I'm not sure why the U.S. government is so intent on destroying relationships with foreign governments, or hampering the potential of a Cloud economy, but according to a recent ruling by U.S. Magistrate Judge James Francis in New York seems to share the same opinion.
As Microsoft has begun investing in overseas datacenters to accommodate local geographic customers and to comply with data storage and export laws for each country, the U.S. government is fighting to retain control. Based on current opinion, U.S. authorities don't believe they are required to coordinate efforts with foreign governments where the datacenters exist, but can force U.S.-based companies to hand over data even if it exists overseas.
The ruling on April 25, 2014, Microsoft sees as a first step to bring awareness of the serious issue and to force the case to be heard by higher courts, i.e., courts that actually have the authority to do something about the issue.
Microsoft agrees that the law is complicated, however a piece of it is straightforward. David Howard, Corporate Vice President & Deputy General Counsel at Microsoft, explains it this way:
It’s generally accepted that a U.S. search warrant in the physical world can only be used to obtain materials that are within the territory of the United States. A U.S. prosecutor cannot obtain a U.S. 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. That’s why the U.S. has entered into many bilateral agreements establishing specific procedures for obtaining evidence in another country. We think the same rules should apply in the online world, but the government disagrees.
Microsoft, Google, Verizon and others are fighting the ruling.