GDP of EU could be hit in Facebook case, court hears

The GDP of the entire European Union could be impacted negatively by between 0.8 per cent and 1.39 per cent – about €143 billion in annual terms – if special clauses used to transfer personal data are found to be invalid, it has been claimed in the High Court.

Ten parties on Tuesday sought to be joined to a case being taken by the Data Protection Commissioner.

In a recent draft decision following a complaint by privacy activist Max Schrems about the method being used by Facebook to transfer his personal data to the US, the commissioner found his concerns about the so-called standard contractual clauses were well founded.

The clauses are among a number of methods used by data controllers in the EU to legally transfer personal data outside the European Economic Area.

Maurice Collins SC for the Business Sofware Alliance, which includes companies such as Intel and Symantec among its members, said if the clauses were ultimately struck down when the case goes before the Court of Justice of the European Union there would be “significant” economic and commercial consequences.

Data

An interruption in the free-flow of data would have a negative impact on EU GDP of between 0.8 per cent and 1.39 per cent, he claimed.

The court heard that personal data transfers governed by the standard contractual clauses included the “full spectrum” of economic activity, including banking, call centre operations and payroll systems.

Mr Collins said his organisation was not in court to “effectively act as cheerleader” or for the purpose of assisting or opposing any party.

He said that while there was likely to be significant issues of American law, it seemed to him there would be little factual dispute and little scope for factual dispute.

The interruption of data flows would have “tremendous commercial consequences” and his clients were concerned about the impact on their members.

The organisation had offices in 15 countries and operated in 60, he said.

Mr Collins said Mr Schrems might very well prevail and the court might “very well say the sky must fall in” in relation to the model contracts, but it was of “critical importance” that the court have a broad perspective.

Cian Ferriter SC for Ibec said there were 185,000 SMEs employing over 70 per cent of the State’s workforce. He said these companies were involved in controlling and processing personal data either themselves or through outsourcing. Personal data transfers outside the EU were happening “every minute of the day”, he said.

It was in Ibec’s members’ interest to ensure the rights of their customers were protected, he said.

Mr Ferriter said it was not a case of “big, bad business” versus a “poor victim” private individual at all.

Decision

The “entire chain of economic activity” on this island could be affected by the court’s decision, he said.

Eileen Barrington SC for the US government said the US was in a “unique and unprecedented position” in circumstances where it was a sovereign state whose circumstances were at the heart of the proceedings.

Making an unprecedented application for the US to join a case here, Ms Barrington said the action was capable of impacting on US agencies and on US commerce generally.

“I think it’s fair to say it’s difficult to exaggerate the importance with which the US views these proceedings. They are of critical importance,” she said.

The US was in a position to offer expertise on US law, but also to provide the court with details of developments in relation to the adoption of the proposed Privacy Shield agreement to facilitate data transfers.

The US considered that decision likely to be adopted by the European Commission in the near future, based on commitments it had given in relation to ensuring an adequate level of protection for European data subjects.

The court heard nine submissions from 10 bodies, including the Electronic Frontier Foundation, the Elecronic Privacy Information Centre, Ibec, the Business Software Alliance (which numbers companies such as Intel and Symantec among its members), the Irish Human Rights and Equality Commission, the American Civil Liberties Union, the Irish Council for Civil Liberties and Mr Kevin Cahill, a lay litigant.

Counsel for Facebook, Paul Gallagher SC, said the standard contractual clauses were important for Facebook, but there were other means available to it to transfer personal data.

But he said there were other parties not involved in the proceedings for whom the clauses were “absolutely vital” in order to enable them transfer personal data beyond the boundaries of the EU.

Conclusion

The breadth of business entities that would be affected were the court to come to a conclusion that the clauses were invalid was “quite enormous”.

Many businesses would not be able to continue if there was a prohibition on them transferring personal data outside the EU.

The issues involved transcended Mr Schrems’s complaint, Mr Gallagher said. There was “no precedent” for a case of this nature.

The possible commercial impact of a finding that the SCCs were invalid "would not only be enormous for Ireland, but would be enormous for Europe as a whole".

Facebook objected to the inclusion of EPIC as an amicus curiae because Mr Schrems serves as an advisor on the board. However, EPIC said he was one of over 90 experts it called on and it gave an assurance he would not be involved in any way in the case.

Mr Justice Brian McGovern said he hoped to give his decision in relation to the applications in about two weeks.