How to draft a legally robust data processing agreement

For small and mid-sized businesses that engage external providers for IT services, cloud hosting or support, a properly executed data processing agreement is critical. Under the GDPR, each such engagement must be governed by a written contract that clearly allocates responsibilities, obligations and boundaries between the parties.

A legally deficient processor agreement can result in administrative fines or unclear liability when incidents occur, even if the fault lies with the supplier. Reviewing or drafting the agreement correctly from the outset reduces risk, strengthens data protection and provides certainty in the collaboration between the customer (data controller), the data processor and any sub-processors.

What should a data processing agreement contain?

A data processing agreement must set out how personal data may be processed, what the data processor may and may not do, and which security measures must be implemented. It must also clearly describe the relationship between the data controller and any sub-processors. In practice, many contracts are weak on these points.

Checklist: structure your data processing agreement

• Processing instructions: Is there a clear description of the purpose of processing, the types of data and the categories of data subjects?
• Confidentiality and security: Has the data processor committed to appropriate technical and organisational measures?
• Sub-processors: Is prior approval from the data controller required before engaging a sub-processor?
• Location of processing: Is the geographic location of processing specified? If third country transfers occur, are safeguards in place?
• Right to audit: Does the data controller have the right to assess and verify the processor’s compliance?
• Return or deletion: Is it regulated what happens to the data when the agreement ends?
• Allocation of responsibility: Is it clear how and when a personal data incident must be reported to the data controller?

Working through this checklist is a first step to ensuring compliance. For companies using supplier standard terms, it is particularly important to verify that these do not favour the data processor alone, leave roles and responsibilities unclear, or, worse, fail to meet GDPR requirements.

At Morling Consulting, we provide legal review and tailoring of processor contracts—whether you act as data controller, data processor or sub-processor. We help you secure your agreements and protect your business against privacy risks, including where a data processing addendum or a DPA agreement is required alongside master services terms.