Ever-increasing digitization of our lives surges the unstoppable reliance to data in every aspect of the personal and professional worlds. In a world of technological developments, storage and manipulation of data play a crucial role for business efficacy. This need for controlling the data created a modern facet to the commercial real estate, which has become the backbone of the digital economy: data centres.

A data centre is a facility or premise, which focuses on storage and management of an organization’s data, including its IT operations and equipment. Data centres are vital for safekeeping and utilization of data for daily operations and can be managed either by an organization itself or through a data centre providing services to its various customers. Though the concept of a data centre exist for a few decades, the sector recently started to mature in infrastructural, financial, management and regulatory aspects to manage data in a reliable and efficient manner due to constant increase in utilization of big data, cloud computing, and digital services/products. The rapid improvement and undeniable necessity for the data centres also attracted involvement of mega players and vast amounts of investments to the sector. In 2018, 68 data centre oriented M&A deals with an approximate aggregate value of USD 16 billion were completed around the world.

Establishment and management of a data centre require diligent planning in conjunction with an extensive legal framework not only related to the real estate aspects such as zoning, construction and infrastructure of the data centre but also involves the commercial, banking, energy infrastructure and data protection laws. This article concentrates on co-location agreements; the core of data centre operations.

Except for a few leading telecommunication companies, the Turkish market mirrors the global trend of outsourcing data centre services rather than establishment of in-house data centres. The data centre agreements levy various liabilities to the data centres due to complex and demanding nature of data storage and data-related services in order to maintain uninterrupted power, data connectivity and data security, physical integrity and lastly, physical security of the data and servers. Legal nature of such agreements may vary depending on the scope of the services, but usually co-location services agreements are used to physically store customer’s hosting infrastructure (e.g. servers and other network connection equipment) to the data centre premises.

Co-location services can be defined as housing of the servers and networking equipment owned by the customers within the data centre premises. A colocation provider not only allocates the physical space – mostly caged racks and cabinets – required for the servers and network equipment, but also provides power, cooling systems and bandwidth for the customers to deploy their servers.

A co-location arrangement is often compared to a lease; however, its characteristic nature of safekeeping a customer’s infrastructure is similar to a bailment agreement (saklama sözleşmesi) under Turkish law, rather than lease of the data centre premises where such infrastructure is located. A bailment agreement is an agreement whereby the owner of a movable, as the bailor, handovers physical possession of its movables to a bailee for safekeeping purposes. Turkish Code of Obligations provides liabilities to both parties of a bailment agreement, such as safekeeping of the movable until the agreed date, reimbursement of expenses and restriction for utilization of such movables for regulation of such arrangement.

The necessities of the market, on the other hand, is much more evolved than the fundamentals laid on in Turkish Code of Obligations for bailment agreements. In practice, it would be an understatement to refer co-location agreements merely as bailment agreements as these agreements contain detailed and extensive service levels in connectivity, power and bandwidth, protective measures for data security (e.g. firewall, antivirus protections), climate conditions as humidity and temperature to maintain physical integrity and access to the relevant spaces, instalment of cages for protection of physical security of the infrastructure including indemnifications and penalties for incidents of failure, liability shifts in certain cases like force majeure, termination rights and periods. All these elements should be carefully set out in the relevant agreement for smart and safe living of your data.