Award of our Article – Data Protection Law

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An overview of the current Data Protection Directive. How the new EU Data Protection Law will affect Companies?

 

Background

 

The European Union (hereinafter «EU») legislated the Data Protection Directive 95/46/EC (hereinafter «the Directive» or DPD) in order to provide a shield for the right to privacy and the protection of personal data; Setting «a milestone in the history of the protection of personal data in the European Union». Personal data protection deals with the protection of personal information relating to an individual against illegal and anauthorised collection, recording and further use. It also provides certain rights to the individuals such as the right of access, right of information, and gives them the possibility to submit to the Office of the Commissioner which is the Competent National Regulatory Authority in Cyprus, complaints relating to the application of the Law.

 

Furthermore, the Directive preserves two significant ambitions of the European Integration process: the fundamental right to data protection and the achievement of the internal market-the free flow of personal data. In particular, its objective is to protect the fundamental rights of individuals (hereinafter “data subjects”) whereas to set out obligations for those processing personal data (hereinafter “data controllers”). Data controllers are the people or company “which determines the purposes and the means of processing” both in the private and in the public sector.

           

Inevitably every company collects and processes personal data in order to perform its day-to-day operations. Those data may concern information regarding employees, clients, suppliers or other business partners. In Cyprus the processing of personal data is governed by the Processing of Personal Data (Protection of Individuals) Law of 2001 (hereinafter “the Law”) that came into force on 23 November 2001. The Law was introduced in the context of harmonization with the European Data Protection legislation and amended in 2003 in order to harmonise domestic legislation with the Directive 95/46/ EC and to address privacy issues arising out of the collection, storage, processing and use of personal data.

 

However, «rapid technological developments and globalization have profoundly changed the world around us, and brought new challenges for the protection of personal data. Therefore, the European Union is putting forward new legislation (COM (2012) 11 final, 25 January 2012), that will take into account technological developments, and social changes concerning data protection. The EU’s new data protection law will impact companies that gather, stores or process data from individuals in Europe. The Regulation is directly applicable in all Member States. This means that it applies to every Member State (subject to limited Exceptions), and does not require any application at national level by Member States.

What are personal data?

 Personal data are information about individuals, employees, customers or information arising during professional activities or business. According to the Commissioner, a simple email address, even it can not reveal the identity of its owners, as well as the online habits of a person that can create his profile, amounts to personal data. In addition, “Sensitive Data” means data of ethnic origin or racial, political opinions, religious or philosophical beliefs, participation in a union, club or trade union organisation, health, sexual life and sexual orientation, and anything about criminal prosecution or conviction.

 Personal data may be processed if the conditions for processing personal data are met. There are certain exemptions in the context of the current Directive for processing for the national security such as defense of the state, public security, the prevention and criminal prosecutions investigations and breaches of criminal law or the Code of Conduct of the legally established professions; and to safeguard major economic and financial interests of a Member State or the European Union, including monetary, fiscal and taxation matters. The Directive does not also apply to personal or household purposes.

Current status of the proposed EU General Data Protection Regulation

The Regulation still remains in draft form.It is being negotiated by the Member States and EU legislative bodies and there are likely to be further changes to the text before the Regulation is finalised. When Regulation comes into force, will be the new general legal framework of data protection, repealing the current Directive. The Final Text of the Regulation is expected to be jointly agreed by the Commission, the Parliament and the Council no earlier than Spring 2016. It is unlikely that the Regulation will come into force before 2017-2018.

Outline of the new Fundamental Principles:

 Every individual has the right not to be profiled and profiling can only occur where special circumstances are met.

-Where processing of information presents specific risks to the rights and freedoms of individuals due to their nature, scope or purpose, then the data controller must undertake a data protection impact assessment and obtain prior authorisation from the supervisory authority before the processing occurs.

-The Regulation also introduce the somewhat controversial “right to be forgotten”. A person can simply withdraw their consent to have their data processed and the data concerning them should be deleted.

-When processing personal data of a person by electronic means and in a structured and commonly used format, it is possible for the data subject to obtain a copy of these data.

Changes by the new Regulation in the Enforcement & Notification system:

The likelihood of enforcement and sanctions and penalties influence a business’ approach to compliance. The Regulation makes significant changes in this area. All business sectors will be subject to the new enforcement powers, sanctions and penalties that the Regulation imposes.

The Regulation seeks to guarantee more protection than the current Directive. To achieve this, the new rules imply that the competences of supervisory authorities would be strengthened, in order to increase enforcement and thus compliance. Art.79 of the Regulation empowers the supervisory authorities for specific cases of non-compliance to impose fines up to 1 million Euros or up to 2% of the annual worldwide turnover of a company. Moreover, the liability and responsibility for any processing of personal information is more clearly established. For instance, the controller should demonstrate that he/she complied with the Regulation. This requirement imply more strict documentation of processing activities to be kept, in order to be used as evidence towards courts or authorities in case of disputes

Further to the above, where a data protection violation occurs, the company involved should inform the regulator in all cases and the affected individuals, where there is a chance that there will be negative impact on the privacy of the individual. The company should not be required to inform individuals of the breach, where the data has been protected with software to the extent that makes the data unintelligible to those not authorised to access it. Failure to comply with obligations and safety requirements for reporting violations could result in fines of 2% of total company turnover.

Information Notices

In order to implement the rights of data subjects all companies are required to provide certain minimum Information about data processing activities to data subjects. Therefore, Firms that acting as auditors would particularly affected by the obligation to provide notifications of data subjects. The regulation increase both the detail to be provided in  these notices and penalties for non-compliance. A negligence or deliberate failure to provide a valid information notice will be fined up to € 500.000 or 1% of the annual worldwide of turnover, whichever is greater.

 Data Breach reporting

“Data breach notification” refers to an obligation of controllers to quickly provide information on data breaches, such as unauthorised access or other data leaks. Data controllers have to notify data violations within no later than 72 hours after been discovered. This is a change for the better, because it will provide a powerful encouragement for companies to improve their data security procedures and technologies. Additionally, individuals will be notified for unauthorized access or disclosure of personal information. Nevertheless, a target of the minimum 72 hours appears unrealistic. Data controllers might argue that it was not practicable to comply within this. Therefore, considerable burden will be on the supervisory authorities.

Consequences of non-compliance: Businesses that fail to fulfil their data breach reporting obligations may be sanctioned by the SA with a fine of up to €1 million or, up to 2% of annual worldwide turnover, whichever is greater.

Data Protection Officer-Accountability

Under the current Directive: There is no obligation to appoint a data protection officer. The Regulation however will require businesses to implement compliance programs to verify that their processing activities comply with the Regulation. Companies in all sectors will have to review their compliance programs and, where necessary, take remedial action. The Elements of a compliance program include (but are not limited to):  appointing a Data Protection Officer; maintaining internal records; implementing robust information security measures etc.

Under the proposed directive, all companies with 250 or more employees must appoint a data protection officer. Parliament’s text modifies this requirement so that any operator who processes the personal data of more than 5,000 data subjects a year has to appoint a Data Protection Officer. A fine of 2% of its global turnover applies should a Data Protection Officer fail to be appointed.

It is unclear how the final version of the Regulation will address this issue.

Commercial Arrangements Where there is an agreement or arrangement in place (e.g. outsourcing) which involves the processing of personal data, parties must recognize the data protection risks at an early stage. It is essential to document all processing undertaken by data controllers and data processors. Controllers must in advance carry out a security assessment of any processing and take the appropriate security measures to ensure that data remains safe. where there are joint controllers of data, they must assign the risk between the parties. If a breach of these requirements occurred, a fine of up to 2% global turnover of the company may arise.

Transparent Policies

In reality, however, “privacy policies” are not formulated in such that it is easy to understand by individual users, and thus are often not read. Due to this, in practice it is difficult to ensure that consent is “genuine”. Nevertheless, the requirement under Art.11 for clarity, accessibility and plain language in policies relating to the processing of personal data, is a welcome requirement. It indicates that more clarity for privacy policies will lead to an “informed consent”.

Ever company must ensure that its policies on data protection are in place and that they are transparent and accessible. Article 14 provides a comprehensive list of information to be provided to data subjects including, in addition to information provided in the current Directive, the period for which the data will be stored, the right to object to the processing of the personal data and the right to lodge a complaint with the supervisory body and the contact details of that body. Failure to comply with this requirement could result in fines of up to 1% of their worldwide turnover.

Additionally, the meaning of “consent” is amended to mean that it is “any freely given, specific, informed and explicit indication of his or her wishes”. While it is possible to interpret this as a statement or an affirmative act, such as ticking a box, it is not sufficient to use a pre-ticked box or an assumption of consent. Consequently, it is necessary to ensure that direct marketing campaigns are only aimed at those who have agreed to accept them within the new meaning of “consent”. It is likely that a breach of this aspect of the regulation will result in a fine of up to 2% of the global turnover of the company.

Jurisdictional and Territorial scope

Why is this issue significant for businesses? Understanding whether the Regulation will apply to a company or not, particularly if that company is located outside the EU, it is important to recognize the obligations of compliance operations. This issue is particularly important for companies that have their headquarters outside the EU, but do business in the EU. For instance, a company established in the U.S. that sells its products directly to EU citizens, but has no physical presence in the EU, is not subject to the requirements of the Directive, but will be subject to the requirements of the Regulation.

The obligation to appoint a Representative: If the relevant entity is established outside the EU, and the Directive (as implemented into national law) applies to that company, then a Representative in each Member State will be required to be appointed. The Regulation reduces this to an obligation to appoint a representative in a single Member State, but the principle is otherwise unchanged. A business that fails to appoint an EU-based representative could face fines of up to 2% of its global turnover.

 What do you need to do to comply with this Regulation?

 Nominate a Data Protection Officer within your company

  1. Examine your organisation’s data breach procedures and have a clear plan of action should a data breach occur. Ensure that those responsible for putting the plan into action know who to notify within the relevant time lines.
  2. If your business is based outside of the EU, the appointment of a data protection representative who is based within the EU, should take place.
  3. Review internal data protection policies. Training might be required for the staff members of the company to ensure their dealings with personal data are legally compliant.
  4. In commercial agreements, examine the data protection risks and apportion risk at an early stage between the parties involved.
  5. Ensure that data protection policies are easily accessible and are transparent to individual data subjects.
  6. Review all consents received for direct marketing campaigns and ensure they fit within the new definition of “consent”. Modify the method that consent is obtained from consumers so that consent is demonstrated by an affirmative action.

 Conclusion:

There will be a major debating and lobbying process before the final version of the Regulation is created. When the Regulation finally adopted, its effect, will have to be seen in the near future and companies should develop internal privacy policies on how the business collects and uses data and the security used to protect that data.

PLEASE NOTE: This Article should be used only as a general guidance and should not be relied upon as legal advice. The Directive and the proposed Regulation, are subject to national interpretation. This Article has been Awarded by Mondaq as the most popular Article in Cyprus, August 2016:http://www.mondaq.com/cyprus/x/517272/data+protection/An+Overview+Of+The+Current+Data+Protection+Directive+How+The+New+EU+Data+Protection+Law+Will+Affect+Companies.

The Article has been awarded as with the “Most Reader Response In Cyprus”:Contributor With Most Reader Response In Cyprus

This Article is not designed to provide analysis of national requirements. For advice on these issues, and other more detailed questions, please contact the AuthorXenia Kasapi, LLB,LLM,Lawyer-Legal Consultant xkasapi@asapglobal.net

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