AAPL Apple Inc

   By Natalia Drozdiak 
 

LUXEMBOURG--The European Union's highest court on Tuesday struck down a trans-Atlantic data pact critical to thousands of companies, ruling that the EU's data-transfer agreements with a third country can't override national regulators' powers to suspend it.

The decision by the European Court of Justice roughs up operations for around 4,500 companies that have been using the mechanism known as "safe harbor" to transfer Europeans' personal data to the U.S.

"The [European] Commission did not have the competence to restrict the national supervisory authorities' powers…for those reasons the court declares the Safe Harbor decision invalid," the court said in its ruling.

Companies such as Apple Inc. (AAPL) and Facebook Inc. (FB)--but also European companies operating in the U.S. like German media giant Bertelsmann SE & Co--have been using the framework to move European personal data, such as payroll and contact information, to the U.S. in exchange for complying with Europe's stricter privacy rules.

Companies have been bracing themselves for such a decision, following a top court adviser's recent non-binding recommendation to invalidate the pact.

Yves Bot, an advocate general at the court, had said the agreement should be ditched because "mass, indiscriminate surveillance" by the U.S. suggests that, when Europeans' data flows there, it isn't sufficiently protected. Europeans' rights to privacy and protection of personal data are written into EU law.

The court also adopted Mr. Bot's line in ruling that national regulators have the power to suspend a transfer of data if they deem that the transfer violates EU citizens' privacy rights, regardless of any assessment made by the European commission when agreeing to a data-transfer pact with that country.

The court said the Irish supervisory authority is therefore required to investigate the claims brought by the plaintiff Max Schrems, an Austrian privacy activist, over the transfer of data by Facebook Inc.

The European Commission is slated to hold a press conference in the afternoon in response to the court ruling.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

October 06, 2015 04:19 ET (08:19 GMT)

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