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Friday, 4 July 2014

Eurocrats Need A Reality Check

The Society for Computers and Law was recently entertained on the topic of trust in Big Data and the Cloud, by Paul Nemitz, European Commission Director of Fundamental Rights and Union Citizenship (in the Directorate-General for Justice). Both immigration and data protection feature among the main responsibilities of his Directorate, so you can imagine Paul is a very busy man right now, and it was very kind of him to take the time to speak.

Right, so that's the polite bit out of the way ;-)

Paul was keen to challenge the Brits in the audience to be more pragmatic in their attitude to the European Union. He believes the UK is among those who engage with the EU irresponsibly on the basis that "everything that comes out of Brussels is shite". Instead, he says British officials, lawyers and academics should be focused pragmatically on how to engage positively to achieve better European policy and regulation.

Of course, it's an old rhetorical trick to characterise your opponent's views as overly simplistic, boorish and stupid. Paul knows that the UK's opposition to red tape is based on more serious and fundamental differences than simply declaring everthing from Brussels as 'shite', as discussed below. But as a Commission official, he's not able to enter into debates over the fundamental principles of the EU. It's his job to be a 'Believer' and get on with building the vision. He must take it on faith that the European Union is a single market, rather than a loose collection of disparate nations held together by red tape and political ambition. 

It suits some EU member states to accept that same article of faith, but not all, and the people in the streets certainly don't think that way - consumers have been worryingly slow to purchase across borders, for example. And the recent election results revealed that a huge proportion of the electorate remain to be convinced that EU governance is wholly worthwhile. 

In these circumstances, the UK's rather sceptical view of what comes out of Brussels is quite broadly representative, and the attempt to draw a line in the sand over the imposition of a fervent unionist as head of the Commission was completely understandable. It's also pragmatic. If the EUrophiles were humble enough to accept that the single market is still an ambition, they too would realise it's unwise to be seen to force the issue. People have to be brought along on the journey, and maybe the UK is a good indicator of how far they are being left behind.

To back his claim that the UK's attitude is simply boorish, Paul points to a 'typical' lack of empirical evidence for resisting provisions in the General Data Protection Regulation requring large firms to appoint a data protection officer and to facilitate fee-free 'data subject access requests'. He says these things work well in other EU member states already, and haven't driven anyone out of business. And against the UK's charge that the European Commission is needlessly committed to ever-increasing levels of privacy regulation, Paul points to surveys that show ever-increasing levels of concern amongst EU citizens about commercial and governmental intrusion into their private lives; as well as recent judgments from the European Court of Justice and the US Supreme Court curbing commercial and governmental intrusion into these areas (ironic, given that one of the ECJ's decisions was to declare Europe's own Data Retention Directive invalid).

Again, he's missing a sensible, pragmatic point. The UK's reaction is telling him is that when huge swathes of the population questionn the very existence of the EU, it's wiser to stick to the essential foundations and building blocks, rather than snowing people with confetti about day-to-day compliance issues.

However, I'm glad to say that Paul was able to explain how the European Commission is working on some important foundations, such as getting standing for foreigners to take action to protect themselves in the US courts; and preventing indiscriminate mass collection of the personal data of EU citizens by any government or corporation, inside or outside the EU. Those two things are very important to building trust in governments, as well as Big Data, and are the sort of fundamental constitutional changes that citizens would find extremely difficult to achieve solely through the democratic process - though the European Commission has climbed on the bandwagon of public opinion (or Merkel's personal outrage), rather than initiated pressure to achieve these outcomes in its own right.

I also think Paul is right to point out that businesses are wrong in the view that personal data is 'the currency of the future' or 'oil in the wheels of commerce'.  Money is fungible - we view one note as the same as another - and, similarly, oil is just a commodity. So the data related to money and oil are hardly very sensitive and can be dealt with through economic regulation. But people, and the data about them and their personal affairs, come with more fundamental rights that can't simply be dealt with in economic terms. It's important that citizens have a right of action against governments and corporations to protect their interests (though I think the Google Spain decision was wrong).

But Paul overstates the 'synergies' between EU regulation, trust and innovation. He is stretching too far when he says that vigorous regulatory protection is essential to the creation of trust between people and their governments and the corporations they deal with. As evidence for this, he claims that the UK's Financial Conduct Authority as doling out the largest fines in the EU for the abuse of people's personal data, and asserts that this has built trust in the UK financial services market. From there, Paul leaps to the conclusion that similarly vigorous regulatory attention is somehow one of the necessary pre-conditions to the creation of commercial trust generally. He then leaps again to the notion that commercial trust driven by regulation is a pre-condition for innovation because, "There is no trust in start-ups," he says.

This is all nonsense.

Here Paul seems to be looking at the world through the lens of his own area of responsibility rather than from a consumer standpoint. Very few of the FCA's fines have anything to do with abuse of customer data, and its fines are puny compared to US regulators in any event. And in survey after survey, we've also seen that the providers of retail financial services are generally among the least trusted retail organisations in the UK and Europe. Enforcement processes also tend to be slow, resulting in fines for activity that ceased years before, and depriving consumers of the opportunity to cease dealing with firms at the time of wrongdoing. So, relative to consumers' perception of other industries, complex financial regulation and allegedly vigorous enforcement action has been no help at all.

It's also strange for Paul to suggest that "there is no trust in start-ups" without the backing of regulation, given the vast number of start-ups that have achieved mass consumer adoption absent effective regulation - certainly across borders. Unless, of course, Paul still considers Google, Facebook, Twitter etc to be 'start-ups', which would be weird. This ignores the fact that, love 'em or hate 'em, such businesses have been far more responsive to consumer/citizen pressure in changing their terms and policies than the European Commission or national legislators have been in altering their own laws etc. Indeed such businesses have even been relied upon by governments to enforce their consumer agreements to shutdown activities that national governments have been powerless to stop.

Paul's view of start-ups appears to reflect the continental civil law notion that citizens cannot undertake an activity unless the law permits it; while in the common law world 'the law follows commerce' - in the UK and Ireland (and the US, Canada, Australia etc) we can act unless the law prevents it. The havoc that arises from these opposing viewpoints - and the differing approaches to interpreting legislation - cannot be underestimated. In fairness, the UK needlessly creates a rod for its own citizens by 'gold-plating' EU laws (transposing them more or less verbatim). The national version is then interpreted literally. We would be far better off adopting the purposive interpretation of EU laws and implementing them according to their intended effect. This may mean a bit more friction with the Commission on the detail of implementation, but the French don't seem to mind frequent trips to the European Court where the Commission objects, and meanwhile their citizens don't labour under unduly restrictive interpretation of EU laws.

None of this is to say that I disagree with Paul's claim that strong individual rights and regulation to protect them are not inconsistent with making money and healthy innovation. But I reach this conclusion by a different route, starting from the premise that retail goods and services must ultimately solve consumers' problems, rather than be designed to solve suppliers' problems at consumers' expense. Strong individual rights are only one feature of a consumer's legitimate day-to-day requirements, not all of which can be legislated for. Co-regulation, self-regulation and responsible, adaptable terms of service are all part of the mix.

Of course, regulation can be helpful in preserving or boosting trust where it is already present - as can be seen in the development of privacy law amidst the rise of social media services (and in the context of peer-to-peer lending and crowd-investment, for example). But regulation can't create trust from scratch, any more than Parliament can start businesses.

If only the Eurocrats would recognise these realities and limit their attention to areas where government action is essential, I'm sure they would find more favour with pragmatists everywhere.


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