EC: U.S. privacy rules concerns are baseless

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By Paul Meller and Juan Carlos PŽrez

(IDG) -- A European Commission official Tuesday termed as "unfounded" U.S. government concerns over privacy rules being considered by the EC. The rules could affect American financial services firms doing business in Europe, in particular their data gathering and transmission activities.

"They expressed their concerns, but in our view these concerns are unfounded," said the Brussels, Belgium-based EC official, who requested anonymity.

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The official confirmed that the EC received a joint letter from the U.S. Department of Commerce and the U.S. Department of the Treasury on Monday that says the Bush administration is worried that standard contractual clauses being drafted by the EC will force U.S. companies in the financial sector to abide by European Union (EU) privacy rules, which are stricter than U.S. privacy rules.

The financial services industry is one sector not covered by the U.S.-EU safe harbor agreement, which allows companies to apply the laws of their own country when doing business abroad. The contractual clauses are being drafted to fill a gap left by the safe harbor agreement, the official said.

"All they will do is provide a means to transfer data securely to the United States," he said.

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The EC official said the U.S. concerns are general ones and not specifically linked to financial services. But the contractual clauses being drafted by the EC are specific to that industry.

The letter states that the proposed standard clauses "are not a workable alternative model" and that they "impose unduly burdensome requirements that are incompatible with real world operations." The letter also complains that the revision process for the clauses "has not been transparent to those seeking participation." It ends by encouraging the EC to "defer consideration" of the proposed clauses.

"In short, we share the concern of a number of multinational firms that the adoption of the proposed standard clauses will introduce uncertainty about the use of contracts," reads the letter, a copy of which was obtained by the IDG News Service.

The EC will respond to the letter, but the official could not confirm when that would be. He would not say whether the EC will agree to U.S. requests to delay the introduction of the contractual clauses. He also declined to comment on the implications these clauses might have on trans-Atlantic e-commerce.

EC press officer Maeve O'Beirne in Washington, also confirmed that the letter was received in Brussels via fax on Monday and that it is being examined, although not in detail yet.

"The letter appears to reiterate points and U.S. concerns which have already been taken into account and expressed in earlier correspondence," O'Beirne said.

The EC plans to reply to the letter as soon as possible, she added.

The standard clauses for contracts between American and European firms regarding customer data exchange have been in preparation since the third quarter of 2000, she said.

The letter, on U.S. Department of Treasury letterhead, is signed by Donald V. Hammond, the Treasury's acting undersecretary for domestic finance, and by Bernard Carreau, acting undersecretary for international trade of the Department of Commerce. It was sent to John Mogg, the EC's director general of the Internal Market Directorate General.

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