Keep Calm and Transfer Appropriately

By Stephen Reynolds, Partner (pictured), Nick Merker, Associate (pictured), Eric McKeown, Of Counsel, Emily Storm-Smith, Associate and John Pence, Associate, Ice Miller LLP

Europe recently invalidated the US-EU Safe Harbor agreement, causing companies who have relied on Safe Harbor to re-evaluate existing transfers of personal data from the EU. If your company receives personal data from the EU as part of your business, you may be impacted.

In early October, Europe’s highest court invalidated the US-EU Safe Harbor agreement (“Safe Harbor”) in the landmark decision Maximillian Schrems v. Data Protection Commissioner. American companies have relied upon Safe Harbor for more than a decade to transfer personal data, including critical customer and employee data, from the European Union (EU) to the United States. This decision now requires those companies to re-evaluate their transfer programs to determine other legal bases for appropriate transfer.

As explained by Fred H. Cate, Distinguished Professor and C. Ben Dutton Professor of Law at Indiana University Maurer School of Law,[1] the decision “requires that transferors look for other legal bases for sending personal data to the U.S. Some of these alternative bases include where consent to the transfer is unambiguous, where the transfer is necessary for the performance of a contract, where the transfer is legally required, or where the transfer is necessary to protect the vital interests of the individual.” Companies may also implement binding corporate rules and/or model contract provisions in engagements with other companies for transfer.

In short, the decision requires that companies re-evaluate existing transfers of personal data from the EU to determine whether these transfers are appropriate and to identify alternative legal bases to support such transfers. Companies that have relied on Safe Harbor should carefully consider alternative legal strategies to ensure that such data transfers do not subject their companies to potential penalties under EU law.

Of course, the full ramifications remain to be seen, and companies may also choose to wait for the dust to settle and see what guidance each EU Member state data protection authority will publish regarding the decision. As Cate explains, “The decision eliminates the Safe Harbor, but that doesn’t necessarily have immediate consequences for companies unless a Data Protection authority or business partner raises the issue.”  Antje Petersen, Attorney at Law and an astute observer of the changing international data protection landscape, offers that the decision is “nothing short of a nightmare for any company in the US that receives personal data from the EU as part of its business. Until the EU provides clarity on how one can now comply with EU Data Protection laws in light of the decision, companies should take a deep breath, review and if necessary enhance their privacy policies and transparently communicate with stakeholders such as employees about their efforts to protect personal data.”

What Next?

In the wake of this decision, companies who have relied on Safe Harbor should re-evaluate existing transfers of personal data from the EU to identify alternative legal bases for such transfers. Alternative strategies may include the use of Standard Contract Clauses approved by the EU Commission and/or Binding Corporate Rules for transfers within groups of companies.  Identifying and implementing such strategies will be an important task in the coming months for companies wishing to ensure compliance with EU law.

Ice Miller’s Data Security and Privacy Practice advises clients on issues of international data transfer. We are currently assisting multiple clients with the impact of this decision.

Stephen Reynolds, a former computer programmer and IT Analyst; and Nick Merker, a former systems, network, and security engineer,are co-chairs of Ice Miller’s Data Security and Privacy Practice. Reynolds can be reached at stephen.reynolds@icemiller.com or (317) 236-2391 and Merker can be reached at nicholas.merker@icemiller.com or (312) 726-2504.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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