FEATURE GLOBAL NATIONAL SECURITY AND SANCTIONS: Key Hurdles that Submarine Cable Owners and Developers Must Navigate BY ANDREW D. LIPMAN AND DENISE S. WOOD
INTRODUCTION
Carrying over 99% of all international communications, submarine cables remain vital to meeting global demands for data and the global market for submarine cables is projected to reach $48 billion by 2030. As the demand for connectivity continues to rise, through continued growth of cloud services and artificial intelligence advancements, the current geopolitical climate and national security concerns present challenges to submarine cable transactions. On one side of the spectrum, the United States, the United Kingdom, and other Western countries are experiencing a rise in economic nationalism that threatens international cooperation, while at the other end, countries such as China continue to assert political influence over the global economy. This East-West dichotomy is starting to affect the free flow of communications as we know it, and may lead to the Balkanization of the internet and global communications networks. Subsea systems across the world have also become increasingly caught up in conflicts outside the context of U.S.-China competition, including large-scale cyberattacks targeting critical infrastructure. In 2022, for example, the U.S. Department of Homeland Security thwarted an international hacking group’s attack on private subsea cable servers located in Hawaii. The same year, following the suspected sabotage of Nord Stream gas pipeline in Europe, a Russian official threatened to retaliate against Western governments by
attacking Western subsea cables. In the Middle East, the Iran-backed Houthi group controlling parts of Yemen has threatened to cut cables in the Red Sea, a critical passage connecting Europe and Asia. More broadly, the U.S. has instituted hundreds of new economic sanctions against Russia since the beginning of the war in Ukraine, and against Iran and militant groups like the Houthis in the Middle East. Against this backdrop, companies building and investing in subsea cables face complex regulatory hurdles. Given that projects often contemplate long-term relationships (for example, 25-year contract terms + expected useful life of the fiber optic system) among multiple consortium members from countries with divergent foreign policy interests, parties may face unique challenges in executing joint build, supply, landing, and capacity agreements, and in complying with ongoing national security-related obligations across multiple jurisdictions. This article addresses two key factors influencing subsea projects—sanctions and national security reviews of telecommunications license applications—with a focus on the United States. It offers strategies companies can proactively employ to mitigate risk in these areas, even in today’s uncertain times.
NATIONAL SECURITY REVIEW
Submarine cables landing in the United States are subject to regulation by the Federal Communications ComMARCH 2024 | ISSUE 135 55