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Does an IRU give property rights?

posted Nov 12, 2012, 4:44 PM by Austin Carwardine   [ updated Nov 12, 2012, 4:45 PM ]
Some enquiries have recently been made regarding the specific rights that attach to the grant of an indefeasible right of use (IRU) in capacity in a telecommunications submarine cable network.  Is the holder of an IRU at risk in the event of the insolvency of the cable network owner?  Is an IRU truly indefeasible?

For background, the vast majority of intercontinental telecommunications traffic is carried through optical fibre submarine cable networks.  The purchase of capacity in a cable network is often in the form of a contract between the purchaser of the capacity and the owner of the cable network and referred to as an IRU or an IRU agreement.  The rights granted to a purchaser are defined solely by the terms and conditions of the relevant IRU agreement, no more, no less.  As a consequence, the holder of an IRU is granted no particular property rights.  If the cable network is sold by a receiver or shut down, existing IRU holders may not be protected.  If the agreement gives the owner the right to terminate the agreement (for example, for breach by the purchaser), the term "indefeasible" will be of no assistance to the purchaser.  Their capacity is terminated in accordance with the agreement.  

It is therefore recommended that purchasers of capacity carefully review any IRU agreements and seek appropriate amendment prior to entering into them.  Such matters as payment terms, and the rights and remedies of the purchaser in the event of breach by or insolvency of the owner (or other granter of the capacity), need to be carefully considered in the light of the above circumstances.

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