The Government is suing cable company Chorus for up to €4 million because the firm has failed to pay for telecoms capacity that it bought under the State's €77 million deal with Global Crossing.
Court papers were filed with the High Court this week and the Government has foreclosed on a €1.6 million bond lodged by Chorus with the Bank of Ireland as a deposit on the deal. Chorus is 50 per cent owned by Independent News & Media (IN&M).
The legal proceedings mark the start of Government attempts to recoup some €12.9 million, which it is owed by telecoms firms for capacity purchased from IDA Ireland. The State is also pursuing US firm Worldport and Australian firm Global Voice for monies owned under the Global Crossing deal.
Under the State's deal with Global Crossing in 1999, six telecoms firms paid €80 million for international telecoms capacity. But three firms failed to pay the total amount of cash that they owed under the terms of the deal.
Chorus lost €36.6 million in 2002 and last March IN&M wrote down its €482.5 million investment in the group. Last month the Comptroller and Auditor General (C&AG) criticised the Global Crossing deal and said that bills worth €12.9 million were outstanding. The Government should have undertaken a more thorough examination of the telecoms market before signing the €77.1 million deal with the now bankrupt US telecoms firm, according to the C&AG's report.
It is understood negotiations between the Department of Communications, IDA Ireland and Chorus broke down in recent weeks and the Minister for Communications, Mr Ahern, sanctioned the legal proceedings.
Chorus is suing the State for its failure to shut down deflector systems in a long-running case that may come to court shortly.
Meanwhile, the Commission for Communications Regulation (ComReg) recently issued proceedings against Chorus for fees that it claims to be owed by the firm to cover the cost of regulating the cable television sector.
A Chorus spokesman confirmed last night that it was aware of the latest legal proceedings filed by the Government. He denied that the sheer volume of legal cases involving Chorus suggested that it was a litigious firm.
"It has always been our policy at Chorus to seek to negotiate on issues," he said. "But very often this route isn't open to us."
It is understood that the Government plans to issue proceedings against Worldport, which recently sold its Irish internet data centre when it ran into financial problems. The firm still owes the State up to €3 million for capacity that it bought under the Global Crossing deal.
Meanwhile, Global Voice, which acquired the assets of troubled US firm Metromedia Fibre Networks, may also be pursued for money owed to the State for capacity.
Government sources suggested it had decided to go the legal route to recover the monies owed under the contract following protracted negotiations with the companies involved.
The State's deal with Global Crossing in 1999 enabled it to offer Irish firms low-cost international telecoms capacity. But the subsequent collapse in the telecoms market forced many firms, including Eircom, to write off the value of their capacity contracts.
The IDA, which sold the contracts to telecoms firms on behalf of the State, wrote down the value of the telecommunications capacity it bought from Global Crossing by €21 million in 2002.
This provision for impairment amounts to a quarter of the total value of the €80 million telecoms contract, which was negotiated by IDA Ireland and the Department of Public Enterprise in 1999.
