Worldwide: Transferring Personal Data Overseas: EU - US Privacy Shield Will Create New Obligations

On February 2, 2016, EU and US authorities reached an agreement in principle on a new framework for transatlantic data transfers, dubbed the "Privacy Shield." In a nutshell, the Privacy Shield aims to create a higher level of protection for EU citizens' personal data, and to provide some legal certainty for companies engaging in transatlantic data transfers. While the details are still being worked out, there are important steps companies can take now to prepare for the changes. We'll run through the key elements of the Privacy Shield and let you know how to get ahead of the curve.

Background

The Privacy Shield agreement comes in the wake of the European Court of Justice's invalidation in October 2015 of the then-existing Safe Harbor data transfer agreement on the ground it failed to adequately protect the privacy rights of EU citizens, primarily in light of the Edward Snowden revelations. Shortly after the decision, the Article 29 Working Party, consisting of EU data protection authorities ("DPAs"), announced that if a new agreement wasn't reached by the end of January 2016, individual DPAs in Europe could initiate enforcement actions against companies that continued to rely on the invalidated Safe Harbor. In its latest press statement accompanying the release of the Privacy Shield documents, the European Commission confirmed that the new Privacy Shield framework satisfies European Court of Justice requirements. The deal now must be approved by the EU's College of Commissioners, with reports suggesting it could be adopted by June or early summer.

Key Elements of Privacy Shield

  • The Privacy Shield Principles. Key to the new Privacy Shield are seven principles with which US companies must agree to comply when handling Europeans' personal data: i) notice; ii) choice; iii) security; iv) data integrity and purpose limitation; v) access; vi) accountability for onward transfers; and vii) recourse, enforcement and liability.
  • Stronger Obligations, Monitoring, and Enforcement:

    • Companies must certify to the US Department of Commerce that they agree to and will comply with the Privacy Shield Principles.
    • The Department of Commerce will require companies to publish their Privacy Shield commitments via their privacy policies.
    • The FTC will have jurisdiction (as it does now) to enforce Privacy Shield representations made in company privacy policies.
    • There will be stricter conditions for onward transfers of data to agents and other third-party vendors.
    • Any company handling human resources data from Europe must comply with advice from the relevant European DPAs.
    • Companies must designate an independent dispute resolution body to investigate and resolve individuals' complaints.
    • As part of the certification process, the Department of Commerce will verify that the company complies with the Principles, and that it has designated an independent recourse mechanism.
    • Non-compliant companies (or public authorities) can be sanctioned or excluded from the benefits of the Privacy Shield.
  • Complaints about Possible Data Misuse: Aggrieved EU citizens will have several avenues for redress:

    • Companies. EU citizens may complain directly to companies, which will have 45 days to respond.
    • European DPAs. EU Citizens will be able to complain to European DPAs, who will coordinate with the Department of Commerce and the Federal Trade Commission.
    • Alternative Dispute Resolution Mechanism. Companies will be required to set up free alternative dispute resolution mechanisms. They can select either a private sector ADR mechanism or rely on a panel of EU DPAs to perform this function.
    • Privacy Shield Panel. There will be a newly created arbitration mechanism which can take binding action against US companies that have certified adherence to the Privacy Shield.
    • US National Security Ombudsman. US Under Secretary of State Catherine Novelli has been appointed to the newly created Ombudsman position, tasked with handling complaints related to possible access of EU citizens' data for alleged national security reasons.
    • Judicial Redress Act. Officially signed into law by President Obama on February 24, 2016, this law will give EU citizens access to US courts to enforce their privacy rights in matters arising from US law enforcement efforts.
  • Clear Limits on US Government Access and No Mass Surveillance:

    • The US has given the EU written assurances that the access to personal data by public authorities for law enforcement and national security will be subject to clear limitations, safeguards and oversight mechanisms.
    • The US also has indicated that it will not be conducting indiscriminate mass surveillance on the personal data transferred to the US under the new arrangement.
  • Annual Joint Review Process: The EU Commission and the US Department of Commerce will conduct an annual review of the new Privacy Shield framework, with the participation of national intelligence experts from the US and European DPAs.

Preparing for the Privacy Shield : What You Can Do Today

Remember, you cannot rely on the new Privacy Shield yet, and its legal sufficiency may well be challenged. But, assuming the Privacy Shield will be enacted substantially in its current form, businesses may begin taking some preparatory steps.

Here are our suggestions:

  • Until the Privacy Shield is enacted, companies relying on the existing Safe Harbor should proceed with caution as they could face enforcement action from local DPAs in the event of a privacy complaint.
  • Assess your company's ability to comply with the seven privacy principles. In particular, your company may need to:

    • Implement new consent and opt-out mechanisms when personal data is disclosed either to a third party or for materially different purposes than that for which it was collected;
    • Provide ways for EU citizens to access their personal data; and
    • Implement additional security measures to safeguard personal data.
  • Plan to update your privacy policy with required Privacy Shield information.
  • Talk to your subcontractors and other entities that receive onward data transfers. Note that certifying companies will have between two and nine months from certification to bring legacy subcontractors in line with Privacy Shield requirements.
  • Consider which independent dispute resolution mechanism to implement; the European Commission has encouraged companies to select the panel established by EU DPAs as the forum for complaint resolution.
  • Train company employees to appropriately handle and escalate privacy complaints received by the company directly.
  • Consider special circumstances that may apply to personal data collected by your company; for example, companies that collect HR data must cooperate and comply with local DPAs' advice with respect to that data.

We will keep you apprised of further developments as they unfold.

www.fkks.com

This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

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Authors
S. Gregory Boyd
Jeremy S. Goldman
 
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