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European Union privacy laws have barely changed in more than 20 years, but in 2018 the EU privacy law regime is changing with a vengeance. The author answers some of the most frequent questions companies have been asking as they prepare for the EU General Data Protection Regulation.
By Lothar Determann
Lothar Determann is a partner in Baker & McKenzie LLP’s Palo Alto office and is a member of the firm’s global privacy & information management working group. He is also the author of “Determann’s Field Guide to International Data Privacy Law Compliance.”
By Lothar Determann
Happy new year!
As we are wondering what 2018 will bring, we have known one fact since 2016: May 25, 2018 is the day when the European Union General Data Protection Regulation (2016/679/EU) (GDPR) will take effect.
This is the first significant update of data protection laws in Europe for more than 20 years. In 1995, when the then-called European Community (EC) enacted the Data Protection Directive (95/46/EC), it only harmonized existing national laws. It hardly updated the national data protection laws, which member states had been enacting since 1970. The current EU data protection laws are from an ancient time before the internet, mobile phones, cloud computing, virtual worlds, big data, artificial intelligence and Pokemon. Apart from attempts to lower and then heighten again consent requirements for web cookies in 2002 and 2009 respectively, European data protection laws have remained largely unchanged and outdated.
But this year, data protection laws in Europe are changing with a vengeance—and draconian penalties of up to 20 million euros ($23.91 million) or 4 percent of total annual worldwide turnover, whichever is higher. Most companies have been working on updating their compliance programs for more than a year. Approaches and progress vary greatly, but the following questions are frequently asked:
Data protection authorities have announced that they will conduct more routine audits. For example, the data protection authority in the German state Bavaria mailed a GDPR questionnaire already in May 2017 to 150 randomly selected companies and publicly announced that all companies in Bavaria—where many multinationals maintain subsidiaries—should have their answers ready by May 25, 2018.
Some degree and period of leniency would be appropriate, given the dramatic increase in requirements. Particularly companies outside the European Economic Area (EEA) should be afforded extra time to process the 173 recitals and 99 articles on 88 pages of regulations (more than four times the page count of Directive 95/46/EC in the Official Journal)—plus national laws and official guidance that the 28 member states continue to issue on a daily or weekly basis, often only in one of the less commonly used of the 24 official EU languages.
But, companies should probably not count on a formal transition period, given that the EU published the final, binding text of the GDPR already in May 2016 with a two year delayed application date to give companies time to adjust (Art. 99). Since 2016, EU institutions and national data protection authorities have been actively communicating about the upcoming application date and issuing guidance.
Multinationals have to observe guidance from each data protection authority in whose territory they maintain a subsidiary. Companies without any subsidiaries in the EEA should pay particular attention to the guidance of the data protection authority in charge of the territory where they appoint a legal representative (per Art. 27 GDPR), but they may hear from data protection authorities in other EEA member states, too.
According to the GDPR, a “lead authority” has jurisdiction over each controller and processor per Art. 56 et seq. and recitals 124 et seq. Within a multinational group of companies, each subsidiary qualifies as a “controller” and “processor” and is thus subject to separate jurisdiction. Some EEA member states have appointed one authority for their entire country ( e.g., French regulator, the CNIL and U.K. Information Commissioner’s Office). Others have appointed separate authorities for each province or state within a country ( e.g., Germany has 16 authorities, one in each of its 16 Bundeslander).
Probably yes. Most data protection authorities have announced plans for more audits and sanctions and some have already increased proceedings in the last few years.
The next years may bring a few high profile cases against “trophy targets” (which will tie up a lot of resources in litigation) and a flood of actions against “low hanging fruit”-type formal violations to fund the authorities’ extended operations and resources, similar to “traffic ticket” type-enforcement. Every company should focus on presentable compliance paperwork to avoid standing out as a “low hanging fruit” in an audit or response to a routine questionnaire.
Every business has a different risk profile and thus different priorities. Companies have to focus on more compliance priorities if they had prior run-ins with EU data protection authorities, experienced bad publicity around privacy topics, maintain employees or subsidiaries in the EEA, are subject to scrutiny by works councils, process consumer data, belong to regulated industries, or rely on data monetization. But even companies without any of these risk factors may be confronted with questions about GDPR compliance from corporate customers or in the context of data security breaches. The following top 10 compliance priorities seem relevant to nearly all companies with direct or indirect business ties to Europe:
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