It would still be very alarming if a democratic country like Australia or European Union taking a step like this where they tell the vendor that it will use its data and service in whatever way it sees fit, and sidestep existing policies those vendors have on the uses of their services and data.
Now maybe we can say that Israel is not a democratic system or environment, but then Microsoft would not be wholly desiring to do business serving such an entity, lest they break with US oversight.
Israel here told the vendor that whenever there is a gag on them by their government against making Israel aware of their request, the vendor is to secretly transmit a message alerting them..