Summary Under the proposed Cloud and AI Development Act (CADA), the Article 38 accession agreement is the mandatory legal instrument that enables Member States, Union entities, and selected partner organisations to participate in the Commission's centralised procurement framework for cloud and AI services. This agreement, which requires the signature of the Commission and at least two Member States to enter into force, establishes the governance structureβ€”specifically a Steering Committeeβ€”and defines the practical arrangements for the Commission to act as a central purchasing body. For legal counsel, signing this agreement is the essential gateway to accessing economies of scale and strategic procurement benefits. Crucially, Article 39(6) ties the ability to join existing Dynamic Purchasing Systems (DPS) mid-term strictly to entities that accede to the Article 38 agreement after the DPS has been launched, creating a specific legal pathway for latecomers to benefit from established frameworks.

Detail

The proposed Cloud and AI Development Act (CADA) introduces a novel mechanism to aggregate public demand for cloud and AI services, aiming to leverage the EU's collective purchasing power to reduce costs, drive innovation, and strengthen strategic autonomy. Central to this mechanism is Chapter IV, which empowers the European Commission to act as a central purchasing body on behalf of participating entities. The Article 38 accession agreement serves as the contractual and governance backbone of this entire framework.

The Legal Nature and Entry into Force

Article 38(1) establishes the foundational requirement for the framework: before any procurement activity is carried out under Chapter IV, the Commission and at least two Member States must enter into a formal agreement. This agreement lays down the practical arrangements governing the procurement activities, including the decision-making process, evaluation of tenders, and applicable law.

Crucially, the agreement functions as a mandate. Article 38(2) explicitly states that the agreement "shall constitute a mandate for the Commission to procure on behalf of, or in the name of, the participating entities." This mandate satisfies the requirements of Article 168(2) and (3) of the Financial Regulation (Regulation (EU, Euratom) 2024/2509), thereby legally enabling the Commission to act as a central purchasing body for these entities.

The framework is designed for rapid deployment without requiring unanimity across the entire Union. Article 38(1) clarifies that the agreement enters into force once signed by the Commission and at least two Member States. Once in force, other Member States, Union entities, and partner organisations selected by the Commission may subsequently accede to the agreement and benefit from it, as detailed in Article 38(6).

Governance: The Steering Committee

A defining feature of the Article 38 agreement is the establishment of a Steering Committee. Article 38(4) mandates that this committee be composed of the Commission and one representative from each participating Member State at the national level. Member States may accede to the agreement at a later stage and will then be represented in the committee. The committee may also appoint additional representatives from Union entities, contracting authorities, and partner organisations.

The Steering Committee's role is strictly strategic, not operational. Article 38(5) clarifies that the Commission retains full responsibility for the operation and management of procurement activities, including the decision to launch a procedure, the choice of procedure type, and the award of contracts. However, the Steering Committee exercises critical oversight:

  • Strategic Oversight: It is responsible for the strategic direction of the procurement agenda for a fixed period.
  • Pre-Launch Approval: It must approve the strategic direction of each procurement procedure before it is launched by the Commission to ensure compliance with the CADA framework.
  • Accession Conditions: Under Article 38(8), the committee sets transparent and non-discriminatory conditions for contracting authorities to accede, including criteria regarding size, minimum amounts, and other objective factors. It also establishes rules for terminating participation if an authority fails to comply with its obligations.

Derogations, Flexibility, and Ancillary Services

The accession agreement introduces specific flexibilities that derogate from standard EU public procurement rules to facilitate broader participation.

  • International Participation: Article 38(9) allows the Steering Committee to approve the participation of contracting authorities from EFTA States and Union candidate countries without the need for a bilateral or multilateral treaty, provided they meet the accession conditions.
  • Ancillary Support: Article 38(10) permits the Steering Committee to make accession conditional on participating entities accepting one or more ancillary support services. These services, defined in Article 37, include technical infrastructure, advice on procurement preparation, and administrative support. This ensures that participating entities can fully utilise the framework's capabilities.
  • Dynamic Accession: Article 38(7) clarifies that the participation of a contracting authority of a Member State is not conditional on that Member State's participation, allowing for granular, authority-level access.

The Critical Link to Dynamic Purchasing Systems (DPS)

For compliance officers and procurement managers, the interaction between the Article 38 agreement and Dynamic Purchasing Systems (DPS) is a pivotal operational detail. Article 39(5) introduces a derogation from the Financial Regulation, allowing participating entities to request to join a DPS throughout its period of validity, subject to Commission approval.

However, Article 39(6) imposes a strict temporal and legal condition on this mechanism. It states that the possibility to join a DPS mid-term is available only to participating entities that accede to the agreement referred to in Article 38 after the dynamic purchasing system has been launched.

This creates a clear legal distinction:

  1. Initial Participants: Entities that are part of the agreement when the DPS is launched participate under the standard rules.
  2. Latecomers: Entities that accede to the Article 38 agreement after a DPS is already active are the only ones eligible to use the mid-term joining mechanism under Article 39(5).
  3. Exclusion: Entities that do not accede to the Article 38 agreement, or those that were already parties to the agreement before the DPS launch, cannot utilise this specific mid-term joining provision.

Furthermore, Article 39(5) limits the scale of such mid-term access: cumulative requests for participation cannot exceed 50% of the initial estimated quantities of the envisaged purchases. This ensures that the original scope of the procurement is not fundamentally altered by late entrants.

What this means for you

For in-house counsel, procurement directors, and compliance officers in public sector bodies, the Article 38 accession agreement represents a new, mandatory layer of contractual obligation and governance participation.

1. The Mandatory Gateway to Centralised Benefits If your organisation intends to leverage the Commission's central purchasing power for cloud or AI services, you must accede to the Article 38 agreement. You cannot simply "buy" from the Commission's framework contracts or dynamic purchasing systems without being a party to this overarching agreement. The agreement defines your rights, obligations, and the strategic direction of the procurements you will utilise.

2. Strategic Oversight and National Representation If your Member State is a signatory to the agreement, you will have a representative on the Steering Committee. This is an active governance role, not a passive one. You will be involved in approving the strategic direction of procurement procedures before they launch. Compliance teams should prepare for the administrative burden of engaging with this committee, ensuring that national procurement priorities and specific sectoral needs are effectively communicated and aligned with the EU-wide strategy.

3. The "Latecomer" Advantage for DPS Access Article 39(6) creates a specific legal pathway for entities that join the framework later. If your organisation decides to accede to the Article 38 agreement after a Dynamic Purchasing System has already been launched, you gain the unique right to join that DPS mid-term. This allows for flexibility in procurement planning, enabling late-joining authorities to access established, high-value frameworks without waiting for a new procedure to start. However, this right is strictly conditional on your accession to the Article 38 agreement; without it, mid-term DPS access is unavailable.

4. Compliance and Termination Risks The agreement includes robust provisions for termination. Article 38(8) empowers the Steering Committee to set rules for terminating the participation of a contracting authority that fails to comply with its obligations. Counsel must monitor ongoing compliance with the agreement's terms, as failure could result in the loss of access to centralised procurement benefits, forcing the organisation back to fragmented, potentially higher-cost national procurement processes.

Common misconceptions

Misconception 1: The Commission runs the procurement alone. While the Commission manages the operational aspects of the procurement (Article 38(5)), it does not act unilaterally. The Steering Committee, composed of Member State representatives, must approve the strategic direction of each procurement procedure before it is launched. National authorities retain significant influence over the agenda and the strategic priorities of the procurement framework.

Misconception 2: Any public body can join a DPS at any time. Article 39(6) strictly limits the ability to join a DPS mid-term. This mechanism is available only to entities that accede to the Article 38 agreement after the DPS has been launched. Entities that were part of the initial launch group, or those that do not accede to the Article 38 agreement at all, cannot use this specific mid-term joining mechanism. Additionally, mid-term participation is capped at 50% of the initial estimated quantities (Article 39(5)).

Misconception 3: The agreement replaces national procurement laws entirely. The Article 38 agreement does not abolish national procurement law. Instead, it provides a specific derogation. Article 39(1) states that a participating entity is deemed to have fulfilled its obligations under applicable Union public procurement law when it acquires supplies or services through contracts awarded by the Commission under this Chapter. However, entities must still comply with the specific terms of the accession agreement and the overarching CADA framework.

Misconception 4: Accession is automatic for all Member States. Accession is not automatic. The Steering Committee sets transparent and non-discriminatory conditions for accession, including potential minimum amounts or size criteria (Article 38(8)). While individual contracting authorities may accede independently of their Member State's participation (Article 38(7)), they must still meet the conditions set by the Steering Committee.

Related

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