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China proposes draft privacy legislation with significant potential implications


ChinaOn July 6, 2015, China’s legislature, the National People’s Congress (NPC), circulated for comment two pieces of draft legislation with significant potential implications for data privacy and data security in China. The key provisions of these two draft laws are summarized below.

DRAFT CYBER SECURITY LAW

Coming closely on the heels of the July 1, 2015 promulgation of a new national security law, the draft Cyber Security Law (网络安全法) has as its stated goal the protection of “cyber sovereignty” and the preservation of cyber security. It includes provisions governing data localization, protection of personal information and other data, and network security.

  • Definition of personal information. Many Chinese regulations that include provisions governing the protection of personal information are unclear on the scope of the term “personal information”. The draft law includes a relatively detailed definition of “citizens’ personal information”, meaning personal information such as a citizen’s name, birth date, ID number, biometric data, profession, residence, or telephone number, recorded electronically or through another method, as well as other kinds of information that, alone or combined with other information, may be used to determine a citizen’s identity.
  • Data localization. Article 31 of the draft law would require an operator of “key information infrastructure” to store personal information and other “significant data” collected and produced in the course of its business operations inside China. It would also require that, before any of that data can be shared with parties overseas or stored overseas, the Chinese company complete a security evaluation in order to evaluate the security risk associated with the data export. The term “key information infrastructure” refers to, among other things, public communications infrastructure and information systems used by public utilities, government at the municipal or higher level; the military, or used in transportation systems, health care, or the financial sector. Notably the term also includes networks and systems owned or managed by network services providers that provide services to “large groups of users”, potentially giving the data localization requirements of the draft law a very broad application. Frustratingly, the term “significant data” is not defined in the draft law. We anticipate the intention is to reinforce exisiting restrictions on the export of state secrets, as well as address other information whose export may have an impact on national security, but further guidance will be needed on this issue, as well as on the nature of the security evaluation required in connection with data exports.
  • Data protection. Chapter 4 of the draft law includes broad provisions governing the protection of network data, including personal information. The term “network data” refers to all kinds of electronic data collected, stored, transmitted, processed, and produced through networks. The personal information protection provisions take a similar approach to personal information protection in sector-specific data privacy rules already in place with respect to the telecommunications sector. The provisions apply to all “network operators”. “Network operator” and the term “network” are both defined broadly so that the obligations apply to the owner of any computer information network, as well as to any party who administers a computer information network or provides services over it. As such, the data protection provisions of the draft law apply broadly to a very wide range of parties who either own or use a computer information network (and effectively to all personal information in electronic form), and not only within the limited sectors covered by current rules. The principal requirements include the following:
    • Collection and use of personal information must comply with the principles of legality, legitimacy, and necessity.
    • The purpose, method, and scope of the collection and use of personal information must be expressly disclosed, and the collection and use of personal information must be based on the individual’s consent.
    • Network operators may collect and use personal information only in connection with their provision of services and should not collect or use personal information outside the scope agreed by the individual.
    • Network operators should disclose to individuals their policies for the collection and use of personal information.
    • Individuals can demand that personal information collected unlawfully be deleted, and they have the right to demand correction of personal information that is inaccurate.
    • No entity or individual may steal or acquire personal information by other unlawful means, or sell or unlawfully provide personal information to others; language that corresponds to language in the Ninth Amendment to the Criminal Law is also discussed in this update.
  • Security certification/inspection. Article 19 of the draft law would require that key network equipment and special- purpose network security products comply with applicable security standards and be subject to a security certification or security inspection before being sold in the market. The security certification/inspection requirement builds on a similar requirement contemplated in regard to equipment used in the telecommunications and Internet sectors in the Guiding Opinions on Strengthening Network Security in the Telecommunications and Internet Sectors. Article 19 makes clear that its implementation is subject to the issuance of a catalogue of key network equipment and special-purpose network security products by the “State network information department”, a reference to the Cyber Administration of China (CAC).
  • National security review. Article 30 of the draft law contemplates a vague national security review requirement, requiring the operator of “key information infrastructure” procuring network products or services to undergo a security review process led by the CAC if the procurement “might have an effect on national security”. This brief provision does not provide further details but states that the implementing measures for this process will be issued by the State Council. This requirement echoes the announcement made by the State Internet Information Office on May 22, 2014, which stated for the first time that all important technology products and services affecting national security or the public interest will be subject to a “cyber security” review. This provision of the draft law would establish the formal statutory basis for implementing such a national security review process for the procurement of IT equipment and services for important IT infrastructure.

It is difficult to predict how long it will take for the NPC’s legislation process to be completed after the period for comments closes on August 5, 2015. The draft law is still subject to two readings before the full NPC or its Standing Committee, and we anticipate that a significant amount of debate within government circles has yet to take place on various aspects of the draft law before the law is formally promulgated. Some commentators are predicting that the draft law will be promulgated before the end of 2015.

In the meantime, various other regulatory efforts continue as part of the Chinese government’s campaign to enhance network security, many of which are likely to have an adverse impact on market access by foreign IT companies.

DRAFT AMENDMENT TO CRIMINAL LAW

As we reported previously, the NPC’s circulation for public comment Amendment 9 to the Criminal Law of the People’s Republic of China (Draft) (中华人民共和国刑法修正案(九)(草案)), which contemplated a significant broadening of the scope of criminal liability under Article 253 of the Criminal Law for misuse of personal information.

The NPC has circulated a second draft of Amendment 9 (刑法修正案(九)(草案二次审议稿), which while reworking the drafting of the data privacy provisions of the first draft, preserves the scope of criminal liability contemplated in the first draft while increasing related penalties. Now any breach of Article 253 is subject to a prison term of up to three years, with a longer prison term of between three and seven years if the circumstances are especially serious. Under the previous draft, the maximum penalty was three years (two for the new offense of unlawfully “selling or providing personal information to another party” introduced in the first draft).

It is likewise difficult to predict how long it will take for the NPC to complete its legislation process in respect of the Criminal Law amendment completed after the period for comments closes on August 5, 2015. The draft is still subject to one reading before the full NPC or its Standing Committee.

Source: Morrison & Foerster LLPPaul D. McKenzie and Wei Zhang

ICO fines NHS £70,000

May 1, 2012 2 comments

The Information Commissioner’s Office has issued its first, significant monetary penalty following a serious data protection breach by an NHS body

The Information Commissioner’s Office (“ICO”) has taken action following an administrative error by Welsh health board, Aneurin Bevan Health Board (“ABHB”), which led to a serious breach of the Data Protection Act 1998 (“DPA”).

As the ICO gets used to using its new powers to issue substantial fines, all organizations which handle personal data need to ensure they are complying with their obligations under the DPA and have the necessary measures in place to avoid serious breaches occurring.

Background

Section 55 of the DPA came into force on 6 April 2010 and allows the ICO, where there has been a serious contravention of the Act, to serve a monetary penalty notice on data controllers. The maximum penalty that can be imposed is £500,000.

What did they do wrong?

The error, which occurred in March 2011, meant that a highly sensitive report containing details of a patient’s health was sent to a former patient who had a similar name. A letter which had been drafted by a consultant and emailed to his secretary for formatting failed to identify accurately the patient to whom it should have been sent. The draft letter misspelt the name of the patient and did not contain sufficient additional details to identify the patient concerned. Furthermore, the letter was not checked prior to it being sent.

The investigation carried out by the ICO into the incident concluded that ABHB did not have in place sufficient checks to prevent personal data being sent to the wrong person and that the members of staff involved had not received any DPA training. An exacerbating factor was that the inadequate procedures followed in this instance were replicated across ABHB.

What was the penalty?

As a result of this incident ABHB has become the first NHS organization to be fined by the ICO.

The ICO has not only issued a fine of £70,000 to ABHB (which will be reduced to £56,000 if early payment is received) but also required it to sign an undertaking with a view to ensuring that all personal data it holds is processed in accordance with the DPA.

Following its investigation into this matter; the ICO had particular concerns about ABHB’s internal practices and the undertaking also includes measures to deal with these, including implementing:

  • new checks across the organization to ensure that a patients’ identities are established before any documentation containing personal data is issued;
  • the provision of training for staff;
  • putting in place and maintaining appropriate IT and other security measures; and
  • regular monitoring of compliance with the DPA.

This decision comes shortly after the ICO indicated that it would be focusing on, amongst others, the health sector in respect of responses to subject access requests. It has highlighted that notice should be taken of this decision by those operating within the health sector and stated that it is vital that the health service ensures that it has appropriate DPA compliance procedures in place.

The future

The Information Rights Strategy that was published by the ICO at the end of 2011 made clear that it would be taking a robust approach to DPA compliance over the coming year. This decision, reflects that approach and should be seriously considered by those organizations and employers operating within the health sector.

Future enforcement action by the ICO is likely to be significant, particularly in view of the European Commission’s proposals for reforming the approach to data protection across the European Economic Area.

Tips for organizations

  • Ensure that all your employees are trained on handling personal data particularly those who process it on a day to day basis.
  • Consider carrying out a data protection audit to establish the level of compliance with the DPA within your organization and, if necessary, to decide how this can be improved.
  • Ensure that you actively promote, implement and monitor compliance – it is not enough to have written policies in place if they are not enforced.

Source: Shoosmiths.

Violations of Proposed EU Privacy Rules Could Cost Companies Up to Two Percent of Global Revenues

April 24, 2012 Leave a comment

A BEERG-HR Policy Association policy paper describes how a proposed new regulation in the European Union replacing the myriad national laws governing individual data protection with a single set of EU-wide rules would have significant consequences for employment data.  Most significantly, a violation of the regulation could subject a company to a fine of up to two percent of its annual global revenues.  The policy paper, prepared by international law specialist, Malcolm Mason, describes several areas where the proposed regulation would impact the collection of HR data, including:

  • A requirement of a “valid consent” by an employee before her/his data can be processed, and such consent may not be made a condition of employment;
  • Stricter controls on transfers of personal data from within the EU to countries outside the EU;
  • A “right to be forgotten” requiring data controllers to delete personal data relating to a data subject where the individual withdraws consent, objects to that controller’s processing of their information, or where their personal data is no longer needed; and
  • A requirement to appoint a “data protection officer” for a two-year term with enhanced job protections.

While the proposed regulation is mainly targeted at social media and Internet trading, it fails to recognize that the nature of the relationship between an employer and an employee is fundamentally different from that between a user and Twitter or Facebook.  As the proposal moves forward, our European ally BEERG will be making the case that employment data should be treated differently from social media data or client/consumer data and subjected to a separate set of rules.

Source: HRPolicy.org

Serbia set to start Personal Data Protection Project

April 23, 2012 Leave a comment

The implementation of a project funded by the EU and meant to improve the protection of personal data in Serbia officially started last Wednesday.

The implementation of a project funded by the EU and meant to improve the protection of personal data in Serbia officially started on Wednesday.

The project began with a meeting between Rodoljub Sabic, Serbian commissioner for information of public importance and protection of personal data, and Slovenian commissioner for information Natasa Pirc Musar.

Sabic said the project would take six months to complete and would include numerous important activities, “starting with an evaluation of how harmonized our regulations are with the EU standards on the protection personal information.”

He added the project would include “strengthening the institution of the commissioner by educating and training personnel to monitor and improve data protection in accordance with those standards,” Sabic’s office stated.

He said he was pleased to work with Slovenian colleagues, because the team led by Pic Musar had gained recognition “not only in Slovenia, but in the EU also, as a team of excellent experts.”

The protection of identity data in Serbia is still in its first stage, even with the efforts invested by the commissioner and some initial results in the field, he noted.

According to Sabic, it is an issue of extreme significance in terms of respecting constitutionally guaranteed human rights, and it is also an issue “that will be one of the first the EU will inquire about once the start date for the negotiations is set.”

Source: As reported by Ekonom:east Media Group

European Companies Preparing for Data Protection Overhaul

April 21, 2012 Leave a comment

The recently unveiled European Union (EU) data protection proposals call for hefty fines, new rules for reporting data breaches, large companies to appoint a data protection officer and several other regulations. Although the legislation has yet to be put into effect, many European enterprises are already planning ahead, making changes to their IT security strategies and policies.

The data protection proposal would enable the EU to fine companies in violation of the laws up to 2 percent of their global annual turnover. Combined with the increasing prevalence of cyberattacks and data breaches, the threat of severe financial punishment has prompted many businesses among EU member states to make continuous compliance an organizational priority.

According to a recent study by Tufin Technologies, 42 percent of network security managers believe the EU proposal has led to heightened risk awareness in their organization. Additionally, 34 percent of respondents said their attitude toward continuous compliance has changed due to the data protection legislation, and 54 percent said automating compliance audits would help reduce the risk of violating the regulations, potentially saving the company from being fined.

“While 29 percent of respondents have partially automated compliance audits, those processes that are not automated run the risk falling out of compliance the moment after the auditor signs off on the audit,” said Shaul Efraim, vice president of marketing and business development for Tufin.

The report said respondents provided vastly different answers regarding best practices in reducing the risk of noncompliance. According to Tufin, some IT security professionals said a strict regulatory compliance strategy that includes a comprehensive data security awareness program would help organizations meet EU compliance standards.

While the proposed legislation may cause headaches for enterprise compliance officers and other IT professionals, the EU and Justice Commissioner Viviane Reding are confident the laws will facilitate stronger data protection standards for government organizations, businesses and consumers.

“Seventeen years ago less than 1 percent of Europeans used the internet,” Reding said. “Today, vast amounts of personal data are transferred and exchanged, across continents and around the globe in fractions of seconds. The protection of personal data is a fundamental right for all Europeans, but citizens do not always feel in full control of their personal data.”

Reding said the presented changes to the existing policy will save businesses around €2.3 billion per year by providing them with a single set of rules and one data protection authority to report to, reducing costs related to paperwork and other compliance expenses. Meanwhile, enterprises will be required to notify authorities about data breaches as quickly as possible – within 24 hours if feasible. Also, companies with more than 250 employees will have to appoint an independent data protection officer.

With the new regulations requiring organizations to quickly report data breaches, and large fines for companies that fail to do so, it’s essential for IT decision-makers to consider implementing security solutions capable of detecting and eliminating advanced threats before a major breach occurs. Some IT security providers offer integrated, state-of-the-art systems that can analyze security events in real time, giving enterprises the ability reduce costs, efficiently detect threats and decrease risk. These advanced solutions can also help organizations meet regulatory compliance standards by encrypting critical data, controlling access and constantly monitoring company networks, systems and endpoints.

The importance of data protection legislation, organizational policies and awareness is at an all-time high, as cyberattacks are more sophisticated and widespread adoption of mobile devices has opened the door for new threats. According to a recent global survey, 86 percent of IT professionals believe their job would be at risk if a data breach occurred, revealing yet another reason enterprises must develop better security and data protection plans.

Security News from SimplySecurity.com by Trend Micro

Ghanaian Parliament Passes Data Protection Bill

April 19, 2012 1 comment

After reports last July that the Data Protection Bill had been withdrawn from Ghana’s Parliament for adjustments, the bill was re-introduced and Parliament has passed the bill on February 10.  The Act, said to be awaiting presidential assent to be fully operational, is modeled upon European precedents and will set out the rights and responsibilities of data controllers, data processors and data subjects in relation to personal data, under the supervisory authority of a Data Protection Commission.  Ghana swore in a new President, John Atta Mills, a 64-year-old law professor, on January 8.

EU Data Protection Proposals: Outsourcing and Employee Data Issues

February 17, 2012 Leave a comment

The following article by  Matthew Howse, Partner, and Celia Kendrick, Associate, at Morgan Lewis should serve as a great primer for US as well as other multinational organizations that deal with human resource data of EU citizens. The EU’s proposed new revisions to data privacy could have broad ramifications for the unwary.

Outsourcing arrangements often require the transfer of employees’ personal data from the customer to the supplier or vice versa.  For example, an outsourcing of payroll functions will involve the transfer of employee data.

Particular issues arise if the data is to be transferred outside of the EU.  In addition, notwithstanding that most data protection legislation within the EU derives from the EU Data Protection Directive, there are important differences between countries on how personal data can be processed.  The UK rules are currently contained in the Data Protection Act 1998.

In January 2012, the European Commission published its proposal for a new General Data Protection Regulation.  The extensive proposals would overhaul this area of law and significantly increase data protection across Europe.

The key proposals are:

Harmonization: A single set of rules will apply across Europe.

Scope extends beyond Europe: The new rules will apply to EU businesses and businesses based outside the EU that process European citizens’ personal data for the sale of goods or services or the monitoring of behavior.

Fines: Penalties for non-compliance will be significant, with businesses facing proposed fines of up to €1 million or up to 2% of their annual worldwide turnover (depending on whether the organization is an ‘enterprise’).

Explicit consent: The new definition of “consent” will include a requirement that individuals’ consent must be explicitly obtained; it cannot be assumed.

Notification requirements: Organizations will be required to notify their supervisory authority of a security breach without undue delay, meaning within 24 hours if that is feasible.  If not, the notification must be accompanied by a reasoned justification.

Right to be forgotten: Individuals will be able to ask to be forgotten and have their data deleted unless there is a legitimate ground for keeping it.

Data protection officers: Organizations with over 250 employees will be required to have a designated data protection officer who will have specific duties in relation to monitoring and advising the organization.

These changes are probably long overdue – the current law was drafted when recent technological advances could not have been contemplated.  However, preparing for the changes and ensuring compliance will place a large administrative and financial burden on businesses with a European presence, including businesses involved in outsourcing.

The next step is for the proposed Regulation to be considered by the European Parliament and Council.  It is expected there will be widespread debate on the proposals, and that the Regulation will be amended.  Once the Regulation is approved, it is likely to be a further two years before it comes into force.

If the current drafting of the Regulation is approved, there will be a significant change in data protection obligations for both customers and suppliers.  Under the current law, only data controllers – organizations that control the purposes and manner for which personal data is processed – are subject to the obligations and restrictions on personal data.  Most suppliers are data processors as they process personal data on behalf of the customer (the data controllers).  However, the proposal is to impose restrictions and obligations directly on data processors (i.e. suppliers) for the first time.

Currently, it is important for all parties to establish who the data controller is and for the data controller to impose contractual obligations on the other party to ensure compliance with data protection legislation.  It is also key to ensure that, if personal data will be moved outside of the EU, this is done in compliance with the strict restrictions on exporting data.  Arguably, by extending the scope of data protection legislation to cover data processors and organizations based outside the EU which process EU citizens’ data, these considerations will become less significant for EU-based data controllers (i.e. customers).  However, the effect on data processors and international organizations will be much more significant.  The more stringent rules will place a tougher administrative burden on suppliers, which could lead to an increase in the overall cost of outsourcing.

Organizations that are about to enter into new outsourcing arrangements should be aware that their data protection obligations may change during the course of the arrangements.  Contractual provisions should be drafted accordingly, for example to make data protection provisions subject to amendment to comply with legislative changes.

The key message for customers and suppliers is: watch this space.  It will be some time before the measures are implemented, but the scope and effect of data protection legislation is likely to change significantly.

As published by © 2012 sourcingfocus.com

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