On September 8, 2017, the Federal Trade Commission (FTC) announced enforcement actions against three companies alleged to have falsely claimed participation in the EU-U.S. Privacy Shield Framework. The move follows several months of uncertainty surrounding the Framework’s future as EU officials and privacy advocates have questioned its efficacy and validity in the run-up to the first annual joint review set to begin next week.
FTC Enforcement Actions
According to the FTC’s complaints, the three companies claimed on their websites to have self-certified to the EU-U.S. Privacy Shield Framework – and in one instance, also the Swiss-U.S. Privacy Shield Framework – whereas allegedly they had not completed the certification process.
The Commission’s allegations in these cases did not concern substantive violations of the Privacy Shield Principles; rather, they focused on misrepresentations regarding certification status. This should come as no surprise: in an April 13 blog post, the FTC issued a direct warning that it “will pursue enforcement if companies mislead consumers about their participation in Privacy Shield.”
These enforcement actions are likely to be a topic of conversation during the upcoming first annual joint review of the Privacy Shield Framework, which is scheduled to begin next week and will involve representatives from the U.S. Department of Commerce, the European Commission, the Article 29 Working Party and the FTC.
Concerns and Criticisms
Ahead of that meeting, Jan Philipp Albrecht, Vice Chairman of the European Parliament’s Civil Liberties, Justice and Home Affairs Committee (LIBE), stated that it is “a bit unclear” whether the commitments the Obama administration made to limit government surveillance will be maintained by the Trump administration, and that “the new administration is making … Europeans … nervous.” Albrecht confirmed that EU officials “are insisting” that the prior commitments be maintained because “otherwise it will be hard for European legislators to … justify data transfers” to EU citizens.
In recent months a growing number of EU regulators and other stakeholders have voiced apprehension about the Privacy Shield’s viability.
In July, a delegation from the LIBE Committee visited Washington, D.C., for discussions about immigration, counterterrorism and data protection matters. Although all parties reiterated their continued commitment to the Privacy Shield’s functionality, LIBE Chair Claude Moraes also stressed that “deficiencies still remain which need to be urgently resolved to ensure that the Privacy Shield doesn’t suffer from critical weaknesses.” Such deficiencies include the fact that the Secretary of State has yet to appoint a permanent Ombudsperson, as set forth in a February 2016 memorandum from former Secretary of State John Kerry regarding Signals Intelligence. The introduction of the Ombudsperson role is an important component of the Privacy Shield Framework that differentiates it from its predecessor, the Safe Harbor Framework.
Humanitarian organizations have echoed EU authorities’ concerns about the Privacy Shield. In July, Human Rights Watch and Amnesty International sent a joint letter to EU Justice Commissioner Věra Jourová urging the Commission to re-evaluate its adequacy determination, stating that the Privacy Shield does not “ensure a level of fundamental rights protection regarding the processing of personal data that is essentially equivalent to that guaranteed within the EU.”
Also in July, the Court of Justice of the European Union (CJEU) issued an opinion that may impact the Privacy Shield’s future. The case involves a draft passenger name record (PNR) agreement that allows law enforcement and national security officials to access certain airline passenger data. Although PNR agreements are not directly analogous to the Privacy Shield Framework, the opinion marks the first time the CJEU has addressed the conditions for authorizing cross-border personal data transfers through treaties. In the ruling, the court advised the European Parliament to amend the draft PNR to better protect fundamental privacy rights. In particular, the court found the draft pact’s “provisions of the agreement on the transfer of sensitive data to Canada and on the processing and retention of that data are incompatible with fundamental rights” and failed to provide sufficient notice to individuals about onward data transfers beyond the initial recipient. Further, the court expressed a desire for a guarantee that the proposed Canadian oversight would be carried out by an independent supervisory authority (not unlike the Privacy Shield Ombudsman). On July 12, Commissioner Jourová tweeted that the “independence and efficiency of the ombudsperson is crucial.”
In June, the Article 29 Working Party discussed the upcoming annual review in a letter questioning certain aspects of the Privacy Shield and indicating its intention to examine both commercial and law enforcement access to, and management of, EU personal data. In particular, the Working Party is eyeing “the latest developments of US law and jurisprudence in the field of privacy” and “seeks, inter alia, precise evidence to show that bulk collection, when it exists, is ‘as tailored as feasible’, limited and proportionate.” Finally, the group “stresses the need to obtain information concerning the nomination of the four missing members of the [U.S.] PCLOB (Privacy and Civil Liberties Oversight Board) as well as on the appointment of the Ombudsperson and the procedures governing the Ombudsperson mechanism, as they are key elements of the oversight architecture of the Privacy Shield.”
On April 6, the European Parliament adopted a resolution regarding the “adequacy” of certain Privacy Shield provisions. The resolution, originally proposed and narrowly passed in late March by the LIBE Committee, sets forth a list of concerns and calls on the European Commission to thoroughly examine them in the joint annual review. For example, the resolution calls out recent developments in the U.S. affecting data protection, such as Congress’s nullification of the Federal Communications Commission’s broadband privacy rule. The resolution also “stresses that any kind of mass surveillance is in breach of the EU Charter” and seeks a definition of “bulk surveillance” that is tied to the European understanding of the term. Further, the resolution expresses alarm about revelations that U.S. authorities continue to carry out mass surveillance, indicating such reports had caused the Parliament “to strongly doubt the assurances” of the Office of the Director of National Intelligence surrounding national security and surveillance.
Following the March LIBE Committee vote on the adequacy resolution, LIBE Chair Moraes stated that “the Commission needs to conduct a proper assessment to ensure” the certainty of the Privacy Shield’s “robust legal framework.” The adoption of the resolution and call for a thorough assessment coincided with Commissioner Jourová’s visit to the U.S. at the end of March, during which she discussed the Privacy Shield. Speaking at the Center for Strategic and International Studies, she praised the “growing number of U.S. companies” that have endorsed the framework but stressed that, to guarantee its proper functionality, authorities would have to ensure “that the key foundations of the Privacy Shield remain in place” and safeguard “the proper day-to-day implementation and robust follow-up of the Privacy Shield.”
On top of the above-mentioned developments, the Privacy Shield also faces two legal challenges currently pending before the CJEU. The first was filed on September 16, 2016, by Digital Rights Ireland, an Irish privacy advocacy group that has a history of successfully challenging EU legislation. The second legal challenge was filed on October 25, 2016, by the not-for-profit internet service provider French Data Network, its Federation FDN industry association and the French privacy advocacy group La Quadrature du Net. Limited information is available on the CJEU’s website, but reports indicate that the challenge contends that the U.S. Ombudsperson lacks sufficient independence and is not an effective mechanism for dealing with data protection complaints.