The Impact of Schrems II & Key Considerations for Companies Using M365: The Cloud Environment

In part one of this series, we described the state of the EU-US Privacy Shield and the mechanisms global companies have relied upon to transfer data from their multiple locations. In short, a recent decision – Schrems II – invalidated the Privacy Shield and shook the foundation of Standard Contractual Clauses (SCCs). Companies are now left asking the question of how to respond.

In this post, we will share our view on how to navigate forward. If your organization is not already highly reliant on cloud software, we recommend weighing the benefits and risks of making that move. As you assess your options, keep in mind that this move may come at a higher cost because of the need to do periodic risk assessments during this uncertain time. For those already in the Cloud, the motto here is “do everything that you reasonably can.” The position no company wants to find itself in is one of stasis. It is difficult to see such a position being looked upon favourably should regulators start to investigate how companies are responding to Schrems II and the consequences that go along with it.

The touchstone is the EDPB guidance and its six-stage approach to assessing data transfers, which we recommend companies undertake:

• Identify your data transfers: It is an obvious first step, although in practice this could prove challenging. You’ll need to know all the scenarios where your data is moved to a non-European Economic Area (EEA) country (at the time of writing this article, the UK, although out of Europe, is still under the European umbrella until at least the 30^th of June).
• Identify the data transfer mechanisms: You need to decide the grounds upon which the transfer is taking place, such as on the basis of an adequacy decision (this does not apply to the US), SCCs, or a specific derogation (such as consent).
• Assess the law in the third country: You need to assess “if there is anything in the law or practice of the third country that may impinge on the effectiveness of the appropriate safeguards of the transfer tools you are relying on, in the context of your specific transfer.” There is more guidance from the EDPB as to how the evaluation should be carried out (i.e., an independent oversight mechanism should exist). How effective or practical it is to suggest each company has to perform its own thorough legal assessment as the entire range of relevant legislation in any importing country is open to debate and might perhaps be considered further as these recommendations are refined.
• Adopt supplementary measures if necessary to level up protection of data transfers: The EDPB has published a non-exhaustive list of such measures, which essentially fall into one of three categories - technical (i.e., encryption), contractual (i.e., transparency), and organisational (i.e., involvement of a Data Protection Officer on all transfers). We’ll have a look at these measures in more detail below in relation to Microsoft 365.
• Adopt necessary procedural steps: If you have made changes to deliver the required level of protection, these need to be embedded into your operation (i.e.., by means of policy).
• Re-evaluate at appropriate intervals: This is not a job that can be completed and then left. It needs continual monitoring. There is no specific guideline as to what an appropriate interval is, but quarterly is probably a reasonable approach.

Essentially this boils down to carrying out a risk assessment and taking steps to mitigate the risks that are uncovered. If your cloud strategy includes Microsoft 365, the next part of this blog series is a must-read. We will share what Microsoft has done in response to Schrems II as well as some specific configuration options that will influence steps 4 and 5, listed above. Bear in mind that these recommendations could change and you should watch the space.

To continue the discussion or to ask questions, please feel free to reach out to us at info@lighthouseglobal.com.