The judgement follows six pleas by the European Parliament around the exchange of the data, called Passenger Name Records (PNR).
The deal was struck two years ago between the European Commission and the United States government despite opposition by the European Parliament. Airlines were forced to release data originally deemed private under European law, or face revocation of landing rights within the United States.
The Luxembourg court has now ruled that the deal goes against European Community law, and has concluded it should therefore be annulled, with exchange of PNR data to cease as of Sept. 30. In the meantime, airlines claim to have invested millions of dollars to make their computer systems suitable for the required transfers.
The so-called "no-fly lists" compiled with such data--complemented by credit card records--have in recent years forced some flights to return to Europe or divert to Canada.
Of the six pleas, the court only reviewed the first, looking mainly at the technical legal grounds on which the European Commission entered into the agreement. This will disappoint many members of the European Parliament, who had hoped the courts would base the verdict on privacy issues.
Now that the agreement has been annulled, the court said other issues are irrelevant. "It is not necessary to consider the other limbs of the first plea or the other pleas relied upon by the Parliament," the court said.
Lars Pasveer of ZDNet Netherlands reported from the Hague.