The consequences of a cybersecurity incident can be severe. The economic loss associated with an incident can often be compounded by reputational damage, loss of trade secrets, destruction of assets, operational impairment, lost revenue following the announcement of the cybersecurity incident and the expense of implementing remedial measures. The timing and content of any public communication about a suspected or confirmed cybersecurity incident can exacerbate this loss and have a significant impact on the trading price of the issuer’s securities. The disclosure considerations become even more complex when a company is subject to overlapping, and potentially conflicting, regulatory obligations in multiple jurisdictions, including the United States and the European Union (“EU”). This issue is now at the forefront with the EU’s new data security and privacy regime, the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018.
Since the adoption of the General Data Protection Regulation (GDPR) in 2016, considerable attention has focused on the vastly increased scope of potential administrative fines, and even more attention is being paid to the issue with the GDPR becoming effective on May 25, 2018. In this post, we summarize the key fining provisions, and analyze the recent relevant guidance on this issue from the Article 29 Working Party (an advisory group consisting of representatives from national data protection authorities together with the European Commission). Continue Reading Administrative Fines Under the GDPR
Following the generally positive assessment of the EU-U.S. Privacy Shield framework (the “Privacy Shield”) by the European Commission further to its first annual review, the Article 29 Working Party (an advisory group consisting of representatives from national data protection authorities together with the European Commission), released its own opinion (the “WP29 Opinion”), which was more critical and called for immediate actions to be taken on the part of the United States.
While the Article 29 Working Party praised some improvements made by U.S. authorities in terms of transparency and surveillance, the WP29 Opinion noted significant outstanding issues which ought to be remedied before the second annual review of the Privacy Shield or even earlier. In particular, the Article 29 Working Party expressed concerns relating to the supervision of U.S. surveillance programs, the processing by U.S. authorities of personal data transferred under the Privacy Shield for national security purposes and the implementation of redress mechanisms available to individuals located in the EU against U.S. companies that are not using personal data in accordance with their commitments under the Privacy Shield. The Article 29 Working Party has set out as priorities the appointment of an independent Ombudsperson entrusted with the appropriate powers, the clarification of internal procedural rules relating to the interaction between the Ombudsperson and other intelligence or oversight bodies (including declassification rules) and the appointment by the U.S. administration of the members of the Privacy and Civil Liberties Oversight Board contemplated by the Privacy Shield. According to the Article 29 Working Party, those priority issues should be resolved by May 25, 2018, which is the deadline for compliance with the EU’s General Data Protection Regulation (GDPR) (please refer to our prior Alert Memo in that regard).
Other issues identified by the Article 29 Working Party related to the lack of information given to individuals in the EU regarding the exercise of their rights under the Privacy Shield and the need to increasingly monitor compliance of companies certified under the Privacy Shield. The WP29 Opinion also provided specific recommendations with regard to the processing of employee data, rules regarding automated decision-making and the profiling of individuals, and the self-certification process by U.S. companies wishing to take advantage of the Privacy Shield.
The Article 29 Working Party advised that in the event of a failure to take the actions it prescribed in the WP29 Opinion within the next year, it reserved the right to challenge the validity of the European Commission’s adequacy decision underlying the Privacy Shield in national courts, which could result in its annulment. In that regard, some of the arguments the Article 29 Working Party could raise (such as the broad access to personal data by U.S. authorities for national security purposes) appear to be similar to those that resulted in the invalidation of the Safe Harbor scheme (the Privacy Shield’s predecessor) by the Court of Justice of the European Union in its Schrems v. Data Protection Commissioner judgment.
The Privacy Shield is also subject to pending challenges, one of which was dismissed on November 22, 2017, albeit not on substantive grounds but as a result of the applicant’s lack standing to act. These challenges to the Privacy Shield echo other actions seeking to invalidate alternative legal grounds to transfer personal data from the EU to the United States, such as the one initiated by Mr. Schrems and the Irish Data Commissioner to question the legitimacy of so-called Standard Contractual Clauses (“SCCs,” also commonly referred to as Model Contracts), which is now pending before the Court of Justice of the European Union for a preliminary ruling.
The invalidation of both the Privacy Shield and the SCCs as approved methods for transferring personal data would cause serious disruptions in the flow of data and, as a result, business relations, between EU and U.S. companies.
The EU General Data Protection Regulation (GDPR) represents the biggest change to EU data protection law in more than twenty years. It has grabbed headlines as a result of its extra-territorial reach and the potentially vast fines for non-compliance. (For a general overview of the GDPR, please refer to our Alert Memo.) With the GDPR’s May 25, 2018 effective date rapidly approaching, the Article 29 Working Party (an advisory group made up of representatives from EU data protection authorities as well as the European Commission) recently published its latest wave of GDPR guidance. In this post, we summarize both the prior guidance and the most recent update, which covers critical issues such as data breach notification requirements and the calculation of penalties for non-compliance. Continue Reading Preparing for GDPR – Guidance from the Article 29 Working Party
On October 18, 2017, the European Commission published its report on the functioning of the EU-U.S. Privacy Shield framework (the “Privacy Shield”), marking the conclusion of its first joint annual review of the regime. The Privacy Shield, which is administered by the International Trade Administration within the U.S. Department of Commerce (“DOC”), provides companies on both sides of the Atlantic with a mechanism to comply with data protection requirements when transferring personal data from the European Union to the United States. To join the Privacy Shield, a U.S.-based organization is required to self-certify to the DOC and publicly commit to comply with the Privacy Shield requirements. While joining the Privacy Shield is voluntary, once an eligible organization makes the public commitment to comply with the Privacy Shield requirements, the commitment will become enforceable under U.S. law. Continue Reading EU-U.S. Privacy Shield Functions Well, with Scope for Improvement, According to its First Annual Review
Earlier this month, in the latest ruling to emerge from the privacy campaign initiated by activist Max Schrems, the Irish High Court cast fresh doubt on the legitimacy of so-called Standard Contractual Clauses (“SCCs”, also commonly referred to as Model Contracts) as an approved method of ensuring lawful personal data transfers from the European Economic Area (“EEA”) to the United States. In this case, Mr. Schrems, joined by the Irish Data Protection Commissioner (“DPC”), objected to Facebook Ireland Ltd. transferring personal data to its parent company in the U.S., Facebook Inc. Continue Reading Schrems Ruling: Renewed Scrutiny of Standard Contractual Clauses for EU-US Personal Data Flows
From May 2018, organizations established or providing services in the EU will be subject to new national and EU-wide cybersecurity legislation, as regulators in EU Member States begin to apply both the General Data Protection Regulation and national legislation implementing the Network and Information Security Directive.
These new laws will significantly increase the territorial and sectoral scope of organizations subject to EU cybersecurity obligations and introduce strict data security and breach disclosure obligations with potentially severe penalties for non-compliance.
This tightening of the EU cybersecurity regime coincides with similar developments in other jurisdictions worldwide and reflects a global trend for legislators and regulators to require organizations to observe increasingly stringent cybersecurity practices. This memorandum considers the key components of the new EU laws and outlines a number of recent cybersecurity developments in other key jurisdictions.
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