Policy & Regulation
EU Strikes Provisional Agreement on the Data Act
The European Union has taken a significant leap forward in its quest to become a global pacesetter in the data-driven economy. The Council presidency and European Parliament representatives have reached a provisional agreement on a landmark regulation, the Data Act, which puts forth harmonised rules on fair access to and usage of data.
Aiming for Fairness and Competition
The Act will reshape data access and usage across all economic sectors within the EU. Its fourfold goal is to: ensure fair distribution of data value among stakeholders in the digital space, stimulate competition in the data market, spur data-driven innovation, and enhance data accessibility. These are ambitions that will bolster the EU’s vision to lead in the digital transformation race.
The legislation is set to introduce provisions to facilitate the switching of data processing service providers, establish safeguards against unlawful data transfers by cloud service providers, and aid in the development of interoperability standards for cross-sectoral data reuse.
The Data Act will give individuals and businesses greater control over their data through a reinforced portability right. This means they will have the ease of copying or transferring data across various services. The legislation targets data generated through smart objects, machines, and devices, and it pledges to give consumers and companies a voice in determining how their connected products’ data is used.
Key points of the Agreement
The political agreement underscores several pivotal aspects of the new regulation.
First, the scope of the legislation has been clarified, enabling users of connected devices, ranging from smart home appliances to smart industrial machinery, to access data generated by their usage. This data has often been exclusively harvested by manufacturers and service providers.
For Internet of Things (IoT) data, the focus has shifted from the products to the functionalities of the data collected by these products.
Second, the text includes measures to prevent the exploitation of contractual imbalances in data sharing contracts arising from unfair terms imposed by a party with significantly stronger bargaining power. It provides guidance on reasonable compensation for businesses making data available and outlines adequate dispute settlement mechanisms.
Third, the agreement ensures a suitable level of protection for trade secrets and intellectual property rights. Safeguards against possible abusive behaviour by data holders are also included.
Public sector bodies, the Commission, the European Central Bank, and Union bodies are given the ability to access and use private sector data in exceptional circumstances, such as public emergencies, floods, wildfires, or for tasks in the public interest.
The new rules will empower customers to switch effectively between different data-processing service providers, adding extra safeguards against unlawful data transfers.
The Data Act does not exist in a vacuum. The text defines its relationship with existing horizontal and sectoral legislation, such as the Data Governance Act and the General Data Protection Regulation (GDPR).
The Road Ahead
The provisional agreement now awaits endorsement by the Council and the European Parliament. Once it gets the nod, it will be adopted by both institutions following legal-linguistic revision. The upcoming Spanish presidency intends to expedite this process.
The Data Act follows the Data Governance Act, adopted by the co-legislators in 2022, making it the second primary legislative initiative resulting from the Commission’s 2020 European strategy for data.
While the Data Governance Act created processes and structures to facilitate data sharing, the Data Act clarifies who can create value from data and under which conditions. This critical digital principle will solidify the foundations for a fair and robust data-driven economy and will guide the EU’s digital transformation by 2030. It is expected to generate new, innovative services and more competitive prices for aftermarket services and repairs of connected objects.
The European Council, in its conclusions of 25 March 2021, stressed the importance of digital transformation for the EU’s growth, prosperity, security, and competitiveness, as well as for societal well-being. Given these ambitions and challenges, the Commission proposed measures for a fair and innovative data economy, culminating in the Data Act.
In essence, the Act is a testament to the EU’s commitment to its February 2020 European strategy for data. As a significant step in the digitalisation journey, it underscores the EU’s determination to harness the full potential of data, empowering individuals, businesses, and public bodies in a fair, competitive, and innovative data economy.
