The EU will push ahead with plans to make financial services firms respect the rights of European citizens over their data
The European Union (EU) has rejected a US request to delay implementing the section of its controversial privacy directive that deals with personal data flow from financial services, saying it will not postpone action because of "US domestic complaints".
Last month, the US Treasury and Commerce Departments asked the European Commission to delay approval of a "model contract" that financial institutions would be asked to sign before transferring personal data to non-EU countries. The US has said the contract is flawed, and is accusing the EU of trying to impose laws beyond its own frontiers.
The directive, which was enacted in 1998 and is due to come into force this July, aims to protect the private data of EU citizens. The transfer of consumer data in the US is currently self-regulated, whereas in Europe, fines can be imposed for contravening data protection laws. The directive contains the new power to cut off data flows to countries that the EU judges not to have adequate data rules and enforcement.
"[The privacy directive] will have a significant impact on transborder data flows from the EU to the US," said Mark Ford, solicitor at city law firm Clifford Chance, "but the fact that it doesn't cover financial services is a problem. US banks don't want to go through the hassle of getting consent from their customers before transferring data -- it would be a huge administrative burden."
Financial services were excluded from the original Safe Harbour agreement as the US Department of Commerce who negotiated the directive, does not regulate the American financial sector.
"This dilutes the practical benefits of Safe Harbour as it makes no provision for an entire industry sector," said Ford.
The US has said that the "model contract" intended to set out the minimum standard for data flow between the US and UE, could prejudice efforts of compromise between Brussels and Washington. However, the director-general of the Commission's internal market directorate, John Mogg, has told Washington that the model contract plan will go ahead and denied it would hinder chances of reaching an overall settlement.
Mogg stated in a letter that he did not accept existing US data protection laws to meet the directive's requirements, and rejected US accusations that EU decisions on its implementation were not transparent.
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