EU-U.S. Privacy Shield Survives First Annual Review

by King & Spalding
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On October 18, 2017, the European Commission (“EC”) published its report (“Report”) on the results of the first annual joint review of the functioning of the EU-U.S. Privacy Shield (“Privacy Shield”). The Report is good news for the approximately 2,400 companies that already have been certified under the Privacy Shield:  According to the EC, the annual review has demonstrated “that the U.S. authorities have put in place the necessary structures and procedures to ensure the correct functioning of the Privacy Shield” and, therefore, “the United States continues to ensure an adequate level of protection for personal data transferred under the Privacy Shield.”

The Privacy Shield was designed by the U.S. Department of Commerce (“DoC”) and the EC to provide companies with a mechanism to comply with European data protection requirements when transferring personal data from the EU to the U.S. (see here for more details). A transfer of personal data from the EU to Privacy Shield-certified companies in the U.S. is considered “adequate” by the EC and, therefore, allowed under EU privacy laws without further notification or consent requirements. The Privacy Shield, which has been operational since August 1, 2016, replaced the previous Safe Harbor Agreement, which was invalidated by the European Court of Justice in the Schrems case in October 2015 (see here for more details).

To regularly verify that the findings in the EC’s adequacy decision remain factually and legally justified, the Privacy Shield framework provides for an annual evaluation (“Annual Review”). The Annual Review is intended to cover all aspects of the Privacy Shield, including the implementation, administration, supervision, and enforcement of the Privacy Shield framework by competent U.S. authorities and bodies, but also questions relating to the access by U.S. public authorities to personal data transferred under the Privacy Shield for public interest purposes, in particular national security. The results of the review on this point were considered critical given that mass surveillance was a central issue in the Schrems case.

The Annual Review meeting took place on 18 and 19 September 2017 in Washington, D.C., and was attended, inter alia, by representatives of the EC; the EU’s Art. 29 Working Group; several U.S. departments; the U.S. Office of the Director of National Intelligence; the EU-U.S. Privacy Shield Ombudsperson; and the American Arbitration Association. The EC advised in the Report that the conclusions in the review were also informed by information and feedback it has received from several relevant stakeholders, such as trade associations, NGOs, and U.S. authorities, as well as by publicly available materials, such as court decisions, implementing rules and procedures of relevant U.S. authorities, reports and studies from NGOs, and transparency reports and studies.

Based on the evaluation of this information, the EC found that “the certification process has been handled in an overall satisfactory manner” and “the U.S. authorities have put in place the complaint-handling and enforcement mechanisms and procedures to safeguard individual rights.” Regarding the access to personal data by public authorities for national security purposes, the EC noted that “relevant safeguards on the U.S. side remain in place.” In this respect, the EC specifically referred to the Presidential Policy Directive-28 issued in 2014 (“PPD-28”), “which sets out limitations and safeguards on use by national security authorities of personal data, regardless of nationality of the individual.

In the Report, the EC also identified areas where there is room for improvement and provided recommendations:

  • The EC criticized, for example, that in the past, companies have referred to their Privacy Shield certification prior to the completion of the certification process. The EC therefore asked the DoC to clarify in the certification rules that companies should not be allowed to make public representations about their Privacy Shield certification before the DoC has finalized the certification and included the company in the Privacy Shield list.
  • The EC wants the DoC to be more proactive about preventing misrepresentations regarding Privacy Shield registrations both regarding companies that have initiated but not completed the registration process and companies that never applied for certification at all. The EC also recommended that the DoC conduct compliance checks on a regular basis, such as regarding compliance with the provision on onward transfers or data retention.
  • The Report includes several further suggestions and ideas on how the protection standard could be further improved, specifically with respect to intelligence. The EC suggested, for instance, enshrining the privacy protections offered by PPD-28 with respect to non-U.S. persons in the Foreign Intelligence Surveillance Act and called upon the U.S. administration to publicly release reports of the Privacy and Civil Liberties Oversight Board on the implementation of PPD-28.

A more detailed summary of the factual findings of the Annual Review is published in the Commission Staff Working Document, which supplements the Report.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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