On 25 January, the European Commission proposed a comprehensive reform of the EU’s 1995 data protection rules ‘to strengthen online privacy rights and boost Europe’s digital economy’. Since 1995, technological progress and globalisation have profoundly changed the way data is collected, accessed and used and, says the Commission, the 27 EU Member States have implemented the 1995 rules differently, resulting in divergences in enforcement. The Commission aims for a genuine single law which will do away with the current fragmentation and costly administrative burdens, leading to claimed savings for businesses of around €2.3 billion a year. It appears however that, judging from Commissioner Reding’s response to a question at the press conference, the law will not apply to the Commission itself. The initiative aims to help reinforce consumer confidence in online services, providing a much needed boost to growth, jobs and innovation in Europe.
’17 years ago less than 1% of Europeans used the internet. Today, vast amounts of personal data are transferred and exchanged, across continents and around the globe in fractions of seconds,” said EU Justice Commissioner Viviane Reding, the Commission’s Vice-President. ‘The protection of personal data is a fundamental right for all Europeans, but citizens do not always feel in full control of their personal data. My proposals will help build trust in online services because people will be better informed about their rights and in more control of their information. The reform will accomplish this while making life easier and less costly for businesses. A strong, clear and uniform legal framework at EU level will help to unleash the potential of the Digital Single Market and foster economic growth, innovation and job creation.’
More details, including the legislative texts, can be found here.
Don’t miss the SCL two-hour data protection update seminar on 22 February. This includes an in-depth look at the draft Regulation. Mark Watts, Christopher Millard and Hazel Grant are the speakers.
SCL welcomes comments on the proposals for publication here. See below for comments from Eduardo Ustaran, Jacob Kohnstamm, John Halton, Bridget Treacy, Richard Thomas, Maragaret Tofalides, Peter Hustinx and Shelley Thomas.
Brief Summary
The Commission’s proposals update and modernise the principles enshrined in the 1995 Data Protection Directive to guarantee privacy rights in the future. They include a policy Communication setting out the Commission’s objectives and two legislative proposals: a Regulation setting out a general EU framework for data protection and a Directive on protecting personal data processed for the purposes of prevention, detection, investigation or prosecution of criminal offences and related judicial activities.
Key changes in the reform include:
· A single set of rules on data protection, valid across the EU. Unnecessary administrative requirements, such as notification requirements for companies, will be removed. This will save businesses around €2.3 billion a year.
· Instead of the current obligation of all companies to notify all data protection activities to data protection supervisors – a requirement that has led to unnecessary paperwork and costs businesses €130 million per year, the Regulation provides for increased responsibility and accountability for those processing personal data.
· For example, companies and organisations must notify the national supervisory authority of serious data breaches as soon as possible (if feasible within 24 hours).
· Organisations will only have to deal with a single national data protection authority in the EU country where they have their main establishment. Likewise, people can refer to the data protection authority in their country, even when their data is processed by a company based outside the EU. Wherever consent is required for data to be processed, it is clarified that it has to be given explicitly, rather than assumed.
· People will have easier access to their own data and be able to transfer personal data from one service provider to another more easily (right to data portability). This will improve competition among services.
· A ‘right to be forgotten’ will help people better manage data protection risks online: people will be able to delete their data if there are no legitimate grounds for retaining it.
· EU rules must apply if personal data is handled abroad by companies that are active in the EU market and offer their services to EU citizens.
· Independent national data protection authorities will be strengthened so they can better enforce the EU rules at home. They will be empowered to fine companies that violate EU data protection rules. This can lead to penalties of up to €1 million or up to 2% of the global annual turnover of a company.
· A new Directive will apply general data protection principles and rules for police and judicial cooperation in criminal matters. The rules will apply to both domestic and cross-border transfers of data.
The Commission’s proposals will now be passed on to the European Parliament and EU Member States (meeting in the Council of Ministers) for discussion. They will take effect two years after they have been adopted.
Comments
Eduardo Ustaran, partner and Head of the European data protection team at law firm Field Fisher Waterhouse says:
‘The proposed legislation is the most radical global attempt ever to regulate the increasing exploitation of personal information. After many years of a principles-based approach, the new law goes much further than that and establishes a new system of powerful rights and very prescriptive and uniform obligations across the EU.
The extra-territorial reach of the new law is clearly targeted at companies operating on the internet and interacting with EU residents and is aimed at shaking up the way in which they tackle privacy issues. In particular, technology service providers outside the EU will face a whole range of new obligations. However, for those providers that are quick enough to demonstrate that they meet European standards this brings real opportunity – they will be able to market themselves as “safe processors” gaining an advantage over the competition.
Companies that fail to comply could find themselves facing substantial monetary fines based on their annual worldwide turnover.
However this is by no means the end of the road. My expectation is that 2012 will be a crucial year to influence the outcome of the new law and policy makers will be looking for input from all key stakeholders.’
Jacob Kohnstamm, Chairman of the Article 29 Working Party, says:
‘The proposals provide a sound basis for a European regulatory framework to effectively protect the fundamental right to data protection, but emphasises the need for further improvement.
I welcome the proposals that seek to reinforce the position of data subjects, to enhance the responsibility of controllers and to strengthen the position of supervisory authorities, both nationally and internationally. I believe that the rules proposed can put an end to the existing fragmentation and, subject to further improvement, strengthen data protection across Europe.
In particular, I welcome the inclusion of provisions that give incentives to controllers to invest, from the start, in getting data protection right (such as PIAs, Privacy by Design and by Default). The proposals place clear responsibility and accountability on those processing personal data, throughout the information life cycle.
I would underline the importance of the provisions intended to clarify and strengthen data subjects’ rights, notably by clarifying the notion of consent, the introduction of a general transparency principle and enhanced redress mechanisms. Also, the introduction of a data breach notification duty that provides consistency across all sectors is very welcome.
The proposals harmonise the powers and competences of supervisory authorities to more effectively ensure and where necessary enforce compliance, both individually and in cooperation with each other, for example, by being able to impose significant fines. With these measures robust and effective enforcement by DPAs can finally be realised.
But I do regret the Commission’s level of ambition in the area of police and justice and wish to underline the need for stronger provisions in this field.’
John Halton, technology specialist and partner at Cripps Harries Hall LLP says:
‘The “right to be forgotten” has been the most widely-publicised measure under consideration, and will certainly raise some tricky practical issues. However, I suspect that the biggest practical impact will come from the requirement for explicit consent, where consent is required. At present, certainly under UK data protection law, a lot of reliance is placed on implied consent; see, for example, the Information Commissioner’s guidance on the new cookies law. Explicit consent will greatly increase the practical burden on many businesses.’
Bridget Treacy, Partner, Hunton & Williams (http://www.hunton.com/bridget_treacy/) says:
‘The draft General Data Protection Directive is to be welcomed. There has been much criticism of EU data protection law, and the draft Regulation addresses many of these concerns. The reduction in red tape will be a real benefit for businesses. A single set of data protection laws across Europe, a single Data Protection Authority (as a “one stop shop”) and the need for a single authorisation are helpful, especially for smaller businesses. But not everything in the draft will be welcomed.
For UK organisations, the draft Regulation offers a mixed bag. Harmonisation of data protection laws will be at a higher level than we are used to in the UK. This will hit UK businesses particularly hard. The mandatory appointment of data protection officers with numerous prescribed obligations (such as mandatory Privacy Impact Assessments) will be expensive, particularly for smaller organisations. Also of particular note for the UK is the fact that data processors will have direct obligations under the legislation, and be subject to enforcement action, including fines.
In a radical change, companies that are based outside the EU, but which target their services at EU consumers, or monitor their behaviour, will find that they are subject to EU data protection law. This will be a significant issue for non EU companies to watch.
Mandatory reporting of data breaches within 24 hours will be difficult, if not impossible, to comply with. Increased enforcement powers, including fines of up to 2% of worldwide turnover, will ensure that data protection is taken seriously. Organisations will need to think strategically about data protection compliance . In the UK, companies are likely to lament the inevitable loss of a more pragmatic approach to enforcement.
The “right to be forgotten” has been widely hailed as a key legislative reform that will give individuals greater control over their data. In the formal draft of the Regulation, this right is not an absolute right. Importantly, the obligations on a controller to remove or take down data are now linked to the actions of that controller in publishing or authorising the publication. In the original leaked draft, there was a much more onerous and general obligation on the controller to erase such data.’
Richard Thomas, Global Strategy Advisor, Centre for Information Policy Leadership, Hunton & Williams (http://www.hunton.com/richard_thomas/), and former Information Commissioner, says:
‘The Commission’s wish to shift the focus is brave and welcome – away from paper-based, bureaucratic requirements and towards compliance in practice, genuine harmonization and individual empowerment. But there are real risks that new bureaucratic burdens will be created and that some proposals will be very difficult to implement in practice. The detail will require close scrutiny and more innovative solutions may be needed on some aspects.’
Margaret Tofalides, a specialist in privacy and data protection at Manches, says:
‘The proposals will change the basic DNA of online businesses, refocusing data protection to the centre of what they do through much tougher monitoring and reporting requirements and with explicit consent requirements, and greater rights for data deletion. Tools for tracking users interests, such as cookies and browsing, will face new challenges
In addition, the pressure on firms with more than 250 employees is now the need to employ a data protection officer. Data processors will now be directly liable for any breaches. Fines and penalties for violations are significant, as is the focus on the regulator taking action. Of fundamental importance is a new requirement to report data breaches within 24 hours if practicable.
Firms will have to demonstrate to the regulating authority, quite likely when they report breaches, that they have contingency plans in place to notify customers, cure IT system defects and contain damage or they could face enormous fines. This is a major change.’
Peter Hustinx, the European Data Protection Supervisor, says:
‘The proposal for the general rules on data protection is ambitious and constitutes a huge step forward for data protection in Europe. Although there is certainly room for further improvement, we generally support the solutions proposed by the Commission. This proposal is an excellent starting point for the adoption of European rules on data protection robust enough to face the information technology-driven challenges before us.
[as regards the Directive in the area of police and justice] The Commission has not lived up to its promises to ensure a robust system for police and justice. These are areas where the use of personal information inevitably has an enormous impact on the lives of private individuals. It is difficult to understand why the Commission has excluded this area from what it intended to do, namely proposing a comprehensive legislative framework.‘
See here for the full press release from the EDPS.
Shelley Thomas, Partner at Hill Dickinson, says:
‘It is difficult to see how a system that will harmonise the Data Protection regime across Europe can be anything but a good thing, and this does seem to be the consensus amongst early commentators. Certain proposals, such as the simplification of the process of securing Binding Corporate Rules protection, should assist organisations in the compliant transfer of personal data to those within their group that are outside the EEA, and will hopefully make this a more realistic option for such organisations.
Further, the removal of the requirement to notify is welcome. It is difficult to see what practical purpose the system serves for the average data subject, and the removal of the administrative burden on organisations (and cost, albeit small in many cases) is a good thing. The only downside would appear to be the removal of a source of revenue in notification fees- when introducing two tiered fees, the House of Commons Justice Committee Report Protection of Private Data considered that a ‘graduated rate would be more appropriate…and more suited to providing an adequate income for the policing of data protection’. It is perhaps questionable where that income will come from if notification is no longer a legal requirement.
Some may see the obligation on businesses that do not fit into the category of an SME (ie they have more than 250 employees) to appoint a Data Protection Officer as burdensome, but it could be a positive development. Most businesses of this size will have an individual undertaking at least some of the envisaged role already (albeit maybe not with an official title) and obliging them to make an appointment will remove doubt as to responsibility, and create a point of focus for compliance.
One point to note is the definitions of ‘personal data’ (any information relating to a data subject) and ‘data subject’, which, although not very different from those definitions in the 1995 Directive, are potentially wider than the corresponding definitions in the Data Protection Act that UK companies are used to. Such a definition of ‘personal data’ could widen the scope of the information which needs to be disclosed in response to a Subject Access Request, for instance, and the circumstances in which companies need to have regard to data protection law, but it could remove any doubt as to whether a particular piece of information (for instance, a car registration number) constitutes personal data.’
