Microsoft 365 Copilot and Law 25: where does your data go?

Copilot is the easiest AI tool for a Quebec business to adopt. It is already in Outlook, Word, Excel and Teams, it reads whatever files the employee can open, and it switches on with a licence. That is exactly why you need to ask where the data it reads ends up.

A quick note on names. Microsoft has renamed Microsoft 365 Copilot to Microsoft Copilot, and Copilot Chat is following suit, according to its documentation. Microsoft says the security, compliance and privacy commitments do not change with the name.

Start with what is solid, because there is a lot of it. According to Microsoft’s Copilot privacy page, prompts, responses and data accessed through Microsoft Graph are not used to train foundation large language models, including those Copilot uses.

Copilot only surfaces organizational data that an employee has at least view permission for. It honours Microsoft Purview sensitivity labels and encryption. Data is encrypted at rest and in transit. Microsoft also says Copilot has opted out of Azure OpenAI abuse monitoring, which includes human review of content.

These are real, documented, contractual guarantees. For plenty of everyday uses, they are enough.

Microsoft separates two things: storage at rest and processing. On storage, Copilot has been a covered workload under the data residency commitments in the Microsoft Product Terms since March 1, 2024.

In practice, the prompts and responses Copilot keeps in activity history are stored with the rest of the organization’s Microsoft 365 content. Canada is among the geographies these commitments cover, and Microsoft runs two Azure regions there, in Toronto and Quebec City. The paid Advanced Data Residency (ADR) add-on adds an explicit commitment for the content of Copilot interactions.

Processing is the moment the model reads your prompt and the documents it found, and produces an answer. Microsoft is upfront about it in its documentation: Copilot calls to the model are routed to the closest data centres in the region, but can also go to other regions where capacity is available during high-usage periods.

For the European Union, Microsoft applies the EU Data Boundary. For everyone else, the same page says queries may be processed in the US, the EU or other regions. A Canadian tenant falls in that group today.

On November 4, 2025, Microsoft announced in-country processing for Copilot, with Canada among the countries slated for 2026. An April 3, 2026 update to the same post revised the timeline: Australia, India, the United Arab Emirates, the United Kingdom and the United States by the end of 2026, then Canada in 2027.

The CLOUD Act requires an American provider to preserve or disclose data in its possession, custody or control, whether that data is located inside or outside the United States. Storing it in Canada does not take it out of the law’s reach.

Fairness matters here too. Before a French Senate inquiry on June 18, 2025, Anton Carniaux of Microsoft France said he could not guarantee that data would never be passed to US authorities, while noting that it had never happened, as reported by The Register. He described Microsoft’s commitments: review every request, reject unfounded ones, ask for requests to be redirected to the customer and notify the customer where possible.

So the risk is not that Microsoft hands over your files lightly. It is that a foreign law applies to your vendor, and the protection rests on that vendor’s commitments rather than on architecture. Our article on the CLOUD Act and data sovereignty goes further.

Section 17 of Quebec’s Act respecting the protection of personal information in the private sector requires a business, before communicating personal information outside Quebec, to conduct a privacy impact assessment. It must weigh the sensitivity of the information, the purpose, the protection measures and the legal framework where it would go. The rule also applies when storage is entrusted to a third party outside Quebec.

With Copilot, two facts belong in that assessment: storage in Canada but outside Quebec, and processing that may happen in the US or elsewhere. The assessment may well conclude that protection is adequate for your uses. It just has to be done and documented. Our privacy impact assessment guide walks through it.

For most SMEs, the right answer is neither “everything in Copilot” nor “no Copilot.” It is a decision by type of data.

Copilot shines on email, meetings and everyday documents. For a law firm’s client files, health information or ERP data, sovereign AI on your premises or in your region settles the question at the source: processing happens where you decided, without going through an outside AI vendor.

That is what Cogio deploys, as our home page explains. For law firms, the Barreau du Québec’s guide adds specific requirements on professional secrecy. Our page for law firms and our article on AI and professional secrecy cover them.