Data Protection and Privacy

Data Protection, privacy and technology developments continued to dominate the headlines last year. In this briefing, we consider some of the most noteworthy developments of which organisations should be aware, and look at what is coming down the tracks in 2023.

The importance of fair, transparent and lawful processing has been in the spotlight as the Irish Data Protection Commission ("DPC") recently imposed three significant fines on a leading technology company for unlawful reliance on contractual necessity as a lawful basis for certain processing activities. International transfers continues to be a hot topic, as the EU Parliament, EDPB and a Committee of EU Member States review the draft EU-US Data Privacy Framework ("DPF").

In addition, the extent and scope of the right to compensation for non-material damage under Article 82 GDPR has been subject to scrutiny as a number of national court decisions concerning this matter are filtering up to the Court of Justice of the European Union ("CJEU"). All of these matters are considered in more detail in this commentary.

We also consider the CJEU decision in the case of X-Fab (Case C-453/21) which provides guidance on how to determine whether a conflict of interest could arise for an organisation's Data Protection Officer. In addition, the European Data Protection Board ("EDPB") has finalised a number of Guidelines to assist organisations to comply with their GDPR obligations including, amongst others, Guidelines on what constitutes an international transfer of data under Chapter V GDPR, and Guidelines on deceptive design patterns in social media platform interfaces.

Legislation surrounding data protection, privacy and technology continues to develop at a rapid pace. These technologies and developments present new challenges for companies and consumers alike. As a result, 2023 will undoubtedly be an exciting and busy year for all.

Key Themes in Data Protection and Technology

DPC Enforcement Activity - Fair, Transparent, and Lawful Processing in the Spotlight

2022 was another record year for GDPR fines across Europe. It is estimated that European Data Protection Authorities ('DPAs') imposed approximately €1.64 billion in fines last year, a 50% increase over the prior year. Ad-tech and behavioural advertising were a top enforcement priority in 2022. Other infringements in relation to violations concerning the processing of children's data, the failure to meet privacy by design requirements and the failure to implement appropriate security mechanisms also caught regulators' attention.

There is also a noticeable rise in willingness on the part of supervisory authorities to fine controllers who have been the subject of cybercrime where controllers did not have adequate security measures in place appropriate to the risk profile of the data processed. This trend arose particularly where special category data such as employment and health data were impacted.

2023 started with the DPC imposing a number of significant fines. In particular, the DPC fined Meta €210 million, Instagram €180 million, and WhatsApp €5.5 million in relation to breach of the transparency obligation, and for unlawfully relying on contractual necessity as a lawful basis for processing personal data for behavioural advertising purposes and for security and service improvements. The fines serve as a reminder of the importance of providing data subjects with clear and granular information in Privacy Notices about what personal data is being processed for each processing activity, the purpose(s) of such processing, and the lawful bases relied upon for the processing. In addition, more careful consideration must be given to the most appropriate lawful basis to rely on for the processing activity at hand. Typically the practice has been to avoid relying on consent as a lawful basis, due to the high threshold that must be reached to obtain valid consent and the right of data subjects to withdraw consent at any time. However, it seems that consent and legitimate interests are likely to be relied on more frequently in the future to legitimise data processing activities, as it is clear that the contractual necessity and legal obligation lawful bases can only be relied upon in narrow circumstances.

Resources:

Key Developments in Data Protection and Privacy

Compensation Claims

Article 82 of the GDPR, along with the Data Protection Act 2018, allows data subjects or non-profit organisations mandated to act on their behalf, to take compensation claims for material or non-material loss suffered as a result of a breach of the GDPR. However, uncertainty prevails as to the scope of the right to compensation for non-material damage.

On 6 October 2022, the Advocate General at the CJEU issued an Opinion in the Österreichische Post AG case (Case C-300/21) that a mere violation of the GDPR is not sufficient to recover compensation. Proof of material or non-material damage must be also provided by the claimant. In addition, compensation for non-material damage does not cover mere upset which the person concerned may feel as a result of a violation of the GDPR. If the CJEU follows this opinion, it would be welcome news for companies, as it would raise the bar for successful damages claims for non-material loss.

On 23 January 2023, the Irish Circuit Court, in the case of Cunniam v Parcel Connect Limited & Ors, granted a stay on proceedings brought by a data subject where only non-material damages have been alleged, pending six decisions awaited from the CJEU relating to non-material damage (including the CJEU's decision in the Österreichische Post AG case). The Court held that not granting the stay would substantially prejudice the defendants’ case, and would lead to the risk of an irreconcilable judgment being produced by the Court.

Data Protection Officers ("DPOs")

The CJEU decision in X-Fab (Case C-453/21) provides guidance on how to determine whether a conflict of interest arises in respect of the role of Data Protection Officer and when a DPO may be lawfully dismissed. In this case, an employee, who performed the role of DPO and also worked as council chair, was dismissed at the direction of the State DPA due to a potential conflict of interest between these roles. The employee claimed that the dismissal was void due to protective employment provisions under German law, and the German court referred the matter to the CJEU.

Article 38(6) GDPR acknowledges that a DPO may fulfil other tasks and duties, provided such other tasks and duties do not result in a conflict of interests. The CJEU held that an assessment of whether a conflict of interests exists must be carried out on a case by case basis, in light of all the relevant circumstances, in particular the structure of the organisation. However, DPOs cannot be entrusted with tasks or duties which would result in them “determining the objectives and methods of processing personal data on the part of the controller or processor".

Article 38(3) of the GDPR further states “[a DPO] shall not be dismissed or penalised by the [organization] for performing his tasks”. The CJEU held that member states, such as Germany, are free to lay down more protective provisions provided they do not undermine the GDPR’s objectives. However, a national law which prevents the dismissal of a DPO who is unable to carry out their role in an independent manner because of a conflict of interest would be incompatible with the GDPR.

The EDPB recently announced that it has selected the designation and position of the DPO role as the focus for its next coordinated pan-EU enforcement action. It would therefore be prudent for organisations to take steps to review their DPO function. It is natural for jobs and roles to evolve over time, so organisations which have appointed a DPO should take steps to ensure that their DPO is not also entrusted with tasks or duties which conflict with the performance of their DPO obligations.

International transfers

In January 2023, the DPC referred its draft decision in relation to the lawfulness of Meta's EU-US transfers to the European Data Protection Board ("EDPB") under the Article 65 dispute resolution process, after it was unable to resolve objections from other EU data protection authorities. The dispute resolution procedure comes as the EU considers a draft adequacy decision for the Data Protection Framework ("DPF").

The DPF is expected to be finalised and adopted by Summer 2023, which will mark three years since the invalidation of its predecessor, the EU-US Privacy Shield. The DPF and accompanying US Executive Order aims to address the concerns raised by the European Court of Justice in Schrems II. In particular, they provide binding safeguards that limit access by US intelligence services to what it is necessary and proportionate to protect national security, and establishes an independent and impartial redress mechanism, including a new Data Protection Review Court. Although a finalised adequacy decision is expected later this year, many organisations may continue entering into the standard contractual clauses and conducting transfer impact assessments due to the likelihood of the DPF being further challenged by privacy advocates such as NOYB or others before the CJEU in the future.

Following public consultation, on 23 February 2023, the EDPB have also issued their finalised Guidelines 05/2021 on the interplay between Article 3 and Chapter V GDPR. The guidelines provide some welcome clarity in regard to what constitutes a 'transfer' requiring compliance with the international transfer rules set out in Chapter V of the GDPR.

Data Subject Access Requests ("DSARs")

Over the past year, the EDPB and DPC have each published guidelines on the right of access to help controllers understand the scope of their obligations under Article 15 GDPR (available here and here). Whilst these non-binding guidelines are informative, in many ways they raise the bar in regard to what is expected from controllers when responding to access requests. Two issues, in particular, are worth noting.

First, the draft EDPB guidelines reject any proportionality limit with regard to the efforts a controller has to expend on responding to a DSAR. This is surprising as to date there have been strong grounds to believe that a controller is only required to take reasonable and proportionate steps to search for personal data in line with the EU principle of proportionality. It remains to be seen if this approach will be endorsed in the finalised guidelines. In contrast, the DPC guidelines state that controllers are not obliged to conduct searches which go beyond what is reasonable in terms of time and money, taking into account the circumstances of the case.

Second, both sets of guidelines indicate that in order to meet the information requirements in Article 15(1) and (2) GDPR it is not sufficient for companies to provide a copy of, or link to, or extract of their privacy notice, when responding to access requests. Rather, organisations are required to update and tailor the information in the privacy notice to reflect the processing operations carried out with regard to the data subject making the request. A recent ruling from the CJEU ( Case C-151/21) supports this view. This will unfortunately make responding to access requests a more burdensome task for many organisations.

Further cases regarding the scope of the right of access under Article 15 GDPR are currently pending before the CJEU which should provide greater clarity on the scope of the right of access.

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Responding to data subject access requests

Cookie Compliance

Cookie compliance continues to be an enforcement trend. In January 2023, the EDPB Cookie Banner Task Force published a report which provides some tips on how to comply with the cookie rules in the ePrivacy Directive. The Report was issued following complaints from NOYB, and investigations by EU DPAs in relation to certain companies' cookie banners and policies. In light of the report and continued enforcement of cookie rules by EU DPAs across Europe, it would be prudent for organisations to revisit their cookie practices to ensure they comply with the cookie rules and expectations of Regulators.

Deceptive Design Patterns in Social Media Platform Interfaces

The EDPB have published finalised Guidelines 03/2022 on deceptive design patterns in social media platform interfaces. The guidelines offer practical recommendations to designers and users of social media platforms on how to assess and avoid deceptive design patterns that violate the GDPR. Deceptive design patterns are interfaces and user journeys implemented on social media platforms that attempt to influence users into making unintended, unwilling and potentially harmful decisions, regarding the processing of their personal data. The guidelines provide examples of deceptive design pattern types, present best practices for different use cases and contain specific recommendations for designers of user interfaces that aim to facilitate the effective implementation of the GDPR.

European Data Protection Board Agenda for 2023

The European Data Protection Board ("EDPB") recently published its 2023-2024 work programme. In particular, the EDPB intends to publish guidance on a list of topics, including: Legitimate Interest; Children’s Data; Processing of data for Medical and Scientific Research Purposes; Anonymisation and Pseudonymisation. The EDPB further indicated its intention to develop guidance on the interplay between the proposed EU Artificial Intelligence Act and the GDPR, along with updated guidance on the right of access, identifying lead supervisory authority and breach notification. Organisations should familiarise themselves with these guidelines once published, as they set out the expectations of EU DPAs, in regard to GDPR compliance requirements.

The EDPB will also continue to prioritise effective enforcement and cooperation between European data protection authorities such as by supporting their work on cases of strategic importance.

Separately, the European Commission has launched an initiative to improve and streamline cooperation between EU data protection authorities when enforcing the GDPR in cross-border cases. Little is known of the initiative so far, other than the fact that it aims to harmonise aspects of administrative procedure applied by national DPAs in cross-border cases. The initiative likely follows on from the EDPB's letter to the European Commission of 10 October 2022, which contained a list of procedural aspects that could benefit from further harmonisation at EU level. The list includes, amongst other issues, the status and rights of parties to administrative procedures; procedural deadlines; requirements for admissibility or dismissal of complaints; investigative powers of Supervisory Authorities; and the practical implementation of the cooperation procedure.

Recent Developments in the EU Digital Technology Space

The European Commission has been making good progress with its Digital Single Market Strategy, which consists of a wide-ranging group of legislative initiatives aimed at adapting the European market to the digital age. EU regulation of digital services is intended to ensure better access for consumers and businesses to online goods and services across Europe, for example by removing barriers to cross-border e-commerce and improving access to online content while increasing consumer protection. It also aims to address concerns in relation to cybersecurity, data protection/e-privacy, and the fairness and transparency of online platforms.

The legislative proposals, once a promise for the future, are quickly becoming a reality. The Digital Markets Act, Digital Services Act, Data Governance Act and the NIS2 Directive have each been published in the Official Journal and entered into force in recent months.

2023 is likely to bring much more data regulation, as negotiations continue at EU level in respect of the proposed Data Act, Artificial Intelligence Act, Artificial Intelligence Liability Directive, Cyber Resilience Act, and ePrivacy Regulation. These legislative proposals will significantly affect companies operating in the technology sector and beyond.

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Is Mere Worry Enough? “Non-Material Loss” claims for breach of data rights under the GDPR

Oct 7, 2022, 17:47 PM

The GDPR brought with it the possibility of, for the first time in Ireland, individuals (or groups of individuals) being allowed by law to claim damages for “non-material loss” arising from breaches of their data rights. Two recent and much-publicised English decisions have already restricted the scope for claims of this kind in the UK to those where there is more than a de minimis level of pain and suffering. This week, an opinion of the Advocate General, delivered on 6 October 2022 in one of the cases awaiting judgment before the CJEU, suggests that the CJEU may follow suit.

Title : Is Mere Worry Enough? “Non-Material Loss” claims for breach of data rights under the GDPR

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Insight Date : Oct 7, 2022, 00:00 AM

The Data Protection Act 2018, which entered into force in May 2018 for the purposes of implementing the General Data Protection Regulation (“GDPR”), brought with it the possibility of a brave new world of damages claims for breaches of personal data rights. For the first time in Ireland, individuals (or groups of individuals) would be allowed by law to claim damages for “non-material loss” arising from breaches of their data rights. The term “non-material loss” essentially means non-economic loss, i.e. pain and suffering, inconvenience and anxiety which might arise from a data rights breach, as opposed to any kind of financial damage.

Now, more than four years later, we are awaiting judgments in a number of cases which have been referred to the Court of Justice of the European Union (“CJEU”) by Member State courts, including by courts in Germany and Austria, which have the potential to significantly curtail the operation of the new regime for non-material loss claims before it has ever really taken off in Ireland. Two recent and much-publicised English decisions have already restricted the scope for claims of this kind in the UK to those where there is more than a de minimis level of pain and suffering. This week, an opinion of the Advocate General, delivered on 6 October 2022 in one of the cases awaiting judgment before the CJEU, suggests that the CJEU may follow suit.

What is "non-material loss" under the GDPR?

Prior to 2018, the Irish courts had taken the position that a person was not entitled to damages for a breach of data rights without proof of some financial or economic loss caused by the breach^[1]^. That position seemed settled in Irish law until Article 82(1) of the GDPR introduced a broader basis for damages claims by providing that:

“Any person who has suffered material or non-material damage as a result of an infringement of this Regulation shall have the right to receive compensation from the controller or processor for the damage suffered.”

While “non-material damage” is not defined in the GDPR, the (non-binding) Recital 146 of the GDPR suggests that the “concept of damage should be broadly interpreted” and that data subjects should receive “full and effective compensation for the damage they have suffered”. Recital 85 of the GDPR provides that where a personal data breach is not addressed in an appropriate or timely manner, it may result in “physical, material or non-material damage to natural persons” in circumstances where the natural person has “suffered a loss of control over their personal data or limitation of their rights, discrimination, identity theft or fraud, financial loss…damage to reputation, loss of confidentiality of personal data or any other significant economic or social disadvantage”.

To date, the Irish courts have not been required to deliver any written judgment assessing a claim for damages for non-material loss. As such, it has not been possible to glean an understanding of the approximate value which the courts in this jurisdiction would place on claims of this kind. However, the question has been the subject of a number of reported cases in other EU Member States since the entry into force of the GDPR, particularly in Germany and Austria. Now, questions have emerged from those countries, and others, as to whether technical breach of data rights is, in itself, sufficient to justify damages for non-material loss or, alternatively, whether some minimum level of “pain and suffering” will be required.

The position in the EU

In April 2021, in the case of UI v Österreichische Post AG, the Austrian Supreme Court (Oberster Gerichtsof ^[2]), referred some key questions to the CJEU on the appropriate method to award and quantify non-material damages for data protection infringements under the GDPR. In particular, the CJEU has been asked to determine:

does a mere breach of provisions of the GDPR, in and of itself, allow a data subject to seek an award of damages?;
in addition to the principles of effectiveness and equivalence, what, if any, additional considerations must a national court observe when assessing damages under Article 82 of the GDPR?; and
to be eligible for non-material damages, is there a requirement that the legal infringement goes beyond the annoyance caused by the infringement?

The recent opinion of the Advocate General (published on 6 October 2022) on these issues proposes effectively that a de minimis approach should be adopted, concluding that:

mere infringement of provisions of the GDPR, without accompanying damage (whether that be material or non-material), is not sufficient for the purposes of awarding compensation; and
specifically in relation to non-material damage, compensation for such damage as provided for in the GDPR does not cover "mere upset".

Confirmation of whether the CJEU will adopt this position though will have to wait for its final judgment on the questions referred. It can often take several months after the publication of an Advocate General opinion for the CJEU to deliver its judgment.

In Germany (as well as some other countries), it would appear that a general rule has emerged from domestic case law to the effect that there must be more than minimal damage to ground a claim and that compensation should only be paid where there is “perceptible harm”. Separately, the German Federal Labour Court^[3] has asked the CJEU for a preliminary ruling on the following questions relating to non-material damages under the GDPR:

does Article 82 (1) GDPR have a special or general preventive character and does this have to be taken into account when assessing the amount of non-material damage to be compensated on the basis of Article 82 (1) GDPR at the expense of the controller or the processor?; and
when assessing the amount of non-material damage to be compensated on the basis of Article 82 (1) GDPR, is the degree of fault of the controller or processor decisive? In particular, may a non-existent or minor fault on the part of the controller or processor be taken into account in its favour?

The decisions of the CJEU on the above questions will be of great significance to the development of future case law on this subject and will be of particular interest to organisations and data controllers which process a large amount of data and which, as such, can expect to find themselves as the targets of claims for non-material loss.

The UK position and the de minimis threshold

The CJEU’s awaited decision in UI v Österreichische Post AG is particularly relevant given the recent judgment of the English High Court in Rolfe v Veale ^[4], in which the Court held that there is a de minimis threshold implicit in English case law which claimants have to show has been exceeded before they can seek damages for actual loss or distress. In a separate case, Johnson v Eastlight Community Homes Ltd ^[5], the English High Court has ruled that the de minimis concept applies to claims taken under the GDPR and the UK Data Protection Act 2018.

It is difficult to know how much persuasive authority these UK judgments will have in the post-Brexit age, particularly at EU level. However, even post-Brexit, it is likely that the CJEU and other European courts will pay attention to the decisions of the UK higher courts in the sphere of data protection, especially given the general dearth of case law in this arena. Indeed, it seems likely that the CJEU will follow a de minimis approach given the recent opinion of the Advocate General in UI v Österreichische Post AG, although, as noted above, the final decision of the CJEU on the matter is still awaited. In an Irish context, while the Irish judiciary is not bound by these UK decisions, they are nevertheless likely to have some persuasive effect in this jurisdiction also.

Can we expect class actions data breach cases in Ireland?

There is currently no provision in Irish court rules for class actions. Rather, there is a range of procedural options which allow claims involving multiple parties to be litigated as private actions. These include; (i) joining additional parties to an individual claim; (ii) representative actions; (iii) consolidation and co-ordinated hearings of separate actions; and (iv) test cases.

One potential additional avenue for class actions in Ireland will be the EU Directive 2020/1828 on representative actions for the protection of the collective interests of consumers (Directive on representative actions) (the “Directive”), which is due to enter into effect in June 2023. This Directive will harmonise the regime for collective actions to be brought on behalf of EU Consumers and will require each Member State to designate at least one “qualified entity” to bring actions on behalf of consumers for breaches of a wide range of EU directives and regulations. It remains to be seen what, if any, impact this will have on data breach cases in Ireland. Article 80 of the GDPR already makes provision for collective actions to be brought in respect of certain provisions of the GDPR, including the right to compensation under Article 82. However, the take-up on actions of this kind has been slow to date, possibly as a result of a lack of clarity as to whether a de minimis level of harm is required. Where the requirement of a de minimis level of harm is confirmed by the CJEU, this is likely to decrease the chances of class actions for breach of data rights.

Conclusion

CJEU decisions are difficult to predict and while most decisions follow the opinion of the Advocate General (such as that delivered this week in the Österreichische Post case), this is never completely certain. We eagerly await and look forward to receiving clarity from the CJEU when it delivers its rulings in the Österreichische Post and other references currently before it, in particular, as to whether there is a de minimis threshold which must be met in order to be eligible for an award of damages under the GDPR. The future of non-material loss claims depends on them.

If you would like to find out more, please contact Michael Byrne, Partner, Commercial and Dispute Resolution, any member of the Data Protection, Technology and Cyber Security Expert Team, or your usual Matheson contact.

The author would like to credit Roisin Collins, trainee solicitor; and Dylan Gannon for their support and assistance in researching and producing this article.

[1] Collins v FBD Insurance plc [2013] IEHC 137

[2] Case C-300/21 – UI v Österreichische Post AG

[3] Case C-667/21 – ZQ v Medizinischer Dienst der Krankenversicherung Nordrhein

[4] Rolfe & Others v Veale Wasbrough Vizards LLP [2021] EWHC (QB)

[5] [2021] EWHC 3069 (QB)