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It's not about having a subsidiary, it's about the technical structure of 365 meaning Microsoft US has access to Microsoft EU servers and thus US employees can be compelled to follow US court orders.

They simply don't separate the infrastructure this way AFAIK.

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Oh I see the point. So MS US has credentials for the infra in EU.

So no reason to deal with any European citizen or court. You just threaten the US IT guy to give you the EU credentials.

Yes, and the Cloud Act pretty much forces upper management to ensure that there is always a US IT guy that can be compelled to implement the wishes of The US Federal Government, as the penalties apply to executives of US companies, too.

We can quibble about whether the term "threaten", which implies some moral wrong doing, is correct though. It's a law with defined criminal penalties. That's how criminal law works

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