Though FSM Supreme Court Confirms IRU Deed Between FSMTC & OAE is Legally Valid & Enforceable, FSM Still Faces Connectivity, Security & Diplomacy Challenges

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Though FSM Supreme Court Confirms IRU Deed Between FSMTC & OAE is Legally Valid & Enforceable, FSM Still Faces Connectivity, Security & Diplomacy Challenges

 

PALIKIR, Pohnpei—Recently, His Excellency David W. Panuelo—President of the Federated States of Micronesia (FSM)—received a briefing from the Department of Justice regarding FSM Supreme Court Case 2021-010 (FSM Telecommunications Cable Corporation v. FSM Telecommunications Corporation). The purpose of the briefing was to ensure the President was equipped with the right information prior to receiving a diplomatic demarche from the Governments of the United States of America, Japan, and Australia, regarding the East Micronesia Cable Project, which is a proposed fiber optic cable funded by those three Governments that, when completed, would see secure, stable, and highly efficient internet access in the State of Kosrae, the Republic of Nauru, and the Republic of Kiribati. The main idea from the President’s briefing is that while the FSM Supreme Court has ruled that the deed of indefeasible rights of use (i.e. the IRU Deed) signed between the two FSM Government corporations on February 2nd, 2018, is legally valid and enforceable, the FSM’s objective of achieving a low-cost high-quality fiber optic cable to benefit the State of Kosrae is in increasing jeopardy.

 

This (lengthy) release will describe the partial summary judgment as well as the threat to the East Micronesia Cable Project as it relates to the State of Kosrae. As this release assumes that the reader has no prior knowledge or insight into the FSM’s telecommunications sector, it is frontloaded with background and contextualizing information.

 

Due to the similarity between the two entities’ names, FSM Telecommunications Cable Corporation is often referred to as the Open Access Entity (OAE), and the latter, FSM Telecommunications Corporation, is often referred to by its initialism (FSMTC).

 

The OAE is the submarine cable company connecting Yap, Chuuk, Pohnpei, and Kosrae to promote broadband adoption in the FSM; they are a wholesaler and not-for-profit. The OAE’s customers are the Nation’s Internet Service Providers (ISPs), of which FSMTC is undoubtedly the largest and, in some jurisdictions, the only ISP available.

 

Both the OAE and FSMTC are FSM Government entities. FSMTC exists due to Title 21 of the FSM Code, and the OAE exists due to the Telecom Act of 2014, which intends to liberalize the FSM’s marketplace to allow multiple ISPs to exist and compete with each other for the purpose of providing cheaper internet, television, and phone service options for all citizens of the FSM. (A third entity, the Telecommunications Regulation Authority, came into existence to regulate those ISPs).

 

Prior to 2018, only the State of Pohnpei possessed a fiber optic cable connection. That fiber optic cable—the HANTRU-1 submarine cable—connected the U.S. Territory of Guam to Pohnpei. The FSM Government’s intention was to expand fiber optic cable connections to Yap, Chuuk, and Kosrae; the idea was that this could be achieved if FSMTC and OAE signed what is called an indefeasible rights of use deed (IRU Deed). Indefeasible means something that cannot be undone, lost, annulled, or overturned.

 

The IRU Deed signed between FSMTC and the OAE on February 2nd, 2018, established the shared use of the HANTRU-1 submarine cable, as well as close cooperation of the parties in the efficient use of new submarine cables for Yap, Chuuk, and Kosrae, and the FSMTC facilities required to connect them to all of the states of the FSM. Thanks in large part to generous financial assistance from the World Bank, Yap and Chuuk have received fiber optic cable connections; only the State of Kosrae is presently lacking this capacity.

 

Though this release does not intend to summarize all of the resulting philosophical and legal disagreements between FSMTC and OAE following the signing of the IRU Deed, this release will now summarize some of them as a means of providing context for later detail on why what could have arguably been described as a purely domestic and internal issue has become, in the view of the Office of the President, a national security and international diplomacy issue worthy of FSM citizens’ attention and concern.

 

FSMTC has alleged for several years that the IRU Deed it signed with the OAE was not legally valid, and that it had entered it under duress; OAE then requested, by summary judgment, a declaration from the FSM Supreme Court that the IRU Deed was legally valid and enforceable.

 

FSMTC has claimed to the FSM Supreme Court that the HANTRU-1 cable was unconstitutionally taken without just compensation. The Court’s finding is that a taking occurs when a public party deprives a private party of private property to be used for a public purpose. FSMTC is not a private party; the HANTRU-1 spectrum is not a private property, but a public property to be used for a public purpose. In other words, the Court’s finding is that that one public property was transferred from one public instrumentality to another, and continued to be used for a public purpose.

 

FSMTC has claimed that they received illusory compensation or no compensation for the transfer of the HANTRU-1 interest. The FSM Supreme Court’s finding is that FSMTC’s interest was not illusory or non-existent; FSMTC received, at cost, non-discriminatory access to undersea fiber optics between Yap and Guam, Chuuk, and Pohnpei, and the future prospect of a cable between Pohnpei and Kosrae all without capital expenditure or indebtedness on FSMTC’s part.

 

FSMTC has claimed that they were subject to economic duress by the FSM Congress to enter the IRU Deed. The FSM Supreme Court’s finding is that Congress, and by extension the FSM Government, owns FSMTC, and also owns the OAE; pressure from an owner to require the corporation to negotiate and execute a contract does not constitute a wrongful or improper act giving rise to a duress defense.

 

FSMTC has claimed that the IRU Deed is unconscionable, as FSMTC claims that the Nation’s telecommunications reform policies are ill-advised and unworkable. The FSM Supreme Court’s finding is that policy adoption is a matter for the Executive and Legislative Branches of the Government, not the Court’s.

 

Citizens unfamiliar with legal language may appreciate that a summary judgment is an expedited proceeding; they can only be granted when there are no genuine issues relating to material facts. The FSM Supreme Court has confirmed that the IRU Deed is legally valid and enforceable in what is referred to as a partial summary judgment; in other words, while the IRU Deed is legally valid and enforceable, there remain additional issues for future adjudication at trial. Additionally, FSMTC can choose to appeal the FSM Supreme Court’s partial summary judgment.

 

Every piece of information above, if potentially news to FSM citizens and international media entities, is well-known to the FSM’s friends, allies, and development partners, as the legal case between the OAE and FSMTC over the IRU Deed and the ownership and use of the HANTRU-1 cable is ultimately what has been preventing forward movement on the East Micronesia Cable Project.

 

The East Micronesia Cable Project is a proposed fiber optic submarine cable funded by the Governments of the United States of America, Japan, and Australia, so as to provide safe, secure, and reliable internet capacity to the Republic of Kiribati, the Republic of Nauru, and the FSM State of Kosrae. The World Bank and Asian Development Bank are providing technical and coordination-related support.

 

If completed as intended, the new cable will connect Kosrae, Nauru, and Tarawa with the existing HANTRU-1 cable in Pohnpei. Thus, the legal dispute between the OAE and FSMTC over the ownership of the HANTRU-1 cable, among other related matters, is matter of significant interest to the Nation’s friends, allies, and development partners.

 

The FSM Government is aware that there is now a contractor available to build the cable—but the contractor cannot begin work until the other partners involved in the project have assurance that there will be no issue connecting the new cable to the HANTRU-1. Additionally, there is a time limit on the bid, and if the time runs out then the process must start again.

 

The FSM Government possesses knowledge that there is an alternative solution for the Republic of Kiribati and the Republic of Nauru, as the donor countries have committed to their primary cable. But the practical impact of that alternative solution is that the FSM State of Kosrae would not be part of it. It also means that Pohnpei State would miss the longer-term benefits of becoming a regional communications hub for the North Pacific; becoming such a hub will allow lower costs for the FSM, as well as new business opportunities.

 

“If this doesn’t get resolved soon,” President Panuelo said in a statement, “On the diplomacy-side, we’d be having to deal with the ramifications of having the Governments of the United States of America, Japan, Australia, Kiribati, and Nauru, and the international finance institutions of the World Bank and Asian Development Bank looking at our country as being a less trust-worthy partner for future projects, as their policy and technical public servants would privately point to our failure in solving an internal dispute between two of our own Government’s component units as the basis for why the East Micronesia Cable Project was delayed and more expensive than it needed to be. We’d be looking at a situation where we WOULD see our Micronesian brothers and sisters in Kiribati and Nauru succeed in getting their fiber optic cable, but on a timeline that is less favorable to them; meanwhile, the State of Kosrae would still be without secure, reliable, high-speed internet. Additionally, with appreciation that internet access these days is essentially as much of a public good as having access to clean tap water and electricity, this increasingly becomes an economic security issue for the State of Kosrae and the FSM at large—never mind the traditional security aspects, which are just as real and arguably even more profound in their scope and depth. That would be a disaster for the FSM and our People—so we cannot let that happen. We need to solve this. If we solve this, our partners will forgive and forget, and so will our citizens; if we don’t solve this, they will never forget, as it will necessarily impact their decision-making in the medium and long-term.”

 

It is the President’s intention to meet with the Board of FSMTC during the week of November 7th to 11th, so as to strongly convey the national security risks, the economic security risks, and the diplomacy risks involved in not concretely resolving this internal issue with the utmost expediency.

 

“I will not allow our national security and critical telecommunications infrastructure to be jeopardized,” President Panuelo said.

 

By way of this release, the President is requesting that FSM citizens concerned about the success of the East Micronesia Cable Project solicit their elected officials and representatives to encourage FSMTC to follow the intent of Congress when the IRU Deed was created, and to follow the requirements of the law in the name of the national interest.

FSM GOVERNMENT

P.O. BOX PS53
Palikir, Pohnpei State, FM 96941
Phone: (691) 320-2228
Fax: (691) 320-2785

 

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