Privacy Shield's Drama Is Far From Over

It's been a couple of months since the EU-US Privacy Shield data-sharing framework went into effect. Adoption of the measure was a nail-biter because of redrafts and threats from European privacy advocates that they'd challenge it. The agreement was adopted on July 12 and is now the basis under which cross-border transfer of individuals' private information between Europe and the US is governed. But while business leaders on both sides of the Atlantic breathed a collective sigh of relief, the drama is far from over.

The same privacy advocates whose lawsuit overturned Safe Harbor — the original cross-border data-sharing framework — and who are considering taking action against Privacy Shield over what they believe are inadequate systemic protections are now watching and waiting. The Article 29 Working Party, Europe's governing body of privacy authorities, has agreed to give Privacy Shield one year before it takes action. What's more, Europe's new omnibus data privacy law, the General Data Protection Regulation (GDPR), with its stringent penalties for violators — as high as 4% of an organization's global revenue — goes into effect in May 2018, raising the stakes further.

For organizations that rely on Privacy Shield as their trans-Atlantic data trade policy, things remain uncertain — and it seems that many organizations are deciding to play it safe. 

According to the 2016 International Association of Privacy Professionals-Ernst & Young (IAPP-EY) Annual Privacy Governance Report, 54% of companies currently transfer data between Europe and the United States. Of US firms, 73% had previously been certified under Safe Harbor, but only 42% are currently certified or plan to seek certification under Privacy Shield. Most will rely on standard contractual clauses to set the rules.

The IAPP-EY numbers strongly suggest that companies have decided to look for a middle ground. Rather than build their trans-Atlantic compliance programs on Privacy Shield's uncertain foundation, companies are collaborating with trading partners to take responsibility for protecting private data and establishing obligations that they can rely on, should Privacy Shield meet the same fate as Safe Harbor. Under the circumstances, that is a wise course of action, but to be effective it requires that companies take certain steps to ensure data sharing meets EU standards both now and for the future, including complying with GDPR. Even for those companies that have been certified under Privacy Shield, or that plan to do so, creating data-sharing programs that can stand on their own is a good idea, whether or not Privacy Shield is challenged or voided after July 2017.

What does all this mean for companies? It means investing in education and training so that all parties understand the rules and the stakes. It means a thorough re-examination of current data management practices and a retooling of those practices with a look ahead to GDPR. It also means backing it all up with the technical underpinning to ensure proper governance and documentation. Should there be any questions or accusations of wrongdoing, you must be able to prove compliance — and good faith.

In the period between the voiding of Safe Harbor and the adoption of Privacy Shield, trans-Atlantic data transfer did not cease; it continued as it will now until July of next year. And it will continue whether the promised challenges are successful or not. There is too much at stake: $260 billion in US-EU trade depends on it.

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