Data centres now represent critical infrastructure and are a core part of the UK’s growth agenda. Demand is being driven by AI adoption and mass cloud migration, with the pace of development showing no sign of slowing.

Delivery is rarely straightforward. Data centre projects combine complex construction, specialist technology and intense power and connectivity requirements in a planning and infrastructure environment that’s increasingly sensitive to land use, energy demands and sustainability concerns. When something goes wrong, whether that be a delayed grid connection, a late transformer delivery, a commissioning failure or a cyber incident, disputes can escalate quickly.

In this article, we look at:

• why disputes in the data centre sector are increasing
• the most common types of disputes we’re seeing
• how you can use contracts to reduce risk before issues arise

Why are data centre disputes increasing?

Data centres are uniquely exposed to disputes because they sit at the intersection of construction, energy, technology and regulation. Most issues stem from the same pressure:

• Power constraints and grid queues – limited capacity and long lead times can dictate project viability and drive delay
• Specialist supply chains – transformers, switchgear, generators, UPS and cooling equipment often have long procurement times and few suppliers.
• Complex integrations – civil works, IT systems and operational readiness must align, with fast-track programmes leaving little margin for error.
• Regulatory and ESG scrutiny – evolving planning, sustainability and cybersecurity requirements add further uncertainty.

When failures occur, disruptions such as downtime or outages can prompt high-value claims from customers who rely on uninterrupted service. These disputes are not new, but their scale, technical complexity and commercial impact have grown significantly. Standard ‘business as usual’ contracts often don’t adequately address the risks.

Common types of disputes we’re seeing

While each project is different, disputes tend to arise at predictable pressure points.

1. Power, water and connectivity – A data centre only works if utilities do. Delays in securing power, water or fibre can derail a project. Common causes include constrained local infrastructure, unclear responsibility for obtaining and funding connections, or mid-project changes in grid strategy or regulation. As utility risk often sits partly outside a developer’s control, disputes escalate quickly when contracts don’t clearly allocate responsibility or provide remedies if capacity is late or insufficient.
2. Supply chain and specialist equipment – Disputes typically arise when items arrive late, don’t meet specifications, or are substituted without agreement. These issues often spill beyond the immediate supply contract. Typical disputes concern:
   1. Whether delays are excusable;
   2. What counts as equivalent equipment and who decides; and
   3. Disruption claims cascading across multi-tier supply chains.
3. Performance and outages – Claims often relate to latency breaches, cooling or power failures, or capacity shortfalls affecting AI or cloud workloads. These disputes are highly technical and expert‑heavy, with exposure under customer or tenant service level agreements (SLAs).
4. Cyber security and ESG – Cyber incidents often trigger contractual claims, regulatory notifications and cross‑border compliance obligations, especially where data localisation rules apply. At the same time, planning, ESG and community‑driven disputes are rising as attention intensifies on power and water usage, sustainability commitments and local environmental impact. Challenges arise when planning conditions are contested, difficult to discharge, or when standards tighten mid‑development.

Overall, these disputes reflect a common theme: highly complex assets with minimal tolerance for delay or failure, often dependent on third parties.

How your contracts can reduce the risk of disputes

Many data centre disputes are avoidable. Effective risk management begins with contracts that reflect technical and regulatory realties.

• Contracts should be supported by robust technical due diligence, including utility and counterparty capacity and track records, subcontracting chains and responsibility for key inputs and regulatory requirements. Incorrect early assumptions often turn manageable risks into disputes.
• If your project depends on power/water/fibre being delivered by a certain date, the contract must do more than reference it. This is particularly important in the UK, where grid connection lead times can be significant. Practical drafting should include clear connection milestones and meaningful long‑stop dates. Where capacity isn’t delivered as expected, the contract should allocate risk clearly: who bears the cost; what time (if any) is allowed to remedy the issue; and whether termination rights arise. Obligations around engagement with utilities and regulators should also be clearly defined.
• Ambiguity is a major cause of disputes. Contracts should specify equipment requirements, define criteria for equivalence, establish approval processes for substitutions, and include realistic procurement schedules and early‑warning obligations. Where appropriate, inspection and audit rights can provide additional protection.
• Generic templates rarely work, SLAs should reflect operational reality and include specific uptime, latency and redundancy expectations, staged commissioning and progressive testing regimes, and performance warranties linked to realistic workloads. They must clearly define what constitutes a breach, how it is measured and what grace periods apply. For long‑term arrangements, bespoke change‑in‑law provisions and mechanisms to allocate responsibility for variable energy, water and compliance costs can help preserve commercial balance throughout the lifecycle.
• Dispute resolution clauses should be treated as operational tools as these provisions can prevent disputes from transforming into litigation. Tiered dispute resolution mechanisms, standing dispute adjudication boards for technical issues, and international arbitration for cross‑border projects can all help resolve problems efficiently. Early expert determination often prevents technical disagreements becoming full‑blown (and costly) litigation scenarios.

In short, well‑drafted contracts don’t just allocate risk, they create a framework for identifying, managing and resolving issues before they escalate.

Data centre disputes: How we can support you

Data centre projects combine construction, energy, planning and technology risks in a way few other assets do, meaning disputes often span multiple disciplines and require integrated advice.

We support developers, operators, investors and occupiers throughout the data centre lifecycle, working closely with our Infrastructure & Energy and Planning teams to identify risk early and reflect it clearly in development agreements, connection arrangements, construction contracts and customer agreements. This includes practical allocation of power, water, programme and interference risk, as well as mechanisms to manage regulatory change.

Our focus is always on outcomes, preventing disputes where possible through accurate drafting and early intervention. Where disputes do arise, we resolve them quickly and commercially, supported by a clear understanding of how data centres operate. We advise on delay, commissioning, outages, performance, ESG and utility-related claims, including complex multi-party disputes.

If you’re developing, operating or investing in data centres, now is the time to ensure your contracts effectively manage risk.