European Court of Justice

The European Parliament passed a resolution today strongly criticizing Privacy Shield and recommending that Privacy Shield be suspended as of September 1, 2018, if the US doesn’t shape up by that deadline.  Should US companies that rely on Privacy Shield panic?

No.

The European Parliament has no power to suspend Privacy Shield on September 1, 2018, or any other date.  Only two entities can do that:  the European Commission, or the Court of Justice of the European Union (CJEU).  And the CJEU might just do that when it rules sometime during the next year or so on the new case between Maximillian Schrems and Facebook (Case C-311/18).  There’s no new information on the Schrems II case at CJEU, but we are tracking it.   That one is worth worrying about.

The European Parliament’s resolution does have some political weight, however.   The Commission is required to respond to the Parliament within three months explaining what it is going to do – if anything – in response to the Parliament’s criticisms.   And if the Commission shrugs its shoulders, there’s not much the Parliament can do except pass another resolution.

The final version of the European Parliament’s resolution is not available yet on the Parliament’s website (it was just passed today), but the proposed form can be found here. 

Executive summary:  The EU’s standard contractual clauses may be on the fast track to invalidation, putting a vast number of personal data transfers from the EEA at risk.  A case brought by Maximilian Schrems (whose first complaint resulted in the invalidation of Safe Harbor) has been referred to the EU’s highest court, via a 153-page Irish High Court decision that provides ample ammunition to those who would like to see the standard contractual clauses struck down.  Although aimed at Facebook, the consequences of the decision are virtually certain to affect all US companies that rely on the standard contractual clauses.

Many companies around the world rely on the EU’s standard contractual clauses (also known as the model clauses, and referred to in this article as the “SCCs”) as the legal basis for transferring personal data from the European Economic Area (EEA) to countries whose privacy laws have not been found adequate by the EU Commission.  The SCCs are private contracts, and while some EEA countries require that parties that enter into SCCs deposit a copy, other countries do not, so no one knows for sure how many companies rely on the SCCs.  But the answer is probably “an awful lot of companies.”  Given the data flows between the EEA and US, and the fact that, as of today, only around 2,500 companies rely on Privacy Shield as the legal basis for the data transfers, it’s safe to assume that for US companies, the standard contractual clauses are the primary mechanism for transferring personal data to the US.

The SCCs have been subject to a legal challenge by Maximillian Schrems (often called the Schrems II case) that has just reached a critical inflection point: The Irish High Court has just issued a decision referring to the Court of Justice of the EU (CJEU) the question of whether the SCCs are invalid.  The main thrust of the invalidity argument is the assertion that US national security laws do not offer adequate levels of protection for the rights of EU residents.  In particular, the argument runs, EU residents lack a meaningful remedy before US courts for uses of their personal data by US national security agencies that are inconsistent with those persons’ rights under EU law. Continue Reading Will the EU box itself in?  Fate of Standard Contractual Clauses (aka the Model Clauses) for personal data transfers is now in the hands of the EU’s highest court

The final version of Privacy Shield (which has not yet been officially published) passed the Article 31 Committee vote on July 8th and is being presented today to the LIBE committee of the European Parliament.  LIBE’s vote is advisory, but it may provide some early indications as to how well Privacy Shield will survive anticipated legal attacks once it is formally adopted and implemented.

Formal adoption of Privacy Shield is widely expected to happen this week.  Once that happens, the US Department of Commerce or FTC  should publish the final text and start processing registrations.  Companies considering certifying under Privacy Shield should note that it requires a greater degree of internal scrutiny and documentation than Safe Harbor did.

Companies that have put standard clauses in place following the demise of Safe Harbor will want to consider the pros and cons of participating in Privacy Shield rather than continuing to rely on the standard clauses.  Neither approach is guaranteed to be risk-free: The standard clauses have been sent to the Court of Justice of the EU for review under the second round of the Schrems case in Ireland, and Privacy Shield is virtually certain to end up before the Court of Justice at some point within the next year or two.

While it’s making few headlines, the European Commission is still working to finalize Privacy Shield, and it’s even possible that Privacy Shield will pass a key hurdle by the end of this month.  The Commission is still scrambling to address the concerns raised by the Article 29 Working Party and the European Data Protection Supervisor concerning the Privacy Shield arrangements that the Commission had negotiated with the US.  (The European Parliament has also criticized Privacy Shield.)  Some of the concerns raised so far have made it necessary for the Commission to negotiate further with the U.S. State Department.  And now the Commission is shortly to present a proposed final version of Privacy Shield to the Article 31 Committee, which represents the Member States.

If the Art. 31 Committee agrees with the Commission, Privacy Shield will be submitted to the College of the Commission for  formal adoption.  If the Art. 31 Committee does not endorse the Privacy Shield arrangements, the Commission will need to consider further how to proceed.  Also, the Council or Commission could intervene as permitted by the comitology procedure (which could result in more pressure on the Commission to negotiate further with the US).

News sources have speculated as to the status of the Article 31 negotiations (see here and here (scroll down)), but given the lack of specific information from the Commission on this point, it’s tough to tell what the real status is.  In any event, while we expect to have some more concrete news by the end of June as to the progress of Privacy Shield, it is unlikely that Privacy Shield will be formally adopted by then.

And it’s important to keep in mind that, as soon as Privacy Shield limps over the finish line (assuming it doesn’t succumb to death by a thousand objections), it will almost certainly face immediate litigation seeking to have the Court of Justice of the EU invalidate it.

PS – for those who’ve been wondering, Brexit (should it occur) is unlikely to result in the UK taking a divergent path from the EU on general data protection rules.

The Article 29 Working Party has released opinions on Privacy Shield and “essential guarantees” under EU law relating to surveillance, here and here.

Please join us in our webinar at 1 pm EDT today to learn more about the Article 29 Working Party’s opinion on Privacy Shield (register here).  We will look at the opinion’s likely impact on Privacy Shield’s rocky progress through the EU bureaucracy, as well as on the legal attacks that we expect Privacy Shield will face if and when it is ultimately adopted by the Commission.

 

Now that the EU Commission has published the complete version of its draft decision adopting the EU-US Privacy Shield program, it’s time for the key reviewers to dig in.   I don’t mean the lawyers, or EU privacy advocates, or US businesses, although their views will no doubt be wide-ranging and illuminating.  But no, the really important reviewers are the members of the Article 29 Working Party.

Regular readers of this blog will know that the Art. 29 WP is made up of representatives of the EU’s national data protection authorities and that the group has a major advisory role as mandated by Art. 29 of the Data Protection Directive (hence the catchy name).  The reason that that Art. 29 WP’s views will be particularly important for Privacy Shield is that the national DPAs will be the arbiters of the initial attacks that are almost certain to be made on Privacy Shield once it is adopted.  In terms of legal action, the first step EU privacy advocates who are not satisfied with Privacy Shield (which Max Schrems has already characterized as “lipstick on a pig“)  will take is to file complaints with their local DPAs. The DPAs will then need to consider whether Privacy Shield protects the “fundamental rights and freedoms” of the complainants.  The DPAs will then issue decisions that can be appealed to the local courts.  The local courts would then need to refer questions of European law (such as the validity of the Commission decision to adopt Privacy Shield) to the Court of Justice of the EU, which is the only court authorized to strike down a Commission decision.  But it all starts with the DPAs.

The Art. 29 WP has promised to publish its comments after a plenary meeting on April 12-13.  If the Art. 29 WP comes out in favor of Privacy Shield prior to its adoption, it will be a lot tougher for the DPAs to turn around later and agree with complainants that Privacy Shield is, after all, inadequate and should be struck down.  So Art. 29 WP has compelling incentives to scrutinize the draft Privacy Shield decision very carefully over the next six weeks.  It will be interesting to see whether the Commission draft survives the review without any vulnerabilities being identified that would lead the Commission to reopen negotiations with the US.

The European Commission has finally made the draft text of the EU-US Privacy Shield program available (scroll down in the press release for further links).  The Privacy Shield program, which was agreed to in principle by US and EU negotiators nearly four weeks ago, will replace the Safe Harbor program that was struck down last autumn by the Court of Justice of the EU.  However, Privacy Shield is not quite a done deal. The Commission is awaiting comments on the Privacy Shield program from the Article 29 Working Party, an advisory group that consists of members of the national data protection authorities.

Update: The US Commerce Department has released a “fact sheet” on the new Privacy Shield agreement.  

The European Commission has issued a press release that gives an outline of some key changes to the EU-US safe harbor, now dubbed the “Privacy Shield.”  The new accord still needs to be reviewed by the Article 29 Working Party and the College of Commissioners, but assuming it remains substantially the same, we can expect the following: Continue Reading Commission Press Release and FTC Fact Sheet outlines the new EU-US “Privacy Shield”

According to press reports, European Union and U.S. negotiators in Brussels finalized what is being called a “political agreement” on a new Safe Harbor transatlantic data transfer agreement. European Union justice commissioner Vera Jourová will present the agreement to the European Commission’s 28 commissioners today. Continue Reading Political Agreement Reached on US-EU Safe Harbor; Details “Hazy”

If you would like to learn more about the politics and law behind the current Safe Harbor 2.0 negotiations, download the podcast of Running Aground in the Surveillance Safe Harbor, a teleforum hosted by the Federalist Society.  The podcast features moderator Matthew R.A. Heiman, Vice President, Chief Compliance & Audit Officer, Tyco International; Stewart A. Baker, Partner, Steptoe & Johnson LLP and former Assistant Secretary for Policy at the Department of Homeland Security; and Susan Foster, a solicitor in England & Wales whose practice bridges the UK and US perspectives on data protection matters.  Podcast made available through kind permission of the Federalist Society.