European Privacy Reform: Council Chooses Quality Over Speed

by Latham & Watkins LLP

On March 4, 2014, a policy debate was held in the European Justice and Home Affairs Council concerning the planned General Data Protection Regulation. The debate focused on several issues related to Chapters I through V of the draft Regulation. The main issues were the territorial scope of the Regulation and the provisions regarding data transfers to third countries. Most of the Member State representatives in the Council opted for a far-reaching territorial scope, which would make the Regulation applicable to most foreign companies with customers or users in the European Union. As regards to third country transfer of personal data, the majority of the Member States wishes to retain, in principle, the instruments as they exist today. The future of the US Safe Harbor Principles was not tackled in the debate and is still uncertain.

Another topic of the debate was profiling. The representatives of the Member States were asked if they believed the provision should only apply for decisions significantly affecting the data subject or if a general provision on the creation and use of profiles should be introduced. Germany, France and Austria were very much in favor of the second option. The majority of the Member States, however, opposed such a solution. There seems to be growing support in the Council to rather avoid the application of the provision to - for example - profiling for marketing purposes, because such profiling does not significantly affect the data subjects. This might not be the final decision on the point, because the proposal made by the LIBE Committee of the European Parliament is more far-reaching, but in the European legislative process the opinion of the Council usually wins over proposals of the Parliament.

There were three more topics on the agenda:

1.       Pseudonymization: The EC Council of Ministers discussed several proposals as to how the Regulation should address the issue of the processing of pseudonymized data. This is relevant for big data or web analytics. Pseudonymized data falls into the scope of the Regulation whilst anonymized data does not. Therefore, the definition of each is very relevant for companies who rely on the assumption that the data they use is anonymous (especially market research companies or OBA service providers). Given the definitions by the Council, the Regulation might become applicable to data which, pursuant to current law, are considered to be anonymous and, therefore, not regulated.

2.       Portability of personal data: The Council plans to retain the right to data portability in the draft Regulation. The original aim of the provision was to give the data subject the right to transfer data from one internet service provider to another. However, the provision would be applicable to all types of businesses, because of the technology neutral approach of the Regulation. Only public administrations are to be expressly exempt from the provision now. It is also under discussion, whether the data transfer obligation should restricted to certain kinds of data. It remains to be seen, whether this provision will finally turn out to be practical.

3.       Obligations for commissioned data processors: The provisions for commissioned data processing are very important for businesses, because they are the basis for engaging service providers in and outside the European Union. The Amendments discussed by the Council aim at a simplification. For example, codes of conduct or certifications shall be regarded as a method of providing adequate guarantees for technical and organizational security measures. It is quite obvious that the Council is trying to modify the provisions in a way that they become more practical for cloud computing. Furthermore, the Council proposes provisions for the commissioning of subcontractors. On the whole, this makes the provisions better to handle.

The results of the policy debate in the Council will be important for the remaining legislative procedure, but they are only one step on the way to the final adoption of the General Data Protection Regulation. The debate mainly aimed at forming an opinion regarding the individual topics. In essence, the Council referred the issues back to the Council Working Group DAPIX and is still far from reaching a final agreement. The task of the Working Group is to turn the original proposal of the Commission into a qualitative, proportional and modern legislative framework taking the real risks for the privacy of citizens into account.

The Working Group will have to revisit most parts of the proposed Regulation in detail. This will, most likely, not happen prior to the next Justice and Home Affairs Council Meeting on June 5 and 6, 2014. There are still more fundamental issues to be discussed in this Meeting which marks the end of the Greek Presidency in the Council. One of the potential topics of the meeting will again be the one stop shop principle which aims to concentrate and coordinate supervision by national data protection authorities. The Council will probably also discuss, whether or not the Regulation shall be applicable for the public sector. Another open question is, whether parts of the proposed Regulation should better be governed by a Directive in order to give Member States more flexibility.

In its session on March 11 and 12, 2014, the European Parliament wants to adopt the amendments to the reform proposed by the LIBE Committee. However, the ideas of the LIBE Committee are far from identical with the modifications discussed by the Council. Sometime after the European Parliament elections (scheduled for May), Parliament and Council plan to discuss the differences with guidance by the European Commission in order to streamline their individual ideas (so-called “Trilogue”). This will only make sense, though, once the Council has developed its own position. Therefore, it is not very likely that the Regulation will be passed in the course of this year. The Regulation will, most probably, not come into force before 2016.

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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