New – Standard Contractual Clauses!

Nigel Miller
Nigel Miller

Background

Standard Contractual Clauses (SCCs) are the most commonly used mechanism to authorise transfers of personal data from the EEA. The attraction is that they are relatively straight forward and cost-effective to implement. The problem is that the current versions are hopelessly out of date and, given that they are often simply signed and “left in the drawer”, don’t really do a convincing job in terms of protecting personal data.

It was always the intention to update them to reflect the GDPR. However, two years on from GDPR go-live in May 2018, the old versions of SCCs are still very much in use in the absence of alternative solutions. Then, in July 2020, along came the decision of the European Court of Justice (“ECJ”) in Schrems II which shook up the world of international data transfers.

Schrems II

The Schrems II decision has two main consequences.  First, the ECJ found that the EU-US Privacy Shield like its predecessor the Safe Harbor – is invalid as a transfer mechanism.  Second, although the validity of SCCs was upheld, the ECJ stressed that simply signing off the SCCs will not always be sufficient. The ECJ said that the parties to the SCCs need to:

  • carry out a transfer impact assessment as to whether there is adequate protection for data in the country concerned; and
  • if necessary, implement “supplementary measures” to ensure that individuals have equivalent protections in respect of their data as afforded under EU law.

On 11 November 2020 the European Data Protection Board (“EDPB”) issued for consultation its much awaited guidance on these issues. This sets out the steps data exporters must take to determine if they need to put in place supplementary measures to be able to transfer data outside the EEA, and provides examples of measures that can be used. For our article on this, please see here

New SCCs

And then, barely noticed, the next day, the European Commission published its proposals for the new SCCs. There is a relatively short consultation period on the proposed new SCCs expiring on 10 December 2020.  Once the proposed new SCCs are approved, probably before the end of the year, we’ll have 12 months in which to replace all existing SCCs with the new ones. And this is far from a form-filling or box-ticking exercise.

We’ve taken a look at the proposed new SCCs and find some interesting developments:

  • The SCCs adopt a modular approach to cater for various transfer scenarios. They can be used for transfers from (i) controllers to other controllers, (ii) controllers to processors, (iii) processors to sub-processors and (iv) processors to controllers. This is helpful as the current SCCs do not cope with categories (iii) or (iv) which is problematic.
  • While the current SCCs can only be used by EU based controllers, the new SCCs can also be used by parties who are outside the EU who may be subject to the GDPR by virtue of its extraterritorial reach.
  • They allow for more than two parties to sign up to the SCCs, which can be useful (for example) for intra-group transfers.
  • They also allow for additional parties to accede to the clauses from time to time as exporters or importers.  For example, onward transfers by the importer to a recipient in another third country can be allowed if the recipient accedes to the SCCs.
  • Data subjects must be able to enforce the SCCs as a third party beneficiary. As such the SCCs must be governed by a law that allows for third party beneficiary rights.
  • For transparency purposes, data subjects should be provided with a copy of the SCCs and should be informed of any change of the identity of any third party to which the personal data is disclosed.
  • In respect of transfers by a controller to a processor, or by a processor to a sub-processor, the SCCs comply with the data processing requirements of the GDPR so that it will no longer be necessary to supplement the SCCs with data processing clauses.
  • The SCCs support EU processors by allowing for the transfer by an EU processor to a controller in a third country, reflecting the limited self-standing obligations of processors under the GDPR.
  • The SCCs have also been written with Schrems II in mind and provide for certain specific safeguards. The exporter must warrant that it has used reasonable efforts to determine that the importer is able to satisfy its obligations under the clauses and must document its transfer impact assessment. In the event that, for example, the importer is subject to a legal requirement to disclose data to a government or law enforcement agency, the importer must notify the exporter and, where possible, challenge the request. The data exporter may be required to suspend the data transfers if it considers that no appropriate safeguards can be ensured.

What about Brexit?

The new SCCs may become effective just around the time the transition period expires and the UK fully leaves the EU. So, what will be the position so far as the UK is concerned?

First, the UK Government are seeking an “adequacy decision” from the European Commission as part of the Brexit deal. If there is no deal, or no adequacy decision or other transitional arrangement, in place by 31 December 2020, then the UK will become a third country and data transfers from the EU to the UK will need to comply with EU GDPR transfer restrictions. In this scenario, SCCs will be required for transfers from the EU to the UK. The new SCCs will be particularly helpful as they can be used to cover transfers by EUA based processors to UK controllers or sub-processors, something which is not possible under the current SCCs.

As regards transfers from the UK, UK rules will mirror the current GDPR rules. The UK government has confirmed that, when the transition period ends, transfers from the UK to the EEA will not be restricted.

The rules on transfers to countries outside the EEA will remain similar to the current GDPR rules. Although the UK will make its own adequacy decisions after the end of the transition period, the UK government has confirmed that it intends to recognise existing EU adequacy decisions and the EU approved SCCs.

Next steps

Organisations now have a year to review all international transfers. Where necessary this will involve conducting transfer impact assessments, implementing the new SCCs in place of the current ones, adopting supplemental measures, putting in place flow-down terms where there are onward data transfers and providing enhanced transparency to data subjects. Certain data transfers may need to be discontinued or restructured. It’s going to be a busy 2021!

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