The European Commission Wades Into The Cloud Contracts Debate

The European Commission Wades Into The Cloud Contracts Debate

Cloud computing contracts have always been a matter of serious debate in this fledgling industry. With a lack of established standards and best practices (See: Cloud Computing Standards: How Important Are They? ), not unknown for such a nascent and dynamic field, this is only to be expected. Not surprisingly, this topic has featured in a number of articles on this site (See: The Small Print in Cloud Computing Contracts, Can You Retrieve Your Data After Terminating Your Contract?  and Negotiating Tips On Software-As-A-Service Contracts). Now, the European Commission has made its views known on this issue.

European regulators have always had strong opinions about the cloud, especially with regard to privacy, a situation that had raised barriers for American service providers to do business in the continent (See: European Firm
Refuses To Go On the Microsoft Cloud Due to PATRIOT Act Concerns
 and Cloud Computing May Open Up Firms To Hundreds Of Millions In Fines Under EU Laws ). In fact, complex legislation has been blamed for a slowdown in cloud adoption in Europe (See: Why Is Europe Not Storming the Cloud?).

The Commission’s latest views with regard to simplifying contracts may well put an additional burden on providers but will be welcomed by consumers baffled by complex cloud contracts. These views were expressed in a policy paper that is expected to be published soon. Although the paper is non-binding, it may well direct future legislation and hence, will be closely monitored by cloud stakeholders.

“The complexity and uncertainty of the legal framework for cloud services providers means that they often issue complex contracts … or agreements with extensive disclaimers….Contracts often do not accept liability for data integrity, confidentiality or service continuity,” the Commission is quoted by Reuters as espousing in the paper obtained by the news agency. It said it wanted to help the industry develop model agreements on issues such as which country’s laws applied in a legal dispute between a service provider and a consumer. It expressed its intention to work with the World Trade Organisation, the Organisation for Economic Co-operation and Development and the United Nations to develop a common legal basis for dispute resolution. The paper has specifically mentioned the US and Japan as two regions where the Commission wanted to focus its efforts.

By Sourya Biswas

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