New York Law Journal
In April 2016, the European Union (EU) adopted a major overhaul of its data privacy laws to better address new technologies and provide a more coherent approach across different EU Member States. The new law, known as the General Data Protection Regulation (EU) 2016/679 (GDPR) takes effect on May 24, 2018. It will replace the patchwork of national laws created under the old Directive 95/46/EC with a more unified law directly binding each Member State and threatening significant fines amounting to 4 percent of a company's global turnover for non-compliance.
Significantly, the GDPR includes new provisions addressing litigation-related international data transfers. These new provisions create both new perils and opportunities when personal data must be transferred from the EU to the United States for use in discovery.
Article 48: The Good and Bad
When drafting the GDPR, EU legislators recognized the pressure U.S. authorities often place on companies subject to EU data privacy laws and wanted to send a clear signal that companies should resist such pressure and better respect EU privacy restrictions. The result was Article 48, which notes that "any judgment of a court or tribunal and any decision of an administrative authority of a third country requiring [an entity holding EU data] to transfer or disclose personal data may only be recognizable or enforceable … if based on an international agreement, such as a mutual legal assistance treaty (MLAT) … ." The provision presents an obstacle because most Member States do not have MLATs with the U.S., and even those that exist often do not always cover U.S. pretrial discovery. Article 48 further notes that it is without prejudice to other grounds for international transfers set forth in Chapter V of the GDPR.
Grounds for Transfers
Although Chapter V lists several options for legitimizing international data transfers, Articles 46 and 49 will likely provide the most useful mechanisms for transfers to the United States during discovery. This includes:
The scope of this exception is not entirely clear and its meaning cannot be discerned by interpreting existing statutes or case law. As a result, use of this provision may entail significant risk for the transferring entity.
While many of these methods for legitimizing a data transfer will seem familiar to experienced practitioners, the GDPR has fundamentally changed the implementation of these procedures, opening new possibilities for their use in discovery and wiping the slate clean of localized interpretations of their predecessors under the old directive. Of course, useful guidance issued under the old directive is also no longer binding, so practitioners must be careful not to assume what worked under the directive still works under the GDPR.
In addition, none of these provisions, including Article 49(1)(e), provide carte blanche permission to transfer data irrespective of how broad the request is or what measures are taken to protect the data. Appropriate measures must still be put in place, and the amount of data transferred should be the minimum necessary to achieve the purpose for which the data is being transferred. Among other things, this means that when a transfer is needed for response to a discovery request or subpoena, the scope of the request will almost certainly need to be narrowed. European law does not accept the broad concept of responsiveness used in U.S. discovery. Requests must be tightly focused on only the information and custodians directly relevant and critical to the matter in question.
What Should Companies Do?
In light of the draconian fines possible under the GDPR, companies should make a careful case-by-case assessment of the basis for transferring data discussed above before transferring any data to the United States for use in discovery, law enforcement matters or internal investigations. One size does not fit all.
Companies should also follow the measures recommended by the Sedona Conference and the EU Article 29 Working Party. These will include, among other things, using international treaties for justifying transfers (if so available), entering into the SCCs proposed by the EU Commission, minimizing the amount of data actually transferred, redacting or anonymizing personal data wherever feasible, entering into a strong protective order with provisions directly addressing documents subject to EU data privacy laws, processing and hosting the data in the country of origin if possible, or at the very least, filtering the data heavily in the country of origin before transferring it, and meticulously documenting any steps taken to protect the data subjects' privacy.
Finally, companies must be prepared to accept that there is no such thing as a risk-free data transfer from the EU to the United States. While taking appropriate measures can substantially reduce the risk, particularly of a large fine, the GDPR is new and much about the law's implementation remains unclear. Only time will provide more concrete guidance.
Christian Schröder is a cybersecurity and data privacy partner, Jeffrey McKenna is a senior e-discovery and privacy attorney, and Renee Phillips is an employment law partner at Orrick in the Düsseldorf, San Francisco and New York offices, respectively.
Reprinted with permission from the February 6, 2017 edition of New York Law Journal © 2017 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected].