Competing for Space Business - Level Playing Fields

In the business of space there is much competition between states. Many governments are competing to attract companies to submit ITU filings through their national administration or to apply for launch or space operations licenses from their launch authority. The benefits to the state would come with the ancillary setting up of an office, possibly a headquarters, a TT&C facility, foreign investment, recruitment of skilled employees etc. — several of which may be conditions to the submission of the ITU filing or the license application.

In another move to encourage the “Open for Business” message and showing its commitment to the sector, the U.K. government have capped the previously unlimited liability on U.K. satellite operators pursuant to the U.K. Outer Space Act 1986 to 60 million euros ($66.28 million) for most missions. The Deregulation Act 2015, which implemented this change, received Royal assent on 26 March 2015. This has taken several years to implement, however. It was back in March 2011 when George Osborne promised that “To create a level playing field with other countries, the government will reform the Outer Space Act 1986 by introducing an upper limit on liability for U.K. operators.”

Unlimited Indemnity vs. Risk Sharing

The U.K. government, as with the governments of other space faring nations, is liable under international treaties — primarily the Outer Space Treaty and the Liability Convention — for damage caused by activities in outer space by entities under its jurisdiction. The U.K. government sought to transfer its responsibility for these international obligations to the commercial or public entities, as appropriate, seeking to launch or operate space objects and which require licenses to do so.

Section 10 of the Outer Space Act obliges licensed entities to indemnify the U.K. government fully against any third-party liability claims that may be brought against the government. This represented an unlimited liability on licensees — a concept which offers little financial certainty when fund raising and, compared with other space faring nations, poses a competitive disadvantage to U.K. operators.

Currently, the licensing governmental authority in other countries such as the United States, Sweden and Australia and France, in relation to launch-phase liability, may accept liability for damage above the level covered by insurance; the liability of an operator is therefore capped by the level of insurance cover.

In the United States, an operator is responsible for insuring Maximum Probable Loss (MPL) up to $500 million covering the launch participants and the U.S. government, and any contractors as additional insureds. The amount of insurance becomes the operator’s possible liability to the U.S. government, offering some certainty. The U.S. government then indemnifies the operator in relation to third party claims up to $1.5 billion above the required MPL insurance. In effect, the government shares the risk with the operator.

At no cost to the taxpayer, the U.S. government passes the responsibility of the MPL insurance to the operator by requiring it to obtain insurance cover. In turn, the U.S. government covers more remote liabilities in excess of the MPL.

Unlimited vs. Limited Liability in Europe

Six EU member states have implemented a national space law: Austria, Belgium, France, The Netherlands, Sweden, and the United Kingdom. Luxembourg acts through a concession agreement with operators. Satellite operators in Austria, France, Luxembourg, the Netherlands, and the United Kingdom are required to take out around 60 million euros in third party liability insurance cover. In other EU member states, including Belgium and Sweden, operators tend to take out such insurance purely on a voluntary basis.

Concerning in-orbit satellite operations, satellite operators in Europe are either exposed to an unlimited liability risk for damages in outer space (Austria, France, Luxembourg, Sweden and previously the United Kingdom) or benefit from a capped liability or state warranty (Belgium and the Netherlands).

Most operators in EU member states are licensed in France and the United Kingdom; about 50 licenses were granted in United Kingdom alone in the last five years. Only two licenses were granted in Belgium and the Netherlands in the same time period, even though in these states the liability of the satellite operator is capped. VS