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EU may be powerless to stop US snooping

But what about the Belgians?

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A trans-Atlantic dispute over US snooping on international financial transactions is turning into a full-blown test of legal authority, with US security interests on the one side and European privacy guardians on the other.

The Europeans believe this could also be as much a test for international business as international law, with Swift, the Belgian firm that has been caught in the middle, feared to be just the first case of many in which a firm has had its privacy trounced by zealous US anti-terrorist investigators.

The test is whether European law has competence over US claims to data held by European firms. It does not look at all certain whether it does, but The Register understands that the EU is planning to walk and talk like it does.

European regulators met Wednesday to discuss the case of Swift, a firm that has suffered an unspecified number of subpoenas (from the US Treasury's secret terrorism finance investigation) for details of the international financial transactions it handles on behalf of private clients.

They hope they can shoehorn the case into the jurisdiction of EU data protection law so they can stop the US from riding roughshod over privacy laws and trawling through private data held by European multinationals.

"You can expect that Swift is just one of many cases where similar events have happened. If this is not yet the case you can expect that it's likely to be the case in the future," said one legislator close to the case in Europe.

The Swift case shows that any international firm should fear having its data snatched by the US authorities unless Europe can guarantee the oversight of its privacy laws, he said. Transportation firms, internet service providers, email providers - anybody that holds European data in a US jurisdiction - is on the minds of European regulators. They are also concerned about data held by US firms, like Google and Hotmail, about European people.

The group that co-ordinates European member states' reactions to issues such as this, the Article 29 Data Protection Working Party, is turning to the example of another recent trans-Atlantic bust-up over privacy for guidance - that of passenger name records (PNR).

Some believe this an unfortunate reference. The EU did have an agreement to let airlines satisfy US demands for trans-Atlantic passenger flight details for security purposes, but the European Court of Justice ruled in May that the agreement was worthless because the Europeans had no competence to make it.

Security matters are outside the jurisdiction of EU regulators, so they may have no right to interfere with US subpoenas on European firms when their purpose is national security. Some in Brussels believe the PNR ruling was too narrow to have any influence on Swift, but it is still highly debatable whether the Europeans can claim any jurisdiction over Swift's dealings with the US Treasury.

Rosemary Jay, a specialist data protection lawyer with Pinsent Masons, said the Europeans might be able to claim jurisdiction over this case through the nature of Swift's business, which is handling international finance transactions from a Belgium headquarters. Commercial matters are an EU competence. Nevertheless, she said, it was a "humdinger" of a problem.

The Europeans can guarantee that national Belgian law has competence over Swift in this case. Most EU member countries broadened their implementations of the EU Data Protection directive so they covered security matters.

The Belgian data protection registrar is indeed co-ordinating the response of 33 European countries to complaints about Swift's handing over of data to the US government. Yet the working party does not want to have to rely on Belgian law to represent Europe's interests.

Without the unwavering co-ordination warranted by EU law, individual member countries might be tempted to enter bilateral agreements for the unrestricted transfer of corporate data to US investigators. That's not the sort of thing that makes the sun shine in Brussels. ®

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