Last week, the Irish High Court made a judgement on transatlantic data flows that could have far reaching implications for US tech firms and point the way towards economic disaster for the UK.
Yes, it might not have received much coverage at the time, but the court’s decision was a biggie.
It asked the European Union Court of Justice (CJEU) to scrutinise the mechanism by which Facebook and many other firms transfer data: standard contractual clauses (SCCs).
Why? Because Austrian law student Max Schrems is still not happy that his personal data could theoretically be snooped on by the US authorities whilst residing in Facebook datacentres over there. His previous battle with Facebook over this issue led to the collapse of the Safe Harbour agreement between the EU and US.
Its replacement, Privacy Shield, is the other main legal mechanism – aside from SCCs – that govern data transfers outside the US.
“In simple terms, US law requires Facebook to help the NSA with mass surveillance and EU law prohibits just that,” Schrems said in a written statement following the court’s decision. “As Facebook is subject to both jurisdictions, they got themselves in a legal dilemma that they cannot possibly solve in the long run.”
Emily Taylor, CEO of Oxford Innovation Labs and Chatham House associate fellow, took time out to discuss the issue with me.
“The reference to the CJEU is no surprise, and the fact that the US government applied to be joined as party shows how high the stakes are on all sides – for governments, for big data platforms like Facebook, and for individuals,” she told me.
“The case shows that the Snowden revelations continue to reverberate on both sides of the Atlantic. The CJEU has taken a consistently hard line against mass data collection and retention, and increasingly relies on the EU Charter of Fundamental Rights. The Charter allows for ‘more extensive protection’ of fundamental rights such as privacy, compared with the more familiar European Convention.”
That spells some uncertain times ahead for Silicon Valley, especially with Privacy Shield also facing an uncertain future.
That’s not all though. The case tells us much about what may happen to post-Brexit Britain.
Our digital economy is worth around £160bn and responsible for over 1.5m jobs, by some estimates. That makes it a vital part of the economy, and means unhindered data transfers with the EU – our biggest trading partner and the largest trading bloc in the world – are absolutely essential.
So how do we square the EU’s requirements around strong privacy protections for citizens, with the round hole of the UK’s brand spanking new Investigatory Powers Act? Also known as the Snoopers’ Charter, the new law has given the UK authorities probably more power than any country on earth – save for China and North Korea – to snoop on their own citizens.
“It is difficult to see how the UK’s mass data collection requirements under the Investigatory Powers Act could satisfy the EU Charter and this could have a severe impact on EU-UK data flows, potentially damaging UK business interests post-Brexit,” Taylor concluded.
That should be getting people in all sorts of high places very nervous indeed.
All over Europe organisations of all sizes are currently scrabbling desperately to get their house in order for 25 May 2018. What happens then? Only the biggest shake-up to Europe’s data protection laws in nearly a generation. The implications are immense, both in terms of the scope of the new regulation and the companies who will now be held liable.
There’s just one problem. The UK’s Snoopers’ Charter, or Investigatory Powers Act. Its enshrining into law of mass surveillance powers could create major problems down the line, possibly putting UK firms at a competitive disadvantage precisely at a time when they need the digital economy most.
What’s the problem?
Let’s start at the beginning. UK firms will have to comply with GDPR, even with Brexit looming. That’s because the extrication of the country from the EU will take at least two years from whenever Article 50 is triggered – presumably in March – and probably much, much longer. And even beyond that, the UK government has said in its Brexit white paper:
“The European Commission is able to recognise data protection standards in third countries as being essentially equivalent to those in the EU, meaning that EU companies are able to transfer data to those countries freely.
As we leave the EU, we will seek to maintain the stability of data transfer between EU Member States and the UK.”
This implies that the UK will broadly speaking harmonise its laws with the GDPR. But the bulk data collection powers granted by the IPA mean the regime is certainly not equivocal to that in Europe. Emily Taylor, CEO of Oxford Innovation Labs and associate fellow of Chatham House, told me that the European Court of Justice (CJEU) shows no signs on shifting its stance on bulk data collection – having recently ruled against the forerunner to the Snoopers’ Charter, DRIPA.
“Other elements of the judgment are likely to cause problems with the Investigatory Powers Act: the CJEU says that targeted data retention may be allowable, but must be restricted solely to fighting serious crime; warrants must be signed off by a court, not a minister; and the data concerned must be retained within the EU. All these will potentially conflict with core elements of the IP Act,” she told me.
If its kept as is, the Act could therefore impact the legality of data transfers between Europe and a newly independent UK, which will be bad news for most firms reliant on a thriving digital economy.
“The impact of conflicts between the GDPR and our Investigatory Powers Act may be to hamper the competitiveness of UK tech, particularly as the GDPR seeks to protect EU citizens’ data wherever it will be processed,” she argued.
Not great for America
This is a hot button issue for Europe In fact it’s the reason why data transfers to the US were put under threat after Safe Harbour was torn down because of fears of US authorities snooping on Europeans’ data. Despite a new agreement – Privacy Shield – being put in place, there could still be bumps in the road ahead.
“Transatlantic data flows will not be legal unless there is a robust framework in place to offer EU citizens’ data equivalent protection to what is enjoyed in the EU,” said Taylor.
“President Trump’s ‘America First’ policy is likely to renew tensions over Privacy Shield – a shaky compromise which was hurriedly reached following the CJEU’s obliteration of its predecessor ‘Safe Harbour’.”
KPMG’s globa privacy advisory lead, Mark Thompson, told me that firms outside of Europe that need to comply with the GDPR are better off keeping data on European citizens inside the EU so as not to fall foul of any changes to data transfer agreements.
“Despite the USA and EU having some cultural alignment, there is potential for significant culture clash between the EU’s view of a fundamental human right to privacy and the US view on what constitutes privacy, which is significantly different,” he added.
We’ll have to wait a while to see what the fallout of all this is. But with the UK government unlikely to countenance any changes to the IPA, there could be some potentially bad news for the country’s digital economy in the next few years if nothing changes.