The problem is conflicting jurisdictions. The PATRIOT act requires US businesses to hand over data stored when requested, even if it is outside of the US. Twitter are subject to those requests.The EU have strict laws regarding data protection but the fundamental issue is Twitter are breaking somebody's law whichever they choose to comply with.
Let's paint the picture - a request for data on an EU citizen, posted from Europe through a European datacentre but on a service owned by an American company. The American government request data but European law prohibits it. What do the American company do? Whose law do they break?
Storing the data under a non-American subsidiary puts at least some buffer in there. I'm not sure how effective this will really be but that is the intention.