Sophie Ratzke LL.M.

Associate

Düsseldorf


Read full biography at www.orrick.com
Ms. Sophie Ratzke is an associate in the Düsseldorf office and a member of the Technology Companies Group.Her practice focuses on counseling in the area of IP/IT and Data Privacy. She joined Orrick in 2015.

Posts by: Sophie Ratzke

Data Protection Officer and IT Manager – Two Jobs That Do Not Match

Companies required to appoint a data protection officer (“DPO” ) in Europe should carefully consider which candidate is best to select for the job. A company established in Bavaria, Germany, was recently fined by the Bavarian data protection authority (Bayerisches Landesamt für Datenschutzaufsicht, “BayLDA“) for appointing a DPO who at the same time held an operational position as an IT manager. The appointment was deemed to create a conflict of interests between the two functions. This decision could potentially influence the interpretation of the upcoming EU General Data Protection Regulation (“GDPR“) and thus influence the appointment of DPOs by international companies.

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First Privacy Shield Guidelines for Companies published by German DPA

First EU-U.S. Privacy Shield Guidelines by German DPA

On September 12, 2016, the Data Protection Authority of the German Federal State of North Rhine-Westphalia (“DPA NRW”) became one of the first EU data protection authorities to issue guidance on the implementation of the Privacy Shield. Although the guidance is primarily directed at German companies that engage U.S. providers (any third party service providers), U.S. providers should understand the guidance to better understand what German and EU customers may ask of them in addition to EU/U.S. Privacy Shield certification.

Background

 Since August 1, 2016, U.S. companies have been able to certify for the EU-U.S. Privacy Shield (“Privacy Shield”) for personal data transfers from the EU to the U.S.  Companies electing to certify under the Privacy Shield with the U.S. Department of Commerce will be recognized by the EU as providing an adequate level of protection for personal data transferred from the EU to the U.S. The Privacy Shield, which was adopted on July 12, 2016 by the European Commission, replaces the EU-U.S. Safe Harbor Framework, which was invalidated by the Court of Justice of the European Union (“CJEU”) on October 6, 2015.  Certifying under the Privacy Shield requires U.S. entities to undertake certain steps and assessments to verify that they can comply with the Privacy Shield principles for the data that they transfer from the EU, such as having a Privacy Shield-compliant privacy policy, giving people choice about how their data will be used, implementing data protection controls, selecting a third party to adjudicate individual privacy complaints, and verifying that vendors and service providers they allow to access the data also follow equivalent principles.  Failure to comply with the principles can subject the companies to investigations and liability from the FTC (or Department of Transportation for entities regulated by that agency).

The DPA NRW raised the following issues that U.S. companies should consider:

1. Privacy Shield Alone May Not Be Sufficient For Transfers of Personal Data

Pursuant to the guidance, European companies considering transfers of personal data abroad must make a two-step assessment of data privacy compliance.

First, there must be a statutory basis for the transfer that is consistent with the local law of the concerned EU Member State, and as of May 2018, also with the EU General Data Protection Regulation. Second, the personal data held by EU companies should only be transferred to countries with an adequately high level of data protection comparable to the protection in the EU.

Privacy Shield, however, only addresses the latter. More specifically, the EU Commission’s adequacy decision of July 12, 2016 held that U.S. companies certified under the Privacy Shield provide an adequate level of protection.

Practically, what does this mean? In addition to the Privacy Shield certification, U.S. companies may need to enter into a data processing agreement with their EU partner that satisfies the relevant EU Member State statutory provisions that apply to data processing agreements. One example of such statutory provisions is Section 11 of the German Federal Data Protection Act, which contains fairly detailed requirements on the content of data processing agreements. In particular, it requires both parties to agree on rather specific technical and organizational measures that the processor has implemented to protect the security of the data to be processed.

2. Data Controllers Transferring Personal Data under the Privacy Shield Have Additional Duties

Under the guidance, even if a U.S. company is Privacy Shield certified, data controllers are still responsible for independently verifying that data privacy protections are upheld. That means that before transferring personal data to a Privacy Shield certified U.S. company the data controllers must confirm that:

  • the Privacy Shield certification actually exists;
  • the Privacy Shield certification is up to date (the certification has to be renewed annually); and
  • the personal data the data controller intends to transfer is covered by the certification.

Thus, U.S. companies should expect that data controllers will ask the U.S. company questions regarding these points, and likely require the U.S. company to attest that it complies with its privacy obligations with respect to the concerned data subjects. For verification of the status of a Privacy Shield certification, the U.S. Department of Commerce keeps and updates a list of certified companies https://www.privacyshield.gov/list.

For U.S. companies that are using the nine month grace period for compliance with the onward transfer principle of the Privacy Shield, the guidance indicates that the EU data controller should have the U.S. company confirm when it has completed compliance with the onward transfer principle. For U.S. companies, this will underscore the importance of reviewing, and where necessary updating, vendor and service provider contracts to ensure compliance with the Privacy Shield’s onward transfer principle by, among other things, contractually restricting the vendor or service provider’s data processing activities and requiring protection consistent with the Privacy Shield Principles.

3. Employee Data is Special

The Privacy Shield contains special provisions regarding transfers of employee data. If the Privacy Shield certification covers employee data, the company must agree to cooperate and comply with the EU DPAs with respect to such data. This means that the use of such data will still remain subject to EU law, and complaints from data subjects about the use of the data will be adjudicated by the EU DPAs.  In addition, the following principles must also be followed by the EU companies transferring employee data to the United States:

  • The Privacy Shield Principle of choice may be impacted by generally applicable regulations from EU Member States that do not allow for the continued processing of employee data for purposes other than the purpose for which they were collected. EU data controllers (e.g. in general, the employing entities) may further restrict U.S. companies from such uses and require contractual restrictions.
  • U.S. companies and/or the data transferring EU entity (employer) need to respect an employee’s exercise of his/her right of choice against processing their personal data and must not disadvantage the employee in any way.
  • If specific protection for employee data is needed, appropriate measures have to be taken, e.g. pseudonymization or anonymization of data should be considered.

4. Privacy Shield May Not Be a Long Term Solution.

Despite raising various concerns about the EU/U.S. Privacy Shield, the DPA NRW agreed to give the program one year to address those concerns. After this initial year, the Article 29 Working Party plans to review whether its concerns have been addressed, and if the Privacy Shield is effective and functioning. Depending on the outcome of this annual assessment, the DPA NRW reserves the right to reevaluate and potentially stop data transfers under the Privacy Shield. Accordingly, U.S. companies relying on the Privacy Shield should carefully weigh the uncertainty it offers as a long term solution.

At the same time, the DPA NRW guidance points out that the outcome of this assessment will also have an impact on other methods of transatlantic data flows such as binding corporate rules and EU model contractual clauses which are currently likewise under scrutiny.

For more details on the Privacy Shield, or for help exploring whether it is appropriate for your company, please contact any member of Orrick’s Cybersecurity and Privacy team.

IP Addresses as Personal Data – Website Providers To Come Under Even More Scrutiny With EU Data Privacy Law

IP address

Website providers that collect dynamic Internet Protocol addresses (“IP address”) from website visitors may soon be subject to even more scrutiny from data protection authorities in the EU.

Last week, Europe’s Advocate General Manuel Campos Sánchez-Bordona (one of the advisors to the European Court of Justice, “ECJ”) released an opinion which, if followed by the ECJ would end a long debated question whether IP addresses are personal data subject to EU data privacy law. The Advocate General takes the view that dynamic IP addresses are personal data when being in the hands of a website provider when a third party (e.g. the internet access provider) has access to additional information that would enable identification of the Internet user.

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Data transfers in limbo – U.S. companies face fines by German data protection authorities

international data transfers

While EU regulators determine whether to adopt a new agreement for transfers of personal data from Europe to the United States to replace the invalid EU-U.S. Safe Harbor Framework, German data protection authorities have not been idly twiddling their thumbs.

Hamburg’s data protection commissioner, the head of one of 16 Federal German data protection authorities (“DPA”), announced in February that his agency is investigating Hamburg-based subsidiaries of large U.S. companies engaging in transfers of personal data of EU citizens to the U.S.

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Requirements for valid consent – Why opting-in should not be optional

personal data

The Düsseldorfer Kreis, a committee made up of representatives of German data protection authorities, recently published guidance on the requirements for obtaining valid consent to the collection, processing and use of personal data under the relevant German data protection provisions, the Federal Data Protection Act (Bundesdatenschutzgesetz) (“BDSG”) and the Telemedia Act (Telemediengesetz).

The Düsseldorfer Kreis frequently publishes guidelines on topics of relevance for data privacy law which are broadly recognized as good practices (and from the supervisory authorities’ viewpoint, mandatory interpretations of the applicable law). The German data protection authorities found the topic of consent to be particularly relevant, noting that while it is common for companies to rely on obtaining consent from their customers to justify the processing of personal data, in many cases these companies fail to implement compliant data privacy consent language into their business processes. To ensure that such data processing can be performed in compliance with data privacy law, the procedure of obtaining valid consent should be the focus of any company active in processing personal data.

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EU-US Privacy Shield may not be up after all

data privacy

Bad news for companies relying on transatlantic data flows as, once again, the transfer of personal data from Europe to the United States is called into question by the Article 29 Working Party (the “Working Party”), an influential committee of the EU privacy regulators. Ever since the EU-U.S. Safe Harbor Framework was declared invalid by the Court of Justice of the European Union in October 2015, companies have had to find alternative ways to legally transfer personal data. On 29 February 2016, the EU Commission proposed the “EU-U.S. Privacy Shield” as a replacement to the Safe Harbor Framework and a potential solution.

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More Fines to Come in Germany? Service Provider Engagements are Under Increased Scrutiny

data processing

Following a significant fine against the parties to an asset acquisition for illegally transferring customer information, the Bavarian Data Protection Supervisory Authority (Bavarian DPA) announced on August, 20, 2015 that it has fined a company that engaged a service provider based on a data processing agreement which did not meet the requirements of Section 11 of the German Federal Data Protection Act (FDPA). The technical and organizational measures of the service provider were not specified as required by Section 11 of the FDPA.

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Fines Issued for Transfer of Customer Data in an M&A Asset Deal

Recent enforcement actions by the Bavarian Data Protection Authority (DPA) [Bayerisches Landesamt für Datenschutzaufsicht] highlight the importance of severe restrictions placed on the transfer of such data, even in the context of a merger/acquisition deal scenario. Specifically, on July 30, 2015 the Bavarian DPA announced that it has fined two companies, both the seller and the acquirer, in an asset deal with a five figure EUR sum for transferring customer e-mail-addresses collected during operating an online shop in violation of the German Federal Data Protection Act. Clients should expect to see more of these actions in the future, given the Bavarian DPA’s announcement that it will pay increased attention to data protection compliance in asset deals and shall accordingly monitor and fine the companies breaching the legal requirements with more persistence.

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