Information Technology- Germany

In February 2007 the Federal Court of Justice ended protracted discussions on the civil law consequences of a data protection violation. The court had to decide on the validity of the assignment of a claim resulting from a terminated loan agreement. A bank had assigned the claim in order to refinance the loan. The court held, among other things, that such assignment is valid even if the information about the debtor is shared with the assignee in violation of the requirements of the Federal Data Protection Act. In the court's view, the constitutional right to privacy is sufficiently protected by the debtor's possible claim for damages due to the violation of data protection law, and the fact that any such violation may constitute a misdemeanour and may trigger substantial fines. The court further held that a violation of data protection law often requires a delicate balancing of interests, and it is not practicable to link the validity of a contractual agreement to such balancing of interests, with uncertain results. Therefore, it was neither necessary nor proportionate to declare the assignment null and void. Hence, even if a contractual agreement implies or necessitates the transfer of personal data (and such transfer may violate the Federal Data Protection Act), the underlying contract remains valid. Thus, it can be generally concluded that a violation of data protection law does not trigger the invalidity of any contractual agreements.

The decision is helpful because it provides clear guidance for the contracting parties. M&A deals in the form of asset transfer agreements and the assignment of bad loans, which regularly require the transfer of personal data between the contracting parties, are no longer at risk of being void due to general data protection law. However, the court has not repudiated its jurisprudence regarding the consequences of contracts triggering the violation of professional secrets (eg, of lawyers, doctors or health insurers). In such cases the underlying contracts, in particular agreements regarding assignment or claims for professional fees, are void.

International Law Office