EC proposes major reform of data protection rules
25 January 2012
The European Commission has proposed a comprehensive reform of the EU's 1995 data protection rules to strengthen online privacy rights and boost Europe's digital economy. Technological progress and globalisation have profoundly changed the way our data is collected, accessed and used. In addition, the 27 EU Member States have implemented the 1995 rules differently, resulting in divergences in enforcement.
A single law will do away with the current fragmentation and costly administrative burdens, leading to savings for businesses of around €2.3 billion a year. The initiative will help reinforce consumer confidence in online services, providing a much needed boost to growth, jobs and innovation in Europe.
"17 years ago less than 1% of Europeans used the internet. Today, vast amounts of personal data are transferred and exchanged, across continents and around the globe in fractions of seconds," said EU Justice Commissioner Viviane Reding, the Commission’s Vice-President.
"The protection of personal data is a fundamental right for all Europeans, but citizens do not always feel in full control of their personal data. My proposals will help build trust in online services because people will be better informed about their rights and in more control of their information. The reform will accomplish this while making life easier and less costly for businesses. A strong, clear and uniform legal framework at EU level will help to unleash the potential of the Digital Single Market and foster economic growth, innovation and job creation."
The Commission's proposals update and modernise the principles enshrined in the 1995 Data Protection Directive to guarantee privacy rights in the future. They include a policy Communication setting out the Commission's objectives and two legislative proposals: a Regulation setting out a general EU framework for data protection and a Directive on protecting personal data processed for the purposes of prevention, detection, investigation or prosecution of criminal offences and related judicial activities.
Key changes in the reform include:
A single set of rules on data protection, valid across the EU. Unnecessary administrative requirements, such as notification requirements for companies, will be removed. This will save businesses around €2.3 billion a year.
Instead of the current obligation of all companies to notify all data protection activities to data protection supervisors – a requirement that has led to unnecessary paperwork and costs businesses €130 million per year, the Regulation provides for increased responsibility and accountability for those processing personal data.
For example, companies and organisations must notify the national supervisory authority of serious data breaches as soon as possible (if feasible within 24 hours).
Organisations will only have to deal with a single national data protection authority in the EU country where they have their main establishment. Likewise, people can refer to the data protection authority in their country, even when their data is processed by a company based outside the EU. Wherever consent is required for data to be processed, it is clarified that it has to be given explicitly, rather than assumed.
People will have easier access to their own data and be able to transfer personal data from one service provider to another more easily (right to data portability). This will improve competition among services.
A ‘right to be forgotten’ will help people better manage data protection risks online: people will be able to delete their data if there are no legitimate grounds for retaining it.
EU rules must apply if personal data is handled abroad by companies that are active in the EU market and offer their services to EU citizens.
Independent national data protection authorities will be strengthened so they can better enforce the EU rules at home. They will be empowered to fine companies that violate EU data protection rules. This can lead to penalties of up to €1 million or up to 2% of the global annual turnover of a company.
A new Directive will apply general data protection principles and rules for police and judicial cooperation in criminal matters. The rules will apply to both domestic and cross-border transfers of data.
The Commission's proposals will now be passed on to the European Parliament and EU Member States (meeting in the Council of Ministers) for discussion. They will take effect two years after they have been adopted.
Commenting on the EU proposals, Margaret Tofalides, a specialist in privacy and data protection at law firm Manches, said:
"The proposals will change the basic DNA of online businesses, refocusing data protection to the centre of what they do through much tougher monitoring and reporting requirements and with explicit consent requirements, and greater rights for data deletion. Tools for tracking users interests, such as cookies and browsing, will face new challenges
"In addition, the pressure on firms with more than 250 employees is now the need to employ a data protection officer. In addition data processors will now be directly liable for any breaches. Fines and penalties for violations are significant, as is the focus on the regulator taking action. Of fundamental importance is a new requirement to report data breaches within 24 hours if practicable.
"Firms will have to demonstrate to the regulating authority, quite likely when they report breaches, that they have contingency plans in place to notify customers, cure IT system defects and contain damage or they could face enormous fines. This is a major change."