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. In addition, the US intelligence agencies will adapt procedures to ensure effective oversight of new privacy and civil liberties standards. 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.