You will cross the border. Just saying.

You will cross the border. Just saying.

Today I am referring again to the famous Google Spain judgement, better known for ruling on what press has been popularly calling the ‘right to be forgotten’. The amount and the complexity of the questions raised in that decision enabled me to address all of them in the previous posts (here, here, here, and here)… And as I like to honour my promises, I will not  promise that this will be the last post regarding that matter.

So, although the worldwide attention has been focusing on the fact that individuals may directly address, to search engines, requests for deletion of links from search results, the ruling also dealt with a key topic that seemed to have been undervalued, even if as equally important for businesses.

I am specifically referring to the territorial scope of the Directive 95/46 1)Directive 95/46/EC of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, i.e., whether it applies to Google Spain, a subsidiary of Google Inc. or not, given that the parent company is based in Silicon Valley.

In order to fall within the territorial scope of the national provisions implementing the above mentioned Directive, the data processing shall be namely carried out in the context of the activities of an establishment of the data controller on the territory of the Member State, as stated in its article 4(1)(a).

As foreseen in its recitals, “establishment on the territory of a Member State implies the effective and real exercise of activity through stable arrangements” and “the legal form of such an establishment, whether simply branch or a subsidiary with a legal personality, is not the determining factor.2)Recital 19 of the Directive

In this regard, the main relevant facts that the ECJ took into consideration were that Google search engine is operated by Google Inc. outside of the EU and that it has a subsidiary on Spanish territory which sells advertising connected to the Internet-related activities of Google Inc.

In parallel, the ECJ rejected the argument according to which Google does not carry out its processing of personal data activities in Spain and that Google Spain is a mere commercial representative for its advertising actions. Instead, the ECJ noted that, pursuant to recital 19 of the Directive, an establishment on the territory of a Member State implies the effective and real exercise of activity through stable arrangements. 3)Paragraph 48 of the ruling

Moreover, it held that Google Spain engages in such activity and, as a subsidiary of Google Inc., with its own legal personality, constitutes an establishment.4)Paragraph 49 of the ruling

According to the ECJ, Article 4(1)(a) of the directive does not require the processing of personal data to be conducted by the subsidiary itself, but only that it be carried out ‘in the context of the activities’ of the subsidiary.5)Paragraph 52 of the ruling That would be the case, for instance, if the subsidiary promotes and sells advertising space offered by the parent company which serves to make the service offered by that engine profitable.6)Paragraph 55 of the ruling Since the advertisements are displayed next to search results and finance the website, both activities are inextricably linked.7)Paragraph 56 of the ruling

Furthermore, the court considered that the very display of personal data on search results page constitutes processing of such data. As results are displayed, on the same page, with advertising linked to the search terms, the Court concluded that the processing of personal data is carried out in the context of the commercial and advertising activities of the controller’s establishment on the territory of a Member State.8)Paragraph 57 of the ruling

For all these reasons, the ECJ concluded that the processing of personal data in the context of the activities of a subsidiary of the controller established in a EU Member State, which is intended to promote and sell advertising space offered by that engine and which orientates its activity towards the inhabitants of that Member State, does fall within the territorial scope of application of the Directive.9)Paragraph 60 of the ruling

Last but not the least, the Court noted that, in light of the objectives of the Directive, the rules on its scope ‘cannot be interpreted restrictively’, and that it had ‘a particularly broad territorial scope’.

I must confess that I wasn’t particularly surprised by the conclusion that the Directive is applicable to companies based outside the EU, as long as it conducts a noteworthy local activity that has some link to the Internet activities of the parent body.

In fact, none withstanding the divergence of viewpoints regarding ‘right to be forgotten’ issue, the ECJ broadly confirmed the Advocate General opinion regarding jurisdiction.

The Advocate General had previously established the scope of application of the Directive, pointing out the very nature of the business model of search engines, and the inextricable link between Google Inc. and its subsidiary. Thus, the consideration according to which a controller should be treated as a single economic unit would lead to conclude that a controller is established in a Member State if the subsidiary which generates its revenues is established in that Member State. In this context, it was also disregarded that the technical data processing operations were conducted outside the EU. 10)Paragraphs 64, 65, 66 and 67 of the opinion

As a result, the ruling has broadened the territorial scope of the Directive. Not referring specifically to search engines, it applies to every data processing “in the context of the activities of an establishment”. Hence, it means that businesses with operations in the EU might generally be subjected to EU Data Protection rules.

The concept of establishment may therefore include non-EU businesses which have branches set up in a Member State. This is particularly relevant as it might affect foreign companies simply by virtue of having local sales subsidiaries in the EU. Moreover, it might potentially extend to every business that has a stable presence in the EU market, even if no European representation.

This is in line with the wider reach of the territorial scope of the forthcoming General Data Protection Regulation, which is intended to be applicable not only to businesses established in the EU. The Regulation will, in fact, introduce some key changes to the existing legal framework.

Firstly, while the current Directive applies to the data processing conducted by an establishment of a data controller in the EU, the new legislation will cover as well the personal data processing in the context of the activities of an establishment of a controller or a processor established in the Union.

In addition, the Regulation will also be applicable to the processing of personal data of individuals residing in the EU, by data controllers who are not established in the EU, when the processing activities are related to the offering of goods and services to data subjects in the EU or the monitoring of their behaviour (profiling), as far as their behaviour takes place within the EU.

If implemented, the proposed changes will bring all foreign companies who process EU citizens’ data, many of which have kept their data processing abroad to avoid being subjected to the current Data Protection Directive, within the scope of EU law.

As a consequence, non-EU based businesses will have to reconsider their arrangements for subsidiaries to ensure full compliance with EU Data Protection requirements.

References   [ + ]

1. Directive 95/46/EC of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data
2. Recital 19 of the Directive
3. Paragraph 48 of the ruling
4. Paragraph 49 of the ruling
5. Paragraph 52 of the ruling
6. Paragraph 55 of the ruling
7. Paragraph 56 of the ruling
8. Paragraph 57 of the ruling
9. Paragraph 60 of the ruling
10. Paragraphs 64, 65, 66 and 67 of the opinion