Case could redefine data sharing between US and Europe.
Facebook is facing scrutiny over how it handles data as the European Court of Justice (ECJ) looks to investigate whether data agreements between the EU and US protect European privacy.
The case was prompted by a complaint from Austrian campaigner Max Schrems, who has argued that information revealed by NSA whistleblower Edward Snowden showed Facebook and others were ignoring their privacy obligations.
Snowden has previously alleged that Facebook and other technology companies were involved in Prism, a snooping programme used by US spies.
Whatever the ruling the hearing, which will conclude on June 24, will shift the terrain in which Silicon Valley operates, potentially tearing up the Safe Harbour agreement that allows European data to be collected by American firms and stored in the US.
Herwig Hofmann, a lawyer for the plaintiff, told the court: "The commission has told us today several times that it cannot ensure the adequacy of US levels of protection, nor has it been able to do so over the last 15 years."
Yves Bot, an advocate general at the ECJ, said he would publish his opinion, which is non-binding, on June 24, with the final ruling to follow months later.