BACKGROUND

On 30 March 2021, the European Commission, in a joint statement with the Personal Information Protection Commission, the data protection authority of the Republic of Korea (Korea), declared that Korea ensured a level of protection for personal data that is similar to the level provided in the European Union (the EU) and, as such, is a jurisdiction deemed “adequate.” Further to this joint declaration, the European Commission completed its internal procedures and formally adopted the substance of this joint statement in a draft adequacy decision published on 14 June 2021. Once finalized, businesses will be allowed to transfer personal data freely from the EU and European Economic Area (EEA) to Korea without being required to provide further safeguards as required for “third country transfers” under the EU General Data Protection Regulation 2016/679 (GDPR). Once so adopted, the adequacy decision would cover transfers of personal data to commercial operators located in Korea, as well as Korean public authorities. However, the transfer of personal credit information that is subject to jurisdiction of Korea’s Financial Services Commission will be excluded from the coverage of the adequacy decision.  

The adequacy decision only relates to the transfer of personal data from the EU/EEA to a recipient in Korea, but it does not cover the general applicability of GDPR. In this context, any company (even outside the EU/EEA) that directly collects personal data from EU residents in connection with offering goods or services or monitoring of behavior of EU residents will still need to comply with the obligations set out in the GDPR for its collection of personal data. Also, significantly, the adequacy decision only covers data flow in one direction, from the EU to Korea, but not in the opposite direction, i.e., from Korea to the EEA. As noted below, barring any further statutory amendments, Korean privacy laws still require data handlers to obtain the consent of data subjects (as opposed to an opt-out) prior to transferring their personal data outside of Korea.

The conclusion of adequacy talks between Korea and the European Commission is a major step in their ongoing four-year dialogue regarding mutual recognition of personal data protection regimes. Korea has been preparing for this adequacy decision since 2015, when the Korean government established a joint public-private sector task force, which was charged with conducting data regulation-related feasibility studies, self-assessments, and comparative analyses in preparation for the first round of adequacy negotiations with the EU in 2017. After two extensive rounds of adequacy negotiations between the representatives of the European Commission and Korea ended without an adequacy finding, Korea decided to make significant amendments to its data protection laws. Such amendments were enacted by the National Assembly, Korea’s national legislature, in January 2020 and became effective in August 2020, thus paving the way for the March 2021 joint statement.

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Depending on whether you are an optimist or a pessimist, it will have taken the European Commission either three years and two weeks (since the entry into force of the General Data Protection Regulation (GDPR) or eleven months (since the Schrems II decision — see our Alert here) to publish its finalized revision of the most flexible tool to allow for the transfer of personal data to partners located in countries not otherwise providing an adequate level of data protection (Adequate Countries): the Standard Contractual Clauses (SCCs).

While Schrems II made headlines with its cancellation of the Privacy Shield framework, this mechanism only affected 5,000 companies in the United States. SCCs, on the other hand, remain the most widely used instrument to ensure an end-to-end sufficient level protection of personal data covered by European data protection. With their original version dating back 2001, an update was severely needed to align them with GDPR’s extensive reach and requirements.

IN A NUTSHELL:

  • The new SCCs were published on 4 June 2021:
    • Starting on 27 June 2021, companies will need to transition to the new SCCs;
    • On 27 December 2022, companies must have finalized their transition to the new SCCs.
  • Affected companies include:
    • EU-based entities sharing data with partners and providers located in countries deemed not to offer an adequate level of protection;
    • Non EU-based entities otherwise subject to GDPR’s extensive territorial reach (see our Alert here) sharing data with partners and providers located in countries deemed not to offer an adequate level of protection; and
    • Non-EU based entities receiving or processing personal data from or on behalf of EU-based partners or non-EU partners otherwise subject to GDPR.
  • Key new elements include:
    • Data exporting entities will need to assess the importing countries’ regulatory framework;
    • Where such framework cannot safeguard the transferred data subject to GDPR, additional measures must be implemented contractually, organizationally and/or technically;
    • Each and every step of the assessment, and the relevancy of the remediation measures, must be thoroughly documented; and
    • In the case of a controller/processor/sub-processor relationship, the new SCCs consolidate the requirements into a single agreement addressing the data processing requirements under Article 28 GDPR and the data transfer agreement.
  • While the new SCCs provide for a general framework, many issues are left to:
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Practice head(s): Claude-Etienne Armingaud

Testimonials

Skilled technical lawyers with excellent industry knowledge.

Claude-Étienne Armingaud possesses excellent technical legal skills with a sensible practical commercial approach which comes through unrivalled knowledge of the sector.

Claude-Étienne Armingaud is the best at what he does, plain and simply.

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Source: Legal 500

With notable experience in the implementation of GDPR compliance and data protection, the team at K&L Gates LLP coordinates with the firm’s wider European practice to act for multinational clients in the luxury goods, entertainment, and telecoms sectors. Practice head Claude-Etienne Armingaud frequently acts for fintech clients in contentious multi-jurisdictional matters regarding IP and IT data protection. In March 2020, associate Clara Schmit joined from D’Alverny Demont Associés.

Practice head(s): Claude-Étienne Armingaud

Other key lawyers: Clara Schmit

Testimonials

‘Claude-Etienne Armingaud is the best at what he does, plain and simply. Fast, reliable, and efficient.’

‘A team which is very familiar with the evolution of the regulatory framework applicable to data, and which has often participated in the work of developing new guidelines with the CNIL.’

‘Claude-Etienne Armingaud is very familiar with the issues of data protection and privacy. He supports a large clientele in various fields of intervention.’

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Since the Schrems II decision of the Court of Justice of the European Union (CJEU) last year (see our alert here), companies in the European Union found themselves between a rock and a hard place, as many still rely on U.S.-based online service providers in one capacity or another, and the CJEU, in addition to totally invalidating the Privacy Shield framework, mandated additional requirements over the Standard Contractual Clauses (SCCs), the most widely used lawful transfer mechanisms.

Following this CJEU decision, the Bavarian Data Protection Authority (Bayerisches Landesamt für Datenschutzaufsicht) has now effectively barred a European online magazine from using the popular U.S.-based newsletter delivery service, Mailchimp.

Companies using Mailchimp to route their newsletters must generally transfer personal data (e.g., the recipients’ email addresses) to Mailchimp’s servers in the United States. Previously certified under the late EU-U.S. Privacy Shield framework, Mailchimp had to pivot to offer its European customers an alternative transfer mechanism, i.e. the SCCs. While their general validity was left untouched by the Schrems II decision, the CJEU argued that it may be required for companies relying on the SCCs to assess whether additional safeguards should be implemented on top of the SCCs in order to effectively protect personal data.

As expressly mentioned in the Schrems II decision, transfers to cloud service providers in the United States would require such additional safeguards, due to the broad investigative powers of U.S. authorities, e.g., under Section 702 (50 U.S.C. § 1881a) of the Foreign Intelligence Surveillance Act (Cloud Services Act).

Until now, it had seemed that the EU supervisory authorities had granted companies an unofficial grace period to adjust to the amended legal situation, especially as new templates for SCCs taking into consideration the Schrems II decision are expected to be finalized in the coming weeks.

The action of the Bavarian Data Protection Authority shows that this restraint might have come to an end. In a recent press release concerning this investigation, the authority commented that the case was exemplary for their enforcement of the requirements of the Schrems II decision, which had already been taken up with a high degree of intensity even without publicly perceived investigations or sanctions. 

The Bavarian Data Protection Authority based its action expressly on the fact that the European company has not assessed whether additional safeguards for transferring personal data to Mailchimp were required, in particular as Mailchimp may be subject to the Cloud Services Act. While no fine was imposed in this case and the Bavarian Data Protection Authority did not issue a formal decision, the authority still informed the company that their use of Mailchimp was (in their view) not in line with General Data Protection Regulation (GDPR) requirements. The company also promised to cease using Mailchimp in the future.

However, it should be noted that the official reason for not imposing a fine was on the one hand, the low sensitivity of the data transferred (email addresses only) and, on the other hand, the limited scope of the transmission (only two newsletters were sent). The details of the case being leaked and officially commented on by the supervisory authority could be considered as a warning to other EU companies transferring data to U.S. cloud service providers, which should probably expect less leniency from the supervisory authorities from now on. 

The current case was rather clear, as the European company in question has apparently taken no steps at all to establish and document whether additional safeguards were required and were already (because of this omission) in breach of their statutory obligations under GDPR. Future cases will probably not be as easy to decide, in particular when an EU company has documented a respective assessment or even implemented additional safeguards, and supervisory authorities and ultimately courts will have to assess what is really required to ensure adequate security of personal data in countries outside the European Union. 

Following the decision of the Bavarian Data Protection Authority, EU companies using U.S. online service providers, especially cloud services, are therefore encouraged to check the basis of their data transfers to the United States and, if necessary, adapt them to the new legal situation in order to avoid facing potentially high fines. 

K&L Gates’ global data protection team (including in each of our European offices) remains available to assist you in achieving the compliance of your data transfers at global levels.

First Publication: K&L Gates with Thomas Nietsch & Martin Fokken

K&L Gates ranked “Highly Recommended – Band 1” with Claude-Etienne Armingaud.

Source: Leaders League

The French Supervisory Authority (CNIL) wrapped up 2020 with a EUR 20,000 fine against NESTOR, a French food preparation and delivery company catering to office employees (see full Decision SAN-2020-018 in French).

The CNIL highlighted various breaches of the General Data Protection Regulation (GDPR) and the ePrivacy Directive regarding the processing of prospects and clients’ personal data by the CNIL, most notably:

While the fine is rather limited in view of the maximum potential amount of EUR 20 million or four percent of the turnover (whichever the greater), this decision presents an opportunity to examine web scraping and direct marketing practices, which are rapidly developing.

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With the Brexit transition period ending on 31 December 2020, and no deal in sight, the future of cross-border data transfers between the European Economic Area (the EEA) and the United Kingdom remains unclear. On 1 January 2021, the United Kingdom will be considered as a “third country” and, unless a Brexit deal is proposed dealing with data protection and how data transfers between the EEA and the United Kingdom are to be treated, it could be significantly more difficult for European Union (EU)-based entities to transfer personal data to the United Kingdom.

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The European Data Protection Board (EDPB) published two sets of new guidelines on 2 September 2020, on the concepts of controller and processor (Guidelines 07/2020, the Guidelines) and on the targeting of social media users (Guidelines 08/2020 – see our Alert here). The earlier aims to replace the previous opinion by EDPB’s predecessor, the WP29, on these concepts by clarifying the main concepts of “controller”, “joint-controllers” and “processor” and by specifying the consequences attached to these notions.

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