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Data processing agreements are important documents that are compulsory under the UK General Data Protection (UK GDPR) in certain circumstances. Some businesses use template data processing agreements that they find online. However, sole reliance on template documentation comes with certain risks. This article will explore the risks of using a template data processing agreement.
Why Is a Data Processing Agreement Important?
The significance of a data processing agreement under the UK GDPR rules is vital. This legally binding document serves as a critical tool defining the responsibilities of data controllers and data processors in ensuring compliance with data protection laws when personal data is exchanged between them.
A data controller determines the purpose and manner of processing personal data, while a data processor acts solely upon the controller’s instructions without authority over the personal data itself. This relationship often occurs in customer-supplier arrangements, where the customer entrusts the supplier with personal data to enable the provision of services under a specific commercial agreement.
Various essential obligations under a data processing agreement include provisions around:
- ensuring that personal data is used strictly by the data controller’s instructions;
- upholding standards of security and confidentiality in handling personal data; and
- undertaking to erase personal data upon the conclusion of the commercial relationship, thereby adhering to the data minimisation and retention principle outlined in the UK GDPR.
A data processing agreement lays out these obligations and ensures that personal data is processed lawfully, securely, and in accordance with the fundamental principles of data protection enshrined in the UK GDPR.
What Are the Risks of a Template Data Processing Agreement?
While it is possible to use a template data processing agreement document (such as an online template), this approach has risks.
The key risks are as follows:
1. The Template May Not Be UK GDPR Compliant
Template agreements can present various problem issues, such as:
- Non-Compliant Terms: Templates might not include all the necessary terms required by the UK GDPR, leaving out critical legal obligations;
- Lack of Customisation: Templates often are not tailored to your specific business needs, so they might not accurately reflect how you handle personal data;
- Outdated Legal References: Templates might not be up-to-date with the latest laws and regulations. This can be especially risky if you buy a template online that a solicitor has not checked.
If a template data processing agreement presents such issues, it will likely not meet the UK GDPR requirements. Using such a template without making the necessary changes increases the risk of not following data protection laws properly. So, it is essential to carefully check and adjust template agreements to fit your business data processing activities and comply with legal requirements.
2. The Template May Not Protect Your Business from Risk
Template agreements often lack clauses to protect parties from various risks, particularly indemnity and liability provisions and clauses apportioning responsibility between the parties.
For instance, as a processor processing personal data on behalf of a customer, you will want your liability for breaching the agreement to be limited to a maximum financial amount. Otherwise, you risk unlimited financial exposure if you breach the terms of your contract. Template agreements may fail to include a well-drafted and robust limitation of liability clause.
As a controller, you may want an indemnity from your processor to state that they will compensate you for any losses or damages you suffer due to them breaching data protection laws. Again, an indemnity is a commercial matter and a complex clause which may not feature in a template agreement and often requires bespoke legal advice.
As such, relying on simple template agreements can mean your agreements do not adequately address the risks your business could face when entering into a data processing agreement.
3. The Template May Lead to Customer Problems
When using a template agreement, you should consider the legal, commercial and practical risks.
If a template agreement is not tailored or compliant, your business, as a data processor, could face severe problems with customers.
Data controller customers will likely question your agreements and lose faith in your business’s ability to safeguard their personal data.
This factsheet sets out how your business can become GDPR compliant.
Poorly drafted or problematic template data processing agreements can lead to protracted customer negotiations, time and costs. In the worst case, a controller customer could walk away from doing business with you if your contract does not address their compliance requirements.
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Why Should You Ensure Your Data Processing Agreement is Correct?
Using template data processing agreements without proper care or attention risks an organisation falling short of UK GDPR compliance.
Data processing agreements are mandatory and not optional. As such, a non-compliance agreement could result in a breach of the UK GDPR, which would have several negative implications.
Non-compliance can lead to various problems, from enforcement action to heavy fines. It can also lead to commercial difficulties, such as customer questions and protracted negotiation time and costs.
Key Takeaways
Data processing agreements are mandatory legal documents to enter into where there is a controller-to-processor data processing arrangement. They need careful and precise drafting. Using a template agreement can result in various risks. For instance, the agreement may not be UK GDPR compliant or tailored enough for your business and its processing activities. Further, problematic template agreements can lead to back-and-forth negotiations with customers and slow down commercial contract closures.
As such, it is vital to take care when using template agreements for your business. It is advisable to seek support from a data protection lawyer to help prepare a UK GDPR-compliant data processing agreement that protects your business from risk.
If you need support with a data processing agreement, you can contact LegalVision’s experienced IT lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.
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