The clash between US and EU - an unresolved paradox

07 November 2012
Liability Newsletter 2/2012. Claims handling at If means working internationally, and we do our utmost to pass that knowledge on to our customers, to ensure that you as a company will be able to limit your financial risk, regardless of whether the risk is insurable or not.

​In the US these risks are magnified for companies based in civil-law countries that operate under diametrically opposed cultures of litigation and privacy. Especially you need to be aware of the perils that exposure to litigation in the US can mean to your operations.

When you just can’t do right!

As an example: In the legendary “Zubulake case” the following was stated: “Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” Violating this statement cost the company MUSD 20 in fine (normally uninsured).

  • Prior to litigation: Has your company ensured that a “Litigation Hold Letter” is issued once you might be at risk of ending up in litigation in the US – and has it been sent to the right people?
  • Once in litigation; have you ensured that the discovery is limited as much as possible?

The paradox to the EU regulations lies in the fact that you have a severe risk of violating the EU Data Protection Directive (Directive 95/46/EC, protecting private data) whilst fulfilling the US regulation.

The EU directive intends to protect private data, and does to a large extend prohibit private data from being transferred. In other words; when you issue a Litigation Hold Letter to your employees and transfer the needed data to be used in the litigation in the US, you will not be fined according to the US regulation, and you have ensured the best possible defence in the litigation, but you might simultaneously have violated the EU directive, and risk a fine based on that regulation.

  • Prior and once in litigation: have you ensured that your company does not violate the EU Data Protection Directive (Directive 95/46/EC)?

If you are in doubt, contact If's US Team and let us discuss how you address the challenge.

Kristine B. Wagner