In our latest blog post, we shared a few considerations for compliance in the context of complex outsourcing contracts. Continuing on this theme, we take a look into the matter of data protection compliance.
In today’s digital economy, where data is seen as the “new oil,” governments are placing greater emphasis on regulating and controlling data that originates and is collected within their territories. This has resulted in the development of various sovereignty laws that affect how data can be processed, shared, and stored. The concept of data sovereignty extends to general data protection laws; sector-specific regulations related to, for instance, the Internet of Things (IoT) and telecommunications data; and cybersecurity regulations.
Data Protection in the Context of Outsourcing Agreements
Outsourcing contracts that involve the collection, sharing, and usage of data should include provisions designed to protect the confidentiality and integrity of that data. However, the complexity of these provisions increases when dealing with regular data transfers, large volumes of data, or sensitive personal data, which requires an enhanced level of compliance.
To navigate these issues, consider the following questions when tailoring data protection provisions:
(1) Is data involved in the performance of the agreement and to what extent? Assess whether the agreement involves the collection, sharing, or use of any data.
(2) What types of data are involved and what is the scope? The type of data being processed determines the level of protection required. For instance, sensitive data, especially health-related data, is subject to more stringent requirements and necessitates additional safeguards to ensure compliance.
(3) Where does the data originate and how will it be used? Will the data be shared or stored outside the country of origin? Understand the origin of the data and its intended use. Moreover, with an increasing number of data protection laws with extraterritorial effect, it is vital to analyze how relevant laws may interact and what legal obligations they impose.
(4) Who controls the data in the context of the agreement? Data protection laws distinguish between two key roles in data processing: the data controller and the data processor. The data controller defines the purposes and means of processing, while the processor follows the controller’s instructions. These roles carry different responsibilities, and it is essential to clarify them in the agreement to avoid ambiguity.
(5) What are the purposes of data processing? Clearly define the purposes for which data will be processed. It is important to ensure that data is processed only for specific, legitimate purposes and that it is not used for any other purposes.
(6) What security measures are in place? Data protection laws may set out minimum security requirements for the protection of data with additional security measures to be prescribed depending on the sensitivity of the data involved. Ensure that robust cybersecurity protocols are implemented and specify these requirements in the agreement.
In our view, it is essential to adopt a holistic approach to data protection compliance to address legal and security issues. By carefully considering the questions outlined above and including comprehensive data protection provisions in their agreements, businesses can better manage their data protection risks and ensure that both parties comply with the ever-evolving landscape of data protection laws.