• At Kemp Little, we are known for our ability to serve the very particular needs of a large but diverse technology client base. Our hands-on industry know-how makes us a good fit with many of the world's biggest technology and digital media businesses, yet means we are equally relevant to companies with a technology bias, in sectors such as professional services, financial services, retail, travel and healthcare.
  • Kemp Little specialises in the technology and digital media sectors and provides a range of legal services that are crucial to fast-moving, innovative businesses.Our blend of sector awareness, technical excellence and responsiveness, means we are regularly ranked as a leading firm by directories such as Legal 500, Chambers and PLC Which Lawyer. Our practice areas cover a wide range of legal issues and advice.
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  • We bring our commercial understanding of digital business models, our legal expertise and our reputation for delivering high quality, cost-effective services to this dynamic sector.
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'EU-US Privacy Shield' to replace Safe Harbor

On 2 February 2016, the European Commission announced that the EU Commission and the United States agreed on a new framework for transatlantic data flows to replace Safe Harbor, to be called the EU-US Privacy Shield. 

On 6 October 2015, we reported that the Court of Justice of the European Commission (CJEU) stated in its decision on Schrems that the Safe Harbor framework is invalid and set out the implications of this decision for EU businesses. We also described alternative mechanisms available to EU businesses who want to continue to transfer personal data from the EU to the US. 

The Commission has stated that the EU-US Privacy Shield will be a new framework that will protect the fundamental rights of Europeans where their data is transferred to the US and ensure legal certainty for businesses. The Commission’s press release states that the EU-US Privacy Shield reflects the requirements set out by the CJEU in its ruling on 6 October 2015, that declared the old Safe Harbor framework invalid and will –

  • provide stronger obligations on US companies to protect the personal data of Europeans;
  • provide stronger monitoring and enforcement by the US Department of Commerce and Federal Trade Commission, including through increased cooperation with European Data Protection Authorities;
  • include commitments by the US that possibilities under US law for public authorities to access personal data will be subject to clear conditions, limitations and oversight, preventing generalised access; and
  • give Europeans the possibility to raise enquiries and complaints with a dedicated, new Ombudsperson. 

Commissioner Jourova said: “The new EU-US Privacy Shield will protect the fundamental rights of Europeans when their personal data is transferred to US companies.  For the first time ever, the United States has given the EU binding assurances that the access of public authorities for national security purposes will be subject to clear limitations, safeguards and oversight mechanisms. Also, for the first time, EU citizens will benefit from redress mechanisms in this area.  In the context of the negotiations for this agreement, the US has assured that it does not conduct mass or indiscriminate surveillance of Europeans.  We have established an annual joint review in order to closely monitor the implementation of these commitments.”

The new arrangement will include the following three core elements –

  • “Strong obligations on companies handling Europeans" personal data and robust enforcement: US companies wishing to import personal data from Europe will need to commit to robust obligations on how personal data is processed and individual rights are guaranteed.  The Department of Commerce will monitor that companies publish their commitments, which makes them enforceable under US law by the US Federal Trade Commission.  In addition, any company handling human resources data from Europe has to commit to comply with decisions by European DPAs. 
  • Clear safeguards and transparency obligations on US government access: For the first time, the US has given the EU written assurances that the access of public authorities for law enforcement and national security will be subject to clear limitations, safeguards and oversight mechanisms.  These exceptions must be used only to the extent necessary and proportionate.  The US has ruled out indiscriminate mass surveillance on the personal data transferred to the US under the new arrangement.  To regularly monitor the functioning of the arrangement there will be an annual joint review, which will also include the issue of national security access.  The European Commission and the US Department of Commerce will conduct the review and invite national intelligence experts from the US and European Data Protection Authorities to it. 
     
  • Effective protection of EU citizens’ rights with several redress possibilities: Any citizen who considers that their data has been misused under the new arrangement will have several redress possibilities.  Companies have deadlines to reply to complaints.  European DPAs can refer complaints to the Department of Commerce and the Federal Trade Commission.  In addition, Alternative Dispute Resolution will be free of charge.  For complaints on possible access by national intelligence authorities, a new Ombudsperson will be created.” 

Next steps

While the new agreement is a positive step forwards, it is the first step in a process towards fully implementing the EU-US Privacy Shield on both sides of the Atlantic.  The next steps are for the Commission to prepare a draft adequacy decision in the coming weeks, which, after first, taking the advice of the Article 29 Working Party and second, consulting a committee composed of representatives of the Member States, could then be adopted by the College of Commissioners.  At the same time, the US will be making preparation to implement the new framework from the US side, monitoring mechanisms and the new Ombudsperson. 

What is the reaction of the Article 29 Working Party?

The Article 29 Working Party will only release their statement “late this afternoon”.  However, it seems they don’t yet feel they have sufficient information to come to a view on the proposed EU-US Privacy Shield.  They will review the proposal over the next couple of months, but it appears that as a group they will support transfers using the approved Standard Contractual Clauses (model clauses) or BCRs during this time. 

In this regard, the announcement yesterday has succeeded in buying more time and allowing data transfers to continue.  However, if businesses are still relying on Safe Harbor, it looks likely that some DPAs, at least, will commence enforcement action.

What could this mean for EU businesses?

It will still be some time yet before transatlantic data transfers can take place under the new EU-US Privacy Shield.  The Commission said that the EU-US Privacy Shield will take 3 months to implement. 

Our earlier article set out alternative mechanisms to Safe Harbor that companies can use to transfer personal data from the EU to the US following the CJEU’s declaration that Safe Harbor is invalid, such as the model clauses or BCRs.  Until the EU-US Privacy Shield is agreed and finally put in place, companies should continue to rely on these alternative mechanisms for transatlantic data transfers. 

It remains to be seen how widely the EU-US Privacy Shield will be adopted and how soon EU companies will sign up to it.  Companies that have gone to the effort of putting model clauses in place with their US suppliers or entering into BCRs between group companies, might decide to continue to rely on these mechanisms instead of adopting the new EU-US Privacy Shield so soon afterwards.  Another potential reason in favour of relying on these mechanisms is that the CJEU’s decision in Schrems gave national Data Protection Authorities the power to question adequacy decisions of the Commission, so it is possible that Data Protection Authorities in different member states might reach different conclusions on the adequacy of the EU-US Privacy Shield, and EU companies might well decide to keep their model clauses or BCRs in place as a backup. 

A question mark still hangs over the status of US companies that are currently Safe Harbor certified.  The Commission’s announcement does not clarify whether they will automatically transition to the new EU-US Privacy Shield or whether they will have to register anew under the EU-US Privacy Shield, and what that will involve. 

EU Data Protection Authorities agreed to refrain from taking enforcement action against companies that had relied on Safe Harbor and which had not put in place an alternative solution for exporting data to the US until 31 January 2016.  Now that this deadline has passed, and given that it might take some time for the EU-US Privacy Shield to be formally put in place, we wait to see whether this deadline will be extended, but this should be confirmed by the Article 29 Working Party statement this afternoon, which all DPAs have “committed” to. 

Interestingly, it seems that the changes that form part of the EU-US Privacy Shield deal will also be important for long term approval of model clauses and BCRs transfers to the US, which were also potentially at risk given the nature of the criticisms of Safe Harbor, which to a great extent related to the US legal position more generally, rather than the enforcement of Safe Harbor in particular.

The Privacy Shield is expected to be a living scheme for transatlantic data transfers, including annual joint reviews.  Hopefully, this indicates that it will have built-in flexibility to evolve in response to new innovations and withstand challenges, but at the same time, EU businesses that sign up to the EU-US Privacy Shield should expect to have to update their compliance with it as it evolves.  

For further information please contact Nicola Fulford and Shirine Corboy.