The Best Time to Enact Data Protection Laws was 20 Years Ago; The Next Best Time is Now!

The road to personal data protection in India has been rocky. In 2017, India’s Supreme Court upheld the right to privacy as a part of our fundamental right to life and liberty. A panel chaired by retired Justice B N Srikrishna was given the task of drafting a Bill. In 2018, this panel submitted its draft to the Ministry of Electronics & Information Technology. The Personal Data Protection Bill that was eventually tabled in parliament in December 2019 proposed restrictions on the use of personal data without the explicit consent of citizens and introduced data localization requirements. It also proposed establishing a Data Protection Authority.

However, the bill was widely seen as a diluted version of what was originally envisioned by the Srikrishna panel in terms of its ability to truly protect the data/privacy of individuals. The bill was seen to place a significant regulatory burden on businesses and thus viewed as an impediment to the “ease of doing business” in India. A major bone of contention was the bill granting the government a blanket right to exempt investigative agencies from complying with privacy and data protection requirements. Understandably, there was pushback from BigTech, global financial services players as well as activists; even startups were unhappy with the proposed regulatory burdens.

In December 2021, after a number of extensions spanning over two years, the Joint Parliamentary Committee (JPC) that was set up to examine the draft bill submitted its report to the Lok Sabha. The JPC report has reportedly highlighted areas of concern and proposes a number of amendments/recommendations such as:

  • a single law to cover both personal and non-personal datasets;
  • using only “trusted hardware” in smartphones and other devices;
  • treating social media companies as content publishers, thus making them liable for the content they host.

In early August 2022, the government withdrew the Personal Data Protection Bill, 2019, with the promise to introduce a new one with a “comprehensive framework” and “contemporary digital privacy laws”.

 

India needs New Regulations to Plug the Data Protection Gap

That India needs robust data protection and privacy regulations which should be enacted soon is beyond debate. With digitalization becoming ever more pervasive by the day, the longer we are without clear regulations, the greater the risk is to our citizens. Each of the major trends below has the potential to infringe on individual privacy and can give rise to large-scale risks of user data (including personally identifiable information) being leaked/breached and misused:

  • The growth in digital banking, payment apps and other digital platforms.
  • The potential for Blockchain-based apps (in education- e.g., degree certificates, mark sheets; in health care – medical records; in unemployment benefits; KYC, passports etc.).
  • The growing popularity of crypto assets (and the attendant risk of them being used for money laundering, funding terror/anti-national activities etc.).
  • The rise of Web 3.0.
  • The increase in the use of drones for civilian purposes (e.g., delivery of vaccines, food to disaster-hit areas etc).
  • The emergence of the Metaverse as a theatre of personal/commercial interactions.

According to a news report, IRCTC had sought the services of consultants to help them analyze the huge amount of customer data they have and explore avenues to monetize the information. Given that the existing bill has been withdrawn, they have deferred this plan till new legislation is in place. Delays in enacting new data protection legislation thus also can impact revenue growth and profitability of various businesses- which is another reason for quickly coming up with new legislation.

 

The New Data Protection Law should be Well-defined and Unambiguous

While “consent” must be a cornerstone of any such legislation, the government must also ensure that users whose data need to be protected, fully understand the implications of what they are consenting to. For example, each time an individual downloads an app on his/her smartphone, the app seeks a number of permissions (e.g., to mic, contacts, camera etc.). As smartphones become repositories of larger slices of personally identifiable information as well as financial data (such as bank/investment details), and authentication details such as OTPs, emails etc., the risks of data breaches and misuse that cause serious harm increase. There are a number of frauds and digital scams to which citizens are falling prey. Commercial and other organizations that build and manage various digital platforms must be held accountable for what data they capture, how they do so, why they need the data, how/where they will store such data, who will have access to them etc.

Just as important is for the new law to define unambiguously terms like “critical data”, “localization”, “consent”, “users”, “intermediaries” etc. Many companies are establishing their Global Captive Centres (GCCs) in India, to take advantage of the large talent pool and process maturity. Strong laws will encourage more layers to consider this route seriously, thereby adding to jobs and GDP growth. Such investments also make it easier for India to be a part of emerging global supply chains for services (including high-value ones such as R&D and innovation).

It must address the risks of deliberate breaches as well. For instance, if hybrid working models are indeed going to remain in place, who should be held responsible for deliberate data leaks by employees working remotely? Or by their friends/relatives/others who take screenshots (or otherwise hack into systems) and share data with fraudsters?

While fears of an Orwellian world cannot be overstated, India’s new data privacy/protection legislation must be sufficiently forward-looking and flexible to give our citizens adequate safeguards. If the government fails to do so, our aspirations to become one of the top three nations on earth will take much longer – worse, they main only remain on paper as grandiose but unfulfilled visions.

Picture Credits: Photo By Fernando Arcos: https://www.pexels.com/photo/white-caution-cone-on-keyboard-211151/ 

While fears of an Orwellian world cannot be overstated, India’s new data privacy/protection legislation must be sufficiently forward-looking and flexible to give our citizens adequate safeguards. 

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Privacy Shield 2.0: Cue for EU-India Data Transfer Mechanism?

Since the implementation of GDPR standards across the EU, data transfer between other countries and the EU has become a widely debated complex issue across the world. Article 44 of GDPR permits the transfer of personal data outside the EU, only when the recipient country has an equivalent level of security to protect the personal data of EU citizens, as guaranteed by the General Data Protection Regulation (GDPR). The biggest dilemma that many countries across the globe face is that they either lack a national legislation on data privacy or if they do have one in place, it may not be considered at par with the standards set by GDPR. Such a situation creates a genuine legal obstacle to the transfer of personal data between the EU and those countries.

Conceptualization of the Privacy Shield

 

Over the years EU and various other countries have developed certain mechanisms to tackle these obstacles created by requirements mentioned under Article 44. Standard contractual clauses (SCC), binding corporate rules (BCR) are such instruments that the countries and corporates have adopted for the transfer of personal data.

The United States of America lacks a comprehensively dedicated legislation for data privacy.  However, the country has many sectorial legislation and regulations ensuring the privacy protection of individuals, yet, the EU has consistently ruled that the USA does not guarantee an equivalent level of protection.  Safe Harbour Framework, one such additional mechanism agreed upon between the Governments of the EU and USA defines a series of principles to be followed and adopted by companies for the transfer of personal data.

US companies were required to self-certify these principles mentioned under the safe harbour framework and the US regulators would in turn enforce such framework within their limits and jurisdictions.  In 2013, Edward Snowden rocked the world with some lethal revelations about various global surveillance programs run by the NSA. In light of such a disclosure, an Austrian citizen named Max Schrems filed a complaint stating that the US does not provide adequate protection of personal data against such mass surveillance undertaken by authorities. The European Court of Justice (“ECJ/ Court”), noted that the US could allow any national security, public interest argument and law enforcement requirement to prevail over the Safe Harbour framework. Hence, the ECJ concluded that the safe harbour decision was invalid, as it interfered with the fundamental rights of an EU citizen. This decision is widely known as Schrems I.

After courts invalidated the safe harbour decision, the European Commission and the US Department of Commerce came up with the Privacy Shield framework for the continued transfer of data from the EU to the US.  US Corporations who intend to receive personal data from the EU self-certify before the Department of Commerce that they will adhere to certain principles recognised in the Privacy Shield. These principles were developed by the US Department of Commerce in consultation with the European Commission.

This led Max Schrems to again file a complaint challenging the validity of the privacy shield and the use of SCCs by companies to bypass the requirements of adequate protection stipulated by Article 44 of the GDPR on the ground that US investigation agencies have unlimited access rights of personal data retained with USA corporations neither Privacy Shield nor SCCs prevents those rights. Accordingly, it was argued that Privacy Shield or SCCs does not ensure the privacy rights of EU citizens. This case soon came to be known as Schrems II. The Court of Justice of the European Union (CJEU) examined the US’s Foreign Intelligence Surveillance Act and the surveillance programmes that such provisions allow and found that US agencies have wider access rights on every data retained with USA corporations and Privacy Shield in any manner takes away these rights of USA investigative agencies.   CJEU accordingly invalidated the EU-US privacy shield mechanism. 

The judgment in Schrems II had led to a major deadlock between US-EU economic relations, particularly concerning the transfer of data. With no approved mechanism in sight, companies found it difficult to transfer data for achieving their business obligations. On 25th March 2022, the EU commission and US government announced that they had agreed in principle on a new framework for the purpose of cross border transfer of data, known as Privacy shield 2.0. The new framework promises to provide benefits to both sides of the Atlantic and ensure that a balance is created between the new safeguards and the national security objectives of the US, which will ensure the privacy of EU personal data.

The text of this new framework has not been released.  The press note released by the White House contains a few details that the framework might incorporate. It states that intelligence collection might be undertaken only where it is necessary to advance legitimate national security objectives and in no way should impact the protection of privacy and civil liberties[1]. In addition, the US intelligence agencies will adapt procedures to ensure effective oversight of new privacy and civil liberties standards[2]. Moreover, a proposal to set up an independent Data Protection Review Court has been mooted for EU individuals seeking claims and damages for breach of their personal data by the US Government. The proposal also details that the adjudicating members or individuals shall be chosen from outside the US Government.

If Privacy shield 2.0 does pass the test laid down by the European courts, experts believe that this could trigger an estimated $7.1 trillion economic relationship between the US and the EU. Hopefully, Privacy shield 2.0 will be able to provide a predictable, effective and lasting remedy for transferring personal data from the EU to the USA.

 

 

Data Transfer between EU and India

 

The above discussions and mechanisms have a significant relevance in relation to data transfer between the EU and India. The Indian investigation and intelligence agencies have similar powers to their US counterparts in terms of their right to access or demand or conduct searches in any Indian enterprises and collect all relevant data required.  The fundamental right to privacy recognised in the Puttuswamy case is not absolute. Further, as per Article 19(2) of the constitution, the state can impose reasonable restrictions on the exercise of fundamental rights in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality or in relation to contempt of court, defamation or incitement to an offence.

Moreover, Section 69, of the IT Act, 2000 provides the Central and State government with the power to intercept or monitor any information stored in a computer resource provided such information is required for:

  • In the interests of India’s sovereignty and integrity.
  • Defence of India,
  • State’s security,
  • To maintain friendly relations with other nations, or
  • To maintain public order, or
  • For preventing incitement to the commission of any cognizable offence relating to the above, or
  • For investigation purposes

The above provisions are similar to the rights available to US investigative agencies. For the same reasons, the Schrems II judgment and Privacy Shield mechanisms are relevant while considering EU-India data transfer.

Currently, there are no approved mechanisms for data transfer between the EU and India like the Privacy Shield framework. Hence, the European companies are justifiably reluctant to establish business relations with our country. Since India is a hub of IT-enabled services like BPOs and KPOs, it is desirable to have an efficient and clear legal regime for data transfer to foster a symbiotically advantageous economic relationship between the two sovereigns. Unfortunately, neither of the Governments has taken any urgency to initiate the formulation of rules similar to the Privacy Shield. It is worthwhile to consider whether the new Privacy Shield 2.0 could be considered and replicated in India.  If both the governments can demonstrate their intent, the groundwork for a contusive business environment for data transfer between the two sovereigns can be initiated. 

Currently, there are no approved mechanisms for data transfer between the EU and India like the Privacy Shield framework. Hence, the European companies are justifiably reluctant to establish business relations with our country. Since India is a hub of IT-enabled services like BPOs and KPOs, it is desirable to have an efficient and clear legal regime for data transfer to foster a symbiotically advantageous economic relationship between the two sovereigns. 

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