The Government is reviewing how the bankruptcy of US telecoms firm Global Crossing will affect a €126 million (£99.2 million) deal agreed with the firm's Irish subsidiary.

It has appointed two law firms, A&L Goodbody and the US company Skadden Arps, to monitor Global Crossing's Chapter 11 proceedings in the US. They will also track separate US investigations into accounting practices at the firm, and advise the Government on its public private partnership deal with Global Crossing Ireland.

This deal with Global Crossing's Irish subsidiary provides one-third of the State's international telecoms capacity and is a key enabler of its policy to promote the Republic as an e-commerce hub.

The Government is concerned Global Crossing's Irish subsidiary - which manages the public private partnership with the Government - could be undermined if a proposed debt restructuring plan at the firm's US parent fails amid a cluster of federal investigations.

This week the Federal Bureau of Investigations and the Securities and Exchange Commission began probes into accounting practices at Global Crossing, which shared the same auditor as Enron, Arthur Andersen. And in a further blow yesterday, a spokesman for the Congressional Committee investigating Enron's collapse, said it was now looking into Global Crossing's affairs.

Global Crossing has received €62 million in Exchequer funding to help it build an undersea cable which provides Irish firms with high-speed telecoms capacity to cities in the US, Asia and Europe. The firm is due to receive an extra €15 million in funding in two separate tranches in June and December to complete the partnership project.

It is understood the two law firms will advise on all aspects of the Government's relationship with Global Crossing and whether it should pay the remaining €15 million in outstanding payments.

It is unclear if the legal advisers will review a decision by the Government last year to advance a payment of €7.4 million to Global Crossing Ireland several months earlier than required.

Last month a spokesman for the Minister for Public Enterprise's Department, Ms O'Rourke, said the Government had enhanced its deal with the firm through this early payment by negotiating a 40 per cent reduction in operation and maintenance costs from Global Crossing and links with extra cities. However, last night the Department would not comment on the appointment of the two law firms.

The law firms will almost certainly review the maintenance agreements for the Irish partnership deal which are held by Global Crossing firms currently under Chapter 11 protection in the US.

Global Crossing, which filed for Chapter 11 bankruptcy protection in the US last month, is more than $12.4 billion (€10.8 billion) in debt.

But the extent of the indebtedness of Global Crossing Ireland, which is not affected by the Chapter 11 filing, is not yet clear. The firm's latest return to the Companies Registration Office for the 13 months to December 2000 show it built up losses of €200 million and had net liabilities of a further €58 million.

Global Crossing said yesterday this loss referred to its European operation and were included in its Irish accounts because its subsidiary here holds the financial functions for its European operations.

A Global Crossing Ireland spokesman said it was business as usual in the Republic and Europe.

However, telecoms experts said yesterday the investigations and Chapter 11 proceedings involving Global Crossing in the US were of serious concern for the Republic.

Mr Harry McDermott, director of Mason Communications, said any disruption to Global Crossing's capacity to the Irish market would have a serious impact on the Republic's competitiveness.

Global Crossing has already provided 100 STM1 links (a type of high-speed fibre circuit capable of sending massive chunks of data) to the Government under the deal and is required to provide a further 60. And this capacity is not fully in use due to a slump in demand for international broadband connectivity which has caused financial difficulties for several telecoms carriers.

Global Crossing was one of the fastest growing and most successful telecoms firms in the late 1990s. Its network connects 27 countries and 200 cities worldwide and enables firms to send multimedia and data at very high speeds. But it has suffered from a huge slump in demand for connectivity. It is now being investigated by several bodies in the US for accounting irregularities.