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GDPR and Privacy Shield: Different Tools for Different Goals

Posted by fgilbert on November 26th, 2018

By Paola Zeni, Francoise Gilbert, Max Calehuff

Paola Zeni is the senior director of global privacy at Palo Alto Networks.

Francoise Gilbert is a shareholder in Greenberg Traurig LLP where she focuses her practice on
US and global data privacy and cybersecurity.

Maxwell Calehuff is an attorney in the Cybersecurity and Privacy Group of Greenberg Traurig

US-based organizations are realizing that they must comply with the EU General Data Protection Regulation (GDPR) — even if they do not do business anywhere in Europe — because their practices include the collection or processing of personal data of individuals located in the European Union (EU) or the monitoring of their activities. Unlike its predecessor – Directive
95/46/EC, known as the EU Data Protection Directive – the GDPR was drafted to apply to many organizations established outside the EU, so that the protection follows the data when the data is moved or processed abroad.

GDPR Art. 3 is the key provision regarding the territorial reach of the GDPR. Under Article
3(1), the GDPR applies to the processing of personal data in the context of the activities of the establishment of an entity in the European Union. In practice, the protection extends as well to individuals located in Norway, Iceland and Lichtenstein, because, like most laws of the European Union, the GDPR is incorporated into the laws of these three countries, and thus its scope covers the entire European Economic Area (EEA) – which is comprised of the European Union and
these three additional countries.

Article 3(2) extends the territorial scope of the GDPR outside the EU or EEA borders. It states that GDPR applies to the processing of personal data of individuals who are in the EU / EEA by a data controller or processor established outside the EU /EEA, when the processing is related to the offering of goods or services to such individuals, or the monitoring of their behavior. Article
3(2) attaches to numerous US entities and requires them to comply with the entire GDPR.

Some organizations assume that it is enough for them to have self-certified their adherence to the
EU-US Privacy Shield (Privacy Shield) and that their self-certification is sufficient to address all
99 articles of the GDPR. This is incorrect. While the Privacy Shield and GDPR overlap in some areas, the GDPR is much broader and contains many more requirements.

This article compares the Privacy Shield and the GDPR, to highlight commonalities, but also gaps that organizations need to address to achieve compliance under both frameworks.


The EU-US Privacy Shield framework, which relies on the Privacy Shield Principles and Supplemental Principles (collectively Shield Principles), was developed in consultation between the US Department of Commerce and the European Commission, and finalized in July 2016, is a cross-border data transfer mechanism. It addresses the restrictions to the transfer of personal data outside the EU or EEA under Articles 44-50 of the GDPR (and before that, Articles 25-26 of the EU Data Protection Directive 95/46/EC). These provisions require the data exporter to ensure that EU or EEA data subjects will continue to benefit from effective safeguards and protection after their data has been transferred outside the EU or EEA. This assurance can be provided through different means. The EU-US Privacy Shield framework, is one of these means of providing the assurances required by GDPR Art. 44-50.

The Privacy Shield framework was not drafted to meet the requirements of the GDPR or as an alternative to GDPR. It was drafted separately from the GDPR; it is not even mentioned in the GDPR. The Shield Principles meet only a small aspect of the GDPR. The Shield is limited to providing a legal ground for the processing of EU or EEA data in the United States, and to establishing for EU or EEA individuals and regulators a means for reaching US-based organizations in the United States, and initiating enforcement. It is a data transfer mechanism only. It also addresses some concerns regarding access by US national security to EU or EEA data stored in the United States; this aspect of the Privacy Shield framework is not discussed here.

Common elements of the Privacy Shield Principles and GDPR

There are similarities and, at times, overlap between the Shield Principles and the GDPR. The latter is significantly broader, deeper, and more specific than the Shield Principles. In this section, we look at the seven basic Principles of the EU-US Privacy Shield and compare them with the equivalent provisions found in the GDPR.

1. Notice

The Notice Principle requires an organization, among other things, to inform individuals about its commitment to process all personal data received from the EEA in compliance with the Privacy Shield Principles and in reliance upon the Shield; the fact that the organization is subject to investigatory and enforcement powers of the Federal Trade Commission or the US
Department of Transportation; the requirement to disclose personal data in response to lawful requests; the possibility of invoking binding arbitration; how to contact the organization with
inquiries and complaints; and the independent dispute resolution body designated to address such complaints.

An organization must also inform individuals of the types of personal data collected, the
purposes for which it collects and uses personal data about them, the individuals’ rights to access their data, the choices and means the organization offers them to limit the use and dissemination of their personal data, the identity of third parties to which the data is disclosed, and the organization’s liability in cases involving transfer to third parties.

Most of these requirements are found in GDPR Art. 5(1)(a) [Lawfulness, Fairness, and Transparency] and GDPR Art. 5(1(b) [Purpose Limitation], and further detailed in GDPR Art. 12 [Transparent information], Art. 13 and 14 [Information to be Provided], among others.

2. Choice

Under the Choice Principle, an organization must offer individuals the opportunity to opt out of having their personal data disclosed to a third party or used for a purpose materially different from the purpose for which it was originally collected. It is unnecessary to provide choice when the disclosure is made to a third party acting as an agent of the organization. However, the organization must enter into a contract with the agent.

For sensitive information (medical or health condition, information specifying the sex life of the individual, racial or ethnic origin, political opinion, religious or philosophical beliefs, trade union membership), organizations must obtain the individual’s express affirmative consent before such information is disclosed to a third party or used for a purpose that is materially different than the purpose for which it was originally collected.

Most of these requirements are found in GDPR, for example in Articles 6(4) [Lawfulness of the
Processing, 7 [Conditions for Consent], 9 [Special Categories of Data] as well as GDPR Article
5(1)(a), [Lawfulness, Fairness, and Transparency] and Article 5(1(b) [Purpose Limitation].

The Choice Principle requires offering individuals the opportunity to opt-out from the disclosure of their personal data to a third party, or the use of the data for a materially different purpose than the one originally announced. GDPR Art. 21 [Right to Object] grants individuals the right to object to the use of personal data for the legitimate interest of the data controller, and to the use
of personal data for marketing purposes.

Notably missing from the Privacy Shield framework are the right of EU or EEA citizens not to be subjected to automated decision-making, including profiling, found in GDPR Art. 22(1) the right to restrict the processing of their personal data, such as when it is contested or no longer needed, found in GDPR Article 18(1).

3. Accountability for onward transfer

To transfer personal data to a third-party acting as a data controller, organizations must comply with the Notice and Choice Principles and enter into a contract with the controller. The contract must specify that personal data may only be processed for limited and specified purposes consistent with the consent obtained from the individual. The contract must also specify that the recipient will provide the same level of protection as the Shield Principles and will notify the organization if it can no longer meet this obligation, and take reasonable steps to remediate.

To transfer personal data to a third-party agent, organizations must transfer the personal data only for limited specified purposes, and ensure that the agent provides at least the level of protection required by the Shield Principles. They must take reasonable and appropriate steps to ensure that the agent effectively processes the personal data transferred in a manner consistent with the organization’s obligations under the Shield Principles. They must also require the agent
to notify the organization if it can no longer comply with the Principles, and must take reasonable steps to remediate unauthorized processing.

Under the GDPR, when a US-based data controller wishes to transmit data to a data processor located outside the EU or EEA, two sets of provisions apply: GDPR Art. 28 deals with the use of a processor. GDPR Art. 44 and 46 address the adequacy of the safeguards to be provided by the foreign entity; these provisions focus on cross-border data transfers and further transfers to third parties and are consistent with the Shield Onward Transfer Principle.

The comprehensive GDPR Art. 28 outlines in detail the required content of the contract between the controller and the processor. For example, the contract must stipulate that the processor may process the data only on documented instructions of the controller; must assist the controller in responding to data subjects’ exercise of their rights, must obtain the controller’s consent before enrolling a subcontractor, and must notify the controller if the controller’s instructions would infringe applicable law.

4. Security

The Security Principle requires organizations that self-certify compliance with the Shield to take reasonable and appropriate measures to protect personal data from loss, misuse, unauthorized access, disclosure, alteration, or destruction. GDPR Art. 5(1)(f) [Integrity and Confidentiality] also requires organizations to ensure appropriate security of the personal data. GDPR Art. 32 [Security of Process] provides additional parameters for the identification and choice of security measures, including a number of specific security measures that organizations must undertake when handling personal data originating from the EU or EEA.

The Shield Principles do not deal with the impact of security breaches. While the Security Principle requires the use of appropriate measures to protect data from loss, misuse, unauthorized access disclosure, alteration or destruction, it does not address the potential effect of a security incident or require any form of notice to supervisory authorities or affected data subjects.

On the other hand, GDPR Articles 33 and 34 detail with great specificity the actions to be taken in the event of a data breach. Among those, the affected data controller must notify the supervisory authority or authorities within 72 hours of becoming aware of a personal data breach, unless the breach is unlikely to result in a risk to the rights and freedom of individuals.
They must also notify individuals “without undue delay” if the breach is likely to result in a high
risk to the rights and freedoms of the individuals.

Data processors who suffer a data breach must notify the controller without undue delay after becoming aware of the breach. Further, GDPR Art. 28(3)(c) and Art. 28(3)(f) flow down these requirements to processors and their own subprocessors.

5. Data Integrity, purpose, retention

The Shield Principles require that the collection of personal data be limited to what is relevant for the purposes of processing. An organization must take reasonable steps to ensure that personal data is reliable, accurate, complete, and current, and must retain the data in a form that
makes the individual identifiable only for as long as reasonably necessary to serve the purpose for which it has been collected and to which the individual has consented.

GDPR Art. 5(1)(b) [Purpose Limitation], GDPR Art. 5(1)(e) [Storage Limitation] and GDPR Art. 5(1)(f) [Integrity and Confidentiality] cover similar issues.

6. Access

The Access Principle grants individuals the ability to have access to personal data about them that an organization holds. They are also able to request the amendment or deletion of information that is inaccurate or was collected in violation of the Privacy Shield Principles.

The scope of individuals rights under the GDPR is much greater; it extends beyond the right of access, correction or deletion. Art. 20 provides the right to data portability, while Art. 21 [Right to Object], includes, for example, the right to object to certain uses of personal data and the right to object to the use of personal data for marketing purposes. GDPR Art. 22 [Automated Individual Decision-Making] grants the right not to be subject to a decision solely based on automated processing.

The right of erasure, under GDPR Art. 17, is also more complex and more nuanced. The Privacy Shield limits the right of deletion to situations where the data is inaccurate or was collected in violation of the Shield Principles. The GDPR right of erasure or “right to be forgotten” provides for the right to have data deleted when the individual withdraws consent on which the processing is based, if there are no other legal grounds for the processing. It also includes a provision for the deletion of data about children that has been collected in connection with the use of internet services.

7. Recourse, enforcement, and liability

Both the Shield Principles and the GDPR require organizations to have mechanisms in place for ensuring compliance with the applicable rules. In the Privacy Shield, the Recourse Principle requires the use of independent recourse mechanisms (such as the American Arbitration Association, or the Better Business Bureau). The mechanisms must be readily available at no cost to the individual. The recourse mechanism also must allow for the award of damages in
accordance with applicable law or the rules of the recourse mechanism. There must be follow-up procedures for verifying the accuracy of the assertions made by organizations about their data protection practices. Furthermore, organizations must respond promptly to requests from the Department of Commerce for information related to the Privacy Shield and to complaints referred by EU / EEA Member State supervisory authorities through the Department of Commerce.

In addition to the independent recourse mechanisms, violation of the Shield Principles, or misrepresentation as to compliance with them, may be subject to investigations by the Federal Trade Commission (FTC). When an organization becomes subject to an FTC or court order based on non-compliance, it must make public any relevant Privacy Shield-related sections of any compliance or assessment report submitted to the FTC, to the extent consistent with confidentiality requirements. The Recourse and Enforcement Principle allows affected individuals to bring their complaints directly within the purview of US-based enforcement
authorities, private or governmental, which might make enforcement easier, faster, and more effective. The Recourse and Enforcement Principle does not identify specific administrative fines. FTC consent decrees issued after investigations of non-compliance with the Shield Principles have included significant obligations, such as record keeping requirements for 20 years after the issuance of the order, which can present a significant financial burden, among other things.

GDPR Articles 77 to 84, on the other hand, provide extensive remedies and significant fines. Individuals have the right to lodge a complaint with a Supervisory Authority under GDPR Art.
77, and the right to judicial remedy in the courts of the Member State where the individual reside, under GDPR Art. 79. Individuals can also mandate a nonprofit organization to lodge a complaint on their behalf, under GDPR Art. 80, and may receive compensation under GDPR Art
82 [Right to Compensation]. Most important, GDPR Art. 83 [Administrative Fines] allows for the imposition of administrative fines that may reach €20 million or four percent of the total worldwide annual turner of a global entity, whichever is higher.

In the case of recourse and enforcement under the GDPR, it remains to be seen how EU or EEA authorities and courts will be able to assert jurisdiction or to enforce judgments, damages or fines over organizations located outside the EU or EEA. GDPR Art. 27 requires non-EU or EEA controllers and processors to appoint a representative located in the EU or EEA. The representative can be addressed in addition to, or instead of, the controller or processor by supervisory authorities and data subjects for ensuring compliance with the GDPR. GDPR Recital
80 indicates that the designated representative could be subject to enforcement proceedings in the event of non-compliance by the controller or processor.

At this time, there is little clarity on how enforcement proceeding could be conducted and what the potential outcome might be. Would the role of the representative be limited in most cases to that of an agent for receiving communications and providing responses or could the representative become jointly and severally liable with the non-EEA entity? GDPR Art. 27 is silent and so far, no guidelines have been issued. In addition, it is also not clear how a judgment rendered in the EU or EEA against an organization established abroad would be enforced against that foreign entity.

When addressing recourse and enforcement, GDPR and Privacy Shield adopt different routes and pertain to different subject matters. Privacy Shield focuses on enforcement of violation of the Privacy Shield Principles in the United States, where the FTC is likely to have a significant role in stopping a US company from conducting non-compliant activities, and historically has been a tough enforcer.

GDPR focuses on enforcement in the EU or EEA, pertains to the entire GDPR, provides local government agencies with the ability to assess significant fines, and grants individuals a private right of action to seek damages. In the past, EU or EEA agencies have not been as aggressive as their US counterparts but the landscape is likely to change with the significant fines available under GDPR Art. 83.
It remains to be seen what will happen in practice, which of these avenues will be more frequently used in case of a dispute, what the outcome of enforcement action will be, and which mechanism will provide more effective enforcement or recourse for affected individuals or create more barriers or hurdles for organizations.

GDPR concepts that are not addressed in the Shield Principles

In the first part of this article, we showed that in six of the areas covered by the Shield Principles the GDPR takes a more comprehensive view and contains more stringent, detailed, and specific requirements. The seventh Shield Principle, Enforcement, differs significantly from the enforcement provisions of the GDPR. Given that enforcement of the Shield Principles has been limited to a handful of FTC actions, it is difficult to make a practical comparison between the
two enforcement mechanisms at this time.

When we move the analysis and the comparison to other areas, it becomes even clearer that a self-certification of adherence to the Shield Principle is insufficient to show compliance with all GDPR provisions that may be applicable to organizations. We provide several examples below:

1. Legal grounds for processing data

The Privacy Shield Notice and Choice principles require organizations to disclose the purpose of collecting personal data and obtain consent to conduct certain activities, such as disclosure to third parties or use for a purpose materially different from the originally disclosed purpose. However, it assumes, a priori, that the data have been legally collected or that the consent was implied from the conduct of the parties.

The GDPR Article 6 (1) requires that the collection and processing of personal data be lawful. It identifies only six limited grounds for collection and processing to be legal. For example, processing will be lawful if it is necessary for the performance of a contract to which the data subject is a party, or to comply with a legal obligation. Processing will also be lawful if it is conducted for the legitimate interests of the controller or a third party, so long as these interests are not overridden by the fundamental rights and freedoms of the individual. In some cases, a data controller may have no other choice than seeking and obtaining the explicit consent of the individual (opt-in consent) to provide the required legal basis for the contemplated processing.

2. Obligations regarding data subject rights

In addition to providing extensive rights to individuals located in the EU or EEA, the GDPR imposes obligations on data controllers to facilitate the exercise of those rights. Controllers must provide individuals with information about their rights as data subjects and must facilitate the exercise of those rights electronically. Controllers must respond to a data subject’s request within one month, and provide information on actions taken or not taken in response to a request. In addition, data processors are contractually required to cooperate with the data controller to address such rights.

3. Data protection by design and default

GDPR Art. 25 [Data Protection by Design and by Default] requires data controllers to implement appropriate measures to ensure that the processing implements the data protection principles. It also requires that the processing meet the GDPR principles and requirements, assure and protect the rights of the individual, and that, by default, the processing be limited to the personal data necessary for a specific purpose.

4. Documentation of processing and data protection impact assessment

GDPR Art. 30 [Record of Processing Activities] requires controllers and processors to keep electronic records of their processing activities, to be made available to supervisory authorities upon request. When processing activities are likely to result in a high risk for the rights and freedoms of individuals, GDPR Art. 35 [Data Protection Impact Assessment] requires data controllers to assess the impact of the envisaged processing on the protection of personal data. Both Articles 30 and 35 are likely to have a significant operational impact on organizations.


Even if a company does not do business in the European Union or the European Economic Area, it may be subject to GDPR. Compliance with the GDPR requires significant efforts, time and financial investments.

The Privacy Shield Principles provide a simple, easy to, use means for organizations to address their obligations under Chapter V, Articles 44-50 of the GDPR [Transfer of Personal Data to Third Countries or International Organizations]. However, the use of the Shield just serves its original purpose: providing a means for US entities to show their commitment to protecting personal data originating in the EU or EEA when the processing is conducted in the United States, and to respond to complaints and enforcement actions that may be initiated in the EU or EEA and subsequently transmitted to US agencies. The Privacy Shield is not a data protection law or a comprehensive data protection compliance framework. It is a cross-border transfer mechanism.

As both the Privacy Shield and the GDPR are further explained and clarified, organizations should understand the narrow, limited, and specific role of the Privacy Shield, the significant gaps between the Privacy Shield and the GDPR, and that they cannot meet their obligations under GDPR solely through a self-certification of their commitment to observe the Privacy Shield principles.

The EU General Data Protection Regulation and Its Implications for US Insurance Companies

Posted by fgilbert on August 2nd, 2018

An article published by Francoise Gilbert in collaboration with the Greenberg Traurig Insurance Department.

Summer 2018 Magazine Reprint

All you wanted to know about the GDPR

Posted by fgilbert on April 2nd, 2018

Extensive presentation by Francoise at a Bay Pay event.


90 days to May 25, 2018 – Does your Business Meet its GDPR Obligations?

Posted by fgilbert on February 21st, 2018

The EU General Data Protection Regulations – or GDPR – goes into effect in 90 days, on May 25, 2018.  With such a name, it would be easy to conclude that the law governs only the activities of businesses established in the European Union (EU) or European Economic Area (EEA), and that those established elsewhere are not concerned.

This is not the case.  Organizations that are not established within the EU/EEA are subject to GDPR when they process personal data of individuals who are in the EU/EEA if the processing activities are related to:

  • The offering of goods or services to such individuals in the EU/EEA, even if payment is not required, or
  • The monitoring of their behavior, to the extent that their behavior takes place within the EU/EEA. Profiling of individuals based on their use of the Internet is an example of such monitoring.

In practice, most US businesses – probably 70% – are subject to the GDPR where they collect or process the personal data of individuals located in the US.  According to our observations, only a very small fraction of those US businesses that are subject to the GDPR have completed their GDPR compliance overhaul.  Those who have ignored the GDPR or have failed to properly evaluate the extent to which the GDPR might apply to their activities should rethink this analysis and take action as soon as possible to address these obligations, if relevant.

The GDPR is a significant, complex document.  Compliance, therefore, is commensurate to its complexity.  For most businesses, evaluating their practices and conducting all activities that are required to achieve compliance can take three to six months. Numerous larger businesses, such as multinationals, have been working on GDPR implementation for more than two years.

The list of obligations under the GDPR is very long.  The document is comprised of 272 provisions, which are divided into 173 recitals and 99 Articles. It is also supplemented by documents issued by the EU institutions, or the Member States themselves. The EU’s Article 29 Working Party, so far, has published at least 13 guidelines. Some local supervisory authorities have published their own guidelines. Some Member States have adopted laws or amendments that relate to the GDPR.

Here are some highlights to keep in mind, among the many others that are written in the GDPR and related documents.

  • Violations of the law are subject to significant administrative fines that can reach up to 20 Million euros, or in the case of multi-national businesses, 4% of their global revenue.
  • In addition, individuals have a private right of action that allows them to file a complaint in court when they believe that their rights under the GDPR have been violated as a result of the processing of their personal data in non-compliance with the GDPR. They can mandate certain non-profit organizations to lodge the complaint and exercise their right to receive compensation on their behalf, a process that, in its effect, is likely to be similar to that of class action lawsuits customary in the United States.
  • Businesses are prohibited from collecting or processing personal data unless one of six circumstances occurs. They are required to state on their privacy notice why they have the right to collect and process the personal data of individuals. Company can no longer just infer from a person’s visit of a website that the individual has consented to the collection and use of his/her data. Specific consent is required.
  • Businesses have significant obligations that go well beyond current common practices. In particular, there are significant record keeping requirements as well as limitation to data retention.
  • Products must be designed in accordance with Data Protection by Design and Data Protection by Default principles. In some cases, businesses are required to conduct Data Protection Impact Assessments.
  • Individuals have significant rights, such as right of access, right of correction, right of data portability or right to be forgotten. Businesses have 30 days to respond to a request, which makes it necessary to implement the appropriate technical measures and administrative procedures to respond promptly to requests from individuals.
  • If a company’s core activities require the regular and systematic monitoring of individuals on a large scale, or the processing of special categories of data on a large scale, it must appoint a Data Protection Officer. Special categories of data include, for example, data about health, genetic data and biometric data, religion or sexual life.
  • Privacy notices must be updated to include a large amount of information required by the law.
  • Businesses must amend most of their contracts with third party service providers, or with their own customers if they act as service provider to another entity. These contracts must include numerous provisions mandated by the GDPR.

These are just example. There is much more. GDPR compliance project takes a significant amount of time.

To address their obligations under the GDPR, businesses must to conduct numerous activities, such as:

  • Start with understanding whether and how the business may have access to personal data of individuals in the EU/EEA, what is done to or with this data, with whom it shared, and how the business interacts with the individual for marketing purposes
  • Conduct a gap analysis to determine what needs to be done to comply with the GDPR, and prioritize these activities
  • Address the company’s obligations as a controller or processor
  • Address the restrictions to marketing, targeting, profiling
  • Update the contracts with data processors, subprocessors
  • Document the security program; update the security breach response plan
  • Address the crossborder data transfer restrictions
  • Identify the legal grounds for processing the personal data
  • Update the privacy notice
  • Develop processes to address obligations regarding individuals’ rights
  • Update training for personnel
  • Identify the lead supervisory authority

The GDPR has become a significant part of the US Privacy and Security legal landscape. It is important for US businesses to pay attention to compliance now because a majority of US businesses – as well as business located in other countries outside the EU/EEA – are and will continue to be subject to the GDPR for some of the personal data that they collect.

The GDPR will affect many of the business deals that a company may conduct. As businesses acquire or do business with businesses that are subject to the GDPR, the contracts that are drafted will likely have to address GDPR issues.

There are only 90 days left to take action and address GDPR compliance. There is still time if you have not already done so.  If you don’t, those individuals and businesses located in the EU/EEA with whom you want to do business may soon inquire whether your company can demonstrate whether it is compliant with the GDPR, and if your answer is not satisfactory, may take their business to others who do comply.

NIS Directive Adopted in August 2016 – What’s Next

Posted by fgilbert on August 12th, 2016

Directive (EU) 2016/1148 of the European Parliament and of the Council of July 6, 2016, Concerning Measures for a High Common Level of Security of Network and Information Systems across the Union Network and Information (“NIS Directive” or “Directive”), entered into force in August 2016, outlines plans for establishing a base level of network and information security that is coherent across the European Union (EU) and European Economic Area (EEA). It defines a framework for enabling networks and information systems to be better prepared to respond to actions that compromise the availability, authenticity, integrity, or confidentiality of the data that they process, store, or transmit. In addition, each Member State will be required to adopt a Network Information Security strategy defining its objectives and policy and regulatory measures regarding cybersecurity.

Scope and Affected Entities

The Directive will primarily affect “operators of essential services” and “digital Service providers”. Under the Directive, an entity provides an essential service if the entity provides a service that is essential for the maintenance of critical societal and/or economic activities; the provision of that service depends on network and information systems; and an incident to the network and information systems of that service would have significant disruptive effects on the provision of that service. Examples of such operators of essential services include entities in the following industries: Energy; Transportation; Banking; Financial Markets Infrastructures; Health care; Drinking water supply and distribution; and Digital infrastructure. The second group of companies impacted by the NIS Directive is digital services providers located in the Member States, which includes online market places, such as e-commerce platforms; cloud computing services; and online search engines.

Obligations of Operators of Essential Services

The Directive outlines specific obligations on operators of essential services. For example, they will have to take appropriate and proportionate technical and organizational measures to manage the risks posed to the security of network and information systems that they use in their operation and to prevent and minimize the impact of incidents affecting the security of the network and information systems used for the provision of such essential services, to facilitate the continuation of those services.

They will be required to notify the competent authority or the CSIRT of incidents having a significant impact on the continuity of the essential services they provide. Notifications must include information enabling the competent authority or the CSIRT to determine any cross-border impact of the incident.

They will also have to provide information necessary to assess the security of their network and information systems including documented security policies.; and provide evidence of the effective implementation of security policies, such as the results of a security audit carried out by the competent authority or a qualified auditor, and, in the latter case, to make the results thereof, including underlying evidence, available to the competent authority.

Obligations of Digital Service Providers

Digital service providers will also be required to identify and take appropriate and proportionate technical and organizational measures to manage the risks posed to the security of network and information systems use to offer services and to prevent and minimize the impact of security incidents. These measures will have to ensure a level of security and take into account the security of systems and facilities, incident handling, business continuity management, monitoring, auditing and testing, and compliance with international standards.

Digital service providers will have to notify the competent authorities without undue delay of any incident having a substantial impact on the provision of a service that they offer in the EU. Such notification will have to include information to enable the competent authorities to determine the significance of any cross-border impact.

Cooperation Among Member States

The Directive puts in place several structures for ensuring efficient activities within each Member State and cooperation among the Member States. For example, Member States will have to designate a competent national authority responsible for implementation and enforcement of the NIS Directive.  They will also be required to establish Computer Security Incident Response Teams (CSIRTs) which will be responsible for handling cybersecurity incidents and risks.

A network of Computer Security Incident Response Teams (CSIRTs Network), also established by the Directive, will help promote swift and effective operational cooperation on cybersecurity incidents and for sharing information about security risks among Member States. The CSIRTs Network will consist of representatives of the CSIRTs established in the Member States and the Computer Emergency Response Team (CERT-EU).

A “Cooperation Group”, composed of representatives of the EU Member States, representative of ENISA (EU Agency for Network and Information Security) and the European Commission will facilitate strategic cooperation and information exchanges among Member States. It will prepare strategic guidelines for the activities of the CSIRTs Network and discuss the capabilities and preparedness of Member States.

Between Now and May 2018

The NIS Directive entered into force in August 2016. The EU/EEA Member States now have until May 2018 to implement its principles into their national laws. Companies that do business in the EU/EEA and fall within the scope of the NIS Directive should monitor the implementation process in the Member States where they operate, and the further guidance that the competent authorities will issue. They also should be aware that the EU Commission has the power to adopt implementing acts regarding the required formats and procedures to be used for notification and incident assessment.

EU-U.S. Privacy Shield Approved and Signed

Posted by fgilbert on July 14th, 2016

Since October 2015, when the Court of Justice of the European Union invalidated the Safe Harbor Agreement, numerous US and EU companies have struggled to provide a legal basis to the transfer of personal information across the Atlantic. On July 12, representatives of the European Commission and the U.S. Department of Commerce signed the “EU-US Privacy Shield” agreement, which replaces the Safe Harbor agreement. The new EU US Privacy Shield become effective as of August 1, 2016.

The documents that form the executed Privacy Shield agreement are an updated version of those that were published in late February 2016. The signed Shield documents clarify numerous issues that were of concern to Europeans and introduces several new requirements.

The primary changes are found in the Draft Commission Implementing Decision Regarding the Adequacy of the Protection Provided by the EU-U.S. Privacy Shield (“Decision”). The Decision clarifies that the Principles will apply solely to the processing of personal data by a U.S. organization insofar as the processing by such organization does not fall within the scope of EU legislation.


Shield Certified companies will have to require their subcontractors and service providers to delete or de-identify personal data when no longer needed for the identified processing or compatible purposes. This will also have to require recipients of personal data to notify them if the recipient can no longer provide the same level of protection as required by the Privacy Shield Principles (Principles).

Data Quality and Data Uses

The Decision stresses that organizations will have to ensure that personal data is reliable for its intended use, accurate, complete, and current. Special rules will apply to the use of personal data for direct marketing purposes, to allow individuals to opt-out at any time.

Crossborder Transfers

Regarding cross-border transfers, the Decision stresses that the obligation to provide the same level of protection must apply to all parties involved in the processing of the data, irrespective of their location, when the original recipient itself transfers that data to a third party, for example a subprocessor.

Recourse, Enforcement, and Liability

The Decision clarifies that organizations that have failed to deal appropriately with complaints will be subject to oversight and enforcement actions by the Federal Trade Commission, the Department of Transportation or another U.S. authorized statutory body. It provides a lengthy analysis and details the eight levels of redress and the escalation procedure that will be available to EU residents.

Transparency and Oversight

Part of the new measures to ensure transparency and allow for oversight will include the monitoring by the U.S. Department of Commerce whether the self-certified organizations on the Privacy Shield list are current in their obligations.  If an organization is not current in its obligations, the Department of Commerce will enforce the return or deletion of the personal data that the entity received on the basis of the Privacy Shield.

Access by U.S. Public Authorities

The Decision clarifies that the EU Commission has determined that U.S. law contains a number of limitations on the access to, and use of, personal data transferred to the United States for national security purposes, and that sovereign and redress mechanisms provide sufficient safeguards for those data to be effectively protected against unlawful interference and the risk of abuse.

It also confirms that bulk collection will only be authorized exceptionally where targeted collection is not feasible, and will be accompanied by additional safeguards to minimize the amount of data collected and subsequent access (which will have to be targeted and only be allowed for specific purposes).


For a detailed analysis of the updated Shield Documents see article co-authored by Francoise Gilbert and Marie Jose van der Heijden, “Privacy Shiel 2.0 Sighned, Sealed and Delivered, published in the Bloomberg BNA Privacy and Data Security Law Report on July 11, 2016.




WP29 gives “Thumbs Down” to Draft EU-US Privacy Shield

Posted by fgilbert on April 13th, 2016

In a 58-page opinion published on April 13, 2016, the influential European Union Article 29 Working Party (“WP29”), which gathers representatives of the data protection authorities of the 28 EU member states, expressed significant concerns with respect to the terms of the proposed EU-US Privacy Shield that is intended to replace the EU-US Safe Harbor.

The WP29 made numerous critiques to the documents that form the proposed EU-US Privacy Shield framework. Some of these critiques address the essential elements of contention that have been expressed in numerous forms in the past. These include for example, the lack of consistency between the principles set forth in the Privacy Shield documents and the fundamental EU data Protection principles outlined in the 1995 EU Data Protection Directive, the proposed EU General Data Protection Regulation, and related documents.

The WP29 group also requested that clearer restrictions apply to the onward transfer of the personal information, which occurs once personal data of EU residents has been transferred to the US. They are especially concerned about the subsequent transfer of data to a third country, outside the United States. In addition, the WP29 continues to be concerned about the effect, scope, and effectiveness of the measures proposed to address activities of law enforcement and intelligence agencies, often described as “massive collection” of data.



On 29 February 2016, the European Commission and US Department of Commerce published a series of documents intended to constitute a new framework for transatlantic exchanges of personal data for commercial purposes, to be named the EU-U.S. Privacy Shield. The Privacy Shield is intended to replace the EU-US Safe Harbor, which was invalidated by the Court of Justice of the European Union (CJEU) in October 2015, in the Schrems case.

Since the publication of the draft Privacy Shield documents, the WP29 members have convened in a series of meetings in order to assess these documents and come up with a common position.

The results of this 6-week intense evaluation were expressed in an opinion entitled “Opinion 01/2106 on the EU-US Privacy Shield Draft Adequacy Decision – WP 238” published on April 13, 2016. The 58-page well drafted and thoughtful document contains numerous positive comments about the efforts of the EU and US teams in trying to design a framework that would implement the guidance of the two-page term sheet published at the end of January that outlined the key aspects of the proposed cross Atlantic framework.

The document also expressed a wide variety of concerns with respect to the proposed EU-US Privacy Shield that is intended to replace the EU-US Safe Harbor. The WP29 group was concerned by (i) the commercial provisions (which address issues similar to those addressed in the Safe Harbor); (ii) the surveillance aspects, specifically, the possible derogations to the principles of the Privacy Shield for national security, law enforcement, and public interests purposes; as well as (iii) the proposed joint review mechanism.


Commercial Aspects

Consistency with Data Protection Principles

The WP29 indicated that its key objective is to make sure that the Privacy Shield would offer an equivalent level of protection of individuals when personal data is processed under the Privacy Shield. The WP29 believes that some key EU data protection principles are not reflected in the draft documents, or have been inadequately substituted by alternative notions.

While it does not expect the Privacy Shield to be a mere and exhaustive copy of the EU legal framework, the WP29 stressed that the Privacy Shield should contain the substance of the fundamental principles in effect in the European Union, so that it can ensure an “essentially equivalent” level of protection. For instance, the data retention principle is not expressly mentioned; there is no wording on the protection that should be afforded against automated individual decisions based solely on automated processing. The application of the purpose limitation principle to the data processing is also unclear.

Onward Transfers

The WP29 paid special attention to onward transfers, an issue that was key to the Safe Harbor decision. It believes that the Privacy Shield provisions on onward transfers of EU personal data are insufficiently framed, especially regarding their scope, the limitation of their purpose and the guarantees applying to transfers to Agents.

The WP29 noted that since the Privacy Shield will also be used to transfer data outside the US, onward transfers from a Privacy Shield entity to third country recipients, it should provide the same level of protection on all aspects of the Shield, including national security. In case of an onward transfer to a third country, every Privacy Shield organization should have the obligation to assess any mandatory requirements of the third country’s national legislation applicable to the data importer before making the transfer.

Recourse Mechanisms

Finally, although the WP29 notes the additional recourses made available to individuals to exercise their rights, it is concerned that the new redress mechanism in practice may prove to be too complex, difficult to use for EU individuals, and therefore, ineffective. Further clarification of the various recourse procedures is therefore needed; in particular, where they are willing, EU data protection authorities could be considered as a natural contact point for the EU individuals in the various procedures, and have the option to act on their behalf.


National Security

Derogations for national security purposes

The WP29 observed that the draft EU Commission Adequacy Decision extensively addresses the possible access to data processed under the Privacy Shield for purposes of national security and law enforcement. It also notes that the US Administration, in Annex VI of the documents, also provides for increased transparency on the legislation applicable to intelligence data collection.

Massive Collection

Regarding the massive collection of information, the WP29 notes, however, that the representations of the U.S. Office of the Director of National Intelligence (ODNI) do not exclude massive and indiscriminate collection of personal data originating from the EU. Given the concerns this brings for the protection of the fundamental rights to privacy and data protection, the WP29 pointed to other resources for clarification on this point, such as the forthcoming rulings of the CJEU in cases regarding massive and indiscriminate data collection.


Concerning redress, the WP29 welcomes the establishment of an Ombudsperson as a new redress mechanism. Concurrently, it expressed its concern that this new institution might not be sufficiently independent, might not be vested with adequate powers to effectively exercise its duty, and does not guarantee a satisfactory remedy in case of disagreement.

Annual Joint Review

Regarding the proposed Annual Joint Review mechanism mentioned in the Privacy Shield framework, the WP29 noted that the Joint Review is a key factor to the credibility of the Privacy Shield. It points out, however, that the specific modalities for operations, such as the resulting report, its publicity and the possible consequences, as well as the financing, need to be agreed well in advance of the first review.


Drafting Deficiencies

Consistency with the General Data Protection Regulation

The WP29 notes that the Privacy Shield needs to be consistent with the EU data protection legal framework, in both scope and terminology. It suggests that a review should be undertaken shortly after the entry into application of the General Data Protection Regulation (GDPR), to ensure that the higher level of data protection offered by the GDPR is followed in the adequacy decision and its annexes.

Structure and Content

Regarding the structure and content of the documents, the WP29 noted that the complexity of the structure of the documents that constitute the Privacy Shield make the documents difficult to understand. They are also concerned that the lack of clarity of the new framework might cause it to be difficult to comprehend by data subjects, organizations, and even data protection authorities. In addition, they note occasional inconsistencies within the 110 pages that form the current draft of the Privacy Shield framework. The WP29 therefore urges the Commission to make the documents clear and understandable for both sides of the Atlantic.



In its 58-page opinion, the WP29 made great efforts to point to the improvements brought by the Privacy Shield compared to the Safe Harbor decision. However, overall, the evaluation of the 110-page proposed Privacy Shield framework is generally negative. The WP29 appears to doubt that the protection that would be offered by the Privacy Shield is essentially equivalent to that of the EU.

Even though there are numerous positive comments, such as acknowledgements that many of the shortcomings of the Safe Harbor were addressed in the proposed framework, the general tone of the WP29 is critical of the end result. The concerns expressed in the WP29 Opinion include, for example, lack of consistency with the EU data protection, insufficient coverage of the massive collection of information. They also point to more basic issues such as inconsistencies among provisions, and lack of clarity caused by the structure and composition of the document.

It remains to be seen the extent to which the EU Commission will be able to address these concerns, identify appropriate solutions and provide the requested clarifications in order to improve the proposed documents. The viability of the Privacy Shield remains in question.

With the negative opinion issued by the WP29, a very influential body of the European Union, it becomes uncertain whether, and when, a stable and final draft will be completed. Assuming such framework may reach a form that is satisfactory to both sides, it would also need to be implemented. Once the final draft is approved and voted on, it will need to be implemented. At a minimum, a new infrastructure, a website, and additional personnel will be needed to make it operational.

Six months after the CJEU invalidated the EU Commission decision that had created the EU-US Safe Harbor, cross Atlantic data transfers are still in limbo. There is still no simple, business friendly solution to addressing the stringent prohibition against cross border data transfers between EU/EEA entities and US based companies.

US companies that had built their operations and business models around the simple and easy to use EU-US Safe Harbor; assuming that they have not already done so, need to address the legality of their cross border data transfers. With no light, so far at the end of the tunnel, it is urgent that they evaluate and implement means to address the stringent restriction against cross border data transfers in effect in the European Union and European Economic Areas, that they understand and address the needs of their counterparts in the EU/EEA region, in order to minimize the risk of enforcement action against the European entities.


EU-US Privacy Shield Update

Posted by fgilbert on February 29th, 2016

The European Commission has released a Draft Adequacy Finding as a step towards the finalization of a new EU-US Privacy Shield. The concept of an EU-US Privacy Shield was outlined in an arrangement published on February 2, 2016. The Shield is intended to replace the EU-US Safe Harbor Agreement, which was invalidated in an October 6, 2015 decision of the European Court of Justice.

The Draft Adequacy Finding will now be reviewed, commented upon, revised and finalize by a wide range of EU agencies and officials before being submitted to vote by the EU Parliament and the European Council. This finalization should not occur before several months.

The EU-US Privacy Shield is intended to create stronger obligations for US companies that process the personal data of residents of the European Economic Area than those that were outlined in the EU-US Safe Harbor, adopted in 2000. It is expected to require stronger monitoring and enforcement by the US Department of Commerce and the Federal Trade Commission, including through increased cooperation with the Member States Data Protection Authorities.

The EU-US Privacy Shield is expected to include written commitments and assurances by the United States that any access by public authorities to personal data transferred to the US under the new arrangement on national security grounds will be subject to clear conditions, limitations and oversight, in order to prevent generalized access. A newly created Ombudsperson mechanism will handle complaints and inquiries in this context.

Safe Harbor 2.0 Agreement Reached

Posted by fgilbert on February 2nd, 2016

On February 2, 2016, representatives of the European Commission and the United States agreed on a new framework for transatlantic data flows: the EU-US Privacy Shield. The main elements of the arrangement provide that:

  • US companies that wish to receive EU data will be required to commit to stringent obligations on how personal data is processed and individual rights are guaranteed;
  • Citizens who think that their data has been misused will have several redress possibilities ;
  • Companies will be required to respond to citizens’ complaints within a set timeframe;
  • European Data Protection Authorities will have the ability to refer complaints to the US Department of Commerce and the Federal Trade Commission;
  • Alternative Dispute resolution will be free of charge;
  • Access by U.S. law enforcement to personal data transferred under the EU-US Privacy Shield will be subject to clear conditions, limitations and oversight mechanisms, preventing generalized access;
  • Complaints on possible access by national intelligence authorities will be referred to an Ombudsperson;
  • The implementation of the arrangement – including the restriction to law enforcement access to data – will be subject to annual joint reviews. The European Commission and the U.S. Department of Commerce will conduct the reviews and invite US national intelligence experts and European Data Protection Authorities to participate.

The College of EU Commissioners, which approved the final terms of the arrangement, has mandated Vice-President Ansip and Commissioner Jourová to prepare a draft “adequacy decision” in the coming weeks clarifying the elements of the EU-US Privacy Shield.

Once the document has been finalized, it will be submitted to approval by the College of Commissioners. The Article 29 Working Party and a committee composed of representatives of the Member States will also be consulted. In the meantime, the U.S. will make the necessary preparations to put in place the new framework, monitoring mechanisms and new Ombudsman.

Israel Revokes is Acceptance of Safe Harbor

Posted by fgilbert on October 20th, 2015

In early October 2015, the Court of Justice of the European Union (CJEU) in the Schrems and Facebook case, declared the EU-US Safe Harbor invalid. The CJEU ruling stunned many businesses and organizations throughout the world. For the past 15 years, the Safe Harbor Program had made it easy for businesses established in the United States and the European Economic Area (EEA) to exchange personal data in the ordinary course of business. It was the simplest and most business friendly method for addressing the prohibition against cross-border data transfers to countries that do not offer adequate protection of privacy rights and personal data, a prohibition that is common to all data protection laws of EEA member states.

Since the issuance of the ruling, a flurry of activity has occurred. Numerous reactions and comments have been published. Two of the most notable statements issued by the Article 29 Working Party and by the Israeli Law, Information and Technology Authority require that US companies involved in international exchanges of personal data with the EMEA Region react promptly to the invalidation of the Safe Harbor Program, so that they establish alternative measures to address the void left by this invalidation.

On October 15, 2015 the Article 29 Working Party (A29) – the umbrella organization that encompasses the Data Protection Commissioners of the 31 EEA Member States – published its initial reaction to the CJEU ruling. The A29 confirmed that the invalidation of the Safe Harbor Program is effective immediately. In addition, it warned that if, by January 2016, the United States and the European Union have not reached a satisfactory agreement that incorporates certain elements identified in the A29 statement, the EEA Data Protection Authorities will commence enforcement actions against illegal cross border data transfers.

Israel Revokes its Acceptance of the Us EU Safe Harbor

Now, on October 19 2015 the Israeli Law, Information and Technology Authority (ILITA), the country’s data protection authority, announced that, in view of the CJEU ruling invalidating the EU-US Safe Harbor, it would cease treating a US company’s self-certification under the EU–US Safe Harbor as a ground for granting derogations to its own prohibition against crossborder data transfers out of Israel. In other words, Israeli companies that relied on the fact that a US company was listed on the Safe Harbor List of the US Department of Commerce can no longer do so to justify the legality of their transfer of data to the United States.

In a long statement analyzing the CJEU case, the ILITA announced that it revoked its prior authorization permitting the transfer of personal data from Israel to those organizations in the United States that certified under the EU-US Safe Harbor. In keeping with the data protection legislation enacted throughout the EEA, the Israel Privacy Protection Regulations (Transfer of Data to Databases Abroad) 2001 restricts the transfer of personal data outside the country unless the recipient country ensures a level of data protection that is no lesser than that provided under Israeli law, or one of the derogations in Section 2 of the 2001 Regulations applies.

Up until very recently, the ILITA had found that those US organizations certified under the EU-US Safe Harbor provided an adequate level of protection for personal data and, as such, fell under the derogation, provided under Section 2(8)(2) of Israel’s 2001 Privacy Protection Regulations, authorizing data transfers from Israel. However, with the recent CJEU decision in the Schrems case, the position of the ILITA has changed. It has stated that organizations can no longer rely on the aforementioned derogation as the basis for the transfer of personal data between Israel and the United States. The ILITA has advised organizations to assess whether they can legitimize the transfer of personal data between Israel and the United States under one of the other derogations provided in Section 2 of the 2001 Regulations. The ILITA has also advised that it continues to assess the implications of the Schrems decision and that it will publish information and additional clarifications if necessary.

Israel is one of the few counties whose data protection law has been deemed to meet the stringent criteria required under the EU Data Protection Directive 95/46/EC. Under Commission Decision 2011/61/EU, Israel is considered as providing, an adequate level of protection for personal data transferred from the European Union. This adequacy finding ensures that personal data can be transferred from the European Union to Israel, without companies having to rely on other legal methods, such as contractual clauses, to effect the data transfer. It is likely that Israel’s decision to follow the determination in the CJEU ruling invalidating the Safe Harbor Program was prompted by its concern to keep its privileged status vis-à-vis European entities in good standing.

While Israel’s reaction is understandable under the circumstances, it may be a sign that other countries throughout the world that also have the privilege of having been deemed by the European Commission to offer “adequate protection”, countries such as Argentina, Uruguay, Canada or Switzerland, might soon adopt the same approach as Israel. This would isolate further the United States, and create additional pressure for the United States government to modify its course of action and its strategies regarding international commerce

What to do Next?

The activities of US law enforcement agencies remain of great concern to the rest of the world. In its statement, the A29 points out that the question of massive and indiscriminate surveillance is a key element of the CJEU’s analysis. It believes that such surveillance is incompatible with the EU legal framework, and that existing transfer tools are not the solution to this issue.

It is becoming clear that the repeated assertions of the CJEU in its ruling, that personal data when on the US territory is subject to massive surveillance, and that the current legal regime in the United States requires companies to “disregard … without limitation” the prospective rules laid down by the Safe Harbor when they conflict with US national security and public interest are affecting the reasoning of the EEA Data Protection Commissioners and may also be getting traction outside the European Economic Area. The CJEU opinion also points at other deficiencies in the US legal regime, such as a lack of access and correction rights.

The invalidation of the 2000/520 Safe Harbor Decision does not solve these fundamental issues. It is hard to see how data transferred from the EEA to the United States under BCRs or Standard Contractual clauses would not suffer the same fate. The next few months will be very busy and will see extensive activities in the United States, throughout Europe, and probably in other parts of the world. Hopefully the wake-up call provided by the CJEU ruling will pave the way to effective and productive negotiations that find a solution that help revive commerce and exchanges between the affected countries.

In the meantime, US companies must urgently evaluate their situation and take appropriate remedial measures to meet the data protection standards in the countries in which they currently do business. The January 2016 deadline, set by the A29 Working Party, is a very important deadline. US companies should take the time, this Fall, to reshape their crossborder data transfer solutions to address the significant challenges created by the invalidation of the EU-US Safe Harbor, and the associated ramifications such as the Israeli decision.