Contributed Article
By James McKenzie, international arbitration and cross-border litigation partner at Eversheds Sutherland
The difficulties inherent in delivering subsea cable projects are well known, but a confluence of geopolitical events is making delivering them now, in the current climate, particularly acute.
The critical security role performed by subsea cables makes them an obvious target. Recent events have highlighted the physical challenges of policing and patrolling large cables, and heightened international tensions is reinvigorating the debate about the security of cables as well as the data that passes through them. The nature of subsea cable projects means they usually span multiple geographies (the ownership of which can be contested), jurisdictions, and legal systems, each of which bring unique challenges and cultural differences.
We consider here two key areas in which parties to these projects can mitigate risks and hopefully help to deliver subsea projects efficiently in 2025 and beyond.
Effective change mechanisms
A recent survey of over 2,000 international projects across 107 countries, conducted by global consultancy firm HKA, highlighted that the most common cause for claims and disputes on international projects was change in scope, impacting 36.9% of projects surveyed. The other leading causes were incorrect design (21.5%), late design information (21.3%), and incomplete design information (19.8%).
Subsea cable projects take years, with costs running into hundreds of millions; it is inevitable that changes will be required during the life span of a project. When preparing for and delivering a project, parties need to understand (and contract clearly for) the circumstances in which a variation will arise, who is responsible for valuing its impact, and how to record its consequences quickly and accurately. The more certain all parties are of these requirements, the quicker they can continue to deliver the project with minimal interference.
The potential impact of variations also highlights the need to ensure that, at the outset, the design and route of a cable is sufficiently well developed, and contractual responsibility clearly allocated, to allow the parties to prepare accurate cost estimates for each section(s). To the extent that contract variations can be priced at the outset, this is a sensible approach to take.
For example, if route changes are required, either temporary or permanent, the successful project will be the one which can identify changes early and then move to quickly re-sequence its programme and re-deploy resources elsewhere. As always, communication, and compliance with contractual notice regimes will help. To the extent that differences as to the value, extent or impact of a variation arise at the time, or many years in the future, accurate, detailed, and contemporaneous records are key.
Supply chain and international protections
Secondly, there are only around 80 ships worldwide capable of laying new cable (whilst, for context, there are approximately 20,000 cargo ships). The relative scarcity of capable cable ships highlights the importance of scheduling and tracking project delivery very closely. If projects are delayed and cable ship operators are left carrying cable on board, they will want to be compensated via standby costs or released to work on other projects.
Stakeholders should aim to have clear contractual relationships that cater for unexpected works and flexibility when problems are encountered. The above issues, as well as likely future regulatory changes, also highlight the importance of securing additional protections for investment into subsea cable projects.
Existing legal protections for damage to subsea cables is provided through the 1982 United Nations Convention on the Law of the Sea (“UNCLOS”) and the 1884 Convention for the Protection of Submarine Telegraph Cables (the “1884 Convention”). While almost all European countries are signed up to UNCLOS, fewer are signed up to the 1884 Convention, which, unlike UNCLOS, makes wilful or negligent damage to subsea cables a punishable offence. In Europe, none of Bulgaria, Croatia, Cyprus, Estonia, Finland, Ireland, Latvia, or Lithuania have ratified the 1884 Convention and therefore lack the necessary laws (and obligation to create such laws) to protect subsea cables against sabotage and negligent damage. As a matter of priority, countries should ratify the 1884 Convention to deter damages and provide a clear route for stakeholders to recover their losses.
Finally, in our May 2024 article for Total Telecom (link), we noted that another way for parties to achieve a further measure of protection is through structuring their investments to take advantage of bilateral and multilateral investment treaties. Multilateral and bilateral investment treaties can grant investors falling within the relevant definitions considerable rights which can give rise to additional, distinct remedies to those they have contracted for. These include protections against expropriation (direct and indirect), nationalisation, discrimination, or unfair and inequitable treatment. Although this differs from treaty to treaty, to benefit from their protections a project investment needs to be structured through vehicles incorporated in a country that has the most advantageous investment treaty within the relevant jurisdiction(s).
Structuring investments in this way should go hand in hand with good contracting to provide parties with the tools that they need to deliver their subsea cable projects on time and within budget.
Join Eversheds Sutherland and the submarine cable community next week at Submarine Networks EMEA 2025, the world’s leading subsea connectivity event
