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Schrems II Decision: Privacy Shield Invalid, Standard Contractual Clauses Survive

Schrems II Decision: Privacy Shield Invalid, Standard Contractual Clauses Survive

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The European Court of Justice's judgment in Schrems II case published on 16 July, 2020 founded the Privacy Shield Decision invalid. The judgement also stated that the Commission Decision on Standard Contractual Clauses for the transfer of personal data to processors established in third countries remain valid.

The GDPR provides that the transfer of personal data to a third country may, in principle, take place only if the third country in question ensures an adequate level of data protection. According to the GDPR, the Commission may find that a third country ensures an adequate level of protection. In the absence of an adequacy decision, another frequently used tool is the so-called standard data protection clauses. 

One of the legal bases for the transfer of data to the United States was the so-called Privacy Shield. This provided a mechanism to ensure an adequate level of protection in the case of transfers of personal data to the US. Since the Privacy Shield has been invalidated by the Court, personal data may no longer be transferred to the US based on this adequacy decision.

On 24 July 2020, the EDPB (European Data Protection Board) provided further "guidance" on Schrems II to clarify on how the judgment now needs to be implemented by companies that transfer personal data to countries outside the EEA. The EDPB stressed that the ruling is a 'living document', therefore not conclusive, and that further guidance will be provided.

The EDPB confirmed that Standard Contractual Clauses remain a possible basis for data transfers outside the EEA but emphasised again that a transfer to the US can only be justified via Standard Contractual Clauses if additional measures are taken to ensure the same level of data protection equivalent to the level offered in the European Union. The EDPB stated that the European Court of Justice’s assessment of the invalidity of the Privacy Shield is also applicable regarding BCRs (Binding Corporate Rules), since U.S. law will also have primacy over this tool. This means that a similar case-by-case assessment as that used for Standard Contractual Clauses is required and the above requirements also apply for BCRs.

The EDPB expressed that any data transfer based on the Privacy Shield is illegal and there will be no 'grace period' for data processing on this framework, as the U.S. law does not provide equivalent level of protection as in the EU - according to the Court.

By Adrienn Megyesi, Partner, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

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The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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