Tech industry watching European privacy votes

The tech industry is bracing for a vote next week at the European Union that could put its business on the continent at risk. 

Despite assurances from the U.S. government, some European officials are calling for changes to the rules and agreements that allow U.S. companies to process data belonging to European citizens, in the hopes of keeping that data out of the hands of the National Security Agency (NSA).

Starting on Monday, the EU Parliament will consider two measures that would affect the way American tech companies do business in Europe.

The first is a privacy regulation that would end the Parliament’s role in a two-year process to update, strengthen and make cohesive EU privacy law, heightening privacy and security standards for the companies that deal with European citizens’ data.

Once the Parliament approves the regulation, which is the expected outcome of next week’s vote, the EU legislators have to negotiate over the law with the individual governments of EU countries.

Though those negotiations will likely take more than a year, “there’s still belief that, eventually, a data regulation will pass in Europe,” according to Justin Brookman, director of consumer privacy at the Center for Democracy and Technology.

The second measure is a report from the body’s Civil Liberties Committee, which opened an investigation into U.S. government surveillance after last year’s revelations about NSA electronic surveillance, including that of European officials.

That report made a number of recommendations about U.S. companies’ access to data belonging to European citizens, including the immediate suspension of international agreements between the EU and U.S. that allow U.S. companies to process European data.

While there is support for the conclusions in that report, the Parliament would only be “sending a political message” by voting to approve the report, as the Parliament has no authority to cancel those international agreements, Brookman said.

The vote is “mostly a signal … designed to show how seriously people in Europe are taking” the revelations about U.S. surveillance, he said.

Still, tech companies are watching the votes to see how they might affect their businesses.

“They’re watching it, there’s no doubt about it,” one tech lobbyist said.

The measures in front of the EU Parliament would raise business and compliance costs for U.S. tech companies, and “a lot of companies are going to be very concerned about doing business in Europe,” said Daniel Castro, senior analyst at the Information Technology and Innovation Foundation.

If the EU Parliament votes for these measures, U.S. tech companies — which have lobbied Congress and President Obama to reform surveillance programs — will be stuck between privacy-hungry European governments and a U.S. government that’s hesitant to make fast or substantive changes to its intelligence community.

“One of the central problems we have is that [tech companies] can’t fix this themselves,” Castro said.

“All U.S. companies can do is continue to press the administration to engage on this issue, press Congress to engage,” he said.

Last summer, Castro’s group put out a report estimating that the U.S. cloud computing industry would lose between $22 and $35 billion over the next three years as a result of the revelations about U.S. electronic surveillance and the resulting distrust in American tech companies.

“We’re still moving down this path,” Castro said. “We haven’t really seen the administration take a lot of steps to stop it, and I think that’s been frustrating.”

Next week’s vote “will be a good signal to the U.S. about where the EU is on these issues,” he said.

Even if the EU Parliament’s votes don’t immediately change the legal privacy frameworks for U.S. tech companies looking to do business in Europe, the continued attention to companies’ compliance with U.S. surveillance programs could be bad for the firms’ reputations.

“Europeans have successfully used [the surveillance revelations] to draw a distinction between their industry and ours,” the tech lobbyist said. “These are the types of issues that your competitors will use as a competitive advantage.”