The validity of Model Clauses for EU personal data transfer to the United States is now in real doubt as a result of a new Irish High Court judgment stating that there are “well founded grounds” to find the Model Clauses invalid. The issue of Model Clauses as a legitimate data transfer mechanism will now be adjudicated by the European Court of Justice (ECJ), the same court that previously overturned the Safe Harbor arrangement. EU and US companies will need to consider various strategies in anticipation of this decision.
On 26 November 2014, the Article 29 Working Party adopted a working document on establishing a cooperation procedure for issuing common opinions on whether contractual clauses are compliant with the European Commission’s Model Clauses (Model Clauses).
The working document establishes the procedure in which companies wishing to use identical contractual clauses in different Member States for transfers of personal data outside the European Economic Area (EEA) are able to obtain a coordinated position from the relevant Data Protection Authorities (DPA) on the proposed contracts, without the need to approach each relevant DPA individually for approval.
Background
Model Clauses represent one of the ways that a data controller can overcome the general prohibition contained in the EU Data Protection Directive (95/46/EC) on cross-border transfers of personal data to countries outside the EEA that do not offer adequate levels of data protection. The Model Clauses are intended to be used without amendment – although some divergence, e.g., through the use of additional clauses having no impact on the overall compliance of the Model clauses adopted, may be acceptable.
Company groups in Europe often use identical contractual clauses in different jurisdictions for the purposes of transfers out of the EEA. However, differing implementation of the Data Protection Directive between Member States has resulted in the situation whereby some jurisdictions require DPA approval of the Model Clauses used (such as Austria, Denmark, France and Spain), whether used with or without amendment, whereas other jurisdictions do not require such DPA approval where the Model Clauses are used without amendment. The result of the above is that it may be possible that identical contracts using the Model Clauses with only minor amendment are considered compliant by a DPA in one jurisdiction but not in others.
According to the Working Party, the purpose of this working document is to create a procedure allowing companies to obtain a coordinated position from the relevant DPAs when using identical contractual clauses based on the Model Clauses with minor amendment, in particular as to whether the contractual clauses are compliant with the Model Clauses.
The Process
Should a company wish to know whether its contract is compliant with the Model Clauses, under the proposed cooperation procedure, it will first need to ask the DPA it believes is entitled to act as the lead DPA to launch the EU cooperation procedure.
The company will then need to provide the lead DPA a copy of the contract, indicating the references to the Model Clauses together with any divergences and additional clauses, as well a list of EEA countries from which the company will be carrying out the transfers.
The Lead DPA
The Working Party has suggested that the company should choose the lead DPA from a Member State in which the transfers will take place and it will be for the company to justify why the DPA should be considered the lead. According to the Working Party, the following criteria should be considered by the company:
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