The crucial point for the firm and others like it in the UK is that there is no way to tell what its liability would be because the law in this area has not yet been tested. It could be read as absolving the company. But, dangerously for it, it could just as easily be read as meaning that it can be sued if users behave unlawfully.
A case of mistaken identity in Australia illustrates the point. Someone wrote a hateful blog about writer and television personality Marieke Hardy. She wrote a blog post accusing Joshua Meggitt of being its author and used her Twitter account to draw attention to her post.
Hardy was wrong to finger Meggitt as the author of the original material and she reportedly paid AUS$15,000 (£10,000) to settle the case.
But will Twitter still be held liable for the libel? The Sydney Morning Herald reports that Meggitt is suing Twitter, claiming that it is liable for any unlawful actions by Hardy on its service.
Under the country's defamation laws internet service providers (ISPs) and internet content hosts (ICHs) are publishers and can be sued in relation to material published by a third party. This means that Twitter and other social media platforms can be held liable for defamatory material published by a user.
These laws don't always apply, though. ISPs and ICHs are protected by the Broadcasting Services Act, but Twitter does not fall within the strict definition of an ICH, which is "a person who hosts internet content in Australia, or who proposes to host internet content in Australia". Twitter doesn't fall within this definition and will be unable to rely on it.
The law in the UK is even less clear. Whereas in the US, where Twitter is headquartered, it is not liable for the publication of information provided by others because it is classed as a provider of "an interactive computer service", in the UK things are more complicated.
The basic rule of defamation law is that 'authors', 'editors' and 'publishers' are liable for defamatory comments and secondary publishers can be liable too. What matters here is whether or not Twitter is a 'secondary publisher'. If so, it will be liable for its users' actions.
Whether it qualifies as a secondary publisher or not will have to be decided by the courts, and we have little evidence on which way they might swing. In a 1999 case between ISP Demon Internet and user Laurence Godfrey the courts found that ISPs were partly responsible for defamatory posts and should remove them quickly if alerted to them.
Twitter claims that it is not a publisher. According to its terms of service "by submitting, posting or displaying Content on or through the Services, you grant us a worldwide, non-exclusive, royalty-free license.......". Its view is that the individual is liable for any action that may arise out of their tweet. A more recent case involving Google seems to favour this view. In a 2009 case the judge held that the search engine was not a publisher under common law, meaning that Google was not liable for defamatory comments.
In the absence of a definitive precedent the UK the courts would have look at the degree of control exercised over user content on Twitter to decide first and foremost whether it is a publisher. They would also have to consider whether any defences could be relied on either under the Defamation Act or the common law defence of 'innocent dissemination'. Finally consideration would have to be given to whether Twitter is offered protection under the UK's e-commerce directive, which limits liability of service providers who host content.
If a social media platform can show that all it does is store online content and did not know that the content was defamatory, then it may not fall foul of the laws.
This all leaves us in a position of uncertainty, where we will remain until a case reaches the courts.
Claire McCracken is a technology law specialist at PInsent Masons, the law firm behind Out-Law.com