Privacy & Information Security Law Blog

On November 23, 2018, the European Data Protection Board (“EDPB”) published its long-awaited draft guidelines on the extraterritorial application of the EU General Data Protection Regulation (“GDPR”) (the “Guidelines”). To date, there has been a degree of uncertainty for organizations regarding the scope of the GDPR’s application outside of the EU. While the Guidelines provide some clarity on this issue, questions will remain for non-EU controllers and processors. Importantly, these Guidelines are only in draft form and are open for consultation until January 18, 2019, which will give organizations an opportunity to provide comments and raise additional questions in an effort to obtain further clarification from the EDPB on these important scoping questions.

Under Article 3 of the GDPR, the law applies to organizations that process personal data in three circumstances:

1. When a controller or processor is established in the EU and processes personal data in the context of the activities of that establishment;
2. When a controller or processor is not established in the EU but processes personal data relating to the offering of goods or services to individuals in the EU; or
3. When a controller or processor is not established in the EU but monitors the behavior of individuals in the EU.

Given the extensive obligations imposed by the GDPR and the onerous enforcement regime, global organizations have been rightly focused on how their own data processing activities may (or may not) fit within the scope of Article 3. While the Guidelines do not resolve all of these questions, they do provide some clarity. We have summarized and assessed the key aspects of the Guidelines below.

• For controllers and processors that are located in the EU, the Guidelines reiterate that the GDPR applies to the processing of personal data by those EU establishments regarding all data subjects, regardless of their location or nationality. For example, the processing of personal data by a French controller relating to customers in the U.S. is subject to the GDPR. As a practical matter, this means that the GDPR will apply in full with respect to this processing, including with respect to data subject rights available under the GDPR, which in this hypothetical would be conferred upon the controller’s customers in the U.S.
• A non-EU controller that is not otherwise subject to the GDPR will not become subject to the GDPR merely because a data processor located in the EU processes personal data on its behalf. This reiterates the conventional interpretation of Article 3, as this non-EU controller would not be established in the EU, nor would it be offering goods or services to individuals in the EU or monitoring behavior in the EU on account of retaining an EU processor.
• If a controller subject to the GDPR uses a non-EU processor that is not otherwise subject to the GDPR, that processor will not become directly subject to the GDPR on account of this processing. Notably, the Guidelines state that “the existence of a relationship between a controller and a processor does not necessarily trigger the application of the GDPR to both, should one of these two entities not be established in the Union.” Instead, the controller subject to the GDPR will need to execute an Article 28 agreement with the non-EU processor. As a practical matter, this means that, from a contractual perspective, the processor will be subject to many of the same substantive obligations imposed on processors subject to the GDPR. This also means, however, that breaches of these Article 28 contractual obligations by such processors will only be enforceable as breaches of contract, not as direct GDPR infringements.
• With regards to controllers or processors that are not established in the EU but process personal data relating to the offering of goods or services to individuals in the EU, the Guidelines confirm that the key factor for determining scope is whether the controller or processor intends to “target” individuals in the EU. The mere accessibility of a website from the EU, for example, is insufficient. The Guidelines provide a non-exhaustive list of nine factors that may indicate an intention to offer goods or services to individuals in the EU, including running marketing campaigns aimed at an EU audience, the use of EU-related domain names, the provision of dedicated contact telephone numbers for individuals in the EU, and the delivery of goods to locations in the EU.
• With regards to controllers or processors that are not established in the EU but monitor the behavior of individuals in the EU, the Guidelines acknowledge that unlike the “offer of goods or services” prong discussed above, the “monitoring” prong does not include an “intention to target” criteria for purposes of determining application of the GDPR. The Guidelines do, however, provide clarity with respect to the “monitoring” prong by stating that “the EDPB does not consider that any online collection or analysis of personal data of individuals in the EU would automatically count as ‘monitoring’.” Rather, the EDPB states that “the use of the word ‘monitoring’ implies that the controller has a specific purpose in mind for the collection and subsequent reuse of the relevant data about an individual’s behaviour within the EU.” This is an important clarification, as it implies a degree of intentionality must be present with respect to the collection and reuse of personal data of individuals in the EU by organizations outside the EU for it to constitute cognizable “monitoring.” Accordingly, a website based in the U.S. that is focused on the U.S. market does not necessarily fall within the scope of the GDPR simply on account of the fact that an individual in the EU visits the website and the website engages in automated data collection. For the GDPR to apply, the U.S. website would need to have a “specific purpose in mind” with respect to its collection and reuse of the EU visitor’s personal data, which is unlikely for a business singularly focused on the U.S. market.
• The Guidelines recommend that Article 27 representatives should be located in the EU Member State in which the majority of data subjects whose personal data are processed are located. In addition, the Guidelines confirm that, in principle, enforcement action for non-compliance with the GDPR by the controller or processor could be initiated against the EU representative “in the same way as against controllers or processors,” including the possibility of imposing administrative fines and penalties.

There was an expectation that the Guidelines would provide guidance related to how the restrictions on transfers of personal data outside the EU are intended to coexist with the extraterritorial application of the GDPR, but the draft did not address this issue directly. Once the consultation period ends on January 18, 2019, we expect the Guidelines to be published in final form by April 2019.