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The Privacy Shield

Aaron P Simpson and Maeve Olney

Hunton Andrews Kurth LLP

Tuesday 27 August 2019

Twenty-first century commerce depends on the unencumbered flow of data around the globe. At the same time, however, individuals everywhere are clamouring for governments to do more to safeguard their personal data. A prominent outgrowth of this global cacophony has been reinvigorated regulatory focus on cross-border data transfers. Russia made headlines because it enacted a law in 2015 that requires companies to store the personal data of Russians on servers in Russia. While this is an extreme example of ‘data localisation’, the Russian law is not alone in its effort to create impediments to the free flow of data across borders. The Safe Harbor framework, which was a popular tool used to facilitate data flows from the EU to the US for nearly 15 years, was invalidated by the Court of Justice of the European Union (CJEU) in 2015, in part as a result of the PRISM scandal that arose in the wake of Edward Snowden’s 2013 revelations. The invalidation of Safe Harbor raised challenging questions regarding the future of transatlantic data flows. A successor framework, the EU–US Privacy Shield, was unveiled by the European Commission in February 2016 and, in July 2016, was formally approved in Europe. In 2017, the Swiss government announced its approval of a Swiss–US Privacy Shield framework.

Contrasting approaches to privacy regulation in the EU and US

Privacy regulation tends to differ from country to country around the world, as it represents a culturally bound window into a nation’s attitudes about the appropriate use of information, whether by government or private industry. This is certainly true of the approaches to privacy regulation taken in the EU and the US, which historically have been both literally and figuratively an ocean apart. Policymakers in the EU and the US were able to set aside these differences in 2000 when they created the Safe Harbor framework, which was developed explicitly to bridge the gap between the differing regulatory approaches taken in the EU and the US. With the onset of the Privacy Shield, policymakers have again sought to bridge this gap between the EU and US.

The European approach to data protection regulation

Largely as a result of the role of data accumulation and misuse in the human rights atrocities perpetrated in mid-20th-century Europe, the region takes an understandably hard-line approach to data protection. The processing of personal data about individuals in the EU is strictly regulated on a pan-EU basis by the General Data Protection Regulation (GDPR). Unlike its predecessor, the Data Protection Directive 95/46/EC, the GDPR is not implemented differently at the member state level but instead applies directly across the EU as a regulation.

Extraterritorial considerations are an important component of the data protection regulatory scheme in Europe, as policymakers have no interest in allowing companies to circumvent European data protection regulations simply by transferring personal data outside of Europe. These extraterritorial restrictions are triggered when personal data is exported from Europe to the vast majority of jurisdictions that have not been deemed adequate by the European Commission; chief among them from a global commerce perspective is the United States.

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