17OCT

EU ownership rule meets its loophole

3 min read

17:43UTC

EuroHPC's guidance for the €4.12bn AI Gigafactories call keeps an EU-ownership rule but lets Cooperation-Agreement countries, Pax Silica members among them, bypass it.

← Back to Trump waives his own 500% Russia tariffs Jump to analysis ↓

ConflictDeveloping

Key takeaway

A EuroHPC carve-out lets Pax Silica members bypass the EU-ownership rule on €4.12bn in compute funding.

EuroHPC's published guidance for July's €4.12bn AI Gigafactories call requires the lead builder to be headquartered in the EU, then adds a carve-out: a third country holding an "AI gigafactory Cooperation Agreement" with the EU can take part without that ownership test. EuroHPC is the EU's joint supercomputing body, and the gigafactories programme funds the large-scale compute the bloc wants to own outright.

the Commission confirmed the €4.12bn call in early June with EU ownership as its headline condition. EuroHPC's own guidance then opened the door that the rule was written to keep shut. Pax Silica membership is exactly the kind of agreement that qualifies, so a US-defined export-control system can reach inside an EU-funded compute programme without anyone touching the regulation. Whoever drafts the agreement terms, rather than the lawmakers who wrote the ownership rule, decides how binding the sovereignty test really is.

Members at the Washington summit are already naming the danger: they flagged Washington's case-by-case sign-off on access to OpenAI's GPT-5.6 as a kill switch over the very models the gigafactories are built to run. European cash and European ownership rules would then sit on top of an American licence to cut the supply off.

Deep Analysis

In plain English

The EU is spending €4.12bn to build giant AI computing centres, called AI Gigafactories, across Europe. The rules say the lead company building each one must be headquartered in the EU, so the money stays in European hands. But the published rules contain an exception: if a country has a special Cooperation Agreement with the EU, its companies can bypass the European headquarters requirement. Pax Silica, the US-run chip alliance that the EU just joined, is exactly the kind of agreement that qualifies. So an American company could lead an EU-funded gigafactory as long as its country is in Pax Silica. And because access to the AI models those gigafactories are built to run requires US case-by-case approval, European money could end up funding computing infrastructure that runs on an American on-off switch.

What could happen next?

Risk
If Pax Silica members win AI Gigafactory contracts under the carve-out, US export-control terms on model access will flow into EU-publicly-funded infrastructure, making the kill-switch concern structurally embedded rather than contingent.
Medium term · Reported
Consequence
The carve-out undermines the EU-ownership signal the Commission intended the July call to send to European compute investors, reducing the policy clarity that would justify domestic capital committing to European AI infrastructure.
Short term · Assessed
Precedent
A Cooperation Agreement carve-out in a major EU funding programme establishes the mechanism by which trade-agreement terms can bypass European ownership requirements in strategic technology without treaty amendment.
Long term · Assessed

Source Landscape

This story draws on neutral-leaning sources

Primary parallel: The WTO Government Procurement Agreement (GPA) requires signatories to open public tenders to foreign bidders above defined thresholds, but permits carve-outs for national security and bilateral reciprocity agreements.

EU member states have repeatedly used reciprocity carve-outs to favour domestic suppliers in defence procurement without amending the GPA itself. EuroHPC's Cooperation Agreement clause replicates this mechanism: a general ownership rule with an agreement-based bypass that the rule's drafters built in but whose specific use cases they did not enumerate.

Counter-parallel: The EU's Chips Act I (2023) contained a 'first-of-a-kind' facility exception that waived European production-capacity requirements for fabs bringing genuinely novel technology to Europe. TSMC cited this exception in its 2023 Chips Act I application, where the Taiwanese foundry's EUV-free 28nm Dresden greenfield site qualified as first-of-a-kind in Europe.

Where the Chips Act exception was published transparently and applied prospectively to a known actor, the EuroHPC Cooperation Agreement carve-out is written generically, creating an open-ended bypass whose beneficiaries are not named.

The €4.12bn AI Gigafactories call is the largest single EU compute-infrastructure commitment ever made. If Pax Silica membership allows US companies to lead consortium bids, the primary economic beneficiaries of that public spend could be US hyperscalers, equipment vendors and model providers rather than European compute startups or system integrators.

The Cooperation Agreement carve-out also affects the programme's leverage value: if EU public money funds compute that runs US models under US export-control terms, the Commission loses the procurement leverage that would otherwise allow it to demand EU-based model hosting, EU data standards or EU audit access as conditions of the contracts it funds.

Consensus view: Researchers at the Science Policy Research Unit (SPRU) at the University of Sussex, who track EU research-funding governance, have documented a recurring pattern in Framework Programme participation rules: ownership or headquarters requirements designed to favour European actors are routinely softened by bilateral Cooperation Agreements that the Commission negotiates with third countries, effectively making the nationality test a default rather than a hard constraint.

The EuroHPC carve-out follows the same mechanism.

Counter-view: The Oxford Internet Institute's Luciano Floridi argues the Cooperation Agreement carve-out serves a legitimate pluralism function: insisting on European-only AI compute would exclude Taiwanese TSMC equipment and Canadian chip-design expertise that currently underpin ESMC Dresden's own build, making pure EU ownership a rule the EU cannot itself satisfy.

The carve-out is not a loophole but an acknowledgement that European compute sovereignty does not yet exist as a self-contained reality.

Key tension: Whether the Cooperation Agreement carve-out, which was written to allow participation by allied-country partners, can be used to embed a US-defined export-control framework inside an EU-funded programme without EU member states having been consulted on that specific consequence.

Sources:Electronics Weekly·EuroHPC Joint Undertaking

Mentions:EuroHPC JU →AI Gigafactories →European Commission →TSMC →Dresden →OpenAI →Washington →ESMC →Pax Silica →

First Reported In

Update #10 · Digital euro to trilogue; Senate bars CBDC

Electronics Weekly· 30 Jun 2026

Read original →

Causes and effects

Caused by

EU confirms €4.12bn AI gigafactory call

The Commission's confirmation of the €4.12bn AI Gigafactories call is the instrument that contains the Cooperation-Agreement carve-out now under scrutiny.

Occurred 3 Jun 2026

Read story →

Ten states join US-run Pax Silica

Pax Silica membership is exactly the class of agreement that triggers the EuroHPC Cooperation-Agreement ownership carve-out.

Occurred 1 Jun 2026

Read story →

This Event

EU ownership rule meets its loophole

EuroHPC's Cooperation-Agreement carve-out lets a US-defined export-control system reach inside EU-funded compute without amending the ownership rule.

Different Perspectives

Bulgarian government

Bulgaria's Prime Minister, Rumen Radev, said the sinking of HS Dignity "benefits the Russian Federation" while saying Bulgaria lacked solid evidence to accuse anyone, and Defence Minister Dimitar Stoyanov asked NATO for air defence on 16 October. The request comes from a government that stopped state military aid to Ukraine in June.

Radoslaw Sikorski

Poland's foreign minister challenged Elon Musk on X after SpaceX capped Ukraine's Starshield terminals on 14 October. Poland pays about $50m a year for Ukraine's Starlink subscriptions, so Warsaw speaks as the paying customer as well as the ally.

Andy Burnham

Burnham fast-tracked £10m of a £45m air-defence missile delivery when Zelenskyy visited London on 14 October, and his ministers are lobbying allies to ban maritime services for Russian liquefied natural gas. The measure targets insurers and shipowners, many of them in London, rather than the gas itself.

Ministry of External Affairs (India)

India's foreign ministry said after the 16 September House vote that New Delhi would take all necessary measures to protect its trade.

European Council

EU leaders on 15-16 October rejected a US idea to hand Washington the roughly €200bn of frozen Russian assets held in Europe, and Kaja Kallas said the decision belongs to Europeans. The same summit put off a decision on financing Ukraine, saying leaders "will revert to the issue in a timely manner".

Donald Trump

Trump signed the 16 October order that sets the Graham Act's duties and waives them under section 115(a), with a certification sent to Congress. He says the United States has not stopped sharing intelligence with Ukraine, and on 11 October he said both sides had agreed to halt attacks on energy infrastructure.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.