This works! Thank you.
I figured what was happening after this work-around. I started having the same issue after getting the latest Mac. My documents started showing the cloud with the arrow and the error message as per the OP.
In fact, the error message is misleading, it's nothing to do with the internet, as so many posters here (including me) have found (no problem at all with the internet). All it is is that iCloud is optimising your iCould storage. So if you click into specific documents (the folder will show the cloud with the arrow to say it is not yet downloaded) which are showing the "arrowed cloud", you can actually download them individually. In other words, various documents have been chosen by iCloud NOT to be downloaded to your Mac itself (to optimise storage), but they are all downloaded "on demand" without problems. Whenever a single document has been chosen to be in the "downloadable on demand" category, the whole folder shows the "arrowed cloud".
In summary, it is not a problem to have a folder with the "arrowed cloud". Clicking on that cloud produces the error message as per this post. However, it is possible to access any individual document within that folder, including those that have not been downloaded yet, because they are downloaded "on demand". It is only a little annoying to see an "arrowed cloud" on the side bar against all these folders, but in practice, no documents have been lost or is not downloadable. If you find the "arrowed cloud" icon annoying and would like all your folders to be already downloaded (as opposed to be not yet downloaded, but "on demand"), then as per teomor's post, just uncheck "Optimise Storage" in iCloud settings, and all your documents will be downloaded onto your Mac (and the "arrowed clouds" will become "full clouds"... eventually). But this will obviously make up more available space on the Mac. The idea behind the "Optimise Storage" feature is to leave as much unused space on the Mac, so that only documents on demand are downloaded as and when needed. Hope this makes sense!
