EU Court To Review Privacy Case -- WSJ
May 26 2016 - 03:03AM
Dow Jones News
By Sam Schechner
One of the last legal methods that companies have to store
Europeans' data -- everything from Swedish salary files to Spanish
selfies -- on servers in the U.S. was thrust deeper into limbo
Wednesday when a privacy regulator said it would ask Europe's top
court to review its legality.
The Irish Data Protection Commissioner's office said it plans to
ask the European Union's Court of Justice to review backup
contractual language that Facebook Inc. and thousands of other
companies use to justify sending personal information about
Europeans to the United States. The same court last year
invalidated the main legal framework the companies had used to do
so.
The referral puts new pressure on firms that operate in the EU
and keep data about customers or employees on servers on U.S. soil.
Companies ranging from cloud services to retail have been
scrambling to avoid running afoul of European privacy law since the
EU court last year ruled that the 15-year-old data-transfer
agreement dubbed Safe Harbor was invalid because it could expose
Europeans to mass surveillance by the U.S. government.
Wednesday's announcement also raises the pressure on the EU's
executive arm, which has faced opposition as it rushes to complete
a successor agreement to Safe Harbor to keep data flowing. In an
opinion last month, a body representing the EU's 28 privacy
regulators said that the new framework, dubbed Privacy Shield,
needs to change to rule out any "massive and indiscriminate"
collection of personal information by intelligence agencies,
signaling that the new agreement will likely end up back in court
as well.
At issue in the new referral is whether companies can still use
snippets of contractual language that has been preapproved as
privacy compliant by the EU when transferring personal data to the
American servers. Following last year's court decision, many
companies said they were now relying on contracts using those
so-called standard contractual clauses to authorize their data
transfers. Without those clauses, there are few other ways to
justify keeping such data in the U.S. under EU law.
Hanging in the balance are billions of dollars in business,
particularly in the online-advertising and cloud-services
sectors.
"This is a worrying development for all organizations that
transfer personal data from Europe," said Oliver Yaros, a lawyer at
Mayer Brown. He added that if courts decide to invalidate the EU's
backup mechanism without a viable alternative, "the effect on
international business would be catastrophic."
The referral and last year's decision both stem from a complaint
that privacy activist Max Schrems launched three years ago against
Facebook in Ireland, where the company has its European
headquarters. Mr. Schrems based his case on allegations by former
National Security Agency contractor Edward Snowden that U.S.
intelligence agencies had wide-ranging access to personal
information gathered by American tech firms.
When the Irish privacy regulator rejected his claim, saying
Facebook was protected by the old Safe Harbor agreement, Mr.
Schrems appealed to an Irish court, which referred his claim to the
EU's Court of Justice. In its decision last year invalidating Safe
Harbor, the court said the Irish privacy regulator now had to
evaluate the merits of Mr. Schrems's complaints. It is as part of
that inquiry that the regulator said it would refer the new
question back to the courts.
Facebook contends that while it is the subject of the case, its
impact goes far wider.
"This isn't just an issue for Facebook," said Stephen Deadman,
Facebook's global deputy chief privacy officer. "If [standard
clauses] were found to be invalid it would have serious
consequences for the European economy."
Write to Sam Schechner at sam.schechner@wsj.com
(END) Dow Jones Newswires
May 26, 2016 02:48 ET (06:48 GMT)
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