US and EU Reach Preliminary Data Privacy Agreement


BRUSSELS – The United States and the European Union have reached a preliminary agreement to allow the storage of data on Europeans on American soil, thus averting a growing threat to the transatlantic operations of thousands of companies.

The deal, announced Friday by President Biden and European Commission President Ursula von der Leyen, could, if reached, resolve one of the thorniest outstanding issues between the two economic giants. It also allays concerns from companies such as Meta Platforms Inc. and Alphabet Inc.

Google which was facing growing legal challenges over the data transfers that underpin some of its operations in Europe.

An earlier deal regulating transatlantic data flows was ruled illegal by the EU’s highest court in 2020. The ruling was the second time since 2015 that the EU Court of Justice found US data safeguards insufficient of Europeans. The court said the US failed to provide EU citizens with effective means to challenge the US government’s surveillance of their data.

Officials and observers on both sides of the Atlantic expect any new deal to be challenged again in court, raising uncertainty over the length of Friday’s deal.

Mr. Biden and Ms. von der Leyen did not provide details on how the new deal would work and withstand legal challenges. The question in the talks was whether the US could convince the EU – and its highest court – with new administrative appeal mechanisms for Europeans, but without changes to US law, which would require approval of Congress, people briefed on the talks said. These last months.

Apple has started requiring apps to ask for user tracking permissions. Now tech giants and small businesses say they are losing money because of the new privacy policy. The WSJ’s Shelby Holliday explains why these costs could be passed on to consumers. Illustration: Raphaël Garcia

Mr Biden said that “the framework underlines our shared commitment to privacy, data protection and the rule of law” and would allow EU authorities “to re-allow data flows”. transatlantic data that helps facilitate $7.1 trillion in economic relations with the EU”. .”

Ms von der Leyen said the agreement “will enable predictable and reliable data flows between the EU and the US, protecting privacy and civil liberties”.

If successful, the data deal would resolve one of the last major points of contention in US-EU relations in recent years. Over the past year, the two sides have agreed to a truce in their long-running fight over subsidies to Airbus SE and Boeing. Co.

struck a deal to rescind U.S. steel and aluminum tariffs and increasingly aligned their positions on China’s economic practices.

“Just as we did when we resolved the Boeing-Airbus dispute and lifted steel and aluminum tariffs, the United States and the EU are finding creative new approaches to bringing our economies closer together and our peoples around common values,” Biden said, alongside Ms von der Leyen in Brussels.

The deal, if upheld, would mark a major victory for thousands of companies across a range of industries moving data from the EU to the US, many of whom have warned in securities filings against potential disruption if they were forced to cut off the trans-Atlantic data stream.

The ability of companies to use US-based data centers to do things like sell online advertisements, measure their website traffic or manage payroll for companies in Europe is at stake.

Friday’s deal is particularly important for big US tech companies, which have called on diplomats to strike a deal to avoid a growing number of cases in which European privacy regulators order them or their customers, to stop their transfer of data to the United States.

In France and Austria, regulators citing the 2020 EU court ruling recently ordered some websites to stop using Alphabet’s Google Analytics service because it sends information about users’ web addresses. in the United States, where regulators say it could be requested by government agencies. Similar cases are ongoing in other EU countries.

The Irish Data Protection Commission has also finalized a draft order under EU court precedent that could have forced Facebook’s Meta Platforms to stop sending certain data about its users to servers in the United States, because they could be caught up in surveillance requests. Meta warned that such an order, if implemented, could force it to stop offering some of its services in Europe.

But lawyers and privacy experts say such orders would likely be preempted by the new EU-US deal – at least until a new court battle is fought – because any deal should address the same concerns the EU court raised in 2020.

Jay Modrall, a partner at Norton Rose Fulbright law firm in Brussels, said the deal “will be a big relief for many companies”, although he added that the deal is also at risk of being challenged again. .

On Friday, tech companies such as Google and Meta welcomed the deal. The Computer & Communications Industry Association, which represents companies like Amazon.com Inc.

and apple Inc.,

said the agreement should “restore legal certainty for thousands of companies that regularly transfer commercial data between the EU and the US”

“With growing concern over the global fragmentation of the internet, this agreement will help keep people connected and services running,” Nick Clegg, Meta’s vice president of global affairs, said on Twitter.

In recent years, major economies including China and India have considered privacy rules that force companies to keep data within national borders for national security and data protection reasons. In Europe, the dispute over data transfers has prompted some US companies to similarly move data or facilities to the bloc.

While many American companies such as Microsoft Corp.

already claim to comply with EU privacy standards, the pending agreement will nevertheless provide clarity to customers concerned about whether their personal information could be subject to surveillance, said Julie Brill, the company’s chief privacy officer. .

“It will start to build those bridges and build the trust that they need,” Ms Brill said.

The deal announced Friday is the latest effort to bridge more than two decades of wrangling over how to balance privacy and commerce when it comes to transatlantic data flows. But while some lawyers and lobbyists in the United States have expressed optimism that the new deal will withstand legal scrutiny, some in Europe have said they believe any deal that is not coupled with changes to the US surveillance laws are unlikely to pass with the EU Court of Justice.

“We had a purely ‘political’ agreement in 2015 also called #PrivacyShield – but it lacked a basic legal basis and was dead on arrival,” Max Schrems, the Austrian lawyer and privacy campaigner who led the cases that overturned two earlier agreements dubbed Safe Harbor and Privacy Shield, said on Twitter ahead of the deal.

Write to Daniel Michaels at daniel.michaels@wsj.com and Sam Schechner at sam.schechner@wsj.com

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