It was pointed out that technological progress and globalization have profoundly changed the way data is collected, accessed and used. In addition, the 27 EU member states have implemented the 1995 rules differently, resulting in divergences in enforcement.

A single law will do away with the current fragmentation and costly administrative burdens, leading to savings for businesses of around EUR2.3bn (USD3bn) a year, according to the Commission. The initiative will also help reinforce consumer confidence in online services, providing a much needed boost to growth, jobs and innovation in Europe.

"17 years ago less than 1% of Europeans used the internet. Today, vast amounts of personal data are transferred and exchanged, across continents and around the globe in fractions of seconds," said European Justice Commissioner Viviane Reding, the EC’s Vice-President. "The protection of personal data is a fundamental right for all Europeans, but citizens do not always feel in full control of their personal data.”

“My proposals will help build trust in online services because people will be better informed about their rights and in more control of their information,” Reding added. “The reform will accomplish this while making life easier and less costly for businesses. A strong, clear and uniform legal framework at EU level will help to unleash the potential of the Digital Single Market and foster economic growth, innovation and job creation."

The EC's proposals update and modernize the principles in the 1995 Data Protection Directive to guarantee privacy rights in the future. They include a policy Communication setting out the EC's objectives and two legislative proposals: a Regulation setting out a general EU framework for data protection and a Directive on protecting personal data processed for the purposes of prevention, detection, investigation or prosecution of criminal offences and related judicial activities.

The new rules should help businesses by creating legal certainty. There will be one law that will apply to all member states in the EU, and to all companies which are offering their goods and services to consumers in the EU – even if their servers are based outside of the EU. The new Regulation will remove barriers to market entry – a factor of particular importance to small and medium-sized enterprises.

Key changes in the reform therefore include the introduction of a single set of rules on data protection, valid across the EU. Unnecessary administrative requirements will be removed, and there will a regulatory 'one-stop-shop' for businesses for all data protection matters. A company will only have to deal with one single data protection authority; that of the member state in which the company has its main establishment.

Instead of the current obligation of all companies to notify all data protection activities to data protection supervisors, the Regulation provides for increased responsibility and accountability for those processing personal data. In addition, companies and organizations must notify the national supervisory authority of serious data breaches as soon as possible (if feasible within 24 hours).

People will be able to refer to the data protection authority in their country, even when their data is processed by a company based outside the EU. Wherever consent is required for data to be processed, it is clarified that it has to be given explicitly, rather than assumed. It will be stipulated that EU rules must apply if personal data is handled abroad by companies that are active in the EU market and offer their services to EU citizens.

People will also have easier access to their own data and be able to transfer personal data from one service provider to another more easily (the right to data portability), while a ‘right to be forgotten’ will help people better manage data protection risks online. People will be able to delete their data if there are no legitimate grounds for retaining it.

Independent national data protection authorities will be strengthened so they can better enforce the EU rules at home. They will be empowered to fine companies that violate EU data protection rules. This could lead to penalties of up to EU1m, or up to 2% of the global annual turnover of a company.

A new Directive will also apply general data protection principles and rules for police and judicial cooperation in criminal matters. The rules will apply to both domestic and cross-border transfers of data.

In a recent speech in Munich, Reding said that the new legislation should “make the Digital Single Market more accessible for both businesses and consumers, which will make Europe more competitive and which will become an international standard-setter in terms of modern data protection rules”.

The EC's proposals will now be passed on to the European Parliament and EU member states (meeting in the Council of Ministers) for discussion. They will take effect two years after they have been adopted.