SaaS Agreements – Brexit – EU Data Transfers to the UK after Brexit

Under EU and UK data protection laws, UK SaaS suppliers are lawfully permitted to transfer personal data of SaaS customers located in the EU to any country within the EEA. From the 30th of March 2019, when the UK leaves the EU (“Brexit Date”), the UK will no longer be part of the EEA and will become a “third country” for data protection purposes, just like the USA.

The EU Commission recently confirmed in a Notice that on the Brexit Date, UK based SaaS suppliers can no longer lawfully transfer personal data of SaaS customers located in the EU (i.e. in France, Germany, Spain etc.) to the UK, unless SaaS suppliers have in place appropriate protection measures to make the transfer legal under the GDPR.

EEA Data Transfers

The EEA is the EU, Norway, Lichtenstein and Iceland. If the UK decides to become a member of the EEA in its own right, following Brexit, UK SaaS suppliers would be able to continue to transfer personal data of  SaaS customers located in the EU to the UK. However, the UK government has indicated that it does not intend to join the EEA after leaving the EU. This means that prior to the Brexit Date the UK government must agree alternative arrangements with the EU to allow personal data to be transferred from the EU to the UK or SaaS suppliers themselves will put alternative arrangements in place from the Brexit Date.

Alternative Arrangements

The alternative arrangements that could be used by UK SaaS suppliers are currently:

  • Standard model clauses;
  • Binding Corporate Rules;
  • Approved certification measures; or
  • Consent from data subjects.

Standard Model Clauses

Standard model clauses are designed to allow EU SaaS customers transfer personal data from the EU to SaaS suppliers located outside the EEA. If the UK is not a member of the EEA after leaving the EU, SaaS customers located in the EU will need to enter into EU model clauses with UK SaaS suppliers in order to  continue to transfer personal data to UK SaaS suppliers.

BCRs

Binding Corporate Rules (BCRs) are designed to allow multinational companies to transfer personal data from the EEA to their affiliates located outside of the EEA in compliance with EU data protection law. If the UK is not a member of the EEA after leaving the EU, then a UK based SaaS customer will not be able to use BCRs to cover transfers outside of the EEA to a data processor, unless the SaaS customer has another entity located within the EEA. In any event, BCRs only cover inter-company transfers of personal data, not transfers of data by a SaaS customer to a third party SaaS supplier located outside of the EEA.

Approved Certification Measures

The UK government could apply for an adequacy decision from the European Commission certifying that it provides adequate protection for data transfers under English law. Currently Andorra, Argentina, Canada, Faeroe Islands, Israel, Isle of Man, Jersey, Switzerland, New Zealand and Uruguay are considered as having “adequate” protection. However, it is unlikely that such a decision would be granted if the UK:

  • Does not continue to comply with the General Data Protection Regulation (GDPR) after the Brexit Date; or
  • Changes its existing data protection laws – which are based upon a EU directive and the GDPR from the 25th of May 2018.

In any event an adequacy decision would not be approved by the European Commission prior to the Brexit Date.

EU-UK Privacy Shield

Another option would be for the UK to enter into an agreement with the EU similar to the EU-US Privacy Shield. The EU-US Privacy Shield (which replaced the Safe Harbor framework) permits EU entities to lawfully transfer personal data from the EU to the US. The UK could negotiate its own privacy shield to cover personal data transfers from the EU to the UK. Again, it is unlikely that a UK-EU privacy shield would be negotiated, or finalised, prior to the Brexit Date.

Consent

Another method of compliance is to obtain specific consent from each data subject before the transfer to the UK takes place. If the data subject consents to the transfer outside of the EEA, the transfer to the UK SaaS supplier will be in compliance with EU data protection law. Consent is usually obtained by having a data subject agree to the transfer of its personal data outside of the EEA and full details about the transfer itself should be set out in the privacy policy of the SaaS customer and the SaaS supplier.

How to Prepare for Change

UK SaaS suppliers should start considering the specific changes that may need to be made to the data protection terms of their SaaS agreements and privacy policies in order to allow them to continue transferring personal data from the EU to the UK once the UK leaves the EU on the Brexit Date. This action should be taken now, regardless of which, if any, of the above actions the UK government decides to take deal in order to ensure that data transfers from the EU can continue to take place from the Brexit Date.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – GDPR – US Companies

From the 25th of May 2018 the EU General Data Protection Regulation (GDPR) will come into force and change existing UK data protection laws. The GDPR does not just apply to SaaS suppliers and SaaS customers located in the EU. The GDPR also applies outside the EU, i.e. to SaaS suppliers and SaaS customers located in the USA and other non-EU countries.

GDPR Applies to US SaaS Customers and SaaS Suppliers

The GDPR will apply to SaaS suppliers and SaaS customers located in the USA if:

  • They offer goods or services to SaaS customers located within the EU; or
  • They monitor the behaviour of EU data subjects;

Even though the SaaS supplier or SaaS Customer is not located within the EU.

US SaaS suppliers and US SaaS customers must therefore comply with the provisions of the GDPR from the 25th of May 2018.

Offering Goods or Services

In order for a US SaaS customer or supplier to be deemed to be offering SaaS goods or services it must be clear that the US company envisages offering SaaS goods or services to data subjects in one or more EU countries. This will be determined by looking at:

  • The use of any country specific domain names, e.g. co.uk;
  • The languages in which goods or services are offered, e.g. French;
  • The currencies in which goods or services are offered e.g. Euros.

Monitoring Behaviour of EU Data Subjects

In order for a US SaaS customer or supplier to be deemed to be monitoring the behaviour of EU data subjects, this will be the case if you track individuals on the Internet for profiling purposes, e.g. through the use of cookies.

Fines for Non-compliance

Data subjects will be able to claim damages directly from SaaS suppliers or SaaS customers who breach any obligations under the GDPR.

In addition data protection authorities will be able to fine SaaS suppliers and/or SaaS customers up to 4% of annual global turnover or 20m Euros (whichever is higher) for breaches of the GDPR.

How to Comply

US SaaS customers and SaaS suppliers need to take the following actions to comply with the GDPR by the 25th of May 2018:

  • Identify what personal data of data subjects located in the EU they collect/process;
  • Review and amend SaaS agreement terms for compliance with the GDPR;
  • Create GDPR compliant data processing agreements (DPA);
  • Amend existing privacy policies to comply with the GDPR;
  • Implement the security, technical and administrative changes required to comply with the GDPR and set out in the above legal documentation.

NB/ US SaaS customers or SaaS suppliers who do not, or cannot, comply with the GDPR, should enact measures to prevent orders being placed on their websites by EU data subjects.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 14 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – GDPR – The General Data Protection Regulation

The General Data Protection Regulation (“GDPR”) will replace the existing EU Data Protection Directive and harmonise European data protection law from the 25th of May 2018. In the UK the GDPR will replace the Data Protection Act 1998 from the 25th of May 2018, regardless of “Brexit”. This will have a significant effect on both SaaS suppliers and SaaS customers who will need to comply with the terms of the GDPR. SaaS suppliers and SaaS customers must update all contractual documents that involve data processing, such as SaaS agreements, privacy policies and hosting and support agreements to comply with the new rules under the GDPR before the 25th of May deadline.

Harmonisation

SaaS suppliers and SaaS customers should be aware that the GDPR will not fully harmonise data protection law throughout Europe, as each EU country may introduce their own requirements in certain instances. However, SaaS suppliers and SaaS customers need to start making organisational changes now to their data processing activities in order to comply with the new rules on consent, audit rights, data exports, increased administrative requirements and the new obligations of data processors.

Below is a summary of the main provisions of the GDPR that SaaS suppliers and customers need to be aware of.

New Data Processor Obligations

The GDPR applies to data controllers (SaaS customers) and data processors (SaaS suppliers) and in particular SaaS suppliers should be aware that some of the GDPR applies directly to data processors who will be subject to compliance obligations and sanctions for non-compliance.

Consent

SaaS suppliers and SaaS customers relying on consent to process personal data will need to show that the consent is:

  • freely given;
  • specific and informed; and
  • an “unambiguous indication” of a data subject’s wishes and expressed either by a statement or a clear affirmative action (i.e. ticking a consent box when visiting a website).

Consent must be purpose limited i.e. related to explicitly specified purposes.

The default age for giving valid consent and using online services is 16, however each EU country will be able to reduce this to 13.

Penalties

The maximum penalty for a breach of the GDPR will be substantially higher than under current legislation. Fines can be imposed on SaaS suppliers or SaaS customers. Fines of up to 4% of annual global turnover or up to 20m Euros (whichever is higher) can be applied.

Applicable to Non-EU Entities

The GDPR will apply not just to EU SaaS customers and suppliers but also to non-EU SaaS customers and suppliers who:

  • offer goods or services to data subjects in the EU; or
  • monitor the behaviour of EU citizens to the extent that the behaviour takes place in the EU.

Enforcement – One Stop Shop

SaaS suppliers and SaaS customers will be regulated by a single regulator in the place of their main establishment, which shall be their main administrative location in the EU. Data subjects will be able to make complaints to regulators in their own EU country.

Data Protection Officer

An independent data protection officer (“DPO”) must be appointed where an organisation’s core business involves processing personal data involving regular and systematic monitoring of data subjects or large amounts of sensitive personal data. Each EU country may enact national provisions imposing further requirements regarding the appointment of DPOs. This will be particularly relevant in Germany where this is already a legal requirement.

Notification

There is no requirement for a SaaS supplier or SaaS customer to notify local data protection authorities of any data processing activities but there is a requirement to keep records of data processing activities (subject to limited exceptions).

Breach Reporting

SaaS customers and SaaS suppliers must report breaches to the relevant local regulator without undue delay and, where feasible, within 72 hours of becoming aware of the breach. Data subjects must be informed of breaches without undue delay where the breach is likely to result in a high risk to the data subject’s rights and freedoms unless:

  • the data has been rendered unintelligible to any third party (for example by encryption);
  • the data controller has taken steps to ensure the high risk is unlikely to materialise; or
  • it would involve disproportionate effort to inform data subjects individually, in which case a public announcement can be made.

Data processors (SaaS suppliers) are required to inform data controllers (SaaS customers) of any breach without undue delay.

Impact Assessments

SaaS customers will be required to carry out data protection impact assessments (“DPIAs”) if their proposed activities are likely to result in a high risk for the rights and freedoms of individuals, in particular, through the use of new technologies and in cases of profiling.

Data Subject Rights

The following rights shall be granted to data subjects:

  • data portability;
  • the right to be forgotten;
  • the right to prevent profiling;
  • the right to object to processing;
  • the right to rectification and erasure.
  • subject access requests (“SARs”).

SARs must be responded to by the data controller (SaaS customer) without undue delay and, at the latest, within one month of receipt of the request. The data controller only has the right to charge a reasonable fee to cover administrative costs where the requests are “manifestly unfounded or excessive”.

Preparing for Change

Although the GDPR will not come into force until the 25th of May 2018, it is essential that SaaS customers and SaaS suppliers start to prepare for the changes now. For example by:

  • Adding written data processing agreements to existing SaaS agreements and future SaaS agreements with relevant customers;
  • Amending existing privacy policies to comply with the GDPR rules;
  • Appointing a data protection officer (where appropriate);
  • Devising a documentation system for recording data processing activities;
  • Reviewing how consent is obtained from data subjects.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 14 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – GDPR – New German Data Protection Law (BDSG)

The General Data Protection Regulation (GDPR) will replace the existing EU Data Protection Directive and aims to harmonise European data protection law from the 25th of May 2018. In Germany, the Government has already amended the existing German Data Protection Act (BDSG) and from the 25th of May 2018 the New German Data Protection Act (New BDSG) and the GDPR will apply together in Germany.

Compliance with the New BDSG

Both SaaS suppliers and SaaS customers who provide services to German clients or who collect or process personal data of German data subjects on behalf of international SaaS clients, will need to comply with the terms of the New BDSG in addition to the terms of the GDPR. The New BDSG sets out derogations from certain parts of the GDPR and additional obligations. Below is a summary of the main derogations and additional obligations that SaaS suppliers and SaaS customers should be aware of.

Data Protection Officer

In addition to the obligation to appoint a data protection officer in certain circumstances under the GDPR, the New BDSG imposes additional circumstances in which a data protection officer must be appointed:

  • By any business with 10 or more employees permanently processing personal data;
  • Where data controllers are required to carry out privacy impact assessments;
  • Where data controllers process personal data in a commercial context for the purpose of transfer (whether or not the data is anonymised).

Sensitive Data

Sensitive data is referred to in the GDPR as special categories of personal data (Sensitive Data). Sensitive Data is personal data that reveals racial or ethnic origin, political opinions, religious or philosophical beliefs, or genetic data, biometric data, data concerning health, or data concerning a natural person’s sex life or sexual orientation. The GDPR only allows processing of Sensitive Data where specific exceptions apply. The New BDSG extends the scope of the exceptions.

Employee Data

Employee data protection rules under the New BDSG generally correspond to the existing rules under the BDSG, with some changes. For example: Any collective agreements, (an agreement between a company and its works council) which allows the company to process employee data, must comply with the GDPR obligation to ensure that the employee’s human dignity, legitimate interests, and fundamental rights are properly safeguarded.

Dealing with Derogations

Each of the 27 EU member states are permitted to derogate from some of the provisions of the GDPR. SaaS customers and SaaS suppliers who collect or process personal data from data subjects located in Germany need to be aware of such additional or differing rules in Germany and/or any other EU countries in which they collect or process personal data.

SaaS suppliers and SaaS customers should ensure that their privacy policies and data processing agreements reflect these differences and that data processing activities reflect the obligations set out in such policies and agreements. SaaS customers and SaaS suppliers must also ensure that they comply with other applicable laws which apply to the particular industry in which they operate, as such laws may impose mandatory additional responsibilities in relation to personal data.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – GDPR – Draft UK Data Protection Bill

The General Data Protection Regulation (GDPR)  will replace the existing EU Data Protection Directive and aims to harmonise European data protection law from the 25th of May 2018. In the UK, the GDPR will replace the Data Protection Act 1998 from the 25th of May 2018. This will have a significant effect on both SaaS suppliers and SaaS customers who will need to comply with the terms of the GDPR.

Harmonisation

SaaS suppliers and SaaS customers should be aware that the GDPR will not fully harmonise data protection law throughout the EU, as each EU member state may introduce their own requirements in certain instances. For example, in the UK, the Government has just published a Draft Data Protection Bill (Draft Law) which aims to incorporate the GDPR into a new UK data protection law which will replace the DPA from the 25th of May 2018. The Draft Law sets out derogations from certain parts of the GDPR. Below is a summary of the main derogations that SaaaS suppliers and SaaS customers should be aware of.

Age of Consent

Under the GDPR personal data cannot be collected from children under the age of 16 without obtaining parental consent. The Draft Law intends to lower the age of consent to 13 years of age. This means that SaaS customers may collect personal data from children from the age of 13, once the Draft Law is in force, without the need to obtain parental consent. However, SaaS customers and SaaS suppliers should be aware that this derogation will only apply in the UK. SaaS customers and SaaS suppliers will need to bear in mind when collecting and processing personal data from children in other countries within the EU that:

  • The GDPR restriction of 16 may apply; or
  • Other countries may have set a different age of consent.

Right to be Forgotten

Under the GDPR data subjects have the right to be forgotten. The Draft Law intends to make this obligation more onerous in relation to social media platforms. SaaS customers who operate social media platforms will be obliged, on request, to remove posts made by individuals when the data subject was under the age of 18. SaaS customers and suppliers should be aware that this is an additional condition and it will only apply in the UK, unless other EU member states adopt a similar obligation.

Automated Processing/Profiling

The GDPR includes the right for a data subject to prevent processing based on automated decision making. The Draft Law intends to include exemptions, for example: for credit reference checking. However, data subjects must still be permitted to object to decisions made by automated means.

Criminal Offences

The Draft Law creates two new criminal offences for:

  • Intentionally or recklessly re-identifying individuals from anonymised or pseundonymised data; or knowingly handling or processing such data; and
  • For altering records with the intent of preventing disclosure under a subject access request.

Dealing with Derogations

In light of the fact that each of the 27 EU member states are permitted to derogate from some of the provisions of the GDPR, SaaS customers and SaaS suppliers will need to be aware of the additional or differing rules in each of the EU countries in which they collect or process personal data. SaaS suppliers and SaaS customers should ensure that privacy policies and data processing agreements reflect these differences and that data processing activities reflect the obligations set out in such policies and agreements. Additionally, SaaS customers and SaaS suppliers must ensure that they also comply with other applicable laws which apply to the particular industry in which they operate, as such laws may impose mandatory additional responsibilities in relation to the age of consent, duration of storage and obligations to delete personal data.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreement – FAQs -What is a SLA and Essential Terms to include in a SLA

SLA is the abbreviation for a service level agreement.

Is a SLA a Software Licence

No. A service level agreement (SLA) sets out the SaaS services being provided in addition to the right to use the SaaS software.

What is a SLA

A SLA forms part of a SaaS agreement. The SLA can be contained in a separate schedule to the SaaS agreement, or included in the main terms and conditions of the SaaS agreement. SLAs set out:

How much Detail

It is advisable for a SaaS supplier to provide some degree of detail in the SLA to avoid spending unnecessary time negotiating the addition of further details requested by SaaS customers.

The degree of detail included in the SLA will depend upon:

  • How much a SaaS customer pays for the SaaS software and services;
  • Whether the SaaS software is business critical i.e. online banking;
  • What is standard in that particular business sector.

Terms to Include

SLAs should generally contain the following provisions, where appropriate:

Advantages of having a SLA

If SaaS suppliers do not have their own SLA, customers will often try to impose their own SLA on the supplier which does not “fit” the SaaS services being provided. This can lead to protracted negotiations about the content of the SLA.

Summary

Due to the unique nature of SaaS and in particular the use of SLAs you should seek specialist legal advice on the content of a SLA whether you are a SaaS supplier or a SaaS customer to ensure that your rights are adequately protected.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
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SaaS Agreements – FAQs – What is SaaS and Essential Terms to include in a SaaS Agreement

SaaS is the abbreviation for “software as a service”. You may know this under another name, for example subscription agreement, software on demand, software subscription agreement, cloud computing or ASP services (application service provider). These names all refer to the same thing – software being made available via the Internet to users.

What is a SaaS Agreement

A SaaS agreement is simply the name used for the agreement between a SaaS supplier and a SaaS customer which sets out the terms under which SaaS software may be accessed. This will usually include a service level agreement (SLA).

Differences between a SaaS Agreement and a Standard Software Licence

A SaaS agreement differs from a standard software licence in that:

  • The SaaS customer will not usually receive a physical or installed copy of the software;
  • No ownership in the SaaS software will be transferred to the SaaS customer;
  • The SaaS customer ‘s right to use SaaS software will end upon termination of the SaaS agreement.

Essential Terms to Include in a SaaS Agreement

The following legal issues should be included in any SaaS agreement, whether you are a SaaS supplier or a SaaS customer.

Software Licence

Access to the SaaS software should be limited to the term of the SaaS agreement. Once the SaaS agreement expires or terminates the software licence should automatically terminate.

If the SaaS customer is a global entity, you should specify:

  • Which companies or entities may access the SaaS software;
  • In which territories the software may be used; and
  • The number of authorised users;
  • Identify the specific purposes for which the SaaS software may be accessed; and
  • Name any third parties who will be permitted access to the SaaS software i.e. outsourcing providers or clients of the SaaS customer.

Intellectual Property Rights – IPR

The SaaS supplier should retain ownership of all IPR in the SaaS software and services it provides. The SaaS customer should retain ownership of all IPR in its systems, content and data. You should specifically state that the source code remains owned by the SaaS supplier. The SaaS customer should grant the SaaS supplier the right to use its IPRs for the term of the SaaS agreement i.e. to display the SaaS customer’s logos and copyrighted information.

Applicable Law, Jurisdiction & Language

State which law applies to the SaaS agreement and any disputes arising from it. In international SaaS agreements make sure that you specify in which language the dispute will be dealt with, and if the SaaS agreement is in more than one language, which language prevails if there is a discrepancy between the two versions.

Return of Data

At the end of the SaaS agreement the SaaS customer’s data should be returned. The format in which the data is to be returned and payment for this service should be agreed in advance. Additionally the parties can agree that the SaaS supplier will provide assistance in transferring SaaS customer data to a new supplier – in return for payment for this service.

Data Protection

The SaaS supplier is the data processor and the SaaS customer is the data controller. Under data protection law different rules apply to the data controller and the data processor. The SaaS supplier is obliged to process data in accordance with the SaaS customer’s instructions and should protect itself against claims from third parties that such processing was illegal. Likewise, the SaaS customer will also need to protect itself against claims from third parties caused by the SaaS supplier not processing data in accordance with its instructions or the terms of the SaaS agreement.

From May 2018 each party’s data protections obligations must be set out in a written data processing agreement which should form a schedule to the SaaS agreement.

Service Level Agreement (SLA)

This sets out the hosting, support and maintenance services being provided to the SaaS customer by the SaaS supplier. The SLA should specify where the data centre is located, who is operating it, what security, backup and disaster recovery procedures are in place. Support hours and support services for dealing with hosting problems and software problems should be identified and documented and the procedure for dealing with upgrades and maintenance to the software should be specified. The particular details will depend on the amount being paid for the hosting, support and maintenance and the purpose for which the SaaS software is being used.

Summary

Due to the unique nature of SaaS agreements you will need to seek specialist legal advice on the content of a SaaS agreement whether you are a SaaS supplier or a SaaS customer to ensure that your rights are adequately protected and that you are fully complying with all applicable laws.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – Brexit – How Brexit and the GDPR will affect SaaS Businesses

SaaS suppliers should be aware that from the 25th of May 2018, the General Data Protection Regulation (GDPR) will apply directly in all Member States of the European Union (EU).

Many SaaS suppliers are concerned about the changes the GDPR will impose upon their current data protection obligations, particularly in light of the uncertainties surrounding “Brexit”.  SaaS suppliers should be aware that they will be obliged to comply with the new rules imposed by the GDPR from May next year and post Brexit.

Will the GDPR apply in the UK after Brexit

Regardless of the timing of Brexit and any agreement reached between the UK and the EU on the terms under which the UK will leave the EU, the GDPR will automatically apply in the UK, until UK data protection laws are amended.

GDPR applies to UK SaaS Suppliers despite Brexit

Regardless of when and how Brexit takes place or any subsequent changes made to UK data protection laws, the GDPR will still apply directly to SaaS suppliers located within the UK if:

  • They offer goods or services to SaaS customers located within the EU (i.e. in any of the remaining 27 Member States); or
  • They monitor the behaviour of EU data subjects;

Even though UK SaaS suppliers will no longer be located within the EU themselves after a Brexit.

GDPR will apply to non-EU SaaS Suppliers

From the 25th of May 2018 the GDPR will automatically also apply to all SaaS suppliers located outside of the EU i.e. in the USA, if:

  • They offer goods or services to SaaS customers located within the EU; or
  • They monitor the behaviour of EU data subjects, even though the SaaS supplier is not located within the EU.

Complying with the GDPR

The following are the main obligations that all SaaS suppliers, who are subject to data processor obligations under the GDPR, will need to comply with:

  • Having specific minimum terms in a written data processing agreement with all customers;
  • Keeping records of all categories of processing activities that they carry out;
  • Obtaining prior written consent to the subcontracting of any data processing activities;
  • Notifying customers of any breach of their obligations, without undue delay, after becoming aware of the breach;
  • Appointing a data protection officer (DPO) in specific circumstances; and
  • Allowing customers to choose between deletion or return of all personal data.

Fines for Breach

Data subjects will be able to claim damages directly from SaaS suppliers who breach:

  • Any obligations under the GDPR; or
  • Any lawful instructions of the customer.

In addition data protection authorities will be able to fine SaaS suppliers up to 4% of annual global turnover or 20m Euros (whichever is higher) for breaches of the GDPR.

Preparing for Change

The current position with regard to Brexit is unclear and subject to change. However, all SaaS suppliers supplying SaaS services to customers located in the EU need to be aware that current data protection laws will change throughout the EU on the 25th of May 2018, and/or in the UK following Brexit.

SaaS suppliers who plan to provide SaaS services to individuals located in the EU after the 25th of May 2018, need to take the following action:

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – Data Protection – What SaaS Suppliers need to know about the GDPR


From the 25th of May 2018 the EU General Data Protection Regulation (GDPR) will come into force and change existing data protection laws in all 28 EU member states. The GDPR will place direct obligations on SaaS suppliers (data processors) in relation to data processing activities. In addition SaaS customers (data controllers), their clients (data subjects) and local data protection authorities will be able to enforce breaches of the new rules directly against SaaS suppliers.

SaaS suppliers need to amend the provisions of their existing SaaS agreements in order to comply with the upcoming changes in data protection law.

Written Data Processing Agreement

SaaS suppliers will need to include the following minimum terms in a written data processing agreement with all SaaS customers:

  • The duration, nature and purpose of the data processing;
  • The types of data being processed;
  • The obligations and rights of the customer.

The written data processing agreement must state that:

  • Personal data will only be processed in accordance with documented instructions from the SaaS customer;
  • The SaaS supplier will assist the SaaS customer in complying with its own obligations as a data controller;
  • The SaaS supplier is obliged to inform the SaaS customer if it believes an instruction to give personal data to the SaaS customer breaches the GDPR or any other EU or Member State law.

Record Keeping

Unless one of the exceptions applies, the main one being that the SaaS supplier has less than 250 employees, SaaS suppliers must keep records of all categories of processing activities that they carry out.

The following details must be recorded:

  • Information about the SaaS customer and any other data processors;
  • Names of relevant data protection officers (DPOs);
  • The categories of data processing carried out;
  • Any transfers to third countries; and
  • The general technical, organisational and security measures used by the SaaS supplier.

If requested by a supervisory authority, SaaS suppliers must provide such records.

Subcontracting

SaaS suppliers will need to obtain prior written consent to the subcontracting of any data processing activities: for example the using a third party hosting centre such as AWS or Microsoft Azure. Although SaaS suppliers can include a general consent to subcontracting in the provisions of their SaaS agreeents, SaaS suppliers will still be obliged to inform SaaS customers before adding or replacing any sub-processors in order to give customers time to object to a change.

Breach Notification

SaaS suppliers will be required to notify SaaS customers of any breach of their obligations, without undue delay, after becoming aware of the breach.

Data Protection Officers

SaaS suppliers will be obliged to appoint a data protection officer (DPO) in some specific circumstances: for example where the SaaS supplier is processing special data (sensitive data) or if required to do so under a Member State law.

The contact details of any DPO appointed must be published and communicated to the applicable supervisory authority.

Deletion or Return of Data

SaaS suppliers must allow SaaS customers to choose between deletion or return of all personal data on termination or expiry of the SaaS agreement (unless applicable mandatory law requires storage). SaaS customers will be entitled to check compliance with this requirement.

Transfers outside the EEA

Although SaaS suppliers are required to follow a SaaS customer’s instructions with regard to data processing, SaaS suppliers may only transfer personal data outside of the EEA if the SaaS supplier or SaaS customer has provided appropriate safeguards: for example by using of EU model clauses or Binding Corporate Rules (BCRs).

Fines and Compensation

  • Data subjects will be able to take action against SaaS suppliers directly and claim damages for the SaaS supplier’s breach of any obligations under the GDPR; or
  • SaaS suppliers will be potentially liable to both the SaaS customer and data subjects for the same breach.

In addition data protection authorities will be able to fine SaaS suppliers up to 4% of annual global turnover for some breaches.

Preparing for Change

SaaS suppliers need to review the terms of their existing SaaS agreements and their internal procedures to ensure that they comply with the new rules on the use of subcontractors, data security requirements, appointment of DPOs and having in place appropriate organisational and technical measures.

SaaS suppliers should ensure that existing and future agreements with their sub-processors impose the same data processing obligations on all subcontractors, as the SaaS supplier will be liable to the SaaS customer and data subjects for any breaches of the new rules caused by any subcontractors.

SaaS suppliers should ensure that their insurance cover and indemnities and limitations on liability contained in existing SaaS agreements relating to use of personal data are sufficient to cover the higher levels of fines and direct claims for damages by data subjects.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Brexit – Amendments to Terms and Conditions

SaaS suppliers and SaaS customers are becoming increasingly concerned about the effect of “Brexit” upon the terms of their existing SaaS agreements, particularly where contracts are subject to English law or SaaS suppliers or customers are located within the UK. Below is a summary of the main issues that SaaS suppliers need to be aware of that may result in problems arising now or in the future with the terms of their existing SaaS agreements.

Territory

Where the EU or the EEA is used:

  • To define a territory in which rights are granted to the parties in a SaaS agreement, for example countries in which a SaaS reseller may resell SaaS services; or
  • As a general concept, for example in relation to the countries in which a data centre must be located;

The wording may need to be adapted to ensure that this includes or excludes the UK (as necessary).

The use of “EU” or “EEA” is of particular importance where rights are being granted for specific countries, some of which may be exclusive rights or where the applicable law depends upon the location of the SaaS customers being within or outside the EU/EEA.

Applicable Law

English law is often chosen as the applicable law in international SaaS agreements. Even after “Brexit” this position should not change as English law:

  • Will still be one of the most flexible laws with few mandatory restrictions on liability and other contractual obligations;
  • Historically forms the basis of local law in many countries worldwide; and
  • Is more similar to US laws and legal concepts than other European country’s laws.

Force Majeure

Force Majeure clauses set out special rules that apply if something beyond a party’s reasonable control effects that party’s ability to comply with its contractual obligations. Depending on how a SaaS supplier’s force majeure clause is worded “Brexit” could be considered to be a force majeure event. In most SaaS agreements, a force majeure event entitles the non-breaching party to terminate the SaaS agreement, without penalty and this could be used by a unhappy SaaS customer looking for a reason to terminate the SaaS agreement early.

Application of existing EU based law

Some EU laws apply to the UK directly, for example: interest on late payments and compensation for the termination of commercial agents. Following a Brexit, the application of such laws and UK compliance with such laws may change depending upon the exact circumstances of the Brexit and some laws will still apply extra-territorially to the UK despite a Brexit.

Compliance with new EU based law

Prior to the UK actually formally leaving the EU, the EU will continue to make laws that apply in the UK and the UK will be bound by any new laws at least until Brexit is complete. For example: the UK’s compliance with the General Data Protection Regulation (GDPR) will automatically apply from the 25th of May 2018 but the UK government may then remove the GDPR from English law or adapt its terms after “Brexit” under English law.

Identifying Potential Issues

While there is currently no immediate need for SaaS suppliers to amend existing SaaS agreement terms, as the government’s “Brexit” strategy has not been finalised or published, SaaS suppliers should be aware of the issues and should now be:

  • Reviewing existing SaaS agreements to identify potential problems; and
  • Addressing problems that are identified within any new SaaS agreements or renewals of existing SaaS agreements entered into with SaaS customers in the interim.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

______________________________________________________

ASP Agreements – Essential Elements”>Other related articles: