Summary Under the proposed Cloud and AI Development Act (CADA), fees charged within the EuroCloud Federation must be strictly limited to the costs incurred by the sharing entity. Article 35(5) explicitly states that such fees "shall not constitute a pecuniary interest" within the meaning of Directive 2014/24/EU. This legal distinction is the cornerstone of the federation's design: it ensures that sharing cloud capacity between public bodies remains a form of public-sector cooperation driven by public interest, rather than a commercial transaction. By prohibiting profit-making, the proposal prevents the arrangement from triggering EU public procurement rules and avoids distorting competition with private cloud providers.

Detail

The EuroCloud Federation, established by Article 34 of the proposed CADA (COM(2026) 502 final), is designed to facilitate the voluntary sharing of data centre and cloud computing services among Union entities and public sector bodies. While the federation aims to optimize the use of idle public capacity and enhance strategic autonomy, its financial architecture is tightly constrained to preserve its non-commercial nature.

The Legal Mechanism: Article 35(5) and "Pecuniary Interest"

The core financial rule is found in Article 35(5). It permits a "sharing entity" (the public body providing the service) to charge a fee to a "using entity" (the public body receiving the service). However, this permission is heavily qualified:

"The amount of the fee shall be limited to the costs that the sharing entity incurs in relation to the sharing of the service and shall not constitute a pecuniary interest within the meaning of Article 2 of Directive 2014/24/EU and Regulation (EU, Euratom) 2024/2509."

This provision creates a binary legal test. If a fee exceeds the actual costs incurred, it becomes a "pecuniary interest." Under EU public procurement law, a contract awarded for pecuniary interest is a "public contract" subject to the full rigour of Directive 2014/24/EU. This would require competitive tendering, transparency obligations, and strict procedural timelines. By mandating that fees be strictly cost-recovery, CADA ensures the arrangement falls outside the definition of a public contract, thereby exempting it from these burdensome procedures.

The Rationale: Public Interest vs. Market Distortion

The requirement for cost-based fees serves two primary policy objectives outlined in the proposal's recitals:

  1. Preserving Public-to-Public Cooperation: Recital 73 clarifies that cooperation within the EuroCloud Federation "should be governed solely by considerations of public interest, and should not entail any form of consideration in exchange for another." The proposal views the sharing of capacity as a collaborative effort to improve resilience and efficiency, not a trade. If fees were set at market rates or included a profit margin, the transaction would resemble a commercial sale, undermining the cooperative rationale and potentially requiring the sharing entity to act as a market operator subject to state-aid and competition rules.

  2. Avoiding Distortion of Competition: Recital 70 explicitly states that members of the federation must comply with requirements to "avoid any distortion of competition in relation to private economic operators."

    • If fees are too high: The public entity acts as a commercial competitor, potentially crowding out private providers.
    • If fees are too low (subsidized): The public entity could offer services below cost, engaging in predatory pricing that private providers cannot match.
    • The Cost-Based Solution: By limiting fees to the actual costs of sharing (e.g., allocating resources, managing access, ensuring interoperability), the federation ensures a level playing field. The public entity is merely recovering the marginal cost of sharing its own assets, not competing on price.

Defining "Costs" in the EuroCloud Context

The proposal provides a specific, non-exhaustive definition of the costs that may be recovered. According to Recital 73, these are limited to "the additional costs incurred in the sharing of capacity." These include:

  • Allocating and isolating resources.
  • Managing access.
  • Enabling the integration and interoperability of resources.
  • Ensuring compliance with applicable Union law.
  • Managing the sharing relationship itself.

Crucially, the fees levied "shall not be deemed as a consideration for the provision of a service." This reinforces that the payment is an administrative cost-sharing mechanism, not a purchase price.

What this means for you

For legal counsel, finance officers, and IT directors in public sector bodies, the cost-based fee requirement imposes strict operational and governance obligations.

1. Rigorous Cost Accounting and Segregation

You cannot simply apply a standard markup or a flat rate. You must implement a granular accounting system capable of isolating the marginal costs of sharing.

  • Action: Identify and track only the specific costs listed in Recital 73 (e.g., the cost of a specific API call for access management, the incremental electricity for isolated resources).
  • Risk: Allocating general overheads (e.g., building rent, general staff salaries) that are not directly attributable to the sharing activity could be interpreted as a "pecuniary interest," triggering procurement rules.

2. Contractual Safeguards

Inter-entity agreements within the federation must explicitly reference the legal basis for the fee structure.

  • Action: Draft agreements that cite Article 35(5) and explicitly state that the fee is "limited to costs incurred" and "does not constitute a pecuniary interest."
  • Risk: Ambiguous language regarding "service fees" or "usage charges" could lead national audit courts or competition authorities to reclassify the arrangement as a public contract, invalidating the sharing arrangement and requiring retroactive tendering.

3. Audit and Evidence Readiness

Since the exemption from procurement rules hinges on the absence of a profit motive, the burden of proof lies with the sharing entity.

  • Action: Maintain a clear audit trail showing the calculation of the fee. Be prepared to demonstrate that the fee equals the cost, not cost-plus.
  • Risk: If an audit reveals that the fee generated a surplus, the arrangement could be deemed a violation of procurement law or state-aid rules.

4. Monitoring Delegated and Implementing Acts

Article 35(6) empowers the Commission to adopt implementing acts specifying the technical and organisational measures for the federation.

  • Action: Monitor the development of these acts, as they may provide the definitive methodology for calculating "additional costs." Until then, adopt a conservative approach, ensuring fees do not exceed verifiable direct costs.

Common misconceptions

"Cost-based means the fee is zero." No. Article 35(5) explicitly allows for a fee. The sharing entity can charge for the additional costs incurred in the sharing process (e.g., the cost of setting up a secure access tunnel or isolating a specific server cluster). The prohibition is against profit, not against cost recovery.

"Public bodies can share services at any price as long as both agree." Incorrect. The price is not a matter of mutual agreement; it is a matter of legal compliance. If the agreed price exceeds the actual costs incurred, the transaction becomes a "public contract" subject to Directive 2014/24/EU, regardless of the parties' intent.

"The EuroCloud Federation allows public bodies to undercut private providers." The proposal is designed to prevent this. By strictly limiting fees to costs, the federation ensures that public bodies are not engaging in predatory pricing. They are merely recovering the cost of sharing their own infrastructure. Private providers remain the primary market actors for commercial needs, while the federation serves as a supplementary, non-commercial tool for public resilience.

"Any cost can be passed on." No. Only "additional costs incurred in the sharing of capacity" are permissible. General operational costs of the data centre (e.g., baseline cooling, base staff salaries) that would exist regardless of the sharing arrangement cannot be passed on. Doing so would likely constitute a pecuniary interest.

Related

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