Washington and Brussels are racing against the clock to seal a deal on protecting Europeans' data transferred across the Atlantic after an EU court quashed the previous agreement, Safe Harbour, on privacy concerns, leaving thousands of businesses in legal limbo.

European Union data protection law says companies cannot transfer EU citizens' personal data to countries outside the bloc deemed to have insufficient privacy safeguards—like the United States.

Revelations of mass US surveillance programs in 2013 prompted the European Commission to demand that Safe Harbour, which helped over 4,000 companies avoid cumbersome EU data transferral rules, be strengthened.

In October, the European Court of Justice (ECJ) ruled that Safe Harbour was invalid, giving the EU-US talks a new urgency as companies scrambled to set up alternative mechanisms to meet the EU's end of January deadline.

Now the United States has offered to create an "ombudsman" to help verify that US authorities' access to personal data transferred under Safe Harbour is not excessive, four people familiar with the talks said.

The new office would be in the State Department, one of the people said.

The EU insists that US officials' access to personal data is limited to national security matters.

The Americans have provided a description of the limitations and safeguards applying to their signals intelligence, as well as legal remedies for EU citizens. But they have so far opposed limits that would apply to data transferred under Safe Harbour.

This is the first time Washington has offered something specifically for Safe Harbour, three of the people said.

EU negotiators want to know what powers and mandate the new office would have before accepting the proposal, three of the sources said.

Christian Wigand, spokesman for the Commission, said, "intense negotiations have been ongoing ... we need further clarification on effective oversight and transparency."

Negotiators are striving to clinch a deal before Feb 2, when European data protection authorities meet to decide whether and how data transfers to the United States should continue.

Without a new Safe Harbour agreement, they are likely to start restricting transatlantic data flows, sources have told Reuters.

Data flows between the United States and Europe are the highest in the world. In 2015 there was 240 billion dollars of trade across the Atlantic in digital goods, the president of Microsoft said at a conference on Monday.