University of Southern California

Navigating the Atlantic: Understanding EU Data Privacy Compliance Amidst a Sea of Uncertainty

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Note by Griffin Drake
From Volume 91, Number 1 (November, 2017)

United States government surveillance has reached a point where the government “c[an] construct a complete electronic narrative of an individual’s life: their friends, lovers, joys, sorrows.” In June 2013, Edward Snowden released thousands of confidential documents from the National Security Agency (“NSA”) regarding classified government surveillance programs. The documents brought to light the fact that that the NSA was spying on individuals, including foreign citizens, and deliberately misleading Congress about these activities. According to Snowden, the spying was so extensive that the spying measures, including a program known as “PRISM,” involved the improper mass collection of data from citizens worldwide through NSA interactions with telecom giants like Google, Microsoft, and Facebook, and by tapping into global fiber optic cables.

These revelations sent shockwaves around the globe, and the backlash was swift and unforgiving. One thing became clear to Americans and the rest of the world: the NSA and the U.S. government had prioritized the massive collection of private information over and above the personal privacy rights of the global population. The concept of throwing civil liberties to the wayside through grossly intrusive surveillance pushed Snowden to step forward and reveal what he had seen all too closely. He no longer wanted to “live in a world ‘where everything that I say, everything that I do, everyone I talk to, every expression of love or friendship is recorded.’”

Across the Atlantic, the priorities of European Union member nations stand in stark contrast to those of the United States. The EU takes a much stronger stance on privacy and data protection and restricts how companies transfer data to non-EU nations. In the EU’s Data Protection Directive (the “Directive”), the right to privacy is described as a “fundamental right[ ] and freedom[ ].” This sentiment is echoed in other landmark EU documents such as the Convention for the Protection of Human Rights and Fundamental Freedoms.

Despite the very different treatment of the right to privacy in the U.S. and EU, we live in an era of lightning-quick information transfers and an interconnected global economy in which the sharing of private data (including names, IP addresses, health care information, and so forth) across borders is essential to companies conducting business worldwide. The current state of the world necessitates that data flow seamlessly from country to country. This reality led to the EU’s Safe Harbor Decision (“Safe Harbor”), allowing American companies to self-certify their compliance with certain heightened privacy restrictions when handling the private information of EU citizens and thus facilitating the transfer of information from the EU to the U.S. However, the Safe Harbor was invalidated in Schrems v. Data Protection Commissioner (“Schrems I”). This left American companies to rely on other EU-approved data transfer mechanisms—namely, Model Clauses, Binding Corporate Rules (“BCRs”), or specific statutory derogations. In need of a replacement for the Safe Harbor, the EU and the United States agreed on a new deal known as the “Privacy Shield,” despite heavy criticism. An additional layer of complexity exists due to the fact that the Directive, which long governed the handling of private information in the EU, is now being replaced with the significantly stronger General Data Protection Regulation (“GDPR”).

This Note will argue that in light of the pending commencement of the GDPR, American companies relying on the Privacy Shield are exposed to potential risk, as it fails to satisfy the “essentially equivalent protection” standard set forth in Schrems I, and that alternative data protection mechanisms, such as Model Clauses or BCRs, have serious drawbacks and face similar questions regarding their validity. Subsequently, I will discuss some of the potential alternative mechanisms that companies can use to best mitigate exposure to the risks inherent in transatlantic data transfers.

Part I of this Note will describe the background that has led to the current uncertainty in the validity of the various data protection mechanisms. This Part will discuss the key principles behind data privacy protections, the Schrems I case and the subsequent invalidation of the Safe Harbor, the buildup to the Privacy Shield, and the other possible transfer mechanisms. Part II will discuss the fundamental differences between the United States’ and the European Union’s approaches to protecting individuals’ private information. This section will highlight the irreconcilable differences between U.S. surveillance policies and the EU’s view of the fundamental right to privacy. Part III will discuss the pending implementation of the GDPR and the relevant changes this directive will have to the current transatlantic data transfer legal regime. Part IV will outline the shortcomings inherent in the Privacy Shield, Model Clauses, and BCRs individually. Part V will conclude this Note by briefly discussing potential alternatives that companies can use to attempt to weather the shaky data privacy landscape that exists today. The proposed alternatives include obtaining consent, using codes of conduct and certification, and layering transfer mechanisms.

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