Summary Under the proposed Cloud and AI Development Act (CADA), a "participating entity" is a Union institution, body, office, or agency; a national contracting authority; or a partner organisation selected by the Commission that joins the EU's common procurement framework for cloud, data centre, and AI services. By accessing contracts awarded by the Commission under this framework, a participating entity is deemed to have fulfilled its obligations under applicable Union public procurement law, as explicitly stated in Article 39(1). This mechanism, governed by Articles 37 to 40, allows public bodies to leverage collective purchasing power and bypass standard national tender procedures, provided they adhere to the specific accession agreement and fee structures established in the proposal.

Detail

The Cloud and AI Development Act (CADA), as proposed in COM(2026) 502 final, introduces a novel mechanism to consolidate public demand for digital infrastructure. This addresses the EU's strategic need to reduce dependence on non-European cloud providers and accelerate the deployment of sovereign AI capabilities. Central to this demand-side strategy is the establishment of a common procurement framework, detailed in Chapter IV of the proposal (Articles 37–40).

Definition and Scope of Participating Entities

Article 37(1) of CADA explicitly defines the scope of "participating entities." These are not merely passive beneficiaries but active participants in a centralized purchasing structure managed by the European Commission. The category includes three distinct groups:

  1. Union Entities: The institutions, bodies, offices, and agencies of the European Union.
  2. National Contracting Authorities: Public sector bodies in Member States responsible for procuring cloud computing services, data centre services, software, and AI systems.
  3. Partner Organisations: Entities selected by the Commission. As noted in the derogation from Article 168(3) of Regulation (EU, Euratom) 2024/2509, these may include specific partners deemed necessary to achieve the framework's objectives.

The Commission acts as the central purchasing body for these entities. As outlined in Article 37(3), the Commission may procure services on behalf of these entities, conclude framework contracts, operate dynamic purchasing systems, or even act as a wholesaler by acquiring and reselling services. This structure is designed to harness economies of scale, ensuring that smaller national authorities can access high-quality, secure, and sovereign-compliant digital solutions that might otherwise be out of reach due to limited financial or technical resources.

The Accession Agreement and Governance

Participation is not automatic; it requires formal accession to an agreement governed by Article 38. This agreement lays down the practical arrangements for the procurement activities, including decision-making processes, evaluation criteria, and applicable law.

  • Steering Committee: Article 38(4) establishes a Steering Committee composed of the Commission and one representative from each participating Member State. This body provides strategic oversight, approves the strategic direction of procurement procedures, and ensures compliance with the framework.
  • Accession Conditions: The Steering Committee sets transparent and non-discriminatory conditions for accession, including size and minimum amount thresholds (Article 38(8)). Crucially, the participation of a contracting authority from a Member State is not conditional on that Member State's overall participation (Article 38(7)), allowing individual national bodies to join even if their central government has not fully acceded.
  • Dynamic Participation: Article 39(5) introduces flexibility, allowing participating entities to request access to a dynamic purchasing system throughout its validity period, subject to Commission approval and volume caps. This ensures the framework can adapt to evolving market conditions and emerging technological needs.

The Deemed Compliance Benefit: Article 39(1)

The most significant legal implication for in-house counsel is the "deemed compliance" benefit. Article 39(1) states clearly:

"A participating entity shall be deemed to have fulfilled its obligations under applicable Union public procurement law where it acquires supplies or services by means of contracts awarded by the Commission under this Chapter, including through framework contracts concluded by or dynamic purchasing systems operated by the Commission acting as a central purchasing body, or any ancillary support services referred to in Article 37."

This provision creates a direct legal link between the Article 37 common procurement activities and the Article 38 accession agreement. Once a national contracting authority accedes to the agreement and utilizes the Commission's awarded contracts, it does not need to run its own separate tender procedure for those specific goods or services. The procedural burdens of national procurement law are effectively discharged by participation in the EU-level framework. However, this benefit is contingent on strict adherence to the terms of the accession agreement and the payment of fees, as detailed in Article 40.

Fees and Financial Obligations

To ensure the sustainability of the framework, Article 40 establishes a fee-based model. Participating entities contribute to the costs incurred by the Commission through levied fees. These fees are set in advance, must be proportionate to the estimated costs, and are designed to cover all direct and indirect costs of the procurement activities. Any surplus revenue is entered into the general budget of the Union. The Commission adopts implementing acts to specify the exact calculation and payment conditions for these fees.

What this means for you

For in-house counsel and compliance officers in public sector bodies, CADA's common procurement framework presents both an opportunity for efficiency and a new set of compliance obligations.

  • Simplified Procurement Processes: By joining the framework, your organization can bypass lengthy national tender procedures for cloud and AI services. This accelerates digital transformation and ensures access to vetted, sovereign-compliant providers.
  • Mandatory Accession Procedures: You must monitor the establishment of the Article 38 agreement. Participation requires formal accession, which may involve meeting specific size or spending thresholds defined by the Steering Committee. Ensure your legal team is prepared to negotiate and adhere to the terms of this agreement.
  • Fee Management: Budget for the fees levied under Article 40. These are not optional administrative costs but a mandatory contribution to the operational costs of the Commission's procurement activities. Failure to pay may result in exclusion from the framework.
  • Compliance Monitoring: While Article 39(1) provides deemed compliance with procurement law, it does not exempt you from other CADA obligations, such as the sovereignty risk assessments under Article 29 or the use of Union assurance levels under Article 30. You must still ensure that the services procured through the framework meet the specific sovereignty and security requirements of your public sector activities.
  • Dynamic Purchasing Systems: If your organization needs to join an ongoing dynamic purchasing system, be aware of the caps and approval processes under Article 39(5). Plan your procurement timelines accordingly to avoid disruptions.

Common misconceptions

"Participation is automatic for all public bodies." No. Participation is voluntary and requires formal accession to the Article 38 agreement. Not all national authorities may qualify based on the thresholds set by the Steering Committee.

"Deemed compliance under Article 39(1) exempts entities from all CADA obligations." No. Article 39(1) only relieves entities of standard public procurement procedural requirements. Entities must still comply with CADA's sovereignty framework, risk assessments, and assurance level requirements.

"The Commission's fees are profit-driven." No. Article 40 specifies that fees are cost-recovery mechanisms. They are set to cover the direct and indirect costs of the procurement activities, with any surplus returning to the EU budget.

"Member State participation is a prerequisite for national authority participation." No. Article 38(7) explicitly states that the participation of a contracting authority is not conditional on its Member State's participation. Individual national bodies can join independently.

Related

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