Worldwide: Which U.S. Businesses Must Comply With EU Data Protection Laws?

Last Updated: September 8 2016
Article by Catherine Muyl

What the recent Amazon decision tells us

On 28 July 2016, the European Court of Justice rendered a decision in a dispute between an Austrian Consumer Protection organization known as VKI (Verein für Konsumenteninformation) and Amazon EU Sàrl, a subsidiary of Amazon registered in Luxembourg. The main issue in this case is whether Amazon General Conditions were enforceable under Consumer Law; however; one of the questions referred to the European Court was about the territorial scope (Article 4) of the 95/46/EC Directive on Data Protection.

Article 4 reads as follows:

"National law applicable

Each member State shall apply the national provisions it adopts pursuant to this Directive to the processing of personal data where:

(a) the processing is carried out in the context of the activities of an establishment of the controller on the territory of the Member State; when the same controller is established on the territory of several Member States, he must take the necessary measures to ensure that each of these establishments complies with the obligations laid down by the national law applicable;

(...)

(c) the controller is not established on Community territory and, for purposes of processing personal data makes use of equipment, automated or otherwise, situated on the territory of said Member State..."

Do European Data Protection rules apply at all?

1. Is the company "established" in the EU?

The first step is to determine whether a company has an establishment in the EU; this concept is interpreted broadly. According to paragraph 19 of the Preamble "establishment on the territory of a Member State implies the effective and real exercise of activity through stable arrangements; ... the legal form of such an establishment, whether simply branch or a subsidiary with a legal personality, is not the determining factor..."

In the Google Spain case, the "right to be forgotten" case, two entities were parties to the action, the U.S. parent (Google Inc.) and its Spanish subsidiary (Google Spain). Google Inc. argued that it did not have any establishment in the EU and Google Spain argued that its activities were not to collect data, but to sell advertising space. The European Court held that Google Spain had to be regarded as an establishment of Google Inc., because the sale of advertising space was closely connected to the search engine, it made it profitable and was directed at persons residing in Spain.

2.   Are the data processing activities conducted "in the context of the activities" of that establishment?

Once it is determined that a data processor has an establishment in the EU, the second step is to determine whether the data processing activities are conducted "in the context of the activities" of that establishment. It is not necessary that the data processing should be conducted by the European establishment. This was made very clear in the Google case:  the Court found that the activities conducted by Google Inc. and Google Spain were different, but still closely enough connected:  one could consider that the activities of the U.S. search engine were conducted in the context of those conducted by Google Spain.

Which one of the various national Data Protection laws applies?

Once it is determined that European Data Protection rules apply, the question becomes more precisely: which national Data Protection law applies? This is important because although the purpose of the 95/46/EC Directive was to harmonize national laws, significant differences still remain.  This issue was dealt with in the Weltimmo case. Weltimmo was a company registered in Slovakia, but it operated a website in Hungarian language with adverts for real property for sale located in Hungary. The service was free for one month, but after this period the advertisers had to take the initiative of removing the ad or be charged for the service. Clients who had been sued for payment filed a complaint with the Hungarian Data Protection Authority, which took the view that Hungarian law applied, that it had been violated and issued a fine. Weltimmo raised as a defense that it was a Slovak company, not subject to the jurisdiction of the Hungarian Data Protection Authority. The European Court said that it was for the national court to assess whether Weltimmo was established in Hungary, but noted that the website was in the Hungarian language only, that it was directed at the Hungarian market exclusively, that it had appointed a representative in Hungary and that these were all relevant factors to be taken into consideration.

The recent Amazon v/ VKI case is similar to the Weltimmo case:  Amazon did not argue that European rules did not apply.  The party to the action was Amazon EU Sàrl, a subsidiary registered in Luxembourg, but the activities at stake were those conducted through the website www.amazon.de, which targets German as well as Austrian customers. An Austrian Consumers Protection Organization had challenged Amazon General Terms and Conditions and brought an action for an injunction to prohibit the use of those Terms and Conditions which it considered contrary to Austrian law. Some of these clauses related to personal data and said, for example, that Amazon would share the information collected with third parties to check the creditworthiness and address of clients. One ancillary question was which national Data Protection law applied to check whether these clauses were legal. Was it the law of the country of Amazon's establishment only or also that of the country that was targeted, namely Austria?

The Court answered that the law of the country that is targeted is only relevant if there is an establishment in that country which processes the data. "Establishment" therefore remains the key concept for the time being.

In practice, the rules set out in Article 4 of the Directive can be summarized as follows: U.S. businesses which do not have any establishment in the EU (i.e., which do not have any branch or subsidiary or other "stable arrangements" in the EU) do not have to comply with EU Data Protection law, provided that they do not use servers or other equipment in the EU.  This will change, however, on 25 May 2018 when the General Data Protection Regulation comes into effect since the Regulation will also apply to non-EU established controllers and processors who target individuals "who are in the Union" for the purposes of offering goods or services to such individuals or monitoring their behavior.

To view Foley Hoag's Security, Privacy and The Law Blog please click here

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
Events from this Firm
18 Sep 2018, Webinar, Boston, United States

What does the generalist in-house counsel need to know about patents and patent litigation? Protecting, exploiting, and enforcing new ideas and inventions are key considerations for any company.

12 Oct 2018, Other, Boston, United States

The New England Electricity Restructuring Roundtable has been meeting bimonthly since 1995 to discuss current topics related to important changes in the electric power industry in Massachusetts and throughout New England.

 
In association with
Related Topics
 
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