US and EU officials expressed hope Monday on sealing a new transatlantic data-sharing pact before a looming deadline expires to avert a potentially crippling impact on American online firms including Facebook and Google.

A US Commerce Department lawyer said Washington made "a very strong proposal" which responds to privacy concerns after Europe's top court struck down the so-called "safe harbor" agreement last year which provided the legal basis for US Internet firms which operate in Europe.

EU officials set a January 31 deadline for a new pact, but Justin Antonipillai said talks were scheduled to continue until February 2.

"We have really come to the time to act," the US official told the "State of the Net" conference in Washington, before departing for the hard-fought negotiations in Europe.

The talks became critical when the European Court of Justice in October ruled that the EU-US arrangement allowing firms to transfer European citizens' personal information to the United States was "invalid" because it did not properly protect the data from spy agencies.

Antonipillai said the US proposal aims to ensure that EU citizens have legal recourse if they believe their rights are violated by online firms handing over data to law enforcement. At the same time, he said the plan aims to protect the ability of US intelligence and law enforcement to root out threats, including terrorism.

"The United States takes privacy very seriously and our institutions take privacy very seriously," he said.

Andrea Glorioso, a counsellor for digital affairs at the EU mission in Washington, told the same panel that Washington and Brussels "are really on the same page" in seeking a new pact.

But he cautioned that any new agreement must pass muster with EU governments and respect the privacy provisions of the European Charter on Human Rights.

If the agreement lapses, major Internet firms in Europe could lose the legal protection they have for transferring data of EU citizens. Trade groups have warned such a scenario could impact the thriving digital economy and make some operations for technology firms in Europe impractical.

The case stems from a legal challenge brought by Austrian Internet activist and law student Max Schrems, who was also present at the Washington conference and was less optimistic about a new pact.

"I really don't see a solution," he said.

Schrems said he sees "a basic conflict of fundamental rights" because Internet firms may be required to cooperate with US intelligence and law enforcement on national security grounds, which could violate the privacy of their users.

"The Googles and Facebooks may not really have a safe harbor," Schrems told the conference.

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