Googles GDPR Fine: What It Means for Jurisdictional Arbitrage

In the wake of Frances recent 50 million GDPR fine against Google, enterprises should consider GDPR-enforcement considerations when determining the base of their EU operations.

When large organizations decide where to base their operations, a jurisdictions data-regulation enforcement could become as significant a consideration as its tax treatment, if the EUs first multi-million-Euro GDPR fine is any indication.
On January 21, Frances Data Protection Authority (DPA) -- the National Data Protection Commission (CNIL) --
issued a €50 million (US$56.7 million) fine
against Google for unlawfully processing user data, particularly for ads personalization purposes.
Lawyers and industry pundits have long anticipated Google getting slapped with a GDPR fine at some point -- paricularly since None of Your Business, a data-privacy organization operated by way of activist and serial litigant Max Schrems, filed the relevant GDPR complaint against Google on May 25, 2018 -- the day GDPR went into effect. What may have been unanticipated -- and what matters more -- is where the fine came from.
No such Irish luck
Google Ireland Ltd. has long existed as Googles headquarters for the EMEA region (Europe, the Middle East, and Africa) to satisfy the requirements of
a tax-shelter mechanism
. Incidentally, it is also generally considered Googles EU headquarters for data-protection purposes. Normally, per GDPRs one-stop shop rubric, the DPA of the nation where the entitys operations are directed will typically be the enforcing party. In this case, however, the CNIL determined that as of the day it began proceedings against Google, Googles Irish subsidiary did not have a decision-making power on the processing operations carried out in the context of the operating system Android and the services provided by [Google] in relation to the creation of an account during the configuration of a mobile phone.
No doubt as part of maintaining the headquarters status of its Irish subsidiary for tax purposes, Google naturally designated the same subsidiary as its headquarters for data-protection enforcement purposes -- and GDPR apparently caught the tech giant with its pants down. While Google Ireland Ltd. may have been actively controlling and even complying with other GDPR-related data and data activities, CNIL charged that Googles data practices involving Android settings were effectively controlled from the US -- bypassing Ireland and all other EU member states. And, indeed, the initial complaint in this case was filed against US-based Google LLC.
In a vacuum, all these factors put GDPR-enforcement jurisdiction up for grabs. As the complaint was filed in France, Frances CNIL handled it.
The CNIL [contacted] other EU DPAs, including the Irish DPA, in order to determine whether any other DPA was the lead authority and should pursue the investigation and enforcement, Deborah Shinbein Howitt, director at Denver law firm Lewis Bess Williams & Reese, told Security Now. [N]either the Irish Data Protection Commission nor any other EU DPA considered itself to be the lead supervisory authority for the US entity Google LLC, so the CNIL was then clear to proceed.
Does member-state jurisdiction matter?
In a perfect rule-of-law world, untainted by individual human prejudices and feelings, the dictates of GDPR itself (variances between individual member-state data-privacy and data-protection laws enacted to enable or complement GDPR notwithstanding) would be evenly enforced in a consistent manner across all EU member-state DPAs. (See
GDPR: Broad, Complex & Coming Soon
.)
But this is not a perfect world. Some member states are more prickly than others when it comes to data privacy. Shinbein Howitt particularly points to Germany, among others, as having a reputation for being stricter about both data-privacy rulemaking and data-privacy enforcement. Austria, for its part, is noted for being the only EU member state to
reject GDPR for not going far enough
; Austria was also the first country to publicly issue a GDPR fine -- against a small business for not providing sufficient notice that a CCTV security camera was recording part of a public way. (See:
GDPR Fines: Some Bark, Little Bite
.)
France, meanwhile, is far from best friends with Google -- and may feel that Google owes her. Nineteen months ago, a French court ruled in Googles favor against the French government in a
back-taxes case
worth approximately €1.11 billion ($1.27 billion) -- a case that, incidentally, have arisen from Googles EMEA tax-avoidance mechanism. French politicos may well feel that Google owes France its due one way or another.
Companies often establish their headquarters in a certain location for tax reasons or other favorable regulation. At this time, it seems that companies may wish to start taking data-privacy regulation into consideration when making these decisions as well, said Shinbein Howitt. Considering the magnitude of potential GDPR fines, particularly for large companies, the consequences of choosing a location for privacy reasons could be as significant as the choices often made to minimize tax liability.
Indeed, for certain violations of GDPR, the maximum fine is the
higher
of either €20 million or 4% of the entitys annual revenue. Because Google is, well,
Google
, the latter very definitely applies. While the €50 million fine represents only a drop in Googles bucket, CNIL could conceivably fine Google
90 times as much
based on
Googles past four quarters
.
Related posts:
GDPR Territorial Scope: Location, Location, Location?
Facebooks Data Breach: Will It Be First Test of GDPR?
British Airways Already Facing Lawsuits Following Data Breach
—Joe Stanganelli is managing director at research and consulting firm Blackwood King LC. In addition to being an attorney and consultant, he has spent several years analyzing and writing about business and technology trends. Follow him on Twitter at @JoeStanganelli.
(Disclaimer: This article is provided for informational, educational and/or entertainment purposes only. Neither this nor other articles here constitute legal advice or the creation, implication or confirmation of an attorney-client relationship. For actual legal advice, personally consult with an attorney licensed to practice in your jurisdiction.)

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Googles GDPR Fine: What It Means for Jurisdictional Arbitrage