Data protection: another generation

On 25 January 2012, the Vice President of the European Commission, Viviane Reding, unveiled far reaching proposals for rewriting the EU’s 17-year-old data protection directive, Directive 95/46/EC (1).

The Commission had previously declared its intention to reform the existing data protection framework back in April 2010. The proposal is intended to modernise the EU’s data protection rules by taking into account technological advances and ensuring a more uniform application of data protection rules across all 27 member states. In doing so, it will impose additional compliance obligations on organisations.

In place of the existing directive, the European Commission has proposed a new regulation setting out a general EU framework for data protection (2). The regulation would create new rights for individuals and impose new compliance obligations on organisations, with potential fines of up to 2% of annual global turnover for non-compliance. As a regulation, it would be directly applicable in national law, with no implementation required from individual national governments. As a consequence, it would replace the Data Protection Act 1998 (“DPA”) in its entirety.

The Commission also issued a proposed directive regulating the processing of personal data for the prevention, detection, investigation or prosecution of criminal offences and related judicial activities (3).  The directive would replace Framework Decision 2008/977/JHA (4).  

This article addresses the proposed regulation and not the proposed directive.   

Reach – implications for non-EU companies

Organisations which are not established in the EU would be caught by the new regulation if they either offer goods or services to data subjects in the EU or monitor the behaviour of EU citizens. This aspect of the proposal is hugely controversial, as the current directive only applies to non-EU organisations if they use equipment in the EU for their data processing operations. This would mean that the likes of Google and Facebook as well as other social media players would be caught by the regulation.   

Definitions

The regulation would also change what we currently understand to be “personal data”. It would do so by amending the key definition of “data subject” such that personal data would include information that could “reasonably likely” be used to identify an individual, irrespective of whether the data is held by the data controller or a third party. This is significant as UK case law has, in recent years, required that the data controller should hold all the information in order for it to be regarded as personal data.  

The concept of “consent” is enshrined in the new regulation. This contrasts sharply with the DPA, where consent is not defined and has always proved to be a troublesome concept for practitioners. Under the regulation, if an organisation wishes to rely on an individual’s consent, for consent to be valid it would have to be a “freely given, specific, informed and explicit indication of his or her wishes… either by a statement or by a clear affirmative action”. Consent could not be gained through silence or inactivity. This would present particular challenges for UK data controllers, where implied consent has been commonly relied on. 

Where consent is given in the context of a written declaration which also relates to another matter, the need for consent should be distinguishable from the other matter. 

A particular challenge for the employer–employee relationship is that consent would not be valid if there is a “significant imbalance” between the positions of the parties. Such a high threshold for the consent requirement may lead organisations to continue to rely on the “legitimate interests” condition for processing personal information. 

The regulation proposes that a “child” would mean anyone below the age of 18. This obviously differs from Scots law. However, when processing the personal information of a child under 13 in relation to information society services, the consent of the parent or guardian would be needed. This would bring the EU into line with US law.   

Principles

The regulation proposes several changes to the data protection principles. For example, in addition to the current requirement to process personal information fairly and lawfully, the regulation would introduce a requirement to do so “in a transparent manner”. Data controllers would also be obliged to ensure that personal data is “limited to the minimum necessary”, and processed only if the purpose cannot be met by processing non-personal information, such as anonymised information.  

Individual rights

The regulation would materially strengthen the rights of individuals. Data controllers would be required to have transparent and easily accessible data protection policies, and establish procedures for handling subject access requests. In a tightening of current UK practice, such requests would have to be dealt with within one month and, in most cases, free of charge. Individuals would be entitled to receive more information than they do at present when their personal information is collected or when they submit a subject access request.  

The “right to be forgotten”

Individuals would have the right to require that organisations delete their data “without delay” where there is no legitimate interest in retaining it. This is commonly referred to as the “right to be forgotten”. Where an individual makes such a request, if the data controller has made the information public it would have to inform any third parties processing the data that the individual has requested that it be erased.  

The right to data portability

Where held electronically, data subjects would be entitled to receive a copy of their personal data in a “commonly used format”. So, if someone’s data is held in the cloud, they could ask their service provider to provide them with a copy so that they can pass it to an alternative service provider. Organisations will need to ensure that data is capable of being ported to alternative platforms using, for example, open standards to hold and save data. 

Data breach notification 

Data controllers would be required to notify regulators about any personal data breach which has occurred, “without delay and where feasible” within 24 hours of becoming aware of it. There is currently no test, meaning all breaches should be notified. Data processors would themselves be required to notify data controllers immediately after establishing that there has been a breach. 

Data controllers would also be required to notify affected individuals where a data breach is “likely to adversely affect” them. There is, however, a specific exemption from notifying where data has been rendered unintelligible to those not authorised to access it.  

Obligations

The regulation would impose various positive obligations on data controllers to adopt policies and implement procedures and controls to achieve compliance and ensure that the effectiveness of such measures can be verified. Both controllers and processors would be required to maintain documentation relating to their data processing. The foregoing would not apply to individuals processing personal data for non-commercial purposes, or organisations employing under 250 people where data processing is ancillary to their principal activities. Both controllers and processors would also be expected to conduct an impact assessment if any processing was to present a specific privacy risk. 

Additionally, controllers and processors who are public authorities, or commercial organisations which employ in excess of 250 people or who regularly and systematically monitor data subjects, would be required to appoint a data protection officer. Data protection officers would have to be appropriately qualified and trained, independent and remain in post for a minimum two year period.  

Data processors

The regulation would require data processors to take appropriate technical and organisational measures to protect personal information.  

International transfers

Currently, data protection legislation can present a major regulatory hurdle to organisations wishing to transfer personal data to non-EEA countries which do not ensure an “adequate level of protection”. The new regulation seeks to lessen the regulatory burden by, for example, giving formal recognition to binding corporate rules (“BCRs”) for the first time. For the first time, BCRs would also be available for use by data processors and not just data controllers. Whilst European Commission-approved “model clauses” remain as an alternative compliance route, national data protection authorities would be able to approve standard data protection clauses (subject to approval by the Commission), as well as individually negotiated contractual clauses, for international transfers of personal data. 

Data protection authorities

Individual data protection authorities would remain responsible for data protection enforcement under the regulation. The regulation is intended to increase cross border co-operation between national authorities by obliging them to provide mutual assistance to each other as well as co-operate with the European Commission. They would also be expected to advise certain proposed legal measures to the Commission and the (to be created) European Data Protection Board, to ensure the regulation is applied consistently throughout the EU.  

Financial penalties 

The existing regime for imposing financial penalties currently varies across the EU. The regulation would replace existing national arrangements and would operate a sanctions regime based on a “sliding scale”, having regard to the seriousness of the data breach. It is also proposed that fines could be imposed against data controllers and data processors, a significant departure from the current regime. Penalties would be enforced by national data protection authorities.  

For a first time offender who unintentionally fails to comply, a written warning may be issued provided the offender is either a natural person processing personal data without a commercial interest or an organisation which employs fewer than 250 persons and the processing of personal data is an ancillary activity. Thereafter, a sliding scale would apply with fines of up to (i) €250,000 or, for enterprises, up to 0.5% of annual global turnover; (ii) €500,000 or, for enterprises, up to 1% of annual global turnover; and (iii) €1,000,000 or, for enterprises, up to 2% of annual global turnover, depending on the severity of the breach.   

Unduly burdensome?

As laudable as its objectives are, the regulation has many detractors. For example, the CBI has expressed the view that the proposals are “unworkable in their current form”, and that by adding “complexity and uncertainty” they will be bad for European businesses. The ICO is itself concerned at the administrative burden the regulation would have on organisations, and has suggested changes which would reduce the burden while preserving the enhanced rights for individual (5).

The regulation will now be considered by the European Parliament and the Council of Ministers. As parts of the regulation are contentious, the road to adoption will be difficult, and it is thought that the earliest the regulation will take effect is sometime in 2015.

References

(1) Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Safeguarding Privacy in a Connected World: A European Data Protection Framework for the 21st Century (COM(2012) 9 final).

(2) Proposal for a Regulation of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data and on the free movement of such date (General Data Protection Regulation), 25.1.2012 COM(2012) 11 final 2012/0011 (COD).

(3) Proposal for a Directive of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data by competent authorities for the purposes of prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and the free movement of such data COM/2012/010 final - 2012/0010 (COD)

(4) Framework Decision 2008/977/JHA of 27 November 2008 on the protection of personal data processed in the framework of police and judicial cooperation in criminal matters, OJ L 350, 30.12.2008, p60.

(5) See Information Commissioner’s Office: initial analysis of the European Commission’s proposals for a revised data protection legislative framework.