Hushmail is a similar service, but uses a java applet for the client side crypto. It's my understanding that they have been legally compelled at least once to deliver a backdoored applet to the client in order to access the clear text email. I think they're Canadian. I don't have references to hand, but a Google search should turn some stuff up.

Whilst yu, "doubt any democratic government should be able to force them to do that", I on the other hand suspect that most (if not all) democratic governments have ways of doing exactly this.