Category: European Court of Justice

EDPS considers Privacy Shield replacement unlikely for a while

18. December 2020

The data transfer agreements between the EU and the USA, namely Safe Harbor and its successor Privacy Shield, have suffered a hard fate for years. Both have been declared invalid by the European Court of Justice (CJEU) in the course of proceedings initiated by Austrian lawyer and privacy activist Max Schrems against Facebook. In either case, the court came to the conclusion that the agreements did not meet the requirements to guarantee equivalent data protection standards and thus violated Europeans’ fundamental rights due to data transfer to US law enforcement agencies enabled by US surveillance laws.

The judgement marking the end of the EU-US Privacy Shield (“Schrems II”) has a huge impact on EU companies doing business with the USA, which are now expected to rely on Standard Contractual Clauses (SCCs). However, the CJEU tightened the requirements for the SCCs. When using them in the future, companies have to determine whether there is an adequate level of data protection in the third country. Therefore, in particular cases, there may need to be taken additional measures to ensure a level of protection that is essentially the same as in the EU.

Despite this, companies were hoping for a new transatlantic data transfer pact. Though, the European Data Protection Supervisor (EDPS) Wojciech Wiewiórowski expressed doubts on an agreement in the near future:

I don’t expect a new solution instead of Privacy Shield in the space of weeks, and probably not even months, and so we have to be ready that the system without a Privacy Shield like solution will last for a while.

He justified his skepticism with the incoming Biden administration, since it may have other priorities than possible changes in the American national security laws. An agreement upon a new data transfer mechanism would admittedly depend on leveling US national security laws with EU fundamental rights.

With that in mind, the EU does not remain inactive. It is also trying to devise different ways to maintain its data transfers with the rest of the world. In this regard, the EDPS appreciated European Commission’s proposed revisions to SCCs, which take into consideration the provisions laid down in CJEU’s judgement “Schrems II”.

The proposed Standard Contractual Clauses look very promising and they are already introducing many thoughts given by the data protection authorities.

The Controversy around the Council of the European Union’s Declaration on End-to-End Encryption

27. November 2020

In the course of November 2020, the Council of the European Union issued several draft versions of a joint declaration with the working title “Security through encryption and security despite encryption”. The drafts were initially intended only for internal purposes, but leaked and first published by the Austrian brodcasting network “Österreichischer Rundfunk” (“ORF”) in an article by journalist Erich Möchel. Since then, the matter has sparked widespread public interest and media attention.

The controversy around the declaration arose when the ORF commentator Möchel presented further information from unknown sources that “compentent authorities” shall be given “exceptional access” to the end-to-end encryption of communications. This would mean that communications service providers like WhatsApp, Signal etc. would be obliged to allow a backdoor and create a general key to encrypted communications which they would deposit with public authorities. From comparing the version of the declaration from 6 November 2020 with the previous version from 21 October 2020, he highlighted that in the previous version it states that additional practical powers shall be given to “law enforcement and judicial authorities”, whereas in the more recent version, the powers shall be given to “competent authorities in the area of security and criminal justice”. He adds that the new broader wording would include European intelligence agencies as well and allow them to undermine end-to-end encryption. Furthermore, he also indicated that plans to restrict end-to-end encyption in Western countries are not new, but originally proposed by the “Five Eyes” intelligence alliance of the United States, Canada, United Kingdom, Australia and New Zealand.

As a result of the ORF article, the supposed plans to restrict or ban end-to-end encryption have been widely criticised by Politicians, Journalists, and NGOs stating that any backdoors to end-to-end encryption would render any secure encryption impossible.

However, while it can be verified that the “Five Eyes” propose the creation of general keys to access end-to-end encrypted communications, similar plans for the EU cannot be clearly deduced from the EU Council’s declaration at hand. The declaration itself recognises end-to-end encryption as highly beneficial to protect governments, critical infrastructures, civil society, citizens and industry by ensuring privacy, confidentiality and data integrity of communications and personal data. Moreover, it mentions that EU data protection authorities have identified it as an important tool in light of the Schrems II decision of the CJEU. At the same time, the Council’s declaration illustrates that end-to-end encryption poses large challenges for criminal investigations when gathering evidencein cases of cyber crime, making it at times “practically impossible”. Lastly, the Council calls for an open, unbiased and active discussion with the tech industry, research and academia in order to achieve a better balance between “security through encryption and security despite encryption”.

Möchel’s sources for EU plans to ban end-to-end encryption through general keys remain unknown and unverifiable. Despite general concerns for overarching surveillance powers of governments, the public can only approach the controversy around the EU Council’s declaration with due objectivity and remain observant on whether or how the EU will regulate end-to-end encryption and find the right balance between the privacy rights of European citizens and the public security and criminal justice interests of governments.

Microsoft reacts on EDPB’s data transfer recommendations

24. November 2020

Microsoft (“MS”) is among the first companies to react to the European Data Protection Board’s data transfer recommendations (please see our article), as the tech giant announced in a blog post on November 19th. MS calls these additional safeguards “Defending Your Data” and will immediately start implementing them in contracts with public sector and enterprise customers.

In light of the Schrems II ruling by the Court of Justice of the European Union (“CJEU”) on June 16th, the EDPB issued recommendations on how to transfer data into non-EEA countries in accordance with the GDPR on November 17th (please see our article). The recommendations lay out a six-step plan on how to assess whether a data transfer is up to GDPR standards or not. These steps include mapping all data transfer, assessing a third countries legislation, assessing the tool used for transferring data and adding supplementary measures to that tool. Among the latter is a list of technical, organizational, and contractual measures to be implemented to ensure the effectiveness of the tool.

Julie Brill, Corporate Vice President for Global Privacy and Regulatory Affairs and Chief Privacy Officer at Microsoft, issued the statement in which she declares MS to be the first company responding to the EDPB’s guidance. These safeguards include an obligation for MS to challenge all government requests for public sector or enterprise customer data, where it has a lawful basis for doing so; to try and redirect data requests; and to notify the customer promptly if legally allowed, about any data request by an authority, concerning that customer. This was one of the main ETDB recommendations and also included in a draft for new Standard Contractual Clauses published by the European Commission on November 12th. MS announces to monetary compensate customers, whose personal data has to be disclosed in response to government requests.  These changes are additions to the SCC’s MS is using ever since Schrems II. Which include (as MS states) data encrypted to a high standard during transition and storage, transparency regarding government access requests to data (“U.S. National Security Orders Report” dating back to 2011; “Law Enforcement Requests Report“) .

Recently European authorities have been criticizing MS and especially its Microsoft 365 (“MS 365”) (formerly Office 365) tools for not being GDPR compliant. In July 2019 the Ministry of Justice in the Netherlands issued a Data Protection Impact Assessment (DPIA), warning authorities not to use Office 365 ProPlus, Windows 10 Enterprise, as well as Office Online and Mobile, since they do not comply with GDPR standards. The European Data Protection Supervisor issued a warning in July 2020 stating that the use of MS 365 by EU authorities and contracts between EU institutions and MS do not comply with the GDPR. Also, the German Data Security Congress (“GDSC”) issued a statement in October, in which it declared MS 365 as not being compliant with the GDPR. The GDSC is a board made up of the regional data security authorities of all 16 german states and the national data security authority. This declaration was reached by a narrow vote of 9 to 8. Some of the 8 regional authorities later even issued a press release explaining why they voted against the declaration. They criticized a missing involvement and hearing of MS during the process, the GDSC’s use of MS’ Online Service Terms and Data Processing Addendum dating back to January 2020 and the declaration for being too undifferentiated.

Some of the German data protection authorities opposing the GDSC’s statement were quick in welcoming the new developments in a joint press release. Although, they stress that the main issues in data transfer from the EU to the U.S. still were not solved. Especially the CJEU main reserves regarding the mass monitoring of data streams by U.S. intelligence agencies (such as the NSA) are hard to prevent and make up for. Still, they announced the GDSC would resume its talks with MS before the end of 2020.

This quick reaction to the EDPB recommendations should bring some ease into the discussion surrounding MS’ GDPR compliance. It will most likely help MS case, especially with the German authorities, and might even lead to a prompt resolution in a conflict regarding tools that are omnipresent at workplaces all over the globe.

European Commission issues draft on Standard Contractual Clauses

18. November 2020

A day after the European Data Protection Board (EDPB) issued its recommendations on supplementary measures, on November 12th the European Commission issued a draft on implementing new Standard Contractual Clauses (SCCs) for data transfers to non-EU countries (third countries). The draft is open for feedback until December 10th, 2020, and includes a 12-month transition period during which companies are to implement the new SCCs. These SCCs are supposed to assist controllers and processors in transferring personal data from an EU-country to a third-country, implementing measures that guarantee GDPR-standards and regarding the Court of Justice of the European Union’s (CJEU) “Schrems II” ruling.

The Annex includes modular clauses suitable for four different scenarios of data transfer. These scenarios are: (1) Controller-to-controller-transfer; (2) Controller-to-processor-transfer; (3) Processor-processor-transfer; (4) Processor-to-controller-transfer. Newly implemented in these SCCs are the latter two scenarios. Since the clauses in the Annex are modular, they can be mixed and matched into a contract fitting the situation at hand. Furthermore, more than two parties can adhere to the SCC and the modular approach even allows for additional parties to accede later on.

The potential of government access to personal data is distinctly addressed, since this was a main issue following the “Schrems II” ruling. Potential concerns are met by implementing clauses that address how the data importer must react when laws of the third country impinge on his ability to comply with the contract, especially the SCCs, and how he must react in case of government interference.  Said measures include notifying the data exporter and the data subject of any government interference, such as legally binding requests of access to personal data, and, if possible, sharing further information on these requests on a regular basis, documenting them and challenging them legally. Termination clauses have been added, in case the data importer cannot comply further, e.g. because of changes in the third country’s law.

Further clauses regard matters such as data security, transparency, accuracy and onwards transfer of personal data, which represent issues that have all been tackled in the older SCCs, but are to be updated now.

First judicial application of Schrems II in France

20. October 2020

France’s highest administrative court (Conseil d’État) issued a summary judgment that rejected a request for the suspension of France’s centralized health data platform – Health Data Hub (HDH) – on October 13th, 2020. The Conseil d’État further recognized that there is a risk of U.S. intelligence services requesting the data and called for additional guarantees.

For background, France’s HDH is a data hub supposed to consolidate all health data of people receiving medical care in France in order to facilitate data sharing and promote medical research. The French Government initially chose to partner with Microsoft and its cloud platform Azure. On April 15th, 2020, the HDH signed a contract with Microsoft’s Irish affiliate to host the health data in data centers in the EU. On September 28th, 2020, several associations, unions and individual applicants appealed to the summary proceedings judge of the Conseil d’État, asking for the suspension of the processing of health data related to the COVID-19 pandemic in the HDH. The worry was that the hosting of data by a company which is subject to U.S. laws entails data protection risks due to the potential surveillance done under U.S. national surveillance laws, as has been presented and highlighted in the Schrems II case.

On October 8th, 2020, the Commission Nationale de l’Informatique et Libertées (CNIL) submitted comments on the summary proceeding before the Conseil d’État. The CNIL considered that, despite all of the technical measures implemented by Microsoft (including data encryption), Microsoft could still be able to access the data it processes on behalf of the HDH and could be subject, in theory, to requests from U.S. intelligence services under FISA (or even EO 12333) that would require Microsoft to transfer personal data stored and processed in the EU.
Further, the CNIL recognized that the Court of Justice of the European Union (CJEU) in the Schrems II case only examined the situation where an operator transfers, on its own initiative, personal data to the U.S. However, according to the CNIL, the reasons for the CJEU’s decision also require examining the lawfulness of a situation in which an operator processes personal data in the EU but faces the possibility of having to transfer the data following an administrative or judicial order or request from U.S. intelligence services, which was not clearly stated in the Schrems II ruling. In that case, the CNIL considered that U.S. laws (FISA and EO 12333) also apply to personal data stored outside of the U.S.

In the decision of the Conseil d’État, it agreed with the CNIL that it cannot be totally discounted that U.S. public authorities could request Microsoft and its Irish affiliate to access some of the data held in the HDH. However, the summary proceedings judge did not consider the CJEU’s ruling in the Schrems II case to also require examination of the conditions under which personal data may be processed in the EU by U.S. companies or their affiliates as data processors. EU law does not prohibit subcontracting U.S. companies to process personal data in the EU. In addition, the Conseil d’État considered the violation of the GDPR in this case was purely hypothetical because it presupposes that U.S. authorities are interested in accessing the health data held in the HDH. Further, the summary proceedings judge noted that the health data is pseudonymized before being shared within the HDH, and is then further encrypted by Microsoft.

In the end, the judge highlighted that, in light of the COVID-19 pandemic, there is an important public interest in continuing the processing of health data as enabled by the HDH. The conclusion reached by the Conseil d’ètat was that there is no adequate justification for suspending the data processing activities conducted by the HDH, but the judge ordered the HDH to work with Microsoft to further strengthen privacy rights.

Swiss Data Protection Commissioner: “Swiss-U.S. Privacy Shield not providing adequate level of Data Protection”

28. September 2020

Following the recent ruling by the Court of Justice of the European Union (“CJEU”) the Swiss Data Protection Commissioner (“EDÖB”) published a statement concerning the level of Data Protection of Data Transfers under the Swiss-U.S. Privacy Shield. The “Schrems II” decision by the CJEU is not legally binding in the Switzerland because Switzerland is neither a EU nor a EEA country. But as the EDÖB and the Joint European Data Protection Authorities work closely together, the decision has first implications for Swiss data exporters.

In accordance with Swiss Data Protection law (Art. 7 VDSG), the Swiss Data Protection Commissioner maintains a publicly accessible list of countries assessing the level of Data Protection guaranteed by these countries. This list shall serve Swiss data exporters as a guidance for their data exporting activities and acts as a rebuttable presumption. EU and EEA countries have continuously been listed in the first column of the list because they are regarded to provide an adequate level of Data Protection. The U.S. has been listed in the second column as a country providing “adequate protection under certain conditions”, which meant a certification of U.S. data importers under the Swiss-U.S. Privacy Shield.

Subsequent to the CJEU ruling, the EDÖB decided to list the U.S. in the third column as a country providing “inadequate protection”, thereby also acting on his past annual reviews of the Swiss-U.S. Privacy Shield. In his reviews, the EDÖB already criticised that data subjects in Switzerland lack access to the courts in the U.S. on account of Data Protection violations and that the Ombudsman-mechanism is ineffective in this regard.

Lastly, the EDÖB pointed out that the Swiss-U.S. Privacy Shield remains in effect since there has not been a decision by Swiss courts comparable to the CJEU decision and that his assessment has the status of a recommendation. However, the EDÖB advises Swiss data exporters to always make a risk assessment when transferring Personal Data to countries with “inadequate protection” and possibly to apply technical measures (e.g. BYOK encryption) in order to protect the data from access by foreign intelligence services.

Privacy Activist Schrems unleashes 101 Complaints

21. September 2020

Lawyer and privacy activist Maximilian Schrems has become known for his legal actions leading to the invalidation of “Safe Harbor” in 2015 and of the “EU-U.S. Privacy Shield” this year (we reported). Following the landmark court decision on the “EU-U.S. Privacy Shield”, Schrems recently announced on the website of his NGO “noyb” (non-of-your-business) that he has filed 101 complaints against 101 European companies in 30 different EU and EEA countries with the responsible Data Protection Authorities. Schrems exercised the right to lodge a complaint with the supervisory authority that every data subject has if he or she considers that the processing of personal data relating to him or her infringes the Regulation, pursuant to Art. 77 GDPR.

The complaints concern the companies’ continued use of Google Analytics and Facebook Connect that transfer personal data about each website visitor (at least IP-address and Cookie data) to Google and Facebook which reside in the United States and fall under U.S. surveillance laws, such as FISA 702. Schrems also published a list of the 101 companies which include Sky Deutschland, the University of Luxembourg and the Cyprus Football Association. With his symbolic action against 101 companies, Schrems wanted to point to the widespread inactivity among many companies that still do not take the data protection rights of individuals seriously despite the recent ruling by the Court of Justice of the European Union.

In response, the European Data Protection Board (“EDPB”) has set up a “task force” to handle complaints against European companies using Google Analytics and Facebook services. The taskforce shall analyse the matter and ensure a close cooperation among the members of the Board which consists of all European supervisory authorities as well as the European Data Protection Supervisor.

U.S. Commerce Department publishes FAQs on EU-US Privacy Shield

12. August 2020

The U.S. Commerce Department has released a frequently asked questions page (FAQ) with regards to the EU-US Privacy Shield, following the latest decision of the Court of Justice of the European Union (CJEU) in the Schrems II case.

The FAQ consists of five questions which revolve around the situation after the invalidation of the Privacy Shield by the CJEU, especially the status of companies already certified under the Privacy Shield.

The Commerce Department states in its FAQ that despite the invalidity of the Privacy Shield certification as a GDPR compliant transfer mechanism, the decision of the CJEU does not relieve companies certified under the Privacy Shield from their obligations. On July 21, 2020, the Federal Trade Commission (FTC) stated that they expect controllers to continue to follow the obligations laid out under the Privacy Shield Framework for transfers.

Further, the Commerce Department will continue to administer certification and re-certification under the Privacy Shield despite the new development. The Commerce Department emphasizes that the continued dedication to the Privacy Shield will show the commitment of the parties and the controllers certified under it to the Data Protection cause.

However, the Commerce Department also notes that the costs coming along with a Privacy Shield certification will remain, which could have an effect on the motivation for companies to get self- and re-certified.

CJEU judges the EU-US Privacy Shield invalid

16. July 2020

On June 16th, 2020, the Court of Justice of the European Union (CJEU) has declared the invalidity of Decision 2016/1250, therefore rendering protection granted to data transfers under the EU-US Privacy Shield inadequate.

The background

The case originated in a complaint of Mr. Max Schrems against Facebook Ireland regarding the transfer of his personal data as a Facebook user to Facebook Inc., situated in the USA, for further processing. Mr. Schrems lodged a complaint with the Irish supervisory authority seeking to prohibit those transfers. He claimed that the law and practices in the United States do not offer sufficient protection against access by the public authorities to the data transferred to the USA. That complaint was rejected on the ground that, in Decision 2000/5205, the Safe Harbour Decision, the Commission had found that the United States ensured an adequate level of protection. In a judgment delivered on October 6th, 2015, the CJEU, to which the High Court of Ireland had referred questions for a preliminary ruling, declared that decision invalid, resulting in the Schrems I judgment.

Today’s judgement in the Schrems II case came from the request of the Irish High Court to Mr. Schrems to reformulate his initial complaint, seeing as the Safe Harbour Agreement had been deemed inadequate. In the following, Mr. Schrems reformulated his complaint, and claimed that the United States does not offer sufficient protection of data transferred to that country. He seeks the suspension of future transfers of his personal data from the EU to the United States, which Facebook Ireland now carries out pursuant to the Standard Contractual Clauses (SCCs) set out in the Annex to Decision 2010/87. After the initiation of those proceedings, the Commission adopted Decision 2016/1250 on the adequacy of the protection provided by the EU-U.S. Privacy Shield.

In its request for a preliminary ruling, the referring court asked the CJEU whether the GDPR applies to transfers of personal data pursuant to the SCCs, what level of protection is required by the GDPR in connection with such a transfer, and what obligations are incumbent on supervisory authorities in those circumstances. The High Court of Ireland also raised the question of the validity of both decisions,  Decision 2010/87 and  Decision 2016/1250.

Judgement in regard to SCCs

In its judgements, the CJEU has stated that it had, after examination of the SCCs in light of the Charter of Fundamental Rights, found nothing that affected the validity of the SCCs and Decision 2010/87.

With regards to the transfer of personal data to third countries, the CJEU claims that the requirements for such purposes set out by the GDPR concerning appropriate safeguards, enforceable rights and effective legal measures must be interpreted in such a way that data subjects whose personal data is transferred into a third country must be afforded a level of protection essentially similar to the level of protection granted within the European Union by the GDPR.

Data Protection Authorities must, unless an adequacy decision has been ruled by the Commission, be required to suspend or prohibit a transfer of personal data to a third country which does not meet these requirements.

The CJEU holds that the SCCs are still effective mechanisms that make it possible to ensure compliance with a level of protection required by the European Union. In that regard the CJEU points out that this imposes an obligation on the data exporter and the recipient of the data to verify, prior to any transfer, whether that level of protection is respected in the third country concerned, and to suspend the transfer of the personal data if it is not.

Judgement in regard to the EU-US Privacy Shield

The CJEU, after thorough examination, concluded that the EU-US Privacy Shield is not adequate protection for transfers to the USA.

This result comes from the fact that the far-reaching US surveillance laws are in conflict with EU fundamental rights. The USA limits most of its protections of personal data from governmental surveillance to US citizen, but does not extend that protection to the personal data of citizens of other countries.

In essence, the limitations on the protection of personal data arising from the domestic law of the USA on the access and use by US public authorities of such data transferred from the European Union are not restricted in a way that satisfies requirements that are equivalent to those required under EU law, which were mentioned in regards to SCCs above. By the principle of proportionality, the surveillance programmes based on those provisions are not limited to what is strictly necessary.

Unless an empowerment and independence of the Ombudsperson takes place, which would give the competence to adopt decisions which are binding on US intelligence services, there are no substantial cause of actions for data subjects before a body which gives legal guarantees in the way that is required by European law for transfers to be equivalent in protection.

Assessment

Overall, the CJEU states that necessary data transfers are still able to continue under Article 49 of the GDPR. However, the provision’s interpretation is restrictive, leaving most companies with data transfers to the USA which are now considered illegal.

Due to the requirements of adequate protection even when relying on the validated SCCs, transfers under such circumstances may also be found unlawful due to the local intelligence laws in the USA, which do not uphold the requirements necessary by European law.

Overall, it is a clear statement of the necessity of reforms of the US intelligence laws, which have to create adequate protections to be able to guarantee the same level of data protection as the European Union, if they want to continue data trades and data transfers necessary for processing.

What does this mean for you?

  • If your business has a EU-US Privacy Shield certification, and uses such for legitimization of data transfers within a group of companies, you should push towards the use of the European Standard Contractual Clauses within that corporate group.
  • If you are employing service providers which rely on the EU-US Privacy Shield certification, you should also push for the use of Standard Contractual Clauses, or base the data transfer on a different solution for an adequate level of data protection.

Transatlantic Data Transfers in light of the Two Year Anniversary of GDPR Application

7. July 2020

In the last two years since the General Data Protection Regulation (GDPR) came into effect on May 25, 2018, it has received an overall positive feedback and structured the data protection culture not only in the European Union, but has set an example for international privacy standards.

However, especially from the American side of the world, criticism has been constant. Different principles are a prerequisite for different opinions and priorities, and the effort to bring European data protection standards and American personal data business together has been a challenge on both sides.

One of the main criticisms coming from the US government is the increasing obstacles the GDPR poses in case of cybercrime investigations and law enforcement. Not only the restrictive implications of the GDPR are an issue, but also the divergent interpretations due to national adaptations of the GDPR are seen as a problem by government officials.

In the cases of cybercrime, the main issue for the US critics is the now less effective database of domain name owners, WHOIS. The online directory, which was created in the 1970s, is an important tool for law enforcement combatting cybercrime. Before the GDPR came into effect in 2018, the request for information on domain owners was straightforward. Now, due to the restrictions of the GDPR, this process has been made long and tedious.

But fighting cybercrime is not the only tension between the EU and the USA concerning data protection. In a judgement in the Schrems II case, expected for July 16, 2020, the European Court of Justice (ECJ) is expected to take a stance on transatlantic data transfers and the current Privacy Shield, which is the basis for the EU-US dataflows under adequate data protection standards. If the Privacy Shield is deemed insufficient protection, it will have a major effect on EU-US business transactions.

However, these are issues that the European Commission (EC) is very aware of. In their communication concerning the two-year review of the GDPR, the Commission stated that they are planning to balance out diverging and fragmented interpretations of the GDPR on national levels and find a common data protection culture within Europe.

In addition, the restrictions the GDPR poses to law enforcement are another point the European Commission knows it needs to fix. The plan for the future is a bilateral and multilateral framework that can allow for simple requests to share data for law enforcement purposes and avoid conflicts of law, while keeping data protection safeguards intact.

The upcoming judgement of the ECJ is seen with watchful eyes by the Commission, and will be incorporated in their upcoming adequacy decisions and re-evaluations, as well as their development of a modern international transfer toolbox, which includes a modernized version of the standard contractual clauses.

Overall, the two-year mark of the existence of the GDPR is seen more as a success, despite the clear areas for future improvement. One of the big challenges in transatlantic data transfers ahead is without a doubt the outcome of the judgement in the Schrems case in mid-July, the implications of which are, at this point in time, not yet able to be defined.

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