Yahoo's decision to scan clients' email accounts at the behest of US authorities has prompted questions in Europe as to whether EU citizens' data had been compromised, and could help derail a new trans-Atlantic data sharing deal.

Reuters reported yesterday that Yahoo complied with a classified US government demand to search customers' incoming emails for specific information provided by US intelligence officials.

The office of the Data Protection Commissioner, the lead European regulator on privacy issues for Yahoo, said today it is making enquiries about the matter.

European politicians called on the European Commission to look into the issue and lawyers said a legal challenge to the new EU-US data sharing deal agreed earlier this year was now more likely in Europe.

"Any form of mass surveillance infringing on the fundamental privacy rights of EU citizens would be viewed as a matter of considerable concern," the regulator in Dublin, where Yahoo's European headquarters is based, said in a statement.

Yahoo said in response to the original Reuters story that it was "a law-abiding company, and complies with the laws of the United States".

It declined to confirm whether it scanned users emails or to say if Europeans' emails were intercepted as part of the programme.

Johannes Kleis, a spokesman with BEUC, an umbrella group for European consumer organisations, called on other EU data protection authorities to investigate Yahoo.

Fabio de Masi, a German member of the European parliament with the leftist Die Linke party called on the EU high representative for external affairs Federica Mogherini to seek clarification from US authorities about the treatment of EU data.

Ashley Winton, a data protection and privacy lawyer with Paul Hastings, said the revelations that Yahoo had helped the authorities scan user emails could prompt clients to ditch Yahoo.

In addition to retail users in Europe, Yahoo also provides email services for other companies including UK listed groups Sky Plc and BT Plc.

Sky did not respond to a request for comment.

When asked about the mater, BT referred to Yahoo's comment about being a law-abiding group.

In February, the United States and Europe published a new deal to allow US companies to move data on EU clients to the United States.

Some European politicians have criticised the deal, saying it does not offer enough protection against mass surveillance by US intelligence agencies.

Mr Winton said the Yahoo news increased the chances of a legal challenge in Europe against the so-called ‘Privacy Shield' deal.