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Friday, February 24, 2017

Irish High Court Hears Challenge to Model Contracts

On February 2, the High Court of Ireland began hearing a case brought by the country’s Data Protection Commissioner, Helen Dixon, urging the court to request a ruling from the Court of Justice of the European Union (CJEU) as to the validity of standard contractual clauses as a mechanism for the transfer of personal data to the U.S. from the EU.  The case first arose as a complaint to the Commissioner from privacy activist Maximillian Schrems about access by U.S. government security agencies to information in his Facebook account that had been transferred from Ireland utilizing standard contractual clauses.  Through his attorney, Schrems has argued that the Commissioner, having made a draft finding in May 2016 that his objections were well-founded, has the authority to suspend the data transfers and that there is no need to send the matter to the CJEU.  An attorney for Facebook contended that the Commissioner’s draft finding was deeply flawed and overtaken by developments such as the conclusion of the Privacy Shield framework agreement.  Submissions to the court were also made by the U.S. government, a US privacy law expert, EPIC, the ACLU, the Business Software Alliance and Digital Europe.  The proceedings, originally expected to run for three weeks, appear to be headed for at least five.

Invalidation of standard contractual clauses would have a profound, if not devastating, impact upon nearly a trillion dollars of trans-Atlantic trade, since model contracts are by far the primary data transfer mechanism used by U.S. companies.  Should the High Court refer the issue of the validity of model contracts to the CJEU, that court may decide to first take up the challenge to Privacy Shield pending before it by Digital Rights Ireland.  Since the EU Data Protection Directive was enacted 22 years ago, there has never been a more turbulent and uncertain regulatory environment around data transfers to the U.S.

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