EU Data Sovereignty vs. Residency: What SaaS Buyers Get Wrong
When you're evaluating SaaS vendors, 'EU-hosted' sounds reassuring. Your data stays in Europe. GDPR-friendly. Box checked. But most vendors are selling you data residency when what you actually need is data sovereignty.
EU Data Sovereignty vs. Residency: What SaaS Buyers Get Wrong
When you're evaluating SaaS vendors, "EU-hosted" sounds reassuring. Your data stays in Europe. GDPR-friendly. Box checked.
But most vendors are selling you data residency when what you actually need is data sovereignty.
What's the difference?
Data residency is just the server location. Sovereignty is about who has legal authority over your data. You can store data in Frankfurt and still have it subject to US law. That's the gap most buyers miss.
Where the CLOUD Act comes in
The US CLOUD Act (2018) lets US law enforcement compel American companies to hand over data stored anywhere, including EU servers. This applies to any company with US operations or legal presence.
Now, this isn't a free-for-all. Requests for content need a warrant, probable cause, and a judge. Companies like Microsoft and AWS say they push back on requests that conflict with local law.
But the problem remains: if your vendor is headquartered in the US, your data can still be subject to US legal process. Sometimes with a gag order attached, so you'd never know. The European Data Protection Board has flagged this as potentially incompatible with GDPR. There's no clean resolution.
Some European government bodies have already started looking for alternatives. Not because of paranoia, but because the legal conflict is real.
"Sovereign cloud" isn't always sovereign
US vendors have caught on to the demand. Many now market "sovereign cloud" or "EU data residency" options. But slapping EU servers on a US-headquartered company doesn't change the jurisdiction question. The CLOUD Act still applies.
The EU-US Data Privacy Framework (2023) was supposed to help, but we've seen these frameworks collapse before (Safe Harbor, Privacy Shield). It's hard to build a long-term strategy on uncertain ground.
Your vendor might be EU-based. Their infrastructure might not be.
This is the part that catches people out. Plenty of European vendors run on AWS, Azure, or Google Cloud. Others use US-based tools for analytics, support, or integrations.
If your data touches US entities anywhere in the chain, the same questions apply. The subprocessor list tells you more than the vendor's homepage does.
Is EU hosting standard, or "enterprise only"?
Worth checking. A lot of vendors treat data residency as a premium feature. If you have to "talk to sales" to find out where your data lives, that tells you something.
What to actually ask
If sovereignty matters for your use case, some questions worth raising:
Where is the vendor incorporated? Not where their marketing says they're "based," but the actual legal entity.
Who are their subprocessors? Where are those companies based?
Is EU hosting the default, or do you pay extra?
Who holds the encryption keys? If you control them, the provider can't hand over readable data even if compelled.
Not everything needs this level of scrutiny
For a lot of use cases, the risk is low. If you're running a marketing site, you probably don't need to lose sleep over this.
But if you're handling sensitive customer data, working in a regulated industry, or selling to government clients, it's different. The questions matter more.
Residency is a checkbox. Sovereignty takes more work.