The data retention judgment, the Irish Facebook case, and the future of EU data transfer regulation

On April 8 the Court of Justice of the European Union (CJEU) announced its judgment in the case C-293/12 and C-594/12 Digital Rights Ireland. Based on EU fundamental rights law, the Court invalidated the EU Data Retention Directive, which obliged telecommunications service providers and Internet service providers in the EU to retain telecommunications metadata and make it available to European law enforcement authorities under certain circumstances. The case illustrates both the key role that the EU Charter of Fundamental Rights plays in EU data protection law, and the CJEU’s seeming disinterest in the impact of its recent data protection rulings on other fundamental rights. In addition, the recent referral to the CJEU by an Irish court of a case involving data transfers by Facebook under the EU-US Safe Harbor holds the potential to further tighten EU rules for data transfers, and to reduce the possibility of EU-wide harmonization in this area.

In considering the implications of Digital Rights Ireland for the regulation of international data transfers, I would like to focus on a passage occurring towards the end of the judgment, where the Court criticizes the Data Retention Directive as follows (paragraph 68):

“[I]t should be added that that directive does not require the data in question to be retained within the European Union, with the result that it cannot be held that the control, explicitly required by Article 8(3) of the Charter, by an independent authority of compliance with the requirements of protection and security, as referred to in the two previous paragraphs, is fully ensured. Such a control, carried out on the basis of EU law, is an essential component of the protection of individuals with regard to the processing of personal data…”

This statement caught many observers by surprise. The CJEU is famous for the concise and self-referential style of its opinions, and the case revolved around the legality of the Directive in general, not around whether data stored under it could be transferred outside the EU. This issue was also not raised in the submission of the case to the Court, and first surfaced in the advisory opinion issued by one of the Court’s advocates-general prior to the judgment (see paragraph 78 of that Opinion).

In US constitutional law, the question “does the constitution follow the flag?” generally arises in the context of whether the Fourth Amendment to the US Constitution applies to government activity overseas (e.g., when US law enforcement abducts a fugitive abroad and brings him back to the US). In the context discussed here, the question is rather whether EU data protection law applies to personal data as they are transferred outside the EU, i.e., “whether the EU flag follows EU data”. As I explained in my book on the regulation of transborder data flows that was published last year by Oxford University Press, in many cases EU data protection law remains applicable to personal data transferred to other regions. For example, in introducing its proposed reform of EU data protection law, the European Commission stated in 2012 that one of its key purposes is to “ensure a level of protection for data transferred out of the EU similar to that within the EU”.

EU data protection law is based on constitutional provisions protecting fundamental rights (e.g., Article 8 of the EU Charter of Fundamental Rights), and the CJEU has emphasized in cases involving the independence of the data protection authorities (DPAs) in Austria, Germany, and Hungary that control of data processing by an independent DPA is an essential element of the fundamental right to data protection (without ever discussing independent supervision in the context of data processing outside the EU). In light of those previous cases, the logical consequence of the Court’s statement in Digital Rights Ireland would seem to be that fundamental rights law requires oversight of data processing by the DPAs also with regard to the data of EU individuals that are transferred to other regions.

This conclusion raises a number of questions. For example, how can it be reconciled with the fact that the enforcement jurisdiction of the DPAs ends at the borders of their respective EU Member States (see Article 28 of the EU Data Protection Directive 95/46)? If supervision by the EU DPAs extends already by operation of law to the storage of EU data in other regions, then why do certain EU legal mechanisms in addition force the parties to data transfers to explicitly accept the extraterritorial regulatory authority of the DPAs (e.g., Clause 5(e) of the EU standard contractual clauses of 2010)? And how does the Court’s statement fit with its 2003 Lindqvist judgment, where it held that EU data protection law should not be interpreted to apply to the entire Internet (see paragraph 69 of that judgment)? The offhand way in which the Court referred to DPA supervision over data processing outside the EU in the Digital Rights Ireland judgment gives the impression that it was unaware of, or disinterested in, such questions.

On June 18 the Irish High Court referred a case to the CJEU that may develop further its line of thought in the Digital Rights Ireland judgment. The High Court’s judgment in Schrems v. Data Protection Commissioner involved a challenge by Austrian student Max Schrems to the transfer of personal data to the US by Facebook under the Safe Harbor. The High Court announced that it would refer to the CJEU the questions of whether the European Commission’s adequacy decision of 2000 creating the Safe Harbor should be re-evaluated in light of the Charter of Fundamental Rights and widespread access to data by US law enforcement, and of whether the individual DPAs should be allowed to determine whether the Safe Harbor provides adequate protection (see paragraphs 71 and 84). The linkage between the two cases is evidenced by the Irish High Court’s frequent citation of Digital Rights Ireland, and by the CJEU’s conclusion that interference with the right to data protection caused by widespread data retention for law enforcement purposes without notice being given to individuals was “particularly serious” (see paragraph 37 of Digital Rights Ireland and paragraph 44 of Schrems v. Data Protection Commissioner). The High Court also criticized the Safe Harbor and the system of oversight of law enforcement data access in the US as failing to provide oversight “carried out on European soil” (paragraph 62), which seems inspired by paragraph 68 of the Digital Rights Ireland judgment.

The Irish referral to the CJEU also holds implications for the possibility of harmonized EU rules regarding international data transfers. If each DPA is allowed to override Commission adequacy decisions based on its individual view of what the Charter of Fundamental Rights requires, then there would be no point to such decisions in the first place (and the current disagreement over the “one stop shop” in the context of the proposed EU General Data Protection Regulation shows the difficulty of reaching agreement on pan-European rules where fundamental rights are at stake). Also, one wonders if other data transfer mechanisms beyond the Safe Harbor could also be at risk (e.g., standard contractual clauses, binding corporate rules, etc.), given that they also allow data to be turned over to non-EU law enforcement authorities. The proposed EU General Data Protection Regulation could eliminate some of these risks, but its passage is still uncertain, and the interpretation by the Court of the role of the Charter of Fundamental Rights would still be relevant under it. Whatever the CJEU eventually decides, it seems inevitable that the case will result in a tightening of EU rules on international data transfers.

The referral by the Irish High Court also raises the question (which the High Court did not address) of how other important fundamental rights, such as freedom of expression and the right to communicate internationally (meaning, in essence, the freedom to communicate on the Internet), should be balanced with the right to data protection. In its recent jurisprudence, the CJEU seems to regard data protection as a “super right” that has preference over other ones; thus, in its recent judgment in the case C-131/12 Google Spain v. AEPD and Mario Costeja Gonzalez involving the “right to be forgotten”, the Court never even refers to Article 11 of the Charter of Fundamental Rights that protects freedom of expression and the right to “receive and impart information and ideas without interference by public authority and regardless of frontiers”. In its zeal to protect personal data transferred outside the EU, it is important that the CJEU not forget that, as it has stated in the past, data protection is not an absolute right, and must be considered in relation to its function in society (see, for example, Joined Cases C-92/09 and C-93/09 Volker und Markus Schecke, paragraph 48), and that there must be some territorial limit to EU data protection law, if it is not to become a system of universal application that applies to the entire world (as the Court held in Lindqvist). Thus, there is an urgent need for an authoritative and dispassionate analysis of the territorial limits to EU data protection law, and of how a balance can be struck between data protection and other fundamental rights, guidance which unfortunately the CJEU seems unwilling to provide.

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