Working in the Indian Data Centre Market

In 2020, the Indian Ministry of Electronics and Information Technology announced its draft Data Centre Policy, designed to make the country more attractive for domestic and foreign investment into the data centre sector. In this article, Ed Cooke, Founder at Conexus Law, shares some of his experiences of working on Indian projects including some of the key differences in design and construction contracts.

The vision

The government’s vision is to make India a global data hub, primarily by promoting the data centre sector to give it infrastructure status and creating a benign regulatory environment. Plans also include establishing Data Centre Economic Zones with high-quality power and connectivity infrastructure, water and other utilities, and creating financial incentives, particularly for the use of Indian-manufactured equipment and hardware. In fact, certain state governments, such as the states of Tamil Nadu and Uttar Pradesh, have already announced state-wide policies to encourage data centre development.

Over the past few years, a number of global data centre operators have announced investment partnerships focused on the Indian market. These include the recently announced joint venture between Digital Realty and Brookfield Infrastructure Partners, Yondr’s venture with Singaporean Everstone Group, AdaniConneX (a JV of EdgeConneX and Adani Group), and announcements of hyperscale data centre developments by the likes of CapitaLand, Hiranandani, NTT, and STT GDC. In fact, Mumbai, Hyderabad, Chennai, Bangalore and Delhi are already well advanced as important locations to serve the increasing Digital Transformation among the Indian domestic market and the global communications market. Mumbai, in particular, has been the premier choice for hyperscale developments due to its infrastructure availability and proximate subsea landing stations.

Understanding the differences

At Conexus Law, we have recently been working for US and European based clients on the construction of hyperscale size data centre projects in India. As commercial and legal advisors specialising in technology infrastructure, one of our regular tasks is to help clients enter new markets.

This includes helping them to understand the legal, commercial and cultural differences compared to operating in their ‘home’ environment. We always work with local partners and it is a part of our work that we really love doing.

The Indian legal system is fashioned on English common law, but overlayed with Indian legislation and regulatory laws. Indian court judgments set precedent and so it is important to understand both the legislative and common law context in which you are working.

In our experience, most data centre construction contracts in India are either based on a bespoke form of contract or a FIDIC standard form (usually a Yellow Book). There are also other inevitable regional differences.

Areas to focus on

As an example, labour and the supply chain are a huge and complex area in India and we often get involved in advising clients on their approach to procurement, and to monitoring second and third tier suppliers. Performance security, bonds and third-party guarantees/letters of credit are extensively used on large construction projects in India and we play a role in monitoring these. Also structuring payments against milestones – in particular protections around advance payments – are, in our experience, common in India.

The quality and workmanship – and in particular compliance with local and international codes and standards – is an area of real focus and aligns with detailed staged and integrated commissioning processes. There are also a number of compulsory insurances required in India alongside those which would normally be expected by an international client.

Cultural considerations

When we are negotiating in a different country or culture, we work hard to understand how the approach of our negotiating partner might differ from your own. It is always risky to try to characterise a whole nation or culture by a set of rules and so there needs to be a lot of ‘finding your way’ with the relevant individuals. However, we find cultural frameworks such as the well-known Geert Hofstede index, can be useful as a starting point. For example, through that, we learn that Indian culture scores highly in relation to its appreciation of hierarchy. It is therefore important to establish early on where the individuals we are negotiating with fit and ensure that either negotiations on specific points are conducted at the right level. An alternative is to provide enough justification for our stance to enable the individual to take the decision back to his or her superiors and make a convincing argument. It is quite easy to cause offence by not respecting the hierarchical structure (perhaps by seeking to jump a level in order to get faster resolution of an issue). To the western negotiator who is often time pressured, negotiating can feel like a very slow process but it is important to temper frustrations for the long-term goal. Also remember, as with many Asian cultures, that the term ‘yes’ is often used to indicate understanding of the point being made, not agreement to it. In our experience, this can cause clients great difficulty when they report that an issue has been closed out, only to find it has not been.

In conclusion, investment in digital infrastructure is happening at scale in India and there is a vast amount of further potential in this market. In fact, investment in the Indian data centre market is expected to reach US$8 billion by 2026. There are inevitable challenges in meeting the demand of a very tech-enabled population and business sector quickly enough, with reliable infrastructure to overcome historic under-investment in the region, such as quality construction and availability of highly qualified labour. We are proud to be part of it.

How to Ensure Stadiums are Built on Time

Ian Timlin, head of sport at Conexus Law explains how to make best use of the law to ensure your stadium is built on time, on budget, on spec and generating revenue.

If the mantra “Plan, plan and plan again and build in extra contingency” ever applied, it is in relation to the construction of stadiums.

As Bath Rugby Club are finding out in the Court of Appeal (hearing 5 Oct 2021), you need to start with the basics and establish whether you can legally do all that you want at the site. Bath Rugby Limited (“BRL”) hold a long lease of an area in the centre of Bath used for playing rugby and football, known as “the Rec” and are planning to develop that area. However, the beneficiaries of restrictive covenants in respect of the Rec obtained a High Court ruling in September 2020 preventing BRL’s proposed development. Hence their time consuming and costly visit to the Court of Appeal in late 2021.

In tandem with the above, whilst proper site surveys, scoping of works and funding and budgeting, consideration of any likely backlash to the development, getting all stakeholders on-board, getting the legal agreements in place in good time, having a realistic project programme and contingency on many fronts are required, we explore below other matters that are in our experience are unique to getting your stadium built on-time, on-budget, with satisfactory quality and so it generates revenue.

  • Normal expectations for competitive tendering do not apply. For example, you go out to 6 main contractors for competitive build costs. In our experience, for certain specialised packages of the build (eg seating) all 6 potential main contractors come back with seating prices from the same or say two seating sub-contractors because of the limited supply pool. So how do you get competitive and transparent pricing? You need transparency in the tender process to understand what makes up the pricing of the proposed main contractors’ packages. You may even need to obtain and pass on the results of your own investigations for bespoke packages to proposed main contractors, or adopt a procurement approach which is more akin to management contracting.
  • Very large bespoke packages only available from limited suppliers often need a long lead time depending on other stadia being constructed in your region/continent at any given time. The procurement of the seating package is paramount and must be given early consideration and priority as should complex M&E elements.
  • You must absolutely adhere to the requirements of the sports’ governing body for the stadium’s proposed use/s especially regarding the playing surface and arena configuration requirements or player’s facilities (eg the construction materials and measurements of a running track or dimensions of a football pitch and dressing rooms and hospitality).
  • The views of stakeholders (eg athletes, local residents, governing bodies, disability groups, emergency services, health and safety, hospitality, fans, tv and media, match day or event operations, non-match day revenue generation, future maintenance operations) must be canvassed early to decide what of their views and requirements can or need to be incorporated in the proposed development.
  • In respect of stakeholders, do not underestimate the impact of television, media and smart technology on your stadium. Facilities must be appropriate and future proofed to accommodate television, media and smart technology (eg smart turnstiles and hospitality and food and beverage offerings equipment and offerings) with more than adequate data connectivity.
  • The traditional legal tool to try and get any construction project delivered on time is liquidated damages – a pre-agreed daily/weekly amount to be paid to the employer by the contractor for late completion of the construction project. However, in our experience on a mission critical stadium construction project (eg the London Stadium for the 2012 Olympics), no amount of accrued daily/weekly liquidated damages (however large) is going to compensate for the stadium not being ready for its planned event. The reputational damage to the employer, governing body and contractor plus the costs of moving an event to another stadium does not bear thinking about (eg moving TV, media, officials, competitors, training grounds and accommodation to an alternative existing venue). So creative thinking needs to be brought to bear to this issue. For example, you may not engage the cheapest main contractor on price but the one with the largest reputation to protect and who demonstrates in the tender process the serious steps that it will take to protect its business reputation whatever.
  • Consequently, stadium construction must be subject to the tightest of regular programme management, an understanding of what is on the critical path at all times, accurate, truthful and honest information flows from the contractor to the employer and its professional consultants and vice versa, quick and straightforward dispute escalation and resolution processes. The project culture must be open and collaborative in actions as well as words and be backed up with adequate legal drafting in contractual documents if any party decides to deviate from that path. All team members should understand schedules and deadlines before construction begins.

The state of the art Tottenham Hotspur Stadium which opened late in April 2019 at a reported cost of circa £1billion (seating capacity of 62,850), being a multi-purpose stadium featuring the world’s first dividing retractable football pitch, which reveals a synthetic turf field underneath for NFL games in London, concerts and other events which includes smart tech such as the revolutionary bottom of the beer glass filling in the longest bar in Europe (65 metres), shows how far stadium have progressed and the trials and tribulations faced in their construction.

Contributors to this article were Ian Timlin, head of sport, Ed Cooke, Conexus managing partner and Earle Brady, specialist construction and engineering lawyer. Legal advice in the sports sector includes acting as one of the principal construction lawyers working for the London 2012 Olympic Games and Paralympic Games; and advising two Premiership football clubs over a period of 15 years on construction and engineering projects in and around their stadia and including two significant stadia extension projects.

For further legal advice in the sport sector, please contact Ian Timlin via his contact details below.

Ian Timlin
Main: +44 (0)20 7390 0280
Mobile: +44 (0)77 6742 7332
[email protected]

Emma Cordiner on real estate legal skills for data centre acquisition

In this episode of Inside Data Centres, Emma Cordiner talks about the real estate legal skills required for data centre acquisition.

If you would like more information, please contact Emma Cordiner.

Cyber Security Interview with FMJ

Interview

Data Centre Alliance talks to Marilyn Heward-Mills

We have completed a series of three briefings with the DCA

In the third in our webinar series, Steve Hone from the Data Centre Alliance speaks to Marilyn Heward-Mills about Employment Law and Staff Wellbeing.

 

 

Data Centre Alliance talks to Ian Timlin

We have completed a series of three briefings with the DCA

In the second in our webinar series, Ian Timlin focuses on dispute resolution and the valuable role that mediation plays

 

 

Data Centre Alliance talks to Ed Cooke

We have completed a series of three briefings with the DCA.

In this first webinar, Steve Hone from the Data Centre Alliance speaks to Ed Cooke and looks at the value of relationship contracting.

 

 

Ed Cooke, Founder of Conexus Law took part in Andy Davis’ Inside Data Centre Podcast

Ed discusses why he established his own specialist legal practise, what the main legal challenges are in the sector, what impact the pandemic has had on the industry, and his views on the future of the industry.

Listen here