With the interim data transfer window under the Brexit Trade Agreement expiring yesterday, on 28 June 2021 the European Commission adopted two adequacy decisions confirming the UK as an adequate jurisdiction for GDPR and Law Enforcement Directive purposes – just in time to allow the uninterrupted free flow of personal data from the European Union to the UK. Continue reading
Tag: data transfers
Seven months after the European Commission published its draft new Standard Contractual Clauses for data transfers between EU and non-EU countries (the “Draft SCCs“) for consultation (see our blog post here (the “Draft SCCs Blog“)), they have now published a finalised set of Standard Contractual Clauses (“Final SCCs“) with little fanfare (available here).
It should also be noted that alongside the Final SCCs, the European Commission have published a finalised set of non-mandatory Article 28 clauses for use between controllers and processors in the EU (see our blog post here on the draft version) in relation to which we will be publishing a follow-up shortly.
It will be mandatory, however, for organisations to implement and comply with the Final SCCs and in this blog post we consider the movement from the Draft SCCs to the Final SCCs (as well as the key points raised by them), the practical impact that this will have on organisations and the UK’s position.
- The Draft SCCs and the Final SCCs – In comparison to the Draft SCCs, the Final SCCs provide some cause for hope, in particular an extended grace period of 18 months, a 3 month window during which organisations may continue to put in place the current SCCs to address international transfers of personal data, and the softening of some provisions such as the approach to challenging public authority access. However, other aspects of the Final SCCs may cause increased friction, notably a more nebulous approach to the warranty regarding impact assessments.
- Practical Considerations from the Final SCCs – The Final SCCs serve to confirm that a repapering exercise is looming for most organisations and that a re-evaluation of current agreements, training, and contracting support will be required so as to have in place mechanisms to implement agreements with appropriate iterations of the Final SCCs on an ongoing basis. Beyond this, more granular considerations including the interplay of the Final SCCs with negotiated clauses will require some more careful, context-specific scrutiny.
- The UK’s Way Forward – The current SCCs will continue to apply for transfers of data from the UK to third countries while the ICO prepares a set of its own standard contractual clauses, independent of the Final SCCs. The extent to which these deviate will inform how much more complex putting in place and maintaining the necessary contractual provisions will be for organisations, particularly those with multifaceted data flows between the UK, EU and third countries.
Please refer to the Draft SCCs Blog for more detailed background, but by way of summary, the GDPR prohibits the transfer of personal data from the EEA to a third country or international organisation outside of the EEA unless an available condition under the GDPR is satisfied.
One of these conditions is the use of Standard Contractual Clauses (“SCCs“) which are effectively a contract ‘pre-approved’ by the European Commission to be entered into between the data exporter and the data importer and which impose certain data protection obligations on both parties. However, the current SCCs had some issues including the fact that they were not updated when the GDPR came into force (referencing the old EU Data Protection Directive rather than GDPR) and there were only two sets of SCCs (covering transfers from one controller to another controller (“C2C“) or from a controller to a processor (“C2P“) which meant that they did not cover situations such as processor to processor (“P2P“) or processor to controller (“P2C“) transfers).
The Draft SCCs looked to address these issues, as well as the impact of the Schrems II decision (see our blog post on the Schrems II case here). The Schrems II judgment made it clear that where SCCs are being used, a level of due diligence needs to take place before any transfer can be made. This is to ensure that personal data originating in the EEA always carries with it protections which are essentially equivalent to those in the EEA. In parallel, to help data exporters in that assessment, on 10 November 2020 the EDPB issued draft guidance on how to carry out the due diligence exercise in practice (see our blog post on the draft guidance here). We are imminently expecting the finalised EDPB guidance on these supplementary measures, potentially as early as next week if the authorities are able to agree them during this month’s plenary meeting on 15 June 2021.
Following a period of consultation and some delay to finalisation, the European Commission published the Final SCCs in final working documents on 4th June with publication in the Official Journal expected swiftly.
The Draft SCCs and the Final SCCs
The Final SCCs broadly adopt the same approach as the Draft SCCs, although there is some deviation both to soften provisions and provide more flexibility to organisations than originally envisioned by the Draft SCCs, although in some instances the approach has been toughened. We detail the material deviations and summarise the changes from the Draft SCCs below.
- Extended Grace Period and Limited Grandfathering Period
The Draft SCCs contemplated a one year grace period within which organisations had to ensure compliance and the Final SCCs have both extended this period and made it more nuanced by introducing a limited grandfathering period during which organisations may continue to implement the current SCCs. From the date of publication in the Official Journal (plus 20 days), organisations will now:
- have 3 months to continue to put in place the current SCCs; and
- have 15 months from the end of the 3 month period within which they must implement the Final SCCs and can continue to rely on the current SCCs (provided there is no change to the processing activities during this time and any necessary supplemental measures are in place).
While the extended grace period is positive in the context of the EU-US Privacy Shield being immediately invalidated as a result of the Schrems II decision and thereby requiring instant contractual and organisational remediation, the result of the Final SCCs is that organisations will still be required to re-paper their existing contracts in the medium term (by likely December 2022) and put in place mechanisms to begin incorporating the Final SCCs into new agreements in the short term (likely starting from June 2021 but by no later than September 2021) (see ‘practical considerations’ section below).
- Modular Structure and Scope
The Final SCCs have retained the modular format allowing for adaptation to different factual scenarios covering both C2C and C2P transfers already provided for under the current SCCs. They now also cater for P2P and P2C situations which were not provided for and enable other parties to ‘dock’ into the Final SCCs (of particular importance where sub-processors are introduced to a pre-existing arrangement).
Additionally the set of processor clauses required by Article 28 GDPR remains incorporated into the Final SCCs, continuing not as a separate module and explicitly prevailing over any conflicting provisions.
While elements of the modules have been somewhat rearranged, materially they provide the same flexibility, but also issues, as discussed in the ‘structure’ and ‘scope’ sections of the Draft SCCs Blog.
The requirement for data importers who are controllers to notify a competent EU supervisory authority (discussed in the ‘extraterritoriality’ section of the Draft SCCs Blog) remains but rather than the threshold being a ‘significant adverse effect’, this has been lowered to ‘a risk to the rights and freedoms of natural persons’ (with an attendant notification obligation to data subjects where there is a ‘high risk’). This aligns with the thresholds in the GDPR, but arguably makes notification a more likely requirement for importers.
Additionally, the approach of the Final SCCs imposes on data importers requirements that will be familiar to those already subject to the GDPR, such as obligations of transparency, security, limits to the purpose of processing, complying with data subject rights amongst others. In binding importers to obligations similar in nature to the requirements of the GDPR, the Final SCCs can be seen as further step in extending the reach of GDPR.
Like the Draft SCCs, the Final SCCs to include provisions which address the challenges of the Schrems II case (discussed in the ‘Schrems’ section of the Draft SCCs Blog) with only minor changes made to the Final SCCs in this regard.
Perhaps most notably, however, the warranty that the parties are required to provide that they have no reason to believe that the ‘laws’ of the importer country prevent the importer from fulfilling its obligations under the Final SCCs, has been expanded to make reference to ‘laws and practices’. The Final SCCs contain a footnote which provides some examples of the elements which may be considered as part of this impact assessment, but this more nebulous phrasing further emphasises the difficultly organisations are likely to have in being able to confidently undertake and document such an assessment and warrant such a claim.
One position that has been softened from the Draft SCCs is that the requirement on importers to exhaust all available legal remedies when challenging a public authority access request has been amended to grant the importer a degree of discretion in circumstances when it believes that there are ‘reasonable grounds to consider that the request is unlawful…’ and so challenge it. This caveat (underlining added) gives importers some leeway in approaching such requests.
The more detailed liability provisions set out in the Draft SCCs remain in the Final SCCs, as does the uncapped liability position. Given the precedence taken by the Final SCCs over any other terms in an agreement to which the Final SCCs are attached, it would have been helpful if the European Commission had provided some clarity in relation to these points. Unfortunately, however, it is still unclear as to how both the detailed liability provisions and uncapped liability position set out in the Final SCCs are supposed to align with any pre-existing liability provisions set out in an agreement to which the Final SCCs are attached, especially if such pre-existing liability provisions include a cap on data protection liability, as they often do.
Absent further guidance, It would appear that attempts to limit or exclude liability would conflict with, and then be subordinate to, the approach taken by the Final SCCs.
Practical Considerations from the Final SCCs
Despite the positive and negative changes brought about by the Final SCCs, they do at least provide some clarity for organisations regarding what next steps they should take and what thinking should be done:
- In-Flight Projects
While there is a limited 3 month period within which organisations can continue to put the current SCCs in place, they will only be able to be rely on them for a further 15 months from the end of that 3 month window. As such, where the contractual arrangements for an in-flight project are likely to last beyond December 2022, it may make most sense for organisations to consider and implement the Final SCCs during this window.
For contracts with a duration likely to end before this window ends, or which will come up for renewal, then in the interests of expediency it would perhaps be preferable to implement the current SCCs at this stage and begin implementing and, where necessary, repapering the Final SCCs over the subsequent 15 months whereupon further guidance is likely to have been published and the market is more likely to have adopted a more settled approach.
- Repapering and Expertise
As noted in the ‘repapering (again)’ section of the Draft SCCs Blog, the Final SCCs confirm that a further, more complex repapering exercise is required.
As well as requiring organisations to analyse the perhaps thousands of contractual arrangements in place to determine the data flows and relationships between parties to replace them with the appropriate combination of Final SCC modules, organisations will also need to ensure that they have in place the appropriate expertise, support, and training to be able to begin putting in place the appropriate combinations by the end of the 3 month grandfathering period.
The earlier organisations begin to engage with the approach taken by the Final SCCs and put in place mechanisms sufficient to prepare and implement combinations of modular Final SCCs, the easier the transition will be.
- Final SCCs and Negotiated Clauses
As well as the repapering exercise (which will not be a ‘rip and replace’ exercise of the current SCCs to the Final SCCs), at a more granular level organisations will also need to consider the interplay between the Final SCCs and negotiated operative clauses in the main body of agreements incorporating the Final SCCs. For example:
- Operative provisions which refer out to the Final SCCs will need to be appropriately tailored to ensure that there is no conflict in multifaceted relationships (e.g. where various parties may be acting as controllers, processors, and sub-processors in relation to different data as part of the same arrangement) to enable the operative provisions and relevant modules to align.
- The Final SCCs contain embedded Article 28 provisions and so, where negotiated and bespoke operative Article 28 provisions are in place, ensuring alignment between them so as not to produce a conflict resulting in the inapplicability of tailored positions will be necessary to preserve commercial certainty.
- Contradictions may also arise for which straightforward resolution may not be possible, such as the apparent conflict between uncapped liability under the Final SCCs and commonly capped negotiated positions, or where a tailored Article 28 provision cannot be aligned with those in the Final SCCs.
- The imposition of obligations on importers will also mean that they may seek more protection from operative contractual clauses, for example the importer’s transparency obligation will likely necessitate the inclusion of operative provisions to detail the responsibility between the parties of discharging such obligations (i.e. certainty of the provision of information).
- The European Commission’s decision to address P2P transfers in the Final SCCs will finally allow parties to simplify the operative clauses that controllers enter into with processors that engage subprocessors based outside of the EU. The absence of any P2P mechanism in the current SCCs has long required parties to shoehorn in the C2P clauses to address transfers between processors and subprocessors, often to unsatisfactory effect given that there is usually an absence of direct contractual nexus between controller and subprocessor. The new P2P module should serve to simplify and speed up the drafting and negotiation of these operative provisions going forward.
Where contracts are remediated, or standard template agreements will be updated, a careful approach will need to be taken to ensure regulatory compliance while also achieving an appropriate balance of commercial risk, depending on the particular factual matrix.
- The Data Importer’s Position
Where a data importer contracts with an exporter on the basis of the Final SCCs, the fact that the Final SCCs impose a range of substantive obligations on importers (see ‘extraterritoriality’ section above) will require importers to take considerable care to determine whether they do in fact have the technical, organisational, and contractual means to satisfy the various obligations placed upon them.
The potential risks of litigation and cost of simply signing and doing what has always been done have never been higher.
The UK’s Way Forward
The ICO has stated that it has been drafting its own standard contractual clauses during the course of 2021 (with a period of consultation also expected) (the “UK SCCs“), in a process distinct from the Final SCCs. It will be interesting to see the extent to which, if at all, the UK SCCs leverage the positions in the current SCCs, Draft SCCs, and Final SCCs, or whether a completely novel route is taken.
While some mood music suggests that the UK will pursue a more relaxed, business-minded approach to data (and so the UK SCCs can perhaps be expected to impose less stringent requirements on organisations), such an approach will need to be carefully balanced against the UK’s position on data vis-à-vis the EU, in particular to ensure the UK SCCs are seen as sufficiently protective if the UK is to benefit from an adequacy decision from the EU.
In addition, the ICO has also previously emphasised that international data transfers would need to account for the impact of the Schrems II decision and in their response to the UK’s National Data Strategy highlighted the importance of building on the rights, principals, and protections of data which are currently in place. Therefore a novel approach or substantial deviation from the EU’s approach (be that the current SCCs or Final SCCs) may be unlikely.
From a practical perspective, the Final SCCs are not currently regarded as an “adequate safeguard” for UK GDPR purposes for transfers from the UK to third countries and will therefore not be officially compliant from a UK GDPR perspective at the moment. Absent the UK SCCs and / or approval of the Final SCCs, the current SCCs may therefore continue to be relevant.
Furthermore, for organisations with data flows between the EU, UK and third countries, the implementation of a further set of standard contractual clauses which may deviate from or potentially conflict with the Final SCCs would be a headache that they could do without, with further repapering and more complex contractual arrangements to introduce and align the Final SCCs with UK SCCs potentially required. That is unless the ICO approves the Final SCCs (in addition to any UK SCCs), giving organisations the option of which set of clauses to select based on their respective data flows and contracting approach to international data transfers to third countries.
The UK’s approach will therefore be important to monitor over the coming months and until such time as UK SCCs are brought into force, the current SCCs continue to remain relevant.
The publication of the Final SCCs provides organisations with a long-awaited update to the current SCCs and, for better or worse, provides clarity in relation to the steps and considerations that organisations will need to take if they are to continue making international transfers of personal data, as well as time (by way of the grace period and limited grandfathering period) to take these steps.
Most organisations will have been through this process before and, while it may be slightly more complex in execution, the principles of previous repapering exercises, as well as more developed processes regarding records of processing, data audits, and data mapping in the years since the GDPR came into force, should provide organisations with many of the tools needed to adopt and implement the Final SCCs (although for importers that are not used to the GDPR, the increased GDPR rigour of the Final SCCs may make this more challenging).
The most important step for organisations will be to understand the new modular approach to the Final SCCs, the most material departure from the current SCCs, as organisations will need to start the process of implementing the Final SCCs in 3 months’ time. Organisations that have template agreements and processes in place which include data protection provisions incorporating the current SCCs will also need to update these template agreements and processes and provide appropriate training to those tasked with maintaining these arrangements. In the longer term, repapering will be flavour of the month once more.
As most in the data community are aware, the EU-UK Trade and Cooperation Agreement (the “Brexit Deal”) was agreed on Christmas Eve and provides for an interim period (up to a maximum of six months ending on 30 June 2021) whereby data transfers from Europe to the UK will not be treated as transfers to a third country subject to Chapter V of the GDPR following the end of the transition period on 1 January 2021, provided the UK complies with certain conditions during the interim period (discussed in our blog here).
Following this, both the European Data Protection Board (“EDPB”) and the UK’s supervisory authority (the Information Commissioner’s Office (“ICO”)) have issued either updated or new responses which provide some more clarity on areas of focus and what to expect over the coming year.
The EDPB’s Response
Prior to the Brexit Deal being agreed, in mid-December the EDPB adopted its ‘Statement on the end of the Brexit transition period’ (here) (the “Statement”) and an ‘Information note on data transfers under the GDPR to the United Kingdom after the transition period’ (here) (the “Information Note”) which highlighted some key considerations of the EDPB.
Following the agreement and implementation of the Brexit Deal from the beginning of 2021, the EDPB has now updated the Statement and Information Note.
- The interim data transfer window
In line with Article FINPROV.10A of the Brexit Deal, the update to the Statement and Information Note emphasises that data transfers to the UK can continue to take place without the requirement of a transfer tool under Article 46, or relying on the derogations list under Article 49, until 30 June 2021 (at the latest) provided that the UK’s current data protection regime stays in place.
- Preparing for an adequacy decision (or lack of one)
The EDPB provides no further view on the adequacy of the UK’s data protection regime other than that the timeline for a favourable decision has now been pushed to the end of June. If a favourable adequacy decision is not taken by 30 June 2021, the EDPB emphasises in the Statement and Information Note that transfers between entities regulated by the GDPR to the UK will become subject to Chapter V of the GDPR. This will mean that transfers to the UK will require adequate safeguards such as standard data protection clauses, binding corporate rules, intra-group agreements, codes of conduct etc. to be put in place along with ensuring enforceable data subject rights and effective legal remedies for data subjects as required by Article 46.
The Information Note further reminds controllers and processors that, absent an adequacy decision, from the end of the interim period compliance with other GDPR obligations will come into sharper focus, including:
- updating privacy notices and records of processing to account for data transfers to the UK;
- taking caution if intending to rely on grounds under Article 49 in the absence of safeguards under Article 46, as such grounds are to be interpreted restrictively, only being fit for occasional and non-repetitive transfers; and
- considering whether any supplementary tools may need to be put in place, a relatively complex and time-consuming consideration discussed further here (albeit the fact that the UK’s data law is the application of the GDPR then such consideration should theoretically be straightforward).
- One-Stop-Shop mechanism
While not affected by the EDPB’s updates, it is worth noting that the Statement and Information Note also clarify the applicability of the One-Stop-Shop (“OSS”) mechanism envisioned by the GDPR within the UK.
The OSS mechanism provides that the supervisory authority in the jurisdiction of an entity’s main establishment will act as the lead supervisory authority and carry out compliance and regulatory functions on behalf of supervisory authorities in each EU jurisdiction in relation to that entity.
From 1 January 2021, the OSS will not apply in the UK so that the ICO will not be able to act as a lead supervisory authority (i.e. the Brexit Deal did not extend this mechanism). The EDPB notes that it has engaged with supervisory authorities and the ICO to ensure a smooth transition of existing cross-border cases.
The Statement and Information Note goes on to remind controllers and processors that they remain free to establish a main establishment in an EU jurisdiction under Article 4(16) to utilise the OSS mechanism (although the feasibility of this for many entities may well be impracticable). If this is not in place, entities will need to designate a representative under Article 27 as long as their activities are subject to the GDPR under Article 3(2).
The ICO’s Response
In a blog posted on 22nd January (here), the ICO’s Information Commission Elizabeth Denham responded to the Brexit Deal (the “ICO Response”) by welcoming the long-term commitments made by the EU and UK, most notably, to promoting high international standards of data protection, developing a regulatory relationship, and co-operating on enforcement activity.
The ICO Response considered the interim period allowing data transfers between Europe and the UK as the “best possible outcome for UK organisations” in light of the risks and impacts to digital trade if this had not been put in place. However, given this interim period will end in either four or six months under the Brexit Deal, the importance of a positive adequacy decision for UK data flows is clear in the ICO Response, emphasised by the reference to the EU’s commitment to considering the UK’s adequacy position “promptly” in a declaration accompanying the Brexit Deal. Although the ICO Response also sounds the warning that adequacy is not guaranteed and so organisations should be putting in place appropriate safeguards during this window.
Finally, as well as some specific commentary regarding data sharing in the context of law enforcement and noting that the UK must also notify the EU-UK Partnership Council, as far as reasonably possible, of any new international transfers of personal data between public authorities for international transfers of personal data, the ICO Response also highlights that the process for any decisions in a range of areas (including UK adequacy decisions, approving international transfer mechanisms, or standard contractual clauses) must be put before the EU-UK Partnership Council. Given this requirement, it may be that material departure from the current UK data protection position is unlikely in the imminent future.
On Christmas Eve, the EU and UK announced that they had reached an agreement on their future relationship, which we expect to come into effect on 1 January 2021 (the “Brexit Deal”). Further details of the deal itself will be discussed by my colleagues on our Beyond Brexit blog, available here. And for the most part, the Brexit Deal does not deal with data protection specific issues.
However, for those data practitioners amongst us, you will know that the main area of concern related to Brexit has long been the issue of data transfers and whether or not the UK will be considered ‘adequate’ for GDPR purposes. In this respect, the Brexit Deal does throw a slightly unexpected lifeline of sorts.
The interim data transfer window
Article FINPROV.10A (Interim provision for transmission of personal data to the United Kingdom) provides for a four month window (which can be extended to six months) during which the UK will still not be treated as a ‘third country’ for GDPR purposes, thereby allowing the free flow of data from the EU and EEA Member States to the UK. So far so good, and many companies may be breathing a sigh of relief that the 31st December ‘cliff edge’ has been avoided. However, the interim data transfer window comes with strings attached.
The draft Brexit Deal makes it clear that the interim data transfer window will only remain open provided that the UK: (i) does not change its data protection laws from those in place on 31 December 2020 (i.e. the UK GDPR); and (ii) does not exercise any of its ‘designated powers’ without agreement from Europe. The ‘designated powers’ referred to are a relatively long shopping list of actions that the UK may not take with respect to international data transfers. For example, it may not publish its own set of ‘standard contractual clauses’ or approve a draft Code of Conduct with respect to international transfers of data. If the UK takes any such action without agreement from Europe, then the transfer window will automatically close (meaning the companies would need to put additional transfer mechanisms in place to legitimise the transfer of data from the EU to the UK). This appears to be a relatively significant restraint on the UK’s autonomy over its own laws in the pending post-Brexit world, although presumably a concession that the UK was willing to make given that it had always intended to effectively transpose the GDPR into UK domestic law.
Implications for adequacy
It is difficult at this stage to understand what the implications of the Brexit Deal could be for the ongoing adequacy assessment being undertaken by the European Commission. The establishment of an interim 4-6 month data transfer window could lead some to be cautiously optimistic that the European Commission simply needs a bit more time to dot its ‘i’s and cross its ‘t’s with respect to adequacy. However, the relatively long shopping list of actions that the UK is prevented from taking in the field of data protection in order to keep the data transfer window open for that 4-6 month period hints at a nervousness within the European Commission that the UK may move away from the principles of the GDPR in the future, something that could prevent an adequacy decision being granted in its favour. As a result, many companies may be left with the distinct impression that the deal is simply delaying the inevitable cliff edge when it comes to data transfers. The implications of not obtaining an adequacy decision are particularly concerning when considering the possible implications of the CJEU judgment in the Schrems II case earlier this year (for further details, please see our Schrems blog posts available here). So whilst the interim data transfer window provided by the Brexit Deal will likely be welcomed, there nonetheless remains an anxious wait to understand the European Commission’s position on the long-term adequacy of the UK in the eyes of data protection law.
The Schrems II judgment from the Court of Justice of the European Union (read our blog post here) raised the bar for transfers of personal data to third countries by making clear that where Standard Contractual Clauses (“SCCs”) are being used, a level of due diligence needs to take place before any transfer can be made. This is to ensure that personal data originating in the EEA always carries with it protections which are essentially equivalent to those in the EEA. To help data exporters in that assessment, the EDPB has now issued guidance on how to carry out the due diligence exercise in practice (available here).
Whilst the “Recommendations 01/2020 on measures that supplement transfer tools to ensure compliance with the EU level of protection of personal data” are subject to consultation until the end of November, it seems doubtful that significant/material changes will be made post-consultation to the final version of the guidance without substantial lobbying.
Unfortunately for both data exporters and data importers, although the requirements are now relatively clear, the framework is complicated and will require focus and considerable effort to ensure that all transfers are taking place in a compliant manner. There also remains a significant question mark over certain data transfers and whether or not they will continue to be possible in the future in a GDPR compliant manner.
We have set out below our key takeaways and initial thoughts in short form. We have then provided a more detailed view of the suggested steps for those who are more interested in the detail but perhaps not all 50+ pages of it!
- The long and winding road to compliance: As mentioned above, the proposed exercise to be undertaken by organisations on a transfer by transfer basis is extensive and likely to be resource heavy and time consuming. Coming off the back of extensive re-papering exercises for Safe Harbor, GDPR, and Privacy Shield, as well as Brexit preparations, this is unlikely to be welcome news for privacy professionals seeking budgetary sign-off for another data protection compliance and re-papering project.
- Mapping and then more mapping: The data mapping exercise alone suggested by the EDPB requires organisations to understand data flows not only to their processors, but also onwards transfers all the way down the chain to subprocessors, their subprocessors, and beyond. It is unlikely that many controller organisations will have this information readily to hand at the level of granularity required. Some may argue this shows a lack of compliance with the record of processing activity (“ROPA”) requirements of the GDPR, but for large global organisations with complex data flows, this will likely just reinforce the impracticality of the ROPA requirements themselves as well as the proposed guidance.
- Mini adequacy assessments: A key element of the EDPB recommendations is the assessment required to ensure that the laws of the importing country contain the so-called European Essential Guarantees (“EEGs”). Essentially this appears to boil down to a mini ‘adequacy assessment’ to be carried out at an organisational level and, for some key countries such as the US, it appears that the working assumption must be that personal data is not subject to an equivalent level of protection. Indeed, a cynical view could well be that very few countries would satisfy the EEGs.
- Supplementary measures only a supplement? Although the recommendations set out various options for technical, contractual and organisational supplementary measures which could be used to protect personal data, the essence of the EDPB guidance appears to be that, in situations where the importer country does not meet the EEGs, the only available acceptable ‘supplementary’ measure would be to encrypt the data to such an extent that it cannot be read even by the data importer – not a practical solution in most circumstances. However, without this, the guidance appears to make it clear that contractual and/or organisational measures alone will not supplement the transfer to a sufficiently protected level.
- Two important use cases: Finally, it is worth mentioning two specific use cases flagged by the guidance where the EDPB confirms that it is incapable of envisioning any appropriate supplementary measures to protect the data when being imported to a country which does not satisfy the EEGs – presumably meaning that any such data transfer cannot and should not take place: (i) transfers to cloud services providers which require access to data in the clear; and (ii) group access (even on a remote basis) to personal data for shared business purposes. Given that these two use cases are likely to be key for many organisations, it is unclear at the moment how it is possible to be able to navigate a compliant route through the EDPB’s guidance.
The (devil is in the) detail
The EDPB guidance is broken down into six steps for organisations to take.
Step 1 – Know Your Transfers
The first step in the process requires data exporters to undertake a comprehensive analysis of all transfers of personal data to third countries taking place (including remote access and cloud storage). The EDPB expects data exporters to be able to develop this information through a combination of their records of processing activities, and any information that they provide in privacy notices regarding data transfers, but further due diligence may well be required. The EDPB also makes clear that this exercise must identify onwards transfers by processors to sub-processors in another third country (or the same third country as the processors).
Once all relevant data transfers have been identified, data exporters must ensure that each transfer complies with the data minimisation principle, and that they are “adequate, relevant and limited to what is necessary in relation to the purposes which it is transferred to and processed in the third country”.
This identification and evaluation exercise must take place before any data transfer is made, and before any data transfer is restarted after a suspension.
Step 2 – Verify your transfer mechanism
Once data exporters have a handle on where their personal data is going, they must then identify the Chapter V GDPR transfer mechanism that they are relying on for each transfer.
If a data exporter is relying on an adequacy decision in respect of a transfer to a third country, assuming the adequacy decision is still valid, then no further action will be required. However, data exporters must monitor adequacy decisions to ensure they remain valid.
For non-repetitive data transfers, it may be possible to rely on one of the derogations in Article 49 GDPR (hereafter “Article 49”). Such transfers should be of an exceptional nature, and meet the requirements in Article 49, but no further steps are required in relation to these guidelines when relying on such a transfer mechanism.
For any other data transfers relying on one of the Article 46 GDPR (hereafter “Article 46”) mechanisms, data exporters need to continue through this process. Whilst the Article 46 mechanisms do contain some inbuilt safeguards to ensure personal data maintains an equivalent level of protection to that which it has in the EEA, these will need to be supplemented in some cases.
Step 3 – Assess the Effectiveness of your Article 46 transfer mechanism
The EDPB guidance makes clear that an Article 46 transfer mechanism will not always be enough to ensure personal data maintains the same level of protection as it carries within the EEA. Data exporters must therefore work with data importers to identify any laws or practices in the relevant third country which could prevent the data importer from complying with their obligations under the Article 46 transfer mechanism. It is clear that the EDPB expects cooperation from data importers in this regard, and they will have an active role in providing “relevant sources and information relating to the third country in which it is established and the laws applicable to the transfer”.
The guidance notes that there will be a number of relevant factors when considering how local laws might affect a transfer, including the purposes for the transfers, the entities involved, the relevant types of personal data, and the format of the personal data. Data exporters need to consider data subjects’ ability to continue to assert their rights, the effectiveness of the safeguards in Article 46, and any requirements to disclose personal data.
In practice, much of the assessment of equivalence will turn on the extent to which public authorities can access or intercept personal data. The ability to require disclosure or access to personal data does not necessarily undermine an Article 46 transfer mechanism provided that the requirements are limited to what is necessary and proportionate in a democratic society, with European standards being the level against which this is assessed. To this end, the EDPB has published a second guidance document, the “Recommendations 02/2020 on the European Essential Guarantees for surveillance measures” (available here). It sets out the European Essential Guarantees (“EEGs”) which are the minimum requirements that must be respected to ensure that interferences with privacy and personal data “do not go beyond what is necessary and proportionate in a democratic society”. There are four constituent guarantees, although the EDPB emphasised that these should be assessed on an overall basis given that they are closely interlinked:
- processing should be based on clear, precise and accessible rules;
- necessity and proportionality with regard to the legitimate objectives pursued need to be demonstrated;
- an independent oversight mechanism should exist; and
- effective remedies need to be available to the individual.
If the EEGs cannot be met, then the personal data is not subject to an equivalent level of protection to the EEA.
Where legislation in the relevant third country is lacking, data exporters must evaluate the transfer mechanism against other relevant and objective factors, rather than subjective ones such as the likelihood of public authorities’ access to the personal data. These objective factors may include considering precedents, legislation and practice that might indicate that a public authority will seek access to the personal data (with or without the data importer’s knowledge) or elements which demonstrate that a public authority may be able to access personal data through the data importer or direct interception. Annex 3 sets out further possible sources of information to make this assessment, including case law, adequacy decisions and intergovernmental resolutions and reports.
It is important that data exporters document their assessment at this step thoroughly, as the EDPB has made clear that data exporters will be held accountable for the decision they make about the effectiveness of the transfer mechanism. If the data exporter concludes that the transfer mechanism is not effective, because it does not ensure an equivalent level of protection to the EEA, then it must either put in place effective supplementary measures (as outlined in step 4), or not transfer the personal data in question.
Step 4 – put in place supplementary measures
Where the Article 46 transfer mechanism alone does not provide effective protections, data exporters will need to consider whether there are supplementary measures which they can put in place in conjunction with the data importer to cure these deficiencies.
Supplementary measures must be identified on a case by case basis, meaning transfers to the same third country but to different data importers for different purposes may have different supplementary measures.
These measures will be technical, contractual or organisational in nature. However, where the aim of the supplementary measures is to manage access by public authorities, contractual and organisational measures alone are unlikely to be sufficient, and technical protections will be necessary to limit access by public authorities to the personal data.
The EDPB has set out non-exhaustive examples of possible measures in Annex 2 of the guidance.
- Technical measures
The range of technical measures that might be implemented will be familiar to data exporters.
Unsurprisingly, encryption is a key focus in the potential technical measures that might assist to ensure the security of data transfers. This includes robust encryption prior to transmission, and ensuring that the encryption itself is strong enough to survive brute force attacks (including during transmission). Limiting access to encryption keys may also be a useful tool for protecting personal data.
Pseudonymisation will be of assistance where the data importer does not require a disaggregated data set. However, the EDPB has cautioned that this may not be sufficient in cases where personal data relates to the use of information services, given that public authorities may already hold other relevant data.
Technical measures are not a complete solution. They will not assist in respect of third countries where public authorities have access to personal data beyond what is necessary and proportionate, and the data importer needs access to personal data to be in the clear.
- Contractual measures
Contractual measures will generally need to be supplemented by technical or organisational measures, because they cannot bind third party authorities. Additional provisions can complement those which are already in place under the applicable Article 46 transfer mechanism, and may include provisions:
- requiring the use of specific technical measures;
- requiring the data importer to provide the data exporter with information about the extent to which public authorities can access personal data;
- warranting that the data importer has not created or is not required to leave backdoors in its systems, or has not otherwise facilitated access for third parties;
- allowing audit or inspection to confirm whether personal data has been disclosed to public authorities;
- requiring the data importer to inform the data exporter if the law changes in a way which impacts the maintenance of an essentially equivalent level of data protection;
- if permitted by local law, requiring the data importer to provide regular notifications that there have been no orders to disclose personal data (the so called “Warrant Canary” method);
- requiring the data importer to assess the legality of any disclosure order and limiting its ability to disclose the personal data (such as an obligation to challenge orders where appropriate);
- requiring the data importer to inform public authorities of conflicts with Article 46 transfer mechanisms;
- limiting access to personal data without consent from the data subjects;
- obliging the data importer to notify data subjects of access requests or orders from public authorities; or
- obliging both the data importer and data exporter to assist data subjects in exercising their rights.
- Organisational measures
Organisational measures may be internal measures that the data exporter puts in place in its own business, or those which are imposed on data importers. Organisational measures can contribute to awareness within businesses about the risks to personal data from access by public authorities, and ensure that those handling personal data can respond confidently to them (including when to refuse requests).
The EDPB suggests the following:
- internal policies governing data transfers, with clear reporting, allocation of responsibilities and procedures for dealing with access requests;
- record keeping requirements for data access requests from public authorities;
- transparency reporting and summaries regarding public authority requests (where permitted by local law);
- strict data access and confidentiality policies, including data minimisation requirements;
- procedures to ensure the data protection officer, legal or audit functions are involved where appropriate;
- strict data security and data privacy policies;
- regular review of internal policies and supplementary measures; and
- commitments from the data importer not to engage in any onward transfer where an equivalent level of protection to the EEA cannot be guaranteed.
These lists are not exhaustive but provide a helpful starting point for tools that data exporters might use to put additional safeguards around their transfers.
Once appropriate supplementary measures are in place, provided an essentially equivalent level of protection has been reached for the relevant personal data, the transfer may proceed. Transfers should not start, or should be suspended until, this threshold has been reached.
The EDPB guidance does anticipate a situation where a data transfer might proceed despite the data importer being unable to meet its commitments under the Article 46 transfer mechanism, but those instances must be reported to the supervisory authority, who will suspend or prohibit the transfer where equivalent protection cannot be ensured. It remains to be seen how this would result in anything other than the transfer being prevented, and could result in a fine, so we do not anticipate many data exporters utilising this backstop.
Step 5 – Procedural steps relating to supplementary measures
Depending on the supplementary measures put in place, data exporters may need to take additional procedural steps.
- Standard Contractual Clauses
If data exporters need to add clauses to the SCCs to manage the supplementary measures that they have put in place, there is no need for permission from a supervisory authority to make such amendments, provided there is no direct or indirect conflict between the new provisions and the SCCs, and they do not limit or lower the protection afforded by the SCCs. Data exporters will need to be able to demonstrate this unambiguity if tested.
The EDPB is still reviewing the impact of the Schrems II judgment on BCRs. Given that they are contractual in nature, BCRs cannot prevent access to personal data by public authorities. Data exporters will still need to assess whether their current BCRs can maintain equivalent protection to the EEA, and if not, consider whether supplementary measures could be put in place to mitigate this.
- Ad hoc contractual clauses
As with BCRs, ad hoc clauses remain under review, and data exporters should consider whether supplementary measures are required in the interim.
Step 6 – Reassess Regularly
The EDPB guidance requires data exporters to monitor their data transfers to third countries on an ongoing basis. If there are any developments in third countries which could impact the assessment carried out under this process, the data exporter would need to carry out a re-evaluation. Transfers to third countries should be suspended or ended where the data importer has breached or cannot honour the commitments it has taken under the relevant Article 46 transfer tool, or where the supplementary measures the data exporter has put in place are no longer effective.
It is clear that the EDPB has put a lot of thought into outlining a comprehensive process which tries to provide a secure route to maintaining transfers of personal data to third countries.
However, for its comprehensiveness, the guidance is not practical and will be extremely challenging for organisations looking to be compliant without grinding international trade and data transfers to a halt.
The due diligence requirements for local laws are particularly onerous and are unlikely to be achievable by private companies alone. We expect this guidance will result in increased involvement from in-house legal teams, external counsel, or external consultants in assessing data transfers. That this obligation falls to businesses themselves, rather than central authorities, risks divergence. Some businesses may diligently follow the guidance, and invest in the process, and find themselves unable to continue certain data transfers, whereas some businesses may take a more risk-based approach and continue to transfer personal data on the basis of a combination of due diligence, risk assessments and technical, contractual and organisational supplementary measures. Given the sheer volume of transfers taking place, it will also be interesting to see how supervisory authorities actually manage compliance with the guidelines.
It also remains to be seen how much involvement there will be from data importers. In a similar way that many non-EEA controllers and processors uplifted their processes to meet a GDPR-standard as a cost of continuing to do business, we may see that data importers are forced to take an advisory role to maintain the confidence of data exporters and ensure that data transfers continue. In particular, it will be interesting to see how the global IT cloud providers respond given the challenges highlighted by the EDPB’s use cases (as described above).
It is clear that there is now a large task facing all organisations, as well as supervisory authorities, to get to grips with the guidelines and ensure that data transfer mechanisms are supplemented where appropriate and compliant. We will watch this space to see if any trends develop, or further guidance is issued by local supervisory authorities to help conduct this exercise in practice.
As we all continue to try to grapple with the implications of a no-deal Brexit, the last week or two has seen the publication of a few things of interest from a data protection perspective:
The EDPB’s view of data transfers in a no-deal Brexit scenario
On 12 February 2019, the European Data Protection Board (the “EDPB“) published a general information note on data transfers under the GDPR in the event of a no-deal Brexit (available here). In summary, the information note provides that organisations must comply with the GDPR when transferring personal data from the EU to the UK, which will become a “third country” for GDPR purposes (from 00.00 am CET on 30 March 2019). No new or additional safeguards are contemplated by the EDPB which effectively means that organisations must choose between:
- Standard contractual clauses (which the EDPB acknowledges are “ready to use”);
- Binding corporate rules;
- Codes of conduct or certification mechanisms (although none are yet approved/available under the GDPR); or
- Derogations such as individual explicit consent (although the EDPB emphasises that the derogations must be interpreted restrictively and mainly relate to processing activities that are occasional and non-repetitive).
For further information regarding the potential impact of a no-deal Brexit on data transfers, including an analysis of worked examples, please see our previous blog post available here.
The UK Government has published a “no deal” note to clarify how data protection law will work in the event that the UK leaves the EU without a deal. The note confirms that separate draft regulations and more detailed guidance will be published in the next few weeks but, in the meantime, it clarifies at a high level a number of key issues for organisations both within the UK and outside but doing business with the UK.
Following a UK Cabinet meeting on 14 November 2018, the UK Government has announced support for the text of a draft Withdrawal Agreement and an outline of the Political Declaration on the Future Relationship agreed with EU negotiators. The Withdrawal Agreement sets out the arrangements for the UK’s withdrawal from the EU on 29 March 2019 and includes a transition period through to 31 December 2020, during which EU law will continue to apply in and to the UK (the “Transition Period”). Data protection features in both the draft Withdrawal Agreement and the outline Political Declaration, reflecting the significance of the data protection rules to both the EU and the UK.
On 13 September 2018, the UK Government published a series of technical notes setting out the implications in various sectors and areas of a ‘no deal’ scenario (i.e. a scenario in which the UK leaves the EU without an agreement), including a note specifically covering data protection. The note sets out the actions UK organisations should take to enable the continued flow of personal data between the UK and the EU in the event that the UK leaves the EU in March 2019 with no agreement in place.
Transferring data from the UK to the EU
Even in the event of a ‘no deal’ scenario, the technical note confirms that there should not be any impact on the transfer of personal data from the UK to the EU and beyond. A combination of the UK Data Protection Act 2018 and the EU Withdrawal Act would incorporate the GDPR into UK law. As such, the provisions currently found in Chapter V of the GDPR, which prohibit the transfer of personal data outside of the EEA without adequate safeguards in place, would remain. UK entities would therefore continue to be able to freely send personal data from the UK to the EU, and would continue to need to satisfy an appropriate legal basis to legitimise the transfer of personal data beyond European borders.
The technical note further confirms that, “in recognition of the unprecedented degree of alignment between the UK and EU’s data protection regimes, the UK would at the point of exit continue to allow the free flow of personal data from the UK to the EU”. However, there is a potential sting in the tail as the technical note provides that the UK will keep this under review – once the UK data protection regime is no longer required to mirror the GDPR, it would in theory be possible for the UK Government to amend the UK rules to provide that, for example, no personal data could be transferred outside of the UK without additional safeguards in place – meaning that this could potentially change in the future.