EU-US Privacy Shield

EU-US Privacy Shield invalidation business implications follow-up

Since the Court of Justice of the European Union (CJEU) invalidated the EU-US Privacy Shield in their Schrems II judgement delivered two weeks ago, many questions have arisen around international data transfers to the US.

After the invalidation of the EU-US Privacy Shield by the CJEU two weeks ago, as reported by Aphaia, data transfers to the US require another valid safeguard or mechanism that provides an adequate level of data protection similar to the one granted by the GDPR.

European Data Protection Board guidelines

With the aim of clarifying the main issues derived from the invalidation of the EU-US Privacy Shield, the European Data Protection Board (EDPB) has published Frequently Asked Questions on the Schrems II judgement. These answers are expected to be developed and complemented along with further analysis, as the EDPB continues to examine and assess the CJEU decision.

In the document, the EDPB reminds that there is no grace period during which the EU-US Privacy Shield is still deemed a valid mechanisms to transfer personal data to the US, therefore businesses that were relying on this safeguard and that wish to keep on transferring data to the US should find another valid safeguard which ensures compliance with the level of protection essentially equivalent to that guaranteed within the EU by the GDPR.

What about Standard Contractual Clauses?

The CJEU considered the SCC validity depends on the ability of the data exporter and the recipient of the data to verify, prior to any transfer, and taking into account the specific circumstances, whether that level of protection can be respected in the US. This seems to be difficult though, because the Court found that US law (i.e., Section 702 FISA and EO 12333) does not ensure an essentially equivalent level of protection.

The data importer should inform the data exporter of any inability to comply with the SCCs and where necessary with any supplementary measures and the data exporter should carry out an assessment to ensure that US law does not impinge on the adequate level of protection, taking into account the circumstances of the transfer and the supplementary measures that could be put in place. The data exporter may contact the data importer to verify the legislation of its country and collaborate for the assessment. Where the result is not favourable, the transfer should be suspended. Otherwise the data exporter should notify the competent Supervisory Authority.

What about Binding Corporate Rules (BCRs)?

Given that the reason of invalidating the EU-US Privacy Shield was the degree of interference created by the US law, the CJEU judgement applies as well in the context of BCRs, since US law will also have primacy over this tool. Likewise before using SCCs, an assessment should be run by the data exporter and the competent Supervisory Authority should be reported where the result is not favourable and the data exporter plans to continue with the transfer.

What about derogations of Article 49 GDPR?

Article 49 GDPR comprises further conditions under which personal data can be transferred to a third-country in the absence of an adequacy decision and appropriate safeguards such as SCCs and BCRs, namely:

  • Consent. The CJEU points out that consent should be explicit, specific for the particular data transfer or set of transfers and informed. This element involves practical obstacles when it comes to businesses processing data from their customers, as this would imply, for instance, asking for all customers’ individual consent before storing their data on Sales Force.
  • Performance of a contract between the data subject and the controller. It is important to note that this only applies where the transfer is occasional and only for those that are objectively necessary for the performance of the contract.

What about third countries other than the US?

The CJEU has indicated that SCCs as a rule can still be used to transfer data to a third country, however the threshold set by the CJEU for transfers to the US applies for any third country, and the same goes for BCRs.

What should I do when it comes to processors transferring data to the US?

Pursuant to the EDPB FAQs, where no supplementary measures can be provided to ensure that US law does not impinge on the essentially equivalent level of protection as granted by the GDPR and if derogations under Article 49 GDPR do not apply, “the only solution is to negotiate an amendment or supplementary clause to your contract to forbid transfers to the US. Data should not only be stored but also administered elsewhere than in the US”.

What can we expect from the CJEU next?

The EDPB is currently analysing the CJEU judgment to determine the kind of supplementary measures that could be provided in addition to SCCs or BCRs, whether legal, technical or organisational measures.

ICO statement

The ICO is continuously updating their statement on the CJEU Schrems II judgement. The latest version so far dates 27th July and it confirms that EDPB FAQs still apply to UK controllers and processors. Until further guidance is provided by EU bodies and institutions, the ICO recommends to take stock of the international transfers businesses make and react promptly plus they claim that they will continue to apply a risk-based and proportionate approach in accordance with their Regulatory Action Policy.

Other European Data Protection Authorities’ statements

Some European data protection supervisory authorities have provided guidance in response to the CJEU Schrems II judgement. While most countries are still considering the implications of the decision, some other are warning about the risk of non-compliance and a few of them like Germany (particularly Berlin and Hamburg) and Netherlands have openly stated that transfers to the US are unlawful.

In general terms, the ones that are warning about the risks claim the following:

  • Data transfers to the U.S. are still possible, but require the implementation of additional safeguards.
  • The obligation to implement the requirements contained in the CJEU’s decision is both on the businesses and the data protection supervisory authorities.
  • Businesses are required to constantly monitor the level of protection in the data importer’s country
  • Businesses should run a previous assessment before transferring data to the US.

The data protection supervisory authority in Germany (Rhineland-Palatinate) has proposed a five-step assessment for businesses. We have prepared the diagram below which summarizes it:

Can the level of data protection required by the GDPR be respected in the US?

The CJEU considered that the requirements of US domestic law and, in particular, certain programmes enabling access by US public authorities to personal data transferred from the EU, result in limitations on the protection of personal data which do not satisfy GDPR requirements. Furthermore, the CJEU stated that US legislation does not gran data subjects actionable rights before the courts against the US authorities. 

In this context, it seems difficult that a company could be able to demonstrate that they can provide an adequate level of data protection to personal data transferred from the EU, because basically it would have to bypass US legislation.

Latest moves in the US Senate does not shed light in this issue, because the “Lawful Access to Encrypted Data Act” was introduced last month. It mandates service providers and device manufacturers to assist law enforcement with accessing encrypted data if assistance would aid in the execution of a lawfully obtained warrant.

Do you make international data transfers to third countries? Are you affected by Schrems II decision? We can help you. Aphaia provides both GDPR and Data Protection Act 2018 consultancy services, including data protection impact assessments, and Data Protection Officer outsourcing. We also offer CCPA compliance servicesContact us today.

EU-US Privacy Shield invalidation

EU-US Privacy Shield invalidation business implications

On 16th July, the Court of Justice of the EU delivered a ruling in the case known as Schrems II by which it invalidated EU-US Privacy Shield and confirmed the validity of Standard Contractual Clauses, with caveats.

After the CJEU’s Advocate General Henrik Saugmandsgaardøe published his opinion in the so-called ‘Schrems II’ in January, now the CJEU has delivered their judgement, pursuant which Privacy Shield is declared invalid and SCC remain valid but can only be used under strict conditions.

What did the Court say?

Two important outcomes derive from the judgement issued by the CJEU:

1.The EU-US Privacy Shield is no longer a valid mechanism for international data transfers from the EU to the US.

It is important to note that it was invalidated with immediate effect. The main reason are US surveillance programmes. According to the CJEU, US surveillance programs are not limited to what is strictly necessary and proportional as required by EU law, plus there are no effective legal remedies in the US to ensure compliance with provisions of EU law when EU data subjects’ data is used for national surveillance programs.

2.SCC but with some important caveats.

It is no longer sufficient for a data exporter and data importer to just sign the agreement, the exporting party must do a factual assessment of whether the contract can actually be complied with in practice. Companies must verify, on a case-by-case basis, whether the law in the recipient country ensures adequate protection for personal data transferred under SCC. Where this is not the case, as it happens in the US, supplementary measures and additional safeguards should be implemented in order to attain the required level of protection; otherwise the transfer should be ceased. 

National Data Protection Authorities may suspend or prohibit transfers to third country if appropriate safeguards cannot be ensured. Based on the CJEU findings in respect of the Privacy Shield, it is difficult to see how supervisory authorities would be able to avoid such a conclusion in the case of transfers to the US. National Data Protection Authorities responses to this decision are yet to be seen.

What does the EDPS say?

On 17th July and following the CJEU ruling, the EDPS, which together with the EDPB had previously expressed their criticisms of the Privacy Shield, released their statement where they welcomed the Court reaffirmation of the importance of maintaining a high level of protection of personal data transferred from the European Union to third countries. However, they trust that “the United States will deploy all possible efforts and means to move towards a comprehensive data protection and privacy legal framework, which genuinely meets the requirements for adequate safeguards reaffirmed by the Court”.

What does the UK Government say?

The UK government intervened in the case, arguing in support of the validity of standard contractual clauses. In their response, they point out their commitment to ensuring “high data protection standards and supporting UK organisations on international data transfer issues”. They have announced that they are working alongside the ICO and international counterparts with the purpose of addressing the impacts of the judgment and ensuring that updated guidance on international data transfers will be provided soon.

EU Data Protection Authorities like Irish Data Protection Commissioner and three in Germany (Federal DPA, DPA of Hamburg and DPA of Rheinland-Pfalz) have also issued their statements. Other European DPAs are expected to do it soon.

What should I do now when transferring data from the EU to the US?

Where relying on the Privacy Shield:

  • Do not enter into any new agreement governed by the Privacy Shield.
  • Review all your current contracts, especially legacy ones, with your providers, clients or third-party processors and identify those that rely on the Privacy Shield. They should be amended to add SCC or any other valid safeguard covered by the GDPR for international data transfers.

Where relying on SCC:

Although the ICO and other national Data Protection Authorities are expected to produce detailed guidance soon, according to CJEU, when transferring personal data to third countries relying on SCC you should:

  • Make sure that security and technical measures which provide an adequate level of protection of personal data are actually implemented. You may need to review or at least ask for further information about the data importer’s technical and security measures plus consider whether additional measures should be specified to strengthen security, like tokenization and encryption.
  • Reinforce your accountability processes. Do not simply sign an appendix to your contracts including SCC, rather but have a closer look at the actual security measures and other mechanisms used by the importer, plus the actual situation in the importing country, especially regarding surveillance.

What can we expect in the near future?

It is expected that guidance will be issued from the European Commission as well as the European Data Protection Board. Apart from that, the EU may decide to renegotiate a new version of Privacy Shield that gives EU data subjects stronger privacy rights under US surveillance laws. Likewise the US came up with the Privacy Shield ten months after the Safe Harbor was declared invalid, so one could now hope for them to put in place a new mechanism which to address the CJEU’s concerns. On another note, SCC may be updated for GDPR soon.

Do you make international data transfers to third countries? Are you affected by Schrems II decision? We can help you. Aphaia provides both GDPR and Data Protection Act 2018 consultancy services, including data protection impact assessments, and Data Protection Officer outsourcing. We also offer CCPA compliance servicesContact us today.