Case that could overturn EU-US data exchange deal to be heard by top EU court

If the court decides to revoke the data exchange deal it could hurt U.S. tech companies

U.S. companies' ability to process personal information from European Union citizens will be challenged in the European Union's highest court on Tuesday.

At stake is the Safe Harbor Framework allowing U.S. companies to self-certify that they meet tough EU rules on the processing of personal information.

A decision to revoke the deal could have serious consequences for U.S. companies that process EU citizens' data in the U.S. Earlier this month, Twitter warned that a revocation of the deal could seriously hurt its business.

On Tuesday, the Court of Justice of the European Union (CJEU) will hear a case referred to it by the Irish High Court, which wants to know if data protection authorities are absolutely bound by a 2000 European Commission decision, which found that personal information transferred to a third country such as the U.S. is adequately protected by the Safe Harbor principles.

According to Max Schrems, front man of the Europe-v-Facebook group and plaintiff in the Irish case, this data is not adequately protected when Facebook and other U.S. tech companies take the data of EU citizens to the U.S. for processing. Personal data processed in the U.S. can be accessed by the U.S. National Security Agency (NSA) for mass surveillance purposes, and by giving the NSA access to it fundamental EU privacy laws are violated, he said.

The case that is now before the CJEU started when Schrems filed a complaint about Facebook's data processing with the Irish Data Protection Commissioner in 2013. The DPC refused to start an investigation because it found it was absolutely bound by the Safe Harbor requirements. Schrems then challenged this decision with the Irish High Court, which referred the case to the CJEU.

Schrems' arguments about the NSA's spying may have swayed the Irish High Court, which said in referring the case: "There is, perhaps, much to be said for the argument that the Safe Harbor Regime has been overtaken by events. The Snowden revelations may be thought to have exposed gaping holes in the contemporary U.S. data protection practice."

The CJEU is set to hear the views of 12 parties, Schrems said on Monday, adding that they include submissions from seven EU countries, the European Commission and the European Parliament.

He is not allowed to identify the countries due to strict CJEU rules, he said in an email. A CJEU spokesman declined to comment on which parties submitted their views or what their views were.

Despite the strict CJEU rules, Schrems said he could say that several proposals were made to solve the case. One proposal was made to suspend data flows to individual companies like Facebook, Apple, Google, Yahoo or Microsoft by invoking an emergency provision in the Safe Harbor rules.

Waiting for a political compromise between the EU and the U.S. on Safe Harbor was also mentioned, he said. The Commission hopes to conclude negotiations over Safe Harbor by the end of May.

Schrems said he and others asked the court to invalidate the Safe Harbor agreement.

Despite the serious implications of invalidating the Safe Harbor rules, it would not make data exchanges between the EU and U.S. impossible, Schrems said. Self-certified companies might lose their rights but would still be able to apply for data transfers under a number of other legal regimes. Nevertheless, a revocation may make it harder for U.S. companies to retrieve data from the EU and they might be prompted to invest in secure European data centers, he said.

Tuesday's hearing in Luxembourg will start at 9.30 a.m. CET and will be open to the public. No live stream of the proceedings will be provided or permitted, a spokeswoman said.

The CJEU will take at least five months to make its decision.

Loek is Amsterdam Correspondent and covers online privacy, intellectual property, online payment issues as well as EU technology policy and regulation for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com

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