In a referendum held Thursday, June 23, 2016, the citizens of the United Kingdom (the “UK”) voted to leave the European Union (“EU”) in the so-called “Brexit”. Although the European Union Referendum Act, which authorized holding the referendum, is silent as to further steps, last year the European Union (Notification of Withdrawal) Act 2017 authorized the Prime Minister to notify the EU of the UK’s intent to withdraw. The Prime Minister made this notification on March 29, 2017 under Article 50 of the Treaty on European Union, which provides two years for the parties to negotiate a withdrawal agreement, unless the UK and the European Council unanimously decide to extend this period.[1] Further Acts and proposals in the UK have also sought to give effect to the results of the referendum and prepare for the separation of the UK and EU.
One area of concern in the context of Brexit is the UK’s legal framework for privacy and data protection. The UK government has recognized that it will still be part of the EU when the General Data Protection Regulation (the “GDPR”) comes into effect on May 25, 2018.[2] The UK has stated that it will comply with the GDPR, and that its compliance will not be affected by Brexit.[3] To this end, on August 7, 2017, the UK Department of Digital, Culture, Media and Sport (the “DCMS”) published a Statement of Intent, in which it outlined the policy and objectives behind a proposed Data Protection Bill (the “Bill”), which was introduced in Parliament on September 13, 2017 and is currently making its way through both houses.[4]
In the discussion below, we provide the key takeaways from the Bill, the differences between the Bill and the GDPR, the differences between the GDPR and the EU Directive (defined below), and then consider in greater detail the proposals contained in the Bill and how those proposals may affect companies in the UK, EU, United States and elsewhere post-Brexit.
Key Takeaways from the Bill
The suite of proposals contained in the Bill will:
- Broaden the definition of “personal data” contained in the UK Data Protection Act 1998
- Require unambiguous consent for processing personal data, and explicit consent with respect to processing an individual’s sensitive data
- Require parents and guardians to consent on behalf of children under the age of 13
- Require simpler methods for individuals to withdraw consent for the use of personal data
- Provide simpler methods for individuals to access their personal data held by organisations
- Allow individuals to request, and in some cases require, companies to delete their personal data
- Facilitate customers’ wishes to migrate personal data when changing service providers
- Increase available monetary sanctions up to £17 million ($22.1 million) or 4% of a company’s global turnover (whichever is higher)
The Current Legal Framework
Since the early 1990’s, data privacy has been a significant concern of EU institutions. Personal privacy and data protection are enshrined in human rights treaties to which the EU adheres,[5] and the EU first adopted the European Data Privacy Directive in 1995 (the “1995 Directive”),[6] which was transposed into local law by Member States, including by the Data Protection Act 1998 (“1998 Act”) in the UK.[7]
Migration to and Retention of the GDPR
In April 2016, the EU adopted the GDPR, which will supersede the 1995 Directive and have direct effect in the 28 Member States on May 25, 2018, without the need for national transposition. Since the UK will still be a member of the EU on the date the GDPR enters into effect, the GDPR will become part of UK law. Under the proposed European Union (Withdrawal) Bill (also referred to as the “Great Repeal Bill”), the GDPR would remain UK law after Brexit, but it could be amended in the UK thereafter.[8] Additionally, regarding the processing of personal data for criminal law enforcement purposes, the EU developed the Data Protection Law Enforcement Directive (“DPLED”), which is also scheduled to come into effect in Member States in May 2018.[9] However, given that this latter instrument is an EU Directive, Member States will have leeway in how they transpose the DPLED into national law.
Proposed Measures of the Bill
Rather than completely overhauling the 1998 Act, the Bill, as proposed by the DCMS, subjects most processing of personal data to the GDPR and seeks to enhance and bolster the laws already in place to reflect the changing nature and scope of the digital economy.[10] Some of the differences between the Bill and the GDPR are due to the derogations that exist under the GDPR. Part 2 of the Bill supplements the GDPR and applies a broadly equivalent regime to certain types of processing to which the GDPR does not apply. Some salient aspects of the Bill are discussed below as well as some key differences between the GDPR and its predecessor, the 1995 Directive.
Scope |
Arguably the most notable development comparing the GDPR to the 1995 Directive is the extended jurisdiction of the GDPR. Unlike the 1995 Directive, which required the company to be established in the EU or use equipment situated in the EU to process data, the GDPR will apply to the processing of personal data of data subjects in the EU by a controller or processor not based in the EU, where the activities relate to (i) offering goods or services to EU citizens and (ii) the monitoring of behaviour that takes place within the EU. Under the GDPR, non-EU businesses processing the data of EU citizens must also appoint an EU-based representative. Also, unlike the 1995 Directive, which required implementation through national legislation, such as the UK’s Data Protection Act, GDPR is a binding piece of legislation that will be legally enforceable as soon as it comes into effect on May 25 and will apply to all EU nations and every company holding data on EU citizens. Since the UK is leaving the EU, the UK Bill proposes to apply the new standards to all general data, not just areas which previously came under EU competence.[11] |
Definition of Personal Data |
Similar to the approach taken by the GDPR,[12] the Bill expands the definition of “personal data” to reflect the growth and development of technology since the passage of the 1998 Act.[13] Personal data is defined to encompass, for example, IP addresses, internet cookies and DNA. |
Privacy by Design |
One of the key changes under the GDPR is the concept of “Privacy by Design” or “Privacy by Default.” The current data protection rules in the EU do not have this concept and no EU law ensures that these measures have to be taken into account. Companies are in essence required to implement appropriate technical and organisational measures regarding the protection of data from the onset of the design of a system and must hold and process only the data absolutely necessary for the completion of the duties involved (i.e., data minimization), as well as limiting access to the data only to those involved in the processing. |
Consent |
Compared to the 1995 Directive, the conditions for consent have been tightened under GDPR. Specifically, the request for consent must be given in an intelligible and easily accessible form attaching the purpose for data processing to that consent. Consent must also be clear and distinguishable from other matters and provided in an intelligible and easily accessible form. It must also be easy for an individual to withdraw their consent. Aligning with the GDPR,[14] an individual’s consent to the use of his or her personal data under the UK bill must not be ambiguous, and not based on the use of default opt-out or pre-checked tick boxes.[15] Consent must also be explicit in order to process sensitive personal data. In respect of children under the age of 13, parents or guardians will be required to give their consent to information society services[16] (defined as “any service normally provided for remuneration, at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data and at the individual request of a recipient of a service”).[17] Under the GDPR, this age is 16 years.[18] Additionally, the Bill, contrary to the GDPR, excludes “preventive or counselling services” from the definition of “information society services.”[19] The Bill, similar to the GDPR,[20] also anticipates an easier withdrawal of consent for all individuals.[21] |
Transparency |
In harmony with the GDPR,[22] pursuant to the Bill, it will become easier for data subjects to require an organisation to disclose personal data it holds.[23] This will be required at no cost, provided the request is not manifestly unfounded or excessive.[24] Organisations will also be required to clearly state how individuals may access their information.[25] |
Data Portability |
Similar to the measures contemplated by the GDPR,[26] the Bill sets out new rules enabling customers to move their data from one service provider to another, which gives more choice to customers and encourages competition and innovation in many industries.[27] Moreover, if an individual switches internet service providers, the Bill will facilitate the transfer of personal data contained in file storage services, such as personal photographs, to the new internet service provider.[28] |
Data Subject Rights |
The GDPR has also introduced a number of data subject rights, which include:
|
Profiling |
In respect of profiling, the Bill will give a greater say to individuals in decisions made about them on the basis of automated processing.[34] Moreover, individuals will be able to request that decisions based on automated processing be reviewed by a person.[35] The measures contemplated by the GDPR seem less robust as they allow the data subject to receive personal data concerning him or her that he or she provided to the controller. However, there is no right for the individuals to partake in the significant decision-making, nor any right that such decisions are taken by a person.[36] |
Data Breaches |
In the event of a data breach that puts the rights and freedoms of the individual at risk, the Bill—aligning with the GDPR[37]—would require the data controller to notify, within 72 hours, the Information Commissioner’s Officer (the “ICO”), which is the public body in the UK in charge of upholding information rights and data privacy.[38] GDPR also requires data processors to notify their customers, the controllers, “without undue delay” when they become aware of a data breach. The Bill and the GDPR also state that if the breach poses a “high risk” to individuals, the company must also notify the individuals affected by the breach and prescribes that organisations involved in “high-risk” data processing must carry out an impact assessment to identify any risks and how to mitigate such risks.[39] |
Data Protection Officers |
Under the GDPR, it will no longer be necessary to submit notifications or registrations to each multinational’s local data protection officer of data processing activities, nor will it be required to notify or obtain approval for transfers based on Model Contract Clauses. Rather, the GDPR includes internal record keeping requirements that organisations must be able to produce to demonstrate compliance with the GDPR. What is more, the appointment of a data protection officer will be mandatory for those controllers and processors whose core activities consist of processing operations, which require regular monitoring of the data subjects on a large scale or special categories of data relating to criminal convictions. Article 29 Working Party guidelines’ examples of large-scale processing include: processing of patient data by a hospital, customer data by an insurance company or a bank, real-time geolocation data of customers by an international fast food chain, and behavioural advertising by a search engine. The GDPR also sets forth the specific requirements a data protection officer must meet and other obligations in connection with the performance of his or her duties. |
EU Representatives for Controllers Based Outside of Its Borders |
While GDPR requires the appointment of a representative for controllers that operate within the EU but are based outside of its borders, the UK Bill expressly states that any references to data protection representatives should be omitted. |
Collective Redress Option |
The GDPR offers EU member states an optional provision allowing for collective redress for consumers via third parties, such as consumer privacy groups acting independently and lodging data protection complaints on consumers’ behalf. The UK bill does not include this provision in the current draft. |
Penalties |
The GDPR contemplates fines on both controllers and processors of up to 4% of annual global turnover or €20 million (whichever is greater). In line with the GDPR,[40] and pursuant to the principle of proportionality, the ICO will be able to impose civil sanctions up to £17 million ($22.1 million) or 4% of the company’s global turnover, whichever is greater, in comparison with the present cap of £500,000 (approximately $650,100) available under the 1998 Act.[41] Further, the ICO and the Crown Prosecution Service, as well as equivalent prosecutorial agencies in Scotland and Northern Ireland, will continue to prosecute offenders under applicable criminal laws. The most serious offences will become recordable (i.e., recorded on a police database in the UK, which can be disclosed as part of previous convictions or criminality checks) pursuant to the Bill.[42] The Bill also creates two new criminal offences: (i) intentionally or recklessly re-identifying individuals from anonymized or pseudonymized data, and (ii) altering records with intent to prevent disclosure following a subject access request.[43] The Bill also seeks to widen the existing offence of unlawfully obtaining data to include the act of retaining data against the wishes of the controller, even if it was obtained lawfully.[44] Journalists and whistle-blowers, however, will benefit from express exemptions under the Bill.[45] |
Looking Through the Brexit Lens: What Businesses Need to Know
If the Bill is adopted in its current state, its workability and success will be determined by its performance post-Brexit. Upon the UK’s departure from the EU, it will become a third country for purposes of EU law. As such, a number of instruments will need to be put in place to ensure a continued successful relationship with other polities regarding the transfer and protection of data, including, importantly, the EU and the United States.
With respect to the EU, post-Brexit, the UK will be subject to Article 45 of the GDPR, which stipulates that data transfers will only be permissible if the UK as a third country ensures an adequate level of protection.[46] The EU Commission could adopt an adequacy decision in respect of the UK, as it has done for several countries under the 1995 Directive, and which would ensure an all-encompassing and clear agreement permitting transfers of personal information from the EU to the UK.[47] In order to obtain a finding of adequacy, in essence, the EU Commission examines, most notably, the strength of the legal framework in question, the effectiveness of the domestic regulator and the petitioner’s international commitments to data protection.[48]
However, if the UK is unable to obtain this designation, then in accordance with Article 46 of the GDPR, cross-border data transfers could still take place if the recipient outside of the EU puts appropriate safeguards in place, which include standard contract clauses or binding corporate rules. These alternative measures would involve added costs and red tape for businesses. For purposes of legal certainty and as the strongest guarantee of the free flow of data, an EU Commission adequacy decision would be the preferred approach.
Regarding the United States, post-Brexit, the transfer of data will no longer be governed by either (i) the EU-U.S. Privacy Shield, which established the legal framework pursuant to which transatlantic transfers of data may take place for commercial purposes between the EU and the United States,[49] or (ii) the EU-U.S. Umbrella Agreement, which established a comprehensive high-level data protection framework for EU-U.S. law enforcement cooperation.[50] Consequently, the UK will be at liberty to choose the mechanisms pursuant to which it wishes to proceed with the United States. However, given the general consensus that the UK is unlikely to diverge from the GDPR, the UK would be able to adopt its own equivalence decision with respect to the United States and its own privacy shield. This would mirror the approach taken by Switzerland and recently advocated by the European Union Committee of the UK House of Lords. Not only does Switzerland have an adequacy finding by the Commission, but it also has in place a Privacy Shield Agreement with the United States identical to the EU-U.S. agreement.[51]
Conclusion
Overall, the proposals contained in the Bill must be welcomed as a sign that the UK government is implementing the GDPR and other developments, and it is doing so with an eye toward certainty and an orderly Brexit in the field of data privacy. This is imperative because data privacy and data protection impact not only personal rights, but a significant portion of the digital economy. However, the Bill is still only the first step as a number of gaps remain, such as the UK’s relationship with the United States and the EU.
Although this article focuses on the UK data protection bill, other EU Member States also have implementing legislation at various stages working through their respective legislative chambers. The attached table summarizes the status of implementing acts in other EU Member States. As we see in the UK data protection bill, many other EU Member States have also taken advantage of the various GDPR provisions that allow for Member State flexibility. Notably, areas worth monitoring closely include: age of consent, transparency, the processing of “sensitive personal data”, data subject rights in terms of access and profiling, and rules related to processing of HR data or data processing for research purposes.
Key Takeaways
The introduction of GDPR represents one of the most significant shifts in data privacy standards in several decades. Any organisation that processes EU citizens’ data should assess how the GDPR applies your organisation and implement a plan to prepare for the new law before it goes into effect in May, taking into account also the complexities that are added by Brexit.
Here are 12 steps to take now to prepare for the GDPR, under the UK Information Commissioner’s Office Guidance:
Status of GDPR Implementation in Other EU Member States
Country |
Bill Title |
Status |
GDPR Deviations |
Austria |
Data Protection Amendment Act 2018 |
On May 12, 2017, the Austrian government adopted the Act, which will enter into force on May 25, 2018 |
|
Belgium |
Data Protection Act |
|
No major deviations from the GDPR in the draft bill |
Bulgaria |
Data protection law |
|
It remains to be seen how the GDPR will be implemented in Bulgaria |
Croatia |
N/A |
No bill as of yet |
It remains to be seen how the GDPR will be implemented in Croatia |
Cyprus |
N/A |
No bill as of yet |
It remains to be seen how the GDPR will be implemented in Cyprus |
Czech Republic |
Act on Personal Data Protection Act |
|
|
Denmark |
Supplementary Provisions for a Regulation on the Protection of Individuals with Regard to the Processing of Personal Data and on the Free Movement of Such Information |
|
|
Estonia |
N/A |
|
It remains to be seen how the GDPR will be implemented in Estonia |
Finland |
N/A |
|
|
France |
Digital Republic Law |
|
|
Germany |
Federal Data Protection Act |
|
|
Greece |
N/A |
|
It remains to be seen how the GDPR will be implemented in Greece |
Hungary |
Privacy Act |
|
|
Ireland |
General Scheme of the Data Protection Bill 2017 |
|
|
Italy |
N/A |
|
It remains to be seen how the GDPR will be implemented in Italy |
Latvia |
Personal Data Processing Law |
|
|
Lithuania |
Law on Legal Protection of Personal Data |
|
It remains to be seen how the GDPR will be implemented in Lithuania |
Luxembourg |
Law regarding the creation of the National Commission for Data Protection and the implementation of the GDPR |
|
|
Malta |
N/A |
No bill as of yet |
It remains to be seen how the GDPR will be implemented in Malta |
Netherlands |
Dutch GDPR Implementation Act |
|
On the government website, it indicates that when implementing European regulations, the starting point is “policy neutrality.” This means that current national law will be maintained to the extent possible under the GDPR |
Poland |
Personal Data Protection Act |
|
|
Portugal |
N/A |
|
It remains to be seen how the GDPR will be implemented in Portugal |
Romania |
N/A |
|
No major deviations from the GDPR. |
Slovakia |
Act on Personal Data Protection |
|
|
Slovenia |
Personal Data Protection Act |
|
It remains to be seen how the GDPR will be implemented in Slovenia |
Spain |
Basic Act of Personal Data Protection |
|
|
Sweden |
Swedish Data Protection Act |
|
|