What Is a Data Processing Agreement & Why Do You Need One?

What Is a Data Processing Agreement & Why Do You Need One?

Software development projects could vary massively around the globe, but there’s one thing that’d be pretty much the same everywhere. It's a Data Processing Agreement (DPA). Data processing agreements must be signed as a part of the General Data Protection Regulations (GDPR) to protect data from being leaked or mishandled.

A DPA is a legal requirement, often considered a necessary step, that one should take according to the European Union to regulate the flow and processing of data and information. The EU regulates the conditions for data protection that one could share during collaboration with others, especially sensitive data.

An organization can’t delegate data control, processing, and sub-processing activities unless one signs this contract. That’s why it is essential to understand how data processing agreements work and how you can fill them out correctly.

This article tries to simplify DPAs for you and will share everything you should know about DPA requirements and much more!

What is a Data Processing Agreement?

The European Union first introduced DPA agreements in 2018. These data processing agreements ensure the personal data of all EU citizens are handled by businesses the right way under GDPR. DPA agreements are legally binding and signed between the data processor and the controller.

The data processor is the person or party responsible for all the practical work behind processing the data. The data controller is the person/party responsible for determining how and why such data is processed.

A data processing agreement establishes various things, including:

  • The extent of data processing
  • The purpose of data processing
  • What kind of data can be processed by party access
  • How do the two parties protect all data
  • What type of relationship stands between the two parties

Who signs DPA?

Software development, computer programming, data processing, and IT companies sign DPAs. According to the GDPR, any or all organizations processing private data from the EU and its citizens must sign these data privacy agreements.

Elements of data processing agreements

Typically, data processing agreements include the purpose and scope of processing data, what kind of data will be processed, how it can be protected, and establishing the relationship between the controller and processor of such data.

A data processing agreement must include comprehensive information about the different aspects of processing data. The DPA must consist of information such as:

  • The kind of data processed
  • The subject matter of such data
  • Different categories of all data subjects
  • Nature and purpose of the data
  • Expected duration of such data
  • The legal basis for such data processing
  • Returning or deleting any or all personal data towards the end of processing it

The rights and responsibilities of the data processors and controller

Data processing agreements should be able to specify the rights and responsibilities of all the parties involved. By doing so, the agreement aims at ensuring better clarity about the parties controlling and handling the data.

The agreement must include the responsibilities of data processors when it comes to the processing as per the wishes of data controllers. It must also specify that data controllers shall retain rights over data and what shall happen to it.

DPAs must direct data processors to process data as per a data controller's directions. Any deviations from such instructions must be processed through a legal channel.

Maintaining confidentiality for personal data

Data processing agreements must specify the protocols for data processors to follow through. This protocol is necessary to ensure that all personal data is confidential and well-protected.

For instance, data processors must ensure that all related permanent and temporary employees sign confidentiality agreements before processing personal data. When statutory obligations make it important for data processors to ensure confidentiality, these agreements become extremely important.

All technical protocols for information security

Data processing agreements must include all security measures that the data processors are supposed to include in the agreement. It must include measures like:

  • Data encryption
  • Protocols that ensure data confidentiality, availability, resilience, and security across all systems.
  • Processes that help restore access to any or all personal data after any attacks or data breaches.
  • Programs that test and evaluate the effectiveness of all security measures involved to protect data.

Most processors wish to access formalized certifications or draw a code of conduct that attests to implemented protocols. Measures such as these ensure that data processing is fully compliant with GDPR and requirements.

Obligations for data processors

The data processing agreement must include how and when data processors are supposed to cooperate with data controllers. For instance, data processors should cooperate to resolve any data access issues and requests.

Data processors must also comply with data subjects’ privacy obligations and rights to protect them. This can be done in the following ways:

  • Make sure there is personal data security
  • To notify promptly any authorities and data subjects of any personal data breaches
  • Data Protection Impact Assessment
  • Consultation with relevant authorities in cases of serious data breaches and risks

Data processors should allow data controllers to perform any compliances during data processing. Regarding data audits, processors should provide data controllers with the necessary information that meets compliance requirements under GDPR.

The ultimate purpose of the data processing agreement

The ultimate purpose of a data processing agreement is to guarantee that there will be sufficient data protection at all stages. For instance, organizations can ensure secure data processing, especially non-encrypted data such as names, DOB, places of residence, log-in information, email addresses, etc.

All of this information is extremely important and sensitive at the same time since it allows people to be identified. One should use a data processing agreement to ensure it doesn’t happen easily.

DPA agreements will include everything, from the very purpose of handling data, handling of information, how it is handled, how to secure it, and the consequences of not handling it correctly.

Why do businesses need DPA agreements?

Businesses can't run without processing any personal data and exchanging information with others. Information here can be analytics, cloud storage, marketing data, CRM, or anything!

One must handle the data lawfully, whether a data processor, controller, or joint controller. This is where a data processing agreement comes in. Organizations must create such agreements to protect all information shared among different parties.

GDPR does not execute any legal obligations or restrictions on the type of DPA agreement. However, if the data processor is outside the jurisdiction of the EU and any international data exchange takes place, there are certain requirements for documentation. For instance, they can use a corporate binding agreement and contractual clauses in such cases.

Since the task here is complex, DPA agreements must be kept as separate documents.

What happens when you sign DPA agreements?

Once DPA agreements are legally signed, both parties shall bear full responsibility for carrying out everything agreed upon. Often, data controllers can require data processors to pass specific certifications. However, it is highly unlikely that this will go through since standard GDPR certifications are unavailable. All the other available options are considered complicated. Read more about it here.

Can you ignore DPA requirements?

For companies and people under the jurisdiction of the EU, there is absolutely no option to ignore DPA requirements. It is a legal requirement. However, if one seems to ignore the same, they risk paying fines, as per Article 83 of GDPR, up to $20 million or 4% of their total global revenues.

Things to watch out for when signing DPA agreements

The foremost element of data processing agreements include requiring data processors to offer sufficient grounds and guarantees for protecting all data and information in question. As per the GDPR, if a data breach occurs, even from the data processor’s side, data controllers can be held responsible for the same. Therefore, carefully consider and choose the data processors. They must be able to implement the right measures to reduce any or all risks of data breaches. Moreover, data processors must also consider the measures they can rely upon to decrease the overall effect of such breaches. If anything does happen, processors must inform data controllers to mitigate future consequences.

Data processors must not process data for any purpose other than the actual purpose presented in the data processing agreement. Accordingly, data controllers must check how data processors shall use data or keep a check on checking intentions of using all data for any purpose. Data controllers must ensure that the scope of data processors’ involvement is not as broad as the original legal basis for processing said data.


Data processing agreements lay out the nature, purpose, and duration of all data processing and controlling activities. The agreement aims at specifying the kind of data that requires processing and the categories of people to whom the data belongs. Under DPA agreements, all parties' legal obligations and rights are stated, ensuring all security measures to protect vital information concerning the future of all organizations.

In an agreement as sensitive as a DPA, parties must abide by it legally or face severe penalties. The primary benefits of such agreements include reliable information on both ends. When organizations know their data is in good hands, it allows them to focus on better things to prosper in the future. Business transactions can vary if there is even a slight problem with these assurances. Data needs to be secured from prying eyes to ensure that everyone involved is safe, even indirectly.

If you are looking forward to data privacy and protection, here is a data processing agreement template by GDPR to get you started! You can even check out various resources on the internet to find the most suitable DPA template that suits your needs and requirements, to help you design your agreement more efficiently.


  • Content Writer -

    Saumya Khanduja

    Saumya is a content writer who’s been writing for over five years now. She is responsible for turning complex jargon into simple and beautiful words which everyone can understand. When she's not writing, you'll find her on her couch, annoying her dog, or cooking something in her kitchen!

Frequently Asked Questions

Data processing agreements are legally binding contracts covering the rights of the people involved and laying the groundwork to work around the information or data exchanged between parties. DPA is an agreement specified by the GDPR that needs to be signed between two parties, namely, the data processor and the data controller.

GDPR requires every data processor and controller to sign such an agreement, so businesses can protect sensitive data and information from leaking or being misused. Whether one is an employee, processor, controller, sub-controller, client, or any other stakeholder, everyone has a right to protect their data through a DPA.

DPA stands for Data Processing Agreement, as per GDPR.

When an organization leverages data on EU residents, they need a GDPR data processing agreement whenever they hire a third party or data processor to process that data.

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