Ireland: Corporate Bulletin - October 2015

Welcome to the Dillon Eustace corporate bulletin. We have set out some of the recent legal developments which we feel may be of interest to you and/or your business.

In this edition we look at the recent European Court of Justice data protection ruling in what was referred to in news reports as the "Facebook Case". We discuss what this decision means for Irish companies who collect personal data and relied on the Safe Harbour arrangements. We also provide an update on the European Securities and Markets Authority's guidelines on the antimoney laundering and counter terrorist financing risks associated with investment-based crowdfunding.

We discuss recent developments to the Research and Development Tax Credit Regime and look at the potential in the Knowledge Development Box announced in the recent Budget.

In highlighting new legislation, we look at the implications of the new Regulation of Lobbying Act, and describe the activities which will require registration with the Standards Commission, We look at the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 which seeks to protect borrowers who have had their loans sold to unregulated entities. We also examine the changes introduced by the Personal Insolvency (Amendment) Act 2015 which amends the Personal Insolvency Act 2012. Finally, we look at the principle innovations of the Industrial Relations (Amendment) Act 2015 and the changes it introduces.

If you wish to discuss anything contained in this bulletin please contact us.

European Court of Justice Data Protection Ruling

Introduction

On Tuesday 6 October, 2015 the Court of Justice of the European Union ("ECJ") ruled, in the case of Schrems v Data Protection Commissioner, that the 'Safe Harbour' arrangements between the United States and the European Commission are invalid.

These arrangements, agreed between the United States and the European Commission, allowed companies based in the U.S. to store personal data about European citizens on U.S. based computer servers without breaching E.U. data protection law (in Ireland; the Data Protection Acts 1988 and 2003). Companies agree to adhere to the Safe Harbour principles, enforced by the U.S. Federal Trade Commission, and as a result are deemed to provide sufficient protection for the personal data. This has allowed Irish subsidiaries of U.S. companies, or even Irish companies which use service providers based in the U.S., transfer personal data to the U.S. without breaching data protection laws.

Facts of the case

This case is the culmination of an action brought against Facebook in the Irish High Court by an Austrian student, Max Schrems. Mr Schrems argued that personal data processed by Facebook is unprotected because it is transferred to the United States, where it is not treated in accordance with EU data protection laws.

Mr Schrems made a complaint to the Irish Data Protection Commissioner (the "DPC") in relation to the processing and transfer of data by Facebook to the U.S. The DPC declined to investigate the matter arguing that the issue was covered under the 'Safe Harbour' convention. Mr Schrems challenged the decision of the DPC in the Irish High Court and the High Court in turn referred the matter to the ECJ on a point of European Law.

Decision of the ECJ

The ECJ ruled as invalid the 'Safe Harbour' arrangements which allowed for the transfer of personal data to the U.S. The ECJ found that the European Commission had neither the legal means to police the Safe Harbour agreement nor the power to prevent U.S. intelligence from collating EU citizens' data. Rather than wait for a successor agreement, the ECJ dismissed the existing arrangement as a breach of EU data rules and the fundamental rights of EU citizens. The ECJ also found that the DPC was not precluded from investigating the original compliant.

Implications of the ECJ Ruling

The ruling does not pull the plug on data transfers between the EU and the U.S. but, until a new transatlantic agreement is put in place, it creates legal uncertainty for all companies currently relying on Safe Harbour as a legitimate means of transferring personal data to the U.S.

Next Steps

There are of course other means whereby personal data can be exported outside the EU. For instance, the European Commission has approved "Model Clauses" which can be included in data transfer agreements with companies based outside of the EEA for the transfer of personal data. Another option would be for Irish companies to obtain consent from the relevant data subject.

Given the far-reaching economic consequences of this ruling, the European Commission has insisted that it will soon conclude a new data agreement with the U.S. to ensure that data channels remain open for business.

The ruling of the ECJ presents a clear opportunity for the European Commission to set robust global standards for the protection of personal data. The next steps taken by the European Commission in this area will be analysed carefully and followed with interest by all parties concerned by the ECJ's ruling. For multi-national companies based in Ireland, it is imperative that the EU and the US government put in place reliable methods for lawful data transfers and resolve any issues relating to national security.

The ruling now returns the case to the High Court, where Mr Schrems took a judicial review against the DPC's original decision. It is likely that the High Court will instruct the DPC to investigate fully Mr Schrem's complaint in relation to Facebook's processing of personal data.

Regulation of Lobbying Act 2015

Overview

The Regulation of Lobbying Act 2015 (the "Act") was signed into law by the President on 11 March 2015. The Act came into effect on 1 September 2015 and applies to a diverse range of individuals who would not be generally regarded as lobbyists. The Act will place requirements on solicitors and other firms where they make certain submissions to designated public officials (as defined in the Act) on their own behalf and on behalf of their clients.

The Act obliges those engaged in lobbying activities to register on the online lobbying register (the "Register"), which is maintained by the Standards in Public Office Commission (the "Standards Commission"), and to provide certain information in respect of those activities for inclusion in the Register. The Act is intended to ensure that the influence of lobbying in public decision-making practices is more transparent.

What is Lobbying?

Under the Act, a person will be considered to be a lobbyist where they make a relevant communication. A "relevant communication" means communications (whether oral or written and however made) other than excepted communications, made personally, either directly or indirectly, to a designated public official in relation to a relevant matter.

A communication will relate to a "relevant matter" if it relates to the:

(i) initiation, development or modification of any public policy or of any public programme;

(ii) preparation or amendment of an enactment; and

(iii) award of any grant, loan or other financial support, contract or other agreement or of any licence or other authorisation involving public funds,

apart from any matter relating only to the implementation of any such policy, programme, enactment or award of a technical nature.

The term "designated public official" includes:

(i) Ministers of the Government and Ministers of State;

(ii) other Members of Dáil Eireann and Seanad Eireann;

(iii) members of the European Parliament for constituencies in the State;

(iv) members of local authorities;

(v) special advisors appointed under section 11 of the Public Service Management Act 1997;

(vi) public servants of a prescribed description; and

(vii) any other prescribed office holders or description of persons.

In respect of (vi) above, a "public servant" is defined in the Act as including a person who is employed by a "public service body". However, section 6(2) of the Act provides that the Minister for Public Expenditure and Reform (the "Minister") "may prescribe descriptions of public servants under subsection (1)(f) by reference to their roles, levels of remuneration, grades or similar factors". Accordingly, in respect of (vi) above, only public servants prescribed by the Minister as designated public officials will fall within the scope of the Act. The Regulation of Lobbying Act 2015 (Designated Public Officials) Regulations 2015 (which also came into effect on 1 September 2015) (the "Regulations") outline the current categories of designated public officials prescribed pursuant to (vi) above. However, these may be expanded upon by the Minister over time.

It should be noted that, while the Central Bank falls within the definition of a public service body pursuant to the Act, under the Regulations no person within the Central Bank is currently prescribed as a designated public official.

Who is Carrying on Lobbying Activities?

A person is deemed to be carrying on lobbying activities if they fall within certain categories. An outline of these categories is outlined below:

(i) persons in the course of their business being paid to make, manage or direct the making of a relevant communication on behalf of a client who has more than ten full time employees or is a representative body or an advocacy body which has at least one full time employee;

(ii) an employer, or their agent or employee, with more than ten employees where the communications are made on behalf of the employer;

(iii) a representative body with at least one employee communicating on behalf of its members and the communication is made by a paid employee or office holder of the body;

(iv) an advocacy body with at least one employee that exists primarily to take up particular issues and a paid employee or office holder of the body is communicating on such issues;

(v) Any person communicating about the development or rezoning of land.

A number of communications are provided for at section 5(5) of the Act. These are referred to as "excepted communications" and include the following:

(i) communications by or on behalf of an individual relating to his or her private affairs about any matter other than the development or zoning under the Planning and Development Acts 2000 to 2014 of any land apart from the individual's principal private residence;

(ii) communications by or on behalf of a country or territory other than the State;

(iii) communications by or on behalf of the European Union, the United Nations or any other international organisation;

(iv) communications requesting factual information or providing factual information in response to a request for the information;

(v) communications requested by a public service body and published by it;

(vi) communications forming part of, or directly related to, negotiations on terms and conditions of employment undertaken by representatives of a trade union on behalf of its members;

(vii) communications the disclosure of which could pose a threat to the safety of any person;

(viii) communications the disclosure of which could pose a threat to the security of the State;

(ix) communications which are made in proceedings of a committee of either House of the Oireachtas;

(x) communications by a designated public official in his or her capacity as such;

(xi) communications which:

a) are made by a person who is employed by, or holds any office or other position in, a public service body in his or her capacity as such, or

b) are made by a person engaged for the purposes of a public service body in his or her capacity as such, and which relate to the functions of the public service body;

(xii) communications which:

a) are made by a person who is employed by, or holds any office or other position in, a body which is not a public service body, but is a body by which a designated public official is employed or in which a designated public official holds any office or other position, in his or her capacity as such, or

b) are made by a person engaged for the purposes of such a body in his or her capacity as such, and which relate to the functions of the body;

(xiii) communications by or on behalf of a body corporate made to a Minister of the Government who holds shares in, or has statutory functions in relation to, the body corporate, or to designated public officials serving in the Minister's department, in the ordinary course of the business of the body corporate;

(xiv) communications between members of a relevant body appointed by a Minister of the Government, or by a public service body, for the purpose of reviewing, assessing or analysing any issue of public policy with a view to reporting to the Minister of the Government or public service body on it;

(xv) any communications of a description prescribed under section 5(8) of the Act.

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