A preliminary report by the European Parliament has attempted to dispel the myth that the Echelon spy network is capable of intercepting all data around the world and using it for industrial espionage.

The study will not be finalised until another report, based on a recent European Parliament visit to Washington, is analysed. But primarily the new report aims to dispel the myth that Echelon is used "for purposes of industrial espionage".

In fact, the study says, "analysis has revealed that the system cannot be nearly as extensive as some sections of the media have assumed".

Although a majority of the information is based on unconfirmed evidence, due to a lack of co-operation from the NSA in the US, the Euro Parliament has said that such a project does exist and is run by the US, Canada, the UK, Australia and New Zealand.

Currently the EU's position on Echelon is that it "is not in breach of union law because it does not concern the aspects of union law that would be required for there to be incompatibility".

But it does acknowledge that "the strategic monitoring of international telecommunications can produce useful information for industrial espionage purposes, but only by chance".

However, "were it to be used for other purposes and for industrial espionage directed against foreign firms, this would constitute an infringement of law".

But even then, as a defence the report practically urges people to begin applying encryption to their communications. "Only where sensitive data is sent outside via cable or radio can a communications surveillance system be used for industrial espionage. Private individuals," it said, "should also be urged to encrypt emails".

"An unencrypted email message is like a letter without an envelope," the report said.

According to the research, Echelon could only be abused for industrial espionage against "firms which operate in three time zones, so that interim results are sent from Europe to America, and then on to Asia". But if there are any tangible threats introduced by Echelon, the report said, these should be addressed through legislation throughout Europe so a standard level of privacy protection can be set for European citizens.

A leaked copy of the report is available here.