European Union: Advocate General Declares US Safe Harbour "Invalid"

On 23 September 2015, Advocate General Bot of the Court of Justice of the European Union (the "AG") delivered his opinion (the "Opinion") on a request for a preliminary ruling brought by the High Court of Ireland in a case pitting Maximilian Schrems - a member of the social network Facebook - against the Irish Data Protection Commissioner (the "Commissioner") (Case C-362/14, Maximilian Schrems v. Data Protection Commissioner). The Opinion is of an advisory nature and does not bind the Court of Justice of the European Union (the "ECJ"). However, should the ECJ follow the AG's Opinion, its judgment would have a major impact on international transfers of personal data by European companies in general and on the way businesses organise data transfers from the EU to the US in particular.

Legal certainty with regard to international transfers of personal data by European companies

Under EU Directive 95/46/EC (the "Data Protection Directive" or "DPD"), personal data must not be transferred to a recipient outside the EEA unless such a recipient is located in a country which is deemed to provide an adequate level of protection (Article 25(1) of the DPD). This decision on "adequacy" is made by the European Commission in accordance with Article 25(6) of the DPD. For instance, in Decision 2000/520, the European Commission decided that the US Safe Harbour Privacy Principles ensure an adequate level of protection for personal data transferred from the EU to companies established in the US. The Safe Harbour system is a voluntary system and many US companies signed up to the Safe Harbour scheme and process personal data from the EU on the basis of Decision 2000/520.  

The question reviewed by the AG concerns the extent to which an "adequacy" decision by the European Commission prevents national Data Protection Authorities ("DPAs") from deciding otherwise. In particular, are DPAs prevented from investigating a complaint alleging that personal data transferred to the third country concerned are not adequately protected and from suspending the transfer of data to this country. The AG essentially held that they are not.

The AG based his Opinion on the observation that the independence of DPAs is an essential component of the protection of individuals with regard to the processing of personal data. This independence is not only laid down in Article 28(1) of the DPD, but also in Article 8(3) of the Charter of Fundamental Rights of the EU (the "Charter"), which enshrines the highest level of the hierarchy of rules in EU law. According to the AG, independence entails that national data protection authorities have to be free from any external influence, including the decisions of the European Commission.

While acknowledging that European Commission decisions such as Decision 2000/520 are binding on the Member States and play an essential role in ensuring uniformity in the transfer conditions applicable in the different Member States, the AG held that "the Member States and therefore, within them, the national supervisory authorities cannot be absolutely bound by an adequacy decision adopted by the Commission". According to the AG, an interpretation of an instrument of secondary EU law, such as the DPD or Decision 2000/520, based on an irrebuttable presumption that fundamental rights will be observed, is not compatible with the duty of Member States to interpret and apply secondary EU law in a manner consistent with fundamental rights.

Organisation of data transfers from the EU to the US

Although the question raised by the High Court of Ireland solely related to the interpretation of the Data Protection Directive and of Decision 2000/520 without directly addressing their validity, the AG stated that the ECJ may still find it necessary to examine the validity of Decision 2000/520 in the case at hand. The AG added that Decision 2000/250 must be declared invalid in view of the overly general formulation of the derogations from the Safe Harbour principles for which it allows, and in view of its concrete implementation.

The annexes to Decision 2000/520 permit derogations from (all) Safe Harbour principles, for instance, if necessary to meet national security requirements, as well as to the extent necessary to meet the overriding legitimate interests furthered by a statute or government regulation that creates conflicting obligations. In his opinion, the AG held that the wording of these derogations unjustifiably interferes with the fundamental rights laid down in the Charter. The AG indicated that the problem arises in connection with this derogation. He was of the opinion that the wording is "too general" and as a result, the implementation of the derogations by US authorities is "not limited to what is strictly necessary". The AG also found that (i) personal data were used for other purposes than for those for which they were initially collected; (ii) users are not informed about the access to their data; and (iii) users do not have an effective right to be heard.

The AG also considered that respect for human rights is a condition of the lawfulness of EU acts. The AG held that the principle of proportionality requires that acts of EU institutions must be appropriate for attaining the legitimate objectives pursued. In this respect, the AG assessed the proportionality of the Safe Harbour derogations. According to the AG, the fact that the European Commission maintained Decision 2000/520 after the revelations made by Edward Snowden, the former CIA official, violate the fundamental rights of the Charter. In particular, the AG denounced that "the access which the United States intelligence authorities may have to the personal data transferred covers, in a generalised manner, all persons and all means of electronic communication and all the data transferred, including the content of the communications, without any differentiation, limitation or exception according to the objective of general interest pursued".

On this basis, the AG found Decision 2000/520 to be invalid and stated that the European Commission should have suspended the adequacy finding of the Safe Harbour scheme.

If the ECJ confirms this finding, the international transfer of personal data on the basis of Safe Harbour registration will become less reliable. As a result, companies may start looking for alternative solutions, such as standard data transfer agreements and Binding Corporate Rules ("BCR"). In addition, should the ECJ side with the AG, companies will have to review their existing contracts with service providers that transfer personal data outside the EU. Remarkably, the ECJ foresees to hand down its judgment as soon as 6 October 2015, which is unusually fast.   

The EU and US authorities are currently negotiating an update of the Safe Harbour principles. It is expected that these negotiations will be expedited by the Schrems case.

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