New provisions for cloud switching under the Data Act

In today's rapidly evolving digital landscape, the ability to switch cloud services (referred to as data processing services in the Data Act) in a seamless manner is crucial for businesses. The Data Act (Regulation (EU) 2023/2854 of the European Parliament and of the Council of 13 December 2023 on harmonized rules on fair access to and use of data and amending Regulation (EU) 2017/2394 and Directive (EU) 2020/1828) addresses this need by setting out provisions to facilitate the switching of cloud services. 

The purpose of the provisions on cloud switching is to remove obstacles to effective switching that may exist today and to avoid vendor lock-in (i.e. the situation where it is (technically, organizationally, commercially, financially, contractually) impossible to move services to another provider). 

The provisions apply in case a customer wants to switch to a service of the same type that is provided by one or more different providers or to an on-premises ICT infrastructure.

Before this blogpost delves into the provisions on cloud switching, it is important to note that the Data Act also provides for rules in other areas. It sets out:

• rules for Internet of Things providers (and related services) to make available data to users, and potentially, third parties specified by those users (these rules apply both in business-to-business and business-to-consumer context);
• provisions on unfair terms in standard business-to-business contracts related to data, with clauses that will be considered unfair and clauses that are presumed unfair;
• rights for public authorities and EU bodies to gain access to certain data in certain circumstances;
• provisions on protection against unlaw third country government access to data;
• provisions on interoperability of data in data spaces;
• provisions on the enforcement of these rules.

Obligations for cloud providers

In order to facilitate cloud switching, cloud providers must:

• have in place a written contract, which sets out a number of provisions mandated by the Data Act;
• be transparent towards it customers by (i) providing information on available procedures for switching and porting to the service, (ii) by making available an up-to-date online register with information on, among other required aspects, data structures and data formats, and (iii) providing information on the jurisdiction of the ICT infrastructure and a description of the technical, organizational and contractual measures of the provider of cloud services;
• work in good faith with the provider they are replacing or the provider services are being transferred to;
• ensure functional equivalence (for Infrastructure-as-a-Service providers), with functional equivalence meaning that a minimum level of functionality in the new environment of the same service type must be guaranteed after the switching process, where the destination provided delivers a materially comparable outcome in response to the same input;

• ensure open interfaces are available to customers and the replacement provider, and compatibility with common specifications (in so far available and applicable) is ensured (for providers other than Infrastructure-as-a-Service provides).  

  Gradual withdrawal of switching charges

  The Data Act foresees in a gradual withdrawal of switching charges. Switching charges are not only the costs related to the transit of data from one provider to another provider (or to an on-premise solution), but also the costs incurred for specific support actions.

  As from 12 January 2027, providers of data processing services shall no longer be permitted to impose any switching charges on its customers for the switching process. Between 11 January 2024 and 12 January 2027, only reduced switching chargers may be imposed, which may in any case not exceed the costs incurred by the provider which are directly linked to the switching process concerned. 

  Exceptions apply for custom-built services

  In case the majority of main features have been custom-built for a specific customer and where those services are not offered at broad commercial scale via the service catalogue of the provider, the obligations relating to functional equivalence, withdrawal of switching charges and compatibility do not apply. 

  Conclusion

  The Data Act marks a significant step forward in creating a more open and competitive digital ecosystem in the EU. It will remove barriers for customers when it comes to switching and will empower customers to make choices to support their needs. For cloud providers, however, this means adapting their services, contracts, and technical infrastructure to meet new transparency, interoperability, and switching obligation.