The CLOUD Act: What European Companies Need to Know

In short, the CLOUD Act (Clarifying Lawful Overseas Use of Data Act) allows US authorities to access data stored by US companies, regardless of where that data is stored.

The law was created to facilitate access to electronic evidence in the fight against serious crimes, such as terrorism or cybercrime. At the same time, it promotes international cooperation: under certain conditions, foreign authorities can also obtain direct access to data from US providers through bilateral agreements. The aim of these regulations is to make law enforcement more efficient and reduce legal conflicts between national data protection laws.

Yes, the CLOUD Act thus creates a clear legal basis, but with consequences for data sovereignty when using cloud services.

The CLOUD Act could undermine European data protection. Even if data is stored in a data center in the EU, US authorities are allowed to access it if the provider belongs to a US corporation. This law is therefore highly controversial, especially concerning personal data and business-critical information.

Using cloud services from US providers may therefore lead to a loss of data sovereignty. In addition to personal information, trade secrets and intellectual property are also affected. The latter in particular is a cause for concern for many companies: The risk of government access leading to industrial espionage is increasingly recognized – particularly when technical expertise or strategically important data is involved.

Furthermore, it remains unclear how the CLOUD Act can be reconciled with the GDPR. The GDPR stipulates that personal data may only be transferred to or processed in third countries if adequate protection is ensured. If this requirement is undermined by the CLOUD Act – for example, because no technical or contractual protective measures are in place – this could constitute a clear violation of European data protection law.

Anyone who stores unencrypted, sensitive data in a US cloud exposes their company to a real security risk.

If data access by US authorities goes unnoticed or is not detected in time, this can lead to a leak of critical information. As a result, there is a risk of losing business-relevant company secrets through industrial espionage. Given the current "America First" trend, such targeted sabotage is no longer completely unrealistic. The trust of customers and partner companies is also at stake – often with long-term effects.

However, this does not mean that US cloud providers must be avoided altogether: often, only a small portion of company data is actually highly sensitive. If you use US clouds exclusively for data that does not require special protection, there is no cause for concern. For data from critical business areas that requires special protection, however, a separate strategy is recommended.