Microsoft’s managing director in the UK, Gordon Frazer, made that admission in June at the Office 365 launch in London. After researching the PATRIOT act, Microsoft found that regardless of where data was stored, it could not ensure that data would not be turned over to the US government as the result of a National Security Letter or other government request, because the company is governed by US law.

via PATRIOT Act and privacy laws take a bite out of US cloud business.