Summary No, the proposed EuroCloud Federation does not compete with commercial cloud providers because it is legally structured as public-to-public cooperation rather than a market transaction. Under Article 35 of the Cloud and AI Development Act (CADA) proposal, sharing is strictly limited to public entities that own the underlying hardware, and any fees charged are restricted to cost recovery. Crucially, Article 35(5) states these fees "shall not constitute a pecuniary interest," ensuring the arrangement falls outside the scope of Union public procurement rules. This design prevents the federation from acting as a state-subsidized competitor, preserving the commercial market for private cloud service providers (CSPs).

Detail

The Cloud and AI Development Act (CADA), as proposed in COM(2026) 502 final, establishes the European public sector cloud federation (EuroCloud Federation) to facilitate the sharing of data centre and cloud computing services among Union entities and public sector bodies. A primary concern for commercial CSPs and data centre operators is whether this mechanism creates a state-subsidized competitor that undercuts the private market. The legislative text explicitly structures EuroCloud to avoid this outcome through strict eligibility criteria, ownership requirements, and financial limitations that distinguish it from commercial activity.

Public-to-Public Cooperation, Not Market Supply

The foundational principle of EuroCloud is that it operates outside the commercial market. Recital 73 of the CADA proposal states that the sharing of data centre and cloud computing services within the EuroCloud Federation should be anchored in "public-sector cooperation." This cooperation is governed "solely by considerations of public interest" and must not entail "any form of consideration in exchange for another."

Consequently, the relationship between a sharing entity (the public body providing capacity) and a using entity (the public body consuming capacity) is not a buyer-seller relationship but a collaborative administrative arrangement. The proposal clarifies that this sharing is "free of charge, except where the charges are limited strictly to what is necessary and proportionate to recover the costs incurred." This distinction is vital: it is an internal reallocation of public resources, not a commercial sale.

Strict Eligibility: Ownership of Hardware

To prevent private commercial operators from participating directly in the federation and leveraging public infrastructure for competitive advantage, CADA imposes rigorous ownership requirements. Article 35(1) stipulates that a member of the EuroCloud Federation (the "sharing entity") may share services with another member (the "using entity") only where the sharing entity "directly, or indirectly through an intermediate legal entity, owns the hardware through which the service is made available."

This provision effectively bars commercial CSPs from joining the EuroCloud Federation as service providers. Recital 71 clarifies that "direct private participation should be excluded" where the sharing entity owns the hardware. Furthermore, if an intermediate legal entity is used, the public sharing entity must exercise decisive influence over it, there must be no direct private capital participation in that intermediate entity, and more than 80% of the intermediate entity's activities must be performed for the sharing entity. This ensures that EuroCloud capacity comes exclusively from public assets or entities fully controlled by the public sector, preserving the commercial market for private CSPs.

Cost-Recovery Fees, Not Commercial Pricing

A critical safeguard against market distortion is the prohibition on profit-making within the federation. Article 35(5) establishes that while a sharing entity may charge a fee to a using entity, the amount of that fee "shall be limited to the costs that the sharing entity incurs in relation to the sharing of the service."

Crucially, the text specifies that these fees "shall not constitute a pecuniary interest within the meaning of Article 2 of Directive 2014/24/EU and Regulation (EU, Euratom) 2024/2509." In EU law, a "pecuniary interest" is the key threshold that triggers public procurement rules. By defining EuroCloud fees as non-pecuniary, the legislation ensures that the exchange of capacity does not legally qualify as a public contract or concession. This means EuroCloud sharing is not subject to the transparency, non-discrimination, and competition rules that apply when a public authority purchases cloud services from a commercial provider.

Exclusion from Procurement Rules

Because the fees are strictly cost-based and non-pecuniary, Recital 73 confirms that "the sharing of public-sector data centre services and cloud computing services within the EuroCloud Federation should not fall under Union public procurement rules."

This distinction is vital for commercial providers: it means that when a public authority uses EuroCloud capacity, it is not "procuring" a service in the legal sense that would require it to issue a tender open to the commercial market. Instead, it is utilizing a shared public resource. This prevents EuroCloud from acting as a de facto monopoly that bypasses competitive bidding for standard cloud services. The arrangement is a mechanism for efficiency and sovereignty, not a market intervention.

Complementarity with the Commercial Market

The CADA proposal positions EuroCloud as a complement to, not a replacement for, the commercial cloud market. The federation is designed to handle specific public-sector workloads, particularly those requiring high levels of sovereignty (Union assurance levels) or those that can utilize idle public capacity. Commercial providers remain the primary source for innovative, scalable, and specialized cloud services.

Article 34 establishes the EuroCloud Federation as a voluntary mechanism for public entities to interconnect their own infrastructures. It does not mandate that public authorities must use EuroCloud over commercial providers, nor does it restrict public authorities from purchasing cloud services from commercial CSPs, provided they meet the relevant sovereignty assurance levels required by their risk assessments (Article 29 and Article 30). The proposal explicitly supports the development of commercial cloud stacks and innovation in Title II, ensuring that the broader market for innovation and scale remains in the hands of commercial providers.

What this means for you

For cloud service providers and data centre operators, the EuroCloud framework presents a defined boundary rather than a competitive threat.

  1. Market Preservation: You do not need to compete with EuroCloud for public contracts in the traditional sense, because EuroCloud transactions are not subject to public procurement law. The public sector's use of EuroCloud capacity is an internal administrative sharing of resources, not a market purchase.
  2. No Direct Participation: You cannot join the EuroCloud Federation to sell your commercial cloud services to public bodies under the EuroCloud banner. Article 35(1) restricts sharing to entities that own the hardware, and Recital 71 excludes direct private participation. Your business model remains distinct: you sell to the public sector via standard procurement procedures, while EuroCloud facilitates public-to-public sharing.
  3. Opportunity for Partnership: While you cannot be a member, public entities using EuroCloud may still require additional capacity or specialized services that their owned hardware cannot provide. In such cases, they must procure from the market. Your role remains that of a commercial supplier subject to standard procurement rules, ensuring a level playing field based on quality, price, and innovation rather than administrative status.
  4. Compliance Clarity: Ensure your offerings are clearly distinguished from "public-sector cooperation." If you provide services to public bodies, these must be governed by commercial contracts and subject to procurement directives, not the cost-recovery mechanisms of Article 35.

Common misconceptions

  • Misconception: EuroCloud will force public authorities to stop buying from commercial cloud providers.
    • Reality: EuroCloud is voluntary (Article 34(1)) and limited to sharing existing public hardware. Public authorities can still procure from commercial providers, especially for services requiring capabilities beyond their owned infrastructure or for workloads not suited to the federation's assurance levels.
  • Misconception: Commercial providers can join EuroCloud to gain preferential access to public contracts.
    • Reality: Direct private participation is explicitly excluded (Recital 71). Only public entities or fully controlled intermediate entities without private capital can share capacity.
  • Misconception: EuroCloud fees are subsidized rates that undercut market prices.
    • Reality: Fees are strictly cost-based and cannot include profit (Article 35(5)). They are not market prices but administrative cost recoveries, and they do not trigger procurement rules, meaning they are not "competing" in the market sense but operating in a separate legal category.
  • Misconception: EuroCloud replaces the need for commercial cloud innovation.
    • Reality: The CADA proposal explicitly supports the development of commercial cloud stacks and innovation (Title II). EuroCloud focuses on sovereignty and resource sharing for critical public functions, leaving the broader market for innovation and scale to commercial providers.

Related

This is general information about a draft EU regulation, not legal advice.