Data Points: Privacy & Data Security Blog

On June 13, 2016, the United States government asked the Irish High Court to be joined as amicus curiae (friend of the court) in the case brought by the Austrian privacy activist Max Schrems against Facebook attacking the use of model contract clauses to transfer EU citizens’ data from the EU to the U.S. as violating fundamental privacy rights. This is an unusual request for the U.S. government to seek to intervene in private ligation, particularly in foreign courts. However, the stakes are high should Facebook lose, and the U.S. government’s surveillance practices are at the center of the litigation. Due to the potential impact on business, the American Chamber of Commerce, Business Software Alliance, and the Irish Business and Employers Confederation also recently petitioned to join the proceedings.

In 2013, Schrems challenged the legality of Safe Harbor, a longstanding agreement between the EU and the U.S. that governed transatlantic data transfer. Schrems argued that U.S. Government’s mass surveillance programs, which Edward Snowden revealed to be mining data from web-based services such as Facebook, violated data protection laws and the fundament privacy rights of EU citizens. The Court of Justice of the European Union, Europe’s highest court, agreed with Schrems and invalidated the Safe Harbor in October 2015.

In response to the invalidation of Safe Harbor, many companies turned to model contract clauses to validate the transfer of personal data from the EU to the U.S. Model contract clauses, according to the European Commission, are contractual clauses that "provide adequate safeguards with respect to the protection of the privacy and fundamental rights and freedoms of individuals and as regards the exercise of the corresponding rights." The approved clauses can be found HERE. Schrems’ claim against Facebook in Ireland (where Facebook’s European headquarters is located) alleges model contract clauses violate EU data protection laws and privacy rights, again due to the social networking company being subject to U.S. surveillance programs. The U.S. government has previously argued that European Courts have misrepresented the surveillance laws applicable to U.S. companies when data has reached the U.S. and denied that it engages in unfettered mass surveillance. We suspect that the U.S. government will make similar arguments in the Schrems’ case.

After the invalidation of Safe Harbor, the EU and U.S. collaborated to come up with a replacement – the “Privacy Shield.” [DataPoints: US and EU “Privacy Shield” Framework for Cross-Border Data Transfers Submitted to Article 29 Working Party Today] However, the Privacy Shield has been criticized as suffering from the same fundamental flaws that sunk the Safe Harbor, including the alleged lack of limitations on mass surveillance by the U.S. government. EU counsel has estimated that it could be a year or more before the U.S. and the EU work out a solution on the perceived shortcomings of the Privacy Shield. If model contract clauses are struck down as unlawful before the Privacy Shield can be shored up, U.S. businesses will have even fewer options to lawfully transfer EU citizen’s data to the U.S.

We will continue to update you on the progress of this important litigation.