The sale of Dutch cloud services firm Solvinity to American IT giant Kyndryl has caused alarm within national and local government because it undermines efforts to reduce dependence on US technology companies and safeguard control over sensitive data, the Financieele Dagblad reported on Wednesday.

Under the US Cloud Act, cloud service providers can be required by law to make information available to the US government, even if the storage is located in Europe.

Solvinity provides secure cloud and data services to a range of government clients, including the digital identification system DigiD, the MijnOverheid portal and the justice ministry. The company was chosen by Amsterdam only last month to help strengthen the city’s “digital autonomy”.

Amsterdam executive Alexander Scholtes said the city was “unpleasantly surprised” to learn that Solvinity is being taken over by a US firm in a deal that was announced last week.

“We selected Solvinity as a reliable Dutch partner that would help us maintain control over our digital infrastructure. The fact that it is now likely to come under foreign ownership is something we take seriously,” he told the paper.

The city signed a €14 million contract with Solvinity and another partner shortly before the takeover was announced. Scholtes said Amsterdam is now consulting other government clients to assess the consequences and possible next steps.

The takeover by Kyndryl, a former IBM subsidiary with a market value of around $6 billion, still requires regulatory approval. The justice ministry and digital services agency Logius said they are also examining what the change of ownership could mean for their collaboration with Solvinity.

Solvinity chief executive Daniëlle Schuur said the company is aware of the “sentiment in the market” but does not expect any disruption to its services. “We are in good discussions with governments and other clients to explain the planned acquisition,” she said.

Schuur declined to tell the FD whether Solvinity had already known about the takeover when talks with Amsterdam took place. She described the sale as a “next step” for the company, which was majority-owned by British private equity firm Vitruvian Partners.

The deal comes as governments and institutions across Europe seek to reduce their reliance on US cloud providers such as Amazon, Google and Microsoft.

Solvinity, which employs around 350 people and has offices in Assen, Amersfoort and Den Bosch, reported turnover of €70 million last year.