The Working Party of Article 29 (“WP29”), made up of representatives of the 28 Data Protection Authorities (“DPA”) of the EU member states, has been very vocal in favor of the European Court of Justice's (“ECJ”) October ruling in the Schrems case. That decision invalidated the EU Commission’s 2000 “adequacy decision,” which approved the Safe Harbor agreement that facilitated transborder data flow between Europe and the US.

Consequently, the criticisms contained in its April 13, 2016, opinion (referred to as “WP 238”) on the recently released draft adequacy decision regarding the new data transfer framework negotiated between the US government and the EU Commission — the “Privacy Shield” that would replace the Safe Harbor agreement — are no surprise. The opinion recognizes that important improvements were made to protect Europeans’ rights to privacy and to data protection, enshrined in Articles 7 and 8 of the Charter of Fundamental Rights of the EU (the “Charter”). However, the WP29 still asks for additional changes in its opinion, recalling the analysis made in its Working Document on European Essential Guarantees (referred to as “WP 237”), adopted on the same day as its opinion on the Privacy Shield.

On the Commercial Aspects of the Privacy Shield

The WP29 considers that in spite of important improvements, the Privacy Shield still requires clarification regarding:

  • Key principles of EU data protection law: For instance, the WP29 notes that the data retention limitation principle, which implies that personal data are retained no longer than necessary to achieve the purpose for which they have been collected, is not expressly mentioned in the draft adequacy decision.
  • Onward transfers: The WP29 submits that, in cases where data are transferred to a recipient in a third country, there should be an obligation to assess whether the third country’s national legislation mandates a sufficient level of data security.
  • Right to recourse: The WP29 also deems too complex and therefore ineffective the overall system of recourse and stresses the fact that EU DPAs should be clearly identified as the natural contact points of data subjects residing in the EU.

On Derogations Allowed by the Privacy Shield for National Security Purposes

On this issue, the WP29 recalls that all restrictions on privacy and data protection for national security motives shall be assessed based on the case law of the ECJ and of the European Court of Human Rights (“ECtHR”).

Based on its analysis of ECJ and ECtHR case law, the WP29 identifies four essential guarantees to be provided in any event. According to the WP29, the guarantees include: (i) defining precise and accessible rules that allow foresight into what may happen when data are transferred to the third country; (ii) ensuring that surveillance measures are necessary and proportionate; (iii) setting up an independent oversight mechanism, e.g., a judge or any independent body; and (iv) putting in place effective remedies. These guarantees are to be distinguished from the level of data protection in the recipient country, which must be “essentially equivalent” to the level provided in the EU. The essential guarantees aim to provide guidance when assessing whether an interference with a fundamental right may be justified. The guarantees are of general application and would thus apply to assessments of measures taken by EU member states as well as third countries’ legislation and practices on national security.

Following on the essential guarantees mentioned above, the WP29 expresses two main concerns related to:

  • Bulk collection of personal data: while the WP29 admits the need to fight terrorism and refers to the ECJ’s pending cases on data collection for that purpose (PNR Canada, Tele2 Sverige and Davis), the WP29 considers that the Privacy Shield wrongly makes room for bulk collection which is, in its opinion, neither justified nor proportionate.
  • Ombudsperson: while the creation of an ombudsperson is welcome, the WP29 underlines the necessity to make sure that the ombudsperson is independent and has effective powers.

On the Request of the WP29 to Revise the EU Commission’s Draft Adequacy Decision

The WP29 stresses that “there is more work to do” and urges the Commission to modify the Privacy Shield so that it will afford protection that is “essentially equivalent” to that provided under EU data protection law. In other words, it expects the Commission to pursue negotiations with the US government to address its concerns.

Moreover, it requests that a revision clause be inserted in the Privacy Shield in order to ensure full compliance with the very demanding General Regulation on Data Protection, which will replace the current Directive 95/46, when it enters into force in 2018.

What Lies Ahead?

The Article 31 Group, composed of representatives of the EU member states, is to adopt its opinion on the Privacy Shield within the coming weeks. The final adequacy decision of the EU Commission is expected between June and September of 2016.

Clearly, the WP29 opinion is not binding. However, everyone is aware that if the EU Commission adopts the draft adequacy decision in its present state, there is a risk that it might be challenged before the ECJ. At the press conference following the publication of the WP29’s opinion, the WP29 affirmed that it is “always an option to go before the ECJ,” meaning that it did not formally exclude the possibility of a legal challenge in the event that the current version is adopted by the EU Commission.

What Should Concerned Companies Do Now?

To be certain, the Safe Harbor can no longer be used as a legal basis for EU-US data transfers.

Fortunately, alternatives to the Safe Harbor, including the binding corporate rules (BCRs) and the standard contractual clauses (SCCs) that the WP29 discussed at the above-mentioned press conference, can still be used to transfer data to the US until the adoption of the European Commission’s adequacy decision on the Privacy Shield. Companies should be advised that setting up BCRs is a long process (about 18 months), while subscribing to SCCs is much easier and can be done almost instantly. Additionally, ad hoc contractual clauses are other alternative solutions that are not difficult to establish on a case by case basis.