Cloud services are becoming increasingly important to organizations of all kinds. The European Commission recently issued Cloud Service Level Agreement Standardisation Guidelines to assist cloud service providers and cloud service customers. The Guidelines identify and explain many important issues that ought to be considered by any organization when negotiating a contract for cloud services.

Cloud Services

Cloud services make information technology resources and services (including data processing and storage) available as a utility or consumption-based service, and enable an organization to outsource its information technology requirements to a specialist cloud service provider (“CSP”). Cloud services typically use various service models (e.g. infrastructure as a service [IaaS], platform as a service [PaaS], software as a service [SaaS] and anything/everything as a service [XaaS]) and various deployment models (e.g. public cloud, private cloud, community cloud and hybrid cloud).

Cloud services can provide significant benefits (e.g. lower cost/financial risk, elasticity/scalability, agility and improved service quality and productivity), but they can also present substantial risks (e.g. business continuity risk, confidentiality risk, legal compliance risk and liability/reputational risk). The risks and benefits of a cloud service depend upon the particular circumstances, including: the service and deployment model; the importance of the service to the customer; the source and sensitivity of the data created, processed or stored using the service; the character, quality and experience of the CSP; the nature of the customer and its business sector; the applicable legal rules and requirements; and the availability and practicability of alternative services.

Service Level Agreements

A service level agreement (also known as a “SLA”) is the part of a service contract between a CSP and customer that defines, usually in measurable, quantitative terms, the nature and quality of the cloud service. A SLA might also specify the customer’s remedies if the cloud service is deficient. A SLA can be an important part of a service contract for cloud services, but it can also be of little value if the service requirements are ambiguous or difficult to monitor and measure, or if the customer does not have meaningful, cost- effective and practicable remedies for deficient service.

The Guidelines

In June 2014, the European Commission’s Cloud Select Industry Group issued Cloud Service Level Agreement Standardisation Guidelines. The stated purpose of the Guidelines is to provide information that regulators, cloud service customers and CSPs may find helpful when considering contracts for cloud services.

The Guidelines identify and explain many important issues that ought to be addressed in a SLA for cloud services, and recommend corresponding “service level objectives”. The Guidelines explain that the applicability and importance of a particular issue and related service level objectives will depend on the type of cloud service (in terms of both service functionality and service model) and the pricing for the service. The Guidelines do not prescribe mandatory requirements for a SLA.

Following is a summary of some of the important issues and corresponding service level objectives described in the Guidelines.

  1. Performance Service Level Objectives

    These objectives relate to the performance of the cloud service and related aspects of the interaction between the CSP and the customer.

    • Availability: minimum performance criteria for the cloud service, so that the cloud service is accessible and usable on demand (e.g. uptime/availability, successful requests and timely service provisioning requests).
    • Response Time: maximum time between a customer-initiated event (stimulus) and the cloud service’s response to the stimulus.
    • Capacity: maximum amount of a specified property of the cloud service (e.g. simultaneous connections, users, resources or throughput).
    • Capability Indicators: requirements for specified cloud service functionalities.
    • Support: requirements for the CSP’s service to handle issues and queries by the customer (e.g. support hours, support responsiveness and resolution time).
    • Reversibility and Termination Process: requirements for ending the cloud service and enabling the customer to retrieve data from the cloud service (e.g. data retrieval period, data retention period and residual data retention).

  2. Security Service Level Objectives

    These objectives relate to the assurance and transparency of the security of the cloud service.

    • Service Reliability: requirements for the cloud service to perform correctly and without failure, typically over a period of time.
    • Authentication/Authorization: requirements for granting, verifying and revoking the access/use privileges of a cloud service user.
    • Cryptography: requirements for the cloud service’s use of cryptographic technologies (i.e. encryption) to protect data.
    • Security Incident Management: requirements for the CSP’s reporting, assessing, responding to, dealing with and learning from information security incidents.
    • Logging/Monitoring: requirements for logging (i.e. recording data regarding the operation and use of the cloud service) and monitoring the status of one or more aspects of the cloud service.
    • Auditing/Security Verification processes for obtaining independent evidence or verification that the cloud service meets specific, pre-determined criteria (e.g. periodic certifications by testing/accreditation bodies).
    • Vulnerability Management: processes for identifying and evaluating technical vulnerabilities of the cloud service and implementing appropriate measures to address vulnerabilities.
    • Governance: processes for implementing changes to the cloud service.

  3. Data Management Service Level Objectives

    These objectives relate to data life cycle management.

    • Data Classification/Use: descriptions of different kinds of data associated with a cloud service and the permissible use by the customer and the CSP of each kind of data.
    • Data Mirroring/Backup/Storage: requirements to provide the customer with access to data if there is a technical failure (e.g. data mirroring and data backup/retention/restoration).
    • Data Lifecycle: requirements for the CSP’s data-life cycle practices (e.g. data handling, storage and deletion).
    • Data Portability: requirements for the customer to obtain data from the cloud service for use outside the cloud service (e.g. data export formats and mechanisms).

  4. Personal Data Protection Service Level Objectives

    These objectives relate to cloud services that involve the processing and storage of personal information regulated by data privacy and personal information protection laws.

    • Codes of Conduct, Standards and Certification Mechanisms: requirements for the CSP’s compliance with specified data protection codes of conduct, standards and certification mechanisms.
    • Purpose Specification: a description of the limited purposes for which the CSP will process and use personal data, including purposes that are beyond those requested by the customer.
    • Data Minimization: requirements for the CSP’s retention and permanent deletion of personal data and related temporary data (i.e. data created as a result of the operation of the cloud service).
    • Use, Retention and Disclosure Limitations: limitations and requirements regarding the CSP’s disclosure of personal data to law enforcement or government.
    • Openness, Transparency and Notice: restrictions and requirements for the CSP’s engagement of subcontractors to store or process personal data, and the kinds of personal data that are suitable for storage/processing using the cloud service.
    • Accountability: requirements for reporting and responding to a data breach and for demonstrable, documented compliance with data protection laws and regulatory oversight.
    • Geographic Location of Data: restrictions regarding the geographic locations where customer data will be stored and processed, and requirements for the cross-border transfer of customer data.
    • Intervenability: requirements to enable the customer to comply with laws regarding a person’s rights of access, rectification, erasure, blocking and objection.

The Guidelines explain that a service level agreement is only one component of the contractual relationship between the CSP and the customer. The Guidelines caution that it is important for the customer to understand the complete set of documents that govern the cloud service, and recommend that a cloud service contract be prepared by qualified lawyers.

The subgroup responsible for the Guidelines is comprised of leading providers of cloud services, including Amazon, Google, HP, IBM, Microsoft, Oracle, Salesforce and SAP. The Guidelines include a disclaimer that the Guidelines do not necessarily represent the position of any of the subgroup members.


Cloud services are a form of outsourcing, but the procurement process for cloud services is usually significantly different from traditional outsourcing transactions. Traditional outsourcing usually involves a formal procurement process and extensive negotiations over technical, business and legal issues and risk allocation. In contrast, for a variety of reasons, many CSPs use standard form, take-it-or-leave-it contracts that are one-sided and fail to reasonably address the customer’s most important business needs and legal requirements. The Guidelines may prove to be a useful contract negotiation tool for any customer who is negotiating a cloud services agreement, because the Guidelines provide persuasive confirmation of the need for a cloud services contract to properly address the business and legal issues that are important to the customer.



Bradley J. Freedman


Corporate Commercial Litigation and Arbitration
Information Technology