Euro ruling hits firms using ‘cloud’ servers based in America

THOUSANDS of small firms face chaos after an EU ruling on how they store information about their customers and staff.

For 15 years European companies have been able to keep customer and employee data on remote systems in the US, under ‘safe harbour’ rules.

But last week the European Court of Justice ruled that firms need to carry out their own audits on how such data is kept secure. Meeting the new rules will require firms to find out where their cloud provider stores data.

If it is held in the US they will have to ensure that its storage meets EU security standards or bring it back to the UK, both of which will cost time and money.

The growth in cloud computing has seen many small firms store data on remote servers, many of which are in the US. Elaine Fletcher, a director at City law firm DWF, said: ‘This creates a great deal of uncertainty for almost any business that transfers data, especially where this is cloud-based.’

Matthew Fell, the Confederation of British Industry’s director for competitive markets, said: ‘Businesses will want to see clarity on the immediate implications of the decision, together with fast action from the European Commission to agree a new framework.

Technology giants such as Amazon, Airbnb and Facebook have been looking at solutions to the data compliance issue for some time.

However it is not yet clear how smaller firms using cloud services in the US will have to comply.

Adam Marshall, director of policy and foreign affairs at the British Chambers of Commerce, has said the body would be ‘very concerned’ if the ruling ‘resulted in the creation of new regulation, risks and liabilities – particularly for small and mediumsized companies, which may not be able to handle the additional burdens and costs’.