European Union: New Rules On European Data Protection

Background

In January 2012 the European Commission published its proposals for a new European Data Protection Regulation. The purpose of the new Regulation is to replace the Data Protection Directive (95/46/EC) and to provide a single harmonised data protection law for the whole of the European Union.

Many of the new proposals in the draft Regulation could be expected to have a significant impact on data controllers and data processors within the EU. The draft Regulation seeks to harmonise data protection procedures and achieve uniform enforcement across the EU. Crucially, the Regulation would be directly binding on data controllers in all Member States immediately upon coming into force without Member States needing to implement the measures through national legislation (as is the case with a directive).

Airlines process personal data in almost all of the countries in which they operate. International data transfers are a necessary feature of airline operations, both in terms of general transportation operations and in terms of complying with security and regulatory obligations, for example with regard to transfers of passenger name record data (as to which, see the article on the subject elsewhere in this Bulletin). Whilst the proposed data Regulation is still being debated and is in draft form, it is still, at this early stage, particularly important that airlines and other companies operating in the aviation industry familiarise themselves with the proposals, work with their legal representatives to evaluate their obligations which would result from them, and prioritise their data protection and privacy obligations as soon as possible.

Scope

The draft Regulation is intended to apply to all businesses engaged in the "processing" (i.e. collection, storage, dissemination and use) of personal data belonging to EU residents. This means that non-EU based businesses which process personal data belonging to EU residents will also fall within the scope of the draft Regulation.

Key changes to the current regime

The proposed Regulation is intended to have broad application and contains a number of new provisions, which, if implemented, would require businesses to adopt additional measures to ensure compliance. The key changes to the data protection regime are discussed below. It is however worth noting that some member states in the EU have already implemented provisions along the lines of the proposed changes (pursuant to the previous EU Directive 95/46/EC), but these have been implemented as a result of national legislation rather than as being required at EU level by the EU Directive.

  • Mandatory breach notification requirement

    Perhaps the most significant new obligation introduced by the draft Regulation is the requirement on all companies to notify any breach of obligations relating to EU residents' personal data to the relevant national supervisory authority "without undue delay" and, where possible, no later than 24 hours after becoming aware of such a breach. Notification after 24 hours must be accompanied by a reasoned justification explaining the delay.

    When a breach is likely to adversely affect the protection of the personal data or privacy of a data subject, notification is also to be provided to the data subject following notification to the national supervisory authority. This notification must occur "without undue delay". To ensure compliance with the draft Regulation's obligations, companies employing more than 250 staff are required to appoint a Data Protection Officer.
  • Rights of data subjects

    There are several new rights for data subjects proposed in the draft Regulation. Most notably, an organisation could be required to erase an EU resident's personal information upon request by the data subject (the "right to be forgotten"). This right to be forgotten requires data controllers to delete the data subject's personal information unless the data controller is able to demonstrate legitimate grounds for the retention of the information.

    The draft Regulation also proposes that where consent is required from the data subject for the processing of data for direct marketing purposes such consent must be given explicitly.
  • National supervisory authorities

    The draft Regulation would strengthen the powers of data protection authorities. The proposals require each Member State to set up a national supervisory authority to monitor and ensure consistent application of the Regulation. These national supervisory authorities will each have the same powers and their rulings will be binding across all other Member States. The idea behind this proposed rule is that the supervisory authorities will act as a "one-stop shop" to ensure enforcement of the Regulation within their jurisdictions.

    The national supervisory authorities will not only have comprehensive investigative powers but also the power to administer sanctions for non-compliance of up to €1 million or two percent of an organisation's worldwide annual turnover.

Comment

It must be said that data protection is an area of law which would benefit from the consistency of a single set of laws rather than the current patchwork of rules which apply across the 27 Member States. However, while many of the changes in the draft Regulation are to be welcomed, concerns remain about the practicalities of implementation. Businesses, in particular, are likely to be concerned about the various new obligations imposed upon them. Some key practical difficulties include the following:

  • The mandatory notification of data breaches within 24 hours is widely regarded as unrealistic and impracticable. Following a data breach the data controller's priority will be to implement disaster recovery procedures. Businesses may need legal advice on their obligations before notification. These factors are likely to make notification within 24 hours unrealistic in practice
  • There are likely to be practical difficulties in enforcing the draft Regulation in a consistent manner across the Member States on a day–to–day basis. For example, how will the situation which arises where a national supervisory authority interprets the Regulation differently to the supervisory authority in another Member State be resolved?
  • It is difficult to see how the ambitious territorial scope of the draft Regulation will work in practice, both within the EU (with the supervisory authorities permitted to levy cross-border fines) as well as from provisions designed to make non-EU based organisations comply with the Regulation

Therefore, while greater harmonisation of data protection legislation across the Member States, and the improved legal certainty which would result, is to be encouraged, it is hoped that more consideration is given to the practical effects of the proposals before the Regulation is to come into force. Indeed, it is expected that there will be much lobbying, particularly by US businesses caught by the Regulation, in the coming months.

In the UK, Clyde &Co have submitted comments on the draft Regulation to the Minister of Justice in response to a call for comments by the Ministry.

Next steps

The draft Regulation will need to be approved by the EU's Member States and ratified by the European Parliament. Implementation could be as early as 2015. It should be noted that the Regulation is directly binding immediately upon coming into force. Therefore, airlines should start the process of reviewing their own data protection and IT security policies in line with the proposed EU rules now to ensure compliance with the proposed new rules.

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.

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