Resolving the Inherent Conflicts
Between U.S. Investigations and
European Data Privacy Laws
May 2011
0
Moderator
Mary Jacoby
Mary Jacoby is an award-winning
former reporter for the Wall Street
Journal, Salon magazine, the St.
Petersburg Times of Florida, the
Chicago Tribune and Roll Call.
From 2005 to 2007 she reported from
Brussels for the Wall Street Journal,
where she covered European Union
antitrust and regulatory issues,
breaking numerous stories about
investigations involving Intel, Microsoft
Corp., Mastercard and other major
companies.
Her investigations have ranged from
the influence of Russian oligarchs in
Washington to terrorist financing and
white-collar crime.
Speaker: Mary Jacoby
Agenda
• Introduction of Presenters
• Background
• Cross-Border Data Transfers
• Data Protection Laws Around the World
• Increased Global Scrutiny
• Common Scenarios
• Cross-Border Data Transfers
• Practical Guidance
• Case Studies
• Q&A
Presenter
Joe Looby
Joe Looby is a senior managing director in the FTI Technology
segment, delivering consulting expertise and advanced technology for
investigations, antitrust and complex litigation matters, and is based in
New York.
He has provided expert testimony and consulting on economic and
technology issues and appeared before regulatory agencies on
diverse matters. Mr. Looby has spoken and written extensively on
litigation technology, electronic evidence and computer forensics.
Mr. Looby is a contributing author and lecturer at the Sedona
Conference, for projects including: Search & Retrieval Sciences; and,
E-Discovery Quality Methods & Metrics. Joe has also participated in
studies on search technology effectiveness, sponsored by the
National Institute of Standards and Technology (NIST) and DOD
Advanced Research and Development Activity (ARDA).
Joe has a B.A. in economics from Fordham University and a J.D. from
Union University School of Law. He is a certified fraud examiner, a
member of the Association of Certified Fraud Examiners and is
licensed to practice law in New York and Connecticut.
Speaker: Mary Jacoby
Presenter
Veeral Gosalia
Veeral Gosalia is a senior managing director in the Electronic Evidence
Consulting group of FTI’s Technology practice and is based in New York. Mr.
Gosalia’s areas of expertise include data extraction, data analysis, computer
forensics and e-discovery. He has assisted attorneys and corporations in
understanding the issues surrounding electronic evidence, including the
acquisition, analysis and production of data.
Mr. Gosalia has extensive computer forensics experience. He has assisted
on matters related to the forensic acquisition and examination of computer
systems, e-mail and various types of computer media. He has acquired
several hundred computer images and coordinated seizure efforts across the
world.
Additionally Mr. Gosalia has experience dealing with EU data privacy issues
in regards to performing computer acquisitions and tape restorations. Select
experience in this area includes serving as an expert witness and providing
an expert report in matters related to evidence destruction and theft,
spoliation and chain of custody issues.
Prior to joining FTI, Mr. Gosalia worked at Deloitte & Touche in the Dispute
Consulting Technology practice. There he assisted with the development of a
national practice technology infrastructure.
Speaker: Mary Jacoby
Presenter
Craig Earnshaw
Craig Earnshaw is a managing director in the FTI Technology segment and is
based in London. Mr. Earnshaw is responsible for the management of the
activities of the Electronic Evidence Consulting, Document Analytics and Data
Processing sub-segments within the UK.
Since 1997, he has worked solely in the electronic evidence field and during this
time has amassed considerable experience in forensic computing, electronic
disclosure, Internet investigations and electronic evidence. In 2006, he founded
FTI’s Technology Consulting segment in Europe.
Mr. Earnshaw has provided both written and oral expert evidence in the High
Court in London, and has testified at depositions in the United h as employment
tribunals and arbitrations.
Prior to joining FTI, Craig was the head of the forensic computing practices at
CRA International and Lee & Allen Consulting, which he founded in 1998. Mr.
Earnshaw is a member of the British Computer Society and the Institute of
Analysts and Programmers. He holds a Bachelor of Science in Computer
Science from the University of Durham.
Speaker: Mary Jacoby
Presenter
William Long
William Long is a counsel in the London office of Sidley Austin LLP. He advises
international clients on a wide variety of data protection, privacy, information
security, e-commerce and other regulatory matters. Mr. Long has experience with
EU and international data protection and privacy projects particularly in the
financial services and healthcare sectors advising on cross-border data transfer
and other data protection issues including regulatory investigations.
Mr. Long was previously in-house counsel to one of the world’s largest
international financial services groups as their e-Commerce counsel dealing with
e-commerce, data protection and on-line financial services matters. Mr. Long is
on the DataGuidance Panel of data protection lawyers for the financial services
sector and on the DataGuidance Panel for data protection lawyers for the life
sciences sector. Mr. Long also writes extensively for a number of journals
including Data Protection Law & Policy, Journal of Medical Research Law &
Policy, Journal of Electronic Business Law, Journal of eCommerce Law and
Policy and E-Finance & Payments Law & Policy. English Solicitor.
Memberships, Affiliations, Presentations & Articles
• Previous Member of the Centre for European Policy Studies Working
Group on eCommerce Regulation
• Article “New International Guidelines on the Transfer of Personal Health
Data” - Journal of Medical Research Law & Policy - Volume 4, Number 4
• Presenter at the Financial Technology Forum on privacy and data
protection issues, Chicago
• Article “Data Security breaches: the changing legal landscape” - EFinance Law & Policy - October 2008
• Article “Data Security and payments: dynamic Phorm of development” E-Finance Law & Policy - April 2009
Speaker: Mary Jacoby
Survey Question
Which of these is not a legitimate basis to permit the US
cross-border discovery of personal data from EU
employees?
a.
Informed Consent
b.
Standard Contractual Clauses
c.
Binding Corporate Rules
d.
Safe Harbor
e.
DOJ Subpoena
Speaker: Mary Jacoby
Background
Joe Looby
Speakers: Mary Jacoby
and Joe Looby
Cross Border Data Transfers
Right Paperwork, Right Technology & Right Approach
Looking after personal information properly goes much wider than ensuring appropriate
security. It involves a comprehensive approach – usefully summarized as ‘data
minimization’ – to the collection, use, sharing, retention, and destruction of personal
information. This is what data protection is all about. An important key is ensuring that
there is clarity and accountability for getting it right in terms of the right paperwork, the
right technology, and the right approach to raising the awareness and skills of
staff. These matters can rarely be left to a single department. Accountability must
therefore usually reside at, or near, the top of the organization. Richard Thomas, UK
Information Commissioner,
January 2009.
From - Data Protection, by Peter Carey, Oxford Press. 2009.
Speaker: Joe Looby
Cross-Border Data Transfers: Consents
In the United States, consent generally trumps all: A person need only give approval for
the use of data. Routinely upon hiring, many U.S. employees are asked to consent and
prospectively waive any and all rights to the e-mails and documents they create
pursuant to employment and/or on employer-owned property. That’s not the case in the
European Union, where a person’s consent cannot be given prospectively and where
consent must be fully informed. E.U. citizens also have the right to revoke consent. As a
result, the E.U. data privacy regulator (i.e., the E.U. Working Party) has indicated
that consent is generally unworkable as a permissible basis to transfer such
protected data to the United States.
From - Discovering Europe: How to Navigate Europe’s
Privacy Protections, National Law Journal, December 2010
Speaker: Joe Looby
Data Protection Laws Around the World
Speaker: Joe Looby
Increased Global Regulatory Scrutiny
Netherlands
People’s Republic of China (PRC)
Canada
Investigated payments and gift-giving business
development practices in connection
with a subsidiary conducting
business.
Directed
investigation
of alleged
improper use
of corporate
funds.
Korea
Allegations of violations of the
Foreign Corrupt Practices Act
involving an international division.
Due diligence investigation focused
on possible affiliations with Chinese
security agencies.
Indonesia
Investigated illegal
"grey market" distribution
of video products.
Belgium
Investigated
portfolio company's
misappropriation of
fund assets.
Investigated allegations of
improper accounting for
international construction
equipment manufacturer.
People’s Republic of China (PRC)
Investigated claims of
ownership related to gold
and other assets “hidden”
after WW II.
Europe
Italy
Conducted a due diligence
investigation on business
practices and integrity of
potential acquisition targets.
France, Germany,
Scotland, England
and Ireland
Japan
Philippines
Investigated allegations that senior management
had fraudulently inflated financial results and
engaged in kickbacks and self-dealing.
France
Investigated allegations
of improper accounting for
finite insurance contracts.
Mexico
Investigated alleged "money
laundering" violations of US
and Mexican banking regulations
at several Mexican bank
branch offices.
Investigated violations
of the Foreign Corrupt
Practices Act involving
a subsidiary of an oil
field services
company.
Brazil
Reviewed allegations that
country manager of U.S.
corporation was receiving
kickbacks from vendors.
Argentina and India
Key: Red Highlight denotes Data Privacy and Protection Laws
Speaker: Joe Looby
Investigated possible improper
manufacture and transhipment
of generic pharmaceuticals.
FCPA Numbers and Fines on the Rise
Average Corporate Penalty (DOJ & SEC) 1977-2009
Number of FCPA Enforcement Actions
60
$60,000,000
50
$50,000,000
40
$40,000,000
30
20
DOJ
$30,000,000
SEC
$20,000,000
10
$10,000,000
0
$0
2004
2005
2006
2007
2008
2009
2010
1977-1981
1982-1986
1987-1991
1992-1996
1997-2001
2002-2006
2007-2009
Source: Miller Chevalier, Winter Review 2010
Source: Gibson, Dunn & Crutcher, August 2010
“ More bad news for violators: paying the large SEC and DOJ fines does not necessarily end the company’s
exposure. A more subtle, yet also potent penalty awaits companies after the onslaught of civil and criminal
fines. Private actions by infuriated stockholders and businessmen have been filed with increasing
frequency following exposure of a company’s fraudulent business practices.
”
Source: The Foreign Corrupt Practices Act: Update 2010, by George Anthony "Tony" Smith, Esq., Weinberg Wheeler Hudgins Gunn & Dial LLC, June 15, 2010
Speaker: Joe Looby
Common Scenarios
Mergers and Acquisitions
Regulatory Reviews
Price Fixing Investigations
Accounting Investigations
Internal Investigations due to Employee Theft
IP Theft Including Employees Starting Competing Ventures
International Arbitration
International Civil Litigation
International Commercial Litigation
Speaker: Joe Looby
Legal
Frameworks
William Long
Speaker: William Long
EU Data Protection and Document
Discovery
• Catch 22 situation – disclosure obligations compete with EU data
protection requirements and blocking statutes
• Approach to document discovery varies between Member States
particularly between common law countries such as the UK and
civil law countries such as Germany
• EU Member States have adopted the EU’s Data Protection
Directive 95/46/EC but there are differences in interpretation and
application in practice
• Article 16 of the Treaty on the Functioning of the European Union
(TFEU) establishes a right to data protection and incorporates
directly in to EU law Article 8 of the Charter of Fundamental
Rights of the EU
• November 2006: Article 29 Working Party expressed and adopted
its opinion on the SWIFT case - fundamental rights of citizens
must be guaranteed
Speaker: William Long
EU Data Protection and Document
Discovery
• Consider blocking statutes such as in France (Aerospatiale/MAFFExecutive Life case) and in Switzerland where Penal Code
prohibits certain types of information being disclosed to foreign
authorities
• Rules on privilege also vary between Member States. The Azko
Nobel (2007) case confirmed principles in relation to privilege in
the context of EU Commission investigations
• In February 2009, the Article 29 Data Protection Working Party
published Guidelines on pre-trial discovery for cross-border civil
litigation (WP 158)
• Requests for information may also be made through the Hague
Convention on taking of evidence abroad in civil and commercial
matters – but not all Member States are parties while some have
filed reservations for discovery in relation to foreign legal
proceedings
• Transfers of evidence for criminal proceedings may be governed
by bilateral agreements which can differ from state to state
Speaker: William Long
17
Article 29 Working Party Paper on
Discovery
• The Article 29 Data Protection Working Party Paper (WP 158)
provides guidance to EU data controllers on data protection
requirements as applied to discovery in civil litigation
• Data Retention
• Legitimacy of Processing
– Consent
– Compliance with a Legal Obligation
– Pursuit of a Legitimate Interest
• Proportionality
• Notice to data subjects and rights of access, rectification and
erasure
• Data Security and Controls over External Service Providers
• Transfers to third countries
Speaker: William Long
Article 29 Working Party Paper on
Discovery
•
Processing of data for litigation purposes - justified when in the
legitimate interests of the data controller but provided rights of
the individual are not overridden
•
Individuals must be provided with fair processing information
unless limited exceptions apply
•
A balancing test must be applied in considering the relevance of
the personal data to the litigation and the consequences for the
individual
•
Must act in a proportionate and fair way
-
determining if the information is relevant to the case
-
assessing the extent to which personal data is included
-
considering whether the personal data can be produced in a
more anonymised or redacted form
-
perform filtering exercise locally
Speaker: William Long
Cross-Border
Data
Transfers
William Long
Speaker: William Long
Survey Question
You are a US company with offices and employees in
Europe, and discovery is required of the documents
resident in the EU. Is there a potential breach of
European data privacy if those documents are
collected and transferred to the US for review?
a.
Yes
b.
No
Speaker: Mary Jacoby
Cross Border Data Transfers
•
Articles 25 and 26 of the Data Protection Directive prohibit transfers to
countries outside EEA that do not ensure an adequate level of protection
•
Possible means for dealing with data transfers outside the EEA include:
– Consent – but consent must be informed and freely given
– Model Contracts – EU’s standard clauses for the transfer of personal
data between a data exporter and a data importer
– US Safe Harbor – US company that subscribes to US Safe Harbor
Scheme and data protection principles
– Binding Corporate Rules – EU approved internal data protection rules
which are binding on parties
– Art 26(1)(d) – transfer necessary or legally required on important
public interest grounds or for establishment, exercise or defence of
legal claims
•
Art 29 Working Party have commented that where the transfer for
litigation purposes is a single transfer of all relevant information then
Article 26(1)(d) is a possible ground but other options should be
considered
•
Hague Convention – compliance with a request under the Hague
Convention does provide a formal basis for the transfer of personal data
but some EU Member States have not signed the Convention or signed
with reservations
Speaker: William Long
Practical
Guidance
William Long and Veeral Gosalia
Speaker: William Long
Article 29 Working Paper on Discovery:
Steps to consider for EU data production
Steps to consider with EU discovery exercises
• Consider if there is a framework to compel co-operation with US
discovery rules such as under the Hague Convention
• Determine which Member State’s data protection laws apply
• Consider Working Party guidelines during each phase: retention,
disclosure, onward transfer, and secondary use
• Develop data protection protocol and privacy log of information
protected from disclosure
• Provide clear and advance notice
• Inform data subjects of data protection rights such as rights of
access, rectification and erasure
• Consider grounds for legitimate processing; apply balance of
interests test
• Consider measures to minimise information collection and
dissemination, specify security and confidentiality procedures
Speaker: William Long
Article 29 Working Paper on Discovery:
Steps to consider for EU data production
Steps to consider with EU discovery exercises
• Devise specific security measures and controls over third party
service providers
• Ensure active oversight role for data protection officers
• Establish pre-transfer data review and filtering procedures
including
review
of
documents
(with
redaction
and
anonymisation) in the EU by trusted third party
• Adopt restrictive data retention policies consistent with applicable
law
• Ensure data transfers are permitted under Article 25 and 26 of
the Data Protection Directive and local law requirements
• Check position with local counsel in each relevant Member State
due to local law differences – for example need to make data
protection filings with local DPA and consult with works council
Speaker: William Long
Practical Guidance
PROPORTIONALITY
PRIVACY LOG
Assess the proportionality, quality and relevance
of the data collected.
When an employee withholds consent for a large
volume of documents, and in any instance in which
redaction or production otherwise may be infeasible.
PROCESSING
Use a qualified and trusted E.U. third party to
process the data.
ANONYMIZING
Remove any personally identifiable information
such as names and e-mail addresses, and
consider using aliases such as Custodian One
and Custodian Two.
FILTERING/MINIMIZATION
Tested keywords should be applied to filter the
documents on-site.
Speaker: Veeral Gosalia
REDACTION
Remove personal data, but beware of blocking
statutes!
PROTOCOLS
Before legally moving data out of the country, make
sure protocols are in place.
Survey Question
If an EU employee’s employment agreement contains a
certified signed consent form permitting cross-border
discovery, can a law firm gather the employee’s documents
and bring them to the US for processing, review and
production?
a.
Yes
b.
No
Speaker: Mary Jacoby
Case Studies
Veeral Gosalia and Craig Earnshaw
Speaker: Veeral Gosalia
Case Study: Financial Services - France
BACKGROUND
• Large French bank needing assistance in the
support of a large-scale, international arbitration
involving a financial dispute.
SPECIFIC CHALLENGES
• Jurisdictional challenges to transferring personal
data outside of France.
• E-mail and electronic documents for six
individuals needed to be collected, processed,
keyword searched and exported for review by
counsel based in Paris.
• Company requires export of data to format for
review locally in Paris to support a document
review.
• Complex IT infrastructure.
• Company generally sensitive to data collection.
SOLUTION
• Mobile team performs data collections and data processing at local counsel’s offices in Paris.
• Global collaboration with legal teams based in New York, London and Paris, including performing
interviews and a targeted data collection of specific documents.
• Deployed an “offline” mobile processing environment at local counsel’s offices.
• Integrated solution into counsel's review workflow and current matter status.
Speaker: Veeral Gosalia
Case Study: Financial Services - Luxembourg
BACKGROUND
• Global law firm investigating the activities of a small number
of individuals based in the UK and Luxemburg following the
identification of a potentially incriminating document on a
printer in the UK.
SPECIFIC CHALLENGES
• Jurisdictional challenges to transferring
personal data outside of Luxemburg.
• E-mail and electronic documents for five individuals needed to
be preserved and reviewed to enable the investigators to
uncover the actions of the individuals involved to enable
appropriate actions to be taken.
• Need for the company to quickly assess
the situation to enable appropriate action
to be taken.
• Requirement to identify and exclude
potentially personal e-mail from review.
SOLUTION
• Mobile team deployed on-site to Luxembourg to preserve and prepare the electronic records and to review the
situation and assist the legal team.
• All document collection, processing and review took place within the clients premises to ensure that the
company’s strict confidentiality requirements were met, and local jurisdictional data privacy needs were met.
• As reviewers came across “hot” documents, they were able to immediately share findings with the investigative
team in the “war room” to pursue new leads and find similar documents.
• Many of the keys to unlocking the fraud were hidden in the details of complex financial spreadsheets and
transactions, requiring expertise in forensic accounting and structured data.
• Through the paper trail and investigation, developed a chronology of activities linking the key individuals to a
series of fraudulent payments.
Speaker: Craig Earnshaw
Q&A
Speaker: Mary Jacoby
Additional Resources
Joe Looby
Joe.looby@fticonsulting.com
New York
Veeral Gosalia
Veeral.gosalia@fticonsulting.com
Washington, D.C.
Craig Earnshaw
Craig.earnshaw@fticonsulting.com
London
William Long
wlong@sidley.com
London
John Casanova
jcasanova@sidley.com
London
T: +44 (0) 20 7360 3600
F: +44 (0) 20 7626 7937
www.sidley.com
Speaker: Mary Jacoby
RAND Europe report on EU data
privacy regulations and discovery
available at www.ftitechnology.com.
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