Resilient Infrastructure
When infrastructure breaks down

Infrastructure failures are rarely simple. When failure occurs, attention shifts from anticipating risk to managing consequences. It is that response which shapes legal exposure, stakeholder outcomes and speed of recovery. 

Stabilise the situation

Immediately following an infrastructure failure, the priority is stabilising the situation. One of the first challenges will be handling the grievances of those claiming to be impacted, which are often amplified by the media.  

As UK-based head of construction disputes James Doe explains, early finger-pointing is counterproductive. “It shuts everyone down,” he says. “You don’t solve the problem, you just exacerbate the problem. That will only increase losses.”  

Instead, organisations must move quickly to manage public and stakeholder communications, acknowledge uncertainty and focus on restoring services. A clear message that the cause is under investigation and resolving the issue is a priority can help contain reputational damage and avoid triggering political or public authority escalation.  

At the same time, operators should cooperate fully with independent investigations and take a disciplined, transparent approach. This includes preserving evidence, engaging experts early and establishing a structured response that integrates legal, technical and communications advice.  

Clear engagement with relevant public authorities early on is vital, including regulators where operational permissions are at risk. “If the regulator is unhappy with you, there is the risk you might lose the right to operate,” Doe warns. “Public pressure on the regulator will increase if you don’t manage the situation properly.”   

Failures to properly document response efforts, coordinate internal actions or engage legal counsel can weaken a company’s position with regulators, insurers and courts. “Operators should act immediately to preserve documents, communicate with the public and prepare for regulatory scrutiny and litigation,” Otis adds. 

Assess exposure

Once the immediate response stabilises the situation, attention turns to where responsibility sits and how loss is allocated across contracts, insurance, and project participants such as designers, contractors and engineering firms.  

Investigations will focus on whether the problem arose from design flaws, construction defects or risks that should reasonably have been anticipated. Here, the engineering, procurement and construction contracts become the primary reference point. “When projects come under stress, it is often the disconnect between contracts, insurance and delivery that determines how severe the outcome becomes,” points out  Singapore-based arbitration partner and construction disputes specialist Daniel Waldek.

Insurance can be critical in early-stage failures, but gaps between contract terms and actual cover can leave owners exposed. Outdated assumptions or unclear exclusions may reduce payouts, creating funding shortfalls when losses occur.  

Failures can also expose risks that fall outside the scope of insurance or sit in contested policy territory. In large energy, transport and resources projects, this can leave losses to be resolved through contractual allocation rather than risk transfer.

One major solar development encountered extensive surface water pooling on a site where no such risk had previously been identified. The cause remains unclear, with climate change, changes in surrounding land use and legacy site conditions all possible – but none were reflected in the original contractual or insurance allocation.

“In living memory there has never been pooling on the surface like this,” says Brigette Baillie, a projects and infrastructure partner in our Africa Group. “When risks materialise unexpectedly, one of the central questions becomes who bears the risk across the finance documents, construction contracts and operating agreements.”

Where insurance does not respond as expected, scrutiny moves to contractual allocation and counterparty credit. Contractors may resist exposure they cannot price or control, while sponsors and lenders focus on enforcement of contractual protections. The result is often delay, dispute and pressure on project viability.

“Projects work best when the project management team, the legal team and the insurance team are aligned from the outset,” suggests Waldek. “If those conversations happen too late, gaps emerge that are very difficult to close.”

How responsibility is identified in the early stages of failure often shapes everything that follows, from dispute strategy to the speed of recovery.

Learn and prevent recurrence

Following a failure, organisations must translate experience into improved governance, risk allocation and decision-making.  

This is where resilience becomes practical, and where the effectiveness of systems, processes and protections is tested.

Many organisations have crisis response frameworks in place, but their true value is only clear once they have been tested under pressure. Will it work if all IT has crashed? Or if the CEO cannot be contacted?  

Nothing should be left to chance. Even well-structured plans can be challenged in practice, where decision-making, access to information or coordination breaks down.

“A subgroup might be set up depending on the nature of the crisis,” says Merryn Quayle, who leads our dispute resolution practice in Melbourne. “When a failure occurs, the question is not whether protections exist, but whether they actually hold under pressure.”

Quayle emphasises the importance of consistent engagement in the critical first hours. This includes avoiding speculation, meeting notification obligations across jurisdictions and anticipating downstream risks such as class actions or contractual disputes. “There is a big communications element to that,” Quayle stresses. “It’s important to be empathetic without overdoing it, and to be seen to be helping and not obfuscating.”

Even where risks were considered unlikely, failures can show how assumptions break when they make contact with real-world conditions.

A separate and striking example is a major facility in the Middle East, where flooding overwhelmed a site not adapted for such conditions. What was treated as an unlikely scenario led to a serious plant failure, triggering one of the region’s largest insurance losses.

“The existing infrastructure simply was not able to deal with the inundation,” says Waldek. “What had been regarded as an implausible risk became very real, very quickly.”

The lesson is not that every risk can be predicted, but that organisations must be able to respond effectively when assumptions are tested.

Across markets, projects are failing not because risks were unknown, but because they were misallocated, uninsured or left unaddressed until they were realised. Uninsurable conditions, delayed government action, hardened insurance markets and unresolved disputes can all undermine otherwise sound assets.

The future of infrastructure depends on recognising that resilience is not just a technical exercise, but a legal, financial, environmental and social challenge.