The European Parliament rejected on Thursday a controversial data-sharing deal between the European Union and the U.S. designed to track international financing for terrorism.
Despite last-minute attempts by the parliament's conservative group to postpone the vote to give more time to negotiate a compromise, the parliament rejected the bill outright, saying the deal did not safeguard the data privacy of Europe's citizens.
The decision sends the debate over data on bank transfers back to square one.
The European Commission, Europe's executive body, must now salvage what it can and will propose a new data deal that is more acceptable to all parties before the end of the year, an EU diplomat close to the talks said.
U.S. diplomats in Brussels called the move "a setback for U.S.-EU counterterror cooperation."
The rejected deal would have allowed the U.S. to access information gathered by the Society for Worldwide Interbank Financial Telecommunication in Brussels on bank transfers within Europe if there was a concern that the money might be funding terrorist activity.
The agreement was meant to serve as a nine-month stop gap until the EU and U.S. could thrash out a more comprehensive policy.
The talks for a new deal begin straight away, the EU diplomat said. Viviane Reding, the new EU justice and fundamental rights commissioner, had a scheduled call with U.S. Attorney General Eric Holder Thursday afternoon, and will talk with Secretary of Homeland Security Janet Napolitano on Friday, the diplomat said.
Jeanine Hennis-Plasschaert, the Dutch liberal who led the motion to reject the agreement, said European governments had neglected to negotiate with the parliament.
The governments had known about the parliamentarians' concerns for "over two years, and done nothing," Hennis-Plasschaert said.
Washington had lobbied hard for the parliament to clear the deal, saying access to the sensitive financial information has been vital for foiling terrorist activity.
Several senior U.S. officials, including Vice President Joe Biden and the secretaries of State and Treasury, told numerous EU officials including the parliamentarians "about the importance of this agreement to our mutual security," the U.S. mission said.
The U.S. had previously been able to access the data from Swift servers located on U.S. soil, but lost access when the servers were moved to Europe.
EU parliamentarians believe the EU and the U.S. may still be able to share data via Mutual Legal Assistance agreements, which allow for the exchange of data between national governments.