Water-related disputes risk: access to water, PFAS class actions and other key risks

Water is running out, and so is the time to prepare 15 min read

Water is no longer a purely environmental issue. It is a social, commercial and legal crisis in the making.

'Day Zero'¹ has moved from a hypothetical warning to a lived reality, with Mexico City, Cape Town, São Paulo and Tehran each having teetered on the brink of running out of municipal water entirely.² Australia is not immune. 'Day Zero' scenarios have already materialised in regional towns³ and the Federal Court in Pabai v Commonwealth of Australia (No 2) [2025] FCA 796 has recognised that global warming is projected to intensify the global water cycle,⁴ making reliable supply harder to guarantee as demand grows.

Water demand is growing fast. Population growth, industrialisation, intensive agriculture and new high-volume consumers such as data centres are placing pressures on water systems that were never designed to absorb them all.⁵ Water scarcity is not a distant risk—it is a present reality already shaping policy, regulation and informing disputes risk.

In this Insight, we examine who is competing for water, the regulatory enforcement under state-based regimes for managing water licensing and allocation, litigation and disputes risks that are emerging as that competition intensifies, and the key questions companies should be asking to manage their exposure.

Key takeaways

• Water scarcity is no longer a future risk—climate change, population growth and competing demands are already creating real supply constraints that affect how companies operate, contract and plan.
• Companies operating in water-intensive industries face converging legal, regulatory and reputational risks, including class actions, project challenges, National Contact Point complaints and commercial disputes.
• Companies that proactively understand their water dependencies and those of third parties are better placed to protect both their legal position and their stakeholder trust to operate.

The shared pool: who is competing for water? 

Water has always been shared. What has changed is the number of users, the volume of water use and the resulting shrinking supply. The actors now vying for water are more numerous, more legally sophisticated and more willing to fight for their share.

Individuals

In 2010, the UN General Assembly recognised access to safe and clean drinking water as a human right.⁶ In 2022, it went further, passing a resolution declaring the right to a healthy environment, including clean water.⁷

First Nations communities 

First Nations communities occupy a distinct position in the water landscape. Their claims are grounded not only in legal entitlement, but in culture, identity and connection to Country. As the UN Office of the High Commissioner for Human Rights has observed, Indigenous peoples' access to safe drinking water is inextricably linked to their control over their ancestral lands and resources.⁸ These claims engage both domestic legal frameworks which provide rights to water, and an expanding body of international human rights law, each of which is increasingly being tested before domestic and international bodies.

Other communities

The residual risk of water conflict lies with the people who live and farm downstream of water-intensive industries. Their exposure takes two principal forms: contamination of the water they depend on, and the erosion of a shared resource through overallocation or mismanagement.

Governments are increasingly focusing on protecting water supplies. In March 2026, the Western Australian Government announced a $606 million dollar investment to expand the Dampier Seawater Desalination Plant in the West Pilbara, securing vital water supplies for regional communities.⁹

Resource companies

Significant amounts of water are required for activities such as dust suppression, ore processing, slurry transport, tailings management and site rehabilitation. Access to water is governed by state and federal legislation which establishes a licensing regime designed to allocate water equitably across competing users while simultaneously protecting water quality. Taking water outside of the relevant regime is a statutory offence.¹³  

Agricultural users

Although they hold the largest formal share of entitlements to water in Australia on a nationally aggregated basis, agricultural users may face the greatest exposure as sustainable diversion limits tighten.¹⁴

Where institutional management of the shared resource has failed, agricultural users have sought to hold regulators directly accountable. Most notably, in the Murray-Darling Basin Authority class action, 28,000 irrigators from the central Murray region of southern NSW and the Goulburn-Murray region of northern Victoria commenced a proceeding alleging negligent mismanagement of the water resource and a failure to comply with the Authority's own guidelines.¹⁵ It was alleged the Authority owed the irrigators a duty of care to take reasonable steps to manage the flow of water and maintain the ability to allocate water to the irrigators in accordance with licenses. The proceeding has been heard and judgment is currently reserved.

Digital infrastructure

As the newest draw on the pool, data centres often rely on water-cooled systems to manage server heat. Projections suggest the sector could consume the equivalent of a quarter of Sydney's annual drinking water supply within a decade, while Melbourne Water reports receiving applications from hyperscale data centres with projected instantaneous or annual demands exceeding those of nearly all of its top 30 non-residential customers.¹⁶

In response, there is an evolving policy framework that seeks to manage the potential impacts on the shared pool.¹⁷ For example, in June 2025 the Federal Government announced that all data centres were required to achieve a 5-star rating in the Australian Built Environment Rating System, which considers water usage, in addition to other environmental criteria. The Government also introduced a new Digital Transformation Agency which has formed a Data Centre Panel. One of the purposes of the Panel is to help promote sustainable environmental practices.¹⁸

Rising water competition: a growing disputes and litigation risk 

As competition for water intensifies, the intersection between environmental regulation, commercial operations and community expectations is becoming more contentious. Companies are increasingly being drawn into complex legal and reputational challenges, whether through project approvals, contamination claims, allocation disputes or shareholder activism. The result is a growing body of litigation and enforcement activity focused on how water is accessed, used and protected, with implications across sectors and jurisdictions.

Regulatory enforcement risk and project challenges

Project challenges (eg to environmental approvals) present a key litigation risk, particularly for projects that draw media and community attention. Much of the litigation in this space has been brought by environmental organisations, and while challenges frequently focus on procedural grounds, judicial review has become a common avenue through which courts are asked to assess whether public decision-makers have adequately considered impacts on water quality, water scarcity and broader ecosystem consequences. As approvals for water-intensive projects continue to be granted, the litigation risk is likely to increase.

Looking ahead, several trends are emerging.

• Public consultation is an increasingly important tool for project developers and third parties. For example, community pressure around proposed water extraction at Springbrook National Park resulted in the City of Gold Coast commissioning an independent environmental impact study to better understand the resource and potential water security risks, and the Queensland Government imposing a moratorium on new underground bores for commercial use in the Tamborine Mountain and Springbrook areas while the study occurred.¹⁹
• Litigation is being used to challenge governments' approach to managing key water resources. For example, in August 2025, the Murray Lower Darling Rivers Indigenous Nations successfully challenged a decision of the Federal Environment Minister to accredit a water resource plan for the Murray Darling Basin, resulting in the Federal Court declaring that the plan was invalid and the Minister was required to remake the decision.²⁰
• Litigation is also being used to seek to block projects and impose conditions on how they proceed. In a clear example of this trend, Environmental Advocacy in Central Queensland brought proceedings against Blue Energy over a proposed coal seam gas project, settling on terms that included binding water-monitoring commitments.²¹ The Mpwerempwer Aboriginal Corporation has also challenged in the High Court a ground water license granted by the Northern Territory Government to the owners of a cattle station. The High Court is considering whether the license was properly granted, including whether First Nations cultural values were adequately considered.²²

Class action risk 

Class actions in Australia have primarily arisen in the context of contamination of water sources, following the trend of PFAS class actions in the US. Although this risk remains present and significant, the modern competition for water suggests that sourcing and scarcity issues represent a new angle of risk—one that is coming under increased regulatory scrutiny.

Other commercial litigation risk

The shared nature of water resources gives rise to the risk of commercial disputes across a range of contexts. Projects relying on common water bodies may expose companies to liability for consequences of contaminating a shared water supply, with the trading of temporary and permanent water rights a $4 billion industry in the Murray-Darling Basin alone. Although formal litigation has remained rare, the conditions for an increase in commercial disputes are building—as water availability tightens, commercial agreements drafted on an assumption of adequate and clean supply may be tested.

National Contact Point complaints

There has been an uptick in NCP complaints in Australia, with eight new complaints received in 2025.²³ While not binding, National Contact Point findings can give rise to reputational impacts and consequences for social license, and be a precursor to harm litigation. Water rights were a focus in a complaint that was subsequently rejected by the Canadian NCP alleging environmental damage at the Minera Florida gold mine, including through breaches of water permits that impacted local water quality.

Reputational risks and maintaining stakeholder trust to operate

• The reported strains on the water supply will continue to promote increased media focus on issues of water scarcity and responsible water use. We also expect to see an uptick in shareholder activism and campaigns on responsible water use. A major electric vehicle manufacturer faced significant shareholder pressure when a majority of independent shareholders voted in favour of a proposal requiring enhanced water risk disclosure and supply chain water risk assessments.²⁴ This illustrates the growing willingness of investors to act on corporate water risk. Sea-level rises caused by climate change are a less direct but emerging problem, particularly impacting coastal communities. Increasing scrutiny has been placed on sectors most significantly contributing to these impacts.
• Pressure from impacted communities also presents a significant reputational risk. Where corporate activities are linked to water contamination or resource depletion, affected communities—including residents exposed to industrial pollutants such as PFAS—have demonstrated a growing willingness to pursue litigation. The reputational and social consequences of such disputes can be severe and enduring, threatening a company's stakeholder relations.

Consider your exposure: what should your business be asking?

• What is our water dependency? Understand where water sits in your operations and supply chain. Consider what you use, where it comes from, under what licence conditions and what happens to your business if supply is reduced or conditions are tightened.
• Have we considered the risks? Understand the legal, regulatory and reputational risks that are relevant to your business. Consider availability of water and necessary authorisations and compliance with authorisations once granted. Review your contracts with disruption to water supply as a real and foreseeable risk and ask whether your force majeure clauses are fit for purpose.
• Are we meeting our regulatory requirements? Understand the full scope of your regulatory obligations in relation to water use, including licensing, extraction limits and reporting requirements. Regularly review your operations against those obligations, ensure accountability for compliance is clearly assigned and stay across legislative and regulatory developments that may affect your position.
• Are we considering our impact on other water users? Consider your business's impact on other water users and adopt a water stewardship approach. This includes understanding how your water use interacts with that of neighbouring users and the broader catchment, identifying potential conflicts or dependencies, and taking steps to manage shared water resources responsibly.
• Are we meeting our policy commitments? Regularly review your business's policy commitments in relation to water use and governance, and verify that those commitments are being met in practice. This includes assessing whether internal policies align with current regulatory requirements and stakeholder expectations, and putting in place mechanisms to monitor and demonstrate ongoing compliance and accountability.
• Have we engaged in community consultations? Proactive water governance is key. Consider how you can transparently engage with surrounding communities and First Nations peoples, and embed responsible water use into project design and operational decision‑ Also consider whether community engagement is showing any 'hotspots' where there may be an opportunity to address issues early.
• Are we prepared for project challenges? Be aware of regulatory approval schemes and potential challenge points. Consider whether stakeholder engagement indicates areas where challenge risk may be higher. Robust understanding of your use and potential impact on water supplies, proactive water management and third-party use and sentiment are all important to minimising project risk.
• Have we considered a disputes risk assessment? If your business operates in a water-intensive or environmentally sensitive sector, consider undertaking a disputes risk assessment to identify key players and areas of legal exposure. This includes mapping your relationships with regulators, neighbouring water users, environmental groups and First Nations peoples, and assessing the likelihood and consequence of enforcement action, third-party claims or litigation