Facebook Loses Court Battle Over Data Transfer

A key agreement which allows American tech companies such as Facebook (NasdaqGS: FB - news) to transfer users' data from the EU to the US is invalid, the European Court of Justice has ruled.

The court said the transfer of data could be suspended because the US "... does not afford an adequate level of protection".

EU data protection laws are among the toughest in the world and forbid EU citizens’ data being exported to countries outside the EU without adequate levels of protection.

Under the Safe Harbour agreement, US companies could fast track this process, so long as they met seven EU principles.

However, law student Max Schrems argued that since Facebook data was subject to mass surveillance by US intelligence agencies, it did not offer an adequate level of protection.

The case was brought against Facebook but could apply to other US companies that process personal data of EU citizens.

"American companies are going to have to restructure how they manage, store and use data in Europe and this take a lot of time and money," Mike Weston, CEO of data science consultancy Profusion, said.

Richard Cumbley, global head of technology, media and telecommunications at Linklaters LLP, added "This is extremely bad news for EU-US trade.

"Thousands of US businesses rely on the Safe Harbour as a means of moving information to the US from Europe.

"Without Safe Harbour, they will be scrambling to put replacement measures in place."

Mr Schrems launched his legal challenge over Safe Harbour following the revelations by whistleblower Edward Snowden about the US National Security Agency (NSA)'s Prism surveillance system which allowed spies to access enormous amounts of data from global tech companies.

The case was brought in Dublin as every Facebook user outside the US and Canada has a contract with Facebook Ireland.

It (Other OTC: ITGL - news) was later transferred to the European court.