GDPR Turns 5, and Trans-Atlantic Data Flow Remains a Headache

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Happy birthday to the GDPR, who has turned 5 years old on May 25, 2023! Is the European Union (and, given the Brussels effect, perhaps the entire world) a better place than pre-GDPR? This is a difficult question. Surely there has been a lot more focus on data protection by companies. And one of the reasons why companies have attempted to comply (100% compliance appears to be an unachievable goal!) is the possibility of being sanctioned with “administrative fines up to 20 000 000 EUR, or in the case of an undertaking, up to 4 % of the total worldwide annual turnover of the preceding financial year, whichever is higher“. Clearly, while the very same GDPR language applies throughout the EU, data protection legislation is not yet harmonised, not even 5 years after its entry into force. About 30 articles of the GDPR allow Member States to depart from it. Interpretations of the Regulation also vary, so in many areas uniformity has given way to diversity (which, in this case, is not ideal).     Additionally, enforcement of the GDPR is entirely decentralized and data protection authorities have different views, differing resources and different strategies. A list of GDPR sanctions is regularly updated and since the Meta decision of May 22, 2023, the Irish Data Protection Commission has emerged as the champion. While it was previously criticized for “being too cozy to Big Tech”, it has issued the highest ever sanction, along with strong measures ordering Meta to stop further transfers of personal data from the EU to the US and to bring its processing operations of data already transferred to the US into compliance with the GDPR. The problem, once again, stems from the trans-Atlantic data flow from the EU to the US, and from the concerns that such EU personal data is subject to surveillance in the US, without any redress system for EU citizens. (Incidentally, thousands of companies, like Meta, may have the same problem).  The US and EU have yet to reach an agreement that would allow a safe flow of data (although there are hopes that progress will be achieved by July). Further, there is no guarantee that the European Court of Justice will not strike down any such new arrangement, like it did in the past (twice). Meanwhile, the post-GDPR world appears to strongly push towards data localization (or “sovereign cloud”), making data flows out of the EU to non-“adequate” countries very scary. 

GARANTE VS. CHATGPT: LATEST DEVELOPMENTS

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1. An Order to Stop ChatGPT

On March 30, 2023 the Italian Data Protection Authority (“Garante”) issued an order by which it temporarily banned the ChatGPT platform (“ChatGPT”) operated by OpenAI LLC (“OpenAI”). The Garante in fact regards ChatGPT as infringing Articles 5, 6, 8, 13 and 25 of the GDPR. In particular:

  • No Information.  OpenAI does not provide any information to users, whose data is collected by OpenAI and processed via ChatGPT;
  • No Legal Basis.  There is no appropriate legal basis in relation to the collection of personal data and their processing for the purpose of training the algorithms underlying the operation of ChatGPT;
  • No Check of User’s Age.  OpenAI does not foresee any verification of users’ age in relation to the ChatGPT service, nor any filters prohibiting the use for users aged under 13.

Given that, the Garante has immediately banned the use of ChatGPT, and OpenAI has blocked the access to ChatGPT to the Italian people.

2. Measures Offered by OpenAI

On April 11, 2023, in light of the willingness expressed by OpenAI to put in place measures to protect the rights and the freedom of the users of ChatGPT, the Garante issued a new order, which opened the possibly to re-assess ChatGPT if OpenAI adopts the following measures:

  1. to draft and publish an information notice to data subjects, which should be linked so that it can be read before the registration;
  2. to make available, at least to data subjects who are connected from Italy, a tool to exercise their right to (i) object, (ii) obtain a rectification, insofar as such data have been obtained from third parties, or (iii) the erasure of their personal data;
  3. to change the legal basis of the processing of users’ personal data for the purpose of algorithmic training, by removing any reference to contract and instead relying on consent or legitimate interest;
  4. to include a request to all users connecting from Italy to go through an “age gate” and to submit a plan for the deployment of age verification tools; and
  5. to promote a non-marketing-oriented information campaign by May 15, 2023 on all the main Italian mass media, the content of which shall be agreed upon with the Italian Authority.

OpenAI has until April 30, 2023 to comply (until May 31, 2023 to prepare a plan for age verification tools). The objections by the Garante have been echoed by other European Union data protection authorities. The European Data Protection Board will be attempting to solve the dispute within two months and launched a dedicated task force on ChatGPT “to exchange information on possible enforcement actions conducted by data protection authorities”

PAYBACK ON MEDICAL DEVICES IN ITALY: LATEST UPDATES

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The medical devices sector in Italy has been struggling for several months now as the Government is retroactively demanding that sellers of medical devices refund a quota of the excessive expenses sustained by the regional health systems during the years 2015-2018.

In fact, following a law decree enacted in August 2022, businesses and companies that won public tenders and provided Italian hospitals with medical devices from 2015 and onwards have been requested to turn back to the Regions part of the relating income, for a total amount of more than 2 billion euros.

In December 2022, Regions issued decrees ordering that the medical devices operators pay their respective quotas of the so-called “payback” contribution by the end of January 2023.

However, hundreds of claims were filed before the Administrative Court of Rome and the Government decided to postpone the payment deadline to 30 April 2023.

As the payment deadline draws closer, it appears that on yesterday’s Council of Ministers the Government issued a new law decree providing for a (still unspecified) discount in favour of businesses and companies that waive all claims and pay the discounted contribution by 30 June 2023.

While this new law decree is yet to be published on the Official Journal, it seems likely that the compromise reached at political level will not satisfy the expectations of several companies operating in the medical devices sector, meaning that the challenge is far from over.

Focus on Med-Tech Prices

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A new body dedicated to reviewing prices of medical devices in Italy has been established by the January 23, 2023 decree of the Ministry of Health, which has been recently published (and you may find here). This new “Osservatorio nazionale dei prezzi dei dispositivi medici” will be aided by the Health Technology Assessment group and other entities within the national healthcare service.

The outcome of the Osservatorio’s analysis will be published in a dedicated section of the Ministry of Health website.

The med-tech industry association has welcomed a better focus on prices, but warned against confusion among the 1.5 million+ med-tech goods and related services offered in Italy, as well as pointed out that Italy does not suffer from a problem of overspending in medical devices (the prices of which are substantially lower than the EU average), but of underfunding of the national health service.

New Whistleblowing Legislation Adopted in Italy

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Italy has implemented today the EU whistleblowing directive (UE) 2019/1937. The new legislative decree no. 24/2003 has in fact been published on the official journal and is scheduled to enter into force on March 30, 2023.

The final published version of the decree, which had been previously leaked in an unofficial draft, can be found here: https://www.gazzettaufficiale.it/eli/id/2023/03/15/23G00032/sg.

The new legislation is certain to affect private companies and public entities alike when it comes to managing whistleblowing reports and new measures may need to be adopted to comply with the new requirements.

For additional information on this subject, materials from our February webinar can be freely accessed here: https://lawhealthtech.com/2023/02/09/our-whistleblowing-webinar/.

Italian Transparency Act: the Opinion of the Italian Data Protection Authority

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The Italian Data Protection Authority has issued its opinion on the data protection implications relating to the new information duties set forth on employers by legislative decree 104/2022.

On August 13, 2022, legislative decree 104/2022 (“Transparency Act”) has entered into force. It provides for a new set of mandatory information that the employer must communicate to its employees at the time of their onboarding. On January 24, 2023, the Italian Data Protection Authority (“Garante”) issued its opinion about compliance of such new information duties with the provisions of the relevant data protection legislation.

In particular, the focus of the Garante was centered on the mandatory communication that, according to section 4, paragraph 8 of the Transparency Act, the employer must give to the employees if any “decision or monitoring automated system is used for the sake of providing information which is relevant for the hiring, management or termination of the employment relationship, for the assignment of tasks and duties, or for the surveillance, evaluation and fulfillment of contractual duties by the employee”. The Garante has stated that:

  • GDPR Sanctions Apply in case of Breach.  The implementation of any decision or monitoring automated system must be made in compliance and within the limits set forth by the applicable labor law provisions, and in particular law 300/1970. Such labor law provisions, which allow the implementation of automated systems only if certain conditions occur, must be deemed as providing “more specific rules to ensure the protection of the rights and freedoms in respect of the processing of employees’ personal data in the employment context” (as per section 88, paragraph 2, of the GDPR), and thus non-compliance with them may lead to administrative fines pursuant to section 83 of the GDPR.
  • Data Processing Impact Analysis (“DPIA”).  The employer, who is subject to the duty of accountability, must assess beforehand if the relevant processing is likely to result “in a high risk to the rights and freedoms of natural persons responsibility”, and thus requires a preliminary data processing impact analysis under section 35 of the GDPR. In such regard, the Garante has clarified that data subjects (i.e., employees) should be deemed as “vulnerable”, and that the processing of their data with automated systems is very likely to meet the conditions that make the DPIA mandatory according to the guidelines on the DPIA issued by the WP 29 on April 4, 2017.
  • Compliance with the “privacy by default” and “privacy by design” principles.  Employers must implement appropriate technical and organizational measures and integrate the necessary safeguards into the processing so that to protect the rights of data subjects (privacy by design). Moreover, the controller shall ensure that, by default, only personal data which are necessary for the specific purpose of the processing are processed (privacy by default), and should then refrain from collecting personal data that are not strictly related to the specific purpose of the relevant processing.
  • Update of the register of processing activities (“ROPA”).  The employer must indicate the processing of data through automated systems within his/her ROPA.

Need any further assistance on the matter? Don’ hesitate to reach us out!