Worldwide: Global Data & Privacy Update - April 2016

Welcome to the April Global Data & Privacy Update. This update is dedicated to covering all the latest legislative developments affecting the way data is managed and protected, as well as reporting on the most recent news in breaches and industry developments of the previous month.

The European Commission release EU-US Privacy Shield legal texts

On 29 February 2016, following two years of negotiations with the US Department of Commerce, the European Commission published the EU-US Privacy Shield legal texts along with a draft adequacy decision. It is intended to replace the Safe Harbour scheme, which was held to be invalid by the Court of Justice of the European Union (CJEU) in the Schrems decision in October 2015, by facilitating transatlantic personal data flows whilst ensuring adequate protection for EU citizens.

The Privacy Shield is a self-certification scheme by which US organisations commit to a set of seven privacy principles:

  • Notice principle: organisations must provide consumers with information relating to the processing of personal data. Also, an organisation's privacy policy must be publicly available.
  • Choice principle: consumers may opt out if an organisation is sharing their personal data with third parties (other than an agent acting on behalf of the organisation) or where their personal data is used for a materially different purpose.
  • Security principle: organisations creating, maintaining, using or disseminating personal data must take reasonable and appropriate security measures, taking into account the risks involved in the processing and the nature of the data.
  • Data integrity and purpose limitation principle: personal data must be limited to its processing purpose and be reliable, accurate, complete and current. 
  • Access principle: consumers have the right to obtain from an organisation confirmation of whether the organisation is processing personal data related to them and have access to the data within reasonable time. This right may only be restricted in limited circumstances. Consumers must also be able to correct, amend or delete personal data where it is inaccurate or has been processed in violation of the privacy principles.
  • Accountability for onward transfer principle: any onward transfer of personal data from an organisation to controllers or processors can only take place: (i) for limited and specified purposes; (ii) on the basis of a contract; and (iii) only if the contract provides the same level of protection as the one guaranteed by the privacy principles.
  • Recourse, enforcement and liability principle: organisations must provide robust mechanisms for ensuring compliance with the privacy principles and recourse for EU data subjects whose personal data have been processed in a non-compliant manner.

These privacy principles are guaranteed through a number of safeguards, including:

  • Obligations on organisations and enforcement actions: organisations will be required to comply with their obligations or face enforcement action from US authorities, such as the Federal Trade Commission (FTC) and/or the Department of Transportation. The consequences include sanctions and exclusions.
  • Safeguards on US government access: the US has given written assurances that the usage of data by government authorities will be subject to clear limitations, safeguards and oversight mechanisms. Complaints relating to data usage by government authorities will now be dealt with by a new Ombudsman.
  • Accessibility to redress: if organisations fail to deal with complaints within 45 days, the complaint will be referred to the national Data Protection Authorities and the FTC. A last resort will be an arbitration mechanism.
  • Annual joint review mechanism: the European Commission and the US Department of Commerce will carry out an annual review to monitor the functioning of the Privacy Shield. The European Commission will then issue a public report to the European Parliament and the Council.

The Privacy Shield still requires the opinion of the Article 29 Working Party and member states before formal adoption by the European Commission. Günther Oettinger, the European Digital Commissioner, is expecting the new scheme to come into force in June. This seems doubtful given that commentators have already voiced concerns over its adequacy taking account of the Schrems decision.

One particular point of contention relates to the extent of the US government's written assurances that there will be no indiscriminate or mass surveillance by national security authorities. This was a key concern of the CJEU in the Schrems decision, however Max Schrems has responded to the release of the Privacy Shield legal texts by pointing out that the National Security Agency will still be allowed to use bulk data collection for six purposes, including counter terrorism.

Another point of contention relates to the level of independence the new Ombudsman will have given that the person will be an official of US government. The need for the Ombudsman to be impartial was a particular point highlighted by the Article 29 Working Party prior to the release of the legal texts. The position will be initially filled by Catherine Novelli, a former Apple executive who is currently Under Secretary of State.

Until the Privacy Shield comes into force, organisations remain uncertain about how to comply with their data protection obligations when it comes to personal data transfers to the US. At present, EU data protection authorities will deal with related cases and complaints on a case-by-case basis. The Article 29 Working Party considers that other data transfer mechanisms, namely Model Contract Clauses (MCC) and Binding Corporate Rules (BCR), can still be used for personal data transfers to the US.  This runs contrary to the opinion of Johannes Caspar, a member of the Article 29 Working Party and Hamburg Data Protection Commissioner, who recently made it clear that both mechanisms do not warrant an appropriate level of data protection for personal data transfers to the US. This uncertainty will likely continue until a case comes before the CJEU, which will be the ultimate test to the validity of the Privacy Shield.  

German Data Protection Authorities begin enforcement actions under Safe Harbour

In February, the Hamburg Data Protection Authority announced three enforcement actions against subsidiaries of US companies for non-compliance with valid data transfer mechanisms. Two other companies are under investigation. Following the Schrems decision, the Article 29 Working Party announced a grace period until 31 January 2016 to allow companies to get compliant with other data transfer mechanisms (MCC and BCR). These are the first enforcement actions against US companies following the grace period and demonstrate the uncertainty that organisations face until the Privacy Shield is formally adopted.

The United States Consumer Financial Protection Bureau issues its first data security fine

On 2 March 2016, the Consumer Financial Protection Bureau (CFPB), whose purpose is to promote fairness and transparency for financial products and services, reached a settlement with Dwolla, Inc, an online payment system company, to resolve claims it deceived consumers in relation to its data security practices. The CFPB ordered Dwolla to pay a $100,000 fine and fix its security practices. This marks the first data security-related fine imposed by the CFPB.

ICO produce General Data Protection Regulation preparation checklist

The General Data Protection Regulation (GDPR) is expected to come into force in mid-2018. To assist businesses prepare for the reforms, the ICO has outlined twelve steps to take now to prepare for the reforms:

  1. Awareness: An organisation's key people should be aware that the law is changing to the GDPR and appreciate its impact.
  2. Information you hold: An organisation should document what personal data it holds, where it came from and who the organisation shares it with.
  3. Communicating privacy information: An organisation should review its current privacy notice and plan any necessary changes in time for GDPR implementation.
  4. Individuals' rights: An organisation should check its procedures to ensure they cover all the rights individuals have.
  5. Subject access requests: An organisation should update its procedures and plan how to handle requests within the new timescales and provide any additional information.
  6. Legal basis for processing personal data: An organisation should look at the various types of data processing it carries out, identify the legal basis for carrying it out and document it.
  7. Consent: An organisation should review how it is seeking, obtaining and recording an individual's consent and whether any changes should be made.
  8. Children: An organisation should plan procedures for verifying individuals' ages and to gather parental or guardian consent for the data processing activity.
  9. Data breaches: An organisation should make sure it has procedures in place to detect, report and investigate personal data breaches.
  10. Data protection by design and impact assessments: An organisation should plan when to implement ICO guidance on Privacy Impact Assessments.
  11. Data protection officers: An organisation should designate a Data Protection Officer, if required, or someone to take responsibility for data protection compliance and assess where this role will sit within the organisation's structure and governance arrangements.
  12. International: If an organisation operates internationally, it should determine which data protection supervisory authority it comes under.

The checklist can be accessed here.

EU Parliament urges a data-driven economy

On 10 March 2016, the European Parliament passed a resolution urging the EU and member states to create a data-driven economy. The resolution recognises that big data has the potential to boost economic productivity and improve consumer and government services. It also asked for initiatives to be launched to establish SMEs as a main player in big data. 

UK government plans to liberalise data sharing between public bodies

The government has launched a consultation into reforms of data held by public bodies. The intention is to maximise data sharing between public bodies to increase the public's confidence in the government's use of data while making use of data to deliver services. The proposals fall into three groups: (1) improving public services; (2) tackling fraud and debt; and (3) allowing the use of data for research and for official statistics.  Views can be submitted to the government until Friday 22 April 2016.

Global Data & Privacy Update - April 2016

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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