Not Every Data Breach Leads to Fines: EU Court Clarifies GDPR Enforcement

The European Court of Justice (CJEU) has clarified that national data protection authorities are not obligated to impose fines or other sanctions automatically in every case of a data breach under the General Data Protection Regulation (GDPR). In Germany, a savings bank discovered that an employee had repeatedly accessed a customer’s personal data without authorization. The bank took disciplinary action, obtained assurances from the employee, and reported the breach to the Hessen Data Protection Commissioner, but chose not to inform the customer, considering the risk low. After learning of the breach, the customer filed a complaint seeking stricter action, but the Commissioner declined to impose sanctions, citing the bank’s corrective measures. Unsatisfied, the customer escalated the case to a German court, which sought the CJEU’s interpretation of the GDPR.

The CJEU ruled that supervisory authorities are not required to exercise corrective powers, including imposing fines, if the breach has been adequately addressed by the data controller. This includes taking swift and effective measures to resolve the issue and prevent its recurrence. Supervisory authorities have discretion in determining the most appropriate response, balancing robust enforcement with the overarching objectives of the GDPR.

The court emphasized that supervisory authorities must maintain a high level of data protection and act consistently. However, they have flexibility in deciding how to address shortcomings, provided their actions align with GDPR principles. The decision underscores that while fines are a powerful tool under GDPR, they are not the default response to every breach. Organizations must still act promptly to assess risks, address breaches, and comply with reporting obligations. Failing to do so or attempting to cover up incidents could result in severe penalties.

This ruling offers reassurance to compliant data controllers, showing that cooperation and immediate remediation can mitigate the likelihood of financial penalties. However, it also serves as a reminder of the need for robust data protection practices to avoid breaches altogether. Adhering to GDPR requirements, such as proper record-keeping, timely notifications, and transparency, is essential to avoid significant fines and maintain a positive relationship with supervisory authorities. Proactive compliance not only mitigates risks but also demonstrates a commitment to protecting personal data effectively.