Summary Under the proposed Cloud and AI Development Act (CADA), fees charged for sharing services within the EuroCloud Federation are strictly limited to cost recovery. Article 35(5) mandates that a sharing entity "may charge a fee to the using entity," but explicitly states that "the amount of the fee shall be limited to the costs that the sharing entity incurs in relation to the sharing of the service." Crucially, the proposal clarifies that such fees "shall not be deemed as a consideration for the provision of a service and should not constitute a pecuniary interest or public contract" under EU public procurement rules. This means the transaction is treated as public-sector cooperation, bypassing standard competitive tendering obligations.

Detail

The EuroCloud Federation, established under Title IV, Chapter III of the proposed Cloud and AI Development Act (CADA), creates a legal framework for Union entities and public sector bodies to share data centre and cloud computing services. A key mechanism for this cooperation is the ability for one member (the "sharing entity") to provide capacity to another (the "using entity"). However, to prevent the Federation from becoming a vehicle for commercial competition or state aid, CADA imposes rigorous constraints on how these services are priced.

The Legal Basis: Article 35(5)

The core pricing rule is found in Article 35(5) of the proposal. This provision grants the sharing entity the right to charge a fee, but immediately qualifies it with a strict cap. The text states:

"The amount of the fee shall be limited to the costs that the sharing entity incurs in relation to the sharing of the service and shall not constitute a pecuniary interest within the meaning of Article 2 of Directive 2014/24/EU and Regulation (EU, Euratom) 2024/2509."

This single sentence establishes two critical legal pillars:

  1. The Cost Ceiling: The fee cannot exceed the actual costs incurred specifically for the act of sharing.
  2. The Procurement Exemption: Because the fee is not a "pecuniary interest," the arrangement does not trigger the definition of a "public contract" under the Public Procurement Directive.

Defining "Costs Incurred in the Sharing of the Service"

While Article 35(5) sets the limit, the explanatory context and the structure of the provision clarify what constitutes eligible costs. The fee is not intended to cover the general overhead of running a data centre or the base cost of the cloud infrastructure, which are typically funded by the sharing entity's public budget. Instead, the fee is restricted to the marginal or additional costs directly attributable to enabling the specific sharing relationship.

Based on the text of Article 35(5) and the associated recitals, these eligible costs include:

  • Allocating and isolating resources: The technical and administrative expenses required to segregate the using entity's data and workloads from the sharing entity's other operations to ensure security and data sovereignty.
  • Managing access: The costs associated with setting up identity management, authentication protocols, and authorization mechanisms for the using entity's personnel.
  • Enabling integration and interoperability: The engineering and operational effort required to connect the using entity's systems to the shared infrastructure, ensuring seamless data exchange and service orchestration.
  • Ensuring compliance: The costs of verifying that the shared service meets applicable Union law requirements, including data protection (GDPR) and cybersecurity standards (NIS2).
  • Managing the sharing relationship: The administrative burden of overseeing the operational and contractual relationship between the two public bodies.

It is vital to note that the fee must not include a profit margin, a markup, or a contribution to the general capital expenditure of the data centre. The principle is strictly one of cost recovery. If a sharing entity attempts to charge a fee that includes a profit element or covers unrelated infrastructure costs, it would violate Article 35(5) and potentially reclassify the transaction as a commercial contract subject to procurement rules.

The "Non-Pecuniary Interest" Exemption

The most significant operational impact of Article 35(5) is its interaction with EU public procurement law. Under standard rules, if one public authority pays another for a service, it often constitutes a "public contract" requiring a competitive tender process under Directive 2014/24/EU.

CADA explicitly removes this barrier for the EuroCloud Federation. By stating that the fee "shall not constitute a pecuniary interest," the proposal classifies the transaction as public-sector cooperation governed solely by considerations of public interest.

As Recital 73 of the proposal explains:

"The sharing of services within the EuroCloud Federation should be anchored in a public-sector cooperation. Such cooperation should be governed solely by considerations of public interest, and should not entail any form of consideration in exchange for another... Under those conditions, 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 exemption means:

  • No Tendering: The using entity is not required to publish a contract notice, run a competitive bidding process, or evaluate multiple offers.
  • Direct Negotiation: The entities can negotiate the fee and the terms of service directly, significantly accelerating the deployment of shared capacity.
  • Legal Certainty: The "non-pecuniary" status provides a safe harbor against challenges from competition authorities or other market participants who might argue that the arrangement distorts the market.

Governance and Verification

While the fee structure is flexible, it is not unregulated. Before a sharing entity can charge fees, it must satisfy the conditions set out in Article 35(1) and (2). Specifically, the sharing entity must:

  1. Own the hardware (directly or through a controlled intermediate entity).
  2. Exercise control over any intermediate legal entity.
  3. Implement appropriate technical, operational, and organizational measures to ensure secure and resilient service provision.

The sharing entity must demonstrate to the Commission that these conditions are met. The Commission then assesses the information and grants permission to share services. This verification step ensures that the fee is being charged within a compliant framework and that the "non-pecuniary" status is legally defensible.

It is also important to distinguish these peer-to-peer sharing fees from the administrative fees levied by the Commission to run the Federation itself. Article 36 establishes a separate fee structure for the Commission to recover the costs of establishing and managing the EuroCloud Federation platform. These administrative fees are levied on all members and are distinct from the service-sharing fees governed by Article 35(5).

What this means for you

For public-sector IT directors, procurement officers, and financial controllers, the pricing rules in the EuroCloud Federation offer a streamlined path to sovereign cloud capacity.

1. Accelerated Deployment You can bypass the months-long tendering process typically required for public procurement. By leveraging Article 35(5), you can negotiate directly with a sharing entity and access capacity within weeks, provided the fee remains strictly within the cost-recovery limit.

2. Rigorous Cost Verification When negotiating a fee, you must act as a guardian of the cost-recovery principle. Request a detailed breakdown of the "costs incurred in relation to the sharing of the service." Scrutinize the quote to ensure it covers only the marginal costs (isolation, integration, access management) and excludes general infrastructure depreciation or unrelated overheads. If a fee includes a profit margin, it risks invalidating the procurement exemption.

3. Budgeting and Accounting Even though the transaction bypasses procurement rules, it still represents a financial outflow. Ensure your internal budgeting processes recognize this as a valid expenditure. The fee should be categorized as a cost-recovery payment for public-sector cooperation, not a commercial service purchase. Clear internal approvals are necessary to authorize the transfer of funds.

4. Compliance and Audit Readiness Before entering into a sharing agreement, verify that the sharing entity has received formal approval from the Commission to share services under Article 35(3) and (4). This approval is your primary defense against audit challenges. It confirms that the entity meets the ownership and control criteria and that the fee structure is legally sound. Keep records of the cost breakdown and the Commission's approval to demonstrate compliance with Article 35(5) during any future audits.

Common misconceptions

Misconception 1: The sharing entity can make a profit on the shared service. Correction: No. Article 35(5) strictly limits the fee to the costs incurred. Any markup, margin, or profit element is prohibited. The model is purely for cost recovery of the specific sharing activity. Charging a profit would likely reclassify the transaction as a commercial contract, triggering full public procurement rules.

Misconception 2: This is a standard public procurement contract. Correction: No. Because the fee does not constitute a "pecuniary interest," the transaction falls outside the scope of Directive 2014/24/EU. It is classified as public-sector cooperation. Standard procurement rules (tendering, evaluation criteria, standstill periods) do not apply, provided the fee remains within the cost-recovery limit.

Misconception 3: The fee covers the entire cost of the cloud service. Correction: The fee covers only the additional costs of sharing (e.g., isolation, integration, access management). It does not necessarily cover the base cost of running the data centre, which is typically funded by the sharing entity's general public budget. The using entity pays for the marginal cost of access, not the full lifecycle cost of the infrastructure.

Misconception 4: Private companies can charge these fees. Correction: No. The EuroCloud Federation is limited to Union entities and public sector bodies. Private entities cannot be members, nor can they charge fees under this framework. If a public entity uses an intermediate legal entity to provide the service, that entity must be under the control of the sharing entity and meet strict criteria to ensure no private capital participation or distortion of competition (Article 35(1) and Recital 71).

Misconception 5: The fee is the same as the Commission's administrative fee. Correction: No. The fee under Article 35(5) is a peer-to-peer charge between members for sharing capacity. The administrative fee under Article 36 is a separate charge levied by the Commission to cover the costs of running the Federation platform and governance. These are two distinct financial mechanisms.

Official sources

Related

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