EU: New Cloud and AI Development Act

 

As part of the AI Continent initiative, the EU is introducing a new legislative framework to address Europe’s shortfall in cloud and AI infrastructure capacity. The initiative focuses on three key priorities:

• advancing research and innovation to accelerate the greening of compute infrastructure and data centres for cloud and AI;
• facilitating private investment in sustainable cloud and AI capacity, with the goal of tripling the EU’s data processing capacity within the next five to seven years; and
• strengthening the secure processing capacity of EU-based cloud providers.

To support these objectives, the European Commission has proposed the Cloud and AI Development Act (“the proposal”). The proposal seeks to address the limited and geographically concentrated computing capacity within the EU, as well as risks arising from dependence on non-European cloud and AI providers. Its objectives are to:

1. increase computing capacity and expand AI development and deployment in the EU through innovative and sustainable cloud and AI technologies;
2. create attractive conditions for deploying sustainable and innovative computing capacity across the Union;
3. address concerns related to data sovereignty and operational continuity in cloud and AI services; and
4. strengthen resilience in cloud computing services to safeguard public order, particularly in the public sector.

The proposal adopts a coordinated ecosystem approach to enhance the EU’s competitiveness and resilience in cloud and AI. It combines supply-side measures to strengthen domestic capabilities, demand-side measures to encourage adoption, and enabling measures to support innovation and investment. It also places strong emphasis on open-source technologies as a strategic lever for technological sovereignty, in line with the EU Open Source Strategy aimed at promoting European alternatives across the technology stack.

First, the proposal supports projects arising from the research and innovation initiative implemented jointly with Member States. This initiative aims to integrate networks, cloud, AI, and software into cohesive ecosystems to address:

1. future challenges in energy-efficient computing infrastructure;
2. greater autonomy across the cloud technology stack;
3. advanced EU capabilities in frontier AI, physical AI, and industrial AI; and
4. wider adoption of cloud and AI in both public and private sectors.

Particular emphasis is placed on large-scale, cross-sector initiatives tackling strategic technological and industrial challenges (“grand challenges”). These initiatives are intended to demonstrate feasibility, catalyse investment, and create conditions for the development of next-generation infrastructure and technologies.

Second, the proposal addresses the growing shortfall in data centre capacity through a framework designed to simplify and harmonise data centre deployment across the EU while ensuring sustainability. The goal is to triple EU capacity within five to seven years and achieve the required capacity by 2035, while maintaining balanced geographic distribution across Member States. To support this objective, the proposal establishes a mechanism to identify and support strategic data centre projects that incorporate significant innovation and sustainability or contribute to a more balanced distribution of computing capacity.

Third, the proposal seeks to reduce risks associated with the EU’s reliance on third-country cloud service providers by establishing a unified EU sovereignty framework. This framework introduces harmonised, auditable criteria defining different sovereignty levels for cloud computing services. It also provides a process for services to be assessed and formally recognised under specific sovereignty levels.

Finally, Member States will be required to conduct sovereignty risk assessments to identify sectors and use cases requiring services aligned with appropriate sovereignty levels. This is intended to ensure adequate protection of data confidentiality, maintain operational autonomy, and prevent disruptions that could undermine public order.