The European Union is set to propose rules for cloud computing contracts that would limit the ability of foreign cloud providers to bid for state tenders.

Citing documents, Reuters reports that the new criteria could be published today, June 3, and would see a requirement for software and hardware to be developed in the EU.

Update -

The "Tech Sovereignty Package" has now been published by the European Commission.

Within the package is the "Cloud and AI Development Act" which the Commission says aims to simultaneously triple data center capacity across Europe over the next five to seven years, and will "introduce a single EU-wide framework to assess cloud and AI sovereignty, while keeping most of our market open to like-minded partners."

Original story resumes -

This would significantly limit US hyperscalers' ability to secure contracts, and is expected to apply to sensitive sectors such as banking, energy, and healthcare.

In order to proceed, the proposal would need backing from all 27 countries in the EU and from the European Parliament.

The European Commission declined to comment on details but said the package was "crucial for strengthening Europe's own technological capacities, for Europe's competitiveness and security."

According to Reuters, other criteria will surround levels of data protection, third countries' control of data and services, and how open their markets are as well. The commission is also suggesting it act as the central purchasing body for nations and institutions to procure data center and cloud services.

The move has received backing from several European cloud providers and other organizations, with thirteen companies signing an open letter in support of the increased restrictions.

The letter said: "Technological sovereignty means that Europe has the capacity to freely design, understand, choose from different home-grown sources, build, operate, and effectively regulate the digital systems on which its society and economy rely."

It acknowledges that there is an existing framework in place, but argues that current legislation is "incomplete in its implementation and insufficient in its effect."

"Critical gaps persist: Europe's structural dependencies on non-EU technology providers have not been resolved. Enforcement has not kept pace with the scale of market distortions. The EU's digital ecosystem continues to face conditions where non-European providers operate at a structural advantage that exempt them from the standards Europe expects of its own actors."

The new regulations shortly follow the awarding of a €180 million ($212m) sovereign cloud services contract by the European Commission. According to the contract award notice, the tender aimed to support the EC's "broader efforts to enhance its own sovereignty, reinforcing strategic control across key technologies and infrastructure."

Amazon and Microsoft both declined to comment to Reuters, but on June 2, Amazon published a blog post titled Why applying the DMA to cloud would regulate away EU competitiveness and resiliency.

The Digital Markets Act, while separate from the issue of technical sovereignty being discussed by the EU, is a regulation aiming to ensure fair competition and openness in the digital sector. AWS argues in the timely piece that "regulation should be shaped by what companies do, not where they come from. We're committed to Europe, and to the shared principles of trust, transparency, and fair competition that drive its digital ambitions forward."

The post suggests that increasing regulation on cloud providers would, in fact, lead to European businesses getting "slower access to new AI and cloud capabilities, startups face higher costs to build and scale, and infrastructure investment, along with the jobs and growth it brings, flows to regions with more predictable regulatory environments."

DCD will update this story if the proposed regulations are published today.