On August 18, 2015, the UK Information Commissioner’s Office (ICO) issued an enforcement notice against Google ordering the removal of nine search results that linked to information about a certain individual’s criminal offence.
On April 24, 2015, China amended its Advertising Law for the first time since its initial promulgation in 1994. The amended Advertising Law (the “Amended Law”) will take effect on September 1, 2015. In the absence of a comprehensive data protection law in China, the Amended Law introduces certain provisions addressing data and privacy issues, in addition to existing data privacy rules which are scattered in various laws and regulations.
On May 26, 2015, Judge Lucy Koh in the Northern District of California granted class certification to plaintiffs in In re Yahoo Mail Litigation, Case No. 13-CV-04980-LHK (N.D. Cal. May 26, 2015) (“Yahoo”). This ruling will likely have an effect on how class action claims are alleged and could impact email providers’ policies and procedures pertaining to email scanning and user consent. In particular, companies may wish to review the impact of their privacy disclosures and consent framework to non-subscribers who may interact with users who have consented to the companies’ policies.
The English Court of Appeal has recently issued a landmark judgment against Google which could open the door to data privacy litigation in the EU.
The case concerned the collection by Google of Safari users’ browser information, allegedly without their knowledge or consent. In its opinion, the Court of Appeal held that four individuals who used Safari browsers can bring a claim for breach of privacy and that the damages claimed can include distress – even in circumstances where there is no financial loss, as this had been the intention of the EU’s Data Protection Directive. To reach this result, the Court relied on EU legal authorities to override and displace limitations on recovery under the UK Data Protection Act.
Cyberthreat Sharing Bills Gain Momentum. On March 12, the Senate Intelligence Committee approved the Cybersecurity Information Sharing Act of 2015 (“CISA”) to increase sharing of cybersecurity threat information by U.S. companies on a vote of 14-1. The legislation grants liability protections for companies that voluntarily share cybersecurity threat information with the government or industry partners. The measure should be scheduled for a vote on the Senate floor shortly.
On February 26, 2015, the Federal Communications Commission (FCC) passed the Open Internet Order to reclassify “broadband Internet access service” as a telecommunication service under Title II of the Communications Act of 1934. In doing so, the FCC found that applying section 222 of the Communications Act to broadband Internet access services is in the public interest and necessary for the protection of customers. Section 222 imposes a duty on telecommunications carriers to protect the confidentiality of proprietary information obtained from their customers or other carriers, and imposes special rules for use and disclosure of information related to customers’ phone service and usage, known as customer proprietary network information (“CPNI”).
“A question we often get as financial regulators is: ‘What keeps you up at night?’ The answer is ‘a lot of things.’ But right at the top of the list is the cybersecurity at the financial institutions we regulate.”
Benjamin Lawsky, prepared remarks from speech at Columbia Law School on February 25, 2015.1
Insurance regulators are gearing up to impose enhanced scrutiny on information security practices to boost protection of sensitive personal information.
A recent judgment of the highest court in the European Union announced that search engines within the court’s jurisdiction must respond to “right to be forgotten” requests. This authoritative interpretation of the existing data protection laws may create significant issues for Internet intermediaries and exacerbate the differences between the European privacy-based “right to be forgotten” and the United States’ free-speech based “right to remember.” This judgment will have a significant impact not only on search engine companies and publishers, but also on many other industries, including financial services and life sciences, that need to maintain data on individuals for legitimate business reasons, often for lengthy periods.
Recent data breaches at retailers like Target have increased awareness about growing cybersecurity threats. Broker-dealers in particular need to reevaluate their own cybersecurity preparedness in light of several recent events:
- FINRA’s launch of a cybersecurity sweep, publicly announced on the FINRA website on February 6, 2014;
- The inclusion of cybersecurity as a priority in the SEC’s National Examination Program for 2014 and FINRA’s 2014 Annual Regulatory and Examination Priorities Letter;
- The White House’s February 12, 2014 release of the much-anticipated Framework for Improving Critical Infrastructure Cybersecurity; and
- An upcoming SEC public roundtable on cybersecurity issues, to be held in Washington, DC on March 26, 2014.
The European Parliament’s Civil Liberties Committee has published its draft report on the proposed EU Data Protection Regulation that is causing concern for many corporations. http://www.europarl.europa.eu/meetdocs/2009_2014/documents/libe/pr/922/922387/922387en.pdf.
The report sets out amendments to the draft EU data protection regulation published by the European Commission last January (the “Regulation”)
Despite being one of the most lobbied pieces of European legislation, many will be disappointed that as amended the draft Regulation still imposes very significant burdens on businesses that are in the EU, or which are outside the EU but offer goods or services to EU customers, with fines of up to 2% of annual worldwide turnover.
Although there has been considerable debate on the proposed Regulation, there is still time for those concerned to make their views known to the European legislature. A summary of the main elements of the proposed regulation as amended by the Committee are set out below.
Scope of Regulation and Enforcement
- The Regulation will apply expansively to all global businesses, including any Internet company with more than 500 European customers. To be specific, it would apply to “data controllers” established in the EU or operating from outside the EU where the processing activities are aimed at the offering of goods or services to individuals in the EU irrespective of whether payment is required. A data controller outside the EU will need to appoint a representative in the EU if it processes personal data of 500 or more individuals a year, irrespective of whether payment is required for the goods or services.
- For the first time, the regime will directly affect software and hardware development. So called “producers” (i.e. hardware and software developers) that produce systems to process personal data must take measures to ensure data protection compliance when designing systems.
- Provisions for fines of up to 2% of annual worldwide turnover for violations of the Regulation remain, although additional criteria are proposed that would be taken into account by Data Protection Authorities (DPA) when determining the administrative sanction.
- There are a number of amendments to strengthen the position on collective redress: Bodies or associations acting in the public interest would be able to go to court on behalf of data subjects to seek damages and damages will now also be permitted for non-pecuniary loss such as distress.
International Data Transfers
- Transfers of personal data from the EU to countries that are not deemed to provide an adequate level of protection (such as the United States) should be on the basis of binding legal instruments (such as Binding Corporate Rules and the EU’s standard contractual clauses). The ability of the European Commission to decide that a particular industry sector provides an adequate level of protection (such as the U.S. healthcare industry) has also been rejected.
- The U.S.-EU Safe Harbor and other previous adequacy decisions as well as decisions relating to standard contractual clauses will remain in force for only two years after the Regulation takes effect. This may lead to companies needing to assess whether their prior compliance efforts remain valid.
- International investigations will become significantly more complicated. An important new provision will require that a controller’s representative must notify the DPA and obtain an authorization for transfer pursuant to the requests or orders of a court, tribunal or authority of any country outside the EU.
Consent, Legitimate Interest and Data Protection Notices
- Compliance will also become more complex given that consent may not be available in the employment context. Although the report emphasizes the importance of consent, it adds the condition that consent should not be valid if there is a significant imbalance between the position of the data controller and the data subject (i.e. the individual) remaining in the Regulation. However, incentives are also included for data controllers to use pseudonymous data (e.g. key coded) for which lighter consent obligations will apply.
- More detail is also provided on when it is possible for a data controller to rely on the legitimate interest ground to process personal data with the controller required to publish why it believes its interests override those of the data subject. The legitimate interests of the data controller include enforcement of legal claims.
- Data protection policies are to be communicated using multi-layered formats and icons with full information available on request. Data subjects also have a right to be informed about the disclosure of their personal data to a public authority.
Right to be Forgotten, Data Portability and Profiling
- The Right to be Forgotten (i.e. to have personal data erased) remains in the Regulation but has been amended so data controllers would no longer have to take reasonable steps to contact third parties to request them to erase copies of the data if the personal data has been transferred or made public based on legal grounds (such as legitimate interest).
- The Right to Data Portability (i.e. to obtain a copy of the data being processed and to move the data to another platform) has been merged with the Right of Subject Access (i.e. the right for confirmation whether personal data is being processed). The Right of Subject Access has also been amended so data subjects now have a right to be informed if their personal data has been disclosed to public authorities.
- Targeted Internet advertising could also face significant impacts. Profiling will only be permitted with the data subject’s consent or based on an express statutory provision.
Documentation, Impact Assessments, Security and DPOs
- The requirement in the proposed Regulation for data controllers and processors to retain detailed documentation on the processing has been merged with the requirement to provide information to individuals about how their personal data are processed. The exemption on small businesses employing less than 250 persons from having to retain such documentation has been removed.
- In the case of a security breach the period to notify the DPA is extended from 24 to 72 hours while the obligation to notify data subjects has also been extended to require that information be included regarding the rights of the data subject including redress.
- The obligation to appoint a Data Protection Officer (DPO) has been amended so a DPO is required where a legal entity processes personal data on more than 500 persons. The DPO must be a direct report to the head of management, such as the CEO, and the minimum appointment of the DPO is also extended from 2 years to 4 years. The DPO will also have an obligation to report suspected breaches to the DPA.
- The requirement to carry out data protection impact assessments where data involves specific risks (such as health data and data on children) remains as does the obligation to seek the views of data subjects. However, instead of having to consult with a DPA it is now proposed that a data controller can consult with their DPO.
Life Sciences and Scientific Research
- Importantly the report provides a comment that processing of sensitive data (e.g. health data) for the purposes of historical, statistical and scientific research are “not considered as urgent or compelling as public health or social protection.” This is of particular concern for the life sciences industry and other industries carrying out research including academic research.
- The provisions in the Regulation on processing of sensitive data (including health data) for the purposes of historical, statistical and scientific research are also amended to provide that such processing shall only be permitted with the consent of the data subject, but Member States may legislate for exceptions to the requirement of consent for research that serves an exceptionally high public interest, if that research cannot possibly be carried out otherwise. The amendments go on to provide that “The data in question shall be anonymized, or if that is not possible for the research purposes, pseudonymized under the highest technical standards, and all necessary measures shall be taken to prevent re-identification of the data subjects.” The possibility of EU Member States determining when scientific research is permitted, where consent has not been obtained, will also be of concern to the life sciences industry.
New One Stop Shop, Codes of Conduct and Certification Schemes
- A modified ‘one stop shop’ approach to regulation is proposed under which a DPA is competent to supervise processing operations within its territory or affecting data subjects resident in its territory. Where the processing activities of a controller or processor are established in more than one EU Member State or affecting data subjects in several Member States, the authority of the Member State of the main establishment of the data controller will be the lead authority acting as a single contact point for the controller or processor.
- Some of the powers of the European Commission to adopt delegated acts (i.e. to provide more detailed requirements) for certain provisions have been removed.
- Industry Codes of Conduct and data protection certification schemes are encouraged with a formal procedure required to be set down for the issue and withdrawal of a data protection seal or mark and to ensure the independence of the issuing organization.
The next steps in the EU legislative timetable include: (i) February 27, 2013: deadline for tabling amendments by MEPs on the Civil Liberties Committee; (ii) end of April 2013: vote by the Civil Liberties Committee; and (iii) from May 2013 on: (depending on progress in the EU’s Council of Ministers) negotiations between European Parliament, the Council and the Commission (the so called “Trilogue”).
For further details on the proposed EU Data Protection Regulation, please contact William Long (email@example.com) or John Casanova (firstname.lastname@example.org). Edward McNicholas (email@example.com) in Washington, D.C. is also available to assist U.S. companies in addressing the potential conflicts between U.S. and EU requirements.
This Sidley update has been prepared by Sidley Austin LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers.
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Prior results do not guarantee a similar outcome.