Swedish government agency fails to make Microsoft keep data in the EU, signs contract anyway
Microsoft refused to meet all 18 requirements.
Image by Photo by Gary Hershorn via Getty Images
- Sweden’s Transport Agency signed a Microsoft deal after the company rejected key demands on data storage, transparency, and compliance.
- Agency lawyers sought 18 contract changes, including EU data handling rules and penalties, but Microsoft refused all final essential clauses.
- The agency said Microsoft services were crucial, while promising extra checks to reduce security and legal risks before cloud use.
- The case strengthens EU digital sovereignty concerns over reliance on US cloud firms and possible foreign access to sensitive data.
Key Takeaways by nexos.ai, reviewed by Cybernews staff.
The Swedish Transport Agency had no choice but to sign a deal with Microsoft even after the tech giant rejected all its demands that would have brought more accountability and transparency into the contract.
The agency, which oversees Sweden’s transport sector, was preparing to sign a contract with the American tech giant in 2025 when its legal experts identified multiple problematic clauses in Microsoft’s standard terms and conditions.
According to a report by the Swedish public broadcaster Sveriges Radio, which Cybernews machine-translated, the agency and Microsoft entered into negotiations.
The details of these discussions were documented in an internal memo obtained by radio stations Dagens Eko and P4 Dalarna, which are part of Sweden’s public broadcaster.
The agency’s legal experts advised including at least 18 clauses in the agreement. Microsoft refused to meet any of them.
The list of demands was then narrowed down. It stipulated, among other things, that Microsoft would have to accept the Swedish Transport Administration’s obligation to disclose information in accordance with the principle of public access.
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In addition, the agency required that Microsoft store, process, and transfer data in compliance with Swedish and EU laws.
The terms proposed by the Swedish legal experts also foresaw financial penalties for Microsoft if the company failed to comply.
The American tech company again turned down the requirements. Further rounds of negotiations left only 3 “absolutely essential” clauses, all of which were rejected by Microsoft.
Nevertheless, the agency accepted the agreement, citing Microsoft’s services being “crucial” to its operations.
The Swedish Transport Administration told local media that it was collaborating with both suppliers and other authorities to ensure that cloud services meet all security, legal compliance, and digital sovereignty requirements.
The agency said it plans to conduct suitability assessments to prevent security risks before implementing cloud services.
Microsoft said it does not comment on individual customers but works with clients to identify risks.
Another reason for digital sovereignty?
The report comes as the EU and individual member states are stepping up their efforts to reduce their reliance on American technologies.
Major concerns driving the digital sovereignty push revolve around data privacy, the prospect of a “kill switch” scenario, and vendor lock-in, where heavy reliance on some companies’ software makes switching to other providers too costly.
Along with Amazon Web Services (AWS) and Google, Microsoft is among 3 American companies that control about 70% of the European cloud market.
This leaves sensitive data of Europeans potentially exposed, as US laws like the 2018 Cloud Act compel American companies to provide US law enforcement data regardless of where it’s stored.
Microsoft was accused in early 2026 of leaking data from Dutch civil servants to the US House of Representatives. The employees affected worked to enforce the EU’s digital regulations, which are fiercely criticized by the Trump administration.
As a result, a growing number of national and local governments have already replaced or committed to replacing Microsoft software with local open-source alternatives.