Cable landing agreements are critical to the deployment and operation of submarine communications cables when many parties are involved. Here are three things you need to know about them:
The legal form has evolved
Traditionally, they have been considered ancillary to a Construction and Maintenance Agreement (C&MA) or Joint Build Agreement (JBA) for a cable consortium, where a local member would own the portion of the infrastructure in jurisdictional waters and the cable station, and obtain all related local permits. It would then sell capacity and collocation space to the other members of the consortium. In this way, the consortium would prevent the creation of multiple local entities, not have to apply for local permits for multiple parties, and avoid any risk of permanent establishment if the other consortium members intended to provide services only up to the cable station and not in the hinterland.
If a fishing trawler damaged such a local portion (domestic waters), who would pay the repair costs? These traditional landing agreements established that all parties owning that segment (country A to country B) would cooperate with their respective shares to afford such costs. It did not matter that the landing party owned 1% of the local portion of the affected segment, because the majority of that segment, the other 98% in international waters, was owned by other parties, and the remainder was owned by a different landing party in another country.
This legal form has evolved in recent years into a contract per se or stand-alone contract, where the cable system owners basically need a local entity in a landing country to provide local space in the landing station and an access connection to the new cable. This basic need can also lead to other possible, hybrid scenarios, assuming that the local entity is any or all of the following:
Holder of the local permits to install the cables or even to provide telecommunications services
Owner of the local portion (territorial waters)
Holder of the right to use the capacity of the new system
The possibility of being the owner of the international portion of the new system would be excluded, as it would otherwise lead to the traditional cable landing agreements as described above.
These new hybrid legal forms actually extend the old concepts of administrative law, where a licence to provide and install an infrastructure or provide a service had to be tied to some degree of ownership of the asset to be exploited, or at least a minimum use of it. Here, a landing party would have ownership of the 12 or 200 nautical mile portion of the cable to the middle of the ocean, depending on the jurisdiction of the local authorities, but not of the majority of the submarine system. It would be like claiming ownership of one wheel of a car for the local authorities, but not the other three.
Things become even more challenging when we add that the local entity is not responsible for operating the submarine cable system in these hybrid legal situations. Thus, this scheme would only work in those countries where a prior legal opinion by a local firm assures all parties involved that it is not a façade hiding the real owners of the system, those who operate and even use it.
In some jurisdictions, this would be allowed subject to the fact that the landing entity is a user of such system, without any further requirement regarding its quantum of ownership, through an Indefeasible Right of Use (IRU) of capacity or fibre pair, or a lease of E-1 to be renewed until the expiration of such local permits.
In any case, it is always advisable in all these cases to include a provision in the cable landing agreements related to the fact that if the local authorities change their mind during the system life, then the parties may negotiate the modification of such agreement or its termination in order to choose another suitable landing party.
They are not partners
While in the traditional cable landing agreements it was common to establish that the local consortium member would be the one responsible for environmental and safety issues, with the appropriate indemnity provisions and internal mechanisms to reimburse the affected party, in the hybrid agreements there is no such justification for the landing party to assume such responsibilities.
Firstly, the local party has not intervened to negotiate the supply agreement with the cable manufacturer and installer, so it knows nothing about the cable specifications and the operations to be performed at sea for its installation. How then can such a landing party take responsibility for environmental issues for years to come?
In such hybrid scenarios, the landing party may be obligated to provide and maintain in efficient working order its own cable station, but not the environmental, health and safety (EHS) risks associated with the installation of wet plant, even though it has assumed ownership of the local portion of the subsea system. Indeed, these are risks to be shared not as partners, which the parties are not, but as subcontractors, where the principal assumes the main obligation and cannot allocate its risks to an entity that is not clearly in control of seabed operations during the installation or operation of the system after its activation.
This is a red-line issue when negotiating such hybrid contracts, as the CEO of the landing party may be held criminally liable for any work accident incurred by the personnel of the cable layer contracted by the owners of the international portion of the cable system.
Similarly, such landing party in hybrid scenarios should never assume any liability for Intellectual Property Rights (IPR) claims regarding the ownership of such local portion. Otherwise, it would be unnecessarily involved in an international dispute over a component buried in the seabed that it may not even know is there since it was not involved in the negotiations with the cable manufacturer.
Prepare for a Default Scenario
The local portions of a cable system are unique in that they are more regulated than in international waters, where mainly the UN Convention on the Law of the Sea (UNCLOS), the Biodiversity Beyond National Jurisdiction (BBNJ) Treaty, and the International Seabed Authority's regulations are what can affect the installation and maintenance of this infrastructure. Therefore, the risk of non-compliance by the landing party is greater than that of other owners in international waters.
Accordingly, the mechanism for deterring a local party from breaching a landing cable agreement by failing to comply with evolving and sometimes intricate local regulations should be very clear from the outset, with a right of inspection of the landing site by any of the other cable owners at any time.
In addition, there should be specific step-in rights in favour of the consortium or other system owners in either scenario of a traditional or hybrid cable landing agreement, so that they can easily contract, for example, security service providers to control access to the cable station or other services that may be temporarily neglected by the landing party. These high-risk situations are typically those that need to be urgently secured to comply with international standards and local approvals in other jurisdictions. For example, Team Telecom's network security agreements in the U.S. require compliance with security standards not only in cable stations in the U.S., but also in those in other countries for a cable system landing in the U.S.
With respect to the latter obligation with a governmental body, it is important to note that any change in the shareholder structure of the landing party may trigger an obligation to notify the governmental body, which may in turn decide to impose further obligations. Therefore, the parties should make it clear in the landing agreements which issues are subject to prior consultation by the parties. Otherwise, they would be exercising undue control over the legitimate activities of the landing parties.
Furthermore, there should also be a provision that if a Landing Party decides to terminate the Construction and Maintenance Agreement (C&MA) or Joint Build Agreement (JBA) applicable to a consortium, its Landing Cable Agreements may also be terminated. And the other members of the consortium would like to do the same in the other direction and in a coordinated manner, because they need the local partner to fulfil its obligations as a landing party as otherwise they would be forced to look for another trusted partner in the area.
Of course, in such cases, the termination of a landing cable agreement should not automatically terminate the other consortium agreements. It should be optional for the non-breaching parties who consider that such a consortium member is still useful in the long term.
In order to avoid a detailed description of a landing party's obligations for the next 25-30 years, it is generally agreed to undertake to have suitable facilities provided and maintained on terms no less favourable than those granted to other international telecommunications companies for transmission facilities of similar type and quantity transiting that country.
Finally, in accepting to become a landing party, a right may be established for each fibre pair owner in the consortium to interconnect, directly or indirectly, with other submarine cables or terrestrial systems. The landing party owner should carefully consult its regulatory experts to ensure that any such interconnection with other submarine cable systems will not affect its good standing with Team Telecom, as there may be restrictions on operations of this kind if such landing stations are already being used for a cable system landing in the United States.
Conclusions
Cable landing agreements have evolved from their traditional form as ancillary agreements to CMAs or JBAs to stand-alone agreements with hybrid scenarios where the landing party may not even be a user of the submarine cable system. In order to avoid any risk with regard to local legislation, the landing party must always verify that such new contractual forms are within the limits of the local laws.
In addition, it is important that a landing party in a hybrid scenario not assume responsibility for EHS, IPR or other sensitive issues beyond its control. To do otherwise would expose it to risks not inherent to a cable station owner.
Last, any cable landing agreement should include strict provisions regarding inspection of the premises, step-in rights in favour of the consortium and a specific procedure to change the landing party if the breach situation persists. Given that these are 25-30 year investments, strict control of any non-compliance is mandatory to avoid further complications in other jurisdictions with respect to regulatory obligations.
Andrés Fígoli is the author of the book “Legal and Regulatory Aspects of Telecommunication Submarine Cables” and is the director of Fígoli Consulting, where he provides legal and regulatory advice on all aspects of subsea cable work. 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 more than 20 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 #139 – November 2024.
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