Summary Under the proposed Cloud and AI Development Act (CADA), joint undertakings are specialized EU public-private partnership bodies that may be entrusted by the Commission and Member States to implement the operational objectives of the Cloud and AI Leadership Initiatives. As explicitly stated in Article 6(1), these structuresβ€”along with "any other structures capable of achieving those objectives"β€”serve as the primary delivery mechanisms for the Act's large-scale "grand challenges." For legal and compliance teams, this means that entities engaging with these initiatives must navigate a hybrid governance model that blends public funding rules, private sector agility, and strict sovereignty criteria.

Detail

The Cloud and AI Development Act (CADA), as proposed in COM(2026) 502 final, establishes a framework to strengthen Europe's cloud and AI ecosystem. Central to this framework are the Cloud and AI Leadership Initiatives, designed to support research, innovation, and the deployment of large-scale capacity. The implementation of these initiatives is governed by Title II of the proposal, with Article 6 serving as the critical operational hinge.

Article 6(1): The Implementation Mandate

Article 6(1) of the CADA proposal explicitly mandates that the implementation of the Cloud and AI Leadership Initiatives' operational objectives "shall be entrusted to the Commission and the Member States and, where relevant, to joint undertakings or any other structures capable of achieving those objectives."

This provision is significant because it decentralizes the execution of high-level policy goals. Rather than relying solely on the European Commission's internal departments (such as DG CNECT or DG DIGIT) or national ministries, the proposal leverages joint undertakings (JUs) as key vehicles for delivery. This approach allows the EU to tap into existing expertise, pooled resources, and streamlined management structures already established under previous EU research and innovation frameworks.

Defining Joint Undertakings in the CADA Context

In the EU legislative context, a joint undertaking is a specific legal entity established under EU law (typically via a Council Regulation) to manage large-scale research and innovation programs. They function as public-private partnerships (PPPs), combining:

  • Public Funding: Contributions from the EU budget (e.g., Horizon Europe, Digital Europe Programme) and Member States.
  • Private Investment: In-kind and financial contributions from industry partners.
  • Strategic Governance: A board comprising representatives from the Commission, Member States, and industry stakeholders.

The CADA proposal does not create a single new "CADA Joint Undertaking." Instead, it designates existing and future JUs as potential implementers. Recital 26 of the proposal explicitly identifies two specific JUs as relevant examples:

  • The Smart Networks and Services Joint Undertaking (SNS JU): Relevant for connectivity, edge computing, and cloud infrastructure.
  • The European High Performance Computing Joint Undertaking (EuroHPC JU): Relevant for high-performance computing, AI factories, and computational capacity.

The text further notes that implementation may be entrusted to "their successor" entities, ensuring continuity as these bodies evolve. The phrase "any other structures capable of achieving those objectives" provides the flexibility to engage new entities if the existing JUs are not suitable for specific "grand challenges."

Operational Objectives and "Grand Challenges"

Article 6(2) specifies that the operational objectives shall be implemented through "large-scale, cross-sectoral initiatives addressing major technological and industrial challenges of strategic relevance for the Union ('grand challenges'), as indicated in Annex I."

These grand challenges, which joint undertakings would help manage, include:

  1. Environmental sustainability and security of data centres (e.g., targeting an average Power Usage Effectiveness of 1.15).
  2. Cloud stacks (building end-to-end hardware and software stacks).
  3. Frontier AI (developing next-generation multimodal models).
  4. Physical AI (autonomous systems and robotics).
  5. Industrial AI (sector-specific applications in healthcare, automotive, etc.).
  6. Cooperative European Industrial Models.
  7. AI Agents Platform.
  8. Public Sector AI.

Joint undertakings are uniquely positioned to manage these challenges because they can coordinate complex consortia, manage large budgets efficiently, and enforce strict technical and sovereignty criteria that pure public funding mechanisms might not handle as effectively.

Funding and Governance Framework

While Article 6 outlines who implements the initiatives, Recital 28 and Article 6(3) clarify the funding sources. The initiatives may be supported by Union programmes such as Horizon Europe and the Digital Europe Programme. The joint undertakings act as the administrative and operational bridge between these funding sources and the actual projects.

For the upcoming 2028-2034 Multiannual Financial Framework (MFF), the proposal anticipates that these initiatives will continue to receive support. This implies a long-term commitment where compliance and governance requirements will evolve alongside the funding cycles. The proposal also notes that implementation may be entrusted to joint undertakings "without prejudice to the next (2028-2034) multiannual financial framework," ensuring that the legal basis remains valid even as budgetary negotiations conclude.

What this means for you

For in-house counsel, compliance officers, and legal teams, the designation of joint undertakings as implementers under Article 6(1) has several critical practical implications:

1. Hybrid Governance and Contractual Complexity

If your organization participates in a project funded or managed by a joint undertaking under CADA, you are entering a complex contractual environment. JUs operate under their own specific statutes and grant agreement templates, which differ from standard Commission grants. You must ensure your internal compliance processes can handle:

  • Intellectual Property (IP) Rights: JUs often have strict rules on IP ownership, particularly regarding results generated with public funding and the rights of industry partners.
  • State Aid Rules: As noted in Recital 89, measures under CADA are "without prejudice to the application of Articles 107 and 108 TFEU." Participating in JU projects may trigger State aid notifications if public support exceeds certain thresholds or if the aid is not compatible with the internal market.
  • Sovereignty and Security Criteria: Given CADA's focus on technological sovereignty, JUs will likely enforce strict due diligence on participants. This includes vetting foreign ownership, ensuring data localization compliance, and verifying supply chain transparency, potentially aligning with the Union assurance levels defined in Title IV.

2. Reporting and Transparency Obligations

Joint undertakings require rigorous reporting on deliverables, financial expenditures, and milestones. Compliance officers must establish robust internal tracking systems to ensure that all claims for funding are substantiated and that any changes in project scope are reported promptly. Failure to comply can lead to the recovery of funds and exclusion from future EU-funded projects.

3. Strategic Alignment with "Grand Challenges"

Your organization should assess whether its R&D or infrastructure projects align with the Grand Challenges listed in Annex I. If they do, engaging with the relevant joint undertaking (e.g., EuroHPC JU for compute capacity, SNS JU for cloud stacks) may provide access to significant funding and strategic partnerships. However, this also means adhering to the specific technical and sustainability criteria defined in those challenges, such as energy efficiency targets for data centres.

4. Long-Term Regulatory Adaptation

Since the proposal looks toward the 2028-2034 MFF, organizations should prepare for long-term engagement. This includes maintaining compliance standards over extended periods and adapting to evolving regulatory requirements as the CADA is implemented and potentially amended through delegated acts (as per Article 45).

Common misconceptions

Misconception 1: Joint undertakings are new entities created solely by CADA. Reality: CADA leverages existing joint undertakings (like EuroHPC JU and SNS JU) and potentially their successors. It does not create a single new "CADA Joint Undertaking" but rather designates these existing bodies as key implementers. The proposal also allows for "any other structures capable of achieving those objectives," providing flexibility.

Misconception 2: Only EU institutions can implement the Leadership Initiatives. Reality: Article 6(1) explicitly expands the scope to include Member States and joint undertakings. This decentralization is intentional to leverage the expertise and resources of the private sector and national governments.

Misconception 3: Participation in a joint undertaking guarantees funding. Reality: While JUs manage funding, participation is competitive. Projects must align with the "grand challenges" and meet strict eligibility criteria, including sovereignty and sustainability requirements. Funding is also subject to the availability of resources under the EU budget and relevant programmes.

Misconception 4: CADA replaces the AI Act's governance structures. Reality: CADA complements the AI Act. While the AI Act focuses on risk-based regulation of AI systems, CADA focuses on the infrastructure, capacity, and sovereignty aspects. Joint undertakings under CADA may fund projects that must still comply with AI Act requirements (e.g., for high-risk AI systems), creating a dual compliance layer.

Official sources

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