The EU and U.S. reached agreement last week on the EU-U.S. Privacy Shield to replace the invalidated EU-U.S. Safe Harbor Program for transatlantic data transfers.  While the announcement of the Privacy Shield is a relief to the thousands of companies who relied on the Safe Harbor Program, details remain unclear.

What do we know so far? The European Commission announced the EU-U.S. Privacy Shield agreement on February 2, 2016. In announcing the agreement, the European Commission said:

The EU-US Privacy Shield reflects the requirements set out by the European Court of Justice in its ruling on 6 October 2015, which declared the old Safe Harbour framework invalid. The new arrangement will provide stronger obligations on companies in the U.S. to protect the personal data of Europeans and stronger monitoring and enforcement by the U.S. Department of Commerce and Federal Trade Commission (FTC), including through increased cooperation with European Data Protection Authorities. The new arrangement includes commitments by the U.S. that possibilities under U.S. law for public authorities to access personal data transferred under the new arrangement will be subject to clear conditions, limitations and oversight, preventing generalised access. Europeans will have the possibility to raise any enquiry or complaint in this context with a dedicated new Ombudsperson.

Based on the European Commission’s statements, the Privacy Shield will provide for more oversight by the U.S. Department of Commerce and the FTC. Additionally, specific limitations and parameters will be placed on law enforcement or national security access to personal data. Finally, a new Ombudsperson will be established to handle complaints. Providing further insight, the European Commissioner for Justice, Consumers and Gender Equality, Vera Jourova, said there would be “several affordable and accessible dispute resolution mechanisms,” and that EU citizens would be able to channel complaints to the U.S. Department of Commerce, which would act within a “reasonable deadline.”

Reacting in the United States, Penny Pritzker, U.S. Commerce Secretary, lauded the agreement as a way forward, and clarified that the FTC will coordinate with EU data protection officials to resolve complaints about government access to data.  Edith Ramirez, FTC Chairwoman, echoed Pritzker’s statement saying, “[w]e are pleased that U.S. and European Commission officials have reached an agreement in principle which, once finalized, will allow for the continuation of an important mechanism for transatlantic data transfers. Under the new agreement, the EU-U.S. Privacy Shield, the Federal Trade Commission will continue to prioritize enforcement of the framework as part of our broader commitment to protect consumers’ personal information and privacy. We will continue to work closely with our European partners to ensure consumer privacy is protected on both sides of the Atlantic.”

Summing up the months following the Court of Justice of the European Union’s ruling in Schrems v. Data Protection Commissioner, Pritzker went on to say that although “it was a tough negotiation focused on protecting privacy” she was confident the Privacy Shield would withstand scrutiny in the EU.

Ms. Pritzker’s statements are pertinent as the Article 29 Working Party of European Union member state data protection commissions still must assess the Privacy Shield arrangement.  The Article 29 Working Party issued a more cautious response, which was backed by statements from Isabelle Falque-Pierrotin, chairwoman of the Article 29 Working Party and president of France’s DPA, who welcomed the Privacy Shield but clarified since no written agreement had been provided by the European Commission, the Article 29 Working Party could not confirm nor deny whether the Privacy Shield complied with EU data protection law.

Importantly, Falque-Pierrotin went on to state that companies which continue to transfer data to the U.S. under the Safe Harbor framework without alternative arrangements—i.e. binding corporate rules (BCRs) or standard contractual clauses (SCCs)—would technically not be in compliance with EU law and could face enforcement action depending on the DPA and whether a complaint is received.

What’s next? The European Commission said that the formal Privacy Shield adequacy decision would be prepared “in the coming weeks.” The Article 29 Working Party has called on the European Commission to communicate all relevant documentation on the Privacy Shield by the end of February, so it may assess the options for “all personal data transfers to the U.S” by the end of March and possibly issue a final decision by the end of April.

When assessing the Privacy Shield agreement, the Article 29 Working Party will do so on the basis of the Privacy Shield’s compliance with four “essential guarantees” for transfers of EU citizens’ data. The four essential guarantees are:

1. There should be precise rules for processing, meaning any individual who is reasonable informed should be able to know what might happen with their data;

2. Any government access to data should be governed by the principles of necessity and proportionality balancing the objective for which the data is collected and accessed and the rights of the individual;

3. There should be independent oversight mechanisms that are effective and impartial; and

4. There must be effective remedies available to individuals.