The Rack Report | Q1 2026

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March 24, 2026

The Rack Report | Q1 2026

The Rack Report is a quarterly newsletter covering the latest legal, regulatory, and commercial trends affecting data center projects. It offers insights on construction, site selection, power procurement, supply chain resilience, and dispute resolution, providing practical guidance for stakeholders in the data center industry.

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Tailoring Arbitration for Data Center Projects: Five Deal-Driven Essentials

By: John Hardin

By any metric, data center construction is booming and is expected to continue doing so for the foreseeable future. Thousands of new facilities are projected to come online globally between 2025 and 2030, while total power capacity is expected to nearly double during that same period. The scale of capital deployment, technical complexity, and operational dependency is unprecedented.

In turn, data center contracts are often among the most complex and technically demanding agreements in modern infrastructure projects. They integrate construction, engineering, power procurement, cooling systems, commissioning, and ongoing operational performance into a single document. Dispute risk in this space rarely involves abstract breach issues. Instead, disputes often implicate uptime commitments, power availability, commissioning milestones, long-lead equipment delivery, and service-level credits owed to downstream customers. When those disputes arise, they are equally technical and carry significant operational and financial consequences for all involved.

Yet many data center contracts continue to rely on generic arbitration clauses recycled from unrelated projects or standard forms. For projects where downtime, delay, or misalignment can have outsized consequences, dispute resolution provisions deserve more intentional, deal-driven drafting commensurate with the project. Arbitration is a contract-driven resolution forum that can—and should—be tailored to the needs of the parties or the project. Below are five key considerations to begin those discussions.

How fast will your expected issues need to be resolved?
Arbitrations often take time to initiate and provide meaningful access to decision-makers. But some data center disputes may require rapid resolution to protect operations.

Arbitration clauses should be drafted with due consideration given to the most likely disputes that could arise and how quickly they must be resolved. Is emergency injunctive relief reasonably foreseeable? If so, do the selected arbitral rules adequately provide for expedited or injunctive relief, or will court intervention be required? Should certain categories of disputes be subject to accelerated timelines? Will interim relief be required to preserve operational continuity?

For large-scale projects, would a dispute board, standing neutral, or structure escalation procedure be practical to resolve issues before they mature into full blown arbitrations?
What will be the technical complexity of a dispute?
Data center disputes are frequently decided on technical evidence, yet generic arbitration clauses rarely account for this reality.

What is the anticipated technical complexity of disputes related to the project? Should the parties agree in advance to baseline arbitrator qualifications? Do the anticipated arbitral rules adequately address expert-heavy proceedings, or should the parties supplement them to better accommodate engineering, scheduling, or systems-based evidence?
Do you want confidentiality or transparency?
Confidentiality is often cited as a reason parties choose arbitration, but data center participants may have differing interests in how much information is protected—and from whom.

Do the parties require strict confidentiality? Or would some degree of transparency be beneficial? Projects involving public companies, private equity sponsors, or project financing often require calibrated disclosure to investors, lenders, insurers, or, in some cases, regulators. Confidentiality obligations should be harmonized with those disclosure requirements rather than assumed.

This baseline discussion should occur on all projects, so the dispute resolution clause reflects commercial reality instead of a one-size-fits-all assumption.
Does the arbitral seat and governing law provide the protection you need?
Even when a data center project is located entirely within the United States, the parties, financing, or operational aspects may have cross-border elements.

Does the chosen arbitral seat and governing law provide the enforceability, remedies, and procedural leverage best suited for the client or the project? For most domestic projects, a U.S.-seated arbitration governed by the laws of a U.S. state may be entirely appropriate. If foreign investors, international financing, or a global operator are involved, understanding the enforceability of an interim or final award abroad may materially affect leverage once a dispute arises.
Is your arbitration clause aligned with the commercial risk allocation in the contract?
Arbitration clauses do not operate in isolation. They interact directly with the contract’s allocation of risk, including limitations of liability, liquidated damages, insurance requirements, and force majeure provisions, and they should be considered holistically.

Do the remedies available in arbitration align with the contract’s negotiated limitations of liability and exclusive remedy provisions? Does the arbitration clause preserve the economic balance of risk allocated elsewhere in the agreement?

If the dispute resolution framework allows for remedies or procedural mechanisms inconsistent with those negotiated risk allocations, the economic balance of the deal can shift in ways that were never intended.

Madison H. Plummer

Associate

MPlummer@perkinscoie.com

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