Belgium: Welcome To The World Of Data Centres

Last Updated: 26 April 2019
Article by Annalisa Feliciani
Most Read Contributor in Belgium, August 2019

INTRODUCTION

Hogan Lovells is your first port of call and the leading legal provider in relation to successful realization and investments in data centres in Germany and Europe.

Our dedicated data centre team comprises lawyers with an in-depth understanding of the data centre industry and its characteristics. When providing you with closely coordinated one-stop advice, we bring together our knowledge carriers from various legal disciplines including Real Estate, Infrastructure, Energy, Resources & Projects, Intellectual Property, Project M&A, Data Security, Dispute Resolution, Corporate, Commercial, Project Finance, Employment Law and Tax Law. This approach adopted by our integrated industry sector team ensures that you receive consistent, industry specific and solution oriented advice which focuses on what you really need.

This brochure summarizes key legal aspects to be considered when buying, selling, financing and/or constructing a data centre, including data protection, digitalization and cyber security.

In the last 3 years the datacentre workload has grown on average by more than 20% worldwide. This development will continue in the coming years until at least 2021. (Source: CISCO)

Lease or build a data centre?

When a company is growing and wants to out-source servers and IT equipment, it must decide on the best way to do this. Such a decision can be crucial if the business is expanding rapidly and therefore urgently requires additional space for servers and IT equipment. The choice it faces is whether to lease data centre space (by a colocation or warehouse solution, which we will refer to as "leasing" or a "leasing solution") or whether to build its own data centre.

The obvious advantages of building over leasing are that

  • the company has maximum control over the IT equipment and anything related to it;
  • there is no risk of "losing the lease", and
  • any unused space can be leased out to other companies, thus reducing electricity, cooling and security infrastructure costs.

On the other hand, the main disadvantages of building are upfront costs which can add up quickly if not calculated thoroughly. The costs of building and maintaining a data centre should not be underestimated and may be a crucial factor in the decision making process. When evaluating the costs involved, the focus is mainly on power, staffing and IT infrastructure. However, real estate related costs are often not taken into account sufficiently or at all. These include architect, planning and design costs, building costs including costs for permits, such as building permits, costs for fire suppression and detection systems, notary costs, costs of registrations, etc. Nor should companies underestimate the various risks related to power and cooling infrastructure, hardware and software, technological development, uncertainty surrounding future business strategy and potential space problems, i.e. if the space later proves to be too small or too big. Moreover, companies should be aware of the large number of building regulations to be met, for example in the area of fire safety which may be very strict in some jurisdictions. On balance, leasing is likely to be a better solution for many companies because it allows risks to be confined and gives companies the flexibility to adapt their space needs to their business needs.

Data centre leasing strategies – the various types of contract structures

The most common types of leasing structures for data centres are:

  • Wholesale data centre and colocation solutions
  • Server hosting – managed hosting

Balancing the need for control with the desire to cut costs

Ultimately, the decision between a whole sale/colocation structure and a purely managed hosting structure is one of balancing the need to control the servers and IT equipment with the desire to achieve the best possible cost savings by entering into a data centre lease. Important topics which need to be addressed before taking such a decision include:

  • how much control is necessary with respect to operation of IT equipment and the premises in which the IT equipment is stored;
  • whether the tenant is prepared and willing to accept (high) capital expenditures for repairing and updating IT equipment; and
  • whether the tenant is prepared to employ and pay for the necessary personnel to operate and maintain the IT equipment.

When taking this decision, the tenant should not only consider its present situation and its needs as a business, but also bear in mind its future strategies and plans in order to find the best solution. Overall, the wholesale/ colocation solution or a hybrid solution might be the right choice for many bigger companies, whereas the managed hosting solution could be the ideal solution for smaller firms.

What a data centre lease should cover

First and foremost, it is vital to clarify the legal relationship between the data centre provider/landlord and the occupier/ customer. Depending on the actual use and allocation of rights and obligations, a lease agreement (triple net or double net), a service agreement or an agreement with lease and service elements are possible options. In the majority of cases, the parties will sign a lease agreement which also includes elements of a service agreement.

As the lease agreement is the main legal document which governs the relationship between the parties, particular care should be taken when negotiating "Provider Must Haves" on the one hand, and "Customer Must Haves" on the other. Key topics to be considered in lease agreements include:

Lease term and renewals

Would the company prefer a long-term or short term lease taking into consideration that the initial term is often 15 to 20 years? In addition, the number of renewal periods and any pre emptive rights of the tenant should be taken into account.

Rent payment

Another important point is how the rent will be paid. The basic rent is usually based either on square meters or on power availability.

Space, permitted uses and equipment

The leased space might not be enough for all the equipment and infrastructure that the tenant requires. It is therefore advisable to stipulate in the lease agreement whether the tenant is allowed to use additional space, e.g. on the roof for antennas, shaft space within the building or special support areas for the placement of generators.

Set-up, alterations, maintenance, repair and replacement

Depending on who owns and who will be obliged to maintain the facility infrastructure, specific provisions must be incorporated into the lease agreement regarding alterations, maintenance, repair and replacement. The tenant and/or landlord might be required to comply with certain standards and/or maintenance schedules. Provisions on services relating to data centre equipment, heating, ventilation and infrastructure should also be included.

Power supply, cooling, humidity, connectivity and data capacity

Power supply, cooling, humidity, connectivity and data capacity are the core topics of a data centre lease. Provisions covering these areas must therefore be included in the agreement. Specifically, the following topics should be discussed and agreed: power requirements, cost of power and uninterrupted power supply as well as redundant fibre access, multiple carriers and sufficient data capacity.

Service level agreements

The parties should also consider including service levels and reasonable support provisions. Moreover, the agreement should describe what happens if service levels are not met. For the customer, it might be desirable to include a termination right for continued breach of guaranteed service levels.

Liability, indemnification, data protection and security

A limitation of liability might be beneficial for both parties. The agreement should also include provisions regarding data protection, security (e.g. access to the building) and compliance with laws.

In addition to the key topics mentioned above, it might be advisable to incorporate other provisions, depending on individual circumstances.

Avoiding pitfalls in construction contracts

Unlike brownfield projects/transactions, developing greenfield data centre projects are challenging and come with various risks. The developer needs to decide on the right approach for such a development: Delivering the project with various (multilot) contractors and a potential designer/or engineer or choosing an turnkey approach whereby an EPC-Contractor delivers the whole projects and agrees to engineer, procure and construct the datacentre. While the first option may deliver a more cost-efficient solution, a turnkey EPC Contractor undertakes the full completion, turnkey and interface risk of such a highly complex project. One of the most obvious benefits of entering into such a contract is having one single point of contact and responsibility for the project, thereby avoiding having to manage various roleplayers that would otherwise have to be involved in the construction and setting up of such a project.

While it is, of course, commonplace for an EPC Contractor to engage various subcontractors to provide certain services or works, the EPC Contractor remains the single point that is directly responsible for ultimately delivering a project ready for operation. This means for the Employer in an EPC project that the added risk of liaising with various parties and allocating various risks is avoided.

Parties need to face reality in terms of construction of a data centre. According to KPMG International's 2015 Global Construction Project Owner's Survey,

  • Major complex EPC projects fail more often than they succeed, resulting in disputes;
  • 71% of owners in the energy and natural resources sector reported unsatisfactory underperforming projects; and
  • 69% of all projects between 2012 and 2015 were reported to be more than 10% over budget

Having this in mind, a clear contractual framework including a fully functional and efficient claims and risk management can assist in avoiding pitfalls as well as significant delays and cost overruns.

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions