By Márton Domokos

As of 1 January 2012, a new data protection supervisory authority was established in Hungary called the National Authority for Data Protection and Freedom of Information, or Nemzeti Adatvédelmi és Információszabadság Hatóság  (NAIH). Its predecessor was a Scandinavian-type parliamentary ombudsman, a data protection commissioner, who was entitled to a limited scope of sanctions. One of the most important changes is that the NAIH has the right to impose fines between HUF 100,000 (approx. EUR 370) and HUF 10,000,000 (approx. EUR 37,037). Now the NAIH has published its 2012 annual report in order to provide a detailed overview on its operation in “year one” so stakeholders can assess whether the establishment of the new authority strengthened the companies’ data privacy compliance.

Notable Cases–Data Retention, Access Requests and Mass Mailing

In 2012, 3,008 data privacy requests were submitted to the NAIH, which is significantly more than the 2,274 in the previous year. The infringement of the law has been determined in 514 cases so far--419 of which are related to data privacy, while 95 are related to freedom of information.

The most important cases before the NAIH affected the data privacy aspects of the following topics: advertisements; website registrations; newsletter services; secure storage of company documents; sending of mass e-mails and unsolicited SMSs; denial of access to medical data; operation of CCTV at the workplace; handling of insurance secrets; online games and coupons, and debt enforcement. The affected companies are business entities: one financial institution, one health insurer, five state organisations, one municipality and one private person. The NAIH imposed a fine in 11 cases. The maximum fine--HUF 10,000,000, or approximately EUR 37,037--was imposed once, and the minimum fine--HUF 100,000, or approximately EUR 370)--three times. Accordingly, the other fines ranged between these two amounts.

In one case, the service provider concerned has stored the documentation of liquidated companies for numerous years on unprotected premises which was also easily accessible to the public. The majority of the documents contained personal data, such as medical final reports, copies of personal identification cards and driving licences and social security documents. The NAIH imposed a fine of HUF 5,000,000--approximately EUR 17,000.

In another case, a complainant requested access from a damage settlement company to a medical expert opinion about him, but it was rejected on the basis that such data are only for internal use. An HUF 500,000--approximately. EUR 1,700--fine was imposed by the NAIH. A financial services provider was also fined HUF 800,000--or approximately EUR 2,800--for sending mass emails to its 600 clients while all addressees remained visible to all clients, as no blind copy was applied. The maximum statutory fine of HUF 10,000,000-- or approximately EUR 35,080--was imposed on a real estate advertisement service provider who did not allow its clients to delete their advertisements and personal data and transferred the clients’ personal data without consent to the operators of similar websites and debt collection companies. It is also worth noting that the NAIH also closed a long-term investigation and finally allowed Google to release its Street View.

Considering the findings of the NAIH in the above cases, it is advisable for companies to revise their data retention practices, access request mechanisms and the processing of their client contact lists.

Changes in the Law on Workplace Privacy and CCTV Use

Before 1 July 2012, monitoring of employees’ activities required the prior and informed consent from the people affected.

Now, the New Labour Code is introduced, and no prior consent is required from the employee to monitor the employment-related conduct of the employee. However, the employer shall provide preliminary information on the technical measures used, and the private life of the employees may not be monitored; In addition, the methods shall not violate human dignity. In its report, the NAIH emphasises that notwithstanding the general authorisation provided by the New Labour Code, the employment-related data processing is lawful only if the employer complies with the essential provisions of the Data Protection Act regarding the data processing, i.e. adequate information and fair processing. The NAIH has also issued a recommendation, consolidating its previous practice on the data privacy implications of CCTV use.

CCTV shall only be used for the protection of health and safety, storage of dangerous materials, protection of business secrets or company property. It is prohibited to place a camera in clothing rooms, bathrooms, toilets, medical rooms, waiting rooms and places where employees take their breaks. The visual angle of the camera shall not be wide. Employers shall publish a data privacy notice on the CCTV, containing the reason of its installation and the territory which is covered. Employers can store the recorded data for three working days; However, the DPA provides some flexibility to determine the cases where the recorded data may be stored longer. The NAIH requires employees to certify that the employees have received the information on the CCTV operation.

It is advisable for employers to revise their data privacy practices in accordance with the above workplace-related recommendations of the NAIH.

Deficiencies in the Legislation

Act CXII of 2011 on the Right of Informational Self-Determination and on Freedom of Information-- or Data Protection Act-- as of 1 January 2012, enables the transfer to third countries without consent only if an adequate level of protection is ensured. Such protection can be established by “binding legislation of the EU” or an international agreement. The Data Protection Act does not define what “binding legislation of the European Union” includes. In practice, it refers to whether the European Commission has determined that the third country ensures an adequate level of protection, the Safe Harbour principles are applied or an “EU Model Clause” is concluded in respect of the data transfer. Since 1 January 2012, entering into other individual data transfer agreements or applying Binding Corporate Rules for International Data Transfers (BCRs) are not considered as providing “adequate protection” anymore. This modification in the legislation was strongly criticised by both the DPA in its report and the industry; However, it remains a question whether the legislator is willing to correct the deficiencies with an eventual amendment of the Data Protection Act. Until such correction, it is advisable for companies to revise their international data transfers accordingly.

Cloud and Cookies

Unfortunately, the report of the NAIH does not address the local issues of data privacy compliance in respect of cloud computing and the use of cookies in details. The NAIH only notes that it has identified numerous deficiencies in the Hungarian legal provisions as well as in the industry practice regarding the compliance with cookie consent rules, and it will make proposals accordingly. As regards cloud computing, the NAIH emphasises that it relies on Opinion 05/2012 on Cloud Computing by the Article 29 Working Party and on the “Sopot Memorandum” of the International Working Group on Data Protection in Telecommunications and that the storage of “sensitive personal data” in the cloud is not recommended. Until detailed guidance from the NAIH on the use of cloud and cookies, data processors should proceed with utmost care.

Márton Domokos is a lawyer with CMS Cameron McKenna LLP in Budapest. Areas of specialisation: legal advisor for the IT sector, data protection and privacy law, internet law, general commercial contracts, corporate restructuring, mergers and acquisitions. As part of his data privacy and regulatory expertise, Márton has specific knowledge of and continuously monitors the regulatory developments in the field of cloud computing and cookie use in Hungary. Recently, he spent six months secondment period at the CEE headquarters of a multinational American technology and services conglomerate as a member of the legal department being responsible for the region. He can be reached at emarton.domokos@cms-cmck.com.

Read more by Márton Domokos:
HUNGARY—Financial Supervisory Authority issues circular for Hungarian financial institutions on the use of cloud computing technologies


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