Contractual and Treaty Rights When Subsea Cables Are Disrupted
THE AUTHORS:
Wesley Pydiamah, Partner & Co-Head of International Arbitration at Eversheds Sutherland
James McKenzie, Partner at Eversheds Sutherland
Gillian Forsyth, Senior Associate at Eversheds Sutherland
Samuel Orme, Associate at Eversheds Sutherland
Recent events in several strategically important waterways have highlighted the vulnerability of global maritime infrastructure to geopolitical disruption. Whether arising from armed conflict, military activity, sanctions, piracy, restrictions on navigation or heightened security concerns, such disruptions can materially impede commercial shipping and the operations of critical undersea infrastructure.
The impact on shipping and on oil and natural gas prices has attracted considerable attention and legal analysis. Less examined, however, are the legal ramifications for subsea cables, and for the specialised vessels tasked with repairing them. Subsea cables carry more than 90% of intercontinental data traffic, and bandwidth demand is expected to significantly increase with the AI boom. Keeping up with that demand will require both new cable infrastructure as well as securing the ongoing operation of existing infrastructure.
Unlike ordinary merchant vessels transiting through waterways, subsea cable repair vessels are often required to operate for extended periods in a fixed location close to the source of the disruption, creating unique operational and legal challenges.
Against that backdrop, this article considers the contractual rights that may be exercised when cable repairs become significantly more difficult, dangerous or expensive, including rights to suspend performance, obtain extensions of time, recover standby or additional costs, alter the repair plan or terminate. It also considers whether cable owners and operators may have direct recourse against a state whose conduct caused or prolonged the disruption.
Why Cable Repairs Are Particularly Affected
Maritime chokepoints, including straits, gulfs and other constrained waterways, often serve as critical arteries for subsea cables. The dense clusters of cables passing through these narrow passages are of considerable strategic importance to both regional and global digital infrastructure. Damage to cables that are either severed outright or left operating below capacity can therefore have substantial financial consequences for owners and operators. For major telecommunications carriers and hyperscalers, even short-term outages can trigger reduced network quality for end users, exposure to service-level penalties, and costly rerouting onto alternative systems. Prolonged impairment may also result in lost revenues and accelerated capital expenditure on redundancy measures.
Unlike tankers transiting dangerous or disrupted regions, cable repair vessels must remain stationary for days at a time, rendering them uniquely exposed to evolving risks. Maritime situations can deteriorate rapidly, and this heightened uncertainty can give rise not only to increased costs but also to legal positions where obligations become unclear, particularly if circumstances shift whilst repairs are underway. Furthermore, unlike vessels on a standard transit route, a repair ship must travel to a specific location, namely, the point at which the cable break has occurred, significantly reducing its operational flexibility.
The legal implications for subsea cable repairs differ from the usual analysis that would apply to a transit route through areas with volatile risk profiles. Attempting to service cables in such areas carries elevated risk and immediate costs through higher insurance premiums, danger pay for crew, and scarcity of support vessels. Contracting parties may find themselves considering whether performance of the repairs remains an enforceable contractual obligation, or even possible.
Is Performance Still Required?
Whether performance is required depends on the contractual obligations, which are rarely contained in a single agreement. A cable outage may engage the maintenance agreement with the cable owner or consortium, the charter or marine-services arrangements for the repair vessel, landing and access arrangements, and downstream capacity or service agreements. The relevant rights may therefore differ at each level of the contractual chain, and relief obtained under one contract may not automatically flow through to another.
Frustration is a common law principle that allows a contract to come to an immediate end when an unforeseen event renders performance of the contract to be impossible, illegal or radically different from what the parties originally contemplated. The threshold, however, is a high one.
In strict legal terms, performance is unlikely to be deemed impossible so long as vessels continue to navigate nearby waters and repair works could, in theory, be undertaken, even if at considerable risk. A demand for an unauthorised passage or security payment may itself impede performance. Whether it can or should be paid will depend on sanctions, anti-bribery and other compliance requirements, as well as whether the contract permits the cost to be recovered. Depending on the governing law and the parties’ compliance frameworks, making payments to a governmental authority under an unrecognised levy could conflict with applicable legal and regulatory obligations, or fall outside the scope of costs that may properly be incurred in the performance of the contract.
The question then becomes whether the elevated level of risk is such that performance, while not strictly impossible, is so impracticable or unreasonable that it amounts to something radically different from what the parties agreed. Planning also needs to consider the duty of care owed by the contractor to its crew. Employers have a well-established obligation to ensure, so far as is reasonably practicable, the health and safety of their employees. The inability to provide adequate protection may give rise to a legal prohibition, or at least a significant practical bar, on sending personnel into a particular region. Where performance of the contract would require the contractor to expose its employees to an unacceptable level of risk, this may provide a basis for suspending or declining to perform the works.
One of the key elements of frustration, however, is that the intervening event is unforeseen, and as such the analysis will vary in each case. In modern contracts for this type of subsea cable services, the parties typically negotiate extensive risk allocations. The inaccessibility of, or heightened risk associated with, a particular area for repair is therefore likely to have been contemplated, even if not specifically apportioned in the contract. Furthermore, in a rapidly evolving situation where the conditions that may prevent performance of the contract, i.e. the risks of navigating certain waters or straits, are temporary, frustration will be harder to argue. While a cable owner may be willing to take a commercial approach to extending deadlines for repairs it is highly unlikely to permit the contractor to walk away from the contract entirely, leaving the owner to absorb the loss. Relying on frustration as a defence would therefore likely require a lengthy, and risky, dispute resolution.
Beyond frustration, parties should examine their contracts’ force majeure, war-risk, safety, change in law, permit and access, variation and change-control provisions. Depending on their drafting, those provisions may confer additional rights of suspension or resequencing of the repair works, using an alternative vessel or repair method, obtain additional time, recover standby, security, insurance, demobilisation and remobilisation costs, or terminate if the disruption continues beyond an agreed period.
War and military action are commonly specified as force majeure events. Restrictions on passage through a contested waterway, combined with risks such as sea mines and attacks on commercial vessels, may well constitute circumstances that prevent or significantly hinder a contractor’s ability to carry out repair works. Similarly, a dramatic increase in insurance premiums for vessels operating in or near affected areas, together with heightened security risks, may amount to a material adverse change in the circumstances under which the contract was entered into. In either case, parties would need to demonstrate that these changed circumstances fall within the scope of the relevant clause and that the contractual consequences (whether suspension, termination, or cost pass-through) are properly engaged.
Potential Recourse Against States
Contractual relief determines how disruption risk is allocated amongst the parties to subsea cabling contracts. A separate protection may arise where the disruption, damage or inability to undertake repairs results from the conduct of a state: might the cable owner or another investor have recourse directly against that state?
Damage to, or interference with, a submarine cable by a state may give rise to a claim under an applicable bilateral or multilateral investment treaty. Investor–State dispute settlement, typically by way of international arbitration (for example, under the ICSID framework or the UNCITRAL Arbitration Rules), may provide a potential avenue of recourse, provided the relevant jurisdictional and substantive conditions are satisfied. Such treaties confer protections against state action for qualifying investors and their investments, but vary significantly in their scope; some define “territory” narrowly as land and internal waters, while others extend it to maritime zones over which the state exercises sovereign rights or jurisdiction. Similarly, definitions of “investor” may be limited to nationals or entities incorporated under the laws of the contracting state, or may reach more broadly to include those with substantial business activities or effective management in that state. These questions should be considered during project structuring, including the choice of investment vehicle and the alignment of the cable, landing-station, licence and project-contract interests held by that vehicle. Threshold questions include whether the cable owner qualifies as a protected “investor”; whether the affected assets, including subsea cables in the relevant waterway, qualify as a protected “investment” within the territorial scope of the applicable treaty; and whether the respondent state has consented to arbitration under that treaty. Depending on the treaty wording and ownership structure, the investment may comprise not only the cable itself, but also landing stations, licences, contractual rights, network capacity and shares in a locally incorporated operating company.
Potential challenges to treaty protections include where a cable is owned through a consortium, traverses several maritime zones or is damaged beyond the respondent state’s territorial sea. Where the relevant cable segment lies beyond that territorial sea, it may be more difficult to establish that the affected asset constitutes an investment made “in the territory” of the respondent state. Much will depend on the treaty’s definition of territory, including whether it extends to maritime zones over which the state exercises sovereign rights or jurisdiction, and on the connection between the damaged segment and the investor’s wider shore-based investment.
Once jurisdiction is established, potential claims might arise from direct damage caused by state organs, unlawful restrictions on access or repairs, discriminatory treatment, or a failure to take reasonable protective measures in response to a known threat. The investor might argue that state conduct in a disputed waterway (such as the laying of sea mines, military operations or interference with commercial or repair vessels) caused damage to the cable or prevented its repair. Conduct may still be attributable to a state organ where a state vessel operates beyond the state’s territorial sea. Attribution will, however, be more difficult where the immediate actor is a private vessel, proxy force or unidentified party, a challenge that will increase with the prevalence of “Shadow Fleets” in disputed territories. An investor will need evidence connecting the conduct to the state under the applicable tests for instruction, direction, control, adoption or acknowledgement.
The investor would also need to demonstrate that the state breached an applicable treaty protection, for example by failing to provide the investment with the requisite protection and security or by effectively expropriating it through conduct that substantially deprived the cable owner of the use, control or economic value of its investment without compensation. Where the necessary requirements concerning jurisdiction, attribution, breach and causation are met, investor–State arbitration may offer cable owners and operators an effective and neutral means of seeking financial compensation or other available redress for qualifying state conduct.
Takeaway
For parties involved in subsea cabling, the key is therefore to look beyond the immediate question of whether a repair can safely proceed. A single disruption may engage rights across multiple project contracts, while the conduct causing or prolonging that disruption may separately engage investment treaty protections. Mapping these rights early, and preserving the relevant contractual notices, evidence, and mitigation steps needed to exercise them, can materially affect where the ultimate cost of disruption falls.
