On 25 January 2012, the Vice President of the European Commission, Viviane Reding, unveiled far reaching proposals for re-writing the EU's 17 year old data protection directive, Directive 95/46/EC. The European Commission had previously declared its intention to reform the existing data protection framework back in April 2010. The proposal is intended to modernise the EU's data protection rules by taking into account technological advances and ensuring a more uniform application of data protection rules across all 27 Member States. In doing so, it will impose additional compliance obligations on organisations.
In place of the existing Directive the European Commission has proposed a new regulation ("Regulation") setting out a general EU framework for data protection. The Regulation would create new rights for individuals and impose new compliance obligations on organisations with potential fines of up to 2% of annual global turnover for non-compliance. As a Regulation, it would be directly applicable in national law with no implementation required from individual national governments. As a consequence, the Data Protection Act 1998 (the "DPA") would be replaced in its entirety by the Regulation.
The European Commission also issued a proposed Directive regulating the processing of personal data for the prevention, detection, investigation or prosecution of criminal offences and related judicial activities. The Directive would replace Framework Decision 2008/977/JHA.
This article addresses the proposed Regulation and not the proposed Directive. We have set out what we regard as the main discussion points of the Regulation below.
Reach - implications for non-EU companies
Organisations which are not established in the EU would be caught by the new Regulation if they either offer goods or services to data subjects in the EU or monitor the behaviour of EU citizens. This aspect of the proposal is hugely controversial as the current Directive only applies to non-EU organisations if they use equipment in the EU for their data processing operations. This would mean the likes of Google and Facebook as well as other social media players would be caught by the Regulation.
For those organisations with establishments in more than one EU member state, compliance oversight would be managed in the jurisdiction of their "main establishment", being where the "effective and real exercise of management activities" takes place.
The Regulation would also change what we currently understand to be "personal data". It would do so by amending the key definition of "data subject" such that personal data would include information that could "reasonably likely" be used to identify an individual, irrespective of whether the data is held by the data controller or a third party. This is significant as UK case law has, in recent years, required that the data controller should hold all the information in order for it to be regarded as personal data.
The concept of "consent" is enshrined in the new Regulation. This contrasts sharply with the DPA where consent is not defined and has always proved to be a troublesome concept for practitioners. Under the Regulation, if an organisation wishes to rely on an individual's consent, for consent to be valid it would have to be a "freely given, specific, informed and explicit indication of his or her wishes ... either by a statement or by a clear affirmative action ...". Consent could not be gained through silence or inactivity. This would present particular challenges for UK data controllers where implied consent has been commonly relied upon. The Regulation also makes it clear that individuals should have the right to withdraw their consent at any time. Where consent is given in the context of a written declaration which also relates to another matter, the need for consent should be distinguishable from the other matter. A particular challenge for the employer – employee relationship is that consent would not be valid if there is a "significant imbalance" between the positions of the parties. Such a high threshold for the consent requirement may lead organisations to continue to rely on the "legitimate interests" condition for processing personal information.
The Regulation proposes that a child would mean anyone below the age of 18. This obviously differs from Scots law. However, when processing the personal information of a child under 13 in relation to information society services, the consent of the parent or guardian would be needed. This would bring the EU into line with US law.
The Regulation proposes several changes to the data protection principles. For example, in addition to the current requirement to process personal information fairly and lawfully, the Regulation would introduce a requirement to do so "in a transparent manner". Data controllers would also be obliged to ensure that personal data is "limited to the minimum necessary" and processed only if the purpose cannot be met by processing non-personal information, such as anonymised information.
The Regulation would materially strengthen the rights of individuals. Data controllers would be required to have transparent and easily accessible data protection policies and establish procedures for handling subject access requests. In a tightening of current UK practice, such requests would have to be dealt with within 1 month and, in most cases, free of charge. Individuals would be entitled to receive more information than they do at present when their personal information is collected or when they submit a subject access request.
The "right to be forgotten
Individuals would have the right to require that organisations delete their data "without delay" where there is no legitimate interest in retaining it. This is commonly referred to as the "right to be forgotten". Where an individual makes such a request, if the data controller has made the information public it would have to inform any third parties processing the data that the individual has requested that it be erased.
The right to data portability
Where held electronically, data subjects would be entitled to receive a copy of their personal data in a "commonly used format". So, if someone's data is held in the cloud they could ask their service provider to provide them with a copy so that they can pass it to an alternative service provider. Organisations will need to ensure that data is capable of being ported to alternative platforms using, for example, open standards to hold and save data.
Data Breach Notification
Data controllers would be required to notify regulators about any personal data breach which has occurred "without delay and where feasible" within 24 hours of becoming aware of it. There is currently no de minimis test meaning all breaches should be notified. Data processors would themselves be required to notify data controllers immediately after establishing that there has been a breach.
Data controllers would also be required to notify affected individuals where a data breach is "likely to adversely affect" them. There is, however, a specific exemption from notifying where data has been rendered unintelligible to those not authorised to access it (such as hackers), encouraging organisations to use encryption techniques to protect information.
Information to be provided to regulators and affected individuals would include what the organisation has done already with regards to the breach and provide advice to individuals about practical steps they can take to mitigate the effects of the breach.
The Regulation would impose various positive obligations on data controllers to adopt policies and implement procedures and controls to achieve compliance and ensure that the effectiveness of such measures can be verified. Both controllers and processors would be required to maintain documentation relating to their data processing. The foregoing would not apply to individuals processing personal data for non-commercial purposes or organisations employing under 250 people where data processing is ancillary to their principal activities. Both controllers and processors would also be expected to conduct an impact assessment if any processing was to present a specific privacy risk.
Additionally, controllers and processors who are public authorities or commercial organisations which employ in excess of 250 people or who regularly and systematically monitor data subjects would be required to appoint a data protection officer. Data protection officers would have to be appropriately qualified and trained, independent and remain in post for a minimum two year period.
Data processors currently have no statutory obligations under the DPA. A data processor's only obligations are governed by its contractual relationship with the data controller. The Regulation would require data processors to take appropriate technical and organisational measures to protect personal information. Where a data processor processes data outside the instructions of the data controller, the Regulation would treat the data processor as a data controller in its own right.
Currently, data protection legislation can present a major regulatory hurdle to organisations wishing to transfer personal data to non-EEA countries which do not ensure an "adequate level of protection". The new Regulation seeks to lessen the regulatory burden by, for example, giving formal recognition to binding corporate rules ("BCRs") for the first time. For the first time, BCRs would also be available for use by data processors and not just data controllers. Whilst European Commission approved "model clauses" remain as an alternative compliance route, national data protection authorities would be able to approve standard data protection clauses (subject to approval by the European Commission) as well as individually negotiated contractual clauses for international transfers of personal data.
Data Protection Authorities
Individual data protection authorities, such as the UK's Information Commissioner, would remain responsible for data protection enforcement under the Regulation, including administering enforcement action on organisations falling within the jurisdiction of their Member State. The national authority would be responsible for enforcing the Regulation against "resident" organisations in respect of processing activities across the EU.
The Regulation is intended to increase cross border co-operation between national authorities by obliging them to provide mutual assistance to each other as well as co-operate with the European Commission. They would also be expected to advise certain proposed legal measures to the European Commission and the (to be created) European Data Protection Board, which would replace the Article 29 Working Party, to ensure the Regulation is applied consistently throughout the EU.
The existing regime for imposing financial penalties currently varies across the EU. The UK Information Commissioner, for example, has the power to fine organisations up to £500,000 for serious breaches of the DPA. The Regulation would replace existing national arrangements and would operate a sanctions regime based on a 'sliding scale', having regard to the seriousness of the data breach. It is also proposed that fines could be imposed against data controllers and data processors, a significant departure from the current regime. Penalties would be enforced by national data protection authorities.
- For a first time offender who unintentionally fails to comply, a written warning may be issued provided the offender is either a natural person processing personal data without a commercial interest or an organisation which employs less than 250 persons and the processing of personal data is an ancillary activity
- Minor failures such as charging for or not responding to a subject access request would attract a fine of up to 250,000 Euros or, for enterprises, up to 0.5% of annual global turnover
- 'Mid level' breaches, by inaction or omission, such as failing to correct an individual's data following notification or failing to adopt or enforce internal policies, would attract a fine of up to 500,000 Euros or, for enterprises, up to 1% of annual global turnover
- More serious failures, such as major security incidents or unlawfully processing personal data would attract a fine of up to 1,000,000 Euros or, for enterprises, up to 2% of annual global turnover
The European Commission hopes that the new Regulation will stimulate growth within the embattled EU, remove barriers to the creation of new jobs and encourage cross border innovation. As laudable as its objectives are however, the Regulation has many detractors. For example, the CBI has expressed the view that the proposals are "unworkable in their current form" and that by adding "complexity and uncertainty" they will be bad for European businesses. The ICO is itself concerned at the administrative burden the Regulation would have on organisations and has suggested changes which would reduce the burden while preserving the enhanced rights for individuals. The ICO would prefer a more flexible instrument.
The Regulation will now be considered by the European Parliament and the Council of Ministers. Once formally adopted, it is proposed that organisations would have two years within which to comply with the Regulation. As parts of the Regulation are contentious, the road to adoption will be difficult and it is thought that the earliest the Regulation will take effect is sometime in 2015.
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.