The US government has been fighting with Microsoft for some time now, insisting that the tech giant should hand over any and all data when presented with a warrant - even if it's stored overseas. The US says that Microsoft is an American company and should comply. Microsoft says it will, provided authorities get a warrant from the host country (in this case, Ireland).
New York courts insisted that the Stored Communications Act meant because Microsoft owned the Irish server, and had access to it, the data (which related to an email account) should be handed over with a domestic warrant. Now an Appeals Judge has ruled that this is not what the law was meant for, and warrants issued by judges in the US do not apply to data stored overseas.
"We conclude that Congress did not intend the SCA's warrant provisions to apply extraterritoriality. The SCA warrant in this case may not lawfully be used to compel Microsoft to produce to the government the contents of a customer's e-mail account stored exclusively in Ireland."
Needless to say this is a big win for Microsoft, who said:
"If people around the world are to trust the technology they use, they need to have confidence that their personal information will be protected by the laws of their own country."
This doesn't mean Microsoft will refuse to hand over data to law enforcement. Quite the opposite. It just believes that US authorities have no right to overseas data, and demanding it is overstepping their bounds. Other big companies agree.