MEPs raise concerns over draft EU-US data transfer deal

A shiny new data transfers deal between the European Union and the United States aimed at fixing costly legal uncertainty over exports of personal data isn’t in place yet but the European Parliament’s civil liberties committee is predicting the incoming EU-U.S. Data Privacy Framework (DPF) won’t survive a legal challenge — just as its two predecessors, Safe Harbor (RIP: October 2015); and Privacy Shield (RIP: July 2020), failed to impress EU judges.

In a resolution passed by the LIBE committee yesterday, with 37 votes in favor, none against and 21 abstentions, the MEPs dubbed the DPF an improvement that nonetheless does not go far enough. They also predicted it’s likely to be invalidated by the Court of Justice of the EU (CJEU) in the future.

The development follows a draft opinion by the LIBE, back in February, also giving the proposal a thumbs down and urging the Commission to press for meaningful reforms.

In the resolution, the committee takes the view that the proposed arrangement does not provide sufficient safeguards for EU citizens since the framework still allows for bulk collection of personal data in certain cases; does not make bulk data collection subject to independent prior authorisation; and does not provide for clear rules on data retention.

The MEPs are also worried that a proposed redress mechanism — a so-called “Data Protection Review Court” — would violate EU citizens’ rights to access and rectify data about them, since decisions would be kept secret. They also question its independence since judges could be dismissed by the U.S. president, who could also overrule its decisions.

“In the resolution, MEPs argue that the framework for data transfers needs to be future-proof, and the assessment of adequacy needs to be based on the practical implementation of rules,” per a parliament press release, which said the committee went on to urge the Commission not to grant adequacy based on the current regime, and instead negotiate a data transfer framework that is likely to be held up in court.

Commenting in statement after the vote, the LIBE committee rapporteur Juan Fernando López Aguilar said:

The new framework is certainly an improvement compared to previous mechanisms. However, we are not there yet. We are not convinced that this new framework sufficiently protects personal data of our citizens, and therefore we doubt it will survive the test of the CJEU. The Commission must continue working to address the concerns raised by the European Data Protection Board [EDPB] and the Civil Liberties Committee even if that means reopening the negotiations with the US.

Back in February, the EDPB adopted its opinion on the framework — couching the deal as an improvement on Privacy Shield too. But the influential steering body also raised a number of concerns which it recommended should be addressed, and clarifications obtained, in order to “ensure the adequacy decision will endure”.

The LIBE committee vote is a part of the EU’s general scrutiny process. Although it’s important to note that parliamentarians do not get an active say in whether or not the DPF is adopted — nor even does the EDPB. The final say on adequacy decisions rests with the Commission alone.

At the same time, it’s obviously awkward if doubts are being raised within the EU about the robustness and sustainability of the planned replacement framework.

The European Parliament as a whole will also get to express a view — via a future plenary session that will consider the LIBE committee’s resolution. So it will be interesting to see which way parliamentarians break.

The DPF is the latest high level bid by the bloc to resolve the head-on clash between EU privacy rights and US surveillance powers by slotting in another so-called adequacy decision to ease EU-US data flows. The proposed framework builds on earlier (defunct) attempts by setting out a new set of provisions aimed at papering around major differences — such as a claim of “binding safeguards” to limit US intelligence agencies’ access to data, including the introduction of concepts of necessity and proportionality; and a promise of enhanced oversight of spooks’ surveillance.

As noted above, a new Data Protection Review Court will also be set up which is supposed to sum to an independent redress mechanism capable of resolving EU citizens’ complaints to the standard required by European judges. But which critics contend is not a proper court, in the full legal sense, so won’t pass muster with the CJEU.

One thing is clear: It’s taking far longer to adopt a deal this time around now that the supply of simple sticking plasters has been exhausted.

The Commission reached an agreement in principle on the DPF just over a year ago. It then took around six months for US president Joe Biden to sign an Executive Order necessary for implementing the replacement. While it was almost nine months on from the agreement announcement for the EU to get to a draft agreement (around two months after the EO). At that point a process of review and scrutiny of the draft by other EU institutions was kicked off, which is still ongoing.

(By contrast, the EU-US Privacy Shield sped from being announced as incoming in February 2016 to officially adopted by July and up and running at the start of August of the same year. It then took the CJEU just over four years to retire it. So there are certainly lessons to be learnt about lawmakers acting in haste and repenting at leisure here.)

Back in April last year, the Commission suggested the whole process of replacing Privacy Shield might be “finalized” by the end of 2022. And if finalized meant adopted it was certainly being overly optimistic since we’re deep into spring 2023 and the process rumbles on.

Some reports have suggested the DPF won’t be adopted before the summer (Reuters cites unnamed officials suggesting it may be ready by July).

Asked about the expected date for adoption, a Commission spokesman told TechCrunch it cannot provide a precise timeline since the process involves multiple stakeholders.

He also stipulated that it’s “carefully” analysing the EDPB’s opinion, and working to address its comments and requests for clarifications before moving to the next phase of the adoption process — which will entail seeking approval from a committee of EU Member States representatives.

The Commission will clearly want to avoid the egg-on-the-face of a third strike down — which likely explains why adoption is taking longer than expected. And why it’s being careful to avoid being accused of ignoring concerns from the EDPB and others.

Meta’s EU-US data flows in the frame

While the intricacies of EU comitology may seem an exceedingly dry theme there is one very tangible consequence attached to when the DPF is adopted. This is because tech giant Meta, the owner of Facebook and Instagram, is facing a data suspension order that could force it to cut off its exports of EU users data. And since Facebook is not federated it could be forced to shut off the service to EU users to comply with the order.

A preliminary order to this end was issued by Ireland’s data watchdog back in fall 2020. After which Meta was granted a stay and also sought a judicial review — so it managed to delay the process for a while. But it ran out of road on that particular legal challenge in May 2021. And a revised draft decision was then issued in February 2022.

The original challenge to Meta’s EU-US data flows hinges on the same core US surveillance vs EU privacy issue — but the complaint actually dates back to the year of the Snowden disclosures. So there’s been around a decade of regulatory whack-a-mole on this issue and still no final decision.

However an end is — theoretically — finally in sight.

Yesterday the EDPB confirmed it has taken a binding decision on the issue — which means a final decision must be issued by Meta’s lead EU DPA, Ireland’s Data Protection Commission (DPC), within a month. So by mid May.

Last summer the social media giant narrowly avoided an earlier cut-off scenario when EU data protection authorities disagreed over the DPC’s draft decision — kicking off a dispute resolution process baked into the General Data Protection Regulation (GDPR) that led, eventually, to the EDPB having to step in and take a binding decision.

We don’t yet know what the decision says but given the preliminary order was for suspension it seems unlikely the Board would reach a radically different outcome. And with this tortuous GDPR enforcement process winding towards a close, the question now is what will come first: An order to Meta to shut off its EU-US data flows — or adoption of the EU-US DPF?

The latter scenario would of course provide a new escape hatch for Meta to use to avoid a suspension order.

While, if the DPF arrives before the DPC’s final order, it’s the same scenario: The company will seize upon the high level framework to refresh its claim to be in full compliance with EU rules and kick the can back down the road (likely for many years more).

But even if an order that Meta suspend its data flows comes first the company will surely throw all its local lawyers at finding fresh ways to delay the knife. An appeal of any regulatory order to stop exporting EU users data is certain. It may also try to stay enforcement pending the outcome of its appeal. Although it’s not certain the courts would allow that.

There is another possibility, too, though. The DPC’s final decision might provide Meta with a period of time to shut off data flows — say two or three months — which could buy it just enough time for the DPF to be adopted, enabling it to reboot its legal base by utilizing the new framework and skip away from the threat of a shutdown yet again.

Last month, the DPC’s commissioner, Helen Dixon, admitted to Reuters the timeline was “coming down to the wire”.

Privacy watchers will certainly be scrutinizing this one closely to see whether Meta faces a final reckoning on data transfers at long, long last. Or if it latches onto another way to keep playing regulators and lawmakers off against each other.