Re: They dont want to use the MLAT.
" T-Systems own and runs the data centre and controls the access"
Local resources would presumably be subject to local law anyway, so that they could be Microsoft employees shouldn't really make any difference locally. Sounds like a PR exercise in that regard.
Microsoft also already offer "bring your own keys" solutions based on Thales HSMs specifically designed to protect against cross jurisdiction access.
"Since Microsoft doesn't control the access to the data, they are unable to comply to demands to give the data to US LEOs."
That's probably more the design goal - make Microsoft immune from US fines if they loose their court case