Facebook Loses Bid to Block Ruling on EU-U.S. Data Flows -- Update
May 14 2021 - 12:27PM
Dow Jones News
By Sam Schechner
Facebook Inc. lost a bid to block a European Union privacy
decision that could suspend its ability to send information about
European users to U.S. computer servers, opening a pathway toward a
precedent-setting interruption of its data flows.
Ireland's High Court dismissed Friday all of Facebook's
procedural complaints about a preliminary decision on data flows
that it received in August from the country's Data Protection
Commission. It rejected Facebook's claims that the privacy
regulator had given it too little time to respond or issued a
judgment prematurely.
The preliminary decision, which the court stayed in September
pending its decision, could, if finalized, force the social-media
company to suspend sending personal information about EU users to
Facebook's servers in the U.S.
While Friday's court decision is a procedural one, the
underlying questions are central to trans-Atlantic trade and the
digital economy. Legal experts say the logic in Ireland's
provisional order could apply to other large tech companies that
are subject to U.S. surveillance laws, such as cloud services and
email providers -- potentially leading to widespread disruption of
trans-Atlantic data flows. In the balance are potentially billions
of dollars of business in the cloud-computing, social-media and
advertising industries.
Ireland's DPC leads enforcement of EU privacy law for Facebook
and other companies that have their European headquarters in the
country. The commission still needs to finalize its draft decision
ordering a suspension of data transfers and submit it to other EU
privacy regulators for approval before it becomes effective. That
process could take months, before counting any further court
challenges.
If the order is put into effect, Facebook will likely have to
re-engineer its service to silo off most data it collects from
European users, or stop serving them entirely, at least
temporarily.
The social-media company said that Friday's court decision was
procedural and that it planned to defend its data transfers before
the DPC. It added that the regulator's preliminary decision could
be "damaging not only to Facebook, but also to users and other
businesses."
The DPC said it welcomed the judgment.
The Wall Street Journal reported on Ireland's move in September.
Facebook challenged the decision in court days later, arguing that
the regulator had suggested a preliminary conclusion too hastily,
without awaiting guidance from other EU regulators.
The move was the first significant step EU regulators had taken
to enforce a July ruling from the bloc's top court about data
transfers. That ruling restricted how companies like Facebook could
send personal information about Europeans to the U.S., because it
found that Europeans had no effective way to challenge American
government surveillance.
How Ireland's DPC enforces the ruling is being closely watched,
because it leads EU privacy enforcement for several other big tech
companies, including Alphabet Inc.'s Google, Apple Inc. and Twitter
Inc., which have their European headquarters in the country.
Friday's decision comes as countries world-wide increase
measures to take control of where data flows. Last year, the U.S.,
under former President Donald Trump, attempted to force the Chinese
parent of video-sharing app TikTok to divest the company to prevent
data on American users being shared with Beijing. The plan was
shelved under President Biden.
After the EU's Court of Justice decision last summer, tech
lobbyists initially signaled optimism that data flows might remain
largely unaffected, with only contractual changes necessary. But
since then, EU regulators, in addition to Ireland, have started
issuing orders to suspend some data transfers. In April, Portugal's
privacy regulator ordered the national statistics agency to stop
sending census data to the U.S., where it was being processed by
Cloudflare Inc.
"The preliminary order from the DPC is concerning as it could
jeopardize data flows from Europe to the U.S. for a wide range of
companies," said Alexandre Roure a senior manager of public policy
for the Computer & Communications Industry Association, which
represents companies including Facebook, Amazon.com Inc. and
Google. "Europe is unlikely to meet its digital aspirations and
become a 'world-class data hub' if it can't even connect with its
main trading partners in the first place."
Orders, even if only preliminary ones, to stop sending data to
the U.S. are a major shift in more than two decades of wrangling
over how to balance privacy and commerce when it comes to
trans-Atlantic data flows. In 2015, the EU's top court invalidated
a major legal mechanism for transferring such information to the
U.S. But the threat ended up being mostly theoretical: No company
faced a specific order to stop sending personal information, and
the data flows never stopped.
Now, some lawyers say resolving the issue could require changes
to U.S. surveillance laws to give more legal rights to Europeans.
It could also become a spur for the U.S. to adopt broader privacy
legislation.
"With trans-Atlantic data flows vital to both economies, the EU
cannot afford to become a data island, nor the U.S. a data pariah,"
Cameron Kerry, a former general counsel and acting secretary of the
U.S. Department of Commerce, said earlier this year.
Write to Sam Schechner at sam.schechner@wsj.com
(END) Dow Jones Newswires
May 14, 2021 12:12 ET (16:12 GMT)
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