How Automated Contract Review is a Game Changer for Data Processing Agreements and Standard Contractual Clauses

Automated contract review software entered the market just when we needed it the most. While legislation to protect consumer information privacy is crucial, given the rise in identity theft and subsequent lawsuits, rolling out this legislation has been anything but smooth. In the meantime, companies need to proactively define data use and protection to stay ahead of compliance issues. Data processing agreements and standard contract clauses are helping companies do just that.

What Are Data Processing Agreements?

A data processing agreement, or DPA, is an agreement between a company (the data controller) and a third-party service provider (the data processor) that regulates the use of personal data for business purposes. Overseas, a DPA may be referred to as a GDPR data processing agreement because it pertains to the General Data Protection Regulation that went into effect in the EU in May 2018. “Data processing” refers to the collection, analysis, or transfer of consumer personal data, and this type of agreement can apply to just about any business. Online retailers, service providers, professional service firms, B2B companies, financial institutions, tech firms, and medical providers alike should all have DPAs in place.

Why Are Data Processing Agreements Important?

DPAs set conditions on how data is stored, protected, accessed, used, and shared. Increasingly, consumers are concerned with privacy and unapproved access to their personal data. Resulting security breaches can lead to lawsuits, so a DPA remains one of the best ways to limit risk and liability. A DPA is also relevant to GDPR compliance and emerging U.S. legislation, including the California Consumer Privacy Act (CCPA).

What Should Be Included in a Data Processing Agreement?

The GDPR went into effect before many companies had the chance to rewrite their contracts in a compliant manner. On June 4, 2021, the EU Commission adopted cross-border standard contractual clauses (SCC) and controller-processor data processing agreement standard contract clauses that didn’t necessarily involve cross-border transfers (DPA-SCC). Though they are not mandatory, these clauses are highly recommended to meet GDPR standards.

These clauses include:

• Annex I - names the parties pursuant to the agreement
  
  
• Annex II - describes the categories of data subjects and data processed

• Annex III - details technical and organizational measures implemented by the processor
  
  
• Annex IV - names sub-processors and the scope of their processing

What Are Standard Contractual Clauses?

Standard contractual clauses are uncontested terms and conditions which both parties have agreed upon. They are also referred to as “general” or “boilerplate” clauses. These provisions are transplanted from one document to the next and often seen as time-honored and non-negotiable. Standard clauses may cover confidentiality, severability, jurisdiction, or, in this case, privacy concerns. 

Even if you’re not conducting business in EU countries where new consumer privacy laws exist, it’s clear that U.S. states are interested in following suit. A simple, concise, and widely applicable standard contract clause that proactively addresses privacy issues will only help your company stay ahead of changing tides. 

Automated Contract Review Platforms for DPAs and Standard Contractual Clauses

The use of artificial intelligence (AI) contract review platforms to expedite contract review and update processes, especially when it comes to handling large volumes of DPAs and standard contractual clauses, has become increasingly important in the legal sphere. Reviewing and revising a single DPA is a complex job, but it can be overwhelming when it is just one of the many agreements you need to review and get executed. AI-powered contract review platforms can help corporate legal departments reach compliance quickly and without sacrificing accuracy.

LexCheck leverages AI, natural language processing (NLP), automation, and machine learning to provide attorney-quality reviews of data processing agreements and standard contractual clauses. The technology also lets legal teams: 

• Create an AI Digital Playbook to ensure adherence to company standards   

• Automatically compare uploaded DPAs with past agreements to identify deviations

• Produce fully redlined contracts that assess risk levels in minutes

• Receive revision suggestions for clear and playbook-compliant contracts

• Automate recommendations at the click of a button

• Set custom “if/then” rules to implement changes in an agreement

AI’s application in the legal field is changing workflows considerably, enabling teams to train junior associates on playbook standards faster, complete review and negotiation processes with speed and accuracy, and perform more value-adding work. 

LexCheck’s DPA can be found here.