Businesses are concerned that a proposed "model contract" on data transmission is so complex that it would make overseas data processing prohibitively expensive.
The contract is an attempt by the European Commission to ensure that the public have the same data protection rights whether companies choose to process data in Europe or overseas.
Although the model contract is voluntary, companies that sign up to it will have protection from enforcement actions under European data protection legislation.
Its publication comes as an increasing number of organisations are processing data in countries such as India, which have strong IT skills but low labour costs.
But business groups believe the model contract could negate any advantages of moving data processing to low cost centres.
Rod Armitage, head of legal affairs at the CBI, said he was concerned that the complexity of the contract would mean that overseas data processors would either refuse to sign it or demand significantly higher fees.
Some multinationals might be tempted to move their call centres overseas to avoid data protection regulations altogether. "It is another example of the cost of doing business inside the EC," said Armitage.
The CBI's fears were echoed by E-Centre, the association for standards and practices in e-commerce. "There is concern about the cost and whether it is going to deter UK businesses," said Will Roebuck, E-Centre's legal executive. "Why overburden businesses? We want a regime that is flexible and allows small companies to breathe."
The Office of the Information Commissioner said it was aware of firms' concerns but denied that the contract would significantly increase the costs for businesses."EU businesses should not be able to escape their responsibilities by exporting data," said assistant information commissioner David Smith.
The EC is seeking views on the model contract.