Summary Under the proposed Cloud and AI Development Act (CADA), the European Commission would establish fees for the EuroCloud Federation and joint procurement activities through implementing acts adopted via the examination procedure set out in Article 46(2). These fees are designed as strict cost-recovery mechanisms to ensure a sustainable funding model, where revenues generated constitute internal assigned revenues that cover the specific operational costs of these initiatives. The specific calculation methods, individual fee amounts, and payment conditions are not fixed in the primary regulation but are delegated to the Commission to be detailed in secondary legislation.

Detail

The Cloud and AI Development Act (CADA), as proposed in COM(2026) 502 final, introduces two major demand-side mechanisms to reduce EU dependence on non-European cloud providers: the European public sector cloud federation ('EuroCloud Federation') and a common procurement framework managed by the Commission. Both mechanisms rely on a fee-based funding model to ensure financial sustainability without permanently draining the general EU budget. The exact financial parameters of these schemes are not fixed in the primary regulation but are delegated to the Commission to be specified in implementing acts.

The Sustainable Funding Model: Internal Assigned Revenues

The explanatory memorandum and the legislative text emphasize that CADA's new operational tasks would be financed through fee-based revenue streams falling under "internal assigned revenues." This approach ensures that the initiatives are self-sustaining and that the EU budget is only temporarily exposed to initial setup costs.

For the EuroCloud Federation (established under Article 34), Article 36(1) states that costs arising from Commission activities would be "jointly financed by the members of the EuroCloud Federation through fees levied by the Commission." Article 36(3) specifies that revenues generated by these fees constitute internal assigned revenues within the meaning of Article 21(3), point (a), of the Financial Regulation (Regulation (EU, Euratom) 2024/2509). These revenues are assigned to cover the costs of Commission activities, including assessing membership requests and establishing the EuroCloud platform. Any surplus revenue would be entered into the general budget of the Union.

Similarly, for common procurement activities (Articles 37–40), Article 40(1) mandates that costs be jointly financed by participating entities through fees levied by the Commission. Article 40(3) confirms these revenues are also internal assigned revenues, assigned to cover the costs of procurement activities carried out pursuant to Article 37.

Implementing Acts and the Examination Procedure

The primary regulation delegates the power to set the detailed financial rules to the Commission. This ensures flexibility to adapt to market conditions and actual operational costs, which cannot be precisely predicted at the legislative stage.

1. EuroCloud Federation Fees (Article 36(4)) Article 36(4) empowers the Commission to adopt implementing acts laying down detailed rules for:

  • Determining the estimated costs.
  • Setting the individual amount of the fees.
  • Specifying the manner and conditions under which the fees are to be paid.

2. Common Procurement Fees (Article 40(5)) Article 40(5) empowers the Commission to adopt implementing acts laying down detailed rules for determining the fees, specifically specifying:

  • The estimated costs attributable to the procurement activities for which fees are chargeable.
  • The individual amounts of the chargeable fees.
  • The manner and conditions under which the fees are to be paid.
  • The conditions under which the fees are to be paid (the text repeats this point, likely covering timing and procedural aspects).

3. The Examination Procedure (Article 46(2)) Crucially, both Article 36(4) and Article 40(5) state that these implementing acts shall be adopted in accordance with the examination procedure referred to in Article 46(2). Article 46(1) establishes that the Commission shall be assisted by a committee, which is a committee within the meaning of Regulation (EU) No 182/2011. Article 46(2) explicitly triggers Article 5 of Regulation (EU) No 182/2011, which is the examination procedure. This means Member States, through the committee, will have the right to vote on the Commission's draft implementing acts. If a qualified majority of Member States opposes the draft, the Commission cannot adopt the act. This provides a significant check on the Commission's power to set fee levels and structures, ensuring that the financial burden on public bodies is scrutinized by national representatives.

Principles for Fee Setting

While the specific numbers will be in secondary legislation, the primary text sets strict principles for how these fees must be structured to prevent them from becoming a revenue-generating tool for the Commission:

  • Cost Recovery: Article 40(4) states that fees shall be set in advance, be proportionate to the estimated costs, and be sufficient to cover those costs. They must reflect practices of comparable procurement frameworks.
  • No Profit Generation: The fees are strictly for cost recovery. Article 36(5) notes that fees charged by a sharing entity in the EuroCloud Federation are limited to costs incurred and do not constitute a pecuniary interest. Article 40(3) notes that any revenue remaining after covering costs goes to the general EU budget, not to the Commission or participating entities as profit.
  • Initial Costs: Article 36(2) and Article 40(2) allow initial establishment costs to be borne by the general EU budget, to be reimbursed by members/participants over a period not exceeding three years.

The Role of Monitoring (Article 33) and Governance (Article 38)

While the fee-setting powers are explicitly located in Articles 36 and 40, the broader governance framework relies on Article 33 and Article 38 to ensure the data and structures necessary for fair fee setting exist.

Article 33 requires Member States to monitor and report on their use of procurement of innovation in cloud computing services and AI systems. While Article 33 specifically targets "procurement of innovation," the data gathered regarding the size of economic operators, SME participation trends, and total contract values provides the Commission with empirical evidence of market activity. This data is essential for the Commission to estimate the volume of transactions and the scale of participation when drafting the implementing acts under Article 40(5). Without accurate monitoring of procurement trends, the Commission would lack the empirical basis to set "proportionate" fees as required by Article 40(4).

Furthermore, Article 38 establishes the Steering Committee responsible for the strategic oversight of the common procurement activities. Article 38(4) mandates that the agreement establishing the framework shall include a Steering Committee composed of the Commission and representatives of Member States. Article 38(3) clarifies that the agreement must include the "applicable law and competent jurisdiction." This governance structure ensures that the entities setting the strategic direction for procurement (and thus the context for fee generation) are directly involved in the oversight of the framework, creating a feedback loop between strategic procurement decisions and the financial rules set in the implementing acts.

What this means for you

For in-house counsel and compliance officers in public sector bodies or entities participating in joint procurement, the key takeaway is that participation in EuroCloud or joint procurement will carry direct financial costs, but these costs are regulated, transparent, and subject to Member State oversight.

  1. Budgeting for Future Fees: You cannot currently determine the exact fee liability because the implementing acts under Articles 36(4) and 40(5) have not yet been adopted. However, you should anticipate that fees will be calculated based on your usage or share of the service. For EuroCloud, the financial statement suggests a membership fee structure (e.g., estimated around EUR 75,000 per member initially, decreasing as membership grows). For joint procurement, fees may be calculated pro-rata per transaction or via a flat fee per awarded contract.
  2. Reimbursement Periods: Be aware of the three-year reimbursement window for initial setup costs (Article 36(2) and Article 40(2)). If your entity joins early, you may be liable for reimbursing initial EU budget expenditures.
  3. Monitoring Secondary Legislation: Watch for the Commission's draft implementing acts under the examination procedure (Article 46(2)). As these are adopted via committee vote, there is an opportunity for stakeholder engagement and potential pushback from Member States if fee structures are deemed disproportionate.
  4. Compliance with Payment Conditions: The implementing acts will specify "manner and conditions" for payment. Non-compliance could potentially affect your access to the services or participation in the procurement framework, although specific penalties for non-payment are not explicitly detailed in the primary text, they would likely be governed by the contractual agreements referenced in Article 38.

Common misconceptions

  • Misconception: The EU budget will fully fund the EuroCloud Federation and joint procurement activities.
    • Correction: No. The proposal explicitly uses a fee-based model. The EU budget may cover initial setup costs, but these must be reimbursed by participants within three years (Articles 36(2) and 40(2)). Ongoing operational costs are covered by fees levied on members/participants.
  • Misconception: The Commission can unilaterally set any fee amount it chooses.
    • Correction: No. The Commission must adopt implementing acts via the examination procedure (Article 46(2)), meaning Member States can block fee structures they disagree with. Furthermore, fees must be proportionate to estimated costs and sufficient only to cover those costs (Article 40(4)).
  • Misconception: Fees are a form of tax or general contribution to the EU budget.
    • Correction: No. These are internal assigned revenues. They are ring-fenced to cover the specific costs of the EuroCloud Federation and joint procurement activities. Any surplus goes to the general EU budget, but the primary purpose is cost recovery for the specific service (Articles 36(3) and 40(3)).
  • Misconception: Article 33 is irrelevant to fee setting.
    • Correction: While Article 33 monitors "procurement of innovation" specifically, the data it generates on market size and participation is a critical input for the Commission to estimate the "estimated costs" and "volume" required to set proportionate fees under Article 40(4) and 40(5).

Related

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