain such clauses (and which type of clauses) will need to be
implemented—for example, in intercompany transfers from the
EU to the U.S. or to cover direct transfers from a data exporter in
the EU to a third-party data importer processor in the U.S. Onward
transfers from the U.S. importer to a third party (data processor
or controller) require special attention, as the clauses concluded
with the U.S. importer will also determine the respectively
applicable flow-down requirements.
Further, companies should not forget that all data transfers need a
justification (either a statutory justification or consent of the
data subjects). Companies should document the basis for the data
transfers, which can be helpful in defending such transfers if
questioned by a data protection authority.
Also, companies should consider practical implications if a
"New" Safe Harbor or other solution is agreed, especially
if such solution is more desirable than the Standard Contractual
Clauses or Binding Corporate Rules. For instance, companies might
consider how best to effectuate a transition back to the
"New" Safe Harbor under the circumstances.
Finally, continued monitoring of the developments will be required.
The Working Party indicated in its statement that, depending on the
outcome of its own assessment of alternative transfer tools in the
light of the ECJ ruling, and should no solution be found with the
U.S. by the end of January 2016, "... EU data protection
authorities are committed to take all necessary and appropriate
actions, which may include coordinated enforcement
actions."
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