Tentative Agreement on New “Privacy Shield” Framework for Transatlantic Data Flows Reached

On February 2, the United States and the European Commission reached tentative agreement on a new framework for the transfer of personal data between the European Union and the United States called the EU-U.S. Privacy Shield. The new framework replaces the U.S.-EU Safe Harbor framework, which was invalidated by the Court of Justice of the EU (Court of Justice) in October 2015, resulting in EU Data Protection Directive compliance questions for U.S. businesses that transfer personal data between the EU and the United States.

EU Justice Commissioner Vera Jourova stated that she is confident that the new framework will withstand review by the Court of Justice because it provides “clear safeguards and transparent obligations on U.S. access to data” and the Court of Justice’s ruling was used as a requirements roadmap during the negotiations. Although the text of the Privacy Shield has not yet been released, some of the requirements were identified by the U.S. Department of Commerce and the European Commission. The tentative agreement on the Privacy Shield is currently pending review and approval by the Article 29 Working Party, composed of representatives from the national data protection authorities of the 28 EU member states. The Privacy Shield will require:

• A published commitment from companies who agree to the Privacy Shield to adopt robust obligations on how personal data is collected and processed, and how individual rights are guaranteed to be monitored by the U.S. Department of Commerce and enforced by the U.S. Federal Trade Commission 
• Binding assurances from the U.S. that access to personal data by public authorities for law enforcement and national security purposes will be subject to clear limitations, safeguards, and oversight mechanisms that prohibit indiscriminate mass surveillance of European citizens 
• Annual joint reviews between the European Commission and the U.S. Department of Commerce, which will include the issue of limited and proportionate national security access and allow for the input of intelligence experts from the U.S. and European Data Protection Authorities 
• The creation of a dedicated U.S. Ombudsperson within the State Department and outside the intelligence community, who will provide independent oversight and other functions over the intelligence community, and who will follow up within the United States on referrals from the European Data Protection Authorities 
• Multiple channels for redress by EU citizens directly against U.S. companies, including:
  • A process to complain to companies, and a deadline for companies to respond to such complaints 
  • A way to escalate the complaint, at no cost to the EU citizen, to an Alternative Dispute Resolution process 
  • European Data Protection Authorities can also refer complaints directly to the U.S. Department of Commerce and the Federal Trade Commission 
  • For complaints regarding access by national intelligence authorities, referral to the Ombudsperson is provided as an arbitration method of last resort

Much like the original U.S.-EU Safe Harbor framework, the U.S. Department of Commerce will monitor the published commitments to the above principles, and the U.S. Federal Trade Commission will enforce companies’ adherence to these commitments. As was the case under the Safe Harbor, companies that transfer human resources data may not rely solely on the Privacy Shield, and must additionally comply with decisions from individual European Data Protection Authorities.

Next Steps
Vice-President Ansip and Commissioner Jourova have been mandated to draft a formal “adequacy decision” in the coming weeks. Following review of the draft decision by the Article 29 Working Party, the EU College of Commissioners — the European Commission’s political leadership — may then adopt the decision. At the same time, the United States will “make the necessary preparations to put in place the new framework,” including details on how it will monitor commitments and implement the new Ombudsperson role. It is estimated that the new framework will be in place for use by organizations in the United States in three months.

It is unclear whether the adequacy decision will address the alternative mechanisms governing the transfer of data between the EU and the United States, such as whether the binding corporate rules and model contracts clauses are valid in light of the Court of Justice’s ruling that invalidated Safe Harbor, and whether, in light of the new Privacy Shield, such alternative mechanisms are valid.

It is expected that Privacy Shield will be endorsed by the Article 29 Working Party; however, the Privacy Shield is not universally endorsed.

Impact to Business
The Article 29 Working Party set a deadline of January 31, 2016, to arrive at a new agreement with the United States before the European Data Protection Authorities would begin enforcement actions. The Article 29 Working Party stated today that it does not acknowledge validity of transfers made under the invalidated Safe Harbor and that, prior to its approval of the Privacy Shield, the European Data Protection Authorities will continue to evaluate cases and complaints regarding data transfers to the U.S. on a case by case basis.

While the new agreement faces additional hurdles, such as approval by the EU member privacy regulators and the possibility of legal challenges from individuals and privacy advocates, this significant development provides a welcomed path forward for finalizing requirements for cross-border data transfers from the EU to the United States.

Foley will continue to closely monitor these developments and will provide an analysis of the Privacy Shield text when it is released, as well as recommendations for the implementation of new requirements and management of new risks.

James Kalyvas
Partner
Los Angeles, California
213.972.4542
[email protected]

Chanley Howell
Partner
Jacksonville, Florida
904.359.8745
[email protected]

Aaron Tantleff
Partner
Chicago, Illinois
312.832.4367
[email protected]

Sophie Lignier
Of Counsel
Brussels, Belgium
322.787.9700

Steve Millendorf
Associate
San Diego, California
858.847.6737
[email protected]

Michael Chung
Associate
Los Angeles, California
213.972.4601
[email protected]