Data centre disputes: Commissioning, completion and recoverable loss

Key points

• Data centre projects involve complex interactions between construction, power, cooling, connectivity, and technology, creating significant interface risk
• Physical completion alone may not mean that a data centre is operational. Commissioning and completion requirements need to reflect how the facility will actually operate
• Delay or defects can result in losses, but identifying where those losses sit and who is responsible can be complex
• Clear drafting around completion, testing, liquidated damages, exclusions, and liability can help establish how risk is allocated before problems arise

The complexity of data centre projects

Data centres are a critical part of the infrastructure supporting the continued growth of AI and cloud computing. As demand for data processing and storage increases, so too does the need for greater data centre capacity.

Delivering that capacity isn’t straightforward. Data centre projects combine complex construction with significant power, cooling, connectivity, and technology requirements, often involving numerous contractors, suppliers, and systems operating under different contracts. These dependencies can create significant interface risk where delay or technical failure affects the wider project.

Why commissioning matters

For a data centre, completing the physical construction is only part of delivering an operational facility. The equipment and systems also need to be commissioned to demonstrate that they have been installed correctly, operate as intended, and work together to achieve the required performance.

Commissioning can take place in stages, from testing individual equipment through to energisation, functional testing, and integrated systems testing. At the final stage, the focus is on whether the systems operate together effectively, including how they respond to failures.

Commissioning also creates an important record of contractual compliance. Evidence of what was tested, how it was tested, and the results achieved can be critical if a dispute later arises.

When is a data centre complete?

Outstanding energisation, cooling, or testing issues may mean that a complete facility still can’t perform its intended function, raising questions around whether contractual completion requirements have actually been satisfied.

The position can become more complicated when an employer begins using or taking the benefit of a facility before all contractual completion requirements have been met. This may have implications for matters including delay damages, responsibility for the facility, and the commencement of other contractual rights and obligations.

Completion requirements, therefore, need to reflect the technical and commercial realities of the particular project, including its commissioning requirements and the allocation of risk between the parties.

From technical failure to financial loss

The consequences become more complicated once delays or defects cause financial loss.

Identifying those losses is only the beginning. Data centre projects can involve multiple entities, contracts, and commercial arrangements, meaning that the financial impact of a problem may be felt by a different party from the one with the relevant contractual rights.

Thought therefore needs to be given to the structure of the contract as a whole, including whether third-party rights, collateral warranties, assignments, or indemnities are needed to reflect where the commercial exposure actually sits.

Identifying the party that has suffered the loss is only part of the analysis. The scale or capacity of the affected facility does not necessarily measure recoverable loss, particularly where that capacity was not yet revenue-generating. The extent of any recoverable loss will depend on the actual financial impact of the delay or defect and the wider commercial circumstances.

How we can support you

Data centre projects bring together construction, infrastructure, energy, technology, and complex commercial arrangements. As projects become more sophisticated, issues around commissioning, completion, interface risk, and financial loss can have significant contractual and commercial implications.

Our multidisciplinary approach brings together lawyers from across the firm to support developers, operators, investors, and occupiers on data centre projects. We can advise on the contractual treatment of commissioning and completion, allocation of project and interface risks, delay and performance issues, liquidated damages and liability, as well as disputes that have already arisen.

Early consideration of these issues can help provide greater certainty around where responsibility lies and reduce the scope for technical issues to develop into complex disputes.