Open Letter: Commit to Data Flows & Back it up with Action
Dear President of the European Council,
Dear Mr. Michel,
Dear President of the European Commission,
Dear Ms. von der Leyen,
Startup communities across Europe urge policy makers to enable data flows across markets. Committing to free data flows necessitates an updated data adequacy agreement with the United States and revamping of the Standard Contractual Clauses agreement.
COVID-19 has challenged us all, from citizens to businesses. Entrepreneurs share a vision of a Europe that will prosper post COVID-19. Startups are in a prime position to shape a green and digital recovery that simultaneously lets the European Union achieve its ambitious goals.
The invalidation of the EU-US Privacy Shield agreement on 16 July causes uncertainty for startups who used it themselves, as well as those who use services where suppliers relied on the instrument.
Over 5000 companies were signed up to the Privacy Shield. Approximately 65% of Privacy Shield certified firms are SMEs. Examples include cloud storage and other online services that are essential for the operations of almost all private and public institutions. Also, 41% of certified firms have a revenue of below $5 million. They span all economic sectors, including travel, retail, finance and manufacturing.
To comply with legal obligations, as set by the GDPR and the EU Court of Justice since 16 July, the obvious alternative for startups in the EU is the use of the Standard Contractual Clauses (SCCs). Unfortunately, this is far from an ideal solution. SCCs involve costly legal procedures that add another level of complexity to business operations. The Court ruled that the use of SCCs issued by the European Commission remain a valid transfer mechanism, but only if extra protections are put in place. However, the Irish Data Protection Commission now also questions whether Standard Contractual Clauses offer sufficient protection for transfers to the US altogether. If this approach is replicated across Europe, SCCs may not remain an option to all startups in the EU.
Startups are therefore left in a situation of uncertainty. The European Commission previously announced that it will modernize the Standard Contractual Clauses, but it is not clear when they will be ready. As for an overall agreement between the EU and the US on data transfers, historically renewing legal frameworks in this space has taken years and startups in Europe are eager to comply with EU obligations today.
We, the undersigned representatives of startup communities, encourage you to see startups as a key partner for the post-COVID-19 economic recovery, to commit to data flows and provide instruments to transfer data legally and affordably into other regions. We therefore urge the EU institutions and leaders to act swiftly:
- The EU and the US should negotiate a legally robust adequacy decision as soon as possible. Time is of essence.
- The Commission should commit to preparing and submitting to consultation modernised Standard Contractual Clauses as soon as possible.
- EU institutions have a responsibility to address a fundamental question: Do they stand behind a mechanism whereby data transfers to the US and elsewhere is possible and feasible for SMEs and startups?
- The Commission therefore, jointly with the European Data Protection Board, can clarify the situation by issuing simplified guidance on the nature of an eligible set of additional safeguards that may be required to transfer personal data to third countries on the basis of alternative transfers tools such as SCCs and Binding Corporate Rules.
For startups, data protection is a top priority. Reputational damage resulting from shortcutting or disobeying rules could quickly become a lethal event for a young startup. It is of upmost importance for startups to ‘get this right’. Regulators should build on this motivation and build a legal framework that startups can comply with. Every additional level of complexity makes it harder to start-up in a new market and effectively ring-fences bigger players.
Digital development and globalisation should not suddenly be scaled back in the name of localisation. This will only deprive startups and SMEs of the best possibilities for onboarding efficient services, increase competitiveness, scale up and grow.
We are available for any questions you may have.
Allied for Startups
BESCO – The Bulgarian Startup Association
Spanish Startups Association
Allied for Startups is a worldwide network of over 40 advocacy organisations focused on improving the policy environment for startups. We are working together to create a consensus on policies that can positively impact startups and grow the digital entrepreneurship and digital economy at large. Our mission is to ensure that the voices of startups are heard in government.