European Union: GDPR Update: Data Processors

Last Updated: 22 August 2017
Article by Marc Elshof, Barry Breedijk and Celine Van Es

Distinction between the data controller and the data processor

In this GDPR Update we address the position of the data processor. The position of the data processor will be analysed from the perspective of the processor itself, as well as from the perspective of the data controller

Unlike under the Directive 95/46/EC (the Directive) and the Dutch Data Protection Act (the DPA), under the General Data Protection Regulation (the GDPR) processors achieve certain specific responsibilities, meaning that it will no longer be only the controller who is responsible for compliance with the (Dutch) privacy regulations. From 25 May 2018, also the processor can be held liable for not complying with the GDPR requirements and additional legislation in this respect. More than before, it will be of importance to distinguish between the positions of the processor and the controller

The controller is the (legal) person determining the purposes and means of the processing of personal data. The processor is the (legal) person processing personal data on behalf of the controller, meaning that the processor does not determine purposes and means of the processing. Generally, it concerns outsourcing of specific processing within the organisation, e.g. payroll and employee administration, customer management, cloud and hosting services and/or camera surveillance. 

The processor is obliged to act within the scope of its tasks as set by the controller. If the processor does not act within the scope and processes the personal data for its own or other purposes, the processor will be regarded as the data controller for that specific part of the processing. One example is the processing of personal data for statistical analyses for internal use. Note that organisations may have different roles regarding the same set of personal data.

Under the DPA, only the data controller is bound by statutory obligations (it is common practice to contractually bind processors by similar obligations). With the introduction of the GDPR also various statutory obligations for processors will be created, which means that the Dutch supervisory authority (de Autoriteit Persoonsgegevens) may directly address the data processor. Furthermore, from the moment the GDPR applies, the processor can be held liable for damages towards third parties. For a thorough analyses on the legal concepts of processor and controller, we refer to Opinion 1/2010 (pdf) of the Article 29 Working Party, the overarching supervisory body consisting of members of the data protection supervisory authorities in the European Union (the EU). 

GDPR from the processor's perspective

Territorial scope

The DPA is applicable in case of processing personal data in the context of the activities of an establishment of a controller in the Netherlands. The GDPR is applicable in case of processing personal data in the context of the activities of an establishment of a controller or a processor in the EU, irrespective whether the processing takes place in the EU. Processors will be confronted with an expansion of the territorial scope of the European privacy regulations. Furthermore, the GDPR also applies to the processing of personal data of data subjects in the EU, by a controller or a processor not established in the EU where the processing is related to:

  1. the offering of goods and/or services to such data subjects; or
  2. the monitoring of such data subjects' behaviour.

In the aforementioned cases, the processor is obliged to appoint in writing a representative in the EU, unless the processing is occasional and is unlikely to result in a risk to the rights and freedoms of the data subjects. Public authorities and bodies are not subject to this obligation. The representative must be mandated by the processor to be addressed by supervisory authorities and data subjects on all issues related to the processing. The obligation to designate a representative in the EU is a newly introduced obligation for the data processor.

Data processing agreement

Similar as under the DPA, the GDPR sets out that the personal data processing arrangements between the data controller and the data processor have to be set out in a data processing agreement. New is that the GDPR specifically determines the content of the processing agreement. Article 28 of the GDPR sums up the mandatory requirements.

Article 28 of the GDPR sets out that the processor is not allowed to contract with other processors, without general or specific prior written consent of the data controller. This consent can be set out in the processing agreement between parties. Where general consent (instead of specific consent) has been obtained, the processor is obliged to contact and inform the controller if and when the processor has intentions to modify (part of) its list of other processors. The controller should be given the opportunity to object to the choices of the processor in this respect. The rationale behind this is that the controller remains the party with overall responsibility and shall generally be the data subject's first point of contact (data subjects might not even know that the data controller is making use of processors).

Where the processor contracts with a sub-processor for a specific part of the processing, the same obligations as set out in the processing agreement between the controller and the processer must be contractually imposed on the specific sub-processor. In the event the sub-processor fails to fulfil its obligations under the sub-processing agreement, the processer will remain fully liable towards the controller for the performance of the obligations arising from the first processing agreement. Therefore, it is of importance that processors carefully and consciously select their sub-processors. According to the GDPR, processors may only engage with other processors that provide sufficient guarantees on compliance with the GDPR.

The processing agreement must contain a general description of the personal data processing, including (i) subject matter and duration of the processing, (ii) the nature and the purpose of the processing, (iii) the type of personal data and categories of data subjects involved, and (iv) the rights and obligations of the controller.

Furthermore, the processing agreement should explicitly state that the processor:

  1. may only process personal data on the controller's documented instructions. The processor is not allowed to process personal data for its own purposes;
  2. ensures that people authorised to process the personal data have committed themselves to confidentiality or are under an appropriate statutory obligation of confidentiality;
  3. takes appropriate technical and organisational measures to ensure a level of security appropriate to the risk (this includes pseudonymisation and encryption of personal data, and regularly testing the systems);
  4. respects its obligations where contracting with other processors, including the obligations on the written form and the imposition of its obligations on to the other processor (as set out above);
  5. assists the controller with the fulfilment of controller's obligations to respond to requests of data subjects exercising their rights;
  6. assists the controller in ensuring compliance with certain specific obligations the controller has under the GDPR, including the notification of a personal data breach, the carrying out of a privacy impact assessment (PIA) and the possible prior notification of the supervisory authority in relation to the PIA;
  7. after the end of the provision of services relating to the processing, at the choice of the controller, deletes or returns all the personal data to the controller, and deletes existing copies, unless storage of the personal data is required by law (e.g. tax obligations or specific sectoral legislation); and
  8. makes available all information to the controller that is necessary to demonstrate compliance with the obligations as laid down in article 28 of the GDPR and allow for and contribute to audits, including inspections, conducted by the controller or any third party.

The GDPR offers local supervisory authorities the opportunity to draw up a model processing agreement. However, the Dutch supervisory authority already indicated that it will currently not make use of this opportunity, meaning that organisations will have to draft their own standard data processing agreement. The processing agreement does not necessarily have to be a separate agreement. Specific provisions on data protection may form part of a broader agreement (for instance a service level agreement).

Records of processing activities

Just like the controller, the processor is obliged to maintain a record of processing activities. The record has to be in writing, including in electronic form. The GDPR sums up specific obligations that must be included in this record:

  1. name and contact details of the processor and any other (sub-)processor(s), and of any controller on behalf of which the processor is acting;
  2. where applicable, the name and contact details of processor's representative and the data protection officer (the DPO);  
  3. the categories of processing carried out on behalf of each controller;
  4. where applicable, if the personal data is transferred to countries outside the EU, and where this is the case, the identification of the specific country including the documents regarding the suitable safeguards that are related to the transfer (e.g. Model Contracts for the transfer of personal data to third countries of the European Commission or Binding Corporate Rules); and
  5. a general description of the technical and organisational measures concerned.

On request, the record must be made available to the supervisory authority.

The obligation to maintain a record of processing activities is not applicable to organisations employing fewer than 250 employees, unless (i) the processing is likely to result in a risk to the rights and freedoms of data subjects, (ii) the processing is not occasional, or (iii) the processing includes special categories of data. Processors that provide services whereby the processing of personal data is standard practice are not likely to fall within the scope of the exceptions and will therefore be obliged to maintain a written record of processing activities.

Data protection officer and data breach notification

In addition to the aforementioned, the processer has the following obligations from the moment the GDPR applies:

  1. If the processor is a public authority or body, its core activities consist of processing on a large scale of special categories of personal data or data relating to criminal convictions, or its core activities consist of processing operations that require regular and systematic monitoring of data subjects on a large scale, the processor is obliged to designate a DPO. A group of organisations may appoint a single DPO. However, this DPO must be able to communicate with data subjects and competent supervisory authorities in their local language.
  2. The processer must notify the controller (without undue delay) after becoming aware of a personal data breach. On the basis of the data processing agreement, the processor is subsequently obliged to assist the controller in ensuring compliance with its obligations towards the competent supervisory authority and (where necessary) the data subjects.

Sanctioning measures and liability

Supervisory authorities are authorised to sanction processors breaching their obligations under the GDPR. In the event of cross-border processing activities (within the EU), the competent lead supervisory authority is the authority in the member state in which the controller (and not the processor) has its main establishment. However, the lead supervisory authority will have to cooperate with the supervisory authority of the processer.

Cross-border operating processors are recommended to review the relevant local legislation of the various member states in which their data controller(s) is/are located. Dutch legislation that is relevant in this respect includes:

  • the GDPR Implementation Act (Uitvoeringswet Algemene verordening gegevensbescherming) - to date still a draft;
  • general administration law (algemeen bestuursrecht); and
  • (in practice) the guidelines of the Dutch supervisory authority. 

In case of infringement of inter alia article 28 GDPR, administrative fines can amount up to €10 million or (if higher) 2% of the total worldwide annual turnover of the organisation concerned. In case of infringement of certain other GDPR provisions - which may also apply to processors - administrative fines can increase up to €20 million or (if higher) 4% of the total worldwide annual turnover of the organisation concerned. Instead of only being contractually liable on the basis of a processing agreement with a data controller (as is standard practice under the DPA), under the GDPR processors will also be subject to administrative liability in case of non-compliance.

In addition to the administrative liability and the contractual liability, a processor can be held liable towards data subjects who have suffered damages as a result of a breach of the GDPR by the processor, unless the processor is able to prove that the breach cannot be attributed to the processor. The concept of damage should be broadly interpreted in a manner which fully reflects the objectives of the GDPR. Where multiple controllers and/or processors are involved in the same processing, each controller or processor can be held liable for the entire amount of the damages, with a right of recourse against other controllers or processors involved in the same processing.

The data processor from the controller's perspective

The controller may only use processors providing sufficient guarantees that they will implement appropriate technical and organisational measures. The processor must ensure the processing meets the requirements of the GDPR and the rights of the concerned data subjects are protected. This obligation is similar to article 17 (2) of the Directive and article 14 of the DPA.

Controllers are recommended to keep control over the processing of their data processors and the possible chain of sub-processors. In the end, the controller remains responsible for the entire processing and is a (first) point of contact for both the competent supervisory authority and the data subjects.

Prior to appointing a sub-processor, the processor is obliged to consult the controller. For the controller this is a good moment to request insight in the (draft) data processing agreement between processor and the potential sub-processor and to make any necessary amendments to this document.

Furthermore, it is of importance to be very precise on the tasks of the processor in the processing agreement in order to avoid uncertainties about the division of responsibilities between the parties. In practice, discussions on the allocation of liability will most likely increase. A data processor engaged for a relatively small task (and accordingly receiving a relatively small compensation), shall not be willing to indemnify the controller against any and all claims of data subjects and/or penalties of supervisory authorities arising from the processing.

Practical recommendations

In nine months, the GDPR finally applies. Within organisations the first (baby) steps have been taken to implement the new privacy regulation. 28 May 2018 is not as far as it seems; adequately implementing the GDPR takes a significant amount of time. To fully comply with the GDPR is not just a matter of amending the applicable privacy policies. 

Organisations are recommended to examine their positions within the various processing activities and to make a very clear assessment on the associated responsibilities and obligations. A careful inventory should be made of the parties involved in the various personal data processing activities within the organisation and their roles. The division of roles directly influences the responsibilities the specific party has in the personal data processing and the corresponding liability.

Furthermore, organisations are advised to compare the processing agreements currently in place with the obligations of Article 28 GDPR, and to timely amend the documents where necessary.

Overview of subjects

January 2017 Territorial scope of the GDPR
February 2017 The Concept of Consent
March 2017 Sensitive Data
April 2017 Accountability, Privacy by Design and Privacy by Default
May 2017 Rights of Data Subjects (information notices)
June 2017 Rights of Data Subjects (access, rectification and portability)
July 2017 Rights of Data Subjects (objection, erasure and restriction of processing)
August 2017 Data Processors
September 2017 Data Breaches and Notifications
October 2017 Privacy Impact Assessment and Data Protection Officers
November 2017 Transfer of Personal Data (outside the EEA)
December 2017 Regulators (competence, tasks and powers)
January 2018 One Stop Shop
February 2018 Sanctions
March 2018 Processing of Personal Data in Employment
April 2018 Profiling and Retail
May 2018 Overview

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