A judge in the US has ordered Microsoft to hand over a customer's emails, even though the data is held in Ireland.
The company had attempted to challenge the search warrant on the basis that the information was stored exclusively on computer servers outside the US.
Microsoft previously said it planned to offer business and government clients control over where their data resided.
This followed concerns about data privacy raised by whistleblower Edward Snowden's leaks about US spying.
But the ruling potentially undermines that pledge.