Global Crossing, the telecoms firm which has filed for bankruptcy protection in the US, has told Dublin City Council and an Irish property firm it will not pay rates or rent owed on a Dublin-based lease.

However, the firm's Irish subsidiary, Global Crossing Ireland, is still set to receive €15 million in State grants later this year for a public private partnership project negotiated with the Government.

Dublin City Council and Mallia Properties are seeking a payment worth about €500,000 for rates and rent owed by GlobalCenter, another subsidiary of Global Crossing which has gone into liquidation.

GlobalCenter secured a 25-year lease on the 215,000 sq ft former Hitachi site in Clonshaugh from Mallia Properties in 2000 for an annual rent of £1.5 million (€1.9 million). But the company, which was subsequently sold to US firm Exodus, went out of business in November leaving Global Crossing Holdings, another subsidiary of Global Crossing, liable for the rent and rates.

Last week, Global Crossing's corporate recovery firm KPMG sent an e-mail to the Irish parties involved informing them that "the rent and rates due on April 1st, 2002 will not be paid by Global Crossing Holdings".

Mr Wesley Edwards, manager of corporate recovery restructuring KPMG Bermuda, wrote: "I have discussed the matter with my colleagues in the US, who have in turn consulted with the relevant individuals at Global Crossing. I am advised that this property is currently empty, and will not be required for the ongoing business of the Global Crossing Group." A Global Crossing spokesman confirmed to The Irish Times that the letter had been sent. The company had not made any payments to the landlord since the bankruptcy filing nor would it be as part of the bankruptcy case, he said.

Dublin City Council, which is owed about €350,000 in rates, said it would pursue Global Crossing for payment but admitted the situation was unclear because of the bankruptcy filing.

But Mr John Flynn, managing director of Mallia Properties, said the company did not have the right to withhold payment as it was only in Chapter 11 bankruptcy proceedings in the US and not in Bermuda, where Global Crossing Holdings is registered.

He said the Government should not pay Global Crossing a €15 million payment due this year on a public-private partnership contract agreed with the firm's Irish subsidiary Global Crossing Ireland. This subsidiary had not filed for bankruptcy protection and Global Crossing had insisted it was business as usual for the firm here, which supplies a third of the Republic's international connectivity.

The Government's €126 million contract with Global Crossing Ireland enables it to offer international telecoms capacity to firms at low cost to promote e-commerce activities from the Republic. It has already paid Global Crossing €62 million in grants and is due to pay two final payments worth €15 million in June and December.

A spokesman for the Department for Public Enterprise said the Clonshaugh facility was not part of the Government's deal with Global Crossing and the issue of money owed was a matter for the parties concerned.

However, the Government is clearly concerned by Global Crossing's Chapter 11 filing in the US and recently appointed two law firms to monitor how it could impact its contract with the firm.

Meanwhile, Global Crossing's chief executive, Mr John Legere, has told a US congressional hearing that the company was "no Enron" and predicted that it would emerge from bankruptcy.

Mr Legere told the House Financial Services Committee that his company's collapse was not due to Enron-type problems and maintained that its accounting practices were common to the telecommunications sector. He added that the company had spoken with more than 40 potential investors.

Mr Legere and other Global Crossing executives had been called before Congress to explain the company's collapse - the largest in the telecom sector and the fourth largest corporate bankruptcy in history - and to provide insights into its accounting practices. The company shared the same auditor as Enron, Arthur Andersen, which is now the subject of a US Justice Department investigation for alleged document destruction.