What happens if a UK government removes benefits from EU citizens in breach of the withdrawal agreement?

 

 

Professor Steve Peers, Law School, Royal Holloway University of London

 

Photo credit: Martin Robson, via Wikimedia Commons

 

Recently the Reform Party proposed that in government it would withdraw benefits from all non-UK citizens, including from those EU citizens who had moved to the UK before the end of 2020. It acknowledged that this would breach the Brexit withdrawal agreement (for an annotated text of the rules on EU and UK citizens’ rights under the agreement, see here, particularly Article 15).

 

Legally the EU response if the UK breached the withdrawal agreement on this issue (I’m assuming the Reform government would amend UK legislation as needed, to ensure that the breach was valid as domestic law) would be to challenge it in the arbitration process which the withdrawal agreement set up. (For an annotated text of the dispute settlement rules, see here). A dispute can be settled politically; if not settled, it goes to arbitration. An arbitration decision is binding, so if a party is found in breach of the withdrawal agreement, it is legally obliged to comply with the ruling.

 

But what if it does not comply with the ruling? The key provision is Article 178, which provides first of all that fines can be imposed upon the party that remains in breach of the treaty despite an arbitration ruling. Article 178 goes on to refer to possible additional retaliation for a continuing breach, but (in paragraph 2(a)) it says that such retaliation cannot concern Part Two of the withdrawal agreement, ie the citizens’ rights provisions. Therefore, the EU cannot respond to the UK breach of EU citizens’ rights by taking UK citizens’ reciprocal rights away. Instead, Article 178 refers to possible retaliation under other agreements (paragraph 2(b)), which brings us to the Trade and Cooperation Agreement (TCA).

 

The TCA has a separate set of dispute settlement rules, which I have annotated here. The key provision on links with the withdrawal agreement is Article 749(4) of the TCA. It states that a continuing breach of the withdrawal agreement can also result in suspension of parts of the TCA, ie tariffs on goods or suspension of other provisions of the agreement (subject again to some limits on the subject-matter of retaliation, ie the retaliation cannot affect social security).

 

The retaliation must be proportionate though, and if the party in breach argues that the amount of that suspension is disproportionate, the arbitration panel can be recalled to rule on the point (Article 178(3) of the withdrawal agreement).

 

One possible form of retaliation which would arguably be proportionate would be to reimpose tariffs equal to the amount of benefits EU citizens would be losing as a result of the breach, to which they would otherwise be entitled under the withdrawal agreement. So if the breach of the agreement caused EU citizens to lose €1 billion in benefits, UK goods exports would face €1 billion in tariffs. Under the World Trade Organisation, in comparable cases, the EU has targeted high profile exports from its trading partner in breach of the rules; for the UK, that might mean higher tariffs in particular on Scottish salmon or whisky, or Jaguar cars. To be clear, this is speculation – the EU might prefer another type of retaliation which is allowed under the agreements. And the EU would be charging its usual tariff rate for countries which it does not have a free trade deal with, which would only mean a big increase for some products.

 

It’s possible it wouldn’t get to this stage: the EU might decide to negotiate changes to the withdrawal agreement; indeed the Reform Party document states that it will ‘renegotiate’ the treaty. But a treaty can only be renegotiated if all parties agree; and it seems very unlikely politically that the EU would agree, given the priority which it placed on the issue before. (On the EU side, an amendment would need to be agreed by a qualified majority of Member States, having been proposed by the Commission, after consent of the European Parliament).

 

As for additional possible sanctions, the EU might, for instance, suspend talks on other issues with the UK. It could even suspend or terminate the entire TCA, although arguably the rule on proportionality of retaliation applies here. In practice, during prior disputes with the UK, the EU has preferred the negotiation and dispute settlement route rather than escalation: both the EU and the UK have previously triggered disputes under the withdrawal agreement and the later Trade and Cooperation Agreement, although only one dispute has got as far as an arbitration decision.

 

For instance, when the EU disputed the UK’s application of (what was then) the Northern Ireland protocol to the withdrawal agreement, it suspended talks on the UK’s participation in EU research programmes and began dispute settlement proceedings, but it put the latter on hold pending negotiations, which eventually resulted in a revised version of the protocol known as the Windsor Framework – after Liz Truss lost her nail-biting contest with a lettuce.

 

As for terminating the whole withdrawal agreement, as discussed further here, there is no termination clause (apart from the trade aspects of the Windsor Framework, subject to certain conditions), and in any event the EU would have no interest in terminating the basis for the Windsor Framework and the protection of its citizens’ rights. Nor does a breach of a treaty automatically terminate it, under international law – which has a whole Latin phrase (pacta sunt servanda) for the importance of upholding treaties. (Though to be fair, international law has a Latin phrase for nearly everything)

 

Anyway, as has been pointed out, EU citizens might choose to apply for UK citizenship before any new UK rules took effect.

 

All of this points to a policy that, on this point at least, seems as ill-thought-through as Mr Farage’s decision not to declare the significant gifts he received shortly before becoming an MP, including those from a convicted money-launderer.

What is wrong with the decision to exclude some Ukrainians from temporary protection?

 

 

Dr. Meltem İneli Ciğer, Associate Professor of International Law, Suleyman Demirel University Faculty of Law, Türkiye; Honorary Fellow, School of Law and Social Justice, University of Liverpool

With comments from Professor Steve Peers, Law School, Royal Holloway University of London

 

Photo credit: President of Ukraine, via Wikimedia Commons

 

 

Nearly every year since I started teaching temporary protection and the Council Directive 2001/55/EC of 20 July 2001 (Temporary Protection Directive) at the Odysseus Summer School in 2022, a familiar pattern has emerged. Each year, while updating my PowerPoint slides, the European Commission adopts a proposal to extend the temporary protection regime implemented for Ukrainians fleeing the full-scale Russian invasion. I usually read and incorporate this new development, either the Commission Proposal or the adopted Council Implementing Decision, when I am flying to Brussels. This year is no exception.

 

This year’s Proposal for a Council Implementing Decision (COM(2026) 345 final) marks a departure from previous practice. Aside from proposing to extend temporary protection for an additional year, namely until 4 March 2028, the Commission is proposing, for the first time, to restrict the scope of temporary protection for a specific subset of newcomers. In particular, Article 2 of the Proposal targets newly arriving Ukrainian citizens who are subject to military service obligations under Ukrainian law and who lack explicit, official authorisation from the Ukrainian authorities to leave the country. By proposing this conditionality, the Commission is effectively linking eligibility for temporary protection to the enforcement of a home state’s conscription laws.

 

I have written here and here why I believe these yearly extensions run contrary to the Temporary Protection Directive itself and the risks they bring. This year, however, I will do something different. Since over the years, I have covered the legal problems with yearly extensions, I want to focus specifically on the legal questions brought by the new proposal, namely, those relating to the new restrictions it introduces.

 

Here, I will pose four main legal questions relating to these new restrictions and give my opinion on them. I should mention that the idea to write this post emerged from an exchange on LinkedIn, where I am a somewhat active user, and the comments I received from Steve Peers. I asked Steve to include his answers to these questions, to provide a ‘devil’s advocate’ perspective on some points. Finally, I should mention the sources that can help this analysis. You can watch the Commission’s official press conference video, where some similar questions were posed to the Commission. Additionally, a recent Council of Europe report explicitly warns about the human rights risks of the proposed restriction of scope. Of course, these legal questions will only arise if the proposal is adopted as it is. What are they?

 

Update: The European Commission proposal was adopted by the Council as Implementing Decision (EU) 2026/1912 on 30 July 2026 and published on 4 August 2026. The Implementing Decision (EU) 2026/1912 extends temporary protection for displaced Ukrainians (those indicated in Article 2 of Council Implementing Decision (EU) 2022/382) (Article 1). While the core initiative to condition temporary protection on compliance with Ukrainian military obligations was included in the final text, the Council introduced several operational additions. First, temporary protection will now only be granted to new arrivals who prove compliance with, or exemption from, their military obligations in Ukraine (Article 2(1) & Recital 16). The decision explicitly retains temporary protection status for individuals who enjoyed temporary protection in a Member State on or before 30 July 2026 and continuously maintain that status. The new restriction applies solely to new applicants from 31 July 2026 onwards (Article 3). Second, the Council clarified how compliance must be proved. Applicants bear the burden of proof, which can be satisfied via an official passport exit stamp, border-crossing records, or digital certification through Ukraine’s Reserv+ application (Recital 18). Third, the Decision explicitly notes that draft evasion and desertion do not, by themselves, constitute grounds for refugee status or subsidiary protection under international standards (Recital 8). Finally, the Council recommends that Member States must reject new residence permit applications under Article 8(1) of the TPD if the applicant already holds a permit in another Member State (Recital 5 and Recital 6).

 

Question 1: Is restricting the scope of temporary protection and excluding newly arriving military-age men from Ukraine discriminatory?

Meltem: Yes, there is a very strong legal argument that this specific restriction is discriminatory under both EU and international human rights frameworks. First, let us look at who is excluded: Article 2 of the proposal explicitly targets newly arriving Ukrainian citizens who are subject to military service obligations under Ukrainian law and who lack official authorisation from the Ukrainian authorities to leave the country. Because martial law and mobilisation frameworks in Ukraine predominantly apply to adult males aged 18 to 60, this measure selectively excludes military-age men from receiving temporary protection in the EU in future.

Article 21 of the Charter of Fundamental Rights strictly prohibits any form of discrimination based on sex or nationality. By implementing a rule that disproportionately and systematically strips temporary protection eligibility away from mostly adult men, the proposal introduces a gender-discriminatory measure. Treating newly arriving men less favourably than women fleeing the same conflict zone creates direct friction with this principle of equal treatment. This is further reinforced by Article 14 of the European Convention on Human Rights (ECHR), which prohibits sex-based discrimination when read alongside the protection of fundamental rights under Article 3 or Article 8 ECHR (cf para 30 here). Of course, although these excluded individuals will retain their absolute right to apply for asylum under Article 18 of the Charter, this route opens up further complex legal questions. Most notably, what happens if their international protection claim is rejected?

If a Member State examines an individual’s asylum (ie international protection) claim (which can still be made, according to the temporary protection Directive, even if temporary protection is refused), and concludes that evading conscription under these specific circumstances does not meet the high threshold for refugee status or subsidiary protection, the individual is left in a dangerous legal vacuum. Because they are barred from registering as temporary protection beneficiaries by this new proposal, this may expose them to the immediate risk of a return decision. 

Update: This legal issue persists. I still argue that linking eligibility for temporary protection to a third state’s military conscription rules creates direct friction with the principle of non-discrimination. Whilst Recital 22 notes that “[t]his Decision respects fundamental rights and observes the principles recognised by the Charter of Fundamental Rights of the European Union”, and Article 2(1) explicitly states that the condition applies “[w]ithout prejudice to Union law and fundamental rights”, it remains unclear how the resulting differential treatment can be justified. The Decision not only creates a distinct divide between newly arriving individuals, who must present proof of compliance with military obligations and those who enjoyed temporary protection in a Member State on or before 30 July 2026 and continuously retain that status, but it also creates a division between individuals subject to military obligations (predominantly adult males aged 18 to 60) and all other newly arriving displaced persons. The Council explicitly relies on Ukraine’s evolving defence and conscription needs (Recitals 13, 16, and 17) as the sole justification for this conditionality. However, can a third country’s military needs legitimately justify gender-disproportionate and selective treatment under EU fundamental rights standards? That for me remains highly doubtful. In a weak attempt to counter the issues concerning gender discrimination, Recital 20 notes that:

“It is possible that Ukrainian nationals who are not subject to conscription have military obligations, irrespective of their age or gender, because they enlisted or otherwise due to responsibilities related to military activities.”

So, the Council frames military compliance as a gender-neutral conditionality, which remains unconvincing. In practice, martial law and statutory conscription in Ukraine predominantly apply to adult males aged 18 to 60. Pointing to a very small minority of women who voluntarily enlist or hold specific military roles does not alter the reality that this new restriction on scope overwhelmingly impacts military-age men.    

Although Recital 8 recalls that temporary protection does not prejudice the right to apply for international protection, it explicitly adds that “in accordance with international standards, desertion and draft evasion are not considered, by themselves, to be grounds for international protection”. Newly arriving individuals with military obligations who apply for international protection but lack distinct personal circumstances justifying refugee status or subsidiary protection risk having their claims rejected and being issued a return decision. Bear in mind, the recognition rate for Ukrainians (all Ukrainians irrespective of military obligations) was around 45% in May 2026, according to the EUAA. As Steve pointed out, Member States remain bound to assess individual non-refoulement risks and ongoing conflicts and human rights conditions in Ukraine before executing any return decision. However, Member States’ approaches to evaluating such asylum claims and conducting return assessments are likely to diverge significantly in practice.

Steve: A devil’s advocate view: the Charter also provides for possible restrictions of Charter rights in its Article 52, which allows limitations on rights to support ‘objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others’. The argument here is that the EU is seeking to support the Ukrainian defence effort, which could be described either as an objective of general interest, or protection of the rights and freedoms of others. The measure is arguably proportionate as long as the return of each Ukrainian citizen in the individual case would not amount to non-refoulement (and only provided that any application for international protection they have made has failed on the merits; the concerns raised about human rights and conscription in Ukraine can obviously be argued in this context). Unlike the Commission’s proposal, the Council decision explicitly confirms the possibility of applying for international protection instead.

One point about the evidence now necessary to show that temporary protection applicants comply with the new rules: the new extension decision refers to Ukrainian controls on exit (‘when leaving’ and ‘a legal departure’); it does not suggest that Member States’ authorities should be filtering Ukrainians as temporary protection applicants at the EU’s external borders.

 

Question 2: Does the Temporary Protection Directive give the Council the power to restrict its scope after four years of its activation?

 

Meltem: No, it does not. Neither Article 5 nor any other provision in the temporary protection Directive (TPD) grants any power to the Council to retroactively alter, narrow, or restrict the objective scope of who qualifies for that protection via a yearly implementing decision. Article 5 is invoked by the Commission in the Proposal to justify restricting the scope of the TPD’s application. However, if you look closely at the TPD, you will see Article 5 is intended to designate the specific categories of persons eligible for temporary protection at the very beginning, when there is a mass influx. It does not give the Council the power to dynamically designate or exclude different groups in subsequent yearly extensions. In my opinion, attempting to introduce new restrictions now is completely contrary to the TPD provisions. These new restrictions essentially introduce new exclusion grounds for temporary protection status. When looking at Article 28 of the Directive, which explicitly sets out the allowed exclusion grounds, it is clear that the new restrictions are also not permitted as additional exclusion grounds.

Update: This statutory concern remains unresolved in the adopted text. In adopting Council Implementing Decision (EU) 2026/1912, the Council explicitly relies on Articles 4(2) and 5(3), point (a) of the TPD as its legal basis. What I have previously argued still applies.

Steve: Again, a devil’s advocate might argue the opposite here – that this is not an issue of a new exclusion from temporary protection (which would definitely need an amendment to the parent Directive to be created), but rather a narrowing of those included by temporary protection. The scope of people included by the current iteration of temporary protection is defined not by the parent Directive, but by the 2022 decision to trigger it in response to the main Russian invasion of Ukraine, which has been amended (to extend its duration) several times already. The parent Directive is silent on the issue of whether the scope of who is covered by temporary protection can be altered (either to narrow it or to widen it) after temporary protection is triggered, but perhaps the earlier CJEU judgment in Kaduna – which accepted that Member States could narrow the scope of any ‘optional’ temporary protection they initially offered on top of the EU minimum if they chose – applies by analogy to EU-wide temporary protection, ie the EU can narrow the scope of temporary protection it initially offered, as long as the parent Directive’s test for terminating temporary protection is met for the specific group of people being removed from the scope of that protection as regards future applications. That test is:

...the situation in the country of origin is such as to permit the safe and durable return of those granted temporary protection with due respect for human rights and fundamental freedoms and Member States' obligations regarding non-refoulement.

It might, of course, be argued that this test is not met for men of military age. In any event, the parent Directive’s guarantee that they can apply for international protection at any time, and the Return Directive’s guarantee that they cannot be refouled, have to be satisfied too, on an individual basis.

It might also be argued that since the parent Directive only sets minimum standards, it must remain open to Member States to grant temporary protection to military age men as an option, as long as they are fleeing Ukraine for the same reason as others seeking temporary protection (see the Kaduna judgment by analogy, as regards those who left Ukraine shortly before the main Russian invasion). This might be relevant in particular to Hungary, which has reportedly objected to this aspect of the proposal.

 

 

Question 3: What will happen to the family members of those who fall within the scope of temporary protection in line with Council Implementing Decision (EU) 2022/382 of 4 March 2022?  

 

Meltem: This raises a very messy legal question regarding family unity. Under the initial Council Implementing Decision (EU) 2022/382, family members of Ukrainian nationals, as well as those of third-country nationals holding refugee or equivalent protection status in Ukraine prior to the full-scale invasion, are explicitly included as a core category entitled to temporary protection alongside the principal applicant.  Article 15 of the Temporary Protection Directive sets out mandatory duties for Member States to reunite family members who were separated due to the circumstances of the mass influx. (cf. Milios’s contribution here) The new proposal creates a direct clash between Article 15 of the TPD and the proposed exclusion grounds. If a newly arriving, military-age man leaves Ukraine to join family members who have held temporary protection in the EU since 2022, his exclusion would directly undermine the right to family life and the obligations in the 2022 Decision and the Directive. Conversely, admitting him while excluding single men in identical circumstances introduces severe issues of differential treatment and discrimination.

Update: This tension between family unity obligations and the new eligibility conditionality remains unaddressed in the adopted text. Recital 15 of Council Implementing Decision (EU) 2026/1912 acknowledges that specific categories of eligible persons are determined “in compliance with Article 15 of [the TPD], where applicable”. Yet, this fleeting reference, in my opinion, does not give a clear answer to the question we posed above.

Steve: here I think the devil’s advocate has no good argument to make. Family members of those with temporary protection are entitled to temporary protection, according to the 2022 Decision, and family reunion, according to Article 15 of the parent Directive, unless the criteria for exclusion set out in that Directive (ie security risks and serious crimes, defined similarly to the exclusion clauses in the Refugee Convention) apply.

 

The wording of the new Council Decision, in my reading, excludes family members who have not complied with their military obligations from temporary protection under the 2022 Decision, but leaves open the prospect of them being eligible for family reunion, on the basis of the parent Directive. Although the final Council decision makes only an oblique reference to family reunion under the Directive, this is better than the failure to refer to it at all in the original proposal, and those who seek to rely on this possibility now have a specific provision in the text to point to. This is most likely to be relevant to men whose wives or partners have temporary protection in the EU (for partners, this is subject to the criteria of having a ‘stable relationship’, and that the host Member State treats partners in a ‘comparable’ way to married couples). As Jane Austen might have said, “It is a truth universally acknowledged, that a single man seeking protection from a Russian platoon, must be in want of a wife.”

 

Question 4: Is Recital 5 of the Proposal a mistake or a new interpretation of the Krasiliva case (C-753/23) by the Commission?

 

In the Krasiliva case (C-753/23), the Court of Justice of the European Union (CJEU) confirmed that displaced persons from Ukraine have a right to choose the Member State where they want to apply for temporary protection. However, the Court ruled that national authorities cannot declare a newcomer’s temporary protection registration and resident permit request inadmissible simply because they already applied for a permit in another Member State but have not received it. Interestingly, the Court left open the question whether a person who has received temporary protection status and a resident permit attached to this status in one Member State can apply and be granted temporary protection in another MS.

 

Recital 5 of the Commission Proposal notes “Given that a person can benefit from the rights attached to temporary protection in only one Member State at a time, to ensure that this is the case, and to avoid multiple registrations for temporary protection, Member States should reject residence permit requests made on the basis of Article 8(1) of Directive 2001/55/EC when it is apparent that the person concerned has already obtained a residence permit on that basis in another Member State and therefore is enjoying the rights attached to temporary protection therein, including social assistance. This would be coherent with the judgment of the Court of Justice of the European Union in case C-753/23 and in particular paragraph 30 thereof.”

 

Steve: To my mind, the Krasiliva judgment is ambiguous. The key para in the judgment says that it is “open to the authorities of a Member State to verify, in the course of examining” a temporary protection application, “whether those persons have already obtained a residence permit in another Member State”. This is not explicitly definitive either way. The important point here is the addition of the words in the Commission proposal: “and therefore is enjoying the rights attached to temporary protection therein, including social assistance”, which do not appear in the previous Council decision extending temporary protection. This suggests that if another Member State has granted temporary protection but has not done so correctly, ie does not extend the substantive rights set out in the parent Directive to beneficiaries in practice, another Member State is obliged to consider a temporary protection application from those persons. This would be consistent with CJEU case law on international protection (Ibrahim).

 

Meltem: I believe the Commission adopts a very restrictive reading of the Judgment by noting Member States should reject residence permit requests made on the basis of Article 8(1) of the Directive when it is apparent that the person concerned has already obtained a residence permit in another MS. However, as Steve pointed out, what happens if a person holds TP status in a Member State but is not enjoying the rights attached to temporary protection therein, including social assistance? Then can they apply for temporary protection in another Member State? I think the recital somehow supports this reading. Is this on purpose or a mistake we do not know.

 

Update: Whether the Commission’s original phrasing in draft Recital 5 was a deliberate attempt to safeguard Chapter III rights or merely a drafting oversight will remain unknown. If intentional, the Commission sought to ensure that holding a residence permit on paper in a first Member State would not bar an applicant from seeking protection elsewhere if that initial state failed to provide effective access to core rights, such as housing or social assistance. What is clear, however, is the Council’s intent in the final text. By deleting the “substantive enjoyment” qualification from Recital 5 and adding Recital 6, the Council rejected this flexible reading. Instead, it endorsed a very restrictive interpretation of Krasiliva (Case C-753/23) and wanted no multiple registrations, irrespective of the standard of protection actually delivered on the ground in the first Member State registered.

 

Conclusion

In conclusion, although the Commission's proposal to restrict the scope of temporary protection to help Ukrainian allies is understandable from a policy point of view, it raises many serious legal problems. For the reasons I have outlined, ranging from discrimination and ultra vires overreach to the risk of creating a dangerous legal gap for those whose asylum claims might be rejected, I argue that the Commission proposal should not be adopted as it is.

 

Meltem: While Council Implementing Decision (EU) 2026/1912 formally extends temporary protection until 4 March 2028, the Council did little to alter the substance of the Commission proposal or resolve the legal issues we raised. Apart from technical adjustments, most notably deleting the ‘substantive enjoyment’ clause from Recital 5 to enforce a bar on multiple registrations, the Council left the discriminatory elements intact while pushing the statutory boundaries of Articles 4 and 5 of the TPD. Moreover, the text left the friction with family-unity obligations under Article 15 TPD largely unaddressed.  

 

Steve: the final decision usefully refers both to the family reunion point and the prospects of those with military obligations applying for international protection instead. In the absence of these provisions, Member States might have tried to claim that family reunion or international protection claims by those with military obligations are not possible, but the explicit references in the preamble mean that such point-blank rejections by national authorities are not tenable. On the other hand, the Council’s final version of the Decision rejects the Commission’s apparent attempt to qualify the position on situations where a temporary protection applicant already has temporary protection in another Member State, and this is a questionable interpretation of the case law. In the face of reductions in support for temporary protection beneficiaries in some Member States, it is not impossible to imagine where severe living conditions induce a beneficiary to apply for temporary protection in another Member State. As with the case law on international protection (Ibrahim), a Charter right to do so should be recognised, at the very least.    

The effectiveness of the Cloud and AI Development Act regarding data centres

 

Annelieke Mooij, Assistant Professor, Tilburg Law School

Photo: Facebook Clonee (Ireland) data centre

Photo credit: Thomas Nugent, via Wikimedia commons

 

1.    Introduction

The debate about sovereignty and specifically digital sovereignty is fierce. Member States, struggle to achieve digital sovereignty which impacts the continuity and safety of the digital services. To speed up the realization of the sovereign cloud the Commission has proposed a new act the Cloud and AI Development Act (CADA). The act covers three important facets: AI, Cloud and Data centres. This contribution is limited to the proposed rules regarding data centres and analyze their effectiveness. The proposed Regulation should not be considered a stand-alone Regulation but rather forms part of the European Union’s broader strategy to strengthen digital sovereignty. The EU aims to reduce dependence on foreign digital service providers and expand Europe’s cloud and data centre capacity. At its core, the proposed Regulation seeks to create the conditions necessary for a sovereign European cloud ecosystem. A system that can support economic growth, innovation, and public-sector resilience.

The pursuit of cloud sovereignty, however, depends on more than software, governance frameworks, or industrial policy. Cloud services, AI and other digital services ultimately rely on physical infrastructure. Data centres provide storage, computing power, and connectivity upon which cloud services and AI applications depend. Without sufficient data centre capacity, ambitions for European technological autonomy cannot be achieved. The Commission aims to stimulate the increase of the data centre capacity through the CADA. The CADA therefore introduces a regulatory framework aimed at accelerating the development of data centres.  The Commission aims for the EU capacity to have tripled by 2030, and by 2035, all critical infrastructure will be hosted in EU data centres. These objectives are ambitious but there are good reasons for the Commission to emphasize digital sovereignty.

2. Why Digital Sovereignty Is Necessary & Difficult

Before delving into the CADA, it is important to understand why digital sovereignty is important to the EU. Cloud computing provides its users with remote access to data storage, software, and computing resources hosted on external servers. By outsourcing storage and computing functions to the cloud, organizations can reduce the need to maintain their own IT infrastructure. Whilst benefiting from greater scalability and operational flexibility. Public authorities increasingly rely on cloud services for precisely these reasons.

At present, however, the European cloud market is heavily concentrated. American providers dominate the sector, with Amazon Web Services and Microsoft accounting for approximately 75% of the European market. The largest European provider holds only a marginal 2% share. This concentration creates a structural dependency on foreign companies for critical digital infrastructure. One of the principal objectives of CADA is therefore to reduce this dependency and strengthen Europe’s technological autonomy.

The strategic rationale for reducing dependence on non-European providers extends beyond concerns about market concentration. Control over cloud infrastructure increasingly translates into geopolitical influence. A recent example is that of the latest AI-model created by Anthropic. The US government prohibited Anthropic from releasing its newest and most powerful model to its European customers. The official reason was due to considered possibilities of jailbreaks. The possibility of this happening was strongly denied by Anthropic. The EU Commission, however, stressed the possible negative impact on EU cybersecurity and cyberdefense.  It has been illustrative of how the US can cut-off new technologies to the EU, without serious repercussions. These incidents have not remained limited to simply limiting foreign accessibility but also to demonstrate power to individuals and institutions. Illustrative of this is the disruption of e-mail communications involving the International Criminal Court. The ICC’s email was cut-off after President Trump disagreed with actions from its main prosecutor. The case illustrated how political pressure exerted through private technology providers, without court permission, may affect the continuity of essential digital services. This dependence can be dangerous for Europe as it includes technology that is necessary for military purposes.

To achieve the desired increased EU cloud and AI capacity, physical infrastructure (or hardware) is necessary. Cloud and AI systems require data centres to operate on. The CADA therefore introduces a framework to create the necessary infrastructure.

3. The CADA’s rules on achieving data centre capacity.  

3.1. Specific Objectives

The CADA seeks to establish what the Commission describes as a coordinated and integrated ecosystem approach to cloud computing and artificial intelligence. According to the Commission, divergent national approaches to data centre permitting barriers to the efficient functioning of the internal market and hinder the development of a competitive European cloud ecosystem.

Against this background, the Regulation aims to create the conditions necessary for the large-scale deployment of cloud and AI infrastructure throughout the Union. In addition to reducing regulatory fragmentation, the proposal seeks to strengthen technological sovereignty, improve operational resilience, and support public-order objectives. The Commission further presents the Regulation as an instrument for promoting innovation and sustainability in Europe's digital infrastructure.

Regarding data centres specifically, the proposal seeks to address perceived shortages in computing and storage capacity through a combination of harmonisation measures and accelerated deployment procedures. This should lead to a specific result namely; triple the data centre capacity by 2030 and have sufficient EU data centre capacity for critical infrastructure by 2035.

3.2 Role of the Commission

The responsibility for achieving the operational objectives established by the CADA rests primarily with the European Commission. To achieve its goals, the proposal relies heavily on existing and future funding programmes intended to stimulate the development of cloud and AI technologies. These programmes seek, among other things, to improve the efficiency with which computing resources are used.

Particular emphasis is placed on technological innovation. High Performance Computing (HPC), for example, may increase the amount of computing output generated from a given level of infrastructure. More efficient use of computing resources can reduce the relative amount of storage and processing capacity required to achieve a particular outcome. Nevertheless, such efficiency gains do not eliminate the need for physical infrastructure. High-performance computing still depends on data centres and therefore remains subject to the same underlying constraints relating to energy, water, and spatial planning.

The effectiveness of this strategy consequently depends largely on the success of research and innovation projects supported through European funding programmes. There is ample reason to believe these strategies can be successful, economic literature has long recognised that research subsidies can stimulate innovation by reducing investment costs and encouraging experimentation. The chance of success, however, depends on the knowledge of the subsidy provider. In the past EU subsidies have proven a successful strategy. It is to be expected that the aim of development through subsidies will be successful again.

3.3. Data centre Acceleration Zones

To facilitate the expansion of data centre capacity, the CADA introduces so-called Data Centre Acceleration Areas (article 10). Each Member State is required to designate at least one such area for the accelerated development of data centre infrastructure, within six months of the Regulation entering into force.

When identifying acceleration areas, Member States must consider existing and future infrastructure capacity, energy availability, and broader sustainability considerations. The proposal further requires national authorities responsible for spatial planning to consider future data centre development and the necessary supporting infrastructure in those zones.

A developer wishing to develop a data centre in such an acceleration zone, will have the right to be assisted by a single point of information (article 11). This single point of information can assist the developer by sharing and coordinating the necessary permits and environmental and habitat assessments. The latter will be a sped-up procedure in accordance with Regulation 2026/XXXX on speeding-up environmental assessments. This Regulation was proposed in December 2025 with the aim to simplify environmental assessments. These rules aim to ensure that new projects have completed the permitting procedures within a year. The latter is the maximum that permitting procedures are allowed to last.

Taken together, these measures are intended to reduce administrative burdens and increase legal certainty for developers. The underlying assumption is that lengthy and fragmented permitting procedures constitute a significant obstacle to data centre deployment. To the extent that regulatory complexity delays investment, the proposed measures may indeed facilitate development. It is, however, questionable whether regulatory procedures are the primary challenge. The extent to which these objectives can be achieved in practice is, however, less clear. The realization of data centres come with significant challenges. When in operation, data centres become increasingly hot. With temperatures rising to 70 degrees in an hour. To continue their operations data centres need to cool. The cooling process requires high amounts of energy and clean water. E.g. data centres in the Netherlands constituted for approximately 5% of electricity demand in 2024. Recently a data centre by Microsoft made headlines that it uses 1% of the total national energy in the Netherlands. This whilst on the other hand there are significant shortages in energy supply for new housing and net congestion is increasing. Thereby creating serious debates on whether power should be diverted to data centres. On an EU level the targets for energy consumption are not yet met. The reduction target is approximately 18% away from its 2030 target. In 2024 the EU was 17% from renewable energy targets for 2030. In 2024 data centres consumed roughly 3% of the EU’s energy. Tripling this number and increasing it further till there is sufficient capacity for digital sovereignty creates a significant challenge.

These concerns are not limited to energy, the Netherlands is estimated to have a drinking water shortage by 2030. This whilst the data centres require approximately 3.7 million tonnes of drinking water per year, roughly 0.3% of Dutch tap water consumption, in the EU it is estimated to total 5.747.764.000 (nearly 6 billion liters). The CADA does not provide solutions to these underlying constraints. Instead, it requires Member States to create data centre acceleration zones and take infrastructure into account when designating these zones. Within these zones permitting procedures must be conducted within 12 months. While this may improve planning and coordination, it does not generate additional electricity capacity, alleviate network congestion, or increase the availability of water resources. The permits may become a hollow factor. A good example of the potential irony is that of the data centre in the Netherlands. The data centre had the required planning permits but were put on a waiting list for their energy connection.

The requirements created by the CADA may seem with a large margin of discretion as it uses language such as “take into consideration”. This language does not exert pressure on Member States. The CADA, however, also includes the earlier mentioned hard objective to triple the data centre capacity by 2030. Here lies another difficulty with the proposed framework. The CADA does not introduce a division key for how much capacity must be realized by each individual Member State. There are, however, big gaps between Member States in the current capacity.

Hungary for example only has 7.3MW of total capacity whereas Germany has 2.6GW of IT power. Arguably the capacity can be divided equally over all Member States, using the GDP as percentage divider. GDP is an indication of how much IT power is consumed in the economy. Generally, the higher the GDP the higher the IT consumption is. There is, however, little data on the demand for critical infrastructure in the EU. This is likely to change as article 15 of the CADA charges the EU Commission with obtaining that data. From an environmental perspective it is, however, ineffective to simply divide along GDP. Countries with cold climates and large coastal areas can build new more efficient data centres as the can use ocean water or outside air to cool. A submerged data centre on the coast is more sustainable than a data centre in a desert. In theory, the incentive to build data centre capacity by these countries is profit. Countries with favorable circumstances can build capacity cheaper than others and sell the capacity for profit. This theory of absolute advantage seems undermined by the next section of the CADA; the introduction of the European Cloud Federation.

 

4. The European Cloud Federation

In addition to measures aimed at expanding data centre capacity, in articles 34 and 35 the CADA introduces the proposed EuroCloud Federation. Participation in the Federation is voluntary and open to EU institutions and public-sector bodies. The purpose of the Federation is to facilitate the sharing of public cloud and data centre resources among participating members.

The underlying rationale is straightforward. Public authorities do not always utilize their available computing resources at full capacity. By enabling participating organisations to share infrastructure, the Federation seeks to improve the utilisation of existing resources and reduce unnecessary duplication of investments. In principle, such an approach may contribute to a more efficient use of public infrastructure.

To facilitate this objective, the proposal establishes a framework governing access to and sharing of infrastructure within the Federation. A notable feature of this framework is the limitation placed on financial compensation. Under Article 35(5), members providing infrastructure may recover their costs but are not permitted to generate profit from sharing their capacity with other participants.

From the perspective of short-term efficiency, this approach is understandable. Allowing access at cost price reduces barriers for participating entities and may encourage greater use of available infrastructure. The arrangement may therefore improve the allocation of existing capacity within the public sector.

The longer-term effects are less clear. The development of additional infrastructure requires significant investment and involves financial and operational risks. Where providers are unable to obtain any return beyond cost recovery, but cost recovery is not guaranteed, the incentive to create surplus capacity that can later be shared within the Federation may be reduced. Public entities may conclude that it is more attractive to rely on the capacity of other participants than to invest in additional infrastructure themselves.

 

5. Conclusion: a failed attempt?

The aim of the CADA is to increase the total EU data centre capacity. The CADA, however, does not create a division key. This is a fundamental gap within the regulation, it is too easy to state that all Member States should triple their data centre capacity equally. At present there are high differences in capacity between the different Member States.

The proposed Cloud and AI Development Act represents an ambitious attempt to strengthen European digital sovereignty through the expansion of cloud and AI infrastructure. Central to this ambition is the objective of significantly increasing data centre capacity across the European Union. To facilitate this development, the Regulation requires Member States to designate acceleration areas, develop national cloud and AI strategies, and participate in a broader framework intended to support the growth of sovereign digital infrastructure.

The proposal therefore sends a clear political signal. Data centres are no longer regarded as purely commercial infrastructure but as strategic assets that are essential for economic competitiveness, public administration, and technological autonomy. In that respect, the CADA forms part of a broader shift in European policy towards reducing strategic dependencies in critical digital technologies. Nevertheless, the CADA does not solve issues regarding natural resources. The introduction of the EU Cloud Federation furthermore has the potential to undermine a sustainable and economically efficient capacity division.