‘Safe harbour’ deal in rough waters as US considers rethink

Date: 19/07/01

WASHINGTON claimed victory when it cemented a deal with the Union last year allowing the transfer of personal data to the US.

However, former US federal trade commissioner Christine Varney, now a lawyer at Hogan & Hartson in Washington, told a Brussels conference recently that there is growing unease on Capitol Hill about the 'safe harbour' deal. She reported that senior members of the House of Representatives' commerce committee have asked the Bush administration to review the agreement amid concerns that it would cost consumers billions of dollars and stifle competition.

Although Varney said she does not think that the safe harbour accord will be torn up entirely, she conceded that its future is uncertain.

Under the agreement, firms which sign up to voluntary safe harbour principles do not need prior approval for transferring employee records and other personal data to the US, as required under existing EU law. In return, firms must adhere to rules designed to ensure that they do not misuse the records.

They must, for example, agree to tell individuals what they plan to do with the information and give them the opportunity to choose whether it can be disclosed to a third party.

The ease with which companies can exchange personal data - especially over the Internet - has prompted growing concern in many countries about protecting citizens' privacy. While the US prefers a sector-by-sector approach relying on a mix of legislation and industry self-regulation, the EU has preferred to err on the side of caution.

Since 1998, the Union has implemented some of the toughest rules on the books, requiring the creation of government data protection agencies. Often, prior approval is required for personal details to be processed, and national commissioners are empowered to block transfers to third countries which do not guarantee "adequate protection".

Although the US falls into this category, its arrangement with the EU should make data transfers easier.

So far, the scheme is off to a slow start, with the number of firms who have signed up well below expectations. "It's still a pretty small club," said one diplomat, adding that there has nevertheless been a steady increase in the number of firms joining the scheme. (The current list is available on the Commerce Department's website, www.ita.doc.gov.)

There are also a number of sectors which are not covered by the agreement, including banks and telecommunications firms. The Federal Trade Commission (FTC) may soon provide some direction as it works on drafting separate directives applying to these particular industries.

Regardless of the outcome, the true test of any agreement is the extent to which it is enforced. In this area there are also kinks to be worked out.

If there are complaints and a firm is found to be violating the agreement, it may be punished by the FTC or the US Department of Transportation.

Article forms part of a survey on e-commerce.