Monthly Archives: February 2014

Anonymisation of Personal Information, Can It Be Safely Used?

The EU Data Protection Directive applies to information concerning an identified or identifiable person. The principles set out by the Directive indicate that a person, the data subject, is identifiable if personal information, whether or not compiled from a single source or multiple sources, is identifiable from that information.  The principles would not apply to data rendered anonymous, such that a specific person is no longer identifiable even from data compiled from multiple sources and if stored in a manner that could not be re-assembled to identify a specific person, provided the risk of identification is “remote”.

Anonymisation of personal information is the stripping away of all personal identifiers such that the data subject is no longer reasonably identifiable or where the risk of identifiability is remote.  Such anonymised information is useful to identify buying patterns, popularity of consumer products and other consumer behaviour.

Personal information that is no longer needed for other purposes is often anonymised and since it is no longer protected, it is sold or shared with others freely.  There are no regulatory measures that limit retention by businesses or any subsequent use of anonymised information.  The question remains, how remote must the risk of identifiability be in order to ensure compliance with data protection regulation is not required.

Is absolute anonymity possible to achieve?  Or should any use of anonymised information be with made with caution?  Periodic reassessment should be undertaken as new technology becomes available to re-assemble or otherwise re-link anonymised information together to re-identify a data subject.

The European Union Agency for Fundamental Rights, the Council of Europe and the Registry of the European Court of Human Rights have just issued a new handbook on European data protection laws.  This non-binding guide is intended to “raise awareness and improve knowledge of data protection rules in European Union and Council of Europe member states”.  The new handbook sets out a different test for defining when personal data can be said to have been anonymised.

“Data are anonymised if all identifying elements have been eliminated from a set of personal data. …No element may be left in the information which could, by exercising reasonable effort, serve to re-identify the person(s) concerned. Where data have been successfully anonymised, they are no longer personal data.”

The standard then has moved from “remote risk” (of re-identification) to “reasonable effort” (to re-identify).  This seems to lower the bar, as may be expected, given the advances in technology over the last several years.  While the guidelines are not binding per se, it is likely that this definition will be given appropriate weight.

If your business relies on anonymised data, continually measure the risk of re-identification as new technology becomes available.

Please contact us if you have any concerns about use of anonymised data.

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Release of New Domains; Protecting your Brand in 2014

2014 will see the introduction of hundreds of new top level domains.  The popularity of these new top level domains won’t be apparent on release, but should be carefully followed.  Popularity may depend on how closely the business aligns with the descriptive domain.  Among the new domains of particular interest are: .email, .clothing, email, .graphics, .careers, .club, .uno, .ventures, .singles, .bike, .holdings, .plumbing, .guru, and .clothing.

Since registration of the new domains will be made on a first-come-first-serve basis, businesses should keep a watchful eye on the developments and ensure their brands are protected as the new domains are introduced.  Protection of your brand during this expansion will require prior registration on  the Trademark Clearing House’s ‘Domains Protected Marks List’.  Once your trademark is registered any subsequent applications to register domains that are identical or that contain the trademark will not be registered.

Cybersquatting has increased in frequency and breadth, costing businesses thousands of dollars every year.  Once a domain has been recovered from a cybersquatter, the business must pay the domain in perpetuity in order to keep the domain out of the hands others, even if there is no intention to use it.  The introduction of these new top level domains brings a renewed excitement around brands that can use them memorably, but also threatens more profound abuse, including phishing, trademark and copyright infringement, and counterfeit sales.

Consider stepping up trademark enforcement and monitoring.  Respond quickly to potential abuses and develop a “watch” program.  If you need assistance contact us.

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Distribution Agreements and Restrictions on Online Sales

A typical distribution agreement may include restrictions for sales to specific vertical or horizontal markets, but agreements that restrict competition are prohibited by Article 101 of the Treaty of the European Union.  Thus, distribution agreements containing strict sales prohibitions are often carefully scrutinized.  With the advance in technology, this prohibition on anti-competitive agreements is experiencing inconsistent application among the member states.  Specifically, in its application to online sales.  The EU Commission’s position is that every distributor must be allowed to use the internet to sell products.

With the rise of third party internet sales platforms, for example, Amazon’s Marketplace, which allows sellers to sell new and used products alongside Amazon, the EU Commission is continually looking at how and whether the prohibitions should be applied. Most restrictions that prohibit sales on these third party platforms will run afoul of the prohibition against anti-competitive agreements.

While the EU Commission seems to accept that sales may be banned on third party platforms if customers are required to navigate to the distributor’s website without using the platform.  The German Federal Cartel Office (“FCO”), however, does not allow such broad leeway.  Sennheiser, a company renowned for making high quality headphones, was forced to remove the restrictive provisions of its distribution agreement that prevented its distributors from selling on third party platforms, specifically, Amazon’s Marketplace.  The FCO could not find any objective reason for the restriction.

Likewise, a cosmetic company located in France, that prohibited all online sales, claiming that the restrictions were to maintain the luxury brand image.  The European Court of Justice and the Paris Court of Appeals both concluded that a total ban on online sales was unlawful.

So what can you do to ensure your company’s distribution agreement won’t run afoul of Article 101 of the Treaty?  First, before including restrictions on sales, consider the antitrust risks.  Does the restriction have an effect on the setting of the resale price?  The EU Commission will be looking for instances where prices have harmonized to see whether the alignment of prices is due to anticompetitive restrictions.  For example, a pricing parity or most favoured nation provision is included in a distribution agreement.  The difficulty is that such a provision may create significant market power and price coordination among distributors.

Avoid scrutiny and by avoiding suspect restrictions in your distribution agreements.  If you need assistance please contact us.

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A Presumption of Consent – The Cookie Conundrum

In December 2013 the French Commission on Information Technology and Liberties (the “CNIL”) revised its guidelines, previously issued following the implementation of Directive 2009/136/EC.  The guidelines required express consent to be obtained from Internet users by the ticking of a box or the clicking of acceptance to the website’s terms and conditions.  Adhering to this strict rule was simply not practical and not adhered to by many websites.

The CNIL is now moving to a more practical and flexible approach, similar to the model adopted in the UK.  That is the presumption of consent.  Consent will be recognized where there is a notification that cookies are used and the stated purpose, and the user continues to browse the website.  Consent will also be presumed once a user views a secondary page on the website.  This not only applies to http cookies, flash cookies,  invisible pixels and other hidden identifiers.

This presumption of consent to the use of cookies is, of course, not new.  But it is a significant step in clarifying what constitutes consent and simplifies the procedure.  The CNIL is recommending the use of a banner informing the user that cookies will be installed, the purpose of the cookies, together with a link to oppose or control the cookies.  This banner must appear each time the user visits the website until the user “continues browsing”.  Cookies can have a life span of no more than 13 months, much longer than the previous guidelines that allowed a lifespan of only 6 months.

If the proposed Data Protection Regulation comes into effect later this year, it will overrule these new guidelines, but for now, continued browsing after being notified that cookies are being used will be a presumption of consent.  In its current form, the Data Protection Regulation would require consent be express and definite, a presumption of consent would not be sufficient.

Contact us about your data privacy issues.

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Spotlight on China, Aggressive on Tax Evasion, Incentives Still Available

Last year China agreed to join the effort to combat tax avoidance and evasion.  With this agreement, China joins the G20 countries in their cooperation on tax avoidance.  China has now announced it will step up its efforts even further.  It seems tax reform is on the agenda.

Before tax reform can take effect, it is expected that renewed efforts will be made to investigate tax fraud.  China, is discovering the importance of greater tax transparency.  For many years China has grappled with the difficulty of ensuring compliance and enforcing disclosure obligations.  The current tax administration has proven successes, recovering taxes worth USD $5.7 billion, 30 times more than in 2008.  As more countries enter into information conventions local governments will have better information and can carry out more thorough investigations.

Tax rates in China range from 3% to 45% for individuals, 25% for domestic and foreign companies although companies in the high tech industry can benefit from a lower 15% corporate tax rate; and VAT is 17%.  Capital gains recognized by an individual are taxed at the rate of 20%, while capital gains recognized by a Chinese company are taxed at the regular income tax rate.

China continues to use economic and technological development zones to encourage manufacturing and other businesses.  Tax incentives provided to companies operating in one of these 50 zones are attractive and have been successful in attracting businesses.  The local economies have benefitted tremendously and are fueling continued growth.

Contact us if you would like to learn more.

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What Can Be Learned from Google’s Missteps.

Recently preliminary motions were heard in a civil suit brought against Google by a UK based Apple User group for misuse of private information, breach of confidence and of the UK Data Protection Act of 1998. The suit alleges that Google circumvented Safari’s security settings to plant a cookie which then surreptitiously tracked online usage and deliver targeted advertising to Safari’s users during 2011 and 2012.

The claimants argued that by tracking online usage without claimants’ consent Google breached the UK Data Protection Act.  Google responded by arguing that the court had no jurisdiction to try the claims, rather that the case should be brought in California.  The High Court disagreed, pointing out the seriousness of the misconduct and declaring that Google was subject to jurisdiction in the UK.  Mr. Justice Tugendhat, sitting at London’s High Court, ruled that the UK courts were the “appropriate jurisdiction” to try their claims. Mr. Justice Tugendhat stated: “I am satisfied that there is a serious issue to be tried in each of the claimant’s claims for misuse of private information. The claimants have clearly established that this jurisdiction is the appropriate one in which to try each of the above claims.”

In October 2013, Google was successful in its bid to have a similar class action suit dismissed.  The federal judge who presided over the case concluded that the claims could not stand since, the plaintiffs could prove no specific measure of damages arising from Google’s alleged misconduct.  Google will, no doubt, appeal the ruling.  In other similar court actions, Google paid USD $17 million to settle a claim by U.S. state attorneys who accused Google of circumventing Safari’s security settings and paid USD $25 million to the Federal Trade Commission for similar misconduct.

Until the outcome of Google’s appeal and possibly the judgment in the case, what can be learned from Google’s misstep.  The legal trend is shifting towards the grant of greater privacy rights and privacy protection.  Claimants are sure to be provided more leeway to bring claims against company’s for breach of data protection laws and will be supported by the courts.  Take careful note of the outcome and learn from Google’s missteps.

If you have any questions or concerns about your company’s data privacy policy, please contact us.

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Introduction of VAT in the Bahamas

Effective July 1, 2014, a Value Added Tax (VAT) is being introduced in the Bahamas.  The VAT will offset reductions in import duty rates and will provide a path to accession to the World Trade Organization and potentially new regional trade agreements.  The new VAT rate will be 15% on goods and services.  Currently over 130 countries impose VAT with rates ranging between 5% and 27%.  In the Caribbean, a number of countries have imposed a VAT including, Trinidad and Tobago, Saint Kitts and Nevus, Guyana and Barbados.

As the time for implementation quickly approaches, the financial services industry, in the Bahamas, is lobbying for a ‘zero rated’ status rather than VAT ‘exempt’.  The zero rating would allow the financial services industry to avoid collecting the 15% VAT from their customers, while reclaiming the VAT paid on their input costs.  If declared exempt, financial services companies, including banks, would avoid collecting the VAT from customers, but would not be permitted to reclaim the VAT on their input costs.

An exempt rating could reduce profits, drive costs up and the financial services industry is concerned about losing a competitive advantage.  It is relatively certain, however, that services provide to overseas clients would be zero rated since such services are being exported.  This means that trust and fund administrators, and attorneys will be zero rated.  While banks, as deposit taking institutions are supplying services within the Bahamas and therefore, may therefore be treated as exempt, rather than zero rated.  The decision is not yet final, but the Minister of Finance is confident that the impact on the financial services industry will be minimal.

The significance of the introduction of this VAT should not be understated.  Income tax free countries where the financial services industry enjoyed a brisk business for many years are losing the advantage they once held.  With the imposition of back breaking withholding tax penalties and the weakening of secrecy laws, these countries now must become more creative and adjust to economic realities.  Nevertheless, the Bahamas should continue to grow and maintain its place as a leading offshore jurisdiction.

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Wanting to Invest in Top Emerging Markets: Look No Further than South Africa.

Emerging markets are pockets of strong growth around the globe. Investors often enjoy good present and future returns on their investments in emerging markets. Even in a global economic crisis as we are experiencing now, emerging markets can have growth and stability. Africa, in particular, has been rather stable during the current crisis and thus, has attracted a great deal of investors. In a recent report done by accounting giant Grant Thornton, LLP, South Africa was rated as Africa’s number one emerging economy.  In 2010, Goldman Sachs added South Africa to BRICS, predicting it to become one of the largest economies in the world along with Brasil, Russia, India and China.

South Africa has a lot to offer in terms of natural resources. Mineral wealth includes gold, platinum, chrome, manganese and vanadium as well as precious gemstones. There is an estimated U.S.$2.5-trillion worth of minerals yet to be extracted, about 100-years of heaving mining to access them all. While currently, South Africa gets almost all of its energy requirements from coal-fired power plants, change is coming. There are areas in the north of the country with enormous solar potential ripe for photovoltaic farms. Following the 17th Conference of the Parties held in Durban in 2011, the government has been pushing for a greener South Africa and green energy is one of the first areas that require attention. Finally, South Africa is making a massive push to improve the country’s infrastructure. In the next three years, the South African Government is expected to contribute U.S.$93-billion to public-private investment structures focused on infrastructure improvement.

Naturally, there are uncertainties and concerns held by foreign investors. The fluctuating Rand-Dollar exchange, cultural differences, bureaucracy and red tape, corruption and bribery, and the Black Economic Empowerment Policy are some concerns that Western investors could have. The media also paints South Africa as politically unstable, thick with corrupt politicians ready to take a kick back with every deal. Negotiating with South Africans and the South African Government can be a sensitive issue if questioning certain laws and policies. Whilst Apartheid ended nearly twenty years ago, it is fresh in the memories of most. Having someone on your team who is well versed in South African cultures, customs and laws will give you the edge for making smarter and safer investments in the country.

If you are interesting in finding and negotiating investment opportunities in South Africa, please contact us for a full assessment of the items that need to be on your radar for smart investing in the exciting emerging economy of South Africa.

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