The top lawyer for the US intelligence community and the National Security Agency said on Wednesday that the spy agencies are giving new consideration to the privacy rights of non-Americans in the wake of a diplomatic row over the surveillance of foreign leaders.

Speaking at a conference on national security law sponsored by the American Bar Association on Thursday, the general counsel for the office of the director of national intelligence, Robert Litt, said intelligence chiefs were giving "a lot of thought" to the issue.

His comments came a day after General Keith Alexander, the NSA director, stated that the spy agency is open to scaling back some of its operations on foreign leaders, following an unfolding diplomatic crisis sparked by revelations that the NSA spied on German chancellor Angela Merkel.

US law provides greater legal protection to those defined as "US persons", which includes American citizens and foreigners living in the US. "On the issue of US person versus non-US person, that’s an issue we’re giving a lot of thought to now,” said Litt.

“It’s not surprising that the law gives more protections to US citizens or persons who are in this country,” Litt added. “That doesn’t mean that we have no protection for non-US persons, and the principal protection we have is the requirement that the collection, retention and dissemination of information has to be for a valid foreign intelligence purpose.”

Litt said the intelligence agencies were “giving some thought to whether there are ways that we can both introduce a little more rigor into that requirement and perhaps a little more transparency into how we enforce that requirement.”

Litt and NSA general counsel Rajesh De would not answer a question from the Guardian about the legal basis for a different, unfolding NSA controversy: the new allegation that the NSA intercepts data transiting between the foreign data centers of Google and Yahoo, two longtime NSA partners, published in the Washington Post.

But De took issue with a suggestion that the Post story prompted that the NSA interception would at times rely on a seminal executive order that defines basic powers and operations of the intelligence agencies, known as Executive Order 12333, rather than the relatively restrictive Foreign Intelligence Surveillance Act, or Fisa.

“The implication, the insinuation, the suggestion or the outright statement that an agency like NSA would use authority under Executive Order 12333 to evade, skirt or go around Fisa is simply inaccurate,” De said.

On Tuesday, the director of national intelligence, James Clapper, testified to the House intelligence panel that they considered US corporations to be “US persons,” meaning their communications and associated data enjoyed legal privileges associated with citizenship. But neither Litt nor De would explain whether that category protected communications data transiting between the data centers of US companies.

Google’s chief legal officer, David Drummond, said on Wednesday that the company was “outraged at the lengths to which the government seems to have gone to intercept data from our private fiber networks, and it underscores the need for urgent reform."

Google and Yahoo are two major technology partners of NSA. They participate in NSA’s Prism program, which provides foreign communications to the agency, ostensibly at the compulsion of a court order. NSA has yet to explain why it also siphons data between its partners’ datacenters, and neither Litt nor De added any legal justification for the practice on Thursday.

Both Litt and De spoke hours before the Senate intelligence committee was due to begin a second day of considering chairwoman Dianne Feinstein’s proposal to increase transparency around the NSA’s surveillance activities. A Tuesday afternoon markup session of the bill – whose text is not yet public – went uncompleted.

Feinstein, previously an unequivocal supporter of the NSA, unexpectedly criticized the agency’s surveillance on foreign leaders, a relatively traditional surveillance function. Feinstein on Monday declared herself “totally opposed” to the collection and suggested her oversight committee was not “fully informed” of the practice.

A similar rift has emerged between NSA and the White House over how much President Obama knew about the spying, which US officials have said does not currently take place and will not resume. Litt appeared to concede that Obama himself may not have known about spying on Merkel, but contended that the White House and Senate intelligence committee had all the information necessary to understand it was taking place.

“I completely disagree with the proposition that the fact that the president and the chairman of the Senate intelligence committee didn’t know every single one of these selectors the NSA was tasking means there is ineffective oversight,” Litt said.

“What the president knew and what the Senate intelligence committee knows: they know what our intelligence priorities are. Those are set annually through the interagency process. That says, here’s the kind of information we need to collect. And that gets sent out to the intelligence community and then the intelligence community, through a process that works down through the ranks, figures out what’s the best way to select that.

“It’s very easy in hindsight to say, well, this particular selector was sensitive and so the president should have been told that,” Litt continued. “That’s always true in hindsight. Virtually everything we do, if it comes out, is going to be embarrassing.”