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Basics of International Privacy Law for Commercial Litigators, Part 1: the EU
Wednesday, April 27, 2016

Let’s say an American commercial litigator is working to defend a multinational client that has been sued in the U.S. The litigator may realize that he or she needs to collect emails or other documents from the client’s office in Germany, perhaps for discovery or investigation. However, the export of the data contained in those documents from Germany may, in certain circumstances, be illegal under German or EU privacy laws, and a lawyer unaware of the nature of these laws may find him- or herself in hot water.

Commercial litigators based in the U.S. often are surprised to learn that other countries’ privacy laws can present hurdles in their own domestic cases. However, the mere awareness that different jurisdictions take different approaches to can go a long way toward easing the headaches inflicted by these varying (and often confusing) legal regimes. This post covers the basics of privacy law in the EU, and future posts in this series will delve further into the complexities of international privacy law and how it affects U.S.-based litigators.

Privacy Law in the EU

In contrast to the U.S., which takes a sectoral approach to privacy – laws like the Health Insurance Portability and Accountability Act (HIPAA) and the Gramm-Leach-Bliley Act set out privacy laws related to specific industries – the EU privacy regime is more comprehensive. For the past 20 years, privacy laws in the EU have been governed by the Data Protection Directive, generally referred to as the “Directive.” The Directive set out the minimum legal standards the EU Member States, as well as non-EU European Economic Area members Norway, Iceland, and Liechtenstein, had to meet in crafting their own data protection laws relating to “personal data,” defined in the Directive as “information relating to an identified or identifiable natural person.” That definition is broad enough to include things like a person’s name, address, financial account numbers, and even IP addresses. Although the Directive therefore allowed for some disparity in the laws among the Member States, it also imposed some stringent requirements that applied more generally across the continent.

One of the areas that has most affected American litigators is the Directive’s prohibition on the export of personal data from the EU in the absence of certain legal measures. In essence, EU lawmakers determined that personal data could not leave the EU unless that data was going to a country with data protection laws that the EU deemed “adequate” compared with its own demanding regulations. The list of countries with “adequate” data protection regimes grew over time and currently includes Argentina, Canada, Israel, New Zealand, Switzerland, and Uruguay, but it has never included the U.S. Accordingly, those wishing to export personal data from an EU Member State to the U.S. had to adopt another measure in order to transfer the data legally. Three of the more commonly-used measures include:

  • Standard contractual clauses, also known as model contracts, which oblige the data importer to take certain measures to protect the personal data being transferred from the EU;

  • Binding corporate rules (“BCRs”), through which a multinational company may adopt EU-approved rules relating to its treatment and handling of personal data;

  • Self-certifying under the U.S.-EU Safe Harbor Agreement, which represented a U.S. company’s pledge to adopt EU-like standards in its treatment and handling of personal data. Of these three options, Safe Harbor self-certification proved to be particularly popular, as the self-certification process was relatively painless.

In late 2015, the European Court of Justice (“CJEU”) further compounded the data transfer headache when it invalidated the decision setting out the Safe Harbor program, which in turn rendered the program itself extinct. The CJEU felt that the revelations as to the U.S. government’s widespread surveillance (most notably publicized by Edward Snowden) indicated that the U.S. government did not adequately protect personal data from NSA surveillance activities. The decision had a profound effect on trans-Atlantic personal data transfers, as many companies that had self-certified under the Safe Harbor program scrambled to implement model contracts or BCRs in an attempt to legalize their EU-to-U.S. transfers. In February 2016, U.S. and EU officials reached agreement on a new version of Safe Harbor, known as the Privacy Shield. Although some Privacy Shield details have been released, it still requires approval, and even then, it likely will be subject to legal challenges that may prevent it from serving as a viable means of transfer for some time.

Making matters even more complicated is the fact that the EU is in the process of adopting the General Data Protection Regulation (“GDPR”), which is meant to replace the Directive as the omnibus EU data protection law. The GDPR still requires the adoption of model contracts, BCRs, or other legal means to legitimize the export of personal data outside the EU, while increasing the fines for violations of data protection laws and imposing other restrictions. The GDPR likely will not go into effect until the spring of 2018, although companies and their counsel should analyze the GDPR now to ensure compliance within two years.

So why do the U.S. and this bloc of European countries – which, by and large, share numerous fundamental cultural similarities – take such different approaches to privacy? One theory takes into account the regions’ differing historical backgrounds. The U.S. has a strong tradition of free speech and expression, which is enshrined in the First Amendment of the Constitution and supports the belief that information (including, according to this theory, personal information) should be shared with few restrictions. The European perspective may be shaped more by World War II, when fascist governments kept lists of people’s personal information and used that information to send certain individuals to work or death camps. According to this theory, Europeans therefore are more wary about their privacy and the security of their personal information, and this sentiment is reflected in the EU’s more stringent and comprehensive privacy laws.

Implications for Litigators

Litigators should be aware that the U.S. privacy law regime (with which they likely have some degree of familiarity) is an outlier compared to the rest of the world, and that laws in the EU, in particular, may hinder discovery and investigations, particularly those relating to international clients.

Part 2: Global Trends

Part 3: Cross-Border Discovery Issues

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