United States: International Cybersecurity Compliance Concerns

Last Updated: July 21 2016
Article by Steven S. Rubin

Article by Steven Rubin and Stephen Milne

Compared with the rest of the world, the United States has historically been a more open framework when dealing with information. Social media has made even the most mundane and possibly personal pieces of data available to many with a press of a finger. Such an open relinquishment of private information is almost assumed, and has become part of the American culture. Those who think about how easy it is to access data understand how their own data has become part of the searchable cyberspace.

The European culture and laws are different. Privacy rights are assumed, information confidentiality is maintained, and the concept of the United States "discovery" is scorned. There is a concern that European sensitive data should stay outside of the United States due to the protection of such data in the country not being sufficiently strong. It is therefore not a surprise that the laws in the United States and in Europe are inconsistent when it comes to cybersecurity.

Cybersecurity Law In the United States

The most significant piece of federal legislation in this area is the Cybersecurity Information Sharing Act (CISA), passed in December 2015. The purpose of this Act, purportedly, is to promote information sharing between the government and the private sector for issues relating to cybersecurity and new threat vectors. The idea is that sometimes industry is aware of new viruses or technical threats, but does not share the information with the government so that the government may protect itself and/or inform the public. CISA creates a voluntary means for companies to share their threat data with the government.

There are problems with sharing this information. While the act of sharing appears to be protected by statute, the underlying problem may not be. If I see a threat to my system, I could tell the government about that threat, and the act of telling would not create a new cause of action. But the law is not clear as to whether that sharing could then lead to a lawsuit relating to the cause of the sharing. Stated another way, I can tell the government I have a virus, and telling the government should not itself expose my company to liability. But I could later get sued for failing to comply with certain cybersecurity requirements because my system was infected with a virus and I did not take proper steps to protect the data.

So, trying to comply with United States laws alone creates a dilemma. But if you consider complying with CISA, you may also expose yourself to legal issues in Europe.

European Laws on Cybersecurity

Disclosure of personal data (capable of being used to identify a living person either on its own, or in conjunction with other data in the possession of the person controlling how the data is used) that relates to EU nationals could cause serious potential issues in light of recent developments overseas. Previously (before January 2016), many organizations relied upon the approved " Safe Harbor" regime framework developed by the Department of Commerce (DOC) in the United States and the European Commission, under which organizations could self-certify that they adhered to its principles. The certifying company gave binding promises that they complied with privacy policy requirements and provided protections for personal data which were sufficiently high that transfers of personal data from the EU to the United States would be permissible under the applicable Data Protection Directive (the Directive).

However, the Safe Harbor regime has suffered a huge blow by virtue of a recent decision in the Court of Justice of the European Union (CJEU). Maximillian Schrems was an Austrian citizen who had been a Facebook user since 2008. Facebook habitually transferred some data provided by its EU-based subscribers from its Irish subsidiary to servers located in the United States. Mr. Schrems lodged a complaint with the relevant supervisory authority in Ireland on the basis that the law and practice in the United States did not provide sufficient protection in relation to his data.

Initially, Mr. Schrems' complaint was rejected, particularly on the basis that the Safe Harbor regime ensured sufficient protection. However, on referral to the CJEU, the court held that the powers available to national supervisory authorities cannot be eliminated just because the European Commission originally decided that the Safe Harbor scheme provided such protection. The authority must look at the situation independently and determine whether the transfer of a person's data to a third country complies with the requirements of the Directive.

The CJEU then proceeded to consider the fact that public authorities in the United States are not subject to the Safe Harbor scheme. Further, national security, law enforcement and public interest all may prevail to the extent that a United States entity holding or processing data may be forced to ignore the requirements of the Safe Harbor scheme where it conflicts with any of the foregoing. As a result, data would not be protected in such circumstances and there were no clear limitations or restrictions on the public authorities' abilities.

In addition, there was no clear ability for individuals to pursue legal remedies in order to access their data or to have it rectified or erased, which the CJEU viewed as inherent in the existence of the rule of law and as compromising "the essence of the fundamental right to effective judicial protection." The CJEU therefore held that the original European Commission decision that Safe Harbor privacy principles provided adequate protection was invalid — effectively nullifying the Safe Harbor option.

What Now?

The Safe Harbor route is no longer a valid basis upon which personal data can be transferred from the European Union to the United States. But there is not, as of yet, clear guidance as to what will replace it. Indeed, different data protection authorities (DPAs) have been taking different approaches to this evolving situation.

For example, the Information Commissioner's Office (ICO; the supervisory data protection authority for the United Kingdom) has been advocating that continued use of the Safe Harbor principles may still be a sensible proposition in the interim. The ICO further indicated it will not take enforcement procedures yet, until an approved alternative to Safe Harbor has been determined. However, this guidance is not legally binding and the ICO is posed to reiterate that companies need to review their compliance processes and procedures.

This approach has been somewhat reflected in guidance from the Spanish regulator, which has indicated that it will not rush to take enforcement action against companies provided they are working on appropriate proposals and arrangements to ensure adequate protection of personal data. However, in stark contrast, the data protection authority in Hamburg, Germany, has already made it public that it does not expect organizations to continue relying upon Safe Harbor and that it will take immediate enforcement proceedings against any that do continue to transfer personal data outside the EU in this way. Such proceedings could lead to fines up to €300,000 (roughly $340,000) per data breach.

Some Proposed European Solutions

The Article 29 Working Party (which is made up of representatives from the data protection authorities of the EU states) recently confirmed that it views use of binding corporate rules and model contract clauses as valid options to enable the transfer of data from the EU to the United States.

Binding Corporate Rules are essentially rules operated by an organization that put in place adequate safeguards for protecting personal data in line with the Article 29 Working Party's requirements. They are not, however, a quick fix — as such rules require an application to, and approval from, the relevant data protection authority via a relatively cumbersome design and implementation procedure that usually takes in the region of 12-18 months.

Model contract clauses are, on the other hand, considerably easier to implement provided both parties are in agreement. These provide for an approved set of contractual obligations that eliminate the requirement for the transferee of data to make their own assessment regarding the adequacy of the protections provided. There are different sets of clauses depending upon the parties' relationship and what they do with the data.

A further possibility is to obtain express consent to the transfer of the data. However, even the more relaxed data protection authorities are closely scrutinizing this route to effecting transfers, as the key concern is whether consent is specific enough for what is happening to the data and whether it provides any real protection to the individual. Much has been made in recent months of high-profile examples of data having been harvested from individuals on the back of a generic data consent, and having then been retransferred, reused and resold multiple times in manners the individual who gave "consent" could not possibly have anticipated. Consent on its own may well not be enough.

Privacy Shield

The European Commission and the DOC have agreed upon a new arrangement, known as the "Privacy Shield," as a replacement for the now defunct Safe Harbor scheme. The Privacy Shield is in fact a collection of principles, including:

  1. Choice — individuals will have the ability to opt-in or out as far as sensitive data is concerned, as regards third-party marketing and in relation to any new use of their data that was not initially contemplated.
  2. Notice — individuals must be informed of their rights, the principles of Privacy Shield and given a contact for complaints. They must also be given details of sharing and disclosure of their data (including public authorities), and organizations will have to confirm their liability for data processing.
  3. Accountability — organizations will be required to put in place formal contract arrangements in writing for onward transfers of data to other controllers or processors (with only limited exceptions).
  4. Security — security measures must be implemented that are reasonable based on the nature of the processing and the personal data being processed.
  5. Integrity and Limitation — data will have to be kept up to date and accurate, and data collection will have to be limited strictly to what is relevant in the circumstances.
  6. Access — individuals will have the right to access their data and to require its correction and/or deletion (unless the cost of doing so would be overly burdensome).
  7. Recourse/enforcement — this is one of the crucial proposals. It provides for a free means of recourse for individuals to be provided by the organization with the ability for individuals to escalate complaints to local data protection authorities if the issue is not satisfactorily dealt with. If that does not resolve the matter, then there is even scope for individuals to potentially initiate arbitration claims.

Privacy Shield is still a little way off, however, as intended implementation was set for June 2016, but there are still a number of criticisms leveled at it by both politicians and commentators and implementation has been delayed. In addition, the General Data Protection Regulations are upcoming (albeit not until April 2018) and these will bolster both the EU's data protection authorities' powers and their likelihood to crack down on enforcement.

Conclusion

Each organization needs to review its current compliance arrangements and re-evaluate on the basis of the above issues, implementing sensible interim solutions, at least, to avoid falling foul of the more aggressive data protection authorities and their willingness to impose potentially sizeable fines.

Previously published in The Corporate Counselor

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
Steven S. Rubin
Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
McDermott Will & Emery
Global Advertising Lawyers Alliance (GALA)
Ogletree, Deakins, Nash, Smoak & Stewart
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
McDermott Will & Emery
Global Advertising Lawyers Alliance (GALA)
Ogletree, Deakins, Nash, Smoak & Stewart
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