Germany extends territorial scope of its new Federal Data Protection Act

Germany was the first EU Member State to pass its new national data protection law in order to align existing legislation with the General Data Protection Regulation (GDPR). The new Federal Data Protection Act (BDSG, pdf in German) will enter into force on 25 May 2018.

What should be of utmost importance to companies outside the European Economic Area are the provisions in the BDSG concerning the territorial application of the new law. The relevant provision is Sec. 1 para 4 BDSG. Mind you that the GPDR is absolutely silent on the issue of applicability of national data protection laws beside the GDPR.

Sec. 1 para 4 BDSG consists of three alternative possibilities with regard to the questions of application of the law.

No. 1: The law applies to data processing in Germany. No. 2 stipulates that the provisions of the BDSG apply to the processing of personal data in the context of the activities of an establishment of a controller or a processor in Germany.

I will now focus on the important provision in No. 3, but also would like to mention that No. 1 seems to contradict Art. 3 para 1 GDPR since according to Art. 3 para 1 GDPR, the regulation applies regardless of whether the processing takes place in the Union or not. Sec. 4 para 1 No. 1 BDSG however surprisingly really only refers to the location of the processing. So one might conclude that No. 1 violates European law.

Now to Sec. para 1 No. 3 BDSG, the relevant provision for controllers and processors with no establishment in the EU.

According to No. 3, this “Act shall apply to non-public bodies, provided that the controller or processor has no establishment in a Member State of the European Union or in any other Contracting State to the Agreement on the European Economic Area, but falls within the scope of the” GDPR.

No. 3 clearly refers to Art. 3 para 2 GDPR according to which the GDPR 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 in two different situations. The problem is that No. 3 does in no way establish a connecting factor with Germany. The provision only refers to the “scope of the GDPR”. But in order to fall within the scope of the GPDR, a company located outside the EU must not necessarily offer goods or services to persons in Germany (Art. 3 para 2 (a) GDPR) or monitor their behaviour as far as their behaviour takes place within Germany (Art. 3 para 2 (b) GDPR). The GDPR will apply according to Art. 3 para 2, if for example, a company in Russia offers services to persons in Poland or Austria, or if a company from the US monitors the behavior of persons in Spain or the Netherlands.

According to Sec. 1 para 4 No. 3 BDSG though, in both aforementioned cases the BDSG will apply, since the company falls within the “scope of the GPDR”. The wording is clear.

One might of course think of an interpretation of that provision in the BDSG in a way that one must read Art. 3 para 2 GDPR always with a connecting factor to Germany in mind. For example: offer goods or services to persons in Germany (Art. 3 para 2 (a) GDPR). But the wording of the BDSG is quite clear here and might not allow such an interpretation. Also the reasoning by the legislator does not shed any light on this issue.

In the end, controllers and processors with no establishment in the EU should carefully follow the developments and also the application of the BDSG in the future. Perhaps we will only get certainty on this issue if Sec. 1 para 4 BDSG will be interpreted by national courts or finally by the European Court of Justice.

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