Summary As proposed in the Cloud and AI Development Act (CADA), the procurement agreement under Article 38 is the foundational legal instrument enabling the European Commission to act as a central purchasing body for Member States. Before any procurement activity can launch, the Commission and at least two Member States must conclude this agreement, which must explicitly define practical arrangements for participation, decision-making, evaluation, and award procedures, as well as the applicable law and jurisdiction. Crucially, the agreement must establish a Steering Committee composed of the Commission and national representatives to provide strategic oversight. However, the proposal maintains a strict separation of powers: while the Committee approves the strategic direction of each procedure, the Commission retains exclusive operational responsibility for launching procedures, selecting procedure types, and awarding contracts.

Detail

The Cloud and AI Development Act (CADA), as set out in COM(2026) 502 final, introduces a centralized procurement mechanism in Title IV, Chapter IV to leverage collective purchasing power for data centre services, cloud computing services, software, and AI systems. This mechanism is not self-executing; it is strictly conditional upon the prior conclusion of a formal agreement between the Commission and participating Member States.

The Mandatory Nature and Timing of the Agreement

Under Article 38(1), the Commission and at least two Member States must enter into an agreement laying down the practical arrangements for procurement activities before any procurement activity is carried out under Article 37. This agreement serves as the legal mandate for the Commission to procure on behalf of, or in the name of, the participating entities.

The proposal explicitly states that this agreement is "deemed to satisfy the requirements of the joint procurement agreement and mandate referred to in Article 168(2) and (3) of Regulation (EU, Euratom) 2024/2509" (the Financial Regulation). This legal fiction is designed to streamline the process, ensuring that the Commission's actions under CADA are immediately recognized as compliant with existing EU financial rules without requiring separate, parallel mandates for each procurement procedure.

Required Contents: Participation, Decision-Making, and Legal Framework

Article 38(3) provides a non-exhaustive but mandatory list of the minimum components that this agreement must contain. These provisions are engineered to balance the strategic interests of Member States with the operational efficiency required for the Commission to act as a central buyer. The agreement must include:

  1. Practical Arrangements for Participation: The agreement must define the mechanisms by which entities join the framework. This includes the decision-making process for the choice of procedure and the applicable conditions for participation. It must also detail the evaluation of requests for participation and the evaluation of tenders.
  2. Award of Contracts: The agreement must specify the rules governing the award of contracts. This ensures transparency and consistency in how winning bids are selected and notified across different Member States.
  3. Applicable Law and Jurisdiction: Given the cross-border nature of the participants (Union entities, Member State contracting authorities, and potentially partner organisations), the agreement must clearly state the applicable law and the competent jurisdiction for any disputes arising from the procurement activities. This is critical for legal certainty in a multi-jurisdictional environment.
  4. Commission's Operational Responsibility: Crucially, Article 38(3) states that "The Commission shall remain responsible for the operation and management of procurement activities." This clause explicitly reserves the following powers for the Commission:
    • The decision to launch a procurement procedure.
    • The selection of the type of procedure used (e.g., open, restricted, competitive dialogue).
    • The type of contract to be awarded.
    • The final award of contracts.

This separation of powers is fundamental to the CADA model. While Member States influence the what and why through the Steering Committee, the Commission controls the how and when to ensure agility and uniformity.

Establishment and Role of the Steering Committee

Article 38(4) mandates the establishment of a Steering Committee as an integral part of the agreement. The composition and function of this body are strictly defined to ensure democratic oversight without bureaucratic paralysis:

  • Composition: The Steering Committee is composed of the Commission and one representative from each participating Member State at the national level.
  • Accession: Member States may accede to the agreement at a later stage. Upon accession, they are automatically represented in the Steering Committee.
  • Additional Representatives: The Steering Committee may appoint additional representatives of other Union entities, contracting authorities of Member States, and partner organisations selected by the Commission. This allows for granular input from the actual end-users of the procured services, ensuring that the strategic direction reflects the needs of the broader public sector.

Strategic Oversight vs. Operational Management

The division of labor between the Steering Committee and the Commission is explicitly delineated in Article 38(5). The Steering Committee is responsible for the strategic oversight of procurement activities. This includes:

  • Proposing the strategic direction of the procurement agenda for a fixed period.
  • Approving the strategic direction of each procurement procedure before it is launched by the Commission.

However, the Steering Committee is not responsible for the day-to-day operations of procurement activities. Operational management, including the setting of fees and the execution of tenders, remains the sole responsibility of the Commission. This structure aims to prevent bureaucratic bottlenecks while ensuring that Member States retain democratic control over the strategic use of public funds. The Explanatory Memorandum reinforces this, noting that the Committee provides "strategic guidance" while the Commission retains "responsibility for the operation and management."

Flexibility, Derogations, and Legal Effect

The agreement also provides for significant flexibility in participation. Article 38(6) notes that once the agreement enters into force, contracting authorities, Union entities, and partner organisations may accede to and benefit from it. The Steering Committee may determine that the agreement takes the form of a contract of adhesion, simplifying the onboarding process for new participants.

Furthermore, Article 38(9) introduces a significant derogation from standard international procurement rules. The Steering Committee may approve the participation of contracting authorities from EFTA States and Union candidate countries without the need for a bilateral or multilateral treaty, provided this is done in accordance with the agreement's terms. This expands the potential market and pool of participants beyond strict EU membership, fostering a broader European digital ecosystem.

The legal effect of the agreement is profound. Under Article 39(1), a participating entity is 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. This creates a "safe harbor" for Member States, relieving them of the need to run their own parallel procurement procedures for the services covered by the Commission's central purchasing activities.

What this means for you

For in-house counsel and compliance officers in Member State contracting authorities, the CADA procurement agreement represents a shift from autonomous procurement to a coordinated, centrally managed model. Your primary obligations will revolve around participation in the Steering Committee and adherence to the agreement's terms.

  1. Strategic Engagement: You must actively engage with the Steering Committee. While the Commission manages the process, your representative on the Committee has the power to approve or reject the strategic direction of specific procurement procedures. Failure to engage could result in procurement outcomes that do not align with your national or institutional priorities.
  2. Legal Review of the Agreement: Before acceding to the agreement, legal teams must rigorously review the clauses on applicable law and jurisdiction (Article 38(3)). Understanding which national or EU courts have jurisdiction over disputes is critical for risk management, especially given the cross-border nature of the services.
  3. Operational Reliance: Once the agreement is in force and you participate, you are relieved of standard public procurement procedural obligations for the specific services procured by the Commission (Article 39(1)). However, you must ensure that your internal contracts with end-users comply with the initial contractual provisions imposed by the Commission (Article 39(3)).
  4. Fee Payment: Participating entities are required to pay fees to the Commission to cover the costs of the procurement activities (Article 40). Compliance officers must ensure that budgetary provisions are in place to meet these fee obligations, which are set to cover direct and indirect costs incurred by the Commission.
  5. Timelines: The agreement must be in place before any procurement begins. Legal teams should monitor the Commission's draft agreements and prepare for rapid negotiation cycles, as the Commission aims to launch procedures quickly to address market gaps in cloud and AI capacity.

Common misconceptions

Misconception 1: The Steering Committee runs the procurement. Many assume that because Member States are represented on the Steering Committee, they control the tender process. This is incorrect. Article 38(3) and (5) clearly state that the Commission remains responsible for the operation, launch, procedure type, and award. The Steering Committee only provides strategic oversight and approves the strategic direction.

Misconception 2: Any Member State can join immediately. The agreement requires at least two Member States to enter into it initially (Article 38(1)). Other Member States can accede later, but this is subject to the conditions set by the Steering Committee, including potential size or minimum amount criteria (Article 38(8)). It is not an open-door policy from day one.

Misconception 3: The agreement overrides all national procurement law. While Article 39(1) deems participating entities compliant with Union public procurement law for the specific contracts awarded by the Commission, it does not override all national law. Entities must still comply with internal financial rules and any specific national security restrictions that may apply to the use of the procured services, particularly if they involve sensitive data requiring higher Union assurance levels.

Misconception 4: EFTA and candidate countries are automatically excluded. Standard EU procurement rules often require bilateral treaties for non-EU participation. However, Article 38(9) explicitly allows the Steering Committee to approve participation from EFTA States and Union candidate countries without the need for such treaties, provided the agreement's terms are met. This is a significant flexibility that legal teams should leverage to broaden the competitive field.

Related

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