Just when you thought the endless rounds of Brexit negotiations were finally drawing to a close and it was safe to tune into the news again, another problem has reared its head. What will happen to GDPR after Brexit? And will UK companies still be able to exchange data within the EU?
To provide some clarity amongst the confusion, we’ve tried to answer both. So, join us on a whistlestop tour of all things Brexit and GDPR.
Will GDPR apply in the UK after Brexit?
Strap yourselves in, this one’s going to take some explaining. While GDPR will no longer apply ‘directly’ once the transition period ends on 31st December 2020, that doesn’t mean UK organisations no longer need to comply with it.
This is because the Data Protection Act 2018 enshrines GDPR’s requirements in law. On top of the existing legislation, the UK government has issued a statutory instrument catchily titled ‘The Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019’. In simple terms, this amends the original law and merges it with the requirements of GDPR. The outcome will be a new data protection framework known as the ‘UK GDPR’.
Still with us? The good news is that there’s virtually no difference between the UK version of GDPR and the current EU regime. So, for the meantime at least, you should continue to comply with the requirements of the EU GDPR.
So why all the dramatic headlines about GDPR after Brexit?
If there’s little material difference between the current GDPR and the proposed UK version, why are we seeing headlines about the switch costing UK firms £1.6bn in compliance fees?
Well, the problem lies in how the UK’s status is defined by the EU. Once the UK leaves the EU, as a non-member state it will be reclassified as a ‘third country’. And this has big ramifications for the transfer of personal data between countries.
Under GDPR (the EU version), transferring personal data from the European Economic Area (EAA) to third countries is only permitted in one of three circumstances.
The three options
- If the European Commission (EC) has issued an adequacy decision. In other words, the EC has decided the third country has adequate data protection measures in place for EU countries to work with it.
- If safeguards such as binding corporate rules (BCRs) or standard contractual clauses (SCCs) are in place between organisations exchanging data. These are essentially commitments to comply with GDPR at the level of an individual company.
- If an approved ‘code of conduct’ is in place between the EEA and the third country.
At the moment, no code of conduct has been agreed between the EEA and the UK. What’s more, the EC is yet to issue an adequacy decision.
This has led commentators, such as the New Economics Foundation (NEF) and UCL’s European Institute research hub, to suggest that in the event of a no-deal Brexit, UK businesses would have to undertake option two from the three circumstances listed above.
The problem with this is that it could prove very costly. In fact, NEF estimates setting up extra compliance measures like SCCs could cost on average £3,000 for a micro-business, £10,000 for a small business and £19,555 for a medium-sized firm. For large firms, the figure could be as high as £162,790, with a cost of £1.6bn to the UK economy as a whole.
How likely is this to happen?
While the last section might be a little scary, it’s important to stress that it is the worst-case scenario. The UK government has stated several times that it’s committed to securing an adequacy agreement with the EC. So it’s not beyond the realms of possibility that all this will be academic and we’ll see a relatively smooth transition process.
However, there are some doubts about the likelihood of the UK being granted adequacy status. And there are a couple of compelling reasons for this. First, the EU has long opposed some of the practices of the UK security services. This has led to several protracted court battles and a few defeats for British legislators. It’s felt that unless the UK is willing to change it’s surveillance practices – something it’s repeatedly refused to do – then this is likely to provide a blocker to the UK being granted adequacy status.
Second, the UK government has committed to ‘liberalizing’ data laws as it leaves the EU. Its argument for doing this is that data is currently ‘inappropriately constrained’ by EU laws. The problem is that this is likely to render the UK’s data protection measures inadequate in the eyes of the EU. Again, leading to a scenario in which the UK becomes considered a third country without adequacy status.
What should SMEs do?
At this point, it’s natural to wonder what your business can do to ensure you’re ready for the transition. After all, with all the decisions being made at an international level, what can a single SME do but wait?
We don’t yet know the outcome of negotiations on the UK’s adequacy status. So planning for extra compliance measures like SSCs is a challenge. Nevertheless, as we mentioned earlier, it’s well worthwhile ensuring your business is compliant under the current GDPR regime. At the very least, this should help you stay on the right side of the new UK GDPR standard once it’s released.
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