The Information Commissioner's Office has expressed fears that the current European Directive on Data Protection is "no longer fit for purpose".
The UK's privacy watchdog called for an international debate on data protection laws in Europe.
To stimulate this debate the ICO has commissioned Rand Europe to carry out an assessment of the strengths and weaknesses of European data protection law and to identify areas for reform.
The watchdog believes that European data protection law needs to be modernised to meet the technological and social challenges of the 21st century.
The research will consider how consumer rights can be enhanced in a rapidly evolving information society.
It will provide EU bodies, national governments and the data protection community with proposals for improving regulatory approaches to protecting privacy and personal information.
"We want to generate new thinking," said Information Commissioner Richard Thomas at the Privacy Laws and Business conference in Cambridge.
"European data protection law is increasingly seen as out of date, bureaucratic and excessively prescriptive.
"It is showing its age and failing to meet new challenges to privacy, such as the transfer of personal details across international borders and the huge growth in personal information online."
Thomas added that the research will help identify ways to make the law more straightforward and more effective in practice, but less burdensome for organisations.
"We are pleased that the European Commission has recently announced a study of its own and we expect our research to complement and strengthen the overall impetus for reform," he said.
"I also very much hope that the UK government will demonstrate leadership by engaging constructively in these reviews, and supporting better regulation and practical approaches to international data protection."
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