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German DPAs Issue Rules for Cloud Computing Use

13 October 2011

The German data protection authorities on September 26, 2011 adopted an "Orientation guide – cloud computing."  The guide sets out mandatory and recommended content for any agreement between German users of cloud computing services (“customers”) and cloud computing service providers. It highlights the customer's responsibility for full compliance with German data protection requirements for the cloud. Based on this orientation guide, customers and providers will have to review existing agreements in the German market.

German DPAs Issue Rules for Cloud Computing Use

Privacy and data protection compliance has been a challenging and unclear issue for cloud computing customers and service providers. The new German "orientation guide", adopted by the Munich conference of the German data protection authorities gives clear guidance to cloud computing service providers and their customers in the German market. Privacy practitioners can expect that German DPAs will refer to this guide when addressing situations that raise close questions about the application of data protection laws to cloud computing.

Full control by the customer

The guide emphasizes that German cloud computing customers are data controller and therefore are responsible for the "cloud's" compliance with all data protection requirements under German law. This means the customer needs to know the identity not only of his immediate cloud computing service provider, but of all sub-processors involved in the cloud computing services. The agreement with the immediate cloud computing service provider must contain duties to disclose these sub-processors, and certain core elements of compliance, such as technical and organizational security measures, audit and control rights vis-à-vis such sub-processors, and all locations of data processing. The customer is required to safeguard data subjects’ rights. Examples of how this is achieved include having liquidated damages and penalties in the cloud agreement, and ensuring that data subjects' rights (for instance the right to access, to correct or to have the data deleted) are observed by all cloud service providers. To the extent that the service also includes locations outside the European Economic Area (EEA), the customer may not only rely on using the EU Model Clauses, but must enter into an additional data processing agreement with control and audit provisions, which are mandatory under German data protection law.

Sensitive data in the cloud

The guide gives specific attention to sensitive data. Under German data protection law, the transfer of sensitive data like health data, trade union affiliation, or religious beliefs cannot be justified by a balance of interest test (see, e.g., Art. 7(f) of the EU Data Protection Directive, which provides a legal basis for processing non-sensitive data as necessary for a controller’s legitimate interests unless the interests are outweighed by the fundamental rights and freedoms of the data subject; see also § 28 of the German Federal Data Protection Act). Instead, the transfer of sensitive data can only be justified by the data subject's consent or other very specific exceptions. For any intra-EEA-cloud, this is not an issue since an EEA-located data processor following the data controller's instructions is not considered a third party to which data are transferred. The case is different for any provider located outside the EEA: This is a "third party" to whom the personal data are "transferred", and thus, any use of such cloud for sensitive data cannot be justified by a balance of interest.

Safe Harbor and the cloud

The German DPAs are repeating their careful approach to Safe Harbor certifications. A customer may not rely solely on the service provider's assurance with regard to any Safe Harbor certification. Instead, the customer needs to certify the validity and the applicability (for the relevant type of data) of the provider's Safe Harbor certification at least on the Safe Harbor website. If the customer wants to transfer employee data to the U.S. in the cloud computing environment, the customer also has to verify that the service provider has accepted to cooperate in investigations by, and to comply with the advice of, competent EU authorities. This requirement is reflected in the Safe Harbor FAQs (question 9, section 4).

Relevance of technical safeguards

The guide deals with technical issues and security measures and specific threats for data protection principals by cloud computing services in detail. The guide frequently addresses transparency for customers and data subjects regarding the location of the data processing, and the identity of the service providers involved (even as subcontractors). The guide highlights the problem of the reliable deletion of the data in the view of the vast storage resources of cloud computing services providers, regular back-up services, and the easy copying and global transferring of data in broadband networks. The guide emphasizes that personal data for different clients need to be securely separated. The guide also raises the concern of the potential access to personal data by state authorities beyond what is accepted in the EEA, and views this as a relevant consideration by a customer when deciding on the service provider. Customers need to address security against illegal access to the data, but also the portability of the data in case of their service provider's insolvency or in case of a termination of the contract.

Conclusion

The guide does not contain revolutionary approaches to the difficult question of how to harmonize the benefits of cloud computing with the legitimate objective to ensure compliance with German data protection requirements. However, it is a clear statement that German DPAs do not compromise on sometimes very strict requirements even for globally standardized services. The guide supports the role of intra-EU/EEA cloud computing service providers and those services that are reliable and highly transparent regarding to the location of the data processing and the identity of any subcontractors used in these services.

Both customer and providers of cloud computing services with an interest in the German market should now review their standard agreements for compliance with the requirements published by the German DPAs.

The paper is published in German can be found here.

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