New EU Data Protection Regulation Announced

The official proposal for an EU Regulation on Data Protection was released in Brussels on Wednesday 25 January 2012 (the “Regulation”). The Regulation, which will replace the existing EU data protection regime, will have a significant impact on almost every business either established in the EU or that has EU customers. The proposed Regulation will now be discussed in detail over the next few months as it goes through the European legislative process and is set to be adopted in 2014. The main implications of the proposed Regulation are summarised below.

  • Greater Enforcement – fines can be imposed of up to 2% of the annual worldwide turnover of a business for failure to comply with the proposed Regulation. In addition, supervisory authorities will be able to impose a temporary or definitive ban on processing personal data, enter premises and suspend data flows to a recipient in a third country or to an international organisation.
  • Class Actions – any organisation which aims to protect the data protection rights of individuals, such as consumer organisations, can make complaints to supervisory authorities and bring class actions on behalf of individuals for non-compliance, even without the consent of those affected.
  • Application to Non European Businesses – the proposed Regulation will apply to businesses established in the EU and importantly to non-European businesses that process personal data of individuals residing in the EU where the processing activities are related to offering goods or services to such individuals or the monitoring of their behaviour.
  • Accountability – businesses will be required to adopt policies and implement measures to demonstrate compliance with the requirements in the proposed Regulation. This will include keeping a detailed record of all forms of data processing and carrying out data protection impact assessments. This will lead to significant compliance costs for affected businesses. Privacy by design measures must also be implemented to ensure, for example, that data is not collected or retained beyond the minimum necessary.
  • Data Protection Impact Assessments – the proposed Regulation introduces a new requirement for impact assessments to be conducted where the processing is likely to present specific risks, such as the processing of health data. As part of the assessment the views of the individuals whose data are being processed need to be obtained.
  • Data Protection Notifications – while the requirement in some EU Member States for data controllers to notify their Data Protection Authority in respect of their data processing activities will be abolished, businesses will be required to consult the relevant supervisory authority prior to the processing of personal data where a data protection impact assessment is required. Where the supervisory authority considers that the assessment insufficiently identifies or mitigates risks it can prohibit the intended processing. Where a data controller or processor is established in more than one EU Member State then the competent authority is where the controller or processor has its main establishment.
  • Information Security – the proposed Regulation requires data controllers and processors to implement appropriate technical and organisational security measures after having carried out an evaluation of data privacy risks. Moreover, data security breaches will have to be notified to the relevant supervisory authority without undue delay and “where feasible” no later than 24 hours after having become aware of it. The proposed Regulation specifies that when the breach notification is not made within 24 hours a reasoned justification must be provided to the relevant supervisory authority. The breach will have to be communicated to the individual without undue delay when the breach is likely to adversely affect the protection of the personal data or the privacy of the individual.
  • Consent – the proposed Regulation places the legal burden on the data controller to prove that the individual has given consent and gives an individual a right to withdraw their consent at any time. The Regulation also significantly restricts reliance on consent “where there is a significant imbalance between the position of the data subject and the controller.”
  • Data Protection Officers – businesses with over 250 employees will be required to appoint a data protection officer who will have to have “expert knowledge” of data protection law and practices. The appointment which must be for a term of at least two years should be notified to the relevant supervisory authority and the public. The proposed Regulation also provides that businesses may appoint a single data protection officer for a corporate group.
  • Increased Rights of Individuals – businesses must have transparent and easily accessible data protection policies and provide information using clear and plain language. An individual also has a right to correct his or her personal data and, importantly for social media, a right to data portability (i.e. to transfer his or her personal data to another provider) and will have a right to be forgotten (i.e. to have his or her personal data erased) which will be complex to apply in practice.
  • Transfer of Personal Data from the EU – the proposed Regulation maintains the restriction under the current Data Protection Directive of transferring personal data to countries outside the EU that are not considered to provide an adequate level of protection including the United States. The Regulation provides that one of the main solutions to permit such international transfers is the adoption of Binding Corporate Rules, which are a set of data protection rules adopted by an international corporate group that meet EU requirements and must be approved by a lead supervisory authority. Significantly, the proposal confirms that that specific sectors of a country could be deemed adequate – perhaps paving the way for recognition of the United States health, communications and financial sectors.

The proposed Regulation will certainly be subject to lengthy discussion and revision by the Council of Ministers and the European Parliament before it is finally adopted and becomes law. However, it is clear that whatever the final form of the Regulation it will have a significant impact on businesses worldwide, increase compliance costs and enforcement actions and will therefore require a new approach to data protection.

If you have any questions regarding this update, please contact:

London

John Casanova
jcasanova@sidley.com
+44 20 7360 3739

William Long
wlong@sidley.com
+44 20 7360 2061

Washington, D.C.

Ed McNicholas
emcnicholas@sidley.com
+1 (202) 736 8010

Alan Raul
araul@sidley.com
+1 (202) 736 8477


 

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.

Attorney Advertising – For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300 and One South Dearborn, Chicago, IL 60603, 312.853.7000. Prior results do not guarantee a similar outcome.

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First Look: Leaked Draft of New EU Data Protection Regulation Suggests Significant Impacts for Global Businesses

A draft of a new EU Regulation on Data Protection to replace the existing EU Data Protection Directive was released un-officially earlier this week. The draft Regulation once adopted will have a significant impact on virtually all businesses established in the EU, or who carry on business with the EU, introducing significant internal compliance requirements and fines that range up to 5% of worldwide turnover.

In an article published by the Bureau of National Affairs, John Casanova and William Long of the London office of Sidley Austin and Alan Raul and Ed McNicholas of the Sidley Washington office provide their initial analysis of this significant new EU development. For further information on this development and other EU data protection requirements please contact John Casanova or William Long and for counseling in relation to US privacy issues please contact Alan Raul.

Reproduced with permission from Privacy & Security Law Report, Vol. 10 PVLR No. 48, 12/12/2011. Copyright 2011 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

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Business Concern Over New EU Consent Requirement to Use Website Cookies

New EU cookie consent requirement

Amendments to the EU’s ePrivacy Directive have meant that since 25 May 2011 the EU has required website operators to obtain the consent of users to the use of cookies. This is a significant development and it is causing considerable concern among businesses. The new consent requirements for use of cookies, which consist of small text files that are used by virtually every website to recognise a user’s computer and collect information on a user’s activities and preferences, has caused a storm of debate as regulators and businesses struggle to find a practical way of obtaining consent.

There is also particular concern regarding compliance with the new requirements in relation to so called “third party” or “tracking” cookies used in behavioural advertising, where information from cookies is shared with third parties. In these circumstances obtaining consent may be more complex and care needs to be taken to make sure users are made aware of what data are being collected and by whom.

There is only one exception to the new EU consent requirement where the website is using a cookie “that is strictly necessary” to provide the service explicitly requested by the user. However, this is a narrow exception covering, for example, use of a cookie to allow the website to remember items placed in a virtual shopping basket and would not apply, to use of cookies to collect website analytics data.

Confused transposition process in the EU

Another particular concern is the lack of a harmonised approach to implementation of the new consent requirements in different EU Member States. Despite the 25 May 2011 implementation deadline only ten EU Member States have yet implemented the requirements into their national laws, including Estonia, Finland, Ireland, Latvia, Lithuania, Malta, Sweden, Hungary, Luxembourg and the UK. The table on page 3 summarises the current position.

There is also a lack of clarity on how in practice consent may be obtained and in particular whether browser settings can be used to obtain consent. It is understood that in Ireland, Luxembourg, Sweden and the UK the implementing legislation or guidance expressly provides that consent may result from the browser settings. Of these early adopting Member States national guidance has only been published, so far, in Ireland, Sweden and the UK although further national guidance may be published in due course.

In the UK, the Information Commissioner’s Office (the “ICO”) has issued guidance on what may constitute a sufficient opt-in consent:

  • Pop ups and similar techniques – using pop ups on the website screen for users to click that they consent to use of cookies, although the ICO acknowledges that this could spoil the user experience.
  • Terms and conditions – when users open an online account, or sign in to use the services, they could consent through terms and conditions to operation of the account and to use of cookies but a positive indication of consent is required such as through the user ticking a box.
  • Settings–led consent – obtaining consent as part of the process by which the user confirms what they want to do, or how they want the site to work, for example, when selecting a feature as to the size of text they want displayed.
  • Feature–led consent – placing text in the footer or header of the web page which is highlighted or which turns into a scrolling piece of text when wanting to set a cookie on the user’s device.
  • Browser settings – using browser settings to obtain consent, although the view of the ICO is that most browser settings are not sophisticated enough to allow a website provider to assume that the user has given their consent to the website using a cookie.

To allow businesses to achieve compliance the UK has a grace period of 12 months until May 2012 during which time the ICO will refrain from using its enforcement powers although businesses are expected to take steps to comply with the new requirements. It is also understood that in Sweden a grace period, expected to be around 6 months, will also be applied.

Another question that is still not clear is whether national Member State laws implementing the new cookie consent requirement will apply to website operators not established in a Member State, for example a US website accessed by French consumers.

Practical steps to be considered by businesses now

While there are still some unanswered questions concerning the implementation and scope of the new EU cookie consent requirement it is important that website operators start to consider the new requirements now and how they may apply to their business. Some practical steps that can be taken now include:

  • monitoring the implementation of the cookie consent requirement in different Member States over the next few months;
  • carrying out an audit of the business use of cookies, including the type of cookies used (e.g. first party or third party cookies, session only cookies or persistent cookies);
  • updating privacy policies to include more explicit disclosures on the use and ability to opt-out of use of cookies;
  • evaluating consent options, taking into account customer impact, costs and applicable laws; and
  • reviewing existing arrangements with service providers concerning the collection of data and use of cookies.
For further details on the current implementation of the EU cookie consent requirements please contact:

John Casanova at jcasanova@sidley.com or on +44 (0)20 7360 3739, Jens Rinze at jrinze@sidley.com or on +49 69 22 22 1 4020, William Long at wlong@sidley.com or on +44 (0)20 7360 2061, or the Sidley lawyer with whom you usually work.


1 Based on adopted or draft legislation or based on views of Government authorities or national Data Protection Authorities. Some of the information in this update is based on views of local counsel which is likely to change and where Sidley Austin LLP is not admitted.


 

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. Some of the information in this update is based on views of local counsel which is likely to change and where Sidley Austin LLP is not admitted. Readers should not act upon this without seeking advice from professional advisers.

Attorney Advertising – For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300 and One South Dearborn, Chicago, IL 60603, 312.853.7000. Prior results do not guarantee a similar outcome.

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European Shift to Concrete Cost Analysis of Data Protection

BNA’s Privacy & Security Law Report

Following meetings held Feb. 24-25, the Council of the European Union released its ‘‘Conclusions’’ in response to the EU Commission’s Nov. 4, 2010 ‘‘Communication’’ proposing ‘‘a comprehensive approach on personal data protection in the European Union.’’ The Council is the main decision-making body of the European Union, comprising the ministers of the Member States. Depending on the issue on the agenda, each country is represented by the minister responsible for that subject (foreign affairs, finance, social affairs, transport, agriculture, etc.).

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