Smart Cities: The Hidden Legal Risks Behind the Technology

May 2, 2023

Smart cities are transforming the way we live, work, and interact with our environment. They have the potential to improve people's quality of life, boost economic growth, and enhance sustainability. However, whilst we leverage the power of advanced technologies such as the Internet of Things (IoT), artificial intelligence (AI), and big data analytics, this transformation doesn't come without risk.

In an era of increasing sensitivity (and demand) for the need to protect privacy and data, and how data is used, businesses need to be aware of the legal considerations surrounding smart city projects.

As the UK continues to embrace this modern approach to urban development, this article aims to provide both an overview and guide for the key legal issues that businesses in the built environment and technology sectors should be aware of.

The Role of IoT, AI, and Big Data in Smart Cities

There are three things at the heart of any smart city development: IoT, AI, and big data analytics.

IoT devices collect vast amounts of data on various aspects of urban life, such as traffic, air quality, and energy consumption. AI algorithms analyse this data, enabling city planners and administrators to make informed decisions about resource allocation and infrastructure development. And big data analytics supports the identification of patterns and trends, helping to create more efficient and sustainable cities.

These three things together, raise many questions:

How do cybersecurity regulations apply to smart cities?

What are the laws for data protection in smart cities?

If the project opportunity is a bid-for-tender, what are the procurement rules within this sector?

These questions, among many others, are what our Virtual General Counsel solutions help clients to navigate at Conexus GC. Whilst the next section of this article won't tell you how these answers apply to your business specifically (that would require a conversation), what you will read below will aid in your understanding of the beginnings of what your business should consider if getting involved with smart city projects.

Key Legal Considerations for Businesses Involved in Smart City Projects

1. Data Privacy and Protection: Smart city projects rely heavily on data collection, storage, and analysis. Businesses must comply with the UK's data protection regulations, including the Data Protection Act 2018 and the General Data Protection Regulation (GDPR). These laws mandate strict safeguards for personal data, including obtaining explicit consent from individuals, anonymising data, and implementing robust security measures to prevent data breaches.

2. Intellectual Property Rights: Companies involved in smart city projects should protect their intellectual property (IP) rights, including patents, trademarks, and copyrights. They should also be aware of potential IP infringements when using third-party technologies (including AI) or collaborating with other stakeholders.

3. Cybersecurity Measures: The interconnected nature of smart city infrastructure makes it vulnerable to cyberattacks. This is why businesses must ensure that their systems are secure and comply with industry-specific cybersecurity regulations, such as the Network and Information Systems (NIS) Directive in the UK.

4. Public Procurement and Tendering Processes: Many smart city projects involve public-private partnerships (PPPs), which require businesses to participate in competitive tendering processes. Companies should familiarise themselves with the UK's public procurement rules and develop strategies to maximise their chances of winning contracts.

5. Regulatory Compliance and Approvals: Depending on the nature of a smart city project, businesses may need to obtain regulatory approvals from various authorities, such as planning permissions, building permits, and environmental impact assessments. It is crucial to understand the relevant regulations and engage with regulators early in the project lifecycle.

Challenges in Balancing Innovation with Regulation in Smart City Development

One of the main challenges in developing smart cities is striking a balance between fostering innovation and ensuring regulatory compliance. Whilst the UK has made significant strides in creating a regulatory environment that supports smart city development, businesses must navigate a complex web of rules and guidelines. This can be particularly challenging for startups and smaller companies that may lack the resources to fully understand and comply with all applicable regulations.

The Importance of Collaboration between Public and Private Entities

Successful smart city projects often involve collaboration between public and private entities, including government agencies, businesses, and research institutions. To foster such partnerships, companies should be proactive in engaging with stakeholders, sharing knowledge, and aligning their goals with broader public policy objectives. This collaborative approach can help mitigate legal risks and create a more favourable environment for innovation.

Case Studies of Successful Smart City Projects in the UK

Several UK cities have made significant progress in implementing smart city initiatives. Some examples are:

• Bristol: The Bristol Is Open project uses IoT technology to collect real-time data on traffic, air quality, and energy usage, enabling the city to optimise its resources and improve its environmental performance. The strong collaboration between the local government, private sector, and academic institutions is a large contributor to why the project has been successful.

• Manchester: The CityVerve project in Manchester focuses on IoT applications in four key areas: transport, healthcare, energy, and culture. The project involves a diverse range of stakeholders and has generated valuable insights into the legal and regulatory challenges associated with smart city development.

• Glasgow: The Future City Glasgow initiative aims to create a more sustainable and resilient urban environment by leveraging technology to optimise energy consumption, waste management, and transportation. Glasgow's smart city projects have benefited from robust public-private partnerships and a supportive regulatory framework.

Liability and Insurance Considerations for Businesses Participating in Smart City Projects

As businesses become more involved in smart city projects, they need to consider their potential liability in the event of system failures or accidents. For example, IoT devices may malfunction, leading to traffic accidents or environmental hazards. Companies should assess their potential exposure to liability and ensure they have appropriate insurance coverage in place to protect against potential claims.

Future Trends and Potential Legal Developments in the Smart City Sector

As smart cities continue to evolve, the legal landscape is likely to change in response to new technologies and business models. These are the key areas to watch for future developments:

1. Data Privacy: As smart city projects collect and process increasing amounts of personal data, regulators may introduce new rules to protect individual privacy and security.

2. Cybersecurity: As the threat landscape evolves, businesses may face more stringent cybersecurity regulations and higher penalties for non-compliance.

3. Liability and Insurance: As the potential risks associated with smart city projects become more apparent, regulators may introduce new liability frameworks, and insurers may develop specialised coverage options.

4. Public Procurement: Governments may revise public procurement rules to encourage more innovation and collaboration in smart city projects.

5. Environmental Regulations: As climate change and sustainability become increasingly important policy priorities, businesses may face new environmental regulations and reporting requirements.

Many businesses are unprepared for a future shaped by smart cities.

Success in this sector won't be defined solely by a business's ability to harness the benefits of technology, it will be defined by their understanding of how the legal landscape can either underpin it, or limit it. As such, as smart cities continue to shape our urban environments, businesses that proactively address legal considerations will be those that are best positioned to capitalise on the many opportunities presented by this exciting new frontier.

If your business operates in the built environment or technology sectors and would like to know how the topics in this article apply to your case specifically, please get in touch with our legal experts here.