After Prism: The transatlantic implications of the new EU Data Protection Regulation

By Sam Tyfield, Vedder Price

The EU and the US have a long-standing safe harbour agreement in relation to the protection of personal data transferred from the EU to the US (to which organisations may either (a) sign-up and appear on the US Dept of Commerce website as ‘compliant’ or (b) agree to abide by a bilateral contract with an EU organisation). The bilateral agreement route is the means by which many international organisations with a significant nexus with the US transfer employee and other data to headquarters/HR departments/accounting departments etc. in the US.

EU politicians are now looking at the existing safe harbour agreement through a new [ahem] prism and what they see is that the safe harbour does not protect the personal data of EU individuals as robustly as they thought it did. The EU will be seeking to re-negotiate the safe harbour agreement. This will have an impact on all organisations which currently rely on bilateral agreements or on the safe harbour.

In addition, the EU is looking to put in place a new data protection regulation (NB: a regulation has immediate force and effect across the EU unlike a directive which must be put into force by each member state through its national legislatures). The primary aim is to harmonise protection of data privacy across the EU. This regulation could come into force as early as January 2014.

This is going to be an issue for all firms with cross-border (into and out of the EU) structuring or with clients and employees (inside the EU).

From the EU press release:

Key changes in the reform include:

Instead of the current obligation of all companies to notify all data protection activities to data protection supervisors – a requirement that has led to unnecessary paperwork and costs businesses €130 million per year, the Regulation provides for increased responsibility and accountability for those processing personal data.

For example, companies and organisations must notify the national supervisory authority of serious data breaches as soon as possible (if feasible within 24 hours).

Organisations will only have to deal with a single national data protection authority in the EU country where they have their main establishment. Likewise, people can refer to the data protection authority in their country, even when their data is processed by a company based outside the EU. Wherever consent is required for data to be processed, it is clarified that it has to be given explicitly, rather than assumed.

People will have easier access to their own data and be able to transfer personal data from one service provider to another more easily (‘right to data portability’). This will improve competition among services.

A ‘right to be forgotten’ will help people better manage data protection risks online: people will be able to delete their data if there are no legitimate grounds for retaining it.

EU rules must apply if personal data is handled abroad by companies that are active in the EU market and offer their services to EU citizens.

Independent national data protection authorities will be strengthened so they can better enforce the EU rules at home. They will be empowered to fine companies that violate EU data protection rules. This can lead to penalties of up to €1 million or up to 2% of the global annual turnover of a company

So how does one get ready for the changes?

  • Review policies and procedures on data transfer and protection – in particular – prepare your organisation to fulfil the “right to be forgotten”, “right to erasure” and the “right to data portability”. A strategy covering topics such as data classification, retention, collection, destruction, storage and search will be required – and it should cover all mechanisms by which data is collected.
  • Consider introducing a ‘data protection’ committee (and if you have 250+ employees, appoint a data protection officer from senior management).
  • Obtain explicit consent from employees as to how their data will be handled (and by whom and where).
  • Test systems so that a breach of security is likely to be identified (and therefore notified to competent authorities) as soon as possible – notifying the authorities that there has been a breach (within 24 hours) is one thing; identifying that there has been a breach is another.