The General Data Protection Regulation (GDPR) is a globally recognized compliance standard that primarily aims to protect an individual’s right to privacy, especially personal data. GDPR is linked to personal data processing in the European Union (EU) and prevents businesses in the EU and abroad from misusing sensitive information pertaining to EU citizens.
Organizations in the EU have to comply with it, and even companies in other regions of the world come under its purview, given that they do not have offices operating in EU countries.
However, the latter need to comprehend the GDPR law and its applicability and often suffer consequences owing to doubts regarding jurisdiction creep. If your company caters to EU residents and you should comply with the GDPR guidelines, this article is perfect for you. This blog will discuss the GDPR’s scope and what’s outlined in Articles 2 and 3 of GDPR. We will also help you understand the global nature of this security standard.
What is the General Data Protection Regulation (GDPR)? Who Needs to Comply With the GDPR Guidelines?
GDPR is a comprehensive data privacy law native to the European Union (EU) and the European Economic Area (EEA). The regulation took effect on May 25, 2018, strengthening citizens’ data privacy rights.
GDPR requires organizations to obtain informed consent for data processing, report data breaches, and, in some circumstances, establish Data Protection Officers (DPOs). The GDPR imposes strict penalties for non-compliance, up to €20 million or 4% of global annual revenue, on organizations processing data of EU or EEA residents. It strives to give people more control over their data and ensures that organizations handle it responsibly.
Any entity, whether individual, company, or organization, obtains or processes any EU citizen’s personal data is subject to GDPR.In this context, personal data refers to any information that makes it possible to identify a specific person. The GDPR applies to every business with an app or website and collects user data from the EU.
The law is written in this way because it wants to protect the rights to privacy and data of all EU internet users, regardless of where they go online or make purchases. In other words, if you do business with EU citizens, you must comply with the GDPR. In addition, GDPR is a requirement for your brand if you want to gain the trust of EU customers and make them want to do business with you.
What is the Scope of GDPR?
There are two ways in which a business falls under the purview of the GDPR guidelines. These are —
- Material Scope (under Article 2)
- Territorial Scope (under Article 3)
Material Scope of GDPR (Article 2)
Businesses processing data usually involves a company gathering, maintaining, utilizing, or destroying the personal data of EU residents or citizens for automated decision-making or marketing reasons.
When carried out by your business, any or all of the aforementioned actions are automatically covered by the GDPR. In some circumstances, even if the processing facility (a processor) is not in the EU, they are subject to the GDPR’s regulations.
The Material Scope of GDPR is discussed in Article 2.
Next, let’s see what the Territorial Scope of GDPR dictates.
Territorial Scope of GDPR (Article 3)
The territorial scope of the GDPR guidelines is discussed in Article 3 and is broadly divided into two sections: Article 3(1) and Article 3(2). However, it is crucial to familiarize yourself with the territorial and extraterritorial scope notions before we delve further into them.
The term “territorial scope” describes how companies operating within the EU region use the personal information of data subjects. If your company meets the requirements, you fall inside the GDPR’s geographical reach.
On the other hand, when companies have an office outside of the GDPR territorial scope and are either Controllers or Processors, this is known as extraterritorial scope. The GDPR’s extraterritorial scope, thus, requires those businesses to comply.
In case you are not entirely familiar with the key terms used in defining the stakeholders involved in GDPR compliance, here is a quick rundown:
- Who is a data controller?
A data controller is an individual or an organization responsible for collecting data and deciding what the data will be used for.
Examples: Businesses in SaaS, Schools, Retail brands, etc.
- Who is a data processor?
A data processor is an individual or an organization responsible for processing the data gathered by the data controller.
Examples: Cloud service providers, Advertising agencies, etc.
- Who is a sub-processor?
A sub-processor is any business that accesses customer data while delivering its core service offering.
Examples: Cloud security vendors, Cloud service providers, etc.
Equipped with this basic understanding, let us get into Articles 3(1) and 3(2) of GDPR.
The GDPR’s authors expanded their scope to include companies that process personal data based on two criteria to ensure maximum efficacy:
- Establishment Criteria (Article 3(1))
- Targeting Criteria (Article 3(2))
What do they dictate?
- Establishment Criteria (Article 3(1))
The GDPR applies to Controllers and Processors domiciled in the European Union who handle data belonging to data subjects.
No matter where the data processing operations are carried out, this holds. For instance, under the establishment criteria, a Controller in one of the EU member states performing their processing activities in a third country must abide by the GDPR geographical scope requirements.
The legal language used in the GDPR framework may be clear and concise; however, understanding the establishment criteria becomes crucial because it gives a lot of opportunity for guesswork.
- Targeting Criteria (Article 3(2))
The official GDPR documentation states —
“This Regulation applies to the processing of personal data of data subjects who are in the Union by a controller or processor not established in the Union, where the processing activities are related to:
(a.) the offering of goods or services, irrespective of whether a payment of the data subject is required, to such data subjects in the Union; or,
(b.) the monitoring of their behavior as far as their behavior takes place within the Union.” Source
This means that a business automatically meets the GDPR compliance checklist if it conducts data processing activities pertaining to the personal information of data subjects within the EU region or offers products or services to data subjects in the EU and monitors their browsing behaviors online such as websites, cookies.
Here are some instances where the Targeting Criteria are in effect:
- When a company’s products or services specifically mention at least one EU member state by name;
- When a Controller or Processor participates in marketing and advertising initiatives with EU data subjects as their target market,
- When a foreign-natured activity (tourism-related activities) is involved or,
- Whenever an address or phone number can be accessed from an EU state(s) is mentioned.
In the following section, we will be discussing the global nature of GDPR compliance and some exemptions from its guidelines.
What Does the Global Nature of GDPR Compliance Mean?
To guarantee that the privacy rights of EU individuals and residents are safeguarded, regardless of the worldwide nature of the information, the GDPR has special nuances and deep intricacies entrenched at its core. Therefore, a Processor in the Philippines is expected to comply with the GDPR even when processing the personal data of EU data subjects.
The GDPR’s authors have ensured this is done using Standard Contractual Clauses (SCC). It is preferable to be on the right side of compliance when conducting business with the EU than to run the risk of incurring administrative penalties or reputational harm if non-compliance is discovered.
In lieu of this, we would like to highlight some instances of exemption from the GDPR laws.
For example, the General Data Protection Regulation does not cover processing personal data for purposes of preventing, deterring, investigating, detecting, or prosecuting offenses or carrying out penalties. Defending against and averting threats to public security is part of this.
In addition, the General Data Protection Regulation does not apply to the processing of personal data that is done in connection with endeavors not governed by Union law, such as endeavors pertaining to national security. National laws are instead in charge of such personal data handling.
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