|The EU’s two bloc-wide data protection entities weighed in on the EC’s proposed changes to SCCs, meant to satisfy the Schrems II ruling.|
The European Union’s (EU) data protection authorities have rendered their joint opinions on the European Commission’s (EC) draft revisions of Standard Contractual Clauses (SCC) permissible under the General Data Protection Regulation (GDPR). At present, SCCs are the primary means by which companies are transferring the personal data of EU residents to other nations for processing, especially the United States (U.S.), without adequacy decisions. Since the adequacy decision on the U.S. was struck down companies have been left only with SCCs, and there are efforts afoot to have the EU’s top court to strike down SCCs governing the transfer of personal data to the U.S. on account of what critics call inadequate redress and protection from U.S. surveillance.
Before I turn to the European Data Protection Board (EDPB) and European Data Protection Supervisor’s (EDPS) joint opinions, some background would be helpful. In mid-2020, in a very anticipated decision, the EU’s top court struck down the adequacy decision underpinning the U.S.-EU Privacy Shield agreement. Under the GDPR, the easiest way for a controller to transfer the personal data of EU residents for processing outside the EU is through such a decision that essentially says the laws of the other nation are basically equivalent to the EU’s with respect to the rights they provide. The U.S. is the biggest trading partner with the EU with respect to these data flows with companies like Facebook and Google generating billions, maybe even trillions, of dollars in economic activity. Consequently, both Washington and Brussels have many reasons to favor the easiest route to making data flows happen. However, the forerunner to Privacy Shield (i.e. Safe Harbor) was also struck down, largely because of the inadequacy of U.S. privacy rights and mass surveillance, and so the U.S. made some changes, but these, too, proved inadequate, and litigation brought by Austrian activist and privacy advocate Maximillian Schrems against Facebook finally made its way to the Court of Justice for the European Union (CJEU).
The GDPR provides that the transfer of such data to a third country may, in principle, take place only if the third country in question ensures an adequate level of data protection. According to the GDPR, the Commission may find that a third country ensures, by reason of its domestic law or its international commitments, an adequate level of protection. In the absence of an adequacy decision, such transfer may take place only if the personal data exporter established in the EU has provided appropriate safeguards, which may arise, in particular, from standard data protection clauses adopted by the Commission, and if data subjects have enforceable rights and effective legal remedies. Furthermore, the GDPR details the conditions under which such a transfer may take place in the absence of an adequacy decision or appropriate safeguards.
Ultimately, the CJEU found the U.S. lacks the requisite safeguards needed under EU law, and so the general means of transferring the data of EU citizens from the EU to the U.S. was essentially struck down. This marked the second time in the last five years such an agreement had been found to violate EU law. However, the CJEU left open the question of whether SCCs may permit the continued exporting of EU personal data into the U.S. for companies like Facebook, Google, and many, many others. Consequently, there has been no small amount of interpreting and questioning of whether this may be a way for the trans-Atlantic data flow to continue. And yet, the CJEU seemed clear that additional measures would likely be necessary. Indeed, the CJEU asserted “[c]ontrollers and processors should be encouraged to provide additional safeguards via contractual commitments that supplement standard protection clauses” and “[i]n so far as those standard data protection clauses cannot, having regard to their very nature, provide guarantees beyond a contractual obligation to ensure compliance with the level of protection required under EU law, they may require, depending on the prevailing position in a particular third country, the adoption of supplementary measures by the controller in order to ensure compliance with that level of protection.”
Thereafter the EC stepped into the breach to seemingly shore up SCCs to protect them from the same fate as Privacy Shield, for it sems like it is a matter of time before the legality of SCCs are challenged. In mid-November 2020, the EC released for comment a draft revision of SCC for transfers of personal data to countries outside the EU with input due by 10 December. The EC had last revised EU law on SCCs in 2010, some years before the GDPR came into force. The EC released draft legislative language and, in an Annex, actual contract language for use by controllers and processors in the form of modules that are designed to be used in a variety of common circumstances (e.g., transfers by controllers to other controllers or a controller to a processor.) However, the EC stressed that SCCs form a floor and controllers, processors, and other parties are free to add additional language so long as it does not contradict or denigrate the rights protected by SCCs.
In the implementing decision, the EC asserted
the standard contractual clauses needed to be updated in light of new requirements in Regulation (EU) 2016/679. Moreover, since the adoption of these decisions, important developments have taken place in the digital economy, with the widespread use of new and more complex processing operations often involving multiple data importers and exporters, long and complex processing chains as well as evolving business relationships. This calls for a modernisation of the standard contractual clauses to better reflect those realities, by covering additional processing and transfer situations and to use a more flexible approach, for example with respect to the number of parties able to join the contract.
The EC continued:
The standard contractual clauses set out in the Annex to this Decision may be used by a controller or a processor in order to provide appropriate safeguards within the meaning of Article 46(1) of Regulation (EU) 2016/679 for the transfer of personal data to a processor or a controller established in a third country. This also includes the transfer of personal data by a controller or processor not established in the Union, to the extent that the processing is subject to Regulation (EU) 2016/679 pursuant to Article 3(2) thereof, because it relates to the offering of goods or services to data subjects in the Union or the monitoring of their behaviour as far as their behaviour takes place within the Union.
The EC explained the design and intent of the SCC language in the Annex:
- The standard contractual clauses set out in the Annex to this Decision combine general clauses with a modular approach to cater for various transfer scenarios and the complexity of modern processing chains. In addition to the general clauses, controllers and processors should select the module applicable to their situation, which makes it possible to tailor their obligations under the standard contractual clauses to their corresponding role and responsibilities in relation to the data processing at issue. It should be possible for more than two parties to adhere to the standard contractual clauses. Moreover, additional controllers and processors should be allowed to accede to the standard contractual clauses as data exporters or importers throughout the life cycle of the contract of which those clauses form a part.
- These Clauses set out appropriate safeguards, including enforceable data subject rights and effective legal remedies, pursuant to Article 46(1), and Article 46 (2)(c) of Regulation (EU) 2016/679 and, with respect to data transfers from controllers to processors and/or processors to processors, standard contractual clauses pursuant to Article 28(7) of Regulation (EU) 2016/679, provided they are not modified, except to add or update information in the Annexes. This does not prevent the Parties from including the standard contractual clauses laid down in this Clauses in a wider contract, and to add other clauses or additional safeguards provided that they do not contradict, directly or indirectly, the standard contractual clauses or prejudice the fundamental rights or freedoms of data subjects. These Clauses are without prejudice to obligations to which the data exporter is subject by virtue of the Regulation (EU) 2016/679
On the same day, the EC released its SCC proposals, the EDPB issued guidance documents, which was surely not coincidental. In “Recommendations 01/2020 on measures that supplement transfer tools to ensure compliance with the EU level of protection of personal data,” the EDPB explained the genesis and rationale for the document:
- The GDPR or the [CJEU] do not define or specify the “additional safeguards”, “additional measures” or “supplementary measures” to the safeguards of the transfer tools listed under Article 46.2 of the GDPR that controllers and processors may adopt to ensure compliance with the level of protection required under EU law in a particular third country.
- The EDPB has decided, on its own initiative, to examine this question and to provide controllers and processors, acting as exporters, with recommendations on the process they may follow to identify and adopt supplementary measures. These recommendations aim at providing a methodology for the exporters to determine whether and which additional measures would need to be put in place for their transfers. It is the primary responsibility of exporters to ensure that the data transferred is afforded in the third country of a level of protection essentially equivalent to that guaranteed within the EU. With these recommendations, the EDPB seeks to encourage consistent application of the GDPR and the Court’s ruling, pursuant to the EDPB’s mandate
Broadly speaking, whether SCCs and supplemental measures will pass muster under the GDPR will be determined on a case-by-case basis. The EDPB did not offer much in the way of bright line rules. Indeed, it will be up to SAs to determine if transfers to nations like the U.S. are possible under the GDPR, meaning these recommendations may shed more light on this central question without deciding it. One wonders, as a practical matter, if the SAs will have the capacity, resources, and will to police SCCs to ensure the GDPR and Charter are being met.
Nonetheless, the EDPB stressed the principle of accountability under which controllers which export personal data must ensure that whatever mechanism and supplemental measures govern a data transfer, the data must receive the same protection it would in the EU. The EDPB made the point that EU protections travel with the data and should EU personal data make its way to a country where it is not possible for appropriate protection to occur, then the transfer violates the GDPR. Moreover, these recommendations pertain to both public and private transfers of EU data to private sector entities outside the EU.
These recommendations work like a decision tree with exporters needing to ask themselves a series of questions to determine whether they must use supplemental measures. This may prove a resource intensive process, for exporters will need to map all transfers (i.e. know exactly) where the data are going. The exporter must understand the laws and practices of the third nation in order to put in place appropriate measures if this is possible in order to meet the EU’s data protection standards.
Reading between the lines leads one to conclude that data exporters may not send personal data to the U.S. for its federal surveillance regime is not “necessary and proportionate,” at least from the EU’s view. The U.S. lacks judicial redress in the case a U.S. national, let alone a foreign national, objects to the sweeping surveillance. The U.S. also has neither a national data protection law nor a dedicated data protection authority. These hints seem to also convey the EDPB’s view on the sorts of legal reforms needed in the U.S. before an adequacy decision would pass muster with the CJEU.
The EDPB said it was still evaluating how Schrems II affects the use of BCR and ad hoc contractual clauses, two of the other alternate means of transferring EU personal data in the absence of an adequacy agreement.
Nevertheless, in an annex, the EDPB provided examples of supplementary measures that may be used depending on the circumstances, of course, such as “flawlessly implemented” encryption and pseudonymizing data. However, the EDPB discusses these in the context of different scenarios and calls for more conditions than just the two aforementioned. Moreover, the EDPB rules out two scenarios categorically as being inadequate: “Transfer to cloud services providers or other processors which require access to data in the clear” and “Remote access to data for business purposes.”
The EDPB also issued an update to guidance published after the first lawsuit brought by Maximilian Schrems resulted in the striking down of the Safe Harbor transfer agreement. The forerunner to the EDPB, the Working Party 29, had drafted and released the European Essential Guarantees, and so, in light of Schrems II, the EDPB updated and published “Recommendations 02/2020 on the European Essential Guarantees for surveillance measures” “to provide elements to examine, whether surveillance measures allowing access to personal data by public authorities in a third country, being national security agencies or law enforcement authorities, can be regarded as a justifiable interference or not” with fundamental EU rights and protections. As the EDPB explains, these recommendations are intended to help data controllers and exporters determine whether other nations have protections and processes in place equivalent to those of the EU visa vis their surveillance programs. The EDPB stressed that these are the essential guarantees and other features and processes may be needed for a determination of lawfulness under EU law.
The EDPB formulated the four European Essential Guarantees:
A. Processing should be based on clear, precise and accessible rules
B. Necessity and proportionality with regard to the legitimate objectives pursued need to be demonstrated
C. An independent oversight mechanism should exist
D. Effective remedies need to be available to the individual
Where the new joint opinions of the EDPB and EDPS fit into this process is that the EC asked for a joint opinion on its drafts as noted at the beginning of one of their opinions:
On 12 November 2020, the European Commission requested a joint opinion of the European Data Protection Board (EDPB) and the European Data Protection Supervisor (EDPS) on the basis of Article 42(1), (2) of Regulation (EU) 2018/1725 (EU DPR) on these two sets of draft standard contractual clauses and the respective implementing acts.
Consequently, the EDPB and EDPS issued the following:
- EDPB-EDPS Joint Opinion 2/2021 on standard contractual clauses for the transfer of personal data to third countries
- Annex Note: the annex contains additional comments of a more technical nature that are made directly to the draft SCCs, notably in order to provide some examples of possible amendments.
- EDPB-EDPS Joint Opinion 1/2021 on standard contractual clauses between controllers and processors
- Annex 1
- Annex 2 Note: the annexes contain additional comments of a more technical nature that are made directly to the draft Implementing Decision and to the draft SCCs, notably in order to provide some examples of possible amendments.
In Joint Opinion 1/2021, the two bodies explained:
The EDPB and the EDPS are of the opinion that clauses which merely restate the provisions of Article 28(3) and (4) GDPR and Article 29 (3) and (4) EUDPR are inadequate to constitute standard contractual clauses. The Board and EDPS have therefore decided to analyse the document in its entirety, including the appendices. In the opinion of the Board and the EDPS, a contract under Article 28 GDPR or Article 29 EUDPR should further stipulate and clarify how the provisions will be fulfilled. It is in this light that the Draft SCCs submitted to the Board and EDPS for opinion are analysed.
The EDPB and EDPS go on to ask the EC to better clarify the difference between the legislation on transfers between controllers and processors, which is meant to happen only inside the EU, and the transfers to third countries. They asked for clarity on the scope of the language. The EDPB and EDPS also asked that the EC expand the the intra-EU SCC decision to include those nations that have been found adequate (e.g. Israel, Japan, New Zealand, and others.)
The EDPB and EDPS did find much to like, however:
- Adopted standard contractual clauses constitute a set of guarantees to be used as is, as they are intended to protect data subjects and mitigate specific risks associated with the fundamental principles of data protection.
- The EDPB and the EDPS welcome in general the adoption of standard contractual clauses as a strong accountability tool that facilitates compliance by controllers and processors to their obligations under the GDPR and the EUDPR.
- The EDPB already issued opinions on standard contractual clauses prepared by the Danish Supervisory Authority2 and the Slovenian Supervisory Authority 3.
- To ensure a coherent approach to personal data protection throughout the Union, the EDPB and the EDPS strongly welcome the envisaged adoption of SCCs having an EU-wide effect by the Commission.
- The same set of SCCs will indeed apply irrespective of whether this relationship involves private entities, public authorities of the Member States or EU institutions or bodies. These EU-wide SCCs will ensure further harmonisation and legal certainty.
- The EDPB and the EDPS also welcome the fact that the same set of SCCs should apply in respect of the relationship between controllers and processors subject to GDPR and EUDPR respectively.
In Joint Opinion 2/2021, the EDPB and EDPS stated:
The Draft SCCs combine general clauses with a modular approach to cater for various transfer scenarios. In addition to the general clauses, controllers and processors should select the module applicable to their situation among the four following modules:
- Module One: transfer controller to controller;
- Module Two: transfer controller to processor;
- Module Three: transfer processor to processor;
- Module Four: transfer processor to controller.
Again, the EDPB and EDPS wanted greater clarity on the language in this decision, especially regarding SCCs governing EU institutions subject not to the GDPR but to Regulation (EU) 2018/1725 (aka the EUDPR). In general, the EDPB and EDPS had this comment on the actual draft SCCs:
The EDPB and the EDPS welcome the introduction of specific modules for each transfer scenarios. However, the EDPB and the EDPS note that it is not clear whether one set of the SCCs can include several modules in practice to address different situations, or whether this should amount to the signing of several sets of the SCCs. In order to achieve maximum readability and easiness in the practical application of the SCCs, the EDPB and the EDPS suggest that the European Commission provides additional guidance (e.g. in the form of flowcharts, publication of Frequently Asked Questions (FAQs), etc.). In particular, it should be made clear that the combination of different modules in a single set of SCCs cannot lead to the blurring of roles and responsibilities among the parties.
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