Yesterday, European and U.S. policy makers agreed on a deal creating a new "safe harbor" framework for data transfers from Europe to the United States dubbed the EU-U.S. Privacy Shield ("Privacy Shield"). This Privacy Shield places robust obligations on U.S. companies to protect Europeans' personal data and ensure stronger monitoring and enforcement by the U.S. Department of Commerce and Federal Trade Commission ("FTC"), including increased cooperation with European regulators.
This new EU-U.S. data transfer accord would replace the 15-year-old Safe Harbor agreement invalidated by the European Court of Justice ("ECJ") last October because it failed to comply with European data protection law. The ECJ ruling called into question the legality of many U.S. companies' data processing activities.
Transatlantic data transfers are used in a variety of industries for sharing employee information, processing consumer credit card information, travel, ecommerce transactions or targeting ads based on customer preferences. Now, U.S. companies wishing to import personal data from Europe under the Privacy Shield framework must commit to robust obligations on how personal data is processed and individual rights are guaranteed. In addition, any company handling human resources data from Europe must comply with decisions by European regulators. European data protection authorities will also work with the FTC to police the system and respond to complaints from EU citizens about their data being misused. The Privacy Shield also provides for the United States to create an Ombudsman within the State Department to deal with complaints forwarded by European regulators, an alternative dispute resolution mechanism to resolve grievances made by EU citizens, and a joint annual review of the Privacy Shield framework by the FTC and the European Commission.
An agreement between the EU and United States that provides a pathway for data transfers is seen by many as critical for continuation of digital data transfers. However, the Privacy Shield must overcome several hurdles before it becomes legally binding. First, all of the EU's 28 member states must approve the deal. The data regulators from each state are expected to meet February 3 to determine whether to recommend approval of the new agreement. The deal must also comply with the ECJ's October ruling to withstand legal challenges under European law. Many European regulators have been vocal about the lack of oversight under U.S. law of the protection and use of European data. In addition, European privacy-rights activists may challenge the deal in European courts as they did in Schrems, which ultimately led to the ECJ's October invalidation ruling.
In the coming weeks, European officials will prepare a draft "adequacy decision" which could then be adopted by the College of Commissioners. In the meantime, the United States will make the necessary preparations to put in place the new framework, monitoring mechanisms and Ombudsman position.
We will continue to monitor and provide updates as we track the new rules under the EU-U.S. Privacy Shield. If you have questions regarding the potential effects of this agreement or any other data security concerns relating to your organization, please contact an attorney on our Data Security & Privacy Team.