European Court of Justice to Review Safe Harbor, Potential Consequences for U.S. Firms

A ruling against Safe Harbor would be disastrous for major U.S. tech firms that rely on the personal data of European citizens.

safe harbor european court of justice

A European privacy activist has taken on Facebook in an Irish court, reports the Washington Post, and the judge has referred the case to Europe’s high court, the European Court of Justice (ECJ).

The case involves Safe Harbor, which lets American companies like Google, Microsoft and Facebook export personal data from Europe to the U.S. Edward Snowden’s NSA revelations made clear that America does not protect the privacy of foreigners, and the activist is claiming his data was breached by Safe Harbor.

The ECJ will have to decide whether Safe Harbor in compatible with Europe’s Charter of Fundamental Rights and privacy laws, which were recently strengthened in favor of the individual with the “right to be forgotten” ruling.

The Post pointed out that an ECJ ruling against Safe Harbor would have “sweeping consequences for U.S. e-commerce firms.”

If the ECJ rules that Safe Harbor is invalid, what next? Potential near-disaster for big U.S. e-commerce firms like Facebook, Google and Microsoft, which are heavily exposed to European markets, and rely on European citizens’ personal data. The death of Safe Harbor would mean that they were not able to legally export personal data, potentially crippling their business model. Nor could they substitute alternative arrangements (such as contracts), since these arrangements would not provide any protection from the NSA. Firms would of course protest volubly, and get the U.S. administration to fight on their behalf.

The U.S. isn’t used to legally restricting its ability to spy on its allies, or changing its domestic arrangements for the convenience of foreign powers. This time, it would almost certainly have to, if it wanted to avoid a protracted dispute that would be very damaging to U.S. economic interests. For a long time, the interdependence of the U.S. economy with the economies of other industrialized democracies has been a source of political strength. In the near future, it may become a source of weakness.

The U.K., which has close ties to the NSA, would also find a ruling of invalidity alarming in that it would place broader restrictions on spying in Europe: “The U.K. intelligence agency, GCHQ, has not only been happy to gather information on the citizens of other European countries, but claims that it can legally gather data on the online activities of U.K. citizens too.”

It’s a sticky situation for the ECJ. Any ruling restricting the privacy of European citizens would likely be met with opposition from Germany, which in recent years has indicated several ways its constitution would trump ECJ rulings when conflicts between the two are present.

The Irish judge seemed to imply that Safe Harbor was problematic and noted similarities between privacy laws in Ireland and Germany.

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