A New York district judge has ruled that Microsoft must comply with US search warrants for emails stored in European data centers. The argument is that as a US company, Microsoft is subject to the order, and because it has control of its European subsidiary which in turn has control of the data center in Europe, it should therefor comply.
This will put Microsoft, and many other US Internet companies, in a tricky place. The EU data protection laws are being expanded to explicitly bar EU subsidiaries of US companies from sending data outside the EU for law enforcement or intelligence purposes.
This also further undermines confidence in the security and privacy of data held by US Internet companies.