Under European law, the US law does not apply in Ireland and all companies operating there must comply to Irish/European laws. Not US laws.
European law does not specify that US law does not apply to US entities operating in Ireland, and I challenge you find a reference for that. The closest you'll find is the vague concept of national sovereignty, which limits the US from carrying out governmental operations on foreign citizens or in foreign territories.
Really, Microsoft, a US company with foreign subsidiaries, is responsible for following US law and Irish/European laws simultaneously. If they conflict, then it's up to Microsoft (the entity who entered into a situation where they're violating some country's laws) to deal with the consequences. This whole situation is a result of Microsoft voluntarily maintaining US incorporation, wholly owning foreign subsidiaries, and wading into muddy international law.
Are you arguing that under European law, European companies (through wholly owned foreign subsidiaries) could engage in any activity at all outside of Europe and have no accountability for their actions in Europe? That a European company could engage in human trafficking, summary executions, child prostitution, etc and Europeans would not pursue legal remedies if the actions were legal in the foreign countries?
[In fact, under EU law, European citizens can be criminally charged for actions committed outside of Europe which are legal in the visited country (see child sex tourism laws). So you're saying that the US applying its laws to overseas US entities is overreach, while being alright with the EU doing the same.]