Privacy & Information Security Law Blog

On February 5, 2010, the European Commission adopted a new set of standard contractual clauses (“SCCs”) for transfers of personal data from data controllers in the EU to data processors outside the EU.  View the European Commission press release.

Despite the growing popularity of other mechanisms that provide a legal basis for complying with the EU legal restrictions for transferring personal data outside the EU (such as binding corporate rules), the use of SCCs remains indispensable.  In many situations SCCs are the only “off the shelf” data transfer solution that can be used and implemented on short notice.  The Commission already published a set of SCCs for transfers to data processors that were approved in 2001, but companies have found that they do not always take business realities into account.  The SCCs can be burdensome to use in practice, in particular for the following reasons:

• The existing SCCs do not contemplate the possibility that a data processor outside the EU may need to transfer personal data to another data processor, which happens very often in practice.
• The SCCs can require the application of data security requirements from multiple EU Member States.
• Many Member States impose bureaucratic formalities (notarization of signatures, annual updates, etc.) on use of the clauses.
• There can be practical problems when using the clauses with multiple parties.
• The SCCs contain a mandatory arbitration clause to which many companies have objected.

Although the Commission did not adopt many of the suggestions made by the business associations, thus diluting the value of the new clauses, the new SCCs do have some important advantages over the existing controller-to-processor clauses.  For example:

• For the first time in EU data protection law, the new clauses provide a legal basis for processor-to-processor transfers.  Under the clauses, such transfers may be carried out when (1) the original data controller consents in writing, and (2) the same data protection obligations are imposed on the subprocessor as are imposed on the original data importer.  The original data importer remains liable for any data protection violations by the subprocessor.
• The arbitration clause has been deleted.

There are two further important points with regard to the new clauses:

• The new clauses must be used for new or changed transfers to data processors; i.e., the existing SCCs for controller-to-processor transfers may no longer be used for such transfers (but existing SCCs remain in effect).
• The SCCs cover transfers from the EU to a data processor outside the EU, but not transfers from a data processor in the EU to a subprocessor outside the EU, although data protection authorities “may” allow use of the new clauses in such situations as well.

The full text of the new SCCs has been published in the Official Journal of the European Union.  Hunton & Williams has prepared a redline version showing the changes from the previous SCCs.