It is imperative that a company has efficient processes and regular checks in place to comply with the changing regulatory framework in each country where a submarine cable is installed. This creates a culture of awareness throughout the organization, which indirectly ensures the proper operation and maintenance of these subsea assets throughout their lifetime.
An "all hands-on deck" compliance culture minimizes the risk of delays in the payment of regulatory fees when different parts of the company have to rush through a payment process with government deadlines that cannot be changed. It also avoids the late submission of periodic regulatory reports with updated cross-information from multiple departments, and finally puts an end to the easy idea of starting service provision before a required telecoms license has been granted.
There are always arguments in favor of shortcuts or even workarounds: low risk of detection of a breach, incomplete information in a filing, or even underpayment of regulatory fees just to meet the deadlines without further action. However, this 'sweeping it under the carpet' behavior poses a risk in the long run. These urgent measures are usually aimed at resolving a burning situation, but they fail to take into account that the cable owner may have its license, permit or authorization revoked or be struck off the register for repeated or even gross breaches of the national telecom’s regulatory framework.
If the cable owner always tries to observe and maintain a culture of regulatory good standing, the benefits will far outweigh the continuous effort, as the issue may come up in the least expected circumstances, and they always do:
1. Due diligence process for M&A investments.
A regulatory due diligence process is carried out before a company is acquired, so that the buyer does not inherit regulatory issues with the acquisition.
Generally, there are new regulatory advisors who would conduct this review and they are not the same current regulatory lawyers that a cable owner relies on for day-to-day compliance. As a result, there may be different interpretations of the regulatory framework between the two teams of lawyers.
This is a good opportunity to take advantage of this double-checking of compliance within a company and remove any unnecessary risk.
2. Permitting process for a new cable project.
The need to be always in good standing also brings a great strategic advantage in the early stages of future cable projects. Regulators and public authorities in general are more sympathetic to operators who share this culture, leading to the establishment of friendly channels such as informal meetings for technical consultation before a project is launched.
From a regulator's perspective, it is important to reassure them that they are not dealing with speculators, abusive dominant operators, or even insolvent telcos.
The guiding principle for any in-house counsel practice should be consistent with a marketing campaign that effectively convey the message that the operator is in a country as a long-term stakeholder to continue to invest there and to comply with local laws accordingly.
Furthermore, at a later stage, even during a new cable installation project phase, this culture of compliance is crucial. When paying customs duties on the imported submarine cable and associated equipment, there may be prior communication between public institutions to verify the veracity and legitimacy of the importer of record's activities. They may even require additional corporate records or public company registers, so it is better to check that these corporate formalities have been completed before the cable ship arrives at mile 201.
3. Planning the repair of a submarine cable failure.
This is particularly relevant for operations in shallow waters where a special maintenance permit may be required under territorial waters jurisdiction. A cable owner with an urgent need to have his cable repaired as soon as possible would submit the paperwork at least 1-2 months in advance, with the approximate dates of arrival of the maintenance cable ship.
Unfortunately, it is common for the permit date to coincide with the ship's arrival time. The carrier should then be ready to submit any additional documentation required by the authorities without any further delays than those inherent in the state bureaucratic system.
4. Arguments of the defendant in a submarine cable damage case.
If the cable owner must initiate legal proceedings to recover damages from the owner of a fishing vessel that has damaged its submarine cable, the P&I (insurance) company representing it will generally try to argue that the submarine installation did not have all the necessary licenses.
Accordingly, a cable owner should check beforehand that he has all of them, if required by law, or even the usual communications with the local hydrographic office to update all charts with the position of the submarine cable.
Careful selection of regulatory advisors in each jurisdiction.
Public authorities can warn a cable owner in advance of continued breaches of the current regulatory framework, and this is a sign to carefully choose the next steps to protect the infrastructure soon.
These red flags should be carefully calibrated by a carrier depending on the scenarios in each jurisdiction. It is not the same to receive a formal notice to remedy a breach in a stable jurisdiction with clear and predictable case law than in a tumultuous nation with changing authorities and little respect for its own constitutional rights and obligations.
In the latter case, a cable owner could face a licence revocation proceeding that could easily be escalated by the telecommunications regulator based on the changing political winds of the day. In addition, a cable operator that has a subsidiary in a jurisdiction with several other group companies that are systemically non-compliant with local regulation could easily find itself under regulatory scrutiny without even knowing it.
For this reason, a cable owner should carefully select its external local regulatory advisors from the outset, before the landing operations take place, and avoid changing them without serious justification. This will enable them to have a clear channel of communication with the regulators and other relevant authorities, which is crucial for consultations and meetings with them, especially if it is to be on a name basis and later direct and honest feedback to their client is expected.
The worst regulatory problems are those unintentional errors and omissions that are not easy to spot, hidden from plain sight until it is too late, and an auditor discovers them, or in the worst case, during a regulatory inspection at a later stage.
Accordingly, a local regulatory advisor should be prepared to raise a red flag without fear and have a clear mind to seek solutions based on common sense. Taking a conservative approach, the best solution for a carrier would be to adopt a long-term strategy in a country where good relations with the telecom’s regulator are a priority.
Of course, the last option, if necessary, should be litigation, including invoking any applicable investment protection agreement, and even using the many resources available through diplomatic channels. However, the time constraints of a cable installation project usually suggest otherwise.
Andrés Fígoli is the Director of Fígoli Consulting, where he provides legal and regulatory advice on all aspects of subsea cable work. His expertise includes contract drafting and negotiations under both civil and common law systems. Additionally, he has extensive experience as an international commercial dispute resolution lawyer. Mr. Fígoli graduated in 2002 from the Law School of the University of the Republic (Uruguay), holds a Master of Laws (LLM) from Northwestern University, and has worked on submarine cable cases for almost 21 years in a major wholesale telecommunication company. He also served as Director and Member of the Executive Committee of the International Cable Protection Committee (2015-2023).
This article was first published in Submarine Telecoms Forum Magazine #133 – November 2023.