Saturday, 25 July 2020

Schrems II (Transfers of Data to the USA) Data Protection Commissioner v Facebook Ireland Ltd and Another

Damien Slattery / CC BY-SA (https://creativecommons.org/licenses/by-sa/3.0)






































Jane Lambert

Court of Justice of the European Union (K. Lenaerts, President, R. Silva de Lapuerta, Vice-President, A. Arabadjiev, A. Prechal, M. Vilaras, M. Safjan, S. Rodin, P.G. Xuereb, L.S. Rossi and I. Jarukaitis, Presidents of Chambers, M. Ilešič, T. von Danwitz (Rapporteur), and D. Šváby, Judges)  Case C‑311/18, Data Protection Commissioner v Facebook Ireland Ltd and another [2020] EUECJ C-311/18, EU:C:2020:559, ECLI:EU:C:2020:559 

This was a request for a preliminary ruling by Ms Justice Costello of the High Court of Ireland pursuant to art 267 of the Treaty on the Functioning of the European Union.  The request came at the behest of the Data Protection Commissioner of the Republic of Ireland.  The Commissioner had been asked by one Maximilian Schrems ("Mr Schrems") to require Facebook Ireland Ltd. ("Facebook") to cease or suspend transfers of personal data of which Mr Schrems was the data subject to Facebook's holding company in the United States where it could be intercepted and processed by US security and intelligence services without any legal redress.

The SCC Decisions
The Commissioner believed that she could not perform her task without a ruling of the validity of three Commission Decisions (referred to collectively as the "SCC Descirions") setting conditions for the transfer of personal data to the USA as a result of the Court of Justice's decision in Case C‑362/14, Schrems v Data Protection Commissioner  EU:C:2015:650, ECLI:EU:C:2015:650, [2016] QB 527, [2015] EUECJ C-362/14, [2016] 2 CMLR 2, [2016] 2 WLR 873, [2016] CEC 647, [2015] WLR(D) 403.  The Commissioner invited the Irish High Court either to make a finding on the validity of the SCC Decisions on its own initiative or to refer the question of their validity to Luxembourg under art 267 TFEU.

The Reference
In The Data Protection Commissioner v Facebook Ireland Limited and another [2017] IEHC 545, Ms Justice Costello found grounds for believing that the SCC Decisions were invalid. It was in her view extremely important for there to be uniformity on the issue throughout the European Union. On that basis, she believed that a reference was necessary and appropriate. Her ladyship delivered her order for a reference to the parties on 12 April 2018 whereupon Facebook Ireland appealed her decision to make a reference and applied for a stay of the reference pending their appeal.   Ms Justice Costello heard and rejected Facebook Ireland's application for a stay in Data Protection Commissioner v Facebook Ireland Ltd and another [2018] IEHC 236 (2 May 2018).

The Questions
The questions that Ms Justice Costlello referred to the Court of Justice were set out at paragraph [68] of the Court's judgment in Case C‑311/18, Data Protection Commissioner v Facebook Ireland Ltd [2020] EUECJ C-311/18, EU:C:2020:559, ECLI:EU:C:2020:559:
"(1) In circumstances in which personal data is transferred by a private company from a European Union (EU) Member State to a private company in a third country for a commercial purpose pursuant to [the SCC Decision] and may be further processed in the third country by its authorities for purposes of national security but also for purposes of law enforcement and the conduct of the foreign affairs of the third country, does EU law (including the Charter) apply to the transfer of the data notwithstanding the provisions of Article 4 (2) TEU in relation to national security and the provisions of the first indent of Article 3 (2) of Directive [95/46] in relation to public security, defence and State security?
(2)
 (a) In determining whether there is a violation of the rights of an individual through the transfer of data from the [European Union] to a third country under the [SCC Decision] where it may be further processed for national security purposes, is the relevant comparator for the purposes of [Directive 95/46]:
(i) the Charter, the EU Treaty, the FEU Treaty, [Directive 95/46], the [European Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Rome on 4 November 1950] (or any other provision of EU law); or
(ii) the national laws of one or more Member States?
(b) If the relevant comparator is (ii), are the practices in the context of national security in one or more Member States also to be included in the comparator?
(3) When assessing whether a third country ensures the level of protection required by EU law to personal data transferred to that country for the purposes of Article 26 of [Directive 95/46], ought the level of protection in the third country be assessed by reference to:
(a) the applicable rules in the third country resulting from its domestic law or international commitments, and the practice designed to ensure compliance with those rules, to include the professional rules and security measures which are complied with in the third country; or
(b) the rules referred to in (a) together with such administrative, regulatory and compliance practices and policy safeguards, procedures, protocols, oversight mechanisms and non-judicial remedies as are in place in the third country?
(4) Given the facts found by the High Court in relation to US law, if personal data is transferred from the European Union to the United States under [the SCC Decision] does this violate the rights of individuals under Articles 7 and/or 8 of the Charter?
(5) Given the facts found by the High Court in relation to US law, if personal data is transferred from the European Union to the United States under [the SCC Decision]:
(a) does the level of protection afforded by the United States respect the essence of an individual’s right to a judicial remedy for breach of his or her data privacy rights guaranteed by Article 47 of the Charter?
If the answer to Question 5(a) is in the affirmative:
(b) are the limitations imposed by US law on an individual’s right to a judicial remedy in the context of US national security proportionate within the meaning of Article 52 of the Charter and do not exceed what is necessary in a democratic society for national security purposes?
(6)
 (a) What is the level of protection required to be afforded to personal data transferred to a third country pursuant to standard contractual clauses adopted in accordance with a decision of the Commission under Article 26(4) [of Directive 95/46] in light of the provisions of [Directive 95/46] and in particular Articles 25 and 26 read in the light of the Charter?
(b) What are the matters to be taken into account in assessing whether the level of protection afforded to data transferred to a third country under [the SCC Decision] satisfies the requirements of [Directive 95/46] and the Charter?
(7) Does the fact that the standard contractual clauses apply as between the data exporter and the data importer and do not bind the national authorities of a third country who may require the data importer to make available to its security services for further processing the personal data transferred pursuant to the clauses provided for in [the SCC Decision] preclude the clauses from adducing adequate safeguards as envisaged by Article 26(2) of [Directive 95/46]?
(8) If a third country data importer is subject to surveillance laws that in the view of a data protection authority conflict with the [standard contractual clauses] or Article 25 and 26 of [Directive 95/46] and/or the Charter, is a data protection authority required to use its enforcement powers under Article 28(3) of [Directive 95/46] to suspend data flows or is the exercise of those powers limited to exceptional cases only, in light of recital 11 of [the SCC Decision], or can a data protection authority use its discretion not to suspend data flows?
(9)
 (a) For the purposes of Article 25(6) of [Directive 95/46], does [the Privacy Shield Decision] constitute a finding of general application binding on data protection authorities and the courts of the Member States to the effect that the United States ensures an adequate level of protection within the meaning of Article 25(2) of [Directive 95/46] by reason of its domestic law or of the international commitments it has entered into?
(b) If it does not, what relevance, if any, does the Privacy Shield Decision have in the assessment conducted into the adequacy of the safeguards provided to data transferred to the United States which is transferred pursuant to the [SCC Decision]?
(10) Given the findings of the High Court in relation to US law, does the provision of the Privacy Shield ombudsperson under Annex A to Annex III to the Privacy Shield Decision when taken in conjunction with the existing regime in the United States ensure that the US provides a remedy to data subjects whose personal data is transferred to the United States under the [SCC Decision] that is compatible with Article 47 of the Charter]?
(11) Does the [SCC Decision] violate Articles 7, 8 and/or 47 of the Charter?’
Admissibility
The admissibility of the reference was challenged by Facebook and the British and German governments. Facebook argued that the reference served no useful purpose as the Data Protection Directive (Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data OJ L 281, 23.11.1995, p. 31–50) had been repealed by the General Data Protection Regulation ("GDPR") (Regulation (EU)  2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) OJ 4.5.2016 L119/1). The Court noted that the Directive was in force when the reference was made and the relevant articles of the Directive had been substantially reproduced in the GDPR. The German government contended that the Commissioner had not expressed an opinion but only doubts on the validity of the SCC Decisions and that the referring court had not made a finding on whether or not Mr Schrems had consented to the data transfer.  The British government submitted that there had been no finding that the transfer of data had been made in reliance on the SCC Decisions. The Court rejected both governments' contentions finding that the request for the preliminary reference had been well-founded.

The First Question
The Court reformulated the first question as follows at paragraph [80]:

"By its first question, the referring court wishes to know, in essence, whether Article 2 (1) and Article 2 (2) (a), (b) and (d) of the GDPR, read in conjunction with Article 4 (2) TEU, must be interpreted as meaning that that regulation applies to the transfer of personal data by an economic operator established in a Member State to another economic operator established in a third country, in circumstances where, at the time of that transfer or thereafter, that data is liable to be processed by the authorities of that third country for the purposes of public security, defence and State security."

Art 2 (1) of the GDPR provides:
"This Regulation applies to the processing of personal data wholly or partly by automated means and to the processing other than by automated means of personal data which form part of a filing system or are intended to form part of a filing system."
However, art 2 (2) limits the scope of art 2 (1):
"This Regulation does not apply to the processing of personal data:
(a)  in the course of an activity which falls outside the scope of Union law;
(b)  by the Member States when carrying out activities which fall within the scope of Chapter 2 of Title V of the TEU;
(c)  ................
(d) by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, including the safeguarding against and the prevention of threats to public security."
 Art 4 (2) of the Treaty on European Union provides:
"The Union shall respect the equality of Member States before the Treaties as well as their national identities, inherent in their fundamental structures, political and constitutional, inclusive of regional and local self-government. It shall respect their essential State functions, including ensuring the territorial integrity of the State, maintaining law and order and safeguarding national security. In particular, national security remains the sole responsibility of each Member State."
The Court held that art 4 (2) applies only to member states of the EU and not to non-member states such as the USA.   None of the limitations of art 2 (2) applies to Facebook. It concluded at paragraph [89]:
"the answer to the first question is that Article 2 (1) and (2) of the GDPR must be interpreted as meaning that that regulation applies to the transfer of personal data for commercial purposes by an economic operator established in a Member State to another economic operator established in a third country, irrespective of whether, at the time of that transfer or thereafter, that data is liable to be processed by the authorities of the third country in question for the purposes of public security, defence and State security."
The Second, Third and Sixth Questions
The Court took the second, third and sixth questions together:
"[90] By its second, third and sixth questions, the referring court seeks clarification from the Court, in essence, on the level of protection required by Article 46 (1) and Article 46 (2) (c) of the GDPR in respect of a transfer of personal data to a third country based on standard data protection clauses. In particular, the referring court asks the Court to specify which factors need to be taken into consideration for the purpose of determining whether that level of protection is ensured in the context of such a transfer." 
Art 46 (1) and (2) (c) of the GDPR are as follows:
"(1) In the absence of a decision pursuant to Article 45(3), a controller or processor may transfer personal data to a third country or an international organisation only if the controller or processor has provided appropriate safeguards, and on condition that enforceable data subject rights and effective legal remedies for data subjects are available.
(2) The appropriate safeguards referred to in paragraph 1 may be provided for, without requiring any specific authorisation from a supervisory authority, by
.............................
(c)  standard data protection clauses adopted by the Commission in accordance with the examination procedure referred to in Article 93 (2)......"
In the absence of an adequacy decision under art 45 (3) GDPR, the Court held that a controller or processor may transfer personal data to a third country only if the controller or processor has provided ‘appropriate safeguards’, and on the condition that ‘enforceable data subject rights and effective legal remedies for data subjects’ are available. These can be provided by contract unless public authorities in the recipient country can override those contracts.   Consequently, the answer to the second, third and sixth questions is that art  46 (1) and art 46 (2) (c) GDPR must be interpreted as meaning that the appropriate safeguards, enforceable rights and effective legal remedies required by those provisions must ensure that data subjects whose personal data are transferred to a third country pursuant to standard data protection clauses are afforded a level of protection essentially equivalent to that guaranteed within the European Union by that regulation, read in the light of the Charter of Fundamental Rights of the European Union ("the Charter").

The Eighth Question
The Court interpreted the Irish High Cour's eighth question as follows:
"By its eighth question, the referring court wishes to know, in essence, whether Article 58 (2) (f) and (j) of the GDPR must be interpreted as meaning that the competent supervisory authority is required to suspend or prohibit a transfer of personal data to a third country pursuant to standard data protection clauses adopted by the Commission, if, in the view of that supervisory authority, those clauses are not or cannot be complied with in that third country and the protection of the data transferred that is required by EU law, in particular by Articles 45 and 46 of the GDPR and by the Charter, cannot be ensured, or as meaning that the exercise of those powers is limited to exceptional cases."
Art 58 (2) (f) and (j) of the GDPR are as follows:

"Each supervisory authority shall have all of the following corrective powers:
.............
(f) to impose a temporary or definitive limitation including a ban on processing;
.............
(j) to order the suspension of data flows to a recipient in a third country or to an international organisation."
Arts 45 and 46 provide safeguards for the transfer of data outside the EU. 

The Court observed that supervisory authorities have to enforce compliance with the GDPR in accordance with the Charter. They have to take particular care with transfers of data outside the EU and be diligent in dealing with data subjects' complaints.  It answered the eighth question as follows:
"In the light of the foregoing considerations, the answer to the eighth question is that Article 58 (2) (f) and (j) of the GDPR must be interpreted as meaning that, unless there is a valid Commission adequacy decision, the competent supervisory authority is required to suspend or prohibit a transfer of data to a third country pursuant to standard data protection clauses adopted by the Commission, if, in the view of that supervisory authority and in the light of all the circumstances of that transfer, those clauses are not or cannot be complied with in that third country and the protection of the data transferred that is required by EU law, in particular by Articles 45 and 46 of the GDPR and by the Charter, cannot be ensured by other means, where the controller or a processor has not itself suspended or put an end to the transfer."

The Seventh and Eleventh Questions
The Court took the seventh and eleventh questions together and interpreted them as follows:
"By its 7th and 11th questions, which it is appropriate to consider together, the referring court seeks clarification from the Court, in essence, on the validity of the SCC Decision in the light of Articles 7, 8 and 47 of the Charter."
The SCC Decision was Commission Decision of 15 June 2001 on standard contractual clauses for the transfer of personal data to third countries, under Directive 95/46/EC (OJ L 181, 4.7.2001, p. 19–31). It has been modified by Commission Decision of 27 December 2004 amending Decision 2001/497/EC as regards the introduction of an alternative set of standard contractual clauses for the transfer of personal data to third countries (notified under document number C(2004) 5271)Text with EEA relevance (OJ L 385, 29.12.2004, p. 74–84) and Commission Decision of 5 February 2010 on standard contractual clauses for the transfer of personal data to processors established in third countries under Directive 95/46/EC of the European Parliament and of the Council (notified under document C(2010) 593) (Text with EEA relevance) (OJ L 39, 12.2.2010, p. 5–18). The three Decisions are referred to collectively as the SCC Decisions.

The Court noted that art 1 of the SCC Decision provides that the standard data protection clauses set out in its annexe are considered to offer adequate safeguards with respect to the protection of the privacy and fundamental rights and freedoms of individuals in accordance with the requirements of art 26 (2) of the Data Protection Directive and now arts 46 (1) and 46 (2) (c) of the GDPR. Those clauses bind the recipient of a data transfer in a country outside the EU but not the public authorities of that country.  However, the clauses impose contractual obligations on both the controller and processor in the EU and the recipient of the data not to transfer data if the contractual safeguards cannot be guaranteed.   In the light of all of the foregoing considerations, the Court answered the 7th and 11th questions as follows:  "examination of the SCC Decision in the light of Articles 7, 8 and 47 of the Charter has disclosed nothing to affect the validity of that decision."

The Fourth, Fifth, Ninth and Tenth Questions
The Court interpreted those questions as follows at paragraph [150] of its judgment:
"By its ninth question, the referring court wishes to know, in essence, whether and to what extent findings in the Privacy Shield Decision to the effect that the United States ensures an adequate level of protection are binding on the supervisory authority of a Member State. By its 4th, 5th and 10th questions, that court asks, in essence, whether, in view of its own findings on US law, the transfer to that third country of personal data pursuant to the standard data protection clauses in the annex to the SCC Decision breaches the rights enshrined in Articles 7, 8 and 47 of the Charter and asks the Court, in particular, whether the introduction of the ombudsperson referred to in Annex III to the Privacy Shield Decision is compatible with Article 47 of the Charter."
The Privacy Shield Decision is Commission Implementing Decision (EU) 2016/1250 of 12 July 2016 pursuant to Directive 95/46/EC of the European Parliament and of the Council on the adequacy of the protection provided by the EU-U.S. Privacy Shield (notified under document C(2016) 4176) (Text with EEA relevance) C/2016/4176  (OJ L 207, 1.8.2016, p. 1–112).  This decision was made after the Data Protection Commissioner began her action in the Irish High Court. It is relevant to the proceedings because Facebook relies on the Privacy Shield Decision and alleges that it is binding on the Commissioner. The Court considered the provisions of the Decision and whether they provided adequate safeguards for data subjects.   It concluded that they did not and determined at [201] that the Privacy Shield Decision was invalid.

Further Proceedings
It is to be assumed that the Data Protection Commissioner's action will now be relisted for a  further hearing in the Irish High Court.  Irish readers are asked whether the relisted proceedings can be taken by Ms Justice Costello as she now sits in the Court of Appeal.

Further Information
Anyone wishing to discuss this case or data protection generally may call my clerk on 07986 948267 or send me a message through my contact page.

Friday, 3 April 2020

Supreme Court allows Morrison's Appeal


UK Supreme Court


















Jane Lambert

Supreme Court (Lady Hale, Lord Reed, Lord Kerr, Lord Hodge and Lord Lloyd-Jones) Wm Morrison Supermarkets plc v Various Claimants [2020] UKSC 12 (01 April 2020)

On 12 Jan 2014, a disgruntled member of the staff of Wm Morrison Supermarkets plc called Andrew Skelton posted a file containing the personal details of nearly 100,000 of the company's employees on a file-sharing website. The information included names, addresses, gender, dates of birth, phone numbers (home or mobile), national insurance numbers, bank sort codes, bank account numbers and salaries. Mr Skelton was caught, prosecuted, convicted and sentenced to 8 years imprisonment.

Some 5,518 of those employees have brought an action for damages against the company for breach of statutory duty under s.4 (4) of the Data Protection Act 1998, breach of confidence and misuse of personal information. The action was split into two: first, a trial on liability and, if necessary, an assessment of damages.    The trial on liability came on before Mr Justice Langstaff who decided that Morrisons was not primarily liable for breaches of statutory duty, breach of confidence or misuse of personal information but it was vicariously liable for the wrongdoing of its employee. The judge was troubled by his decision because it assisted the wrongdoer to accomplish his ends which were to injure his employer. However, the claimants had suffered and were entitled to be compensated  (see Various Claimants v WM Morrisons Supermarket Plc (Rev 1) [2018] IRLR 200, [2018] EMLR 12, [2017] EWHC 3113 (QB), [2018] 3 WLR 691 and Morrisons - Primary and Vicarious Liability for Breaches of Data Protection Act 1998 11 Dec 2017).

The company appealed to the Court of Appeal on the following grounds:
"First, the Judge ought to have concluded that, on its proper interpretation and having regard to the nature and purposes of the statutory scheme, [the Data Protection Act 1998 ("the DPA")] excludes the application of vicarious liability. Second, the Judge ought to have concluded that, on its proper interpretation, the DPA excludes the application of causes of action for misuse of private information and breach of confidence and/or the imposition of vicarious liability for breaches of the same. Third, the Judge was wrong to conclude (a) that the wrongful acts of Mr Skelton occurred during the course of his employment by Morrisons, and, accordingly, (b) that Morrisons was vicariously liable for those wrongful acts."
The appeal came on before the Master of the Rolls and Lord Justices Bean and Flaux who dismissed the appeal (see  WM Morrison Supermarkets Plc v Various Claimants [2018] EWCA Civ 2339, [2019] 2 All ER 579, [2019] ICR 357, [2019] 2 WLR 99, [2019] QB 772, [2019] IRLR 73, [2018] WLR(D) 653 and The Morrisons Appeal - Vicarious Liability for Employees' Breaches of Confidence and Statutory Duty 24 Oct 2018).

As for the first and second grounds, the Lord Justices held at para [48] that it was clear that the vicarious liability of an employer for misuse of private information by an employee and for breach of confidence by an employee had not been excluded by the Data Protection Act 1998. With regard to the third ground, the Court of Appeal referred to the judgment of Lord Toulson in Mohamud v Wm Morrison Supermarkets Plc [2016] UKSC 11, [2016] IRLR 362, [2016] ICR 485, [2016] 2 WLR 821, [2017] 1 All ER 15, [2016] AC 677, [2016] PIQR P11, [2016] WLR(D) 109. At para [44] Lord Toulson had asked "what functions or "field of activities" have been entrusted by the employer to the employee, or, in everyday language, what was the nature of his job?" Next "the court must decide whether there was sufficient connection between the position in which he was employed and his wrongful conduct to make it right for the employer to be held liable under the principle of social justice which goes back to Holt CJ." As to Lord Toulson's first question, the Court of Appeal endorsed the trial judge's finding that Morrisons had entrusted Skelton with payroll data. It was part of his job to disclose it to a third party. He had clearly exceeded his authority but that did not matter because his wrongdoing was nonetheless closely related to the task that he had to do. As to the second part of Lord Toulson's test. the Court endorsed the Mr Justice Langstaff's finding that there was an unbroken thread that linked his work to the disclosure,

The supermarket chain appealed to the Supreme Court which heard argument on 6 and 7 Nov 2019 and delivered judgment on 1 April 2020.  Readers can see the following video recordings of counsels' argument (morning 6 Nov, afternoon 6 Nov and morning 7 Nov) and Lord Reed's summary of the judgment of 1 April 2020). They can also find the full judgment (see Wm Morrison Supermarkets plc v Various Claimants [2020] UKSC 12 (1 April 2020) and a press summary.  The issues before the Supreme Court were:
"(1) Whether Morrisons is vicariously liable for Skelton’s conduct.
(2) If the answer to (1) is in the affirmative:
(a) Whether the DPA excludes the imposition of vicarious liability for statutory torts committed by an employee data controller under the DPA.
(b) Whether the DPA excludes the imposition of vicarious liability for misuse of private information and breach of confidence."
Allowing the appeal, Lord Reed remarked in the opening paragraph of his judgment (with which the rest of the Court agreed) that the appeal provided the court with an opportunity to address the misunderstandings which have arisen since its decision in the case of Mohamud v WM Morrison Supermarkets plc [2016] UKSC 11; [2016] AC 677.

Lord Reed made clear in paragraph [17] that Lord Toulson’s judgment in Mohamud was not intended to effect a change in the law of vicarious liability. The judgments at first instance and in the Court of Appeal focused on the final paragraphs which were taken out of context and treated as establishing legal principles which would represent a departure from the precedents that Lord Toulson was expressly following.

The basic principles on vicarious liability were summri\ed by Baron Parke in Joel v Morison 172 ER 1338, [1834] EWHC KB J39, (1834) 6 C & P 501, 503:
“The master is only liable where the servant is acting in the course of his employment. If he was going out of his way, against his master’s implied commands, when driving on his master’s business, he will make his master liable; but if he was going on a frolic of his own, without being at all on his master’s business, the master will not be liable.”
That principle had been affirmed recently by the House of Lords in Dubai Aluminium Company Ltd v. Salaam  [2003] 2 AC 366, [2002] UKHL 48, [2002] 3 WLR 1913, [2003] 1 LLR 65, [2003] 1 CLC 1020, [2003] 2 All ER (Comm) 451, [2003] 1 Lloyd's Rep 65, [2003] 1 BCLC 32, [2003] 1 All ER 97, [2003] WTLR 163, [2003] IRLR 608:
“A distinction is to be drawn between cases such as Hamlyn v John Houston & Co [1903] 1 KB 81, where the employee was engaged, however misguidedly, in furthering his employer’s business, and cases where the employee is engaged solely in pursuing his own interests: on a ‘frolic of his own’, in the language of the time-honoured catch phrase … The matter stands differently when the employee is engaged only in furthering his own interests, as distinct from those of his employer. Then he ‘acts as to be in effect a stranger in relation to his employer with respect to the act he has committed’: see Isaacs J in Bugge v Brown (1919) 26 CLR 110, 118.”
In  Attorney General v. Hartwell  [2004] WLR 1273, [2004] PIQR P27, [2004] UKPC 12, [2004] 1 WLR 1273, the Privy Council refused to impose liability on Virgin Islands government for the actions of one of its constables who had deserted his post to pursue a domestic quarrel which had resulted in his discharging a firearm causing injury to a passer-by.  This was quite different from Bernard v. Attorney General of Jamaica  [2005] IRLR 398, [2004] UKPC 47 where an officer fired his weapon in the execution of his duty.

The distinction between Mohamud's case and Skelton's was expressed in paragraph [47[ pf the judgment:
"All these examples illustrate the distinction drawn by Lord Nicholls at para 32 of Dubai Aluminium [2003] 2 AC 366 between “cases … where the employee was engaged, however misguidedly, in furthering his employer’s business, and cases where the employee is engaged solely in pursuing his own interests: on a ‘frolic of his own’, in the language of the time-honoured catch phrase.” In the present case, it is abundantly clear that Skelton was not engaged in furthering his employer’s business when he committed the wrongdoing in question. On the contrary, he was pursuing a personal vendetta, seeking vengeance for the disciplinary proceedings some months earlier. In those circumstances, applying the test laid down by Lord Nicholls in Dubai Aluminium in the light of the circumstances of the case and the relevant precedents, Skelton’s wrongful conduct was not so closely connected with acts which he was authorised to do that, for the purposes of Morrisons’ liability to third parties, it can fairly and properly be regarded as done by him while acting in the ordinary course of his employment."
Though logical and consistent with nearly 200 years of authority, the news that they can no longer expect a payout that they had been expecting since 2017 will be bitterly disappointing for thousands of supermarket workers who are risking their health and in some cases their lives to feed their communities.

Although no longer necessary for the disposal of the appeal, Lord Reed addressed the second question of whether the Data Protection Act 1998 excluded the imposition of vicarious liability for:
(a) statutory torts committed by an employee data controller under the Act and
(b) misuse of private information and breach of confidence,
as those matters had been fully argued.

His lordship noted that the appellant company had intended to argue that the former Data Protection Directive (Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data OJ L 281, 23/11/1995 P. 0031 - 0050) had been designed to harmonize national laws governing the processing of personal data and that the existence of vicarious liability under English law in circumstances falling within the scope of that directive, was therefore precluded.  The opinion of Mr Advocate-General Bobek in Case C‑40/17 Fashion ID GmbH & Co KG v Verbraucherzentrale NRW eV (Facebook Ireland Ltd intervening) ECLI:EU:C:2018:1039, [2020] 1 WLR 969, EU:C:2018:1039, [2018] EUECJ C-40/17_O had undermined that argument. It was therefore obliged to argue that the statute impliedly excluded the vicarious liability of an employer for breaches of statutory duty and breaches of confidence. It referred to s.13 (1), (2) and (3) of the Act and to paragraph 10 of Schedule 1 on the interpretation of the Seventh Data Protection Principle,  The company contended that those provisions implied that liability was to be imposed only on data controllers, and only where they had acted without reasonable care.

Their lordships were not persuaded.   Lord Reed said at [54]:
"The imposition of a statutory liability upon a data controller is not inconsistent with the imposition of a common law vicarious liability upon his employer, either for the breach of duties imposed by the DPA, or for breaches of duties arising under the common law or in equity. Since the DPA is silent about the position of a data controller’s employer, there cannot be any inconsistency between the two regimes. That conclusion is not affected by the fact that the statutory liability of a data controller under the DPA, including his liability for the conduct of his employee, is based on a lack of reasonable care, whereas vicarious liability is not based on fault. There is nothing anomalous about the contrast between the fault-based liability of the primary tortfeasor under the DPA and the strict vicarious liability of his employer. A similar contrast can often be drawn between the fault-based liability of an employee under the common law (for example, for negligence) and the strict vicarious liability of his employer, and is no more anomalous where the employee’s liability arises under statute than where it arises at common law."
The Court's pronouncement on the second question, albeit obiter, means that an employer will not be exonerated from the consequences of data breaches occasioned by its employees in all circumstances.  For example, if a loss is caused by an employee's negligence in carrying out his employer's instructions the employer will be vicariously liable.

Anyone wishing to discuss this article, this decisions or data protection and privacy law generally should call my clerk Stephen on 07986 948267 during normal office hours for the duration of the coronavirus crisis or on our usual number afterwards.  Alternatively, message me through my contact page.

Monday, 13 January 2020

GDPR as a Business Opportunity in a Data-Driven Economy

Author OCHA Licence CC BY 3.0 
Source Wikipedia Croatia


















Jane Lambert

One of the most intriguing topics to be discussed at a conference organized by the Croatian presidency of the European Council to mark Data Protection Day is "GDPR as a business opportunity in a data-driven economy."  In the months preceding the implementation of the GDPR (Regulation  (EU) 2016/679 of the European Parliaments and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC), the emphasis was on the burden of compliance and the sanctions for breaches of the regulation. Very little was said about the cost-savings and other business benefits resulting from meeting the regulatory requirements.

One of the most valuable resources in medical research are patient records.  Many new treatments have been discovered through the analysis of patient data.  Computer programs can detect patterns in such data that can assist in formulating optimum dosage or second or more medical uses for known compounds.  Such findings can have enormous commercial value but the data from which they are derived are highly sensitive and must be processed with due regard to patients' privacy. Businesses and researchers from countries that require compliance with the GDPR enjoy an obvious competitive advantage over those that do not.

Although the EU has led the way with data protection, other countries have followed its lead.   The California Privacy Rights Act of 2020, which came into force at the beginning of this month, contains many provisions that are similar to those in the GDPR.  Consultancies and hardware and software suppliers with experience of complying with the regulation have a clear advantage have an obvious advantage over those from other countries in those new markets.

According to the conference programme, there will be three speakers on this topic:
  • Mr Bruno Gencarelli, Head of Unit for International Data Flows and Protection, European Commission who will speak on “Data protection: the increasing convergence at international level”; 
  • Dr Katarina Šiber Makar, President of the Board, IN2 LLC, who will discuss "Data protection in the online world“; and  
  • Dr Dražen Lučić, Head of the Information Security Department, Croatian Chamber of Economy who will address "Information Security: A Cost or a Cost-Saving Measure for Digital Economy".
There will also be a session on the closely related topic of artificial intelligence later in the day.

The conference will take place at the Vatroslav Lisinski Concert Hall in Zagreb between 09:00 and 18:00 on 16 Jan 2019 further information can be obtained from the Croatian Personal Data Protection Agency. Anyone wishing to discuss this article or the data protection law generally may call me on +44 (0)20 7404 5252 or send me a message through my contact page.

Friday, 4 October 2019

Lloyd v Google LLC

Author Gciriani
Licence CC BY-SA 4.0
Source Wikipedia Google























Jane Lambert

Court of Appeal (Dame Victoria Sharp P, Sir Geoffrey Vos C, Lord Justice Davis) Lloyd v Google LLC [2019] EWCA Civ 1599 (2 Oct 2019)

This was an appeal against Mr Justice Warby's refusal to allow the claimant, Richard Lloyd ("Mr Lloyd"), to serve proceedings on Google LLC ("Google") outside the jurisdiction claiming damages on behalf of 4 million i-phone users for  allegedly tracking secretly their internet activity for commercial purposes between 9 Aug 2011 and 15 Feb 2012.  The appeal was heard on 16 and 17 July 2019 by the President of the Queen's Bench Division, the Chancellor and Lord Justice Davis. Judgment was given on 2 Oct 2019. The lead judgment was delivered by the Chancellor, Sir Geoffrey Vos.

The Issues
The facts in this appeal were very similar to those in Google Inc v Vidal-Hal and others [2015] 3 WLR 409, [2015] CP Rep 28, [2015] FSR 25, [2015] 3 CMLR 2, [2015] WLR(D) 156, [2015] EMLR 15, [2015] EWCA Civ 311, [2016] QB 1003, [2016] 2 All ER 337 where the Court of Appeal dismissed Google's appeal against Mr Justice Tugendhat's decision to allow a similar claim to be served  outside the jurisdiction (see Vidal-Hall and others v Google Inc [2014] EWHC 13 (QB) (16 Jan 2014)  [2014] EMLR 14, [2014] 1 WLR 4155, [2014] WLR 4155, [2014] FSR 30, [2014] 1 CLC 201, [2014] WLR(D) 21, [2014] EWHC 13 (QB)). However, the Chancellor pointed out at paragraph [3] of his judgment that there was one crucial difference between the two cases.   In Vidal-Hall, the individual claimants claimed damages for distress as a result of Google's breaches of the Data Protection Act 1998 ("DPA").  In the present case, Mr Lloyd claimed a uniform amount by way of damages on behalf of each person within the defined class without seeking to allege or prove any distinctive facts affecting any of them, save that they did not consent to the abstraction of their data.

The Chancellor analysed Mr Justice Warby's decision between paragraphs [25] and [39] of his judgment.  According to the Chancellor, the grounds on which the application had been refused were  "that: (a) none of the represented class had suffered 'damage' under section 13 of the Data Protection Act 1998 (the 'DPA'), (b) the members of the class did not anyway have the 'same interest' within CPR Part 19.6 (1) so as to justify allowing the claim to proceed as a representative action, and (c) the judge of his own initiative exercised his discretion under CPR Part 19.6 (2) against allowing the claim to proceed."

His lordship summarized the main issues raised by the appeal as follows:
"(a) whether the judge was right to hold that a claimant cannot recover uniform per capita damages for infringement of their data protection rights under section 13 of the DPA, without proving pecuniary loss or distress, (b) whether the judge was right to hold that the members of the class did not have the same interest under CPR Part 19.6 (1) and were not identifiable, and (c) whether the judge's exercise of discretion can be vitiated."
The Facts
Sir Geoffrey adopted the following paragraphs from Mr Justice Warby's judgment:
"[7]. The case concerns the acquisition and use of browser generated information or "BGI". This is information about an individual's internet use which is automatically submitted to websites and servers by a browser, upon connecting to the internet. BGI will include the IP address of the computer or other device which is connecting to the internet, and the address or URL of the website which the browser is displaying to the user. As is well-known, "cookies" can be placed on a user's device, enabling the placer of the cookie to identify and track internet activity undertaken by means of that device.
[8]. Cookies can be placed by the website or domain which the user is visiting, or they may be placed by a domain other than that of the main website the user is visiting ("Third Party Cookies"). Third Party Cookies can be placed on a device if the main website visited by the user includes content from the third party domain. Third Party Cookies are often used to gather information about internet use, and in particular sites visited over time, to enable the delivery to the user of advertisements tailored to the interests apparently demonstrated by a user's browsing history ("Interest Based Adverts").
[9]. Google had a cookie known as the "DoubleClick Ad cookie" which could operate as a Third Party Cookie. It would be placed on a device if the user visited a website that included content from Google's Doubleclick domain. The purpose of the DoubleClick Ad cookie was to enable the delivery and display of Interest Based Adverts.
[10]. Safari is a browser developed by Apple. At the relevant time, unlike most other internet browsers, all relevant versions of Safari were set by default to block Third Party Cookies. However, a blanket application of these default settings would prevent the use of certain popular web functions, so Apple devised some exceptions to the default settings. These exceptions were in place until March 2012, when the system was changed. But in the meantime, the exceptions enabled Google to devise and implement the Safari Workaround. Stripped of technicalities, its effect was to enable Google to set the DoubleClick Ad cookie on a device, without the user's knowledge or consent, immediately, whenever the user visited a website that contained DoubleClick Ad content.
[11]. This enabled Google to identify visits by the device to any website displaying an advertisement from its vast advertising network, and to collect considerable amounts of information. It could tell the date and time of any visit to a given website, how long the user spent there, which pages were visited for how long, and what ads were viewed for how long. In some cases, by means of the IP address of the browser, the user's approximate geographical location could be identified. Over time, Google could and did collect information as to the order in which and the frequency with which websites were visited. It is said by the claimant that this tracking and collating of BGI enabled Google to obtain or deduce information relating not only to users' internet surfing habits and location, but also about such diverse factors as their interests and habits, race or ethnicity, social class, political or religious views or affiliations, age, health, gender, sexuality, and financial position.
[12]. Further, it is said that Google aggregated BGI from browsers displaying sufficiently similar patterns, creating groups with labels such as "football lovers", or "current affairs enthusiasts". Google's DoubleClick service then offered these groups to subscribing advertisers, allowing them to choose … the type of people that they wanted to direct their advertisements to".
Proceedings in the USA
The US Federal Trade Commission bought proceedings for misrepresenting to Safari users that it would not place tracking cookies on their browsers or send targeted advertising which Google settled by agreeing to pay a civil penalty of US$22.5 million.  It also settled an action by 37 states and the District of Columbia on behalf of their consumers by agreeing to pay US$17 million damages and giving certain undertakings.

Proceedings in the UK
 Mr Justice Warby had noted at paragraph [14] of his judgment that similar proceedings had not been brought in the UK by the Information Commissioner but he mentioned Vidal-Hall's claim that I discussed above. 

Applicable Law
Sir Geoffrey referred to paragraphs (2), (7), (8), (10), (11) and (55) of the recitals and arts 1, 22 and 23 of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data ("the Directive").  He also referred to ss.1 (1) (a) and (b), 3, 4 (1) and (4), 13 (1) and (2) and 14 (4) of the Data Protection Act 1998. Finally, he referred to CPR 19.6 (1), (2), (3) and (4).

Was the judge right to hold that a claimant cannot recover uniform per capita damages for infringement of their data protection rights under section 13 without proving pecuniary loss or distress?
The Chancellor affirmed that s.13 of the Data Protection Act 1998 has to be construed in accordance with art 23 of the Directive which had been adopted to give effect to art 8 of the European Convention on Human Rights. He also noted that the parties had agreed that there was a de minimis threshold for an award of damages. After considering the Court of Appeal's decisions in Gulati and others v MGN Ltd [2015] WLR(D) 232, [2015] EWHC 1482 (Ch) which was a case on the misuse of personal information, Halliday v Creation Consumer Finance Ltd (CCF) [2013] EWCA Civ 333 (15 March 2013) which was on damages under s.13 of the Data Protection Act 1998 and other authorities, his lordship concluded at [70] "that damages are in principle capable of being awarded for loss of control of data under article 23 and section 13, even if there is no pecuniary loss and no distress."  He added that it was only by construing the legislation in this way that individuals can be provided with an effective remedy for the infringement of their rights under the Act.

Was the judge was right to hold that the members of the class did not have the same interest under CPR Part 19.6(1) and were not identifiable?
CPR 19.6 (1) provides:
"Where more than one person has the same interest in a claim –
(a) the claim may be begun; or
(b) the court may order that the claim be continued,
by or against one or more of the persons who have the same interest as representatives of any other persons who have that interest."
Mr Justice Warby had held that a representative claim was disqualified unless (a) "every member of the class [had] suffered the same damage (or their share of a readily ascertainable aggregate amount [was] clear)", and (b) different potential defences were not available in respect of claims by different members of the class.  In the present case, for example, some in the claimant class would have been heavy internet users with much BGI taken; it was not credible that all the specified categories of data were obtained by Google from each represented claimant. The same variations would apply if the user principle were applied. Neither the breach of duty nor the impact of it was uniform across the entire class membership.

Sir Geoffrey believed that Mr Justice Earby had applied too stringent a test of "same interest" partly because of his earlier finding on recoverable damages.  H observed at [75]:
"Once it is understood that the claimants that Mr Lloyd seeks to represent will all have had their BGI – something of value - taken by Google without their consent in the same circumstances during the same period, and are not seeking to rely on any personal circumstances affecting any individual claimant (whether distress or volume of data abstracted), the matter looks more straightforward. The represented class are all victims of the same alleged wrong, and have all sustained the same loss, namely loss of control over their BGI. Mr Tomlinson disavowed, as I have said, reliance on any facts affecting any individual represented claimant. That concession has the effect, of course, of reducing the damages that can be claimed to what may be described as the lowest common denominator. But it does not, I think, as the judge held, mean that the represented claimants do not have the same interest in the claim. Finally, in this connection, once the claim is understood in the way I have described, it is impossible to imagine that Google could raise any defence to one represented claimant that did not apply to all others. The wrong is the same, and the loss claimed is the same. The represented parties do, therefore, in the relevant sense have the same interest. Put in the more old-fashioned language of Lord Macnaghten in The Duke of Bedford at [8], the represented claimants have a 'common interest and a common grievance' and 'the relief sought [is] in its nature beneficial to all'".
Mr Justice Warby had also held that a class of claimants having the same interest could not be identified. The Chancellor disagreed.  He said at [81]:  Havi
"In my judgment, therefore, the judge ought to have held that the members of the represented class had the same interest under CPR Part 19.6(1) and that they were identifiable."
Can the judge's exercise of discretion be vitiated?
Having reached a different conclusion on the other two issues, the Chancellor considered that it was appropriate for the court to exercise its discretion afresh.  Having considered carefully all the factors raised by both sides he concluded that this was a claim which, as a matter of discretion, should be allowed to proceed.

Conclusion
The President of the Queen's Bench Divison and Lord Justice Davis agreed with the Chancellor's judgment.  The appeal was therefore allowed and permission was granted to the claimants to serve their claim on Google in the USA.

Anyone wishing to discuss this appeal pr data protection generally should call me on +44 (0)20 7404 5252 or send me a message through my contact form. 

Wednesday, 24 October 2018

The Morrisons Appeal - Vicarious Liability for Enployees' Breaches of Confidence and Statutory Duty

Royal Courts of Justice
Author Rafa Esteve
Licence Creative Commons Attribution Share Alike 4.0 International
Source Wikipedia



















Jane Lambert

Court of Appeal (Sir Terence Etherton MR and Lords Justices Bean and Flaux) Various Claimants v W M Morrison Supermarkets Plc  [2018] EWCA Civ 2339 (22 Oct 2018)

In  Various Claimants v WM Morrisons Supermarkets Plc (Rev 1) [2017] EWHC 3113 (QB), [2018] 3 WLR 691, Mr Justice Langstaff held that W M Morrisons Supermarket Plc ("Morrisons") was vicariously liable to its employees for the unauthorized act of one Skelton, an internal auditor, who had posted the names, addresses, gender, dates of birth, phone numbers (home or mobile), national insurance numbers, bank sort codes, bank account numbers and salaries of Morrisons' employees to a file sharing website. Skelton had acted as he did out of spite.  He had a grudge against Morrisons and wanted to injure the company.  The judge acknowledged at para [198] of his judgment that the effect of his judgment was to accomplish that injury and for that reason he gave the supermarket chain permission to appeal.  I commented on the case in Morrisons - Primary and Vicarious Liability for Breaches of Data Protection Act 1998 11 Dec 2017.

The defendant appealed on the following grounds:
"First, the Judge ought to have concluded that, on its proper interpretation and having regard to the nature and purposes of the statutory scheme, [the Data Protection Act 1998 ("the DPA")] excludes the application of vicarious liability. Second, the Judge ought to have concluded that, on its proper interpretation, the DPA excludes the application of causes of action for misuse of private information and breach of confidence and/or the imposition of vicarious liability for breaches of the same. Third, the Judge was wrong to conclude (a) that the wrongful acts of Mr Skelton occurred during the course of his employment by Morrisons, and, accordingly, (b) that Morrisons was vicariously liable for those wrongful acts."
By their respondents' notice, the claimants sought to uphold the judge's order on the additional ground "that, in evaluating whether there was a sufficient connection between Mr Skelton's employment and his wrongful conduct to make it right for Morrisons to be held vicariously liable, the Judge ought to have taken into account that Mr Skelton's job included the task or duty delegated to him by Morrisons of preserving confidentiality in the claimants' payroll information." The appeal came on before the Master of the Rolls and Lord Justices Bean and Flaux who heard the appeal on the 9 and 10 Oct and delivered judgment on 22 Oct 2018.

Their lorsdhips dismissed Morrisons' appeal.

As for the first and second grounds, the Court concluded at para [48] that it was clear that the vicarious liability of an employer for misuse of private information by an employee and for breach of confidence by an employee had not been excluded by the Data Protection Act 1998.  The applicable principle for determining that issue was whether, on the true construction of the statute in question,  Parliament had intended to exclude vicarious liability.  The appropriate test was:
"If the statutory code covers precisely the same ground as vicarious liability at common law, and the two are inconsistent with each other in one or more substantial respects, then the common law remedy will almost certainly have been excluded by necessary implication. As Lord Dyson said in the Child Poverty Action Group case (at [34]) the question is whether, looked at as a whole, the common law remedy would be incompatible with the statutory scheme and therefore could not have been intended to coexist with it."
Their lordships reasoned that if Parliament had intended to exclude that cause of action, it would have said so expressly. Secondly, Morrisons' counsel had conceded in her submissions that the Act had not excluded the action for breach of confidence or misuse of personal information.   Their lordships observed at [56]:
"Morrisons' acceptance that the causes of action at common law and in equity operate in parallel with the DPA in respect of the primary liability of the wrongdoer for the wrongful processing of personal data while at the same time contending that vicarious liability for the same causes of action has been excluded by the DPA is, on the face of it, a difficult line to tread."
They added at [57}:
"......  the difficulty of treading that line becomes insuperable on the facts of the present case because, as was emphasised by Mr Barnes [the claimants' counsel], the DPA says nothing at all about the liability of an employer, who is not a data controller, for breaches of the DPA by an employee who is a data controller."
The concession that the causes of action for misuse of private information and breach of confidence are not excluded by the Act in respect of the wrongful processing of data within the ambit of the statute, and the complete absence of any provision addressing the situation of an employer where an employee data controller breaches the requirements of the Act, led inevitably to the conclusion that the Mr Justice Langstaff was correct to hold that the common law remedy of vicarious liability of the employer was not expressly or impliedly excluded by the Act.

In respect of the third ground of appeal, the Court referred to the judgment of Lord Toulson in Mohamud v WM Morrison Supermarkets Plc   [2016] UKSC 11, [2016] IRLR 362, [2016] ICR 485, [2016] 2 WLR 821, [2017] 1 All ER 15, [2016] AC 677, [2016] PIQR P11, [2016] WLR(D) 109.  At para [44] Lord Toulson had asked "what functions or "field of activities" have been entrusted by the employer to the employee, or, in everyday language, what was the nature of his job?"  Next "the court must decide whether there was sufficient connection between the position in which he was employed and his wrongful conduct to make it right for the employer to be held liable under the principle of social justice which goes back to Holt CJ."  As to Lord Toulson's first question, the Court of Appeal endorsed the trial judge's finding that Morrisons had entrusted Skelton with payroll data. It was part of his job to disclose it to a third party.  He had clearly exceeded his authority but that did not matter because his wrongdoing was nonetheless closely related to the task that he had to do.  As to the second part of Lord Toulson's test. the Court endorsed the Mr Justice Langstaff's finding that there was an unbroken thread that linked his work to the disclosure,

As noted above, the trial judge had been troubled by the thought that the court was facilitating Skelton's wrongdoing.  The Court of Appeal noted at para [75] that it had not been shown any  reported case in which the motive of the employee committing the wrongdoing was to harm his employer rather than to achieve some benefit for himself or to inflict injury on a third party.  Morrisons submitted that it would be wrong to impose vicarious liability on an employer in circumstances such as this especially as there were so many potential claimants.   Their lordships had no trouble in rejecting those submissions.  Motive was irrelevant and to have held otherwise would have left thousands of hapless data subjects without remedy.

In Mohamud, Lord Toulson had remarked at paea [40] of his judgment that:
"The risk of an employee misusing his position is one of life's unavoidable facts."
The solution for employers was to insure against liability for the misdeeds of their staff.   As the Master of the Rolls put it at [78]:
"There have been many instances reported in the media in recent years of data breaches on a massive scale caused by either corporate system failures or negligence by individuals acting in the course of their employment. These might, depending on the facts, lead to a large number of claims against the relevant company for potentially ruinous amounts. The solution is to insure against such catastrophes; and employers can likewise insure against losses caused by dishonest or malicious employees. We have not been told what the insurance position is in the present case, and of course it cannot affect the result. The fact of a defendant being insured is not a reason for imposing liability, but the availability of insurance is a valid answer to the Doomsday or Armageddon arguments put forward by Ms Proops on behalf of Morrisons."
 That last paragraph will be one of the reasons why this case will appear in countless skeleton arguments and law reports in the future.  The other is the Court's analysis of the circumstances when a statutory code displaces common law remedies.

Anyone wishing to discuss this case or data protection generally should call me on 020 7404 5252 or send me a message through my contact form.

Sunday, 14 October 2018

Privacy Sandbox

Author Hyena
Reproduced with kind permission of the author
Source Wikipedia





















Jane Lambert

The Information Commissioner's Office has just carried out a consultation on creating a regulatory sandbox "to develop innovative products and services using personal data in innovative ways" (see ICO call for views on creating a regulatory sandbox on the ICO website).  The idea of a sandbox was pioneered by the Financial Conduct Authority which described it as  "a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms without immediately incurring all the normal regulatory consequences of engaging in the activity in question" (see FCA Regulatory Sandbox Nov 2015). 

The FCA's idea of a sandbox for new products, services and business models proved not only feasible but popular and has been imitated by other financial services regulators around the world.  The Information Commissioner announced her intention of extending the idea to data protection in her Information Rights Strategic Plan 2017 - 2021:
"Technology goal #8: To engage with organisations in a safe and controlled environment to understand and explore innovative technology. 
  • We will establish a ‘regulatory sandbox’, drawing on the successful sandbox process that the Financial Conduct Authority has developed. The ICO sandbox will enable organisations to develop innovative digital products and services, whilst engaging with the regulator, ensuring that appropriate protections and safeguards are in place. As part of the sandbox process the ICO would provide advice on mitigating risks and data protection by design. 
  • In 2018 we will consult and engage with organisations about implementation of a sandbox."
The consultation closed on Friday but the Call for Evidence makes clear that that was only the first stage of the consultation process. There will be a more detailed proposal for consultation later in the year.

In his blog post Your views will help us build our regulatory sandbox, Chris Taylor, Head of Assurance at the ICO, set out the topics upon which he wants to hear from the public:
  • "what you think the scope of any such sandbox should be - should we focus on particular innovations, sectors or types of organisations?
  • what you think the benefits might be to working in a sandbox, whether that’s our expert input or increased reassurance for your customers or clients.
  • what mechanisms you might find most helpful in a sandbox – from adaptations to our approach, to informal steers or the provision of technical guidance – what are the tools that a sandbox might contain?
  • at what stage in the design and development process a sandbox would be most useful to you?"
Mr Taylor also made a point that applies to innovation generally and not just to data protection law.  It is often said in the USA and in some quarters in this country that red tape (which is a derogatory term for regulation) hobbles innovation and enterprise.   If that were so the USA would be the most innovative nation on earth but a glance of the Global Innovation Index  shows that it lies behind four European nations including the UK. 

The author explains that 
"privacy and innovation go hand in hand. It’s not privacy or innovation, it’s privacy and innovation – because organisations that use our sandbox won’t be exempt from data protection law."
A regulatory sandbox enables regulators to anticipate and make provision for difficulties before they arise thus rescuing sparing new technologies and businesses from the legal quagmires that dogged earlier technologies.  In those days the law reacted to new technologies often imperfectly. 

The proposed sandbox should mitigate the privacy uncertainties affecting new products, services and business models but they won't remove all. There will remain other issues such as patenting or other IP protection, licensing, competition and so firth.  I am well placed and should be glad to help fintech and other entrepreneurs or the patent and trade mark attorneys, solicitors, accountants and other professional advisers who may assist them.  Should any of them wish to discuss this article or data protection generally, they are welcome to call me on +44 (0)20 7404 5252 during office houses or send me a message through my contact form.   

Thursday, 11 October 2018

Data Protection after Brexit

Author Furfur
Licence Creative Commons Attribution Share Alike 4.0 International


























Jane Lambert

Because of the importance of its financial services industry, preserving an uninterrupted flow of personal data across national frontiers is particularly important to the UK.  At present, such flow is guaranteed by art 1 (3) of the General Data Protection Regulation (Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC ("the GDPR").  When the UK leaves the EU, the GDPR will cease to apply to  this country and the UK shall become a third country for the purposes of Chapter V of the GDPR.

Our exit from the UK will have no effect on the obligations of data controllers and processors in the UK or the rights of data subjects anywhere with regard to UK controllers and processors because s.3 (1) of the European Union (Withdrawal) Act 2018 will incorporate the GDPR into our law.  The Department for Digital, Culture, Media and Sport has confirmed in its guidance note Data Protection if there's no Brexit deal of 13 Sept 2018 that
"[i]n recognition of the unprecedented degree of alignment between the UK and EU’s data protection regimes, the UK would at the point of exit continue to allow the free flow of personal data from the UK to the EU"
though it adds that  the UK would keep this under review.  On the other hand, art 44 of the GDPR makes clear that data controllers and processors in the states that remain in the EU would be able to transmit personal data to the UK only in accordance with the provisions of Chapter V of the regulation.

Art 45 (1) of the GDPR provides:
"A transfer of personal data to a third country or an international organisation may take place where the Commission has decided that the third country, a territory or one or more specified sectors within that third country, or the international organisation in question ensures an adequate level of protection."
The  Department for Digital, Culture, Media and Sport's guidance note notes that the "European Commission has stated that if it deems the UK’s level of personal data protection essentially equivalent to that of the EU, it would make an adequacy decision allowing the transfer of personal data to the UK without restrictions." However it adds that while HM government wants to begin preliminary discussions on an adequacy assessment now, the Commission has stated that a decision on adequacy cannot be taken until the UK is a third country. 

Unless and until the Commission makes an adequacy assessment businesses in the UK must rely on one of the other provisions of Chapter V of the GDPR.  The guidance note suggests:
"For the majority of organisations the most relevant alternative legal basis would be standard contractual clauses. These are model data protection clauses that have been approved by the European Commission and enable the free flow of personal data when embedded in a contract. The clauses contain contractual obligations on you and your EU partner, and rights for the individuals whose personal data is transferred. In certain circumstances, your EU partners may alternatively be able to rely on a derogation to transfer personal data."
It recommends businesses proactively to consider what action they may need to take to ensure the continued free flow of data with EU partners.

If the British government and EU reach a withdrawal agreement in time for ratification before the 29 March 2019 there will be an implementation period in which the GDPR will continue to apply to the UK until 31 Dec 2020.  What happens after that will depend on the terms of the agreement on the future relationship between the EU and the UK.  At para 3.2.1 (8) of its while paper The Future Relationship between the United Kingdom and the European Union (Cm 9503) the government says:
"The UK believes that the EU’s adequacy framework provides the right starting point for the arrangements the UK and the EU should agree on data protection but wants to go beyond the framework in two key respects:
a. on stability and transparency, it would benefit the UK and the EU, as well as businesses and individuals, to have a clear, transparent framework to facilitate dialogue, minimise the risk of disruption to data flows and support a stable relationship between the UK and the EU to protect the personal data of UK and EU citizens across Europe; and
b. on regulatory cooperation, it would be in the UK’s and the EU's mutual interest to have close cooperation and joined up enforcement action between the UK's Information Commissioner's Office (ICO) and EU Data Protection Authorities."
It is still not clear whether the EU will agree to the white paper proposal or even whether there will be a withdrawal agreement that will allow a transitional period,

Anyone wishing to discuss this article or data protection generally should call me on 020 7404 5252 during office hours or send me a message through my contact form.