The European Parliament on Thursday voted to block an agreement reached by the 27 EU national governments and the US last month to allow European citizens' personal financial data to be analysed by American authorities investigating the financing of terrorism.
The vote was immediately criticised by supporters of the agreement, who claim that Parliament's veto impedes intelligence services tracking terrorist activities.
A substantial majority of MEPs voted to block the EU's interim agreement on banking data transfers to the US via the SWIFT banking network, the Parliament said in a statement. The resolution rejecting the agreement was approved with 378 votes in favour, 196 against and 31 abstentions.
MEPs' objections to the deal are threefold: it breaches EU data protection rule; it is excessively invasive for its stated purpose; and it is one-sided because the US isn't required to share the banking data of its citizens with EU counterterrorism authorities.
However, many observers see the vote on Thursday as way for Parliament to flex its newly acquired political muscle. The Lisbon Treaty came into effect at the beginning of this month, granting the Parliament equal say over justice and security issues together with the national governments, collectively known as the EU Council.
The Council signed the temporary agreement with the US just days before the Lisbon Treaty took effect.
"Council has not been tough enough on data protection," said Jeanine Hennis-Plasschaert, a Dutch liberal MEP who argued that the rules on data transfer and storage provided for in the interim agreement were not proportionate to the security supposedly provided.
"We deeply regret that the European Parliament has rejected the interim agreement on SWIFT because we firmly believe that this instrument is extremely important for detecting terrorist activities and ensuring the safety of our citizens", said Simon Busuttil, a conservative MEP from Malta.
"The fight against terrorism is a priority for the European Union and a fruitful cooperation with the US — including the exchange of information and data — is a prerequisite to preventing terrorist attacks and ensuring the security of our citizens. This is why we were in favor of the SWIFT Agreement," Busuttil added.
At the heart of the political storm is SWIFT, a Belgium-based cooperative that transfers bank data across borders. US authorities tapped SWIFT's databases in the wake of the attacks on September 11, 2001, in a bid to trace terrorist financing.
Swift was forced to hand over the data in the US. Last year it moved its data storage facilities to the Netherlands. The temporary agreement struck between the US and EU member states last month was due to last nine months. It would have allowed US authorities continued access to SWIFT data for counterterrorism purposes.
The Commission helped the Council draft the interim agreement. Fearing Thursday's vote in the Parliament, it launched a public consultation last Friday concerning the drafting of a permanent agreement on data sharing, to replace the interim one agreed last month. The Parliament will be fully involved in drafting this long-term agreement.
The move was designed to assuage concerned MEPs in the hope that they might vote to support the interim agreement.
The Commission said it will start work drafting a new temporary agreement, which it said it hopes will be agreed on in the near future.
"I hope we will be able to agree a text in the near future that will give us greater security, more data protection and a useful cooperation tool with U.S. authorities," said commissioner for home affairs, Cecilia Malmström in a Commission statement.
Meanwhile, Viviane Reding, who has just switched to being commissioner for justice and fundamental rights, after four years as telecom commissioner, said one way to win the confidence of the Parliament and EU citizens would be to involve the national data protection authorities in the process of drafting the new long-term agreement data sharing agreement.
"I believe that the full involvement of national data protection authorities in the negotiations of the long-term SWIFT agreement will give citizens further assurances about the proportionality and the correct implementation of the agreement particularly with regard to its data protection safeguards," she said.
"This decision disrupts an important counter-terrorism program which has resulted in more than 1500 reports and numerous leads to European governmental authorities and has contributed significantly to collaborative counter-terrorism efforts between the United States and Europe," the US mission to the EU said in a statement.