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Privacy Commissioner proposes new guidance on outsourcing

April 17, 2019

In seeking to revise crossborder dataflows, the OPC’s position would require consent for all transfers of personal information for processing

The Office of the Privacy Commissioner of Canada (OPC) has initiated a consultation that proposes to completely reverse its previous guidance on crossborder dataflows under the Personal Information Protection and Electronic Documents Act (PIPEDA). And because they are trying to fit a round peg in a square hole, their position -- if implemented -- will have a huge impact on all outsourcing.  

In 2009, the OPC published a position that was consistent with the actual wording of the statute. It held that when one organization gives personal information to a service provider, so that the service provider can process the data on behalf of the original organization, it was a transfer and not a disclosure. This is an important distinction because transfers do not require consent from the individual, as is the case with a disclosure. Data is disclosed when it is given to another organization for use by that organization for its own purposes. In a transfer scenario, the personal information is protected by operation of the accountability principle, which means the organization that originally collected the data and has transferred it to a service provider remains responsible for the personal data and has to use contractual and other means to make sure that the service provider takes good care of the personal information at issue. Importantly, in its 2009 guidance, the OPC correctly noted “PIPEDA does not distinguish between domestic and international transfers of data.” Consent was not required, but the OPC did recommend that notice be given to the individual:

Organizations must be transparent about their personal information handling practices. This includes advising customers that their personal information may be sent to another jurisdiction for processing and that while the information is in another jurisdiction it may be accessed by the courts, law enforcement and national security authorities.

The 2009 policy position reflects the consensus of most privacy practitioners since PIPEDA came into effect in 2001. The new position is a complete reversal and discards the notion of “transfers” of personal information for processing: 

Under PIPEDA, any collection, use or disclosure of personal information requires consent, unless an exception to the consent requirement applies.  In the absence of an applicable exception, the OPC’s view is that transfers for processing, including cross border transfers, require consent as they involve the disclosure of personal information from one organization to another. Naturally, other disclosures between organizations that are not in a controller/processor relationship, including cross border disclosures, also require consent. [emphasis added]

The new position concludes that because there is nothing in PIPEDA that specifically exempts transfers from consent, transfers can be folded into the mandatory consent scheme:

While it is true that Canada does not have an adequacy regime [as in Europe] and that PIPEDA in part regulates cross border data processing through the accountability principle, nothing in PIPEDA exempts data transfers, inside or outside Canada, from consent requirements. Therefore, as a matter of law, consent is required. Our view, then, is that cross-border data flows are not only matters decided by states (trade agreements and laws) and organizations (commercial agreements); individuals ought to and do, under PIPEDA, have a say in whether their personal information will be disclosed outside Canada.

This new position, while demanding consent, brings the true nature of that consent into question. One one hand, the organization has to get consent. On the other hand, the individual can be given no meaningful choice or ability to opt-out, because the organization can say “take it or leave it”:

Organizations are free to design their operations to include flows of personal information across borders, but they must respect individuals’ right to make that choice for themselves as part of the consent process. In other words, individuals cannot dictate to an organization that it must design its operations in such a way that personal information must stay in Canada (data localisation), but organizations cannot dictate to individuals that their personal information will cross borders unless, with meaningful information, they consent to this.

There is little basis in the statute for this position reversal, and the OPC’s consultation document shows some significant mental gymnastics to get where they want to go notwithstanding the actual scheme of the Act. 

Because PIPEDA does not deal with crossborder transfers in any specific way, the only way for the OPC to get to the result they seek is to impose their new requirements on all transfers for processing by a third party, regardless of whether that processing involves moving the personal information outside of Canada. And to highlight the shortcomings of trying to shoehorn this principle into the existing statute, it would not affect in any way a US company that operates in Canada deciding after the fact to move data to its own US-based data centre because it would not be a disclosure or a transfer from one entity to another. 

The proposal immediately garnered significant criticism. Lisa Lifshitz wrote for Canadian Lawyer Magazine:

This is problematic in several respects as this analysis flies in the face of years of guidance from the OPC and reiterated repeatedly, including in the 2012 Privacy and Outsourcing for Businesses guidance document) that a transfer for processing is a "use" of the information, not a disclosure. Assuming the information is being used for the purpose it was originally collected, additional consent for the transfer is not required; it is sufficient for organizations to be transparent about their personal information handling practices. This includes advising Canadians that their personal information may be sent to another jurisdiction for processing and that while the information is in another jurisdiction it may be accessed by the courts, law enforcement and national security authorities. 

***

The OPC’s implement-first-ask-permission-later approach to changing the consent requirements for cross-border data transfers is troublesome at best and judging from initial reactions, sits uneasily with many (me included).  

Likely knowing this, at the same time it released the Equifax decision the privacy commissioner also announced a “Consultation on transborder dataflows” under PIPEDA, not only for cross-border transfers between controllers and processors but for other cross border disclosures of personal information between organizations. The GDPR-style language used in this document is no accident and our regulator is seemingly trying to ensure the continued adequacy designation of PIPEDA (and continued data transfers from the EU to Canada) by adopting policy reinterpretations (and new policies) pending any actual legal reform of our law. Meanwhile, the OPC’s sudden new declaration that express consent is required if personal information will cross borders (and the related requirement that individuals must be informed of any options available to them if they do not wish to have their personal information disclosed across borders) introduces a whole new level of confusion and complexity regarding the advice that practitioners are supposed to be giving their clients pending the results of the consultations review, not to mention the potential negative business impacts (for consumers/vendors of cloud/managed services and mobile/ecommerce services, just to name a few examples) that may arise as a consequence.

Michael Geist has written about the OPC’s approach on his blog:

While the OPC position is a preliminary one – the office is accepting comments in a consultation until June 4 – there are distinct similarities with its attempt to add the right to be forgotten (the European privacy rule that allows individuals to request removal of otherwise lawful content about themselves from search results) into Canadian law. In that instance, despite the absence of a right-to-be-forgotten principle in the statute, the OPC simply ruled that it was reading in a right to de-index search results into PIPEDA (Canada’s Personal Information Protection and Electronic Documents Act). The issue is currently being challenged before the courts.

In this case, the absence of meaningful updates to Canadian privacy law for many years has led to another exceptionally aggressive interpretation of the law by the OPC, effectively seeking to update the law through interpretation rather than actual legislative reform.

The OPC is inviting comments up to June 4, 2019 and it is expected they’ll get an earful. The Canadian Technology Law Association is planning to make a submission. For more information or to contribute, contact CAN-TECH Law’s President James Kosa

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