A District Court in New York court has ordered Microsoft to share the emails and other details of one of its customer with US authorities even though the data is stored in Ireland.
The ruling is expected to have larger implications as it removes restrictions on US authorities to seek and obtain details from service providers irrespective of the jurisdiction of the server locations.
The US governement issued a search warrant last year, which sought the user's name, email address and bank details from Microsoft, which the latter did not provide, arguing that US search warrants do not extend overseas.
In response to the US ruling, Mina Andreeva, European Commission spokeswoman for justice, fundamental rights and citizenship, told the BBC: "The commission's position is that this data should not be directly accessed by or transferred to US law enforcement authorities outside formal channels of co-operation, such as the mutual legal assistance agreements or sectoral EU-US agreements authorising such transfers."
Microsoft deputy general counsel David Howard wrote in a blog post: "A US prosecutor cannot obtain a US warrant to search someone's home located in another country, just as another country's prosecutor cannot obtain a court order in her home country to conduct a search in the United States.
"We think the same rules should apply in the online world, but the government disagrees."
Judge James Francis said this was true for "traditional" warrants but not for those seeking online content, which are governed by federal law under the Stored Communications Act.