The adoption of the Privacy Shield ends months of uncertainty for many tech companies such as Google and Facebook after the European court found the Safe Harbour agreement wanting.
The agreement covers everything from personal information about employees to the detailed records of what people do online, which is often used to aid targeted advertising.
According to ECs Justice Commissioner, Vera Jourova, the Privacy Shield put in place clear limitations, safeguards and oversight mechanisms for how data should be protected in the future.
The Privacy Shield pact states that data stored in the US about EU citizens must be given equivalent protection by law to what it would receive if stored in the EU.
The Digital Europe industry group that represents tech firms such as Google and Apple welcomed the decision.
It is not clear how long the Privacy Shield will remain in force in the UK because of the referendum results, which will see the UK leave the EU. However, the UKs Information Commissioner has said the UK may have to adopt EU data protection rules to trade post-Brexit.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now