Power

Tech companies are ‘scrambling’ after the EU’s top court shot down the EU-US Privacy Shield

More than 5,000 companies rely on the shield. Now they have some work to do.

Tech companies are ‘scrambling’ after the EU’s top court shot down the EU-US Privacy Shield

A complaint filed by Austrian data protection activist Max Schrems led a top EU court to strike down the EU-US Privacy Shield.

Photo: Alex Halada/AFP via Getty Images

Tech companies across the U.S. are scrambling to figure out how they can remain in compliance with international privacy laws after Europe's highest court struck down the EU-US Privacy Shield.

In a win for privacy activists, the Court of Justice of the European Union invalidated the Privacy Shield on Thursday, saying the framework does not adequately protect European users from the U.S. government's far-reaching surveillance laws. The decision will force the 5,384 companies that currently rely on the EU-US Privacy Shield to recalibrate their privacy policies, particularly when it comes to how and why they collect data on EU users.

"Like many businesses, we are carefully considering the findings and implications of the decision of the Court of Justice in relation to the use of Privacy Shield and we look forward to regulatory guidance in this regard," Facebook lawyer Eva Nagle said in a statement.

While Facebook, Google, Amazon and Microsoft all partially rely on the EU-US Privacy Shield to transfer data on EU users, 70% of the companies that have been certified under the framework are small- to medium-size businesses, according to the Computer and Communications Industry Association. And those companies, which have fewer resources and likely don't have established servers in the EU, will likely face the greatest challenges as they seek to comply with the decision, said Omer Tene, a vice president with the International Association of Privacy Professionals.

Tene said the privacy professionals he's speaking to are "scrambling," although the decision was not shocking to those watching the case closely.

Eleven U.S.-based companies reached by Protocol on Thursday said they are reviewing the decision with their legal advisers, poring over complicated and extensive agreements and contracts to ensure their current data transfer agreements are still in compliance with the law. Several said they are waiting on further guidance from European and U.S. regulators and might have to make some changes to how they do business.

"Discord is reviewing the ECJ decision and looks forward to regulatory guidance from the European Commission and the Department of Commerce," said a spokesperson for Discord, a popular chat site with users around the world.

Dave Koslow, the chief operating officer of electronic agreements company DocSend, said "there's some work to do" for the company in the immediate term. "We'll need to review our agreements and make any adjustments necessary to accommodate the change in regulations," Koslow said.

While the court struck down the Privacy Shield, its opinion upheld "standard contractual clauses," shorter-term agreements that allow American companies to handle EU data. The court called on data authorities in Europe to ensure those clauses provide an "adequate level of protection" for EU users, which will likely lead to heightened EU scrutiny of those clauses.

Tech firms including Fitbit, Ancestry.com, Box, cloud software company Domo and Akami Technologies all said they will rely on those agreements in lieu of the EU-US Privacy Shield.

"We rely on multiple legal bases to lawfully transfer personal data around the world," said a Fitbit spokesperson. (EU regulators are currently investigating Fitbit's acquisition by Google.) "These include your consent, the EU-US and Swiss-US Privacy Shield, and EU Commission approved model contractual clauses, which require certain privacy and security protections."

Rafi Azim-Khan, the head of data privacy at Pillsbury, said the "seismic" court case is only the latest reminder for companies that privacy is now a "board-level issue."

Correction: This story was updated at 4:51 p.m. to correct where Dave Koslow works.

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