EU Data Act: Don’t forget about switching

The Act provides customers with switching rights which have the potential to change business models for cloud contracts, but the ambiguity with respect to certain of these rights has the potential to cause disputes between customers and providers.

Background

The EU Data Act came into force in September 2025, a year having passed we can now take a look at the impact the new rules are having in practice. Broadly, the Act can be divided into two parts:

1. requirements for connected products and related services; and
2. requirements for switching between data processing services.

In this article we focus on the latter, referred to as “switching”.

Whilst the Act has been in force for some time, traction continues to be slow from data processing service providers and regulators. However, customers are now increasingly looking to exercise their switching rights which are potentially significant for data processing service providers.

Who do the switching provisions apply to?

Switching applies to providers of data processing services, who make their service available in the EU, regardless of their place of establishment. A “data processing service” is broadly defined and covers a substantial number of cloud services.

What do the switching provisions require?

The Act aims to eliminate commercial, technical, contractual and organisational obstacles which hamper effective switching between data processing services. It makes it much easier for customers to switch between data processing services, on relatively short notice, requiring providers to transfer a customer’s data to the replacement provider where requested by the customer. The key switching provisions include:

• Deadline: the switching must be completed within 30 days, which may be extended up to seven months in certain instances. In addition, customers have certain rights to extend the switching period.
• Fees: the Act restricts the fees that can be charged for carrying out the switching. From 12 January 2027 switching charges will be prohibited altogether, except in limited circumstances.
• Termination: a customer may exercise their right to switch at any time. Once the switching has been completed, which may take place on relatively short notice, the contract is deemed terminated. Whilst providers may charge proportionate early termination penalties, it is unclear what amounts may be charged.
• Data retrieval: data processing service providers are required to make a customer’s data available for a period, following completion of the switching, during which their data can be retrieved.
• Functional equivalence: there is a requirement for data processing service providers to take steps to facilitate customers achieving a comparable level of functionality (i.e. functional equivalence) after switching to a new provider.
• Customer contracts: to increase transparency, the Act requires that customer contracts include certain mandatory provisions to enable customers to exercise their rights, including setting out categories of data and digital assets that can be ported.

Guidance

Whilst we have seen little in the way of guidance and commentary from Member State regulators in respect of the Act, customers are increasingly exercising their rights to switch between data processing service providers.

Given the potentially significant impact of the switching requirements on cloud providers, we are hopeful that additional guidance will be issued to clarify certain of the requirements, including, for example, relating to functional equivalence and termination penalties. The Digital Omnibus proposal, published by the European Commission on 19 November 2025, provided some further clarity, but there are a number of points which would benefit from supplemental guidance.

Takeaways

• The switching requirements may have a significant impact on customer contracts and cloud service operations. The exercise by a customer of their switching rights may shorten the term of the customer contract, impose additional data transfer obligations and impact expected revenue.
• For customers, the Act provides (ostensibly) robust rights to transfer their data and prevent vendor lock-in.
• For data processing service providers, the Act may have significant impact on their business models, as noted above, and presents another piece of customer-driven data legislation that must be navigated. In particular, data processing service providers will need to consider the following:
  • Contract remediation: whether customer contracts need to be updated to address the mandatory contractual requirements of the Act.
  • Contracting models: whether customer contracting models need to be amended in light of the Act.
  • IT business: to what extent new processes need to be put in place to comply with the requirements of the Act, including in relation to functional equivalence and to enable compliance with the switching provisions.
  • Supply chain: whether the Act may impact how the contracting models work with subcontractors and other third party providers.
  • National mandatory rules: whether local jurisdictional laws add an additional layer of rules which supplement the Act.

That said, whilst the Act provides rights for customers to switch between data processing services, there is the potential for disputes between providers and customers where customers look to exercise their rights, particularly in relation to the lack of clarity over contract terms and termination charges.

If you have any queries regarding this topic, please contact Tom Sharpe or Nick Mercer.