International data transfers: Overview, definition, and example
What are international data transfers?
International data transfers occur when personal or business data is moved from one country to another. This typically happens when companies store data on servers located in different countries or when they share data with overseas partners, service providers, or subsidiaries.
For example, if a U.S.-based company uses a cloud provider with servers in the EU, any transfer of customer data from the U.S. to the EU is considered an international data transfer.
Why are international data transfers important?
International data transfers are crucial for global business operations, enabling companies to store, process, and share data efficiently across borders. However, different countries have different data protection laws, and transferring data internationally can create legal and compliance challenges.
Many countries, such as those in the European Union, have strict data protection rules that require companies to ensure an adequate level of protection when sending data abroad. Failing to comply can result in fines, legal action, and loss of customer trust.
Understanding international data transfers through an example
Imagine an e-commerce company based in Canada that sells to customers in Europe. It collects customer data, including names, addresses, and payment details, and stores this data on U.S.-based servers. Since customer data is being transferred from the EU to the U.S., the company must comply with European data protection laws, such as the GDPR. This means they may need to implement safeguards like standard contractual clauses (SCCs) or rely on an approved data transfer mechanism.
Similarly, a multinational software company with employees in multiple countries may need to transfer HR data between its offices in Asia, Europe, and North America. To remain compliant, the company must ensure it follows the data protection laws of each region where the data originates.
An example of an international data transfer clause
Here’s how an international data transfer clause might appear in a contract:
"The Parties acknowledge that personal data may be transferred internationally. Any such transfer shall comply with applicable data protection laws, including but not limited to the use of Standard Contractual Clauses, approved transfer mechanisms, or legally recognized safeguards to ensure adequate data protection."
Conclusion
International data transfers allow businesses to operate globally but come with regulatory challenges due to differing data protection laws. Companies must ensure they follow the legal requirements of each jurisdiction to protect personal and business data, avoid penalties, and maintain customer trust.
By including a clear international data transfer clause in contracts, businesses can outline responsibilities, reduce legal risks, and ensure compliance with applicable data protection regulations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.