International Arbitration Trends in 2026
Data centers underpin our digital economy, powering everything from AI to e-commerce. With global demand for data center capacity predicted to triple by 2030, the sector’s exponential growth brings complex environmental, construction and regulatory risks. These risks are likely to fuel a rise in high-value disputes, with arbitration emerging as the preferred forum for resolution.
In detail
Increase in global demand for data centers is attributable to surging AI usage
Around 70% of the increase in global demand for data centers is attributable to surging AI usage, which alone requires around US$1.6tn investment in infrastructure. Markets worldwide are experiencing unprecedented growth in both construction and investment: in 2024, the United States had 6.4 GW of capacity under construction (representing US$74bn in investment) and EMEA’s pipeline surged 43% to 14 GW (around €170bn), while China expects to spend around US$40bn by 2030 to double its capacity. This puts construction of data centers at the heart of digital transformation.
Data center construction has its own specificities. First, data centers have high energy demands (with uninterrupted power required) and produce commensurate GHG emissions if traditional energy sources are used. Second, significant cooling systems are required to prevent servers from overheating, typically requiring large volumes of water (or other innovative cooling solutions). Third, physical and cyber security are crucial due to the sensitive nature of stored data. Fourth, centers need flexibility to accommodate technological advancements and demand increases.
These challenges give rise to certain risks, which have the potential to spill over into disputes.
Data centers must be close to end-users, but they also have large environmental footprints. Site selection is a significant risk, with markets such as the Singapore, Spain and the United Kingdom being slow to bring new energy supply online, upgrade grid infrastructure and secure timely grid access, leading to potential disagreements and claims with governments and regulators.
To avoid these constraints and make projects more sustainable, some companies are building data centers in locations with good access to renewable energy and water and a favorable climate. Others are turning to nuclear energy. However, these solutions can bring their own complexities and face their own ESG, construction and regulatory disputes risks.
In some cases, scrutiny from shareholders, investors, regulators, local communities and NGOs could precipitate disputes for failure to adhere to ESG obligations. These may result in litigation before local courts or commercial arbitration (where there is an arbitration agreement), or, in certain circumstances, be raised as defenses or counterclaims by states in investor-state arbitration.
Practical takeaways
Given these complexities, we expect data center construction disputes to become more frequent and higher in value. In this context, project stakeholders should consider the following:
- Pressure-test contracts and dispute resolution provisions: Ensure clear risk allocation and interface responsibilities across all project documents.
- Build evidence management capacity: Robust project documentation and monitoring are essential for risk prevention and supporting arbitration.
- Proactively manage supply chains and resources: Early procurement and contingency planning for critical equipment and labor can reduce exposure to delay and cost escalation claims.
- Monitor regulatory and community developments: Anticipate changes in energy, environmental and zoning laws, and design agile compliance strategies for each market.
- Secure arbitration-friendly investment structures and treaty protections: Arbitration remains the most common form of dispute resolution for such projects due to the need for confidentiality, flexibility and access to expert arbitrators with engineering or operational experience. To mitigate risks arising from regulatory or policy changes, when investing in this sector, foreign investors should consider structuring their investment to benefit from protection under international treaties.
Our team supports stakeholders from project inception through to dispute resolution, helping clients to identify and manage risks, optimize contracts and deliver commercially focused, efficient solutions to protect investments and secure successful outcomes. Please contact us if you would like to learn more.
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