Summary The proposed Cloud and AI Development Act (CADA) introduces three specific derogations from the EU Financial Regulation (Regulation (EU, Euratom) 2024/2509) to enable the European Commission to act as a central purchasing body for cloud and AI services. As proposed, these exceptions allow partner organisations selected by the Commission to participate in procurement (Article 37(1)), permit late entry into dynamic purchasing systems (DPS) subject to a 50% volume cap (Article 39(5)), and enable EFTA States and candidate countries to join without a bilateral treaty (Article 38(9)). These measures are designed to aggregate public sector buying power to strengthen the EU's cloud ecosystem and reduce strategic dependencies.

Detail

The Cloud and AI Development Act (CADA) establishes a framework for the Commission to procure data centre services, cloud computing services, software, and AI systems on behalf of Union entities and Member State contracting authorities. To facilitate this "common procurement framework," CADA introduces targeted derogations from the standard rules of the EU Financial Regulation. These exceptions are designed to remove administrative barriers that typically hinder cross-border, multi-entity procurement under current EU law.

1. Expansion of Eligible Participants: Partner Organisations (Article 37) Under the standard Financial Regulation, the Commission's ability to procure on behalf of others is generally limited to Union entities and Member State authorities. Article 37(1) of CADA broadens this scope significantly. It states: "By way of derogation from Article 168 of Regulation (EU, Euratom) 2024/2509, partner organisations referred to in Article 168(3) of that Regulation selected by the Commission may also participate in the procurement activities set out in this Chapter."

This derogation allows the Commission to extend its procurement reach to include "partner organisations" selected by the Commission. The text explicitly defines the scope of participation: "Contracting authorities of Member States, Union entities, and partner organisations selected by the Commission, shall be considered as 'participating entities' under this Chapter." This expansion is critical for creating a sufficiently large aggregated demand pool to negotiate favorable terms with cloud providers, aligning with the Act's objectives of strengthening the EU's cloud ecosystem and reducing dependencies.

2. Late Entry into Dynamic Purchasing Systems (Article 39) Dynamic purchasing systems (DPS) are electronic tools for ongoing procurement. Typically, adding new participants after a system is established is restricted to prevent market distortion and ensure fairness. Article 39(5) of CADA introduces a specific exception to the Financial Regulation's volume limits to maintain the framework's attractiveness over time.

The provision allows participating entities that join the common procurement framework after a DPS has been established to be included in the system. It states: "By way of derogation from Article 168 of Regulation (EU, Euratom) 2024/2509, participating entities may request from the Commission, throughout the period of validity of a dynamic purchasing system, the possibility to participate in the system."

Crucially, this derogation is conditional to protect the integrity of the initial tender. The Commission may approve such requests provided that "the cumulative requests do not exceed 50% of the initial estimated quantities of the envisaged purchases." Furthermore, the text mandates a rapid decision timeline: "The participation shall be approved within 10 working days of receipt of the request." This mechanism ensures that the common procurement framework remains flexible for new entrants without destabilizing the initial market assessment or the rights of existing participants.

3. Admission of EFTA and Candidate Countries (Article 38) The common procurement framework is governed by an agreement between the Commission and participating Member States. Article 38(9) of CADA modifies the standard requirements for international participation, which typically require a bilateral or multilateral treaty. It states: "By way of derogation from Article 168(2) of Regulation (EU, Euratom) 2014/2509, 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 for such possibility."

Note on Drafting: The CADA proposal text contains a drafting error in this specific cross-reference. It cites "Regulation (EU, Euratom) 2014/2509" instead of the correct current Financial Regulation, "Regulation (EU, Euratom) 2024/2509." The number 2014/2509 does not exist as a Financial Regulation (the 2014 regulation was 966/2013). The intent is clearly to derogate from the current Financial Regulation's requirement for treaties to allow non-EU participation in Union procurement.

This derogation lowers the barrier for EFTA States (Iceland, Liechtenstein, Norway, and Switzerland) and candidate countries to join the EU's collective cloud procurement efforts. The Steering Committee, composed of the Commission and Member State representatives, holds the discretion to approve such participation based on transparent and non-discriminatory conditions.

Governance and Oversight These derogations are not unilateral powers of the Commission. Article 38 establishes a Steering Committee responsible for strategic oversight. While Article 38(4) establishes the committee's composition, it is Article 38(8) that explicitly grants the power to set conditions: "The Steering Committee shall set transparent and non-discriminatory conditions for contracting authorities of Member States to accede to the agreement." Furthermore, Article 39(6) clarifies that the late-entry derogation is only available to entities that accede to the agreement referred to in Article 38 after the DPS has been launched, ensuring that the rights of original participants are not retroactively altered.

What this means for you

For in-house counsel, procurement officers in public sector bodies, and legal teams in large private entities acting as central purchasing bodies, these derogations signal a shift toward more flexible, EU-coordinated procurement.

  • Opportunity for Aggregated Buying Power: If your organisation is a "partner organisation" selected by the Commission, you can now participate in Commission-led procurement procedures that were previously inaccessible. This could lead to better pricing and terms for cloud and AI services, leveraging the collective volume of the EU public sector.
  • Flexibility for Late Adopters: If your Member State or authority joins the common procurement framework after a dynamic purchasing system is already live, you are not locked out. You can apply to join, subject to the 50% volume cap. Ensure your internal procurement teams are ready to submit requests promptly, as the Commission has a strict 10-working-day window to approve them.
  • Cross-Border Collaboration: For authorities in EFTA or candidate countries, the removal of the treaty requirement simplifies participation significantly. However, compliance with the Steering Committee's conditions will be mandatory, and participation is not automatic but subject to approval.
  • Monitoring Deadlines: Keep track of the establishment of the common procurement agreement (Article 38) and the subsequent launch of DPSs. The derogations apply only within the validity period of these systems and agreements.
  • Compliance with Derogation Conditions: Ensure your procurement documentation aligns with the "participating entity" status and the specific derogation conditions cited above. Failure to adhere to the 50% cap or the timing of entry could invalidate participation.

Common misconceptions

"The Commission can add unlimited new buyers to any procurement." No. Article 39(5) explicitly caps late entries. The cumulative volume of new participants cannot exceed 50% of the initial estimated quantities. This protects the integrity of the original market consultation and tender, ensuring that late entrants do not distort the initial economic balance.

"EFTA and candidate countries can automatically join any EU procurement." No. Article 38(9) allows the Steering Committee to approve participation without a treaty. It is not an automatic right. The Steering Committee sets transparent conditions, and participation is subject to their decision. The derogation removes the treaty requirement, not the approval requirement.

"Partner organisations have the same rights as Member States." Not entirely. While Article 37(1) allows partner organisations to participate as "participating entities," their status is defined by Commission selection. They do not automatically have voting rights in the Steering Committee unless specifically appointed as representatives of other entities under Article 38(4). Their participation is contingent on being "selected by the Commission."

"These derogations apply to all EU procurement." No. These exceptions are strictly limited to the "common procurement framework" for data centre services, cloud computing services, software, and AI systems under Title IV of CADA. They do not alter the general Financial Regulation for other sectors or procurement activities outside this specific framework.

Related

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