Termination pursuant to Art. 25 para. 2 lit. d) Data Act - Requirements for Contract Drafting for Cloud Providers

On 12 September 2025, the Data Act will come into force. One of the core goals of the Data Act is to avoid lock-in effects resulting from the de facto control of customer data by providers of IoT products or cloud services (IaaS, PaaS, or SaaS). In this context, the Data Act contains several regulations that oblige providers to provide some customer-friendly clauses in their customer contracts. Among other things, Art. 25 para. 2 lit. d) Data Act obliges providers of data processing services to grant customers the right to terminate the contract at any time, irrespective of any agreed fixed term. This regulatory concept is familiar from contract drafting in IT contract law and is particularly widespread in international contracts. The clause is often titled Termination for Convenience. The influence of wsuch termination on the remuneration claim is often the subject of contract negotiations. It is customary in the industry that the Termination for Convenience does not affect the claim for remuneration, even if IT purchasing conditions sometimes stipulate otherwise as standard. Art. 25 of the Data Act now obliges providers to grant such a right of termination. The significance of this regulation and the resulting requirements for the drafting of contracts are the subject of this article.

1.          The notice period of two months for the ‘initiation of the switch’

Art. 25 para. 2 lit. d) Data Act stipulates that the provider of data processing services must provide for a maximum termination period of two months in its contracts. However, the contract is not terminated at the end of this notice period. This is because, according to the wording of the law, the notice period of two months applies to the initiation of a switch to another data processing service. The ‘notice period’ of two months pursuant to Art. 25 para. 2 lit. d) Data Act is therefore, strictly speaking, not a notice period at all, but rather a period of notification or announcement. Nevertheless, the declaration results in a termination of the contract, just not with a notice period of two months, but with the completion of the switch, which should take place within the legally stipulated switching phase (see below).

2.          The switching phase of Art. 25 para. 2 lit. a) Data Act

2.1 The 30-day switching phase and the extension options

Art. 25 para. 2 lit. a) Data Act defines a switching phase of 30 days in principle. However, if the provider of data processing services requires more time for technical reasons, it is authorized to extend this period once to a maximum of seven months within 14 days of receipt of the switching request (Art. 25 para. 4 Data Act). The customer may also extend this period but is neither bound by a deadline nor is its request for an extension dependent on a specific reason for extension. It should be noted that the ‘or’ link in the German version of Art. 28 para. 2 lit. a) Data Act is linguistically unfortunate. However, a comparison with other language versions makes it clear that the 30-day period applies both to switching to the company's own infrastructure and to switching to another provider.

2.2 The end of the switching phase

The switch to another provider or to the customers own infrastructure completes the switch. And once the switch has been completed, the contract is terminated by law in accordance with Art. 25 para. 2 lit. c) Data Act. This raises the question of what applies if the switching phase ends without the switch having been completed within the meaning of Art. 25 para. 2 lit. c) of the Data Act. As we all know, things sometimes take longer. Given the clear wording of Art. 25 para. 2 lit. c) Data Act, the contract is likely to continue. However, in addition to sanctions under public law such as fines, contractual sanctions for breach of duty by the party responsible for the delay may also be possible.

2.3 The switching phase in the event of a request for data erasure

If the customer wants his data to be erased instead of a switch, then there is no switching phase. In this case, the contract ends at the end of the 2-month period under Art. 25 para. 2 lit. d) Data Act. Completion of the erasure is not necessary for the termination of the contract pursuant to Art. 25 para. 2 lit. c) ii) Data Act.

3.         The right of termination under the Data Act and fixed-term contracts

The Data Act therefore enables customers of data processing services to terminate their contracts at any time. However, providers of IaaS, PaaS and SaaS services are not forced by this right of termination under Art. 25 para. 2 lit. d) Data Act to waive fixed-term contracts. The legal consequence of Art. 25 para. 2 lit. d) Data Act differs in this respect from the provision of § 309 no. 9 BGB (German Civil Code Law) , which in the case of consumer contracts, however, must be considered in addition to Art. 25 para. 2 lit. d) Data Act. This is because § 309 No. 9 BGB, in deviation from Art. 25 para. 2 lit. d) Data Act, basically prohibits fixed-term contracts and renders deviating provisions ineffective. However, the permissibility of fixed-term contracts under the Data Act is somewhat hidden, especially as Art. 28 of the Data Act expressly regulates the elimination of switching charges, which may no longer be charged from 12 January 2027. This is a key provision to counteract lock-in effects resulting from de facto data control by providers. The fundamental permissibility of fixed-term contracts can be found in the definition of switching charges. According to Art. 2 No. 36 of the Data Act, these are ‘charges, other than standard service fees or early termination penalties‘. In other words, as long as only the license fee continues to run until the originally agreed end of the contract or a penalty is provided for early termination (presumably up to a maximum of the corresponding amount), a corresponding provision is compliant with the Data Act.

This interpretation is also clear, as recital 89 of the Data Act shows. It states verbatim:

‘Nothing in this Regulation prevents a customer from compensating third-party entities for support in the migration process or parties from agreeing on contracts for data processing services of a fixed duration, including proportionate early termination penalties to cover the early termination of such contracts, in accordance with Union or national law.‘

4.         Requirements for the drafting of contracts regarding Art. 25 para. 2 lit. d) Data Act

In this respect, it is clear that the right of termination at any time under Art. 25 para. 2 lit. d) Data Act does not exclude fixed-term contracts. However, this does not mean that providers can simply let 12 September 2025 pass. This is because the right of termination under Art. 25 para. 2 lit. d) Data Act (presumably) also applies by law if it is not contractually agreed in violation of the law. However, the continued entitlement to the license fee beyond the end of the contract must be contractually regulated, otherwise it does not apply. Transitional provisions do not apply to Art. 25 para. 2 lit. d) Data Act. Such provisions are only provided for in Art. 50 Data Act for Chapter IV. However, Art. 25 para. 2 lit. d) Data Act is part of Chapter VI, meaning that the regulation will also apply to current contracts with existing customers from 12 September 2025. What this means for dealing with existing customers is the subject of another article.