The Microsoft-owned internet chat company could potentially face criminal and administrative sanctions, including a ban on passing users' communications covertly to the US signals intelliigence agency.
Skype itself is headquartered in the European country, and could also be fined if an investigation concludes that the data sharing is found in violation of the country's data-protection laws.
The Guardian understands that Luxembourg's data-protection commissioner initiated a probe into Skype's privacy policies following revelations in June about its ties to the NSA.
The country's data-protection chief, Gerard Lommel, declined to comment for this story, citing an ongoing investigation. Microsoft also declined to comment on the issue.
Luxembourg has attracted several large corporations, including Amazon and Netflix, due to its tax structure.
Its constitution enshrines the right to privacy and states that secrecy of correspondence is inviolable unless the law provides otherwise. Surveillance of communications in Luxembourg can only occur with judicial approval or by authorisation of a tribunal selected by the prime minister.
However, it is unclear whether Skype's transfer of communications to the NSA have been sanctioned by Luxembourg through a secret legal assistance or data transfer agreement that would not be known to the data protection commissioner at the start of their inquiry.
Microsoft's acquisition of Skype tripled some types of data flow to the NSA, according to top-secret documents seen by the Guardian.
Microsoft bought Skype for $8.5bn (£5.6bn) in 2011.
The US software giant was the first technology group to be brought within the NSA initative known as Prism, a scheme involving some of the internet's biggest consumer companies passing data on targeted users to the US under secret court orders.
Having
once been considered a secure chat tool beyond the reach of government
eavesdropping, Skype is now facing a backlash in the wake of the Prism
revelations.
"The only people who lose are users," says Eric King, head of research at human rights group Privacy International.
"Skype promoted itself as a fantastic tool for secure communications
around the world, but quickly caved to government pressure and can no
longer be trusted to protect user privacy."http://www.theguardian.com/technology/2013/oct/11/skype-ten-microsoft-nsa
