Further Discussion on German DPAs Enforcement of the Safe Harbor Compliance

Following our blog entry posted on June 2, 2010, Dr. Jörg Hladjk of Hunton & Williams offers additional insights on the obligations of German data exporters with respect to the Safe Harbor compliance program during the Centre for Information Policy Leadership’s First Friday Call on August 6, 2010.  On the call, Dr. Hladjk also discusses a press release issued by the German federal state of Schleswig-Holstein in light of the 10th Anniversary of Safe Harbor.

European Commission Postpones Revision of the General Data Protection Directive

In a statement released on August 2, 2010, the French Data Protection Authority (the “CNIL”) announced that the European Commission has adopted a new time frame for the revision of the EU Data Protection Directive 95/46/EC (the “Directive”).  Following a public consultation on the EU Data Protection Framework late last year, Commissioner Viviane Reding, who is in charge of Justice, Fundamental Rights and Citizenship, had announced that a proposal for the revision of the Directive would be presented in November 2010.  However, several European data protection authorities urged the European Commission not to rush through the revisions, and requested additional time in order to address the impact of this revision and challenges to personal data protection.  Accordingly, the European Commission has decided to postpone the release of a proposal, noting that it will instead issue a statement in November 2010, and will present proposed revisions in the latter half of 2011.

More information is available (in French) on the CNIL’s website.

Article 29 Working Party Report Highlights Inconsistent, Unlawful Implementation of EU Data Retention Directive

On July 14, 2010, the Article 29 Working Party issued a press release regarding its findings on the implementation of the European Data Retention Directive (Directive 2006/24/EC).  The findings, compiled in a report to be contributed to the European Commission’s forthcoming evaluation of the Directive, indicate that the obligation to retain all telecom and Internet traffic data is not being applied correctly or uniformly across the EU Member States.  Specifically, the Working Party’s press release states that service providers retain and share data in ways contrary to the Directive.  The Working Party further noted that Member States’ reluctance to provide statistics on the use of retained data limits the ability to verify the value of data retention practices.

The joint inquiry that formed the basis of the report focused on (i) security measures, (ii) prevention of abuse, (iii) compliance with storage limit obligations and (iv) the type of retained information.  Its findings show significant discrepancies among the Member States, particularly regarding retention periods which range from six months to ten years (far exceeding the maximum allowable retention period of 24 months).  As to the type of data being retained, the report notes that some service providers retain Internet traffic data prohibited by the Directive, including website URLs and information from email headers. 

The Working Party’s report includes recommendations for changes to increase harmonization, promote secure data transmissions and standardize handover procedures, and calls on the Commission to take the report into consideration when discussing the issue of whether or not to amend or repeal the Directive. 

The European Commission’s evaluation of the Data Retention Directive is expected to be published in September 2010.

German Federal Office for Information Security Issues Document on Data Protection and RFID

On July 7, 2010, the German Federal Office for Information Security, the Bundesamt für Sicherheit in der Informationstechnik (“BSI”), published a basic paper on data security and data protection for radio-frequency identification (“RFID”) applications.  The paper, Technical Guidelines RFID as Templates for the PIA-Framework, describes how to use RFID in compliance with data protection requirements, and explains the relationship between the BSI’s technical guidelines for the secure use of RFIDs and the European Commission’s Privacy Impact Assessment (“PIA”) Framework.

In May 2009, the European Commission published its recommendation on the implementation of privacy and data protection principles in applications supported by RFID.  Specifically, the Commission’s recommendation called for the development of a systematic framework to assess the impact of RFID applications on individuals’ privacy and data protection, to be developed by industry in collaboration with the relevant Member State institutions.  In the meantime, a draft framework document was published by a working group of the European Commission and submitted to the Article 29 Working Party. 

In keeping with the Commission’s recommendation regarding the development of a Privacy Impact Assessment, the BSI  prepared its Technical Guidelines on RFID jointly with the German Industry Association for Automatic Identification, Data Collection and Mobile Data Communication.  The new paper explains how German industry can employ the various BSI technical guidelines for RFID applications to efficiently develop a PIA.

For further information on the document, please contact Dr. Jörg Hladjk in the Brussels office of Hunton & Williams.

Article 29 Working Party Releases New FAQs on Controller to Processor Model Clauses

On July 19, 2010, the Article 29 Working Party published a new set of frequently asked questions aimed at addressing some of the issues raised by the European Commission’s new Standard Contractual Clauses for the Transfer of Personal Data to Processors Established in Third Countries (2010/87/EU).  Among other things, the FAQs address the scope of the new model clauses and whether they can be used for intra-EEA data transfers.  The FAQs also clarify certain issues related to sub-processing.

The new controller to processor standard contractual clauses that were adopted on February 5, 2010, repeal the previous set of clauses (2002/16/EC) and regulate the transfers of data from EEA-based controllers to processors located in countries which do not provide an adequate level of protection under EU Data Protection Directive 95/46/EC. 

View the Working Party’s FAQs.

Article 29 Working Party Provides Opinion on Accountability to the European Commission

The European Union’s Article 29 Working Party adopted a detailed recommendation on accountability which was submitted to the European Commission on July 13, 2010.  Opinion 3/2010 elaborates on the Working Party’s 2009 recommendation to include a new principle on accountability in the revised EU Data Protection Directive.  The Opinion’s executive summary states:

“EU data protection principles and obligations are often insufficiently reflected in concrete internal measures and practices.  Unless data protection becomes part of the shared values and practices of an organization, and responsibilities for it are expressly assigned, effective compliance will be at considerable risk, and data mishaps are likely to continue.

…this Opinion puts forward a concrete proposal for a principle on accountability which would require data controllers to put in place appropriate and effective measures to ensure that principles and obligations set out in the Directive are complied with, and to demonstrate so to supervisory authorities upon request.”

The Opinion discusses many of the issues that have been raised as part of international discussions on accountability, including the balance between legal certainty and scalability (what many would call flexibility).  It also acknowledges that accountability could replace or diminish existing requirements such as prior notification.
 
For the past two years the Centre for Information Policy Leadership at Hunton & Williams LLP has been acting as the secretariat for an international accountability project.  That work is acknowledged in the paper.

Irish Government Challenges Adequacy Level of Data Protection in Israel

On July 6, 2010, the Irish government formally objected to the adequacy procedure initiated by the European Commission that would have allowed the free flow of European personal data to Israel, over concerns of the possible use of the information by Israeli officials.  This political move follows recent revelations regarding forgery of European passports, including several from Ireland, and their alleged use by Israel’s intelligence services.

Under the EU Data Protection Directive, the transfer of personal data outside Europe is prohibited unless the recipient country is considered by the European Commission to provide an “adequate” level of data protection, or if the data controller has implemented a proper mechanism to ensure an adequate level of protection (e.g., model contracts or binding corporate rules).

The adequacy procedure was launched by the European Commission after the Article 29 Working Party’s Opinion 6/2009 (issued in December 2009), which found Israel’s data protection law to be adequate.  Notwithstanding that Opinion, however, the European Commission must make an official decision regarding Israeli adequacy for purposes of compliance with the Directive.

Earlier this week, the European Commission sought to move ahead with issuing its adequacy decision through a written procedure that would lead to the automatic adoption of the decision if no Member State objected.  As a result of Ireland’s objection, the Commission now must undertake a full “comitology procedure” in accordance with Article 31 of the EU Data Protection Directive.  The adequacy decision will be subject to a full debate in a committee composed of representatives of all Member States (the Article 31 Committee), followed by a vote.  It remains to be seen whether the Member States will concur with the Article 29 Working Party’s Opinion that Israel provides an adequate level of data protection.

To date, the European Commission has recognized Switzerland, Canada, Argentina, Guernsey, the Isle of Man, the U.S. Department of Commerce Safe Harbor Privacy Principles and the transfer of Air Passenger Name Record to the United States’ Bureau of Customs and Border Protection as providing adequate protection.

German DPA Issues Legal Opinion on Cloud Computing

On June 18, 2010, the data protection authority of the German federal state of Schleswig-Holstein published a press release and a comprehensive legal opinion on cloud computing.  The opinion provides an overview of cloud computing and discusses various practical and legal matters, including:

  • Applicable law issues
  • The legal basis for cloud computing and related processor and controller issues
  • Problems associated with the possibility of third-party access
  • The minimum requirements for data processor relationships and service provider contracts under the new German data protection law
  • Technical and organizational security measures
  • The legal landscape for clouds located outside the European Union

According to the DPA, clouds located outside the European Union are per se unlawful, even if the EU Commission has issued an adequacy decision in favor of the foreign country in question (for example, Switzerland, Canada or Argentina).  A Commission adequacy decision does not confer “agent” status, which normally would privilege such transfers, on entities located in the adequate jurisdiction.  The recipient entities remain “third parties” which means that a transfer in the legal sense takes place and therefore a legal basis is required.  The potential legal basis under German law (“fulfillment of contract” or “balancing of interests test”), however, requires that the transfer is also “necessary.”  The DPA is of the opinion that there are no arguments that the use of a cloud located outside the EU is compulsory. 

This result may be avoided, however, if the German rules on commissioned data processing are applied by analogy and by using an EU-approved model contract for controller-processor data transfers, so long as the German requirements for data processor agreements are also followed. 

The DPA’s opinion further states that self-certification to the U.S. Department of Commerce’s Safe Harbor framework alone does not provide an adequate level of protection in the cloud context.  Accordingly, reliance on certification to the Safe Harbor should not be used to circumvent the more strict EU legal requirements applicable to cloud computing. 

In addition, the DPA indicates that, because SAS 70 Type II Certificates used by some cloud providers do not contemplate the material and procedural interests of data subjects, such certifications offer only partial compliance with German legal requirements for commissioned data processing. 

The opinion concludes by suggesting that binding corporate rules are also an appropriate tool for companies seeking to implement a cloud solution.

For further information on the opinion, please contact Dr. Jörg Hladjk in the Brussels office of Hunton & Williams.

German DPAs Require Data Exporters to Verify Safe Harbor Compliance

On April 29, 2010, German data protection authorities issued a resolution regarding the obligations of German data exporters with respect to U.S. data importers that have self-certified under the Safe Harbor program.  By requiring additional diligence when transferring data to Safe Harbor-certified entities, the resolution may appear to raise questions with respect to the European Commission’s decision that Safe Harbor certification is sufficient to demonstrate an adequate level of privacy protection.

The decision was rendered by the Düsseldorfer Kreis, a working group comprised of the 16 German federal state DPAs responsible for the private sector.  The DPAs concluded that German data exporters may not rely exclusively on the U.S. Department of Commerce’s list of entities that have self-certified to the Safe Harbor program when determining whether a U.S. data importer ensures an “adequate” level of protection for personal data under German law.  According to the decision, prior to transferring data from Germany to the U.S., German data exporters must verify whether a self-certified data importer complies with certain minimum Safe Harbor requirements in practice.  German data exporters must:

  • Check to see when the data importer’s Safe Harbor certification took place.  A certification that is more than seven years old is considered invalid.
  • Ensure that the data importer complies with its Safe Harbor obligation to provide notice of the data processing to the relevant individuals (notice principle).
  • Document the assessment and be able to provide proof upon request by a DPA. 

If a data exporter has doubts regarding the data importer’s Safe Harbor compliance following such an assessment, the DPAs recommend using standard contractual clauses or binding corporate rules to ensure adequate protection.  In addition, the resolution states that a data exporter should inform the DPA if it determines that the a data importer’s Safe Harbor certification is no longer valid, if the required notice of processing is not being provided to individuals, or if other violations of the Safe Harbor principles are discovered during the assessment.
 
Under German law, data exporters that fail to carry out the required assessments may be held liable and face sanctions if they transfer data to a U.S. data importer that does not have an adequate level of data protection.  It is therefore crucial for German data exporters to evaluate the Safe Harbor status and compliance posture of U.S. data importers by conducting appropriate due diligence prior to any data transfers to the United States. 
 
For further information on the German DPA resolution, please contact Dr. Jörg Hladjk in the Brussels office of Hunton & Williams.

Article 29 Working Party's Recommendation on Israel's Data Protection Law

Earlier this year, the EU’s Article 29 Working Party published an opinion finding that Israeli data protection law largely provides an “adequate level of data protection” under EU Data Protection Directive 95/46/EC.  The recommendation breaks new ground.  Law professor Omer Tene, who acted as an advisor to the Israeli government during the process, discussed Israel’s approval during this recorded segment from the Centre for Information Policy Leadership’s “First Friday” call on March 5, 2010.

European Court of Justice Rules on German DPA System

On March 9, 2010, the European Court of Justice ruled that the Federal Republic of Germany’s practice of “state supervision” over data protection authorities violates EU Data Protection Directive 95/46/EC.  The case, brought by the EU Commission, is a milestone which will force Germany to change the structure of its DPA system and could have ramifications in other countries as well.

The Court’s decision is based on Article 28(1) of the Directive, which requires that data protection authorities (“DPAs”) act with “complete independence.” German law makes a distinction with regard to DPA supervision depending on whether the data processing is carried out by public or non-public bodies.  There are therefore different authorities responsible for monitoring public entities’ compliance with data protection provisions versus those that monitor compliance by private parties and undertakings governed by public law which compete on the market (öffentlich-rechtliche Wettbewerbsunternehmen) outside the public sector (such as transportation and utility companies).

At the federal level, data processing by public bodies is supervised by the Federal Commissioner for the protection of personal data and freedom of information (Bundesbeauftragter für den Datenschutz und die Informationsfreiheit).  At the regional level, supervision is carried out by the commissioners responsible for regional data protection (Landesdatenschutzbeauftragte).  These commissioners are responsible solely to their respective parliaments and normally are not subject to any scrutiny, instruction or other influence from the public bodies they supervise.  However, the organization of the authorities responsible for supervising private entities’ data processing varies among the regions, and all the laws at the regional level expressly subject those supervisory authorities to state scrutiny.

In the judgment, the European Court of Justice emphasized that the EU Data Protection Directive requires “complete independence” of the work of the competent DPAs.  It held that the Federal Republic of Germany had implemented this requirement incorrectly by subjecting the DPAs to state control.  In this regard, the Court’s opinion differed from the view of Advocate General Mazák, who stated in October 2009 that state supervision over DPAs does not mean the DPAs cannot execute their work completely independently.  In contrast, the European Court of Justice held that the DPAs for the private sector should not be subject to any outside influence.

Even before the Court’s decision, some of the German federal states had already begun to reorganize the responsibilities for supervision of data protection and to unify supervision.  This judgment will force the remaining federal states to do so as well, and could lead to an overhaul of the organization of DPAs in Germany.  Moreover, the judgment will most likely also have broader implications across Europe, given that a number of DPAs in other Member States are also not believed to work with complete independence.  Reorganization of DPAs to give them more independence could also result in more compliance and enforcement actions, and may raise the threshold for the European Commission to issue adequacy decisions concerning the level of data protection in other countries.

Dr. Jörg Hladjk, an associate in the Brussels office of Hunton & Williams, discussed the decision in an article published in the BNA’s Privacy Law Watch™ on March 10, 2010.

European Parliament Rejects the SWIFT Agreement

On February 11, 2010, the plenary of the European Parliament rejected by a vote of 378 to 196 the agreement reached in 2009 between the EU and the U.S. to allow access by U.S. law enforcement authorities to the payment database of the financial consortium SWIFT.  The agreement had been negotiated between the EU Council of Ministers and the European Commission with the U.S. government to allow continued access to the database, a mirror copy of which had been moved by SWIFT from the U.S. to Europe.  With the Lisbon Treaty’s entry into force, the Parliament gained new powers to approve measures affecting law enforcement and civil liberties, and a number of members of the Parliament have expressed concern regarding the level of data protection provided for in the agreement.  According to news reports, several top U.S. government officials (including Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner) had been lobbying the European Parliament to approve the agreement, on the grounds that it was essential to fight terrorism in both the U.S. and Europe.

The rejection of the agreement sends the EU and the U.S. back to the drawing board to negotiate a new agreement, this time with the participation of the Parliament.  The vote illustrates the enhanced powers of the Parliament in data protection and privacy matters under the Lisbon Treaty, and the dangers that companies face when caught between U.S. law enforcement requirements on the one hand and EU data protection restrictions on the other.

UK Airports Implement Compulsory Use of Full Body Scanners

On February 1, 2010, it became compulsory for randomly selected passengers at Heathrow and Manchester airports in the UK to pass through full body scanners before boarding their flights.  This enhanced security screening has been implemented following the attempted Christmas Day terrorist attack at the Detroit airport in the United States, after which the British government announced that it would begin mandatory body scanning at all UK airports.  The move has raised concerns about the excessive collection of personal data.

The British Department of Transport has published an Interim Code of Practice covering the privacy, health and safety, data protection and equality issues associated with the use of body scanners. The Code calls for the implementation of detailed security standards and for an effective privacy policy to be put in place by airport operators. The privacy policy should include as a minimum:

  • rules regarding the location of the equipment;
  • a process for identifying who will read the screen (i.e., a person of the same sex as the person selected for scanning);
  • a process for selecting passengers (passengers must not be selected on the basis of personal characteristics such as, gender, age, race or ethnic origin);
  • a prohibition on copying or transferring the images in any way;
  • instructions for the images of the passenger to be destroyed and rendered irretrievable once the image has been analyzed; and
  • a process to call on an appropriate Security Officer if an image suggests there is a viable threat to passenger or staff security.

The use of body scanners caused alarm in the privacy community when it was first mooted several years ago. The concern was that scanners could violate the European Convention on Human Rights and that their use would raise sensitivities (or even result in the commission of criminal offenses) when used to capture images of children. Towards the end of 2008, the European Commission withdrew a proposal to roll out body scanners across the EU after Members of the European Parliament called for a detailed impact assessment study. This resulted in the formation of a Body Scanners Taskforce, appointed to advise the Commission. A report, or any specific legislative proposals, have yet to be published.   
 
The use of scanners has been discussed previously in France and Germany. In France, the proposal was dropped due to privacy concerns. The German Data Protection Commission  has indicated it  believes the machines infringe on the privacy of both adults and children, but the German news outlet Spiegel Online recently suggested that the machines may yet be installed in German airports following tests by Germany’s federal police. 

Meanwhile, in a Canadian report published in March 2009, the Ontario Privacy Commissioner,  Dr. Ann Cavoukian, approved the usage of the screening technology, commenting that as long as the scanners “incorporate strong privacy filters … [they] can deliver privacy-protective security.”
 
The British Department of Transport will continue to develop the Interim Code of Practice. The Department has announced that it will launch a full public consultation on the requirements relating to the use of scanners as set out in the Interim Code of Practice, and it will publish a Final Code of Practice later in the year. In the meantime, it is likely that additional airports in the UK and elsewhere in Europe will subject travelers to full body scans. 
 

EU Approves New Standard Contractual Clauses for Transfers to Data Processors

On February 5, 2010, the European Commission adopted a new set of standard contractual clauses (“SCCs”) for transfers of personal data from data controllers in the EU to data processors outside the EU.  View the European Commission press release.  The clauses were negotiated over several years between the European Commission and a group of business associations led by Brussels-based Hunton & Williams partner Christopher Kuner, who is chair of the Task Force on Privacy and Data Protection of the International Chamber of Commerce.

Despite the growing popularity of other mechanisms that provide a legal basis for complying with the EU legal restrictions for transferring personal data outside the EU (such as binding corporate rules), the use of SCCs remains indispensable.  In many situations SCCs are the only “off the shelf” data transfer solution that can be used and implemented on short notice.  The Commission already published a set of SCCs for transfers to data processors that were approved in 2001, but companies have found that they do not always take business realities into account.  The SCCs can be burdensome to use in practice, in particular for the following reasons:

  • The existing SCCs do not contemplate the possibility that a data processor outside the EU may need to transfer personal data to another data processor, which happens very often in practice.
  • The SCCs can require the application of data security requirements from multiple EU Member States.
  • Many Member States impose bureaucratic formalities (notarization of signatures, annual updates, etc.) on use of the clauses.
  • There can be practical problems when using the clauses with multiple parties.
  • The SCCs contain a mandatory arbitration clause to which many companies have objected.

Although the Commission did not adopt many of the suggestions made by the business associations, thus diluting the value of the new clauses, the new SCCs do have some important advantages over the existing controller-to-processor clauses.  For example:

  • For the first time in EU data protection law, the new clauses provide a legal basis for processor-to-processor transfers.  Under the clauses, such transfers may be carried out when (1) the original data controller consents in writing, and (2) the same data protection obligations are imposed on the subprocessor as are imposed on the original data importer.  The original data importer remains liable for any data protection violations by the subprocessor.
  • The arbitration clause has been deleted.

There are two further important points with regard to the new clauses:

  • The new clauses must be used for new or changed transfers to data processors; i.e., the existing SCCs for controller-to-processor transfers may no longer be used for such transfers (but existing SCCs remain in effect).
  • The SCCs cover transfers from the EU to a data processor outside the EU, but not transfers from a data processor in the EU to a subprocessor outside the EU, although data protection authorities “may” allow use of the new clauses in such situations as well.

The full text of the new SCCs has been published in the Official Journal of the European Union.  Hunton & Williams has prepared a redline version showing the changes from the previous SCCs. Christopher Kuner will provide a detailed analysis in the near future. 

Hunton & Williams Prepares Study for the European Commission on the Interaction between Data Protection Law and Copyright Enforcement

On February 3, 2010, Christopher Kuner, a partner in Hunton & Williams’ Brussels office and head of the firm’s EU Privacy Practice, presented to the “Stakeholders’ Dialogue on Illegal Uploading and Downloading,” organized by DG Internal Market and Services of the European Commission.  Mr. Kuner presented a study which the Hunton & Williams Brussels team prepared for the Commission on the interaction of data protection law and copyright enforcement.  The study covers both the legal framework under EU law and the situation in six selected EU Member States (Austria, Belgium, France, Germany, Spain and Sweden).  The relationship between data protection and copyright enforcement was a point of contention in the recent amendment of the EU Directive on Privacy and Electronic Communications. 

The following are the major findings of the study:

At the European level:

At the Member State level:

  • IP addresses are generally considered by DPAs and courts to be personal data, although courts in some countries (e.g., France) have taken conflicting positions on this issue.
  • IP addresses are generally considered to be traffic data, which means that they may only be processed in a limited number of circumstances and for specific purposes (such as billing and invoicing), and that consent is generally required to process them for other purposes (such as online copyright enforcement).
  • IP addresses processed in the context of online copyright enforcement may be considered to be sensitive data (judicial data), except in Spain.
  • ISPs cannot store IP addresses for the specific purpose of online copyright enforcement (except in France, where retention for the purpose of making information available to certain governmental authorities is allowed).
  • The processing of IP addresses by ISPs to pass on infringement warning notices is generally prohibited or subject to strict restrictions.
  • The general monitoring of P2P networks by right holders resulting in the creation of a database of potential copyright infringers is usually prohibited.
  • The disclosure of P2P users’ identities by ISPs to judicial authorities in the context of criminal proceedings is generally authorized.
  • The disclosure of P2P users’ identities by ISPs to right holders for civil enforcement is generally restricted by data protection law.  In particular, ISPs generally may not disclose P2P users’ identities to right holders outside the context of judicial (administrative) proceedings.
  • In most Member States, it seems that little consideration was given to the interaction between data protection rules and implementation of the IP Enforcement Directive.

As the study demonstrates, the relationship between data protection law and online copyright enforcement is far from being settled.  This issue will certainly be discussed in the coming months during the ongoing debate on the review of the General Data Protection Directive at the European level, and in the context of the debate around possible graduated response mechanisms at the national level.

New EU Fundamental Rights Commissioner Reveals Privacy and Data Protection Priorities in the European Union

On January 12, 2010, Ms. Viviane Reding, Commissioner-designate for Justice, Fundamental Rights and Citizenship, was questioned during a public hearing before the European Parliament.  During this hearing, Ms. Reding revealed her priorities in the field of privacy and data protection.  “Fundamental rights and data protection will be top of the line” said Ms. Reding, who explained that she intends to incorporate the EU’s data protection rules into a modern and comprehensive legal instrument.

Ms. Reding promised that all proposed EU legislation will comply with the European Charter of Fundamental Rights (which entered into force on December 1, 2009), including the right to privacy.  Ms. Reding also announced that she would work closely with the Council of Europe on fundamental rights issues and would soon be presenting a proposal for the EU’s accession to the European Convention for the Protection of Human Rights.

When asked about the protection of personal data in international agreements (with regard to issues such as banking data, air passenger name records and body scanners), Ms. Reding replied that “our need for security cannot justify any violation of privacy” and that she would not let anyone dictate “rules that go against fundamental rights on anti-terrorism grounds.”

View the EU press release

View Ms. Viviane Reding’s answers to the European Parliament’s questionnaire.

Article 29 Working Party Issues Contribution to Consultation on the EU Data Protection Framework

On December 1, 2009, the Article 29 Working Party adopted a contribution (the “Contribution”) to the Consultation of the European Commission on the legal framework for the fundamental right to the protection of personal data (the “Consultation”).  View the full text of the Contribution, which was published today.  The Consultation was launched on July 9, 2009, to explore the challenges to personal data protection presented by new technologies and globalization.  The Consultation was also motivated by the recent adoption by the EU of the Lisbon Treaty, which will necessitate a reworking of structure of the EU legal framework for data protection.  The Contribution’s thoughtful examination of several important data protection issues makes it one of the most significant documents that the Working Party has issued in recent years.

The Contribution maintains that the fundamental principles of European data protection law remain valid.  However, it also notes that both improvements in implementation of the existing data protection framework and changes to it should be considered, in particular regarding the following points:

  • implementation of the legal framework for data protection in the EU Member States should be improved;
  • the system for issuing “adequacy decisions” by the European Commission regarding the level of data protection in third countries should be made more efficient;
  • a provision on binding corporate rules should be introduced;
  • the position of “privacy by design” in the legal framework should be strengthened;
  • a general security breach notification regime (i.e., one not limited to telecom service providers and ISPs as is now the case) should be introduced;
  • requirements to notify data processing with national data protection authorities should be simplified or even eliminated in some cases;
  • the responsibilities of data controllers should be increased by introducing an accountability principle into the new legal framework (in this regard, the Contribution explicitly mentions the work of the Centre for Information Policy Leadership at Hunton & Williams);
  • the use of consent as a legal basis for data processing should be made more restrictive;
  • the role of the data protection authorities should be strengthened and clarified, and cooperation between the DPAs should be reinforced, particularly through improvements to the Article 29 Working Party’s working methods.

The European Commission will now evaluate all the contributions received under the Consultation and consider whether changes to the EU legal framework should be proposed.  It should be noted that any changes to the framework would likely take a minimum of five years to be enacted.

Viviane Reding Appointed New EU Commissioner for Fundamental Rights

Commissioner Viviane Reding has been chosen as Commissioner for Justice, Fundamental Rights, and Citizenship in the new European Commission that is set to take office in early 2010 (assuming approval by the European Parliament).  Ms. Reding's responsibilities will thus include data protection, including the Commission's ongoing review of the EU framework for data protection.  She is currently EU Commissioner for Information Society & Media, where she oversaw review of the e-Privacy Directive and the EU legislative framework for telecommunications.  Commission President Barroso appointed a separate commissioner for fundamental rights as part of a commitment he made to the European Parliament to give greater profile to such issues.  Commissioner Reding will share a Directorate-General with Commissioner Cecilia Malmström, who is in charge of Home Affairs (i.e., law enforcement).  It remains to be seen how appointing a separate commissioner in charge of fundamental rights (rather than having a single commissioner in charge of both law enforcement and fundamental rights, as is the case in the current DG Justice, Liberty and Security) will affect the data protection portfolio.

Changes to e-Privacy Directive Approved by European Parliament

On November 24, 2009, the European Parliament formally approved the European Union's telecoms reform package.  This reform proposed by the European Commission in November 2007 consists of various different EU Directives that set-up the legal framework applicable to the electronic communications sector (telecoms) and includes a new e-Privacy Directive.

New provisions of the e-Privacy Directive will strengthen the protection of privacy and personal data in the electronic communication sector and includes the following:

  • mandatory notification for personal data breaches applicable to electronic communication services providers (e.g., telecom providers and ISPs);
  • new regulations on cookies;
  • clarification of the scope of the e-privacy Directive; and
  • enhancement of the right of actions against spam.

The amendment to the e-Privacy Directive seems to be final now and the telecoms package will be signed by the presidents of the European Parliament and Council.  The telecoms reform package will then most likely be enacted with its publication in the EU's Official Journal on December 18, 2009.  EU Members States will be required to implement the new legislation into their national law by June 2011.

View the press release by the European Commission.

European Commission Pursues Infringement Proceedings Against UK

On October 29, 2009, the European Commission (the “Commission”) proceeded to the second phase of infringement proceedings against the UK relating to the UK’s implementation of EU e-privacy and personal data protection laws.  EU Member States must ensure the confidentiality of communications by prohibiting interception and surveillance without user's consent.  The Commission maintains that the UK has failed to fully implement these requirements into its national laws and has identified three specific flaws in the existing UK laws governing the confidentiality of electronic communications:

  • The UK does not have an independent national authority responsible for (i) supervising the interception of communications and (ii) complaints about unlawful interception of electronic communications, despite the requirement to this effect contained within EU laws and imposed on Member States;
  • UK national laws permit the interception of communications not only where the persons concerned have consented to interception, but also when the person intercepting the communications has “reasonable grounds for believing” that consent has been given.  The Commission believes that these provisions do not comply with the EU concept of “consent,” which must be a freely given, specific and informed indication of a person’s preferences or wishes; and,
  • under UK law, only “intentional” interception is prohibited and may be sanctioned, whereas EU laws require Member States to prohibit and sanction any unlawful interception, irrespective of whether it is intentional.

The Commission has confirmed that it is sending a “reasoned opinion” to the UK as a result of the UK government’s failure to take positive action to comply fully with the EU e-privacy and data protection laws.  The reasoned opinion will set out the grounds for the legal proceedings being taken by the Commission and will require the UK to address the issues raised by a specified date; failing to do so may result in the Commission commencing formal proceedings in the European Court of Justice.  The UK has been given two months to provide the Commission with a “satisfactory response” to the proceedings.

Editor's Note:  These proceedings originally commenced in April 2009 following numerous complaints about the use of behavioral advertising technology by internet service providers.

Landmark Conference Considers Future of EU Data Protection Directive

On May 19 and 20 the European Commission held a conference which was perhaps the most important data protection event in Brussels since the Commission conference on evaluation of the EU Data Protection Directive 95/46/EC held in 2002. The conference was part of the Commission's current evaluation of the Directive, and was designed to explore both the current status of data protection in the EU and where it is headed in the coming years. Speakers included Jacques Barrot, the European Commissioner in charge of justice, freedom and security; Alex Türk, chairman of the CNIL (French Data Protection Authority) and the Article 29 Working Party; European Data Protection Supervisor Peter Hustinx; and representatives of European academia, business and non-governmental organizations. Christopher Kuner of Hunton & Williams was among the speakers. The entire event was webcast live; video coverage will shortly be available here.

Several major themes emerged from the conference:

  • While many are calling for amendment of the Directive in areas such as notifications to data protection authorities and international data transfers, there is little consensus on what those changes should be, or how far they should go. There is also apprehension that attempts to amend the Directive may lead to unforeseen changes that could worsen the current situation. These fears may act as a kind of inertia, lessening the likelihood that the Directive will be amended.
  • Several data protection authorities made the point that they are now putting much greater effort into enforcement than they were in the past, and that they are finally being given greater enforcement powers. Thus, companies need to be aware that the data protection enforcement risk in Europe is increasing.
  • There is great interest in the increased harmonization of data protection rules, including on a global basis. The Spanish Data Protection Authority is currently leading an initiative to draft global data protection standards, with the possible goal of having the UN adopt a global convention on data protection. Additional information about that initiative is available here.

The conference will be followed by an "open consultation," which will likely take the form of the European Commission requesting that interested parties submit papers on various data protection topics. The Commission is also currently preparing a legal study on Member States' implementation of the Directive, and will make proposals on possible amendments in 2010. Possible changes to the Directive will also be influenced by whether the EU's Lisbon Treaty comes into effect early next year. In any event, the next two years will be crucial to determining the EU's future legal framework for data protection.

EU Commission Issues Recommendation on RFID, Privacy and Data Protection

On May 12, 2009, the European Commission issued a long-awaited recommendation on the implementation of privacy and data protection principles in applications supported by radio-frequency identification (“RFID”).  The recommendation follows a process initiated in 2006 when the European Commission launched a public consultation on RFID technologies.  Following this public consultation and in order to protect consumers’ privacy and data protection, the European Commission decided to take further steps by preparing a recommendation to regulate the use of RFID.

The recommendation applies the principles of the General Data Protection Directive (Directive 95/46/EC) and of the e-Privacy Directive (Directive 2002/58/EC) to RFID technology.  In summary, the recommendation provides that:

  • Operators of RFID immediately must deactivate RFID tags automatically and free-of-charge at the point of sale, unless the consumer explicitly opts in by asking to keep the chip operational.  This principle is, however, subject to exceptions.
  • Consumers must be clearly informed of the use of their personal data, the type of data collected and the purpose of the processing.
  • The reading device must be clearly identified, and a contact point must be indicated if the consumer would like to receive further information.
  • A common European symbol should be developed to indicate whether a product uses a smart chip.
  • Companies and public authorities should develop a framework for privacy and data protection impact assessments.  This framework will have to be endorsed by the Article 29 Working Party.  The goal of these privacy impact assessments is to ensure that consumer privacy is protected.

Strictly speaking, this recommendation is not legally binding on European Union Member States and so is not required to be implemented. Its influence, however, should not be underestimated.  The recommendation provides that Member States should take all necessary measures to bring this recommendation to the attention of all stakeholders which are involved in the design and operation of RFID.  Member States should also inform the Commission of action taken in response to the recommendation no later than 24 months following the publication of the recommendation.  Within three years from the publication of the recommendation, the Commission will provide a report on its implementation, its effectiveness and its impact on operators of RFID technology.

The recommendation can be found here and the FAQs on RFID here.
 

Online Behavioral Advertising: European Commission launches infringement proceedings against the UK

Following numerous complaints about the use of behavioral advertising technology by internet service providers, the European Commission (the “Commission”) launched infringement proceedings against the United Kingdom for an alleged failure to keep people’s online details confidential. The EU Telecoms Commissioner, Viviane Reding, has called upon the UK to change its national laws to ensure the confidentiality of communications by prohibiting interception and surveillance without the user's consent. If the UK does not comply, the Commission can issue a final warning before taking the UK to the European Court of Justice.

Legal Background
In the UK, those who collect and use data through behavioral advertising technology must comply with the Data Protection Act 1998 (as amended) (the “DPA”), as well as the Privacy and Electronic Communications (EC Directive) Regulations 2003 (the “Privacy Regulations”). In addition, any organization which chooses to “monitor” or “intercept” online communications must also comply with the Regulation of Investigatory Powers Act 2000 (“RIPA”) and the Telecommunications (Lawful Business Practice) (Interception of Communications) Regulations 2000 (the “LBP Regulations”).

These legislative instruments implemented various EU Directives in the UK. Under Article 226 of the EC Treaty, the European Commission is responsible for ensuring that European Community law is correctly enacted into the local laws of individual Member States. If a Member State fails to comply with European Community law, the European Commission can bring infringement proceedings, and may ultimately refer the case to the European Court of Justice (the “ECJ”). Here, the European Commission has commenced infringement proceedings by issuing a formal notice to the UK. The UK has two months to respond or to comply voluntarily by amending the relevant legislation.

Phorm’s Advertising Tracker System
The debate began with the introduction of Phorm Inc.’s advertising tracker system which allows the company to track the identity and web habits of individual computers by tracing their unique Internet Protocol addresses.

Earlier this week a document was published on “Wikileaks” revealing that British Telecom (one of the UK’s leading telephone operators) had commenced a trial of Phorm’s system in 2006. British Telecom acknowledged in April 2008 that it had used Phorm without customer consent in 2006 and in 2007. The UK’s data protection authority, the Information Commissioner’s Office (the “ICO”), investigated British Telecom’s trial of the Phorm system.

In April 2008, the ICO published a response to the concerns voiced about the use of Phorm. Following several complaints from individuals and privacy experts, the ICO forced Phorm to require its customers to “opt-in” rather than “opt-out” of its use. In response to this, British Telecom reassured the ICO that its trial of Phorm did not permit customers’ web browsing activities to be monitored unless customers positively opted-in to participate. British Telecom also confirmed that its use of Phorm does not store personally identifiable information, URLs or IP addresses or retain browsing histories and that search information is deleted almost immediately and is not retrievable. This is also stated on Phorm’s website.

In practical terms, it appears that personal data is collected by Phorm but is subsequently anonymized.

Behavioral advertising technology is beneficial for both users and businesses as users discover more of what interests them and businesses find a more cost-effective way to communicate with users. Effective online advertising helps to create low barriers to online market entry which in turn facilitates competition and innovation.

Legal Implications
If the European Commission finds that the UK has not correctly implemented legislation which governs behavioral advertising technology, the UK will potentially need to amend the DPA, the Privacy Regulations and RIPA. In addition, the European Commission may insist that more effective sanctions be included in the UK legislation. Such amendments would undoubtedly result in significant changes in practices for UK online businesses, employers and social networking sites. Monitoring and interception practices will be restricted and “implied consent” may not be sufficient. The use of opt-in consent, currently required for direct marketing activities throughout Europe, may also be required as a precondition to the use of cookies, web beacons and user tracking systems which currently only require opt-out consent.

Hunton & Williams will provide updates, on this blog, of the status of these infringement proceedings and consider the potential implications, in particular, for retailers and social networking sites going forward. 

Article 29 Working Party Issues Opinion on Potential Updates to Standard Contractual Clauses to Facilitate Processor-to-Sub-Processor Transfers of Personal Data

On March 17, the Article 29 Working Party released its Opinion 3/2009 (dated March 5) on standard contractual clauses for the transfer of personal data from data controllers in the EU to data processors outside the EU. The Opinion deals with proposed changes to the European Commission's decision 2002/16 containing standard clauses for controller to processor transfers. The Opinion discusses proposals to update these clauses to accommodate data transfers to sub-processors, in light of increased global outsourcing. Although not mentioned in the Opinion, the March 17 Opinion is based on the proposal made in October 2006 to the European Commission by three business groups (the International Chamber of Commerce (ICC), the American Chamber of Commerce to the European Union (AmCham EU) and the Federation of European Direct and Interactive Marketing (FEDMA)). Christopher Kuner, partner at Hunton & Williams, has been leading the ICC work. The proposal of the three business groups would amend the existing clauses from 2002 to bring them into line with business realities. The proposal is available here.  Opinion 3/2009 is available here.

The clauses are quite important for business, as they provide a legal basis for transferring personal data from the EU to data processors in other countries, and are often used in, for example, outsourcing contexts. Among the changes proposed by the three business groups was a new clause that for the first time would provide a legal framework for data transfers from one processor to another. This situation can occur, for example, when a data controller in the EU outsources the processing of personal data to a data processing company in the US, which in turn outsources the processing to a company in India. So far, European data protection law has lacked any discussion of the conditions under which such a transfer could be made between data processors. It is a significant development that the Working Party Opinion recognized this possibility.
 
Some of the other clauses proposed by the Working Party seem unrealistic and unworkable, such as requiring audits by data protection authorities in countries outside the EU, or requiring that the contract between the data processor and the subprocessor, be governed by the law of the country of the data exporter in the EU. ICC and the other business groups will work with the European Commission with the goal of ensuring that the final clauses approved by the Commission are drafted in a way that makes them useable in the real world. The final Commission decision on the clauses is not expected for a few months.

Data Privacy Day 2009

Wednesday, January 28, 2009, marks the second annual international Data Privacy Day, which brings together a broad coalition of privacy professionals from both the private and public sectors, as well as corporations, academics and policymakers, with the goal of promoting awareness and collaboration on a variety of data privacy issues.

A wide variety of events celebrating Data Privacy Day has been scheduled throughout the week across the United States, Canada and the European Union. The Triangle Center on Terrorism and Homeland Security and Intel Corporation are sponsoring a panel discussion on the future of privacy and national security, which will include leading experts from the U.S. State Department, Justice Department and Department of Homeland Security and the European Commission, as well as professionals from both the private sector and academia. The discussion will be followed by a reception hosted by Hunton & Williams LLP. This event is open to the public and will take place January 27 from 4 - 6 p.m. at the Sanford Institute of Public Policy at Duke University.

In addition, on Wednesday the 28th, representatives from Hunton & Williams Centre for Information Policy Leadership, TRUSTe, CDT and various industry groups including the ITAA will join Congressman David Price and Member of the European Parliament Alexander Alvaro to participate in an event focused on government's role in increasing privacy awareness and trust, from 4:30 - 6:30 p.m. on the Hill at the Rayburn Building. That same day, the European Privacy Officers Forum and the International Association of Privacy Professionals will host a cocktail reception following a panel discussion on the future of data protection featuring top EU privacy experts. The reception will take place from 5:30 - 7:30 p.m. in the Brussels offices of Hunton & Williams LLP.

More information about Data Privacy Day can be found here.