Yesterday, the European Court of Justice (ECJ) handed down its decision on the Schrems Case, a lawsuit against Facebook regarding data privacy.  The court’s decision determined that the U.S. – EU Safe Harbor Agreement is invalid.  This decision will create legal uncertainty for over 4,400 companies in the Safe Harbor as they may no longer use the Safe Harbor as a basis for transferring data between the United States and the European Union.  Upon news of the decision, SIIA issued its comments to voice deep concern about its effects on data flows and digital trade.

This decision was passed due to privacy and surveillance concerns regarding U.S. access to data on European citizens.  Under the Safe Harbor Agreement, which has been in place since 2000, companies had the legal certainty to transfer data across the Atlantic.  The Court of Justice’s ruling that this Safe Harbor Agreement is invalid will negatively affect data transfers and transatlantic transactions causing tangible economic harm to both European and American companies alike.

After the ruling, Frans Timmermans, the First Vice-President of the European Commission, addressed the issues raised by companies in light of this ruling.  Trying to alleviate concerns held by businesses, Timmermans said that other existing legal mechanisms such as model contracts or data subject consent will enable businesses to continue to move data between Europe and the United States.  Unfortunately, due to ECJ’s ruling on Safe Harbor, it remains unclear how well these other existing mechanisms will hold up.

As mentioned previously, more than 4,400 companies rely on the Safe Harbor Agreement to transfer data between the European Union and the United States.  Companies used the Safe Harbor Agreement to transfer data during regular web searches, buying movies from online service providers, or even for employee payroll and benefits purposes.  This court ruling adversely affects these types of transfers affecting the way these companies, do business.  The effects go way beyond technology companies.

The Obama Administration was unhappy with this ruling by the ECJ.  Secretary of Commerce Penny Pritzker issued a statement in which she said, “We are deeply disappointed in today’s decision from the European Court of Justice, which creates significant uncertainty for both U.S. and EU companies and consumers, and puts at risk the thriving transatlantic digital economy.”

Indeed, as Secretary Pritzker stated, this issue is a huge deal for the maintenance of the U.S. and EU transatlantic digital economies.  As such, companies need a way to transfer their data until a new Safe Harbor Agreement can be put into place.  There needs to be agreement on legal reassurances for the transfer of personal data from the European Union to the United States.  Hopefully, these developments will speed up the completion of a new Safe Harbor framework.

Diane Pinto is the Public Policy Coordinator at SIIA. Follow the Policy team on Twitter @SIIAPolicy.