CJEU: Search engine operator has EU "establishment" via stable ad-selling subsidiary

Concept of ‘establishment’: An ‘establishment’ exists where an organization engages in the effective and real exercise of activity through stable arrangements in a EU Member State. It is not require that the processing be carried out by the establishment itself. The processing of personal data by the not-established controller suffices if it is “carried out in the context of the activities” of the establishment. In this case, the activities of the search engine and those of its establishment in the Member State are inextricably linked since the activities relating to the advertising space constitute the means of rendering the search engine economically profitable and that engine is the means enabling those activities to be performed. (¶¶ 49, 52–56, 60)

It is not disputed that Google Spain engages in the effective and real exercise of activity through stable arrangements in Spain. As it moreover has separate legal personality, it constitutes a subsidiary of Google Inc. on Spanish territory and, therefore, an ‘establishment’ within the meaning of Article 4(1)(a) of Directive 95/46.

Nevertheless, as the Spanish Government and the Commission in particular have pointed out, Article 4(1)(a) of Directive 95/46 does not require the processing of personal data in question to be carried out ‘by’ the establishment concerned itself, but only that it be carried out ‘in the context of the activities’ of the establishment.

Furthermore, in the light of the objective of Directive 95/46 of ensuring effective and complete protection of the fundamental rights and freedoms of natural persons, and in particular their right to privacy, with respect to the processing of personal data, those words cannot be interpreted restrictively (see, by analogy, Case C‑324/09 L'Oréal and Others EU:C:2011:474, paragraphs 62 and 63).

It is to be noted in this context that it is clear in particular from recitals 18 to 20 in the preamble to Directive 95/46 and Article 4 thereof that the European Union legislature sought to prevent individuals from being deprived of the protection guaranteed by the directive and that protection from being circumvented, by prescribing a particularly broad territorial scope.

In the light of that objective of Directive 95/46 and of the wording of Article 4(1)(a), it must be held that the processing of personal data for the purposes of the service of a search engine such as Google Search, which is operated by an undertaking that has its seat in a third State but has an establishment in a Member State, is carried out ‘in the context of the activities’ of that establishment if the latter is intended to promote and sell, in that Member State, advertising space offered by the search engine which serves to make the service offered by that engine profitable.

In such circumstances, the activities of the operator of the search engine and those of its establishment situated in the Member State concerned are inextricably linked since the activities relating to the advertising space constitute the means of rendering the search engine at issue economically profitable and that engine is, at the same time, the means enabling those activities to be performed.

It follows from the foregoing that the answer to Question 1(a) is that Article 4(1)(a) of Directive 95/46 is to be interpreted as meaning that processing of personal data is carried out in the context of the activities of an establishment of the controller on the territory of a Member State, within the meaning of that provision, when the operator of a search engine sets up in a Member State a branch or subsidiary which is intended to promote and sell advertising space offered by that engine and which orientates its activity towards the inhabitants of that Member State.