Data centres have evolved from largely unnoticed digital infrastructure to highly scrutinised, high‑impact industrial assets. Power, water and land demands, ESG and disclosure expectations, and evolving collective redress regimes are converging to create a more adversarial environment.
Operators should be wary of increasing pre‑action skirmishes, regulatory interventions and, in some cases, the potential for group actions, especially around sustainability claims and planning. This article explores the key pressure points facing data centre operators and the steps they can take to prepare.
Why is Scrutiny for Data Centres Intensifying?
Planning and infrastructure pressures
Since September 2024, the UK Government has designated data centres as part of the country’s critical national infrastructure. Historic obstacles, such as uncertain policy treatment and green belt restrictions that once constrained large-scale development in the UK are beginning to soften. The Government has signalled a more supportive approach to data centre expansion as part of its broader AI and digital infrastructure strategy. Regulations came into force on 8 January 2026 which brought these facilities under the Nationally Significant Infrastructure Projects (“NSIPs”) regime. This change enables qualifying developers to apply directly to ministers, streamlining and accelerating the consenting process.
However, the NSIP framework also introduces new complexities and uncertainties around eligibility. Until further guidance is provided as to what constitutes a “nationally significant” data centre, developers face ambiguity that heightens planning risk. Moreover, while bypassing local authorities may accelerate approvals, it could fuel community opposition and increase legal challenges, particularly for green belt or “grey belt” sites.
Grid connections
In 2025, Ofgem approved a new connections process that reformed the existing queue to prioritise those projects that are “ready” and “needed” (i.e. the Gate 2 to Whole Queue (“G2tWQ”) exercise, or the “TOM04+ reform”). Ofgem has warned that the G2tWQ exercise may result in existing contracts being varied if they do not meet the required criteria, and there may be changes or revisions to existing connection agreements, including timelines. It isn’t difficult to see how disputes might arise.
Ofgem has itself issued guidance setting out how it will handle disputes arising from the G2tWQ reform, and confirms that before approaching Ofgem, parties must engage directly with the National Energy System Operator (“NESO”) or Distribution Network Operators (“DNOs”), who have their own procedures to deal with complaints and to remedy errors. Where this is insufficient, the Connection and Use of System Code (“CUSC”) requires senior-level meetings between the parties’ representatives in a formal dispute resolution mechanism. If unresolved, either party may also refer the dispute to the London Court of International Arbitration.
Under the new framework, Ofgem will only consider “exceptional cases”. Ofgem will not consider merit-based appeals, and will only intervene where NESO or a DNO made a material error or failed to follow the correct process. Therefore, most disputes are unlikely to result in re-insertion into the queue.
Water and local environmental pressure
Despite the increase in adoption of low- or no-water cooling technologies, water is still used in substantial volume to cool data centres, and there are mounting pressures for robust water planning to ensure that data centres do not undo the valuable sustainability efforts the UK has worked hard to achieve. Recent press reports have cast light on data centres potentially understating the scale of water use. For example, in one case, as reported by The Guardian, a proposed Northumberland hyperscale campus was found to use 50 times more water indirectly than the developer had claimed, amounting to up to 621 million litres annually once built- equivalent to the average yearly use of more than 11,000 people.
Water usage is a central point of public concern, pushing developers to justify electricity sourcing and cooling strategies more transparently. Furthermore, as climate change accelerates, water‑scarce regions (e.g., Anglian/Water Resources East) are imposing tougher scrutiny on non‑domestic users, requiring evidence that data centres can operate efficiently and sustainably. While low- and no-water cooling systems reduce water consumption, these systems still account for up to 40% of a data centre’s total energy demand. Dielectric fluids used in immersion cooling and engineered refrigerants used in direct-to-chip systems present different environmental challenges, such as risks of leakage and environmentally-safe disposal.
Greenwashing, ESG claims, and multi-party litigation
Greenwashing litigation is an emerging area of legal risk in the UK arising from the disclosure of corporate sustainability information. Claimants are increasingly relying on established causes of action to seek civil damages and may draw on regulatory findings to support their claims. For example, claimants may allege that sustainability statements amounted to false or misleading representations that induced them to act, or that directors breached their duties to promote the success of the company, or the duty to exercise reasonable care, skill and diligence.
The Financial Conduct Authority’s anti‑greenwashing rule came into force on 31 May 2024 and forms part of the FCA’s sustainability disclosure requirements and labelling regime, which applies to authorised firms’ sustainability claims. Meanwhile, the Advertising Standards Authority continues to police advertising. Collectively, the risk profile for sustainability claims has risen markedly.
How to Recognise the Earliest Warning Signs of a Dispute?
Across ESG disputes, group actions, greenwashing, and planning challenges, the earliest signals tend to share common features. For example, questionable or poorly evidenced sustainability claims (either in marketing or ESG disclosures). There may be NGO and advocacy groups that surface issues, through negative reports and campaigns or letters to investors, and large volumes of complaints or coordinated activity. When highlighted at a national level through investigative journalism, this and community unrest can accelerate and often precedes legal action.
These indicators frequently emerge months, or even years, before formal litigation is filed. Identifying these issues early enables companies to remediate, clarify disclosures, strengthen governance, and avoid escalation into high‑profile disputes.
What Can Operators Do to Prepare?
An Action Plan for the Next 12-24 Months
- Strengthen governance and internal controls: Ensure that responsibilities for ESG, planning, engineering and legal compliance are documented and consistently followed. Courts increasingly scrutinise governance structures when determining liability.
- Board-level ESG risk oversight: Maintain clear reporting lines and regular briefings to directors on environmental impacts, regulatory risks, and community concerns.
- Maintain documentation and evidence: Disputes often turn on documentation, and operators should maintain audit-ready records on grid-connection readiness, and environmental-impact assessments, and preserve all documentation relating to internal decision-making processes.
- Strengthen ESG and sustainability claims before they are published: Avoid ambiguous or absolute claims unless supported by rigorous analysis.
- Prepare for planning challenges: Proactively engage in community consultation and keep a documented record of concerns raised and actions taken. Identify likely community, environmental or political opponents early.
- Check your contracts: Ensure all contracts with contractors, suppliers, and partners include clear allocation of environmental and regulatory risk. Consider force-majeure and delay clauses to deal with grid-constraints, and include robust and clear dispute resolution provisions to avoid confusion in the event a dispute escalates.
In summary, data‑centre operators face a rapidly intensifying landscape of ESG‑related legal, regulatory, and community expectations. Proactive preparation, whether through robust governance, accurate disclosures, careful documentation, and strong contractual frameworks, offers the best protection against emerging disputes. By identifying risks early, operators can reduce litigation exposure while supporting sustainable, credible long‑term growth.
