European court to investigate ‘state aid’ for Iris subsea cable

European court to investigate ‘state aid’ for Iris subsea cable


A European authority is to investigate alleged state aid to the Iris subsea cable project in case it breached the rules.

There is now an official formal investigation into two aspects of the project – whether the government of Iceland was wrong to pay for seabed research and whether it should have invested in the cable, which is owned by Farice and went into service two weeks ago.

The authority said it “will now call for further comments from the Icelandic authorities and third parties with an interest in the case”.

Those will likely be not only Farice and the government of Iceland, but also Sýn, an Icelandic carrier that was formed after the merger of Vodafone Iceland and a local broadcast company.

Sýn reported the complaint to the ESA in its annual report for 2021. It said there that “the payments from the Icelandic state to Farice amounted to state aid which neither had been notified to nor approved by ESA. Farice received public service compensation from the Icelandic authorities, including compensation for costs related to surveys conducted in preparation for a possible third submarine cable.”

As Capacity said two weeks ago, Iris “is now live and ready for service”. It is Farice’s third subsea cable connecting Iceland with Galway on the the west coast of Ireland (see map) and increases redundancy and resilience in the region.

It is 1,750km in length and features a six-fibre pair trunk with a total system capacity of 108Tbps, with each fibre pair delivering 18Tbps. A terrestrial cable connects Galway, the landing point, to Dublin, Ireland’s capital.

“Dublin is our nearest neighbour, followed by Copenhagen and Hamburg,” said Farice’s VP of sales and business development Örn Orrason on LinkedIn two weeks ago.

Capacity contacted him this morning for a comment of the investigation. He passed the question to Þorvarður [Thorvardur] Sveinsson, CEO of Farice, who has not so far replied.

The investigation is in the hands of the EFTA Surveillance Authority (ESA), which is a regulatory body of the European Free Trade Association (EFTA), a grouping of four non-members of the European Union (EU).

Iceland, Liechtenstein, Norway and Switzerland, the members of EFTA, are subject to similar rules on state aid as those imposed by the EU: the rules of the European Economic Area (EEA).

It’s a complex case that has been through the courts a number of times. In March 2021 the ESA decided that the state aid to Farice contravened state aid rules. Then, in June 2022, the court annulled that decision.

Sýn appealed, and has just won its appeal, so the ESA now says it is investigating “possible breach of state aid rules by Iceland”.

The appeal court found “that there was a body of objective and consistent evidence that demonstrated that ESA adopted the contested decision despite the fact that ESA should have had doubts”.

The ESA said in a statement: “In its subsequent preliminary assessment, ESA finds that based on the current evidence and information the following two measures may raise questions in relation to the EEA rules.” Those are the rules covering support by the government of Iceland.

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