The best option for the United Kingdom to continue trading data with the EU post-Brexit would be to secure an "adequacy decision" from the European Commission, which provides a standard of protection which is "essentially equivalent" to EU data protection standards.
However, EU adequacy decisions can only be taken in respect of third countries - i.e. countries that are not member states - meaning that the United Kingdom could struggle to get such a decision secured at the time of exit, whilst it is still part of the Union.
Failure to secure an adequacy finding would leave companies having to rely on standard contractual clauses and binding corporate rules to ensure data flows between the European Union and the United Kingdom, but the report warned that these mechanisms may not be available to some types of companies and were now subject to legal challenge.
"To avoid this, the Committee urges the Government to secure a continuing role for the Information Commissioner's Office on the European Data Protection Board".
The committee suggested that the government pursues an "adequacy decision" as it believes this is the most comprehensive option for maintaining unhindered data flows post-Brexit. A report from the Lords Select Committee, 'Brexit: the European Union data protection package', the House of Lords reiterates that there is "no prospect of a clean break" with Europe when it comes to data flows.
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But the panel warned that the police have no fallback option if such a deal isn't reached, so it also urged the government to seek to include data-protection arrangements in any transitional accord as the United Kingdom leaves the EU. The maintenance of unhindered data flows is therefore crucial, both for business and for effective police cooperation.
"The committee was concerned by the lack of detail on how the government plans to maintain unhindered data flows post-Brexit", the committee chairman, Michael Jay, said in an emailed statement.
It warned that any post-Brexit arrangement that leads to greater friction around UK-EU data flows could also pose a non-tariff barrier to trade, putting the UK at a competitive disadvantage.
When asked how the Government meant to achieve its goal of unbroken data flows, Matt Hancock MP, minister of state for digital, told the sub-committee there were "many different ways this could work" but he did "not want to stress any particular option". It said, though, that the United Kingdom could be forced to separately agree arrangements for protecting personal data when transferred from the United Kingdom to the U.S. in order to gain an adequacy decision from the European Commission. These are now sourced through our membership of Eurojust and Europol and are vital for United Kingdom law enforcement'.
"We urge the government to ensure that any transitional arrangements agreed during the withdrawal negotiations provide for continuity of data-sharing, pending the adoption of adequacy decisions in respect of the United Kingdom", the committee report said. New UK surveillance laws finalised last autumn are also likely to be the subject of legal challenge, she warned. It has defined supervisory and enforcement duties under the new Regulation.
Finally, the report noted that in the longer term, it is possible that an worldwide treaty on data protection could emerge as the end product of greater co-ordination between data protection authorities in the world's largest markets.
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