While US companies and the US government fear the consequences of the Safe Harbour ruling of the European Court of Justice, the European companies should be optimistic. In the short term the ruling can cause confusion, but in the longer term it may generate more growth in the European tech industry, which for years has lagged behind the US. With this ruling and a new European privacy legislation, it seems that Europe works to stop the distortion of competition that European companies have suffered precisely because the strict European data rules have not been enforced against US companies.
The Safe Harbour agreement has since 2000 made it possible for thousands of US companies to access and store Europeans data in the United States, although these according to European legislation should be kept in Europe. With Safe Harbor, US companies has to fill in a web form promising that they treat European data according to European legislation. They have, so to speak, self-regulated. European companies, by contrast, have been regulated by individual European countries’ data authorities. The Safe Habour agreement has been under massive criticism long, but it took a young Austrian law student Max Schrems to to get it declared invalid.
Max Schrems has for years with Europe-vs-Facebook led a struggle to get Facebook to follow the European rules. He tried to go through the Irish data protection authority, because Facebook’s European headquarters are in Ireland, but here they have rejected the case and referred to the Safe Harbour Agreement. With the ECJ decision, the Irish authority now has to investigate the case, and it will be interesting to see if Ireland will end up “as the front-line defender of Irish and EU citizens’ fundamental rights to privacy, or as a digital-era colonial outpost of US intelligence?” as The Irish Times writes.
The US government is “deeply disappointed” by the verdict and believes that it can “threaten a thriving transatlantic digital economist” according to The Register. No wonder they are concerned. Each month American companies make billions of dollars at the European markets – without being subjected to the same regulations as the companies in Europe. Therefore European business organisations should be pleased with the ruling rather than worried, as it – along with other decisions and the future EU regulation – will level the playing field when it comes to competition between the EU and the United States.
A coming Microsoft vs The US ruling can make it worse
The Safe Harbour ruling may have the consequence that American companies have to move all of their European data to Europe. That in itself will create jobs and growth – think of Apple’s server farm in Viborg, Denmark or Facebook’s in Northern Sweden.
But another case can make it even worse for American companies. It is the case that Microsoft leads against the US government in New York. The US government believes it has the right to get access to all the data that companies, headquartered in the US, store – whether it is stored in the USA, Ireland or Timbuktu. Microsoft says no and refuse to hand over data from a single Hotmail account on the company’s Irish servers to the US government. But Microsoft has been unsuccessful already in two instances. If Microsoft, backed by most of the US tech industry, loses, it can mean that some US companies choose to relocate their headquarters to or create independent companies in Europe. Yahoo already has a non-US existence in Europe according to The Guardian. More EU-based companies also means tax revenues and more jobs.
Although the Microsoft case can have other detrimental effects on the right to privacy – if other governments follows the US in demanding access to data all over the world – this ruling here can also spur European growth.