Worldwide: Safe Harbor - Not So Safe After Schrems

Last Updated: October 13 2015
Article by John P. Tomaszewski

Yesterday, October 6, 2015, the European Court of Justice ("ECJ") issued its Judgment in the Schrems case, and in doing so, continued along the seismic shift happening in law related to cross-border privacy. The two major elements of yesterday's Judgment are 1) The Commission Decision 2000/520/EC of 26 July 2000 on the adequacy of the protection provided by the US Safe Harbor framework (the "Safe Harbor Decision") is invalid, and 2) even if the Safe Harbor Decision were otherwise valid, no decision of the Commission can reduce the authority of a national data protection authority ("DPA") to enforce data protection rights as granted by Article 28 of the data protection directive ("DP Directive").

Clearly, the first element brings a more immediate concern for all the companies participating in the Safe Harbor framework. However, the second element will have much longer term consequences for the stability of US-EU commerce and privacy law.

Validity of the Safe Harbor Decision

Over 4,000 companies rely on the Safe Harbor Decision as the legitimate basis for transfers of data from the EU to the US. The unfortunate result of yesterday's Judgment is that such a basis for transfer is no longer valid as the ECJ has a direct and retroactive effect on how the DP Directive should be interpreted. Therefore, companies need to determine an alternative basis for lawfully transferring their data to the US. Fortunately, there are ways to do this. Unfortunately, until such measures are taken, companies moving data between the US and the EU may be in breach of EU law.

Derogations to Transfer Prohibition

The Directive provides for certain "derogations", or exceptions, which legitimize cross-border transfers of personal data. More specifically, cross-border transfers are permitted where:

  • the individual has given his unambiguous consent to the transfer;
  • the transfer is necessary for the performance of a contract between the individual and the business (which is the "data controller");
  • the transfer is necessary for the conclusion or performance of a contract concluded in the interest of the individual between the business (again, the "data controller") and a third party;
  • the transfer is necessary or legally required on important public interest grounds, or for the establishment, exercise or defense of legal claims; or
  • the transfer is necessary in order to protect the vital interests of the data subject.

Companies who use these exceptions still need to properly document how and why they are using these exceptions, and should work with their legal counsel to do so. This is particularly important because the exceptions are usually narrower in scope than a plain reading would suggest, due to the way the data protection regulators have interpreted them.

Data Transfer Agreements

Data transfer agreements that use Model Clauses (developed by the European Commission) are another means to legitimize cross-border transfers. While there are challenges with the implementation of Model Clauses, their use is the most obvious solution to this issue where the consent exception should not be used.

Binding Corporate Rules

From a more strategic perspective, Binding Corporate Rules ("BCR") can be a mitigation strategy to avoid the risk of another ECJ judgment invalidating a Commission decision. However, BCRs are time consuming and not inexpensive to put in place.

New Safe Harbor Agreement

While the ECJ invalidated the Safe Harbor Decision, it did give instruction on how to correct the deficiencies of the decision. In fact, the ECJ found the Safe Harbor Decision deficient not in the data protection principles, per se. One can take this to mean that the underlying concept of the data protection principles are not defective, merely the means by which the Commission issued its decision.

While it would seem that developing a Safe Harbor 2.0 might take an inordinate amount of time, work on this issue is already underway. In a press release yesterday, the UK Information Commissioner's Office ("ICO") noted that "...negotiations have been taking place for some time between the European Commission and US authorities with a view to introducing a new, more privacy protective arrangement to replace the existing Safe Harbor agreement... [and] that these negotiations are well advanced." Clearly, the Court has provided a roadmap to resolving the noted deficiencies in the Safe Harbor Decision.

While the Judgment is going to create challenges in the short term, most businesses will have a way to ensure their data can still legally flow between the EU and the US. However, businesses who relied on the Safe Harbor Decision are going to need to take some action to make sure their data flows are legitimized outside the Safe Harbor Decision framework until a new agreement is reached between the European Commission and the US.

National Data Protection Authority Jurisdiction

The second element of the Judgment, which will continue to have farther reaching effects than just the invalidity of the Safe Harbor Decision, is the inability of the Commission to limit the ability of individual national data protection regulators ("DPAs") from making a determination of "adequacy" (or lack thereof) for any transfer of data. The effect of this element of the decision is poised to render any Safe Harbor agreement inconsistent in its enforcement.

As the DPAs and the Commission are deemed to have concurrent jurisdiction in making adequacy determinations, it is quite possible that even when a new Safe Harbor agreement is in place, there is still the possibility that the individual DPAs will make determinations that the Safe Harbor will not be operative in that particular nation.

This inconsistency in application would seem to make it advisable to businesses to start to develop a blended approach to their data transfer practices -- for example, use of consent for consumer data, and use of model contracts for workforce data. Additionally, the development of BCR is going to take on a much more prominent role as a means of legitimizing cross-border transfers of personal data.

Regardless of the solution a business decides to take, the ECJ's Judgment yesterday will require a thorough review of how a business enables its data flows between the EU and the US.

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
John P. Tomaszewski
Similar Articles
Relevancy Powered by MondaqAI
Moritt, Hock & Hamroff LLP
Womble Bond Dickinson
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Moritt, Hock & Hamroff LLP
Womble Bond Dickinson
Related Articles
 
Related Video
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