TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

Towards the end of 2018 we ran a series of Contract Corner blog posts on the GDPR and Data Processing Addendums. (See here and here.) December brought detailed guidance from the UK Information Commission’s Office (ICO) on contracts and GDPR compliance (the New Guidance), which replaces draft guidance previously issued as part of a consultation by the ICO in 2017 (the Draft Guidance).

The process of “going digital” has drastically affected the outsourcing market in recent years. During their webinar, Outsourcing Across the Globe—Going Digital, Ed Hansen, Simon Lightman, Barbara Melby, and Mike Pierides will discuss how to prepare for the future of outsourcing and leading trends that will impact outsourcing transactions globally in 2019. Topics will include the following:

  • Privacy considerations for Europe, China, and beyond
  • The increasing impact of automation
  • Using the contract to mitigate risk

The webinar will be held on Wednesday, January 23, 2019, from 12:00 pm to 1:00 pm ET (5:00 to 6:00 pm GMT).

Register for the webinar.

As 2018 comes to a close, we have once again compiled all the links to our Contract Corner blog posts, a regular feature of Tech & Sourcing @ Morgan Lewis. In these posts, members of our global technology, outsourcing, and commercial transactions practice highlight particular contract provisions, review the issues, and propose negotiating and drafting tips. If you don’t see a topic you are interested in below, please let us know, and we may feature it in a future Contract Corner.

In Part 1 of this series, we looked at the prevalence of standalone data processing addendums (DPAs) as a means to comply with rules on engaging third-party outsourcers under the EU General Data Protection Regulation (GDPR). In particular, we focused on the risks associated with “one size fits all” precedence clauses. In this Part 2, we take a detailed look at some of the commercial issues arising from DPAs, the GDPR’s mandated contract requirements.

What’s the Issue?

Article 28 of the GDPR includes a set of mandated data processing clauses that are broader in scope than the contract requirements under previous EU data protection laws. In addition, despite the GDPR having been in force for more than six months now, it is still uncertain how regulators will interpret and enforce Article 28.

As a result, parties to outsourcing agreements can find themselves in protracted discussions around which party bears the cost of implementing Article 28. Below are some key areas of focus in the context of outsourcing agreements.

Although the EU’s General Data Protection Regulation (GDPR) has been in force for more than six months, many organizations are still getting to grips with some of the practical requirements, including ensuring that their contracts comply with Article 28, which mandates a number of key clauses if personal data is being processed under the service agreement.

With potentially hundreds of in-scope contracts, customers and suppliers alike have developed standard-form data processing addendums (DPAs) or similar contract documents in order to address these Article 28 requirements. DPAs are fast becoming the preferred approach for both new agreements and existing contracts.

The United Kingdom government’s Cabinet Office (the central procurement department for central government) is requiring major government suppliers to draft “living wills.” These are intended to safeguard the provision of services to the public sector in the event of the collapse of a supplier.

This measure follows the insolvency of outsourcing provider, and major government supplier, Carillion in January 2018. The well-documented Carillion collapse led to significant debate about the role of outsourcing within the UK public sector, with pronouncements about the extent to which outsourcing for the public sector has “fallen out of fashion.”

A significant fine imposed by the UK’s Financial Conduct Authority (FCA) on an established UK insurer is further evidence of the increased scrutiny being placed on outsourcing arrangements by the financial services regulator, and also of the importance the regulator places on issues that directly impact retail customers.

The FCA is the UK’s “conduct” regulator, with a focus primarily on the regular business conduct of financial services businesses, as compared to the “macro” focus (safety and soundness) of the Prudential Regulatory Authority (PRA) – although there is overlap between the stated remits of the FCA and the PRA, and outsourcing arrangements are subject to scrutiny by both bodies.

A shrinking in traditional outsourcing deal volumes since the United Kingdom's EU membership referendum vote on June 23, 2016, is being partially attributed to business caution following the “Brexit” decision.

According to consultants ISG, the traditional sourcing market in the UK pre-Brexit referendum had a deal volume of circa $900 million per quarter. However, the UK outsourcing market has only achieved this level of activity in one quarter since the referendum.

Morgan Lewis partner Barbara Melby, the leader of our technology, outsourcing, and commercial transactions practice, has been invited to present at an upcoming Practising Law Institute (PLI) event, Outsourcing 2018: ITO, BPO and Cloud, in New York City. Barbara’s one-hour presentation will take place Friday, November 2, at 11:15 am. She will discuss intellectual property issues in outsourcing, including the following topics:

  • Recognizing and avoiding common IP pitfalls
  • Copyright, patent, and trade secret issues from vendors’ and customers’ perspectives
  • IP representations, warranties, and indemnities in outsourcing transactions
  • Open-source considerations
  • IP issues in cloud deals

The presentation is part of a two-day PLI outsourcing event November 1–2 at the PLI New York Center, 1177 Avenue of the Americas (2nd floor), New York. You can also access the event via webcast and various groupcast locations.

To register, visit the Outsourcing 2018: ITO, BPO, and Cloud event page.

This week we welcome new partners to our outsourcing and commercial transactions practice, Mike Pierides and Simon Lightman. The arrival of Mike and Simon, along with associate Sarah Bryan, adds further strength to our outsourcing and commercial transactions team and brings our capabilities to the firm’s London office. Mike and Simon will lead the expansion of our practice in Europe, the Middle East, and Asia, where both have extensive experience representing a wide range of clients on major outsourcing and complex commercial transactions.