E.C.J Leaves U.S. Organizations to Search for Alternative Data Transfer Channels

J. Adam Sorenson, MJLST Staffer

The Court of Justice of the European Union (E.C.J.), the European’s top court, immediately invalidated a 15-year-old U.S. EU Safe Harbor Program Oct. 6th (Schrems v. Data Prot. Comm’r, E.C.J., No. C-362/14, 10/6/15). This left the thousands of businesses which use this program without a reliable and lawful way to transfer personal data from the European Economic Area to the United States.

The Safe Harbor Program was developed by the U.S. Department of Commerce in consultation with the European Commission. It was designed to provide a streamlined and cost-effective means for U.S. organizations to comply with the European Commission’s Directive on Data Protection (Data Protection Directive) which went into effect October of 1998. The program allowed U.S. organizations to voluntarily join and freely transfer personal data out of all 28 member states if they self-certify and comply with the programs 7 Safe Harbor Privacy Principles. The program was enforced by the U.S. Federal Trade Commission. Schrems v. Data Prot. Comm’r, however, brought a swift halt to the program.

This case revolves around Mr. Schrems, an Australian Facbook user since 2008 living in Austria. Some or all of the data collected by the social networking site Facebook is transferred to servers in the United States where it undergoes processing. Mr. Schrems brought suit against the Data Protection Commissioner after he did not exercise his statutory authority to prohibit this transfer. The case applied to a 2000 decision by the European Commission which found the program provided adequate privacy protection and was in line with the Data Protection Directive. The directive prohibits “transfers of personal data to a third country not ensuring an adequate level of protection.”(Schrems) The directive goes on to say that adequate levels may be inferred if a third country ensures an adequate level of protection.

The E.C.J. found that the current Safe Harbor Program did not ensure an adequate level of protection, and therefore found the 2000 decision and the program itself as invalid. This means all U.S. organizations currently transferring personal data out of the EEA are doing so in violation of the Data Protection Directive. This case requires U.S. organizations to find alternative methods of approved data transfer, which generally means seeking the approval of data protection authorities in the EU, which can be a long process.

Although the EU national data protection authorities may allow for some time before cracking down on these U.S. organization, this decision signals a massive shift in the way personal data is transferred between the U.S. and Europe, and will most likely have ripple effects throughout the data privacy and data transfer worlds.

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