The growing focus on digital sovereignty in Europe has prompted major cloud service providers, including Microsoft, to develop solutions specifically designed to meet the regulatory and operational needs of European organizations. U.S. regulations such as the CLOUD Act and FISA 702 pose significant risks to the confidentiality of data handled by American companies, even when that data is physically stored within the European Union.
Microsoft has responded with a comprehensive strategy that combines compliance with European laws and advanced technical tools for data control and protection. The Microsoft Sovereign Cloud initiative is structured around three models — Public, Private, and National Partner Cloud — to ensure maximum flexibility and security.
This article explores the regulatory landscape, the associated risks, the solutions offered by Microsoft, and provides practical scenarios to better understand the real-world implications for European businesses.
Introducing the Current Landscape
In recent years, digital sovereignty has become a critical issue for businesses, public institutions, and European citizens alike. Rising geopolitical tensions, the rapid expansion of global cloud platforms, and increasing awareness around personal data processing have fueled the need for trustworthy, compliant, and transparent solutions. Regulatory authorities across Europe, guided by increasingly stringent frameworks such as the GDPR, are demanding stronger guarantees from digital service providers in terms of data traceability, localization, and protection.
In parallel, governments and civil society organizations are applying growing pressure to ensure that the data of European citizens is genuinely safeguarded against unauthorized access — even when managed by cloud providers headquartered outside the European Union.
This is not merely a technical matter; it is deeply political and economic. Controlling data now means controlling value, innovation, and critical infrastructure. Digital sovereignty is therefore no longer seen as a luxury or an option, but as a strategic necessity to secure Europe’s safety, competitiveness, and self-determination in the digital age.
This complex and evolving challenge has brought increased scrutiny on the role of major U.S.-based cloud providers — such as Microsoft, Amazon, and Google — which dominate the European market but remain subject to extraterritorial regulations like the CLOUD Act and FISA 702.
In response, Microsoft has launched a new strategy focused on European digital sovereignty, introducing a comprehensive portfolio of sovereign cloud solutions. These offerings not only address regulatory demands but also support the operational needs of customers, delivering a blend of security, compliance, and flexibility.
Designed to give European customers greater control over their data, transparency around access, operational autonomy, and strong alignment with EU laws and values, Microsoft’s objective is twofold: to empower digital innovation in Europe, while ensuring that such innovation respects the principles of sovereignty, accountability, and the protection of fundamental rights.
The Regulatory Framework: CLOUD Act, FISA, and the Conflict with the GDPR
The CLOUD Act is a U.S. law enacted in 2018 that requires American companies to provide data to U.S. authorities upon request — even if that data is stored in datacenters located outside the United States. This principle of “extended jurisdiction” conflicts with European regulations, which condition international data transfers on strict requirements of legality, transparency, and proportionality.
In parallel, Section 702 of the Foreign Intelligence Surveillance Act (FISA) authorizes U.S. intelligence agencies to surveil foreign individuals using digital services operated by American companies, even without a traditional judicial warrant. As a result, data stored and processed within the EU can still be subject to extra-European access, often without the data subject’s knowledge or consent.
The Court of Justice of the European Union acknowledged these risks in the landmark “Schrems II” ruling, which in 2020 invalidated the Privacy Shield agreement, concluding that U.S. safeguards were insufficient to protect the fundamental rights of EU citizens.
| Aspect | GDPR (EU) | CLOUD Act (US) | FISA 702 (US) |
|---|---|---|---|
| Jurisdiction | European Union | United States – applies to U.S. companies worldwide | United States – applies to global communications involving non-U.S. persons |
| Scope | Personal data protection | Access to data held by U.S.-based companies | Intelligence data collection |
| Authorization | Requires consent or valid legal basis | U.S. legal orders (e.g., subpoena, warrant) | Authorized by secret court (FISC), no traditional warrant |
| Extraterritorial Reach | No | Yes – includes data stored in the EU | Yes – interception on global networks |
| GDPR Compatibility | – | Potentially conflicting due to extraterritorial access | Deemed non-compliant by EU Court (Schrems II ruling) |
Table 1 – Comparison of GDPR, CLOUD Act, and FISA 702
The legal conflict is more relevant than ever and calls for concrete technical and organizational solutions.
Known Cases Involving the CLOUD Act or FISA Applied to EU Citizens or Companies
To date, there are no publicly confirmed cases where the CLOUD Act or Section 702 of FISA has been directly applied to data physically stored in EU datacenters. However, there are indirect signals, legal precedents, and official positions that clearly highlight the real possibility of such scenarios:
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Microsoft Ireland (2013–2018): The U.S. government requested that Microsoft hand over emails stored in Ireland. Microsoft contested the order, but the case was rendered moot by the enactment of the CLOUD Act, which made such cross-border data requests legally valid.
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Schrems II and European DPAs: In its landmark ruling, the Court of Justice of the European Union explicitly cited FISA 702 as a reason for invalidating the Privacy Shield agreement. Several European data protection authorities (including those in France, Germany, and the Netherlands) have reiterated that U.S. surveillance laws are incompatible with the GDPR’s protections.
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Transparency Reports: Microsoft reports receiving over 10,000 data requests annually from U.S. authorities. While the company does not specify whether these requests include data stored in the EU, the sheer volume illustrates the frequency of governmental access attempts.
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Snowden Revelations (2013): Documents leaked by Edward Snowden revealed that the NSA had systematic access to data hosted outside the United States, enabled through cooperation with major U.S. technology firms.
Although the lack of specific public cases limits direct evidence, these examples clearly underscore the regulatory tension and the need for European organizations to adopt robust technical and legal safeguards.
Microsoft’s Strategy: Where and Why It Is Evolving
In light of this context, Microsoft has introduced a comprehensive strategy to strengthen European digital sovereignty through three main models:
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Sovereign Public Cloud: Available across all Azure regions in Europe, this model ensures that data remains within the EU, is subject exclusively to European law, and that access is limited to Microsoft personnel who are EU residents.
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Sovereign Private Cloud: Designed for highly regulated scenarios, it enables the execution of critical workloads in fully isolated environments (on-premises, air-gapped, or hybrid), providing full operational continuity and maximum data protection.
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National Partner Clouds: Delivered in partnership with local providers (such as Bleu in France and Delos Cloud in Germany), these infrastructures are entirely managed under national control and aligned with local standards like SecNumCloud and specific government requirements in countries like Germany.
| Feature | Sovereign Public Cloud | Sovereign Private Cloud | National Partner Clouds |
|---|---|---|---|
| Data Location | Within the EU, in existing Azure regions | At local or on-premises facilities | Local infrastructure managed by partners (e.g., Bleu, Delos Cloud) |
| Operational Access | Controlled by Microsoft staff residing in the EU | Managed by the customer or a trusted partner | Operated by an independent legal entity within the target country |
| Included Services | Azure, Microsoft 365, Power Platform | Azure Local, Microsoft 365 Local | Azure + Microsoft 365 in compliance with national regulatory standards |
| Ideal For | Public and private organizations requiring compliance | Private entities with physical isolation or high resilience needs | Governments, healthcare, defense, and critical infrastructure sectors |
| Main Benefit | No migration required, full compliance | Full operational control and local management | Guarantees independence from Microsoft and full national sovereignty |
This structured approach enables Microsoft to address a wide range of needs — from private enterprises to public institutions — by offering flexible models tailored to different levels of data sensitivity.
Sovereignty and Compliance Tools Introduced
To enable these solutions, Microsoft has introduced a suite of tools specifically designed for governance, transparency, and encryption:
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Data Guardian: Ensures that every remote access to data is monitored, supervised by EU-based personnel, and logged in a tamper-proof system. All support interventions are subject to real-time controls.
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External Key Management: Allows organizations to use encryption keys hosted in external HSMs (Hardware Security Modules), either owned by the organization or provided by trusted European third parties (e.g., Thales, Futurex, Utimaco), following a HYOK (Hold Your Own Key) model.
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Regulated Environment Management: A centralized platform for configuring, monitoring, and governing cloud environments in line with regulatory policies, featuring auditable access and granular control capabilities.
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Microsoft 365 Local: Enables services like Exchange, SharePoint, and Teams to run within customer-controlled or on-premises environments, while maintaining full functionality equivalent to public cloud versions.
Together, these tools enhance the ability of organizations to meet sovereignty and compliance requirements — even in the most sensitive sectors.
How Microsoft’s Approach Addresses Legal Risks
Microsoft’s strategy responds to the complex regulatory landscape through a multi-layered model:
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Legal Isolation: Access and operations are restricted to personnel and infrastructure under European jurisdiction.
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Advanced Encryption: The use of HYOK and external HSMs prevents forced access, even in the event of legal orders from non-EU authorities.
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Audit and Oversight: Tools like Data Guardian ensure full visibility and traceability of remote access operations.
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GDPR Alignment: Architectures and processes are designed to meet key principles of accountability and risk minimization required by the GDPR.
However, only the adoption of HYOK models and HSMs that are fully located and managed within Europe — and outside the control of entities subject to U.S. jurisdiction — can truly eliminate the risk of access by foreign governments.
Practical Use Case: Private Entity with Continuity and Sovereignty Requirements
Imagine a private organization aiming to digitize its processes while maintaining full control over its data. Subject to strict regulations such as the GDPR and operational constraints regarding data availability and localization, this organization may soon adopt the Sovereign Private Cloud solution based on Azure Local and Microsoft 365 Local.
With Azure Local, the organization can host cloud infrastructure directly within its own datacenter, leveraging Azure’s compute, storage, and networking capabilities under complete local control. By integrating Microsoft 365 Local, it can run productivity applications such as Exchange, SharePoint, and Teams in an isolated environment, ensuring that no data leaves its jurisdiction and that every access is auditable.
This approach allows the organization to combine operational efficiency, service continuity, and compliance with European regulations, while providing a tangible response to the risks posed by extraterritorial U.S. legislation.
Conclusion
Data protection has become a cornerstone of European digital sovereignty. It is no longer merely a technical concern, but a strategic challenge tied to national security, economic competitiveness, and the protection of citizens’ rights. In this complex landscape, Microsoft offers Sovereign Cloud as a concrete, flexible, and regulation-compliant response tailored to the needs of the European Union.
Through its three-model framework — Public Cloud, Private Cloud, and National Partner Cloud — and tools like Data Guardian, External Key Management, and Microsoft 365 Local, Microsoft empowers European organizations to adopt modern, secure, and locally controlled cloud infrastructures. These solutions not only mitigate risks posed by extraterritorial U.S. laws, but also actively support Europe’s digital autonomy.
In a global context where control over information equates to power, one essential question must be asked: are European enterprises truly ready to embrace technologies that protect their digital sovereignty — or will they continue to rely on infrastructures that may expose their data to foreign jurisdictions? Now is the time for a paradigm shift. Both private companies and public administrations in Europe must begin to strategically assess where and how their data is managed.
This is not solely about regulatory compliance — it is about ensuring that strategic data remains inaccessible to foreign powers, that technology choices do not compromise the confidentiality of sensitive information, and that decision-making authority stays within Europe’s legal boundaries. In this light, solutions such as Azure Local and Microsoft 365 Local, even when hosted within private European datacenters, represent a balanced path forward — combining innovation, performance, and true sovereignty.
