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 existing UK data protection laws. 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.

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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.

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SaaS Agreements – Data Protection – Cyber Insurance

Currently most SaaS suppliers and SaaS customers do not take put 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 customer and SaaS supplier’s failure 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.

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SaaS Agreements – Data Protection – Privacy Shield Update

Similar to the rules under the Safe Harbor scheme, SaaS customer and SaaS suppliers need to self-certify their compliance with the principles of the Privacy Shield. The following are the core principles which must be adhered to.
Core Principles

Notice must be given to data subjects about specific issues;
Choice to opt out of disclosure of data to third parties;
Accountability for onward transfer to third parties;

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SaaS Agreements – Data Protection – Microsoft Irish Data Centre Decision

Many SaaS customers are concerned whne using data centres which are owned by a US parent company i.e. Microsoft or Amazon, that even if their SaaS data is stored in a data centre located in the EU it will not be protected against disclosure to US authorities. The recent US court of appeal ruling won by Microsoft has confirmed the position, namely that SaaS suppliers and SaaS customers who use data centres located in the EU, owned by US companies, can prevent US authorities from accessing their data in some circumstances.

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SaaS Agreements – Terms and Conditions – Limitation Clauses

SaaS suppliers should always include limitation clauses in their SaaS terms and conditions to attempt to limit or exclude liability for certain types of losses and to cap their financial liability for breaches of contract. However, in order for limitation clauses to be valid, SaaS suppliers must ensure that the wording of the limitation clause is clear and unambiguous, otherwise the whole clause could be ruled void by a court and the SaaS supplier’s liability will then be unlimited.

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SaaS Agreements – FAQs – EU Standard Contractual Clauses

EU model clauses are standard data processing agreements that have been approved by the EU Commission as providing adequate protection. There are currently two sets of standard contractual clauses for transfers of personal data between data controllers and one set for transfers between a data controller and a data processor. EU model clauses must be used unamended (other than where specific details may be added, as set out in the notes to the clauses).

Where personal data is transferred from:

a data controller in the EU (SaaS customer) to a data processor outside of the EEA (SaaS supplier); or
a SaaS supplier within the EU to a sub-processor located outside of the EEA;

the SaaS supplier will need to enter into EU model clauses with the SaaS customer or SaaS sub-processor, as applicable.

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SaaS Agreements – Data Protection – General Data Protection Regulation (GDPR)

At the end of 2015 the European Commission published the test of the new Data Protection Regulation (“GDPR”) which will replace the existing EU Data Protection Directive and harmonise European data protection law. The GDPR is expected to be adopted in Spring 2016. Once adopted, the GDPR will come into force within 2 years and in the UK the GDPR will replace the Data Protection Act 1998. This will have a significant effect on both SaaS suppliers and SaaS customers.

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