This past October, the European Parliament’s Committee on Civil Liberties, Justice and Home Affaires (“LIBE”) voted in favour of a major reform of the current European Union (“EU”) data protection regime consisting of the Data Protection Directive, introduced in 1995, and national legislative works existing across EU member states. Intended as a response to privacy concerns in respect of technological developments and recent cases involving mass surveillance, LIBE adopted a proposed General Data Protection Regulation (the “Regulation”), which, once in force, would not only represent a major change in the protection of personal information within the boundaries of the EU but which could extend to and impact Canadian businesses.
Features of the General Data Protection Regulation
The right to be forgotten, or the “right to erasure” as it has more recently been dubbed, allows individuals to require the deletion of their digital trace, that is, any personal data relating to them, and that there is no further dissemination of such data. Individuals may demand erasure “where the retention of such [personal] data is not in compliance” with the Regulation, including where the data is no longer necessary for the purpose it was collected, where the individual concerned has withdrawn consent, or simply, and perhaps most importantly, because the individual objects to the processing, use or disclosure of their personal data. These requests extend not only to companies collecting personal information but also to third-party internet or cloud hosting companies to whom data may have been transferred. While the extent and scope of the Regulation is still unclear, it is likely to be particularly onerous on internet service providers and major search engine, cloud and social-media companies like Google, Facebook, LinkedIn and YouTube, due to the amount of personal data processed on these platforms.
The Regulation also includes stronger safeguards for data transfers to non-EU countries, such that if a court or administrative authority of a third-party country asks a company to divulge personal information processed or controlled in the EU, such request must be approved by the supervisory authority before any data may be transferred. Furthermore, the company transferring the requested data would have an additional obligation to notify the person concerned prior to any such transfer. EU-based multinational corporations that, by the very nature of their business, regularly transfer data outside of the EU, be it to other branches, affiliates or subsidiaries, including cloud service providers, may benefit from an exception to the data transfer restrictions limiting transmission to “white list countries”, as determined by the Commission. Such exceptions are granted where both the EU-based data controller or processing company and the non-EU recipient company, or respective branches of same, have successfully obtained a European Data Protection Seal issued by any supervisory authority in the EU following the audit and certification of their data processing activities. The EU Data Protection Seal is valid for five years and provides additional incentives to certified companies, including an exemption from fines for non-compliance in the absence of intentional or negligent conduct. As it currently stands, both Canada and the US are members of the EU “white-list” and deemed to be countries having an adequate level of data protection by reason of their domestic law or international commitments.
The issue of how consent may be given remains the subject of much debate as, in its current draft, the Regulation requires that consent be free, specific, informed and explicit, thus raising concerns for companies whose existing business models do not always allow for express consent to be obtained and which rely on the general application that consent to the collection, use and disclosure of personal data may be implicitly given or inferred in prescribed situations. How this matter will be resolved and reflected in the final draft of the Regulation could bring with it the obligation for some companies to re-evaluate how they conduct certain business activities. The Regulation also requires that consent be freely given, thereby prohibiting that the execution of a contract or provision of service be made conditional upon the receipt of consent to data processing, except where such consent is necessary or inherently connected to the contract or service. Moreover, individuals have the right to withdraw their consent at any time.
Companies failing to comply with the Regulation could, as the proposed text of the Regulation currently reads, face fines of up to €100 million or 5% of worldwide annual turnover, whichever is greater, thereby pushing the risk of exposure to such extensive financial sanctions to the top of the priority list of compliance matters. Also proposed, are certain alternate or additional sanctions, including regular audits of data processing and compliance measures and written warnings for unintentional, non-negligent, first offences.
Personal Data Protection in Canada
In Canada, the collection, use and disclosure of personal information is regulated concurrently by the federal and provincial governments. At the federal level, two statutes exist to govern privacy issues, the Privacy Act, which regulates federal government departments and agencies, and the Personal Information Protection and Electronic Documents Act (“PIPEDA”), which sets out how private sector organizations may collect, use or disclose personal information of individuals in the course of their commercial activities. At the provincial level, each of the provinces and territories has privacy legislation the governs the collection, use and disclosure of personal information held by government agencies, however, British Columbia, Alberta and Quebec, and most recently, Manitoba, are the only provinces to have enacted laws governing the private sector that are recognized as being substantially similar to PIPEDA.
None of these four provincial statutes provide a right to erasure comparable to the Regulation, but instead all contain various versions of a right for individuals to update and rectify erroneous information kept in a file concerning them. Furthermore, each such provincial statute includes a “limited retention” principle applied to the right to collection, use and disclosure of information, such that, to highlight one province as an example, according to Quebec’s an Act Respecting the Protection of Personal Information in the Private Sector (“PIPP”), information may only be retained for as long as necessary to fulfill the purpose for which it was collected. Moreover, PIPP provides that where consent is required, it must be free, clear, informed and specific and, in connection therewith, individuals concerned may require personal information collected be deleted, but only where such information was collected otherwise than according to law.
In Quebec, in addition to the rights granted under PIPP, the Civil Code of Québec (the “CCQ”) protects the right to privacy at large. It prohibits anyone from establishing a file on another person without having a serious and legitimate reason for doing so. It further prohibits anyone keeping such a file from communicating the information contained therein to third parties or using it for purposes not relevant to the purpose of the file, unless the person concerned consents to such use or disclosure. The CCQ gives anyone whose personal information is contained in such a file the right to demand deletion of information but only where the information collected is obsolete or unjustified by the purpose of the file.
Similarly to the provincial statutes, PIPEDA prohibits any unauthorized use or disclosure of personal information collected by organizations for purposes other than those for which it was collected and grants concerned individuals the right to require such organizations to rectify any personal information, which includes, as appropriate, the correction, addition and deletion of information, that is inaccurate or incomplete, however, this right is conditional upon the individual successfully demonstrating such inaccuracy or incompleteness and furthermore organizations do not have to grant individuals access to their personal information if they provide satisfactory reasons not to do so. PIPEDA also calls for respect of the “limited retention” principle and provides that organizations should erase data that has become obsolete, unless the individual consents to its retention, but fails to explicitly provide the right for individuals to request erasure in the absence of the data becoming obsolete or which is inaccurate or incomplete and remains silent with respect to any right to withdraw consent.
Contrary to what has been proposed by the Regulation, the existing rights to “erasure” under the laws applicable to the collection of data both at the provincial and federal levels in Canada are quite limited. Other significant differences between the Canadian and proposed European regimes include when and how consent to the collection of information is required, the extent to which third party disclosure is regulated and the severity of sanctions imposed upon any breach.
Possible Effects on Canadian Businesses
Once in force, the Regulation will apply not only to companies processing data within Europe, whether European based or multinational with branches in Europe, but will also extend to European companies whose data processing is conducted outside of the EU, such as non-EU based cloud data centers, as well as non-EU companies that conduct any data processing of personal information of individuals in the EU. Canadian companies operating outside of the EU but offering products or services to individuals within Europe, irrespective of whether such products or services are offered at no cost to the consumer, would thus be caught by the Regulation.
What’s more, is that non-EU companies not directly subject to the Regulation by the nature of their own commercial activities may also be affected by the reform in cases where they conduct business with EU companies and are recipients of data processed in the EU. Given the large financial incentives to comply with the Regulation and the responsibility of companies subject thereto for personal information in their possession or custody, including information transferred to a third party, non-EU companies may find their EU-based partners insistent upon their implementing measures necessary to ensure compliance with the Regulation on a global scale, despite not legally being bound to do so, which in turn may prove quite costly.
The introduction of similar legislation in Canada could potentially bring with it tremendous cost to existing businesses. To cite one example, companies would need to find a way to ensure that personal data is stored appropriately, such that it is effectively possible to delete such personal data upon request. The current draft of the Regulation includes a limitation to the right to erasure and provides that where “the particular type of storage technology does not allow for erasure and has been installed before the entry into force of this Regulation” data should be “restricted” instead of erased. How this grandfathered right is to be interpreted and applied practically will be of interest to many.
Could this be reflective of a global trend to come in privacy law? Pointing in that direction is the recent legislation amendment adopted by the State of California which grants minors a right similar in nature to the right to erasure proposed by the Regulation and specifically, to remove posts they have made on Internet Web sites and mobile apps, such as social-media giants Twitter and Facebook. It further requires service providers to make clear “how the minor may remove or, if the operator prefers, request and obtain the removal of content or information posted on the operator’s Internet Web site, online service, online application, or mobile application”. While the legislative amendment requires the removal of such posts from display, it does not require that the data be removed from the service providers’ servers and further does not require the service providers to erase, or have erased, any content copied or posted by a third party or any posts in which others “mention” a minor. Similarly, the Regulation expressly provides that the right to erasure shall apply “especially in relation to personal data which is made available by the data subject while he or she was a child”. As a country that has a strong history in protecting the fundamental rights and freedoms of its citizens, is Canada next in line?
At this preliminary stage, it remains unclear precisely how and to what extent the Regulation may impact Canadian businesses and exactly which type of business are specially targeted. The evolvement and status of the Regulation should be carefully watched to keep abreast of and monitor the ways in which the reform may affect operations of companies doing business in Europe and whether such reform may be first moving towards a bigger global trend. LIBE has called for the final text of the Regulation to be agreed upon with the Council of the EU before May 2014, although it is expected that 2015 may be more realistic. The current draft of the Regulation extends a two year grace period prior to coming into force, such that businesses subject to the Regulation would need to take measures for compliance as early as 2016 or 2017.