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16th Apr 2024

US firms face possible sanctions over Safe Harbour

  • Washington: the EU Court's decision on Safe Harbour is retroactive (Photo: prameya)

US firms that relied solely on a now defunct data-sharing pact with the EU could end up facing sanctions from national data protection authorities.

Known as Safe Harbour, the 15-year-old pact was declared invalid on Tuesday (6 October) by the European Court of Justice in Luxembourg.

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An EU official on Wednesday (7 October) said the decision is retroactive.

This means that all transfers of data from the EU to the US under the regime were illegal since 2000.

“When the Court declares an act of the union institution such as the Safe Harbour invalid and doesn’t say anything else, it means indeed the decision is gone as if it had never existed. Which means also of course that transfers, which don’t have any other legal basis, should not have been made”, the official told reporters.

A second EU official said a company will have to prove, at the moment of the transfer, that it had a number of other guarantees “that showed compliance with the European data protection rules”.

A third EU official said if the company did not show other forms of compliance and if harm had come to the individual as a result, it could face penalties.

The legal complexity is vast, due in part, to a clause in the scheme that had also allowed US laws to overrule Safe Harbour.

“This is a big problem for European rights if you can just overrule the agreement”, said Franziska Boehm, an assistant professor at the German-based Institute for Information, telecommunication and media law.

Boehm, who drafted a European Parliament report on Safe Harbour and had a submitted a review of it to the European Court, said the pact had allowed US intelligence access to the data despite EU protection rules.

Around 4,400 US firms had signed up to the self-certification scheme, which was seldom enforced by the US federal trade commission. According to one independent study, hundreds had even lied about belonging to it.

Big US companies like Facebook use Safe Harbour.

Facebook told AFP in an email that "it is imperative that EU and US governments ensure that they continue to provide reliable methods for lawful data transfers and resolve any issues relating to national security".

The case heard in Luxembourg is rooted in a complaint against Facebook Ireland by Austrian privacy campaigner Max Schrems.

He argued in 2013 that Facebook Ireland could not guarantee his data was protected under Safe Harbour following US mass surveillance revelations from whistleblower Edward Snowden.

Ireland’s data protection authority at the time rejected his case because Facebook was in Safe Harbour. Schrems appealed and the case went to the Luxembourg-based Court.

Ireland’s court will now have to decide whether to suspend Facebook’s transfer of data to the US.

The Irish data protection commissioner Helen Dixon has since said that the ECJ “judgement extends far beyond the case presently pending in Ireland.”

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