Receiving Data from Europe: The EU-US Privacy Shield

by Clark Hill PLC
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The European Union ("EU") recently announced that the new EU-US Privacy Shield Agreement ("Privacy Shield") is adequate to meet EU data privacy requirements and allow for the transfer of personal data from the EU to the US in support of transatlantic commerce. Here is a basic primer on the Privacy Shield and EU-US data transfers. As noted below, the new framework offers organizations certain incentives for self-certifying under the Privacy Shield before September 30, 2016.

BACKGROUND

Privacy laws govern the personal information that organizations collect from individuals: how they collect that information, how they use the information they collect, and whether and how they can transfer it. As a point of distinction, security laws govern the physical, technical and administrative safeguards we employ to prevent unauthorized access to such information. Although containing elements relating to security, the Privacy Shield, as its name suggests, is a law about privacy, and specifically about the privacy of persons in Europe whose personal data is transferred to the United States. (For example, a European division wants to transfer personal data about employees or customers to its US headquarters.)

The EU places a much higher emphasis on privacy as a fundamental individual right than does the US, and this difference in approach has given rise to ongoing concerns in the EU about the privacy of personal data exported from Europe to the US. Indeed, European law prohibits the transfer of personal data to countries that do not meet EU privacy protection standards. By the late 1990s, there was a real threat that EU law would restrict ability of corporations to transfer personal data of EU citizens to the US. Without question, had the EU blocked cross-border data flow, the implications for business would have been staggering. Not surprisingly, the US Department of Commerce and the EU quickly worked out a deal that became known as the Safe Harbor Framework, adopted in 2000. The Safe Harbor Framework offered US companies the opportunity to voluntarily certify that they followed data privacy practices satisfying the EU standard so as to allow data transfer from EU to the US.

For 16 years, the US operated under the Safe Harbor Framework; however, EU authorities continued to be skeptical of its effectiveness. The problems, as identified by the EU in Communication (2013) 847 Final, included lack of accessibility and transparency with respect to participants' privacy policies, limited regulatory oversight and enforcement, and inadequate means for redress by EU citizens. The EU also expressed concern with the US government's data collection practices, which were revealed by Edward Snowden in 2013. 

The situation came to a head in Maximillian Schrems v. Data Protection Commissioner, in which the European Court of Justice ("ECJ") invalidated the Safe Harbor Framework as failing to meet the EU adequacy standard. The ECJ held that the combination of US law, standards, and enforcement was inadequate to ensure an EU standard of protection by US organizations - as required by EU law. The ECJ in the Schrems case also pointed to the US government's interference with the fundamental rights of individuals whose data is collected in connection with national security activities.

After Schrems, the pressure on the EU and US to reach a new agreement intensified. The Privacy Shield was announced in late February 2016 and became available for review and comment as part of its formal adoption by the EU. This process culminated with the announcement on July 12, 2016 of the EU's Adequacy Determination and formal adoption of the Privacy Shield. While the Privacy Shield is now officially in place, and the US Department of Commerce began accepting certifications as of August 1, 2016, the long-term validity of the Privacy Shield is still in question. Critics claim that the Privacy Shield is not strong enough, particularly with respect to bulk data collection practices by the US Government. There continues to be speculation that the Privacy Shield will face another legal challenge. Accordingly, companies as a whole have been slow to certify their compliance with the Privacy Shield.

In discussing the Privacy Shield, it should be noted that there are other mechanisms for achieving compliance, including Model Contract Clauses and Binding Corporate Rules which are discussed briefly below.

PRIVACY SHIELD FAQs  

1. Does the Privacy Shield apply to my organization?

The Privacy Shield is voluntary and is one of several possible methods for meeting EU data protection standards. The Privacy Shield applies to personal information, as defined under European law, transferred from the EU to the US. Personal information under European law means information about an identified or identifiable individual. "[A]n identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity." European Directive 95/46/EC. It is important to keep in mind that personal information is a broad concept under EU law.

In order for organizations in Europe to transfer personal information to an organization in a country outside the EU without violating European law, that country must demonstrate an adequate level of data protection. The Privacy Shield was developed to remediate what European lawmakers considered a failure to meet the adequacy requirement by the US. Accordingly, if your organization intends to receive personal information from the EU inbound to the US, then you may want to consider the Privacy Shield as one way to meet the adequacy requirement.  (See, FAQ No. 4 regarding alternatives.)

Although voluntary, once invoked the Privacy Shield is enforceable under US law. In order to be eligible to invoke the Privacy Shield as your compliance option, your organization must be subject to the regulatory authority of either the Federal Trade Commission ("FTC") or the Department of Transportation ("DOT"). Although organizations should assure themselves on this point of eligibility, the Department of Commerce provides some guidance in "How to Join Privacy Shield: Guide to Self-Certification":

Generally, the FTC's jurisdiction covers acts or practices in or affecting commerce by any "person, partnership, or corporation." The FTC does not have jurisdiction over most depository institutions (banks, federal credit unions, and savings & loan institutions), telecommunications and interstate transportation common carrier activities, air carriers, labor associations, most non-profit organizations, and most packer and stockyard activities. In addition, the FTC's jurisdiction with regard to insurance activities is limited to certain circumstances.   
The DOT has exclusive jurisdiction over U.S. and foreign air carriers. The DOT and the FTC share jurisdiction over ticket agents that market air transportation.

2. What does the Privacy Shield require? What sort of resource commitment will I be making?

A. Satisfy the Privacy Shield Principles. Organizations wishing to achieve Privacy Shield compliance must first conform their privacy practices to the Privacy Shield Principles. These principles are the foundation of the Privacy Shield Framework, and include the following (with very specific directives):

  1. Notice (covering 13 different aspects of data collection, storage and use);
  2. Choice (including opt-out procedures regarding disclosure to third parties or for uses different than what the data was originally collected for);
  3. Accountability for onward transfer (specifies the steps the collecting entity must take when transferring data to third parties as either "controller" or "agent" to ensure adherence to the Principles);
  4. Security (including reasonable and appropriate measures to protect data);
  5. Data Integrity and Purpose Limitation (use and process consistent with the reason it was collected);
  6. Access (individuals must have access to information that is collected); and
  7. Recourse, Enforcement and Liability.

There are also 16 Supplemental Principles addressing certain points from the Privacy Shield Principles in more detail - also noting exceptions to the Principles. 

Assuring that data practices meet the EU adequacy standard may be highly resource-intensive. Organizations will need to perform an audit of transatlantic privacy practices that includes a gap analysis, and remediate shortcomings in existing practices. The type and level of audit will of course depend on a number of factors, including the nature of the organization, the data flow internally and externally, the nature and number of third-party relationships having access to the data, and the organization's prior experience with cross-border compliance, including with the Safe Harbor Framework.

B. Privacy Policy. Under the Notice Principle, an organization that elects to certify Privacy Shield compliance must publish a compliant Privacy Policy in which the organization publicly declares its commitment to following the Principles and that accurately reflects the organization's privacy practices. This is a critical component of the Privacy Shield framework. Note: for organizations only transferring HR data, the privacy policy need not be published to the public generally, but needs to be available to affected employees such as on an internal network, and the organization must provide a copy of the Policy to the Department of Commerce and inform the Department where affected employees can access the policy.

The requirements associated with privacy policies under the Safe Harbor regime have been strengthened and enhanced in a number of respects under the Privacy Shield Framework. Like any privacy policy, a privacy policy under the new Privacy Shield framework must be customized to the unique data practices of the organization. To the extent that the organization conducts its audit processes with care prior to commencing the drafting process, that process will be made all the more efficient.

C. Onward Transfer to Third Parties. The Principles contain tight restrictions on the organization's transfer of personal information to third parties. The nature of the restriction depends on whether the third party is: (i) a "controller," i.e., a party "which, alone or jointly with others, determines the purposes and means of the processing of personal data;" or (ii) an "agent" that processes the data on behalf of the organization. 

Principle 3 provides that to transfer data to a controller, organizations must, in addition to other requirements, "enter into a contract with the third-party controller that provides that such data may only be processed for limited and specified purposes consistent with the consent provided by the individual and that the recipient will provide the same level of protection as the Principles. . . ."

If the transferee is an agent, the organization must, among other obligations: "(i) transfer such data only for limited and specified purposes; (ii) ascertain that the agent is obligated to provide at least the same level of privacy protection as is required by the Principles; (iii) take reasonable and appropriate steps to ensure that the agent effectively processes the personal information transferred in a manner consistent with the organization's obligations under the Principles. . . ."

D. Register with the Department of Commerce. The Privacy Shield is voluntary and requires self-certification to invoke its protections. Organizations must re-certify annually; therefore, your organization needs to remain abreast of Privacy Shield requirements and periodically audit your privacy practices for compliance. If the organization elects to leave the Privacy Shield, it still must certify annually to the Department of Commerce its commitment to apply the Principles to information obtained as a participant that it elects to retain. 

Once invoked, the Privacy Shield's obligations are enforceable as a matter of US law and compliance will be monitored by the Department of Commerce and the FTC or DOT. Indeed, oversight and enforcement are key components of the Privacy Shield designed to address shortcomings identified by the EU regarding the Safe Harbor Framework. Organizations invoking the Privacy Shield should expect that they will be subject to heightened scrutiny regarding compliance with the Principles.

E. Enforcement Mechanism. Lawmakers in the EU were particularly concerned with what they perceived to be inadequate enforcement of the Safe Harbor Framework. As a result one of the primary differences with the Privacy Shield is the creation of specific recourse mechanisms that carry with it the threat of regulatory enforcement. Enforcement is addressed in Principle 7, Recourse, Enforcement and Liability, and further detail is provided in Supplemental Principles 5, 7, and 11. In short, the Privacy Shield promotes a layered system of different mechanisms to address complaints from European individuals regarding their personal data.

First, organizations are encouraged to create an internal mechanism for receiving, investigating, responding to, and resolving claims and to encourage individuals to use this process before turning to the formal dispute resolution process. Second, in order to be compliant with the Principles entities must either provide an independent dispute resolution mechanism at no cost to the individuals (Supplemental Principle 11) or agree to cooperate directly with Data Protection Authorities ("DPAs") in the resolution of claims through the dispute resolution procedure established by the DPAs (Supplemental Principle 5) (a must for HR data). Third, organizations need to establish a procedure for verifying compliance with the Principles and that they are being followed in practice (Supplemental Principle 7). This can be achieved through an independent body (such as the independent resource mechanism) or an internal audit procedure. Finally, organizations also agree to submit to binding arbitration to resolve any claims that remain unresolved after resort to the other processes.

The Department of Commerce, FTC and DOT have all committed to enforcing the Privacy Shield. The Department of Commerce will maintain the self-certification registry and take the lead on verifying compliance with the certification requirements such as publication of the privacy policy. The FTC will be taking a prominent role in enforcing the Privacy Shield Principles and will utilize its authority to regulate deceptive practices to ensure compliance. In addition, the FTC and DOT have committed to working with DPAs to expeditiously resolve complaints referred by the DPAs and to investigate claims of non-compliance with the Principles and/or failure to cooperate.

3. How Does the Privacy Shield Differ from the Safe Harbor Framework? 

As noted above, European regulators were dissatisfied with the Safe Harbor Framework, particularly as it related to enforcement. Among the ways in which the Privacy Shield offers added protection are the following: enhancement and transparency of notice, including a declaration of the organization's participation in the Privacy Shield and publication of its privacy policy; strengthened obligations with respect to transfer of data to agents and controllers; continued certification obligations with respect to personal information acquired under the Privacy Shield and retained after the organization leaves the Privacy Shield; requiring that independent recourse mechanisms be provided at no cost to the individual, and requiring prompt responses to Department of Commerce, FTC and DOT inquiries and complaints relative to the Privacy Shield.

4. Are There Alternatives to the Privacy Shield?  

As noted, the purpose of submitting to the Privacy Shield Framework is to meet the adequacy requirement for transatlantic data transfer. There are alternative mechanisms for meeting the adequacy requirement, and thereby allow for data transfer to the US from Europe without joining the Privacy Shield Framework: 

  1. Standard Contractual Clauses. A set of contractual terms approved by the EU for inclusion in commercial contracts to ensure compliance with EU data protection standards. In essence, these contractual terms legally bind the contracting parties to adhere to EU data protection standards and subject them to the jurisdiction of the relevant DPA in the event of a breach or dispute by an individual whose data is subject to the transfer. These are potentially a good option for US companies dealing with a limited number of European companies but may be less practical for organizations that deal with multiple data sources. Standard Contractual Clauses have also come under scrutiny by privacy advocates in the EU and there is speculation that they may be subject to similar legal challenges as were raised against Safe Harbor and are anticipated with respect to Privacy Shield.
  2. Binding Corporate Resolutions. Organizations can adopt binding corporate resolutions with the approval of the relevant DPA (e.g., Germany for German-domiciled exporter of personal data). This option creates a legally enforceable right in the individuals whose personal data is subject to the transfer. Binding corporate resolutions, however, have limited application as they are only available for intra-company transfers in multinational corporations. 
  3. Derogations. These are a set of exceptions that apply in certain enumerated situations. These are limited in scope and by their nature are meant to apply in situations where other means for satisfying an adequate level of protection are impossible or at least impractical for the organization. Thus, they should not be viewed as a method to secure general compliance with EU data protection standards. 

Organizations should carefully review their particular circumstances with their professionals to determine the course that is best for them. 

5. When Should My Organization Register? 

The Department of Commerce opened registration for the Privacy Shield on August 1, 2016. If your organization desires to register, you may want to consider accelerating plans to register before September 30, 2016. As an incentive to early certification, organizations that register between August 1, 2016 and September 30, 2016 have up-to nine months from the date of certification to bring existing commercial relationships into compliance with the Accountability for Onward Transfer Principle.

6. Where Can I Go to Find Out Additional Information?

Organizations that desire to review additional materials should visit the official Privacy Shield website.

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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JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

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Collection of Information

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Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

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We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

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How We Protect Your Information

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Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
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You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

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  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

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How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

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There are different types of cookies and other technologies used our Website, notably:

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If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

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Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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