Tag: customer data

SaaS Agreements – FAQs – Data Processor

It is important for a SaaS supplier to understand the legal obligations imposed upon them as a data processor when negotiating a SaaS agreement and a data processing agreement (“DPA“) as the duties of a data processor are not the same as the duties of a data controller. In a SaaS relationship the supplier is always the data processor of the SaaS customer. The SaaS customer is always the data controller of the SaaS supplier.

Who is a Data Processor

Articel 4(8) of the GDPR defines a data processor as:

“a natural or legal person, public authority, agency or other body which processes personal data on behalf of the controller”

A data processor acts on behalf of, and only on the instructions of a data controller. Whereas a data controller, determines the purposes and means of the processing of personal data.

Where a SaaS supplier does not have any purpose of its own for processing the personal data and they only act on a SaaS customer’s instructions, they are a data processor – even if the SaaS supplier make some technical decisions about how to process the personal data.

Need for a Data Processing Agreement

Since the GDPR and the UK Data Protection Act 2018 came into force on the 25th of May 2018 the obligations of data processors have become much more onerous. It is now mandatory for the data processor and the data controller to enter into a written agreement – DPA, setting out each party’s obligations. The DPA must include specific minimum terms.

Liability for Personal Data

A SaaS customer will be liable to its clients/end users (whose personal data it is collecting and processing) for any breaches of the GDPR. As the SaaS supplier will be carrying out the processing on behalf of the SaaS customer, the terms of the SaaS agreement and not just the DPA should include adequate clauses to protect the SaaS supplier and the SaaS customer against data protection breaches, bearing in mind the differing responsibilities of the data controller and the data processor.

Subject Access Request

Data subjects (clients of the SaaS customer) have the right to make a subject access request to the data controller.

Information must be provided within strict time limits and at no cost to the data subject. The request is made to the data controller (the SaaS customer) and the SaaS customer is obliged under the GDPR to respond. However, it is often the SaaS supplier who actually needs to provide the information stored on its servers either to the SaaS customer or their clients, on the SaaS customer’s behalf.

General

When considering SaaS customer requests to change clauses relating to liability, indemnities, data and data protection in a DPA or a SaaS agreement it is essential that a SaaS supplier understands the statutory obligations of the data controller and data processor and the implications of changing any terms of the DPA or SaaS agreement.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements and cloud computing with over 15 years experience in the IT sector. If you require assistance with any SaaS or cloud computing contracts or any other IT legal issues contact me:

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 15 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

To register for my newsletter click here

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SaaS Agreements – GDPR – The General Data Protection Regulation

The General Data Protection Regulation (GDPR) has now replaced the existing EU Data Protection Directive in an aim to harmonise European data protection law. In the UK the GDPR and the Data Protection Act 2018 (DPA) replaced the Data Protection Act 1998 on the 25th of May 2018. These changes in data protection law will have a significant effect on both SaaS suppliers and SaaS customers who must comply with both the terms of the GDPR and the DPA. Below is a summary of the main provisions of the GDPR that SaaS suppliers and customers need to be aware of.

Brexit

The GDPR will continue to apply in the UK after any future Brexit.

SaaS Agreement Terms

SaaS suppliers and SaaS customers must ensure that all contractual documents that involve data processing, such as SaaS agreements, privacy policies and hosting and support agreements comply with the new rules under the GDPR and the DPA.

Harmonisation

SaaS suppliers and SaaS customers should be aware that the GDPR does not fully harmonise data protection law throughout Europe. Each EU country may introduce their own requirements in certain instances under the various derogations permitted under the GDPR.

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 GDPR obligations apply directly to data processors who are now 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, if they wish to. The UK has already included this derogation in the DPA.

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”.

Compliance

Now the GDPR is in force, it is essential that SaaS customers and SaaS suppliers comply with its terms. For example by:

  • Including written data processing agreements in existing SaaS agreements and future SaaS agreements with relevant customers;
  • Ensuring that privacy policies comply with the GDPR rules;
  • Appointing a data protection officer (where appropriate);
  • Using a documentation system for recording data processing activities;
  • Being able to show how and when any consents have been obtained from data subjects.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 15 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

To register for my newsletter click here

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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 28 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 15 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 – 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 15 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 – Data Protection – New obligations for SaaS Customers

From the 25th of May 2018 the EU General Data Protection Regulation (GDPR) will come into force and change UK data protection law. The GDPR will place further more onerous obligations on SaaS customers (data controllers) in relation to all data processing. SaaS customers need to amend the terms of their existing SaaS agreements and privacy policies and implement the changes into internal policies and procedures in order to comply with the upcoming changes in UK data protection law.

Data Subject Rights

Data subjects will have more extensive rights to access, rectify and object to the storage and processing of their personal data. New rights to delete, restrict processing, rights in relation to profiling and the right to data portability will be introduced. SaaS customers will also be required to provide a lot more information to data subjects about processing activities than in the past i.e. in their privacy policies.

Fines

Data subjects will be able to take direct action against SaaS customers and claim damages resulting from breaches by SaaS customers of their obligations under the GDPR.

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

Preparing for the Changes

SaaS customers should review the terms of their existing SaaS agreements and privacy policies to ensure that they comply with the new rules before the GDPR comes into force.

SaaS customers should ensure that existing and future agreements with any subcontractors (data processors) impose the same data processing obligations on further subcontractors (sub-processors), as the SaaS customer could be liable to the data subject for any breaches of the new rules caused by any subcontractors.

SaaS customers should ensure their insurance cover and the terms of their SaaS agreement with all SaaS suppliers include indemnities and limitations on liability relating to personal data that are sufficient to cover the higher level of fines and claims made directly by data subjects.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 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

To register for my newsletter click here

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SaaS Agreements – Data Protection – New Obligations for SaaS Suppliers

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 will place direct obligations on SaaS suppliers (data processors) in relation to data processing activities. In addition SaaS customers (data controllers) and their clients (data subjects) will be able to enforce breaches of the new rules directly against SaaS suppliers. SaaS suppliers need to amend the terms of their existing SaaS agreements in order to comply with the upcoming changes in data protection law.

Written Data Processing Terms

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 SaaS customer.

The written data processing terms must state that:

  • Personal data will only 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 and organisational 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. Although SaaS suppliers can include a general consent to subcontracting in their SaaS agreement, SaaS suppliers will still be obliged to inform SaaS customers before adding or replacing any sub-processors in order to give SaaS 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 the use 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
  • Any lawful instructions from the SaaS customer.

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 Changes

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 SaaS agreement indemnities and limitations on liability relating to use or 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 agreements with over 10 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

To register for my newsletter click here

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SaaS Agreements – Data Protection – Cyber Insurance

Currently most SaaS suppliers and SaaS customers do not take out specific cyber insurance and rely upon the provisions of a general insurance policy to cover liabilities in the event of a claim for a cyber incident or a data breach. This is partly due to the fact that few insurers offer adequate cyber insurance policies and SaaS customers and SaaS suppliers often fail to consider the need for a specialist policy of insurance to ensure that they are covered in the event of a claim being denied under a general insurance policy.

General Insurance

Many insurers may not have anticipated providing cover against cyber risks under their general insurance policies and it is likely that disputes will arise as to whether or not a cyber claim is covered when a SaaS supplier or SaaS customer makes a claim. Taking out cyber insurance could reduce this risk.

Professional Indemnity Insurance

Commonly PI insurance covers directors insurance, property risk and some limited cyber cover. However as cyber risks are becoming more common for SaaS suppliers and SaaS customers there is an increasing need to specifically protect against cyber risks i.e. hacking, DNS attacks, phishing etc.

Future Need for Cyber Insurance

Cyber insurance is often seen as too expensive by SaaS suppliers and SaaS customers and they actively chose not to purchase such additional insurance cover.

From the 25th of May 2018, when the new Data Protection Regulation (GDPR) comes into effect there will be a substantial increase in the risk of a cyber claim for a data breach. It is important to be aware that the GDPR applies to all SaaS customers and SaaS suppliers in the EU and any non-EU located SaaS customers and SaaS suppliers offering goods or services in the EU or who monitor the behaviour of EU data subjects. Accordingly the GDPR will apply to UK SaaS customers and SaaS suppliers regardless of if, and when, there is a “Brexit”.

GDPR Fines

The GDPR imposes more onerous obligations on both data processors and data controllers. In particular, the fines which can be applied by any EU data protection authority for breach of the GDPR will increase substantially. Fines of up to €20 million or 4% of global annual turnover for the preceding financial year can be imposed.

Summary

SaaS suppliers and SaaS customers need to consider now the need to increase existing insurance cover to encompass the above changes to data protection law, and when doing so, it could be prudent to consider taking out specialist cyber insurance.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 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

To register for my newsletter click here

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SaaS Agreements – Data Protection – Privacy Shield Approved

EU data protection law prohibits SaaS suppliers and SaaS customers from transferring personal data to countries or territories outside the EEA unless they are considered to provide adequate protection. Below is a summary of the current position following the recent announcement that the EU-US Privacy Shield has been adopted by the European Commission and will now replace Safe Harbor.

Safe Harbor

In the past SaaS suppliers and SaaS customers had relied upon Safe Harbor (a self-certification standard) when transferring personal data from the EEA to the USA. But following a legal challenge to the adequacy of Safe Harbor, on the 6th of October 2015 the European Commission declared that Safe Harbor was invalid. This meant that Safe Harbor could no longer be relied upon by SaaS suppliers and customers when transferring personal data from the EEA to the USA.

Current Alternatives to Safe Harbor

Following the invalidation of the Safe Harbor scheme, SaaS suppliers and customers have three options for lawfully transferring personal data from the EEA to the USA:

  • obtain consent from each data subject to the transfer of data to the USA;
  • create and have approved binding corporate rules (“BCRs”) for transatlantic transfers of personal data within a company’s group of companies;
  • enter into EU Model Clauses with US entities to whom personal data was transferred.

EU – US Privacy Shield

A new privacy agreement called the Privacy Shield was agreed between the USA and EU to replace the safe harbour scheme to permit SaaS customers and suppliers to transfer personal data from the EEA to the USA. The Privacy Shield was adopted by the EU Commission on the 12th of July 2016 and will now replace Safe Harbor.

The EU-US Privacy Shield is based upon the safe harbour scheme in an amended format. It still requires entities to self-certify their compliance annually. However there are now additional obligations, such as:

  • displaying a privacy policy on websites;
  • complying with data subject access requests;
  • deleting personal data which is no longer being used for the purposes for which it was originally collected;
  • allowing data subjects to opt out where data is to be disclosed to a third party;
  • providing recourse for breaches to EU data subjects;
  • replying promptly to any complaints.

When can the Privacy Shield be Relied upon

The US Department of Commerce will now start to operate the Privacy Shield. SaaS supplier and SaaS customers wishing to import personal data from the EU need to apply for certification under the Privacy Shield. Before applying SaaS suppliers and customers should review the terms of the Privacy Shield and adjust their internal procedures to comply with the new rules. From the 1st of August 2016 the US Department of Commerce will start to process applications to certify.

EU based SaaS suppliers and SaaS customers should continue to use BCRs, consent or EU Model Clauses when transferring personal data to the USA, until the USA entities to whom personal data is being transferred have obtained certification under the Privacy Shield.

Potential Problems with the Privacy Shield

Although the EU Commission has adopted the Privacy Shield, EU data protection regulators still have the ability to investigate data exports irrespective of this adequacy decision of the European Commission. This means that even if a SaaS customer or SaaS supplier relies upon Privacy Shield certification in due course, the transfer could still be declared invalid by a local data protection authority.

Depending on the physical location of SaaS suppliers and SaaS customers it is worth SaaS suppliers and SaaS customers considering whether they need to keep any existing EU model clauses, binding corporate rules or consents in place in addition to use of the Privacy Shield in order to avoid the risk of a local data protection authority investigating compliance with EU data protection laws.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 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 – Data Protection – General Data Protection Regulation (GDPR)

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. 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 Europe, as each EU country may introduce their own requirements in certain instances. However, SaaS suppliers and SaaS customers will 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 appointing a data protection officer (where appropriate), devising a documentation system for recording data processing activities, reviewing how consent is obtained from data subjects, adding written data processing agreements to existing SaaS agreements and future SaaS agreements with relevant customers and amending existing privacy policies to comply with the GDPR rules.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 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

To register for my newsletter click here

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Other related articles: