United States: Data Protection Law- A Broken Shield

Sweeping statements made in an Executive Order issued five days into the Trump administration have cast doubt on the legal status of the EU-US Privacy Shield and have caused at least one highly-placed EU politician to challenge its continued legal viability.  While it is not clear that the language used in the 25 January 2017 Executive Order fully supports the dire conclusions some have reached, perception may be as important as reality in this context, particularly given the on-going challenges to the Privacy Shield in the EU and the highly-charged US-EU atmosphere following President Trump's 20 January inauguration. 

Data transfers are the lifeblood of business in a global market.  Consequently, any uncertainties concerning the lawfulness of international transfers of personal data pose a significant commercial risk to US and EU businesses that operate internationally.

What is the problem?

The Privacy Shield was negotiated between the European Union and the US government to prove a legally binding means for businesses to transfer personal data on EU residents to the US.  Businesses certify that they will provide privacy protections comparable to those that apply in the EU. The Privacy Shield provides a means to legally enforce that certification. Absent the Privacy Shield and related mechanisms provided by the EU Commission, the transmission of personally identifiable data from the EU to the US can violate EU law. 

The current problem stems from Section 14 of the Executive Order on "Enhancing Public Safety in the Interior of the United States," which has cast doubt whether the Privacy Shield can meet EU legal requirements. That section provides:

"Agencies shall, to the extent consistent with applicable law, ensure that their privacy policies exclude persons who are not United States citizens or lawful permanent residents from the protections of the Privacy Act regarding personally identifiable information."

Immediately after publication of that executive order Jan Phillip Albrecht, a member of the European Parliament and its rapporteur on data protection regulation, tweeted to suggest that this statement might invalidate Privacy Shield. Albrecht called in his tweet for immediate suspension of Privacy Shield.

In a sequence that would be familiar to President Trump himself, Mr. Albrecht's tweet sparked something of a media storm, including headlines suggesting that the executive order could "nix" transatlantic data flows. Commentators observed that the executive order might undermine Privacy Shield because it departed from assurances given to the EU Commission by the Obama administration (and supported by a five page letter from US intelligence agencies) concerning the treatment of personal data.  The story became, in effect, self-fueling. Articles and tweets expressing concerns themselves became the basis for further articles and tweets.

The EU Commission moved swiftly to address the issue, pointing out that the relevant protections (from an EU perspective) are in the EU-US Umbrella Agreement (in force 1 February 2017) and in the US Judicial Redress Act, which extends the benefits of the US Privacy Act to Europeans and gives them access to US courts.  These protections would be subject to the provision in the executive order that requires actions to be "consistent with applicable laws."  On that analysis, the executive order did nothing to disturb the assurances given in 2016, on the basis of which the EU Commission adopted Privacy Shield.

Alternative facts?

Although we tend to agree with the analysis by the EU Commission, it is clear that perception can be at least as powerful as fact.  Indeed, in the current highly-charged environment, such perceptions may become "alternative facts," to use the current euphemism for exaggerated claims that seek to supplant actual facts in political discourse. Both the Privacy Shield and the EU model clauses (which provide an alternative means for protecting EU-US data transfers) are currently subject to legal challenge in Europe.  The Privacy Shield is also under close scrutiny at a political level, with its success or failure representing a major test of governments' ability to facilitate and protect international data transfers.

In practice, the executive order is likely to be cited as a real and ongoing cause for concern by those already challenging the legal basis for Privacy Shield (notably, Austrian privacy campaigner Max Schrems, whose earlier legal challenge led to the Court ruling that brought the previous Safe Harbor arrangement to an end).

The Privacy Shield is supplemented by other means of giving assurances of privacy protections.  Principal among these are EU Commission-approved "model clauses," which are privacy protections that firms may voluntarily adopt in contracts and other governing corporate documents.  All these mechanisms seek to provide assurances that personal data leaving the EU will receive protections comparable to those that apply in the EU.  If the EU were to determine that US law, post-executive order, is fatal to the enforceability of the Privacy Shield, it might also conclude that US law is equally fatal to the enforceability of these other mechanisms.

Under EU law, the main practical alternative to the Privacy Shield and its related mechanisms involves obtaining data subjects' specific, timely and informed consent for the trans-Atlantic transfer of data. Obtaining such consent can be extremely difficult.  Thus, if Privacy Shield were to fail, business would be faced with potentially growth-threatening difficulties given current business models which are often premised on the free flow of data across international borders.

Steadying the ship

It is extremely unlikely that the executive order on "Enhancing Public Safety in the Interior of the United States" was drafted with any thought that it might adversely affect the personal data transfers on which modern business depends.  However, given that its terms have been widely reported as a threat to a key EU-US agreement it would be extremely useful if the Trump Administration were to provide specific confirmation that the assurances given to the European Commission in 2016 remain valid and reliable. While such a statement might be less immediately striking and newsworthy than the tweets and executive orders of Trump Administration's high-energy and rule-book shredding first days, it would materially help to ensure that businesses can focus on productive activities rather than having to divert resources to deal with the risk of personal data transfers being blocked or made subject to regulatory sanctions. Under a new EU law coming into full operation next year, those sanctions could reach up to 4% of a business' worldwide turnover.


The possibility of a new US-UK trade deal was a significant topic for discussion during UK Prime Minister Theresa May's recent visit to the White House. While both the US and the UK might be keen to make rapid progress with a bilateral trade deal, the UK is currently bound by the terms of its EU membership and cannot press ahead.

Brexit has cleared a major hurdle.  The UK Supreme Court ruling of 24 January 2017 confirmed that Parliamentary authority is required before the Prime Minister can take the executive step of triggering Article 50 of the Lisbon Treaty.  The UK's membership of the EU ends two years after Article 50 has been triggered.

On 1 February the UK House of Commons voted by 498 to 114 in favour of the Bill that will authorise the Prime Minister to trigger Article 50.  The vote was on the Bill's second reading, which means that the House of Commons has approved the principle.  The Bill now moves into its committee stage before its third and final reading in the House of Commons,  It then proceeds to the House of Lords, where any serious attempt to vote it down would spark a major constitutional crisis.  Given the stakes, the House of Lords is unlikely to resist the Bill's progress.

On 2 February the UK government published its strategy for Brexit negotiations. As expected, bilateral trade deals are presented as the key to future prosperity, and the US is singled out as the UK's most important current and potential trading partner.

There is an appropriately transatlantic feel to the government's strategy paper.  It recalls a statement attributed by US writer Mark Twain to UK Prime Minister Benjamin Disraeli: "there are lies, damned lies and statistics".

The US is confidently described as the UK's "single biggest export market", and is therefore marked out as the prime target for an early bilateral trade deal.  Strictly speaking, that claim might well be accurate.  However, it depends on the crucial words "on a country-by-country basis".   The US is the UK's "single biggest export market" only because the European Union is treated as 27 separate markets rather than the reality of the EU single market. 

But the observation is consistent with the fact that as a market (and not a UK trading partner) the United States is larger than the EU after deducting the UK from the EU column. But the US market is approximately 5,000 miles further away from the UK than its sister states of the EU. Furthermore, the US market is already quite strong in sectors like finance and services where the UK excels.

Economists and business leaders will have much to consider as they attempt to quantify the pluses and minuses of the EU vs. the US as UK trading partners.  An intriguing question is whether, much as the UK has been the bridge into the EU for US businesses and others, can it instead serve as a conveniently-positioned bridge into the US market for businesses on the eastern side of the Atlantic?  What sort of UK-US trade agreement would that require?

In any event, good negotiators know that they are only as good as their plan B.  As the Prime Minister negotiates a post-Brexit trade agreement with the EU, a potential high-octane trade deal with the US could be an important part of her plan B.  It is much in the UK's interest to pursue these negotiations as diligently and as publically as possible.  It will equally be in President Trump's interest to do all he can to strengthen the UK's position in these matters lest the UK be forced to accept terms from the EU that are not in either party's interest.

The government's Brexit strategy paper repeats and confirms the point made by the Prime Minister in her speech of 17 January 2017. Leaving the EU means leaving the single market.  It therefore means having to negotiate a new trade deal with the EU as a bloc, but almost certainly requiring separate ratification by each EU member states.  That is because any comprehensive trade deal with the EU would inevitably cover matters within the competence of the EU Commission and other matters reserved to the member states.  As the EU experienced in the final stages of negotiating the CETA deal with Canada in 2016, that split of competence creates a significant risk that ratification will be withheld by one or more of the EU member states, perhaps adding months or even years to the process.

With no guarantee of a swift or smooth path to a UK-EU trade deal, the statistical conjuring in the Brexit strategy paper gives the strongest indication to date that a UK-US trade deal is at the very top of the UK government's wish list.

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.

Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Womble Bond Dickinson
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Womble Bond Dickinson
Related Articles
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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