Worldwide: Global Privacy And Data Protection Roundup: Fall 2016

Privacy and data protection continues to be an international patchwork of laws impacting how personal data is collected, secured, used and shared across borders, and how we contend with the misuse of information technology. These highlights of recent developments from around the world provide an introduction to some new rules and approaches in this area as well as perspectives on the implementation of recent rules affecting data transfers in the global marketplace.

United States: FCC Adopts Privacy Rules for Broadband ISPs

On October 27, 2016, the Federal Communications Commission ("FCC") adopted new privacy rules for broadband Internet service providers ("ISPs") that address how broadband ISPs handle and protect the privacy of their customers. Pointing to the ISPs as the "on ramps" to the Internet, with access to a tremendous amount of their customers' personal and private information,1 the FCC order requires ISPs to provide clear notice and meaningful choices to consumers regarding their data collection and usage practices, including opt-in and opt-out customer consent requirements for ISPs to use and share certain kinds of personal information. In addition, the rules require ISPs to implement strong data security measures and to report any data breaches. Considered in a larger regulatory context, these ISP privacy rules continue the FCC's regulation of Internet services as a common carrier under Title II of the Communications Act, in line with the FCC's Open Internet Order of February 2015, and expand the FCC's role in the area of consumer privacy and data protection. However, the rules have been criticized as failing to provide true online privacy protection and leaving open the possibility of "pay-for-privacy" arrangements (such as discounts in exchange for consent), which the FCC plans to consider on a case-by-case basis.2 In addition, the rules will not impact the privacy practices of "edge services," such as social media sites and content providers, which are under the jurisdiction of the Federal Trade Commission. The notice and choice requirements will be the last feature to go into effect, twelve months after the order is published in the Federal Register, and it remains to be seen how these rules will work and how effective they may be in practice.

United States: FTC Clarifies Position on NIST Framework

In an August 31, 2016 blog post,3 the Federal Trade Commission ("FTC") addressed the long-standing question of whether compliance with the NIST Framework for Improving Critical Infrastructure Cybersecurity (the "Framework") necessarily constitutes compliance with FTC requirements. In short, the FTC's answer to this question is an emphatic "no." The FTC explained its position by asserting that "there's really no such thing as 'complying with the Framework'" because "[t]he Framework is not, and isn't intended to be, a standard or checklist." Indeed, the Framework does not provide a simple checklist of security practices but rather a compilation of cybersecurity guidance and industry-leading practices that organizations may consider in building their own cybersecurity program. While emphasizing this difference between the Framework and FTC requirements, the FTC nonetheless maintained that the approaches of the Framework and the FTC are wholly consistent, noting that the Framework calls for companies to evaluate and establish those policies and practices that the FTC evaluates when determining the reasonableness of data security processes. Finally, the FTC noted that the Framework can be used as a model for companies to conduct risk assessments and mitigation, for example to (1) establish or improve a data security program; (2) review current data security practices; or (3) communicate about data security requirements among stakeholders.

EU-US Privacy Shield: Self-Certifications Continue with Possible Challenges Ahead

Earlier this year, the European Commission determined that the Privacy Shield Framework provides adequate protections for transfers of personal data from the EU to the US, providing a replacement for the now-defunct Safe Harbor. Beginning August 1, 2016, US companies have been able to submit self-certifications to the US Department of Commerce ("DOC"), the agency tasked with verifying compliance with the data protection standards required under the Privacy Shield. Since that time, over 600 companies have been listed by the DOC as compliant with the Privacy Shield, including such major tech companies as Amazon, Facebook, Google, Microsoft and Salesforce. An early rush to self-certify may have been explained by the grace period offered to companies that filed self-certifications by September 30, 2016, allowing those companies nine months after filing their self-certifications to conform their contracts with third-party processors to the new onward transfer requirements under the Privacy Shield. Of course, adoption of the Privacy Shield Framework presents both opportunities and risks, especially for general counsels, privacy officers and compliance officers who will be tasked with ensuring that their organizations are compliant with the Privacy Shield Framework. But the continued growth in certifications may indicate that the Privacy Shield is becoming a preferred means of permitting data transfers from the EU to the US. To assist organizations in complying with the Privacy Shield Framework, the DOC has issued a five-step guide4 for organizations wishing to self-certify under the Privacy Shield.

While adoption of the Privacy Shield continues, there are still doubts about its long-term viability. Some critics viewed the October report that Yahoo! implemented software to search all customers' incoming email at the request of a US intelligence agency as evidence that the Privacy Shield fails to provide adequate protections for personal data. Also in October, privacy advocacy group Digital Rights Ireland filed a legal challenge to the Privacy Shield, seeking to have the adequacy decision reversed in the lower court of the Court of Justice of the European Union—although it will likely take at least a year before there is any resolution to the case. Most recently, on September 12, 2016, one of Germany's state data protection authorities (the "DPA") published guidelines5 which impose verification obligations on German businesses that transfer personal data to the US under the Privacy Shield, although these guidelines only apply to the German State of North Rhine-Westphalia. The DPA also stated that it reserves the right to suspend data transfers under the Privacy Shield based on the outcome of annual reviews by the European Commission and the DOC.

Russia: Status Update on the Data Localization Law

On September 1, 2016, Russian data protection agency Roskomnadzor issued a press release6 concerning the implementation of Russian Federal Law No. 242-FZ (the "Data Localization Law"). This law, which came into force September 1, 2015, requires that all storage and processing of Russian citizens' personal data must be conducted within Russia. Its initial promulgation created significant uncertainty for companies doing business in the Russian Federation, especially with respect to how Russian regulators, including Roskomnadzor, would interpret and enforce the Data Localization Law. Fortunately, Roskomnadzor's press release states that "results of supervisory activities suggest that the legal requirements are enforced by an absolute majority of proven companies and that the level of violations is minor." Roskomnadzor also summarized its inspection and enforcement activities for the Data Localization Law. In the first year the law was in effect, Roskomnadzor conducted 954 planned inspections and 82 ad hoc inspections, and Roskomnadzor plans to conduct 479 more inspections before the end of 2016. Although these inspections identified 1,822 violations of Russian laws relating to personal data, only 23 (or 1.3%) related to violations of the Data Localization Law. Further, in all cases of violations of the Data Localization Law, Roskomnadzor issued an order permitting the offending company to remedy such violations within six months. In sum, Roskomnadzor's press release is welcome news for companies doing business in Russia as (1) most companies are in compliance with the Data Localization Law, and (2) Roskomnadzor has so far enforced the law by issuing compliance orders as a first step, rather than immediately imposing fines or other sanctions.

Japan: NISC's Framework for IoT Security

On August 26, 2016, the Japanese National center of Incident readiness and Strategy for Cybersecurity ("NISC") released a General Framework for Secure and Safe IoT Systems (the "General Framework").7 NISC had released an initial draft of the General Framework in June inviting public comment. This new release incorporates the results of that comment period and represents NISC's final determination on this issue. The General Framework "aims to clarify the fundamental and essential security requirements for secured IoT systems" and sets out both basic principles and policy measures for IoT security. In particular, it emphasizes the importance of "Security by Design" as a fundamental principle. The General Framework also calls for an analytic framework based on a model reflecting the multilayered structure of IoT systems, such as device, network, platform and service layers. This approach supports layer-by-layer assessments and may result in security requirements better tailored to the technical realities of these often complex and integrated devices. Furthermore, the General Framework establishes two prongs of IoT security requirements: (1) performance-based requirements that are universal and essential, and (2) specification requirements that provide effective means and particular methods available at the time. This flexible approach will enable regulators to establish both industry-wide requirements as well as requirements that are more narrowly tailored to specific devices. Although the General Framework has yet to be applied, it provides a view into how Japanese regulators are likely to approach security in the growing IoT industry. NISC's release of the General Framework also seems rather prescient, given the widespread Internet outage in the US that occurred in October, reportedly caused by Mirai-based malware, which exploited security vulnerabilities in IoT devices.

Pakistan: A New E-Crime Act and New Requirements for ISPs

On August 11, 2016, the National Assembly of Pakistan passed the Prevention of Electronic Crimes Act 2016 ("PECA").8 PECA establishes new offenses including "illegal access of data (hacking), as well as interference with data and information systems (DOS and DDOS attacks), specialized cyber-related electronic forgery and electronic frauds, cyber terrorism (electronic or cyberattack on the critical information infrastructure), unauthorized interception conducted by civilians, use of malicious code viruses, identity theft, etc." as well as new investigative powers. In particular, PECA requires service providers to retain traffic data for at least one year or such period as the authorities may require and, subject to a court-issued warrant, provide such data to an investigatory agency or authorized officer whenever required. PECA also provides for access to or seizure of content data with a court-issued warrant, provided that authorities demonstrate to the satisfaction of the court that the content data is reasonably required for a criminal investigation or criminal proceedings for an offense defined under PECA. Critics have raised concerns about the breadth of speech and acts that may be criminalized under PECA, as well as the broad enforcement powers and international jurisdiction that may be claimed.9 PECA became effective upon publication.

Footnotes

1 See Fact Sheet: The FCC Adopts Order to Give Broadband Consumers Increased Choice over Their Personal Information, available at http://transition.fcc.gov/Daily_Releases/Daily_Business/2016/db1027/DOC-341938A1.pdf.

2 See Kate Cox, Final FCC Privacy Rule Won't Ban Pay-for-Privacy, Will Require Some Opt-Ins (Consumerist, Oct. 6, 2016), available at https://consumerist.com/2016/10/06/final-fcc-isp-privacy-rule-doesnt-ban-pay-for-privacy-does-require-some-opt-ins/; Evan Schuman, The FCC's New Privacy Rules Are Toothless (Computerworld, Oct. 31, 2016), available at http://www.computerworld.com/article/3136578/data-privacy/the-fcc-s-new-privacy-rules-are-toothless.html; FCC to Address Pay-for-Privacy Case-by-Case (IAPP Daily Dashboard, Nov. 4, 2016), available at https://iapp.org/news/a/fcc-to-address-pay-for-privacy-case-by-case/.

3 Available at https://www.ftc.gov/news-events/blogs/business-blog/2016/08/nist-cybersecurity-framework-ftc.

4 Available at https://www.commerce.gov/sites/commerce.gov/files/media/files/2016/how_to_join_privacy_shield_sc_cmts.pdf.

5 Available at https://www.ldi.nrw.de/mainmenu_Datenschutz/submenu_Datenschutzrecht/Inhalt/InternationalerDatenverkehr/Inhalt/Eingangsseite/EU_US_Privacy_Shield_Text_komplett.pdf (in German).

6 Available at https://rkn.gov.ru/news/rsoc/news40624.htm (in Russian).

7 Available at http://www.nisc.go.jp/eng/pdf/iot_framework2016_eng.pdf.

8 Available at http://www.na.gov.pk/uploads/documents/1470910659_707.pdf.

9 See Wafa Ben Hassine, A Deeper Look Inside the PECB, Pakistan's Terrible Cyber-Crime Bill (EFF, Nov. 30, 2015), available at https://www.eff.org/deeplinks/2015/11/deeper-look-inside-pecb-pakistans-terrible-cyber-crime-bill; Danny O'Brien, The Global Ambitions of Pakistan's New Cyber-Crime Act (EFF, Aug. 18, 2016), available at https://www.eff.org/deeplinks/2016/08/global-ambitions-pakistans-new-cyber-crime-act; Mehreen Zahra-Malik, Pakistan Passes Controversial Cyber-Crime Law (Reuters, Aug. 12, 2016), available at http://www.reuters.com/article/us-pakistan-internet-idUSKCN10N0ST.

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