The U.S. said Wednesday that it was “disappointed” in a decision by the Dutch government to block New York-based Kyndryl’s planned acquisition of a cloud services provider over concerns about national security.

“We were disappointed by the Dutch government’s decision regarding the Kyndryl-Solvinity deal,” the U.S. Embassy in The Hague, Netherlands, said in a statement. “We understand and respect the responsibility to safeguard critical infrastructure and protect citizens’ data.”

“While we believe additional time for dialogue should have allowed for the identification of a path that would address legitimate concerns, we are committed to working closely with Dutch partners to protect both nations’ interests going forward.”

Kyndryl, an independent spinoff of IBM, announced in November that it had entered into an agreement to acquire Dutch-based Solvinity, seeking to expand its European footprint.

Solvinity hosts the Netherlands-based DigiD platform, a national digital identity system that citizens use when dealing with government agencies, healthcare providers, educational institutions and pension funds.

The proposed $113 million deal faced opposition from lawmakers and activists who were concerned about the tool — which contains sensitive information — coming under foreign ownership, according to Reuters. There were also warnings that the acquisition could make the Dutch firm vulnerable to U.S. legal and intelligence pressure.

Passed in 2018, the Clarifying Lawful Overseas Use of Data (CLOUD) Act grants U.S. law enforcement the power to compel U.S.-owned tech companies to turn over data under their control, regardless of where that data is stored.

Willemijn Aerdts, the state secretary for Digital Economy and Digital Sovereignty of the Netherlands, informed the Dutch Parliament on Tuesday that it had acted on the advice of the national authority tasked with screening foreign investments and blocked the deal.

Aerdts wrote that it was determined the proposed acquisition “may pose a risk to the public interest” but did not provide an explanation for why.

“The Netherlands attaches great value to the presence of foreign, especially U.S.-based tech companies, and their added value to the Dutch economy and digital infrastructure, but it maintains, at the same time, an independent investment screening framework aimed at protecting the public interest and which applies equally to all investors, independent of their country of origin,” the letter stated, according to a translation from Politico EU.

Kyndryl said that it was “extremely disappointed” in the government’s position, insisting it had “consistently engaged in good faith” with stakeholders throughout the process.

“Despite this engagement and our long history of managing mission-critical operations in the Netherlands, the politicization of this process has overshadowed the clear and important benefits this transaction would have brought to Solvinity’s customers and Dutch citizens,” the company said.

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