Europe's rule makers stumble

Fully Charged
Bloomberg

Hey all, it's Natalia. The European Union has emerged in recent years as a leader on digital policy, making it clear that if tech companies want to do business there, they have to abide by a strict set of rules. But the EU doesn't always get its way, as evidenced by two crushing defeats for regulators last week in the bloc's top courts.

On Wednesday, Apple Inc. won a court fight over a record 13 billion-euro ($14.9 billion) Irish tax bill, in a blow to EU digital czar Margrethe Vestager, who has earned a reputation as tough on tech in part due to decisions like the one levied against the iPhone maker. The court sided with the company, which argued that the EU was forcing it to pay taxes in Europe when they were due in the U.S.

Just a day later, judges struck down the so-called Privacy Shield, a data-transfer mechanism that EU and U.S. officials spent years negotiating and which allowed thousands of businesses to easily and legally move everything from payroll data, social media posts and other information to the U.S. for processing.

The two cases highlight the continued effort by European authorities to bend American companies and the U.S. government to their will when it comes to tech—and the limits of their influence. 

In the case of the Privacy Shield ruling, European regulators' proposed solutions were apparently too mild for the courts—resulting in a decision that could cause major upheavalUnder EU rules, companies can only transfer data out of Europe if the third country has adequate data protection laws in place. The Privacy Shield was supposed to prove that U.S. practices were in line with Europe's, but did so mainly through written assurances from the Obama administration, which said that access to data by American intelligence authorities would be subject to clear limitations.

Those assurances apparently weren't enough to assuage the judges, who said Europeans' data was insufficiently protected when moved to the U.S. "They got the best deal they could get and said this is going to have to be good enough," J. Scott Marcus, a senior fellow at Bruegel, a Brussels think-tank, said of the EU's negotiations on Privacy Shield. "The court said no."

Now, American companies that want certainty about operating in Europe may have to hope the U.S. changes its data policies. Privacy campaigner Max Schrems, who initiated the court case, said, "It is clear that the U.S. will have to seriously change their surveillance laws, if U.S. companies want to continue to play a major role on the EU market."

But that might be a tough sell. It's not just European courts that are getting in the way of EU regulators' plans: The U.S. also tends to throw its weight around on digital policies linked to taxes and national security. President Donald Trump's administration has already said it would impose trade tariffs on countries rolling out digital taxes and has threatened to revoke intelligence sharing for countries who supply 5G equipment from Huawei Technologies Co. over national security concerns. Whether the two sides can come to a new agreement on data sharing is anyone's guess.

As EU regulators and the U.S. government jostle for power, international companies may get caught in the middle. It's not just Apple and the tech giants that are getting mixed messages about doing business in Europe, thousands of other businesses are now trying to read geopolitical tea leaves to get a little legal clarity. Natalia Drozdiak

If you read one thing

Jeff Bezos got $13 billion richer on Monday, as Amazon stock surged following rising optimism about web shopping trends, Bloomberg reported. It was the single highest one-day jump ever recorded by the Bloomberg Billionaires Index. 

And here's what you need to know in global technology news

IBM kicked off a big week of earnings for public tech companies. The stock ticked upward in after-hours trading as cloud sales at the company helped offset coronavirus-fueled declines in the consulting services business. 

Startups are already starting to leave Hong Kong, Bloomberg reports. The move may foreshadow similar departures for tech giants like Facebook, Google and Twitter. 

Elizabeth Holmes trial has been postponed because of the coronavirus. 

Uber is bracing for a long summer of legal battles in the U.K.

Join Bloomberg online this Thursday, July 23, for a virtual tech briefing about cyber threats and optimizing security. Featured speakers include Verizon Executive Vice President and Group CEO Tami Erwin, Duo Security Co-Founder and CTO Jon Oberheide and OneLogin Chief Trust & Security Officer Vanessa Pegueros.

 

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