“Future proofing” essential for managing risks in major infrastructure projects

The importance of proactively managing climate change risks and emerging types of disputes in large-scale projects, such as World Cup stadiums, was the main theme of a recent panel discussion on disputes in sports infrastructure during the 2024 London International Disputes Week. The panel was moderated by Jonny Gray, global co-leader of the sports advisory practice at Ankura.

Construction disputes expert Helen Waddell of Pinsent Masons, one of the panellists, said that there are both benefits and challenges for developing venues for major international sporting events, such as the World Cup and the Olympic Games.

“The great benefit for the hosting countries is that you know a long way in advance, so you can thoroughly plan your infrastructure,” said Waddell. “But the main challenge for developers is knowing in 10 years’ time what is going to be the legislation and other factors or commercial decision making that could impact your project. An area of increasing scrutiny is the impact of events like World Cups on climate change.”

International Federation of Association Football (FIFA) has published several guidelines and strategy recently to address the climate change concerns as well as sustainability issues. For example, FIFA published a set of guidelines for football stadiums in 2022, focusing heavily on climate change and sustainability. They are aimed to facilitate “sustainable football” infrastructure development in every aspect – be it environmental, economic or social.

The growing urgency of climate change and sustainability are expected to lead to more disputes in the next 10 years. “We’re already seeing disputes around climate change in the construction and infrastructure sectors, with major industry players facing claims about not only paying compensation but also about reducing their greenhouse gas emissions,” said Waddell. “Fast forward 10 years, we’re only going to see more frequent disputes in this space and globally.”

In the UK, the number of potential claims is likely to increase as a result of the new sustainability disclosure requirements introduced to UK-listed companies. Similarly, businesses in the EU have to comply with the EU Corporate Sustainability Reporting Directive (CSRD). More countries are in the process of introducing the same requirements and standards.

Waddell said: “Anyone involved in planning, in designing, in constructing World Cup infrastructure, or other major infrastructure projects, really needs to put these issues front and centre now to be planning for the future. But that's a real opportunity too, for countries hosting these major sporting events like the World Cup to really lead the way on this front.”

While it is important for the infrastructure sector and sports organisations to take action to achieve their “net zero” ambitions and improve sustainability practices, communicating their efforts and achievements also require careful consideration. According to Rick Liddell KC of 4 New Square Chambers, another expert on the panel, sporting event organisers should be wary about how they market their events in relation to carbon neutrality, as they could be regarded as “greenwashing”.

Last year, the Swiss Fairness Commission found that FIFA had engaged in misleading and unfair advertising regarding the 2022 Qatar World Cup. The commission ruled that FIFA’s branding of the event as a carbon-neutral tournament was a typical example of greenwashing, as the statements were not substantiated with proof.

“The Swiss Fairness Commission’s ruling is certainly a positive step towards combating greenwashing. It shows that even if the statements are not intended to be marketing, they will be potentially subject to rules governing false advertising. Organisers need to be aware that they could fall foul of breaches in relation to human rights and climate change,” said Liddell.

Apart from managing climate change and sustainability related risks of major projects, developers should also take into account the impact of climate change, such as increasing frequency of extreme weather, on sporting events and venues, as well as large infrastructure such as airports, railways and tunnels. Dubai’s recent severe weather event that led to significant flash flooding is an example of such impact. The unprecedented heavy rainfall caused much of the city’s outdoor infrastructure to be submerged under water and forced its airport to temporarily suspend its operations.

Waddell said: “We’re now starting to see what once would be known as ‘freak weather’ events happening a lot more frequently. Countries are experiencing events that they’ve never seen before, such as the flash flooding in Dubai. These are the sort of weather events that need to be factored into any new or even more so repurposed sports infrastructure. Otherwise, disputes will arise during these extreme conditions.”

She explained that the changing climate and frequency of extreme weather events will have an impact on the “foreseeability” argument in construction and infrastructure disputes, as what were considered as unforeseeable weather events 10 or 20 years ago, may now be regarded as foreseeable events.

“These are the new kind of dynamics coming into disputes. Undoubtedly, weather is a factor a project developer needs to think about to future proof the infrastructure of the future,” she added.

As the construction and infrastructure sector moves towards green transition and reduce their carbon footprint, many new and innovative products are coming onto the construction arena, such as low carbon forms of concrete. But Jason Baston of insurance company Miller, another panellist, pointed out that the lack of data to show how they operate and the likelihood of a loss happening and a claim for these new types of projects is a challenge for the industry.

“There’s clearly been a lot of focus on net zero and it’s naturally going to be an ever-increasing topic,” said Baston. “But when you’re introducing new forms of construction, whether it’s a new type of concrete or timber frame, there isn’t much historical data to show how these new materials operate or what’s the effect when you combine different materials together. There needs to really be some forethought time and proper consideration given from the very outset of the design stage to understand the implications whichever choice is made.”

Matt Finn of Ankura Consulting added that disputes during the construction phase of major projects are often caused by changes in scope of works, schedule or time pressures, technical and design issues, procurement, materials and labour shortages, payment and loss of productivity.

A recent study on mega infrastructure projects found that nuclear power projects, putting on the Olympics, and the construction of hydroelectric dams rank among some of the most problematic. In the UK, there have been many cases where contractors failed to build stadiums on time or on budget and leading to large construction disputes.

“It’s essential to anticipate the types of disputes we may see in the future, think about the potential risks and future requirements, such as climate change and sustainability, at the very outset. Parties should be very clear about them when drafting construction contracts to avoid future disputes,” said Waddell.