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Standard Contract Clauses - here today (Schrems[ed] tomorrow?)

Speed read

On 3 October 2017 the Irish High Court published a ruling requiring the ECJ to consider the validity of the standard contractual clauses (SCCs) and EU-US Privacy Shield framework as mechanisms to safeguard personal data transferred outside of the EEA.  For today, key takeaways are:

  • SCCs and Privacy Shield remain valid mechanisms for transfers of personal data from the EU to a third country;
  • referral of both mechanisms to the ECJ is likely to take at least 12 to 18 months, providing some reprieve for those relying upon them; and
  • the ruling paves the way for a potential future ECJ ruling, in relation to the ongoing validity of both SCCs and Privacy Shield.

Setting the scene

In an intriguing case of legal déjà vu, Europe’s best known privacy agitator, Maximillian Schrems, has again found himself at the centre of a trans-Atlantic data privacy clash. Mr Schrems rose to prominence following referral of his post-Snowden data privacy complaint from the High Court of Ireland to the ECJ, and the subsequent (2015) collapse of the then International Safe Harbor Privacy Principles (Safe Harbor). Yesterday’s ruling turned Europe’s judicial spotlight towards Standard Contract Clauses (SCCs), EC drafted contractual provisions intended to ensure sufficient privacy safeguards when transferring personal data outside of the EEA (including to the US), and by proxy, the toughened EU-US Privacy Shield framework (Privacy Shield), Safe Harbor’s replacement.

As a brief refresher, Schrems’ earlier complaint related to the apparent vulnerability of his personal data to U.S. governmental and/or law enforcement surveillance, when transferred from Facebook’s servers in Europe for processing in the United States under the Safe Harbor framework. Ruling in 2013, the ECJ found Safe Harbor to lack “sufficient protection against surveillance by [U.S.] public authorities”, and, as a result, suspended and ruled “invalid” Safe Harbor, as a mechanism for EU-US personal data transfers.

The Data Protection Commissioner – AND – Facebook Ireland Limited and Maximilian Schrems

SCCs’ present predicament comes as a result of referral to the ECJ, of a fresh complaint, raised by Mr Schrems, initially to the Irish Data Protection Commissioner (DPC), requesting the suspension of personal data flows from Facebook’s businesses in the EU, to its servers in the US. This complaint raises (in a similar manner to the Safe Harbor case) concerns in relation to U.S. surveillance of Facebook users’ personal data when Facebook transfers such data to the States, using SCCs.

In reviewing the matter the DPC, “formed the view that there appeared to be well-founded concerns that [EU citizen’s personal data is at]…risk of being accessed and processed by US state agencies for national security purposes in a manner incompatible with [EU law]” though chose not to exercise its power to suspend the specific Facebook data flows. Instead, the DPC referred the matter to the Irish High Court (High Court) for a wider answer as to the validity of SCCs as a mechanism, and a decision as to whether to refer the case to ECJ.

Ruling of 3 October 2017

Following a five week hearing earlier this year, and review of a reported 45,000 pages of documentation, the High Court, yesterday, published a 153 page ruling both in support of the DPC’s concerns, and requiring a referral of the matter, on a number of grounds, to the ECJ. Whilst predictably complex, in brief, the judgement requires the ECJ to address:

  • whether the DPC’s powers to “suspend or ban the transfer of data to a data importer in a third country on the basis of the legal regime in that third country is sufficient to secure the validity of the [SCCs]”. Or, in simple terms, whether the DPC’s power, granted by the SCCs, to block specific data flows is sufficient to protect the SCC mechanism as a whole; and
  • in light of the above, the broader question of whether SCCs can remain a valid mechanism for transfers of personal data outside of the EEA; in addition
  • whilst not actually raised by either Mr Schrems, or the DPC, the High Court also determined that questioning the validity of the SCC mechanism represents “an impermissible collateral attack on the validity of…Privacy Shield”, as an international transfers mechanism mired by similar legal concerns. A similar question was therefore put in relation to Privacy Shield, to determine whether the Privacy Shield Ombudsperson (PSO) mechanism provides sufficient protection for transfers taking place under Privacy Shield.
  • It should be noted that, in relation to the PSO role itself, the Trump administration has yet to appoint a permanent ombudsperson.

Where to from here

The precise wording of questions to the ECJ is yet to be formalised, with a finalised form to be published later this month. Whatever their final form however, the High Court ruling is likely to represent the start a complex legal salvo, aimed squarely at the validity (and longevity) of both SCCs and Privacy Shield.

For today, key takeaways are:

  • SCCs and Privacy Shield remain valid mechanisms for transfers of personal data from the EU to a third country;
  • referral of both mechanisms to the ECJ is likely to take at least 12 to 18 months, providing some reprieve for those relying upon them; and
  • the legal stage is set for a potential future ECJ ruling in relation to the ongoing validity of both SCCs and Privacy Shield.