By Chris Forrester
SES has won a significant step in its long-running action against Intelsat over how the FCC’s compensation for C-band is apportioned. A Delaware Appeal Court has reversed the decision made by Intelsat’s bankruptcy court which ruled out the claim from SES. The Appeal Court has directed the claim now go back to Intelsat’s Bankruptcy Court. “The judgement of the Bankruptcy Court will be reversed,” stated the Appeal Court judge.
The ruling was made by District Judge Robert Payne on June 22nd. His decision was made just a few hours after Intelsat had – on June 21st – decided to pull out of merger talks with SES.
SES Americom has been pursuing Intelsat for a 50/50 share of the FCC’s payments (the Project Gross Proceeds). The dispute centers on the establishment in 2018 of the C-Band Alliance (CBA) and a Consortium Agreement signed to lobby for a private auction of C-band assets over the U.S. owned by SES and Intelsat. The FCC didn’t allow a private auction and, instead, carried out its own auction, with compensation going to each of the satellite operators supplying signals to the U.S. (including Eutelsat and Telesat of Canada).
Intelsat and SES were to receive a total of $9.7 billion (8.9 billion euros) from the FCC. ($866 million, in addition was shared by Eutelsat and Telesat).
In the core CBA document were statements that agreed that SES and Intelsat would share proceeds from the auction on a 50/50 basis. Intelsat later changed its mind over the agreement.
The FCC is (currently) committed to paying out at the end of this year totals of $4.865 billion to Intelsat and $3.968 billion to SES. A portion of these amounts has already been paid to Intelsat and SES.
These payments are at the core of SES’s 50/50 argument. A separate claim by SES against Intelsat for ‘unjust enrichment’ was not allowed by the Appeal Court.
The ruling is a vindication of the agreements, statements and eventually legal arguments made by Steve Collar, the CEO at SES (who is stepping down from his leadership position), and his colleagues during the litigation. The Consortium Agreement, despite not being the best constructed of agreements (and criticized by the Appeal judge) was nevertheless clear in its intentions.
SES, in a statement, stated. “SES achieved a major appellate victory in its commercial contract case against Intelsat over the latter’s refusal to honor its promise to evenly split billions of dollars the parties received for clearing a critical band of electromagnetic spectrum (the “C-Band”) for 5G wireless use. SES had brought its claims against Intelsat in bankruptcy court after Intelsat filed for Chapter 11. The bankruptcy court found Intelsat not liable under the parties’ contract, but on appeal, the district court agreed with SES that the bankruptcy court took “a clearly erroneous view of the record” without conducting an “independent analysis of the extensive extrinsic evidence” favoring SES. The district court remanded the case to the bankruptcy court to consider the “very strong extrinsic evidence favoring SES’s position.”
