HL Chronicle of Data Protection : Privacy Lawyers & Attorneys : Hogan Lovells Law Firm : Data Security, E-Commerce & Technology

Who is in “control” of personal data and who merely processes personal data on behalf of a data “controller”? These are essential questions for purposes of compliance with EU data protection requirements, yet answering them can be quite problematic in practice. The EU Data Protection Directive defines the controller as the person or entity that determines, alone or jointly with others, the purposes and the means of the processing of personal data. The processor, on the other hand, is the person or entity that processes personal data on behalf of the controller. Applying these concepts to a practical case may have been straightforward in the early days of the Directive, but in today’s Web 3.0, RFID and cloud computing environments many are perceiving the controller and processor distinction as archaic and, most importantly, unworkable in practice. At the same time, under the current legal regime the distinction is crucial in order to determine who is responsible for compliance with EU data protection rules, what Member State laws apply, and which data protection authorities are competent to supervise data processing operations.  

Last November in Madrid, when the 31^st International Conference of Data Protection and Privacy Commissioners adopted the “International Standards on the Protection of Personal Data and Privacy”, there was a sparkle of hope that the controller and processors concepts would not survive the upcoming review of the EU data protection framework. The Standards use the more pragmatic concepts of “responsible person” (instead of “controller”) and “processing service provider” (as opposed to “processor”).

However, on 16 February 2010, the Article 29 Working Party (WP) adopted an opinion (Opinion 1/2010) on the concepts of “controller and “processor”, in which it takes the position that there is no reason to assume that the current distinction between controllers and processors would no longer be relevant and workable. The Article 29 WP acknowledges that applying these concepts to concrete situations can be complex, which is why it is providing specific guidance in its opinion to ensure a consistent and harmonized approach throughout the EU.                                                                   

The Article 29 WP’s opinion includes a comprehensive analysis of the controller and processor concepts as well as practical examples and rules of thumb on how to approach the concepts pragmatically. Without going into any level of detail, here are just a few of the Article 29 WP’s pearls of wisdom that can be found in the Opinion:

• In many cases the responsibility of data controller can be attributed on the basis of an assessment of the factual circumstances. Contractual terms can often clarify the issue, although they are not decisive under all circumstances. Even if a contract is silent on who is the controller, it can still contain sufficient elements to assign the responsibility of controller to the party that apparently exercises a dominant role in that regard.

• The data controller must determine the purposes and the means, i.e., the “why” and the “how” of certain processing activities. The crucial question, however, is to which level of detail somebody should determine purposes and means in order to be considered as a data controller. According to the Article 29 WP, whoever decides on the “purposes” of a data processing operation should be the controller. The data controller can delegate the determination of the “means” of the data processing, as far as technical or organizational measures are concerned. Substantial decisions that may affect the lawfulness of the data processing (e.g., how long will the data be stored) are reserved to the data controller.

• In some cases, there may be several persons or entities that determine the purposes and means of a particular data processing operation and that therefore qualify as “joint controllers”. Although contractual arrangements can be useful in assessing joint control, they should always be checked against the factual circumstances of the parties’ relationship. Parties acting jointly also have a certain degree of flexibility in sharing and allocating data protection obligations and responsibilities, as long as they are compliant.

• A data processor is a separate legal person or entity with respect to the data controller and processes personal data on the data controller’s behalf. The data processor is called on to implement the data controllers’ instructions at least with regard to the purposes and the essential means of the processing. The lawfulness of the processors’ data processing therefore depends on the specific mandate given by the controller. A data processor exceeding that mandate could be viewed as assuming the responsibilities of a (joint) controller.

The Article 29 WP’s opinion provides useful explanations and guidance in general, and its analytical approach is helpful. It is perhaps regrettable that the many examples in the opinion do not always include in-depth discussions of the specific issues raised (for instance, data processing by recruitment agencies or in the context of clinical trials).              

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With the compliance date for the federal health data breach notifications in the HITECH Act looming, more states are amending their data breach notification statutes to cover health information. The possible trend is evident in the newly-enacted laws of three states – Missouri, New Hampshire and Texas – all of which have been enacted since June 2009. 

• Missouri – Within the key definition of “Personal Information,” Missouri’s new data breach notification law includes both “medical information” and “health insurance information,” which if disclosed in combination with an individual’s name, may trigger notification rights. 
• New Hampshire– In a separate provision from its general data breach notification law, disclosure of HIPAA protected health information by health care providers and business associates may trigger notice requirements even if the disclosure is permitted under federal law or does not create a risk of harm.
• Texas – Expanding its existing data breach notification statute, Texas specifically amended the definition of “sensitive personal information” to include types of health information not previously covered.

These states join California, Arkansas and Puerto Rico as the only jurisdictions to protect health data under their data breach notification statutes. Still, compliance with these statutes may be costly and burdensome.  Businesses must carefully monitor access, acquisition and disclosure of health and medical information in addition to other types of sensitive information – social security number numbers, financial account numbers, etc. – routinely protected under these statutes. Definitions of health and medical information vary, but can be quite broad to cover, among other things, information relating to:

• physical or mental health or conditions and medical histories; 
•  provision of health care;
•  treatment and diagnosis; 
•  payments for health care; and 
•  insurance policy numbers and subscriber IDs.

Although the interaction of these state laws with the federal data breach notification regulations under the HITECH Act is unsettled, state laws must continue to be monitored and analyzed closely, especially if the number of states protecting health information continues to grow and their notification obligations are consistent with, but extend beyond, the federal requirements.

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