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President Biden October 7, 2022 Executive Order on

Enhancing Safeguards for US Signals Intelligence Activities –

Towards an Updated EU-US Privacy Shield Framework

When the European Court of Justice issued its decision on Schrems and Facebook Ireland v. Data Protection Commissioner in July 2020 (Schrems II),[1] it triggered a brutal disruption and stoppage in the operations of the EU-US Privacy Shield framework (Framework). It also caused significant chaos in the operations of numerous US or EU/EEA businesses and organizations that were relying on the Framework as a strategic tool and structure for providing a legal basis for exchanges or transfers of personal data for commercial and business purposes between the two sides of the Atlantic.

After lengthy and challenging negotiations between representatives of the European Commission and the United States, a new proposed Trans-Atlantic Data Privacy Framework was published at the end of March 2022. According to the White House, the EU-US Trans-Atlantic Data Privacy Framework of March 2022 was intended to lay the ground for providing a legal basis for transatlantic data flows by addressing concerns that the Court of Justice of the European Union raised in July 2020 in the Schrems II case.

Under the March 2022 EU-US Trans-Atlantic Data Privacy Framework, the United States made commitments to:

• Strengthen the privacy and civil liberties safeguards governing the U.S. signals intelligence activities;
• Establish a new redress mechanism with independent and binding authority ; and
• Enhance the existing rigorous and layered oversight of signals intelligence activities.

On October 7, 2022, President Biden signed an Executive Order on Enhancing Safeguards for United States Signals Intelligence Activities (E.O.), which defines the steps that the United States will take to implement the commitments it made in the March 2022 European Union-U.S. Trans-Atlantic Data Privacy Framework. The Executive Order addresses in depth the three commitments made in the Trans-Atlantic Data Privacy Framework, as detailed below.

[1] Strengthening the Privacy and Civil Liberty Safeguards

The October 7, 2022 Executive Order requires that U.S. signals intelligence activities be conducted only in pursuit of defined national security objectives; take into consideration the privacy and civil liberties of all persons, regardless of nationality or country of residence; and be conducted only when necessary to advance a validated intelligence priority and only to the extent and in a manner proportionate to that priority.

Principles and Objectives

Section 2(a) of the EO defines the principles that will be used to determine whether a signals intelligence activities may be authorized and conducted. Section 2(b) of the EO identifies those objectives that will be deemed legitimate and those that will be prohibited.

Privacy and Civil Liberties Safeguards

Section 2(c) of the Executive Order focuses on the safeguards that must be used to ensure that privacy and civil liberties are integral considerations in the planning and implementation of the signal intelligence activities.

• Collection of Signals Intelligence

Section 2(c)(i) identifies general requirements that apply to all forms of such intelligence activities, while Section 2(c)(ii) provides specific requirements in the event bulk collection of signals intelligence. Bulk collection may be used only in the pursuit of specified objectives, such as protection against espionage, sabotage, or protection against cybersecurity threats created or exploited by or on behalf of foreign person, organizations or government.

• Handing of Personal Information Collected Through Signals Intelligence

In Section 2(c)(iii), the EO defines mandatory handling requirements for personal information collected through signals intelligence activities. It also extends the responsibilities of legal, oversight, and compliance officials to ensure that appropriate actions are taken to remediate incidents of non-compliance.

The most prominent requirement is minimization of the dissemination and the retention of personal information collected through signals intelligence. In addition, there are specific requirements for data security and limitation of access to the information. Other provisions focus on ensuring data quality, accuracy and objectivity.

• Policies and Procedures to be Updated within One Year

Section 2(c)(iv) focuses on policies and procedures. U.S. Intelligence Community services are required to update their policies and procedures to reflect the new privacy and civil liberties safeguards contained in the Executive Order within one year of the date of the Executive Order. The review of these updates must be conducted in consultation with the Attorney General, the Civil Liberties Protection Officer of the Office of the Director of National Intelligence (CLPO), and the Privacy and Civil Liberties Oversight Board (PCLOB).

• Review of the Policies and Their Implementation

The Executive Order provides for numerous levels of review, such as a review of the updated policies and procedures by the Privacy and Civil Liberties Oversight Board (PCLOB), once they have been issued to ensure their consistency with the enhanced safeguards contained in the Executive Order.  Moreover, there are provisions for rigorous legal oversight as well as the use of compliance officials to conduct periodic oversight of signals intelligence activities, including an Inspector General, a Privacy and Civil Liberties Officer and the appointment of Officers with compliance roles to conduct oversight and ensure compliance with applicable US laws.

[2] Establishment of a New Redress Mechanism

Section 3 of the Executive Order provides for a redress mechanism to review qualifying complaints transmitted by the appropriate public authority in a “qualifying state”[2] concerning United States Signal intelligence activities for any covered violation of US laws.

The new redress mechanism will be multi-layer, independent and binding, and is intended to enable individuals in qualifying states and regional economic integration organizations, as designated under the E.O., to obtain an independent and binding review and redress of claims that their personal information collected through U.S. signals intelligence was collected or handled by the United States in violation of applicable U.S. law, including the enhanced safeguards in the E.O.

Initial Investigation of Qualifying Complaints by the CLPO

Under the first layer, the Civil Liberties Protection Officer in the Office of the Director of National Intelligence (CLPO) will conduct an initial investigation of qualifying complaints received to determine whether the enhanced safeguards or other applicable U.S. law were violated and, if so, to determine the appropriate remediation.

The process to be followed by the CLPO will be established by the Director of National Intelligence, in consultation with the Attorney General. Section 3(c) of the Executive Order defines in minute details the elements of that process, including review of the information necessary to investigate the complaint, determining whether there was a violation, preparation of a classified report on the alleged violation, and issuing a classified decision. The complainant or the element of the Intelligent Community affected by the decision may seek review of the CLPO’s decision by the Data Protection Review Court. Otherwise, the decision becomes binding.

Independence of the CLPO

One of the issues raised in the decision of the European Court of Justice in the Schrems II case was that the oversight over the data processing conducted by the US intelligence agencies as defined under the 2016 version of the EU US Privacy Shield lacked independence from the US government. Section 3(c)(iv) of the Executive Order, titled [Independence], specifically provides that the Director of National Intelligence shall not interfere with a review by the CLPO of a qualifying complaint, and shall not remove the CLPO for any action taken unless there has been misconduct, malfeasance, neglect of duty or incapacity.

Data Protection Review Court

The second layer of review, described in Section 3(d) of the Executive Order is provided by a Data Protection Review Court. Section 3(d) directs the Attorney General to establish a Data Protection Review Court (DPRC) to provide independent and binding review of the CLPO’s decisions, upon an application from the individual or an element of the Intelligence Community. The EO directs the Attorney General to promulgate regulations establishing the Data Protection Review Court along the lines defined in the EO, within sixty (60) days of the publication of the EO.

Independence of the Data Protection Review Court

In accordance with the focus on ensuring the Court’s independence, as discussed above, the Judges designated to serve on the DPRC must be appointed from outside the U.S. Government. review cases independently, and enjoy protections against removal. In addition, they must have relevant experience in the fields of data privacy and national security.

Further, Section 3(d)(iv), titled [Independence], specifically mandates that the Attorney General shall not interfere with a review by a Data Protection Review Court panel of a determination made by the CLPO regarding a qualifying complaint, and shall not revoke any judge appointed to service on that court except in case of misconduct, malfeasance, breach of security, neglect of duty or incapacity.

Binding Effect

Decisions of the DPRC regarding whether there was a violation of applicable U.S. law and, if so, what remediation is to be implemented will be binding. Under Section 3(d)(iii) each element of the Intelligence Community and each agency containing an element of the Intelligence Community is required to comply with any determination by the Data Protection Review Court panel to undertake appropriate remediation.

Annual Review of the Redress Process by PCLOB

In addition to the reviews and oversight described above, Section 3(e) of the Executive Order “encourages” the Privacy and Civil Liberties Oversight Board (PCLOB) to conduct annual reviews of the processing of qualified complaints by the redress mechanism discussed above, with respect to issues such as timeliness, full access to information, and whether the elements of the Intelligence Community have fully complied with determinations made by the CLPO and the Data Protection Review Court. The role and powers of the PCLOB are discussed in the next section.

[3] Enhancement of Oversight of Signals Intelligence Activities by the PCLOB

The CJEU decision in Schrems II voiced concern about the lack of oversight of the intelligence activities and the weakness of the protection granted to the personal data being collected and processed. The October 7, 2022 Executive Order gives specific authority to the Privacy and Civil Liberties Oversight Board (PCLOB) to review Intelligence Community policies and procedures to ensure that they are consistent with the Executive Order and to conduct an annual review of the redress process, including to review whether the Intelligence Community has fully complied with determinations made by the CLPO and the DPRC. The role of the PCLOB is detailed in several sections of the Executive Order, as explained below.

Participation in the Drafting of the New Policies and Procedures

First, in Section 2, which defines the rules concerning privacy safeguards, Section 2(c)(iv)(B) provides for PCLOB participation in the drafting of the updates to the policies and procedures. In this case, PCLOB only has a consultative role, and the goal is to ensure that the updates to the policies and procedures required by the Executive Order implement the privacy and civil liberty safeguards outlined in the Executive Order.

Review of the Final Policies and Procedures

Once the policies and procedures have been updated and issued as described above, Section 2(c)(v)(A) encourages the PCLOB to conduct a review of the updated policies and procedures to ensure that they are consistent with the enhanced safeguards contained in this order. In addition, Section 2(c)(v)(B) requires that, within 180 days of the completion of the PCLOB review, the head of each element of the Intelligence Community “carefully” consider and implement or otherwise address all recommendations contained in the PCLOB review, consistent with applicable law.

Participation in the Appointment of Judges to Serve on the Data Protection Review Court

Section 3 of the Executive Order, which focuses on Signals Intelligence Redress Mechanism, allocates a role to the PCLOB in connection with the activities of the Data Protection Review Court. Under Section 3(d)(A) of the Executive Order provides that the Attorney General, must consult with the PCLOB – as well as with the Secretary of Commerce, and the Director of National Intelligence –, to appoint individuals to serve as judges on the Data Protection Review Court.

Annual Review of the Redress Process

Finally, in addition to the consultation, reviews and oversight described above, Section 3(e)(i) of the Executive Order “encourages” the Privacy and Civil Liberties Oversight Board (PCLOB) to conduct annual reviews of the processing of qualified complaints by the redress mechanism discussed above, including whether

• the CLPO and the Data Protection Review Court processed qualifying complaints in a timely manner;
• the CLPO and the Data Protection Review Court are obtaining full access to necessary information;
• the CLPO and the Data Protection Review Court are operating in a manner consistent with the Executive Order
• the safeguards established in the Executive Order a properly considered in the processes of the CLPO and the Data Protection Review Court; and
• the elements of the Intelligence Community have fully complied with the determinations made by the CLPO and the Data Protection Review Court.

To assist the PCLOB in its review, Section 3(e)(ii) instructs the Attorney General, the CLPO, and the elements of the Intelligence Community (inter alia) to provide the PCLOB with access to information necessary to conduct the review. In addition, Section 3(2)(iii) provides for the preparation of a classified report to be provided to the President, and the congressional intelligence committees (inter alia) and requires the PCLOB to make an annual public certification as to whether the redress mechanism is processing complaints consistent with the terms of the Executive Order, and to release to the public an unclassified version of the report.

[4] Designation of the Qualifying States for Purposes of the Redress Mechanism

Several provisions of the Executive Order refer to the rights granted to citizens of a “qualifying state.” Section 3(f) provides the criteria for a country or regional economic integration organization for be deemed a “qualifying state” for purpose of the redress mechanism defined in the Executive Order. Section 3(f)(i) grants the Attorney general the authority to designate a country or regional integration organization the status of “qualifying state”. The designation must be made in consultation with the US Secretary of State, US Secretary of Commerce, and the Director of National Intelligence.

The criteria for make the determination that the state or economic integration organization is a “qualifying state,” as listed in Section 3(f)(i)(A) include:

• the laws of the country, organization, or member of the organization require appropriate safeguards in the conduct of signals intelligence activities for United States persons’ personal information that is transferred from the United States to the territory of the country or a member of the organization;
• the country, organization, or member of the organization permit, or are anticipated to permit, the transfer of personal information for commercial purposes between the territory of that country or those member countries and the territory of the United States; and
• such designation would advance the national interests of the United States.

The designation may be revoked or amended.

 [5] Next Steps and Ultimate Goal

The next steps in the development of a new EU-US agreement on trans-Atlantic data transfers and data protection will likely focus on the development or update of the building blocks necessary for the preparation of an Adequacy Evaluation package, that, in the end, will be presented to the European Commission for its review and approval and issuance of a new adequacy decision. In the end, once the formalities have been completed, entities that wish to take advantage of the updated crossborder personal data transfer framework will continue to be required to adhere to the EU-US Privacy Shield Principles – or an updated version -. Those that had self-certified under the 2016 version of the EU-US Privacy Shield Framework, will have to re-certify their adherence to the Principles through the US Department of Commerce, and update their legal terms accordingly.

[1] Schrems and Facebook Ireland v. Data Protection Commissioner (2020) CJEU Case C-311/18; press release available at: https://curia.europa.eu/jcms/upload/docs/application/pdf/2020-07/cp200091en.pdf; July 16, 2020 decision available at: https://curia.europa.eu/juris/document/document.jsf;jsessionid=EBF54609D179D36D02BD7BB10DC3BDF3?text=&docid=228728&pageIndex=0&doclang=en&mode=req&dir=&occ=first&part=1&cid=1285293.

[2] While Section 4(k), in the Definitions section, provides the criteria for a complaint to be deemed a “qualifying complaint”, in Section 4(k), there is no similar definition of the tern “qualifying state”. Instead, the criteria for a state to be deemed a “qualifying state,” and the method to be used for identifying a state as a “qualifying state” are defined in Section 3(f) of the Executive Order.

By Paola Zeni, Francoise Gilbert, Max Calehuff

Paola Zeni is the senior director of global privacy at Palo Alto Networks.

Francoise Gilbert is a shareholder in Greenberg Traurig LLP where she focuses her practice on
US and global data privacy and cybersecurity. gilbertf@gtlaw.com

Maxwell Calehuff is an attorney in the Cybersecurity and Privacy Group of Greenberg Traurig
LLP.

US-based organizations are realizing that they must comply with the EU General Data Protection Regulation (GDPR) — even if they do not do business anywhere in Europe — because their practices include the collection or processing of personal data of individuals located in the European Union (EU) or the monitoring of their activities. Unlike its predecessor – Directive
95/46/EC, known as the EU Data Protection Directive – the GDPR was drafted to apply to many organizations established outside the EU, so that the protection follows the data when the data is moved or processed abroad.

GDPR Art. 3 is the key provision regarding the territorial reach of the GDPR. Under Article
3(1), the GDPR applies to the processing of personal data in the context of the activities of the establishment of an entity in the European Union. In practice, the protection extends as well to individuals located in Norway, Iceland and Lichtenstein, because, like most laws of the European Union, the GDPR is incorporated into the laws of these three countries, and thus its scope covers the entire European Economic Area (EEA) – which is comprised of the European Union and
these three additional countries.

Article 3(2) extends the territorial scope of the GDPR outside the EU or EEA borders. It states that GDPR applies to the processing of personal data of individuals who are in the EU / EEA by a data controller or processor established outside the EU /EEA, when the processing is related to the offering of goods or services to such individuals, or the monitoring of their behavior. Article
3(2) attaches to numerous US entities and requires them to comply with the entire GDPR.

Some organizations assume that it is enough for them to have self-certified their adherence to the
EU-US Privacy Shield (Privacy Shield) and that their self-certification is sufficient to address all
99 articles of the GDPR. This is incorrect. While the Privacy Shield and GDPR overlap in some areas, the GDPR is much broader and contains many more requirements.

This article compares the Privacy Shield and the GDPR, to highlight commonalities, but also gaps that organizations need to address to achieve compliance under both frameworks.

Background

The EU-US Privacy Shield framework, which relies on the Privacy Shield Principles and Supplemental Principles (collectively Shield Principles), was developed in consultation between the US Department of Commerce and the European Commission, and finalized in July 2016, is a cross-border data transfer mechanism. It addresses the restrictions to the transfer of personal data outside the EU or EEA under Articles 44-50 of the GDPR (and before that, Articles 25-26 of the EU Data Protection Directive 95/46/EC). These provisions require the data exporter to ensure that EU or EEA data subjects will continue to benefit from effective safeguards and protection after their data has been transferred outside the EU or EEA. This assurance can be provided through different means. The EU-US Privacy Shield framework, is one of these means of providing the assurances required by GDPR Art. 44-50.

The Privacy Shield framework was not drafted to meet the requirements of the GDPR or as an alternative to GDPR. It was drafted separately from the GDPR; it is not even mentioned in the GDPR. The Shield Principles meet only a small aspect of the GDPR. The Shield is limited to providing a legal ground for the processing of EU or EEA data in the United States, and to establishing for EU or EEA individuals and regulators a means for reaching US-based organizations in the United States, and initiating enforcement. It is a data transfer mechanism only. It also addresses some concerns regarding access by US national security to EU or EEA data stored in the United States; this aspect of the Privacy Shield framework is not discussed here.

Common elements of the Privacy Shield Principles and GDPR

There are similarities and, at times, overlap between the Shield Principles and the GDPR. The latter is significantly broader, deeper, and more specific than the Shield Principles. In this section, we look at the seven basic Principles of the EU-US Privacy Shield and compare them with the equivalent provisions found in the GDPR.

1. Notice

The Notice Principle requires an organization, among other things, to inform individuals about its commitment to process all personal data received from the EEA in compliance with the Privacy Shield Principles and in reliance upon the Shield; the fact that the organization is subject to investigatory and enforcement powers of the Federal Trade Commission or the US
Department of Transportation; the requirement to disclose personal data in response to lawful requests; the possibility of invoking binding arbitration; how to contact the organization with
inquiries and complaints; and the independent dispute resolution body designated to address such complaints.

An organization must also inform individuals of the types of personal data collected, the
purposes for which it collects and uses personal data about them, the individuals’ rights to access their data, the choices and means the organization offers them to limit the use and dissemination of their personal data, the identity of third parties to which the data is disclosed, and the organization’s liability in cases involving transfer to third parties.

Most of these requirements are found in GDPR Art. 5(1)(a) [Lawfulness, Fairness, and Transparency] and GDPR Art. 5(1(b) [Purpose Limitation], and further detailed in GDPR Art. 12 [Transparent information], Art. 13 and 14 [Information to be Provided], among others.

2. Choice

Under the Choice Principle, an organization must offer individuals the opportunity to opt out of having their personal data disclosed to a third party or used for a purpose materially different from the purpose for which it was originally collected. It is unnecessary to provide choice when the disclosure is made to a third party acting as an agent of the organization. However, the organization must enter into a contract with the agent.

For sensitive information (medical or health condition, information specifying the sex life of the individual, racial or ethnic origin, political opinion, religious or philosophical beliefs, trade union membership), organizations must obtain the individual’s express affirmative consent before such information is disclosed to a third party or used for a purpose that is materially different than the purpose for which it was originally collected.

Most of these requirements are found in GDPR, for example in Articles 6(4) [Lawfulness of the
Processing, 7 [Conditions for Consent], 9 [Special Categories of Data] as well as GDPR Article
5(1)(a), [Lawfulness, Fairness, and Transparency] and Article 5(1(b) [Purpose Limitation].

The Choice Principle requires offering individuals the opportunity to opt-out from the disclosure of their personal data to a third party, or the use of the data for a materially different purpose than the one originally announced. GDPR Art. 21 [Right to Object] grants individuals the right to object to the use of personal data for the legitimate interest of the data controller, and to the use
of personal data for marketing purposes.

Notably missing from the Privacy Shield framework are the right of EU or EEA citizens not to be subjected to automated decision-making, including profiling, found in GDPR Art. 22(1) the right to restrict the processing of their personal data, such as when it is contested or no longer needed, found in GDPR Article 18(1).

3. Accountability for onward transfer

To transfer personal data to a third-party acting as a data controller, organizations must comply with the Notice and Choice Principles and enter into a contract with the controller. The contract must specify that personal data may only be processed for limited and specified purposes consistent with the consent obtained from the individual. The contract must also specify that the recipient will provide the same level of protection as the Shield Principles and will notify the organization if it can no longer meet this obligation, and take reasonable steps to remediate.

To transfer personal data to a third-party agent, organizations must transfer the personal data only for limited specified purposes, and ensure that the agent provides at least the level of protection required by the Shield Principles. They must take reasonable and appropriate steps to ensure that the agent effectively processes the personal data transferred in a manner consistent with the organization’s obligations under the Shield Principles. They must also require the agent
to notify the organization if it can no longer comply with the Principles, and must take reasonable steps to remediate unauthorized processing.

Under the GDPR, when a US-based data controller wishes to transmit data to a data processor located outside the EU or EEA, two sets of provisions apply: GDPR Art. 28 deals with the use of a processor. GDPR Art. 44 and 46 address the adequacy of the safeguards to be provided by the foreign entity; these provisions focus on cross-border data transfers and further transfers to third parties and are consistent with the Shield Onward Transfer Principle.

The comprehensive GDPR Art. 28 outlines in detail the required content of the contract between the controller and the processor. For example, the contract must stipulate that the processor may process the data only on documented instructions of the controller; must assist the controller in responding to data subjects’ exercise of their rights, must obtain the controller’s consent before enrolling a subcontractor, and must notify the controller if the controller’s instructions would infringe applicable law.

4. Security

The Security Principle requires organizations that self-certify compliance with the Shield to take reasonable and appropriate measures to protect personal data from loss, misuse, unauthorized access, disclosure, alteration, or destruction. GDPR Art. 5(1)(f) [Integrity and Confidentiality] also requires organizations to ensure appropriate security of the personal data. GDPR Art. 32 [Security of Process] provides additional parameters for the identification and choice of security measures, including a number of specific security measures that organizations must undertake when handling personal data originating from the EU or EEA.

The Shield Principles do not deal with the impact of security breaches. While the Security Principle requires the use of appropriate measures to protect data from loss, misuse, unauthorized access disclosure, alteration or destruction, it does not address the potential effect of a security incident or require any form of notice to supervisory authorities or affected data subjects.

On the other hand, GDPR Articles 33 and 34 detail with great specificity the actions to be taken in the event of a data breach. Among those, the affected data controller must notify the supervisory authority or authorities within 72 hours of becoming aware of a personal data breach, unless the breach is unlikely to result in a risk to the rights and freedom of individuals.
They must also notify individuals “without undue delay” if the breach is likely to result in a high
risk to the rights and freedoms of the individuals.

Data processors who suffer a data breach must notify the controller without undue delay after becoming aware of the breach. Further, GDPR Art. 28(3)(c) and Art. 28(3)(f) flow down these requirements to processors and their own subprocessors.

5. Data Integrity, purpose, retention

The Shield Principles require that the collection of personal data be limited to what is relevant for the purposes of processing. An organization must take reasonable steps to ensure that personal data is reliable, accurate, complete, and current, and must retain the data in a form that
makes the individual identifiable only for as long as reasonably necessary to serve the purpose for which it has been collected and to which the individual has consented.

GDPR Art. 5(1)(b) [Purpose Limitation], GDPR Art. 5(1)(e) [Storage Limitation] and GDPR Art. 5(1)(f) [Integrity and Confidentiality] cover similar issues.

6. Access

The Access Principle grants individuals the ability to have access to personal data about them that an organization holds. They are also able to request the amendment or deletion of information that is inaccurate or was collected in violation of the Privacy Shield Principles.

The scope of individuals rights under the GDPR is much greater; it extends beyond the right of access, correction or deletion. Art. 20 provides the right to data portability, while Art. 21 [Right to Object], includes, for example, the right to object to certain uses of personal data and the right to object to the use of personal data for marketing purposes. GDPR Art. 22 [Automated Individual Decision-Making] grants the right not to be subject to a decision solely based on automated processing.

The right of erasure, under GDPR Art. 17, is also more complex and more nuanced. The Privacy Shield limits the right of deletion to situations where the data is inaccurate or was collected in violation of the Shield Principles. The GDPR right of erasure or “right to be forgotten” provides for the right to have data deleted when the individual withdraws consent on which the processing is based, if there are no other legal grounds for the processing. It also includes a provision for the deletion of data about children that has been collected in connection with the use of internet services.

7. Recourse, enforcement, and liability

Both the Shield Principles and the GDPR require organizations to have mechanisms in place for ensuring compliance with the applicable rules. In the Privacy Shield, the Recourse Principle requires the use of independent recourse mechanisms (such as the American Arbitration Association, or the Better Business Bureau). The mechanisms must be readily available at no cost to the individual. The recourse mechanism also must allow for the award of damages in
accordance with applicable law or the rules of the recourse mechanism. There must be follow-up procedures for verifying the accuracy of the assertions made by organizations about their data protection practices. Furthermore, organizations must respond promptly to requests from the Department of Commerce for information related to the Privacy Shield and to complaints referred by EU / EEA Member State supervisory authorities through the Department of Commerce.

In addition to the independent recourse mechanisms, violation of the Shield Principles, or misrepresentation as to compliance with them, may be subject to investigations by the Federal Trade Commission (FTC). When an organization becomes subject to an FTC or court order based on non-compliance, it must make public any relevant Privacy Shield-related sections of any compliance or assessment report submitted to the FTC, to the extent consistent with confidentiality requirements. The Recourse and Enforcement Principle allows affected individuals to bring their complaints directly within the purview of US-based enforcement
authorities, private or governmental, which might make enforcement easier, faster, and more effective. The Recourse and Enforcement Principle does not identify specific administrative fines. FTC consent decrees issued after investigations of non-compliance with the Shield Principles have included significant obligations, such as record keeping requirements for 20 years after the issuance of the order, which can present a significant financial burden, among other things.

GDPR Articles 77 to 84, on the other hand, provide extensive remedies and significant fines. Individuals have the right to lodge a complaint with a Supervisory Authority under GDPR Art.
77, and the right to judicial remedy in the courts of the Member State where the individual reside, under GDPR Art. 79. Individuals can also mandate a nonprofit organization to lodge a complaint on their behalf, under GDPR Art. 80, and may receive compensation under GDPR Art
82 [Right to Compensation]. Most important, GDPR Art. 83 [Administrative Fines] allows for the imposition of administrative fines that may reach €20 million or four percent of the total worldwide annual turner of a global entity, whichever is higher.

In the case of recourse and enforcement under the GDPR, it remains to be seen how EU or EEA authorities and courts will be able to assert jurisdiction or to enforce judgments, damages or fines over organizations located outside the EU or EEA. GDPR Art. 27 requires non-EU or EEA controllers and processors to appoint a representative located in the EU or EEA. The representative can be addressed in addition to, or instead of, the controller or processor by supervisory authorities and data subjects for ensuring compliance with the GDPR. GDPR Recital
80 indicates that the designated representative could be subject to enforcement proceedings in the event of non-compliance by the controller or processor.

At this time, there is little clarity on how enforcement proceeding could be conducted and what the potential outcome might be. Would the role of the representative be limited in most cases to that of an agent for receiving communications and providing responses or could the representative become jointly and severally liable with the non-EEA entity? GDPR Art. 27 is silent and so far, no guidelines have been issued. In addition, it is also not clear how a judgment rendered in the EU or EEA against an organization established abroad would be enforced against that foreign entity.

When addressing recourse and enforcement, GDPR and Privacy Shield adopt different routes and pertain to different subject matters. Privacy Shield focuses on enforcement of violation of the Privacy Shield Principles in the United States, where the FTC is likely to have a significant role in stopping a US company from conducting non-compliant activities, and historically has been a tough enforcer.

GDPR focuses on enforcement in the EU or EEA, pertains to the entire GDPR, provides local government agencies with the ability to assess significant fines, and grants individuals a private right of action to seek damages. In the past, EU or EEA agencies have not been as aggressive as their US counterparts but the landscape is likely to change with the significant fines available under GDPR Art. 83.
It remains to be seen what will happen in practice, which of these avenues will be more frequently used in case of a dispute, what the outcome of enforcement action will be, and which mechanism will provide more effective enforcement or recourse for affected individuals or create more barriers or hurdles for organizations.

GDPR concepts that are not addressed in the Shield Principles

In the first part of this article, we showed that in six of the areas covered by the Shield Principles the GDPR takes a more comprehensive view and contains more stringent, detailed, and specific requirements. The seventh Shield Principle, Enforcement, differs significantly from the enforcement provisions of the GDPR. Given that enforcement of the Shield Principles has been limited to a handful of FTC actions, it is difficult to make a practical comparison between the
two enforcement mechanisms at this time.

When we move the analysis and the comparison to other areas, it becomes even clearer that a self-certification of adherence to the Shield Principle is insufficient to show compliance with all GDPR provisions that may be applicable to organizations. We provide several examples below:

1. Legal grounds for processing data

The Privacy Shield Notice and Choice principles require organizations to disclose the purpose of collecting personal data and obtain consent to conduct certain activities, such as disclosure to third parties or use for a purpose materially different from the originally disclosed purpose. However, it assumes, a priori, that the data have been legally collected or that the consent was implied from the conduct of the parties.

The GDPR Article 6 (1) requires that the collection and processing of personal data be lawful. It identifies only six limited grounds for collection and processing to be legal. For example, processing will be lawful if it is necessary for the performance of a contract to which the data subject is a party, or to comply with a legal obligation. Processing will also be lawful if it is conducted for the legitimate interests of the controller or a third party, so long as these interests are not overridden by the fundamental rights and freedoms of the individual. In some cases, a data controller may have no other choice than seeking and obtaining the explicit consent of the individual (opt-in consent) to provide the required legal basis for the contemplated processing.

2. Obligations regarding data subject rights

In addition to providing extensive rights to individuals located in the EU or EEA, the GDPR imposes obligations on data controllers to facilitate the exercise of those rights. Controllers must provide individuals with information about their rights as data subjects and must facilitate the exercise of those rights electronically. Controllers must respond to a data subject’s request within one month, and provide information on actions taken or not taken in response to a request. In addition, data processors are contractually required to cooperate with the data controller to address such rights.

3. Data protection by design and default

GDPR Art. 25 [Data Protection by Design and by Default] requires data controllers to implement appropriate measures to ensure that the processing implements the data protection principles. It also requires that the processing meet the GDPR principles and requirements, assure and protect the rights of the individual, and that, by default, the processing be limited to the personal data necessary for a specific purpose.

4. Documentation of processing and data protection impact assessment

GDPR Art. 30 [Record of Processing Activities] requires controllers and processors to keep electronic records of their processing activities, to be made available to supervisory authorities upon request. When processing activities are likely to result in a high risk for the rights and freedoms of individuals, GDPR Art. 35 [Data Protection Impact Assessment] requires data controllers to assess the impact of the envisaged processing on the protection of personal data. Both Articles 30 and 35 are likely to have a significant operational impact on organizations.

Conclusion

Even if a company does not do business in the European Union or the European Economic Area, it may be subject to GDPR. Compliance with the GDPR requires significant efforts, time and financial investments.

The Privacy Shield Principles provide a simple, easy to, use means for organizations to address their obligations under Chapter V, Articles 44-50 of the GDPR [Transfer of Personal Data to Third Countries or International Organizations]. However, the use of the Shield just serves its original purpose: providing a means for US entities to show their commitment to protecting personal data originating in the EU or EEA when the processing is conducted in the United States, and to respond to complaints and enforcement actions that may be initiated in the EU or EEA and subsequently transmitted to US agencies. The Privacy Shield is not a data protection law or a comprehensive data protection compliance framework. It is a cross-border transfer mechanism.

As both the Privacy Shield and the GDPR are further explained and clarified, organizations should understand the narrow, limited, and specific role of the Privacy Shield, the significant gaps between the Privacy Shield and the GDPR, and that they cannot meet their obligations under GDPR solely through a self-certification of their commitment to observe the Privacy Shield principles.