Microsoft gets EU hall pass despite admitting it can't protect European data

The European Data Protection Supervisor handed Microsoft a regulatory victory on July 28, 2025, closing its enforcement investigation into the European Commission's Microsoft 365 use—just weeks after Microsoft executives admitted under oath they cannot guarantee European data protection from US government access. The timing reveals a striking disconnect between regulatory satisfaction and corporate admissions of fundamental vulnerabilities.

On June 10, 2025, Microsoft France's Director of Public and Legal Affairs Anton Carniaux delivered testimony that should have sent shockwaves through European data protection circles. When directly asked under oath whether he could guarantee that French citizen data would never be transmitted to US authorities without explicit French authorization, Carniaux's response was unequivocal: "No, I cannot guarantee it."

The admission came during French Senate hearings examining digital sovereignty in government procurement. Carniaux explained that while Microsoft maintains internal procedures to challenge unjustified requests, "a binding order from a U.S. court could prevail." Pierre Lagarde, Microsoft's technical director, attempted damage control by emphasizing that "since January 2025, under contractual guarantee, the data of our European clients does not leave the EU, whether at rest, in transit, or being processed."

However, data residency proves irrelevant when the Cloud Act grants US authorities extraterritorial jurisdiction over American companies. Microsoft's technical director essentially offered reassurance about data location while the legal director simultaneously admitted that location provides no meaningful protection against US government demands.

Regulatory celebration amid corporate capitulation

Despite these damaging admissions, the EDPS proceeded to declare victory just weeks later. EDPS Supervisor Wojciech Wiewiórowski announced on July 28 that "the infringements identified in the EDPS' 2024 Decision have been remedied" and praised Microsoft's cooperation in achieving compliance.

The original investigation, launched in May 2021, identified three core violations in its March 8, 2024 decision: purpose limitation failures, insufficient controls on international data transfers, and unauthorized disclosure risks. The Commission implemented extensive remedial measures including detailed contractual provisions, explicit data mapping, and enhanced notification requirements.

Yet these contractual fixes directly contradict Microsoft's sworn testimony about its inability to resist valid US court orders. Privacy expert Andreea Lisievici Nevin captured this contradiction perfectly: "none of these contract provisions can neutralize the reach of the U.S. Cloud Act. Microsoft's own public statements confirm that it cannot guarantee EU customer data won't be disclosed under a valid U.S. court order."

The art of regulatory theater

The EDPS closure represents what Nevin characterizes as "a pragmatic regulatory move, not a structural fix." Faced with the impossible task of reconciling European data protection requirements with American surveillance laws, regulators chose the path of contractual symbolism over substantive protection.

The Commission's remedial measures read like a masterclass in bureaucratic box-checking. Purpose limitation violations received contractual definitions of data categories and processing purposes. Transfer risks prompted mapping exercises and adequacy decision requirements. Disclosure concerns generated notification procedures and legal equivalence standards.

These measures share a common limitation: contracts cannot override legislation. When Microsoft executives admit under oath that US court orders supersede all contractual protections, the entire compliance framework reveals itself as elaborate theater designed to provide regulatory cover rather than genuine protection.

European institutions get premium protection theater

The Commission's role as lead contracting authority enabled it to extend these enhanced protections to other EU institutions through the Inter-Institutional Licensing Agreement. This creates a two-tier system where European institutions receive stronger contractual language while commercial customers rely on Microsoft's standard terms.

Microsoft updated its public data processing terms in February 2025, incorporating several Commission-negotiated improvements. However, the most significant protective measures—purpose limitation tied to specific public interest tasks, mapped transfer destinations with legal grounds, and disclosure clauses conditional on legal equivalence—remain exclusive to EU institutional arrangements.

This disparity demonstrates the arbitrary nature of the protection scheme. If contractual provisions genuinely neutralized Cloud Act risks, Microsoft would extend them universally. Instead, enhanced protections remain limited to high-profile government customers whose compliance failures generate regulatory scrutiny.

Legal challenges expose the charade

Both Microsoft and the Commission challenged the original EDPS decision before the General Court of the EU, creating the remarkable situation where parties that supposedly resolved their differences continue fighting in court. Case T-262/24 sees the Commission claiming errors of law and disproportionality. Microsoft Ireland Operations Ltd filed Case T-265/24 seeking complete annulment.

These ongoing legal challenges highlight the manufactured nature of the compliance celebration. If remedial measures genuinely addressed regulatory concerns, why would the parties maintain expensive litigation challenging the underlying decision? The court cases suggest that proclaimed compliance represents political convenience rather than legal resolution.

Privacy experts call out the obvious

Nevin's analysis cuts through regulatory euphemism to identify core problems. She notes that "the risk of foreign government access is not named as such throughout the EDPS procedure, including the final letter and press release." This deliberate omission allows regulators to declare success while avoiding acknowledgment of fundamental vulnerabilities.

"What we're seeing is a pragmatic regulatory move, not a structural fix," Nevin explains. "Short of declaring that EU institutions can't use U.S.-based providers at all, the EDPS had little choice but to accept strengthened safeguards as 'sufficient.'"

The regulatory outcome illustrates what happens when political considerations override technical realities. Rather than confronting the incompatibility between European data protection goals and American surveillance laws, regulators chose elaborate compliance theater that satisfies procedural requirements while leaving substantive problems unresolved.

Marketing implications demand honest assessment

For marketing organizations evaluating cloud adoption strategies, the Microsoft case provides sobering lessons about regulatory reliability. The EDPS closure demonstrates that compliance certifications may reflect political expedience rather than genuine protection against foreign government access.

Commercial entities lack the institutional leverage that enabled the Commission to negotiate enhanced contractual protections. Standard Microsoft terms offer significantly weaker safeguards while exposing organizations to identical Cloud Act vulnerabilities that corporate executives publicly acknowledge.

Marketing teams processing European customer data through US-based cloud services operate under the same legal framework that Microsoft admits cannot guarantee protection from American surveillance requests. Privacy compliance requirements continue expanding while fundamental protection mechanisms remain compromised by extraterritorial legislation.

The Cloud Act elephant crushes contractual mice

Microsoft's Senate testimony reveals the core absurdity underlying European cloud compliance frameworks. No matter how sophisticated the contractual language, how detailed the technical safeguards, or how comprehensive the audit procedures, American companies remain subject to US legal jurisdiction that supersedes all protective measures.

Nevin emphasizes this reality: "contracts cannot override the application of binding legislation" and cannot insulate data from laws like the Cloud Act that apply extraterritorially to US-based providers. The regulatory celebration ignores this fundamental limitation while creating false confidence in contractual solutions.

The situation represents the "underlying tension since Schrems I" where "no contractual safeguard can neutralize the extraterritorial reach of U.S. surveillance law, a political and legal impasse that EU regulators have no authority to resolve on their own," according to Nevin's analysis.

Timeline

• May 2021: EDPS opens investigation into Commission's Microsoft 365 use
• March 8, 2024: EDPS issues decision finding multiple violations and imposing corrective measures
• December 2024: Commission submits compliance report to EDPS
• February 2025: Microsoft updates public data processing terms
• June 10, 2025: Microsoft executives testify under oath to French Senate, admitting inability to guarantee protection from US data requests
• July 3, 2025: Commission provides additional measures letter to EDPS
• July 11, 2025: EDPS concludes violations have been remedied
• July 28, 2025: EDPS announces closure of enforcement proceedings while legal challenges continue

Key Terms Explained

EDPS (European Data Protection Supervisor): The independent supervisory authority that chose to declare victory over Microsoft 365 compliance despite overwhelming evidence that fundamental protection problems remain unresolved. The EDPS demonstrated remarkable capacity for regulatory optimism by accepting contractual measures that the regulated company itself admits cannot guarantee data protection from foreign government access.

Cloud Act: The United States legislation that renders European data protection theater meaningless by granting US authorities extraterritorial jurisdiction to compel disclosure of data held by American companies worldwide. Microsoft's own executives publicly acknowledge they cannot resist valid US court orders, making all contractual protections subordinate to American surveillance demands regardless of where data is physically stored.

Contractual measures: Elaborate legal arrangements that create the illusion of data protection while providing no genuine safeguards against extraterritorial surveillance laws. These measures enable regulators to claim compliance success while corporations simultaneously admit their inability to enforce protective provisions against conflicting national legislation.

Data transfers: The movement of personal information that European regulators pretend to control through mapping exercises and adequacy requirements, while ignoring that US companies remain subject to American legal jurisdiction regardless of physical data location. Transfer restrictions prove meaningless when the receiving company must comply with extraterritorial surveillance demands.

Compliance: A bureaucratic state achieved through procedural box-checking and contractual theater rather than genuine protection against identified risks. The Microsoft case demonstrates how compliance can be declared successful while fundamental vulnerabilities remain entirely unaddressed and publicly acknowledged by regulated entities.

Purpose limitation: A data protection principle that received extensive contractual definition in the Microsoft remediation despite being irrelevant to the core problem of extraterritorial government access. Specifying data processing purposes provides no protection when American companies must surrender information regardless of contractual limitations.

Microsoft 365: The cloud productivity suite that became the subject of extensive regulatory theater designed to create compliance appearances while leaving users exposed to acknowledged surveillance risks. The platform's European deployment demonstrates how sophisticated compliance frameworks can coexist with admitted inability to provide genuine protection.

EU institutions: Governmental bodies that received enhanced contractual protections unavailable to commercial customers, illustrating the arbitrary nature of regulatory protection schemes. These institutions now operate under stronger contractual language that Microsoft executives simultaneously admit cannot guarantee protection from US government demands.

Investigation: A four-year regulatory proceeding that concluded with declared success despite the investigated company publicly acknowledging its inability to provide the protections that formed the basis of compliance measures. The investigation demonstrates institutional commitment to procedural completion over substantive problem resolution.

Disclosure: The revelation of personal data to government authorities that contractual provisions cannot prevent when US companies face valid court orders under extraterritorial surveillance legislation. Disclosure restrictions prove meaningless when Microsoft executives testify under oath about their inability to guarantee protection from American legal demands.

Summary

Who: The European Data Protection Supervisor declared compliance success while Microsoft executives testified under oath about their inability to guarantee European data protection from US government access, creating a regulatory celebration amid corporate capitulation.

What: EDPS closed its investigation after accepting contractual remediation measures that Microsoft's own legal director publicly admitted cannot protect European data from valid US court orders under the Cloud Act, revealing the gap between regulatory satisfaction and substantive protection.

When: The regulatory closure occurred July 28, 2025, just weeks after Microsoft's June 10, 2025 Senate testimony admitting fundamental limitations in data protection capabilities, highlighting the disconnect between corporate admissions and regulatory conclusions.

Where: The enforcement action focused on European institutions' Microsoft 365 use while broader implications affect all European organizations relying on US-based cloud providers that remain subject to extraterritorial surveillance laws regardless of contractual protections.

Why: The investigation closure represents regulatory pragmatism choosing procedural compliance over confronting the fundamental incompatibility between European data protection goals and American surveillance laws, enabling political satisfaction while leaving substantive vulnerabilities entirely unresolved.