European Union: Privacy Shield Update – A Look At The Regulators' Recommended Changes

Earlier this year, the European Commission announced the potential replacement for the EU-US Safe Harbor scheme. The so-called 'Privacy Shield' is intended to be the new mechanism upon which EU-US personal data transfers will be based. A month after the Commission's announcement, the draft text of the Privacy Shield adequacy decision (the "Draft") , complete with lengthy and numerous annexes, was published.

Since its publication, the Draft has been under review by the Article 29 Working Party – the collective group of European data protection authorities, or "DPAs" ("WP29"). Following the conclusion of this review process, WP29 recently published Opinion 01/2016 on the EU-US Privacy Shield draft adequacy decision (the "Opinion"). The Opinion analyses and reviews the entirety of the Draft, with WP29 making various comments, recommendations and voicing certain criticisms. We take a look at these.

Unclear and inconsistent

Although welcoming many aspects of the Privacy Shield, particularly with respect to improvements made over Safe Harbor, WP29 highlights inconsistencies and a general lack of clarity in the Draft. In particular, given the length of the draft text and annexes, WP29 does not consider the Draft accessible. Similarly, it draws attention to the lack of clarity in the language used in the Draft and the need for it to be clear and based on a common understanding on both sides of the Atlantic. In this respect, WP29 has recommended:

  • A separate annex providing a glossary of core terms for all stakeholders;
  • Where possible, the use of vocabulary and terminology that is consistent with EU data protection law;
  • Consistent use of terminology throughout the Draft; and
  • Including various missing definitions throughout the Draft;

'Essential Equivalency' and 'European Essential Guarantees'

One of the key concepts arising from Schrems, and underpinning the Opinion, is that of 'essential equivalency'. In Schrems, the EU Court of Justice ("CJEU") indicated that the wording "adequate level of protection" in respect of an Article 25(6) adequacy decision – such as Safe Harbor or the Privacy Shield – must be understood as requiring a level of data protection that is "essentially equivalent" to that under EU law. WP29 notes that the Draft does not contain any adequacy report, which would have provided a comprehensive assessment of the domestic and international commitments of the US.

Interestingly, WP29 has established a separate doctrine, dubbed the 'European Essential Guarantees'. These guarantees were developed by WP29 in the context of CJEU and European Court of Human Rights decisions. The guarantees provide a useful yardstick to appraise the laws and practices of any non-EEA recipient country which could be deemed to interfere with a fundamental right (such as processing for national security or law enforcement purposes). The guarantees are not intended to be applied rigidly or independently; instead, they are meant to be considered in the round. Furthermore, WP29 intends that they be applied whatever the transfer mechanism, condition or derogation that is relied upon.

In short, the four guarantees require that processing, which could be deemed as an interference with a fundamental right,:

  1. should be in accordance with the law and based on clear, precise and accessible rules;
  2. must be necessary and proportionate;
  3. be accompanied by an independent oversight mechanism; and
  4. permit effective remedies.

WP29 has provided further insight into its development of these guarantees in its Working Document 1/2016.

Exceptions for Law Enforcement and National Security

In its Opinion, WP29 applies these newly-developed 'guarantees' to analyse the circumstances in which the Privacy Shield obligations can be disapplied due to the needs of national security or law enforcement. In applying the guarantees, WP29 underlines the fact that, while exceptions for national security and law enforcement may be permitted, they must still be "justifiable in a democratic society". Despite welcoming the advances in transparency and indicating that oversight mechanisms are largely satisfactory, WP29 highlights the following points in respect of national security:

  • In certain circumstances, non-US based individuals lack equivalent rights and protection, particularly in the context of Fourth Amendment rights, which prohibit unreasonable searches and seizures and require probable cause for warrants.
  • The Draft indicates the potential for continuing existence of "massive and indiscriminate" data collection. Sufficient restrictions on US government surveillance activities do not appear to be envisaged in the Draft.
  • The existence of effective remedies for individuals remains a concern for WP29, particularly given both a lack of clarity on what situations individuals can bring a claim and questions around the independence of the proposed Ombudsperson.

In terms of access to personal data for law enforcement purposes, WP29 welcomes and recognises the effort of US authorities. The investigative tools and limitations and safeguards proposed in the Draft, according to WP29, are both extensive and complex. In particular, WP29 notes the fairly robust oversight mechanism under the Draft. WP29 does, however, suggest that despite the availability of no-cost redress mechanisms, there is a need to involve DPAs given individuals' language barriers and lack of knowledge of the US legal system. However, given the limited information available in the Draft and the fragmented nature of the applicable US laws, procedures and policies, WP29 was unable to provide a comprehensive assessment of the law enforcement guarantees. Despite this, WP29 envisages that a full review of these guarantees might be part of an annual review of the Privacy Shield.

What About Data Processors?

One of the core issues raised by WP29 relates to the application of the Privacy Shield to US-based data processors. Under EU data protection law, data processors are entities that act on behalf of and on the instructions of data controllers. Processors are often likened to an agent of the controller. In particular, WP29 points to the fact that the draft text is primarily controller-, rather than processor-, focused. WP29 has pointed to a number of the Principles contained in the Privacy Shield, which it believes are unsuitable for data processors. It suggests that specific rules must be provided to address data processors.

The Principles

As described in our previous post, the Draft includes seven key 'Principles' that reflect similar principles that applied under Safe Harbor. WP29 has reviewed these Principles and raised various concerns. According to WP29, a number of the Principles do not adequately address the obligations and requirements arising under EU data protection law. In particular, it has "serious concerns" around the inconsistency in terminology across the Principles.

One such issue relates to the potential clash between the Principles of purpose limitation and choice. In this respect, WP29 points to the ability for a US-based importer to rely on an opt-out mechanism, under the choice Principle, in order to process data for additional, materially different purposes, which is not adequately defined. This, however, appears to erode the purpose limitation Principle which restricts the processing of personal data for new purposes that go beyond the original purposes for which it was collected. Furthermore, WP29 has particularly highlighted an apparent gap in the Draft regarding the data retention principle, as the Draft does not oblige organisations to delete data if the data is no longer necessary.

Onward Transfers

Another concern raised by WP29 relates to 'onward transfers' – transfers of personal data from the US-based importer to a third party. The Privacy Shield is, according to WP29, equally applicable to both initial transfers to the US entity and to onward transfers. However, WP29 has raised national security and law enforcement concerns around onward transfers, particularly highlighting "the risk of unjustified interferences with ... fundamental rights". Where onward transfers are envisaged, US-based organisations participating in Privacy Shield must assess the third party recipient's local laws and confirm that the personal data will be subject to the same level of protection. Despite this, WP29 takes the position that where the EU data controller is aware of the onward transfer before the US transfer takes place, or where the EU controller is jointly responsible for such transfer, it will be considered a direct transfer, meaning that the data is deemed to be transferred directly from the EU entity to the third party recipient. This means that an alternative transfer condition or mechanism – such as Standard Contractual Clauses – must instead be relied upon.

What Comes Next?

It is worth noting that during its assessment of the Draft, WP29 had the opportunity to meet with the Commission and US representatives. In the course of these meetings, some clarifications were provided, albeit informally. WP29 expects these to be put on a firm footing. Furthermore, WP29 signalled that, in addition to its existing comments and recommendations,  it may find further issues with the Draft at a later date.

Strictly speaking, the Opinion cannot halt the progress of the Draft. However, the WP29 members – the DPAs – play an important role in data protection in the EU. Consequently, the Commission may take on board and implement some of the recommendations and suggestions made, with the intention of staving off potential challenges down the line.

Next, a committee made up of representatives from each EU Member State, the Article 31 committee, will consider the Draft. It must be approved by a qualified majority of this committee. Once the Draft has been through this procedure, the Commission may adopt the decision formally, and it will become effective. Of course, it is always open to the committee or the European Parliament to refer aspects of the Draft to the CJEU for a determination of their compatibility with EU law. Based on current progress, and in the absence of any significant stumbling blocks, the Privacy Shield could be published by mid-Summer. Watch this space. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions