At the end of 2020, Luxembourg adopted the Act of 15 December 2020 on space activities (loi du 15 décembre 2020 portant sur les activités spatiales) (the "Space Act"). The Space Act complements the Exploration and Use of Space Resources Act 2017 (the "Space Resources Act") and applies to all types of space activities falling within the Luxembourg jurisdiction not covered by the latter legislation. This newsflash briefly describes the regulatory obligations for space operators (including satellite operators) as well as certain notification obligations and required approvals in the context of mergers and acquisitions. Existing space operators should pay due attention to the deadlines for compliance with the new legislation.
Which space activities are covered?
The Space Act applies to (i) space activities carried out from the Luxembourg territory or by means of installations that fall under Luxembourg's control and jurisdiction, regardless of the operator's nationality, and (ii) space activities carried out abroad by Luxembourg nationals or legal persons subject to Luxembourg law.
Space activities are defined broadly and include the use of satellites. The term covers any activity entailing the launch or attempt to launch one or more objects (including satellites) into outer space or the control of one or more such objects or their use in outer space, including their return to Earth, as well as any other activity taking place in outer space for which Luxembourg may bear international responsibility.
Missions relating to the exploration and use of space resources governed by the Space Resources Act are expressly excluded from the scope of the Space Act, with the exception of the provisions on the registration of space objects and tax-related provisions.
Before engaging in any type of space activity, an operator must request and obtain an authorisation from the minister responsible for space activities, currently the Minister of the Economy, supported by the Luxembourg Space Agency (LSA).
In order to obtain such an authorisation, the operator must fulfil various requirements. For example, it must have its registered office and central administration in Luxembourg, including its administrative and accounting structure. The honourability, knowledge, skills and experience of the members of the operator's governing body will be assessed, and there must be at least two persons responsible for management. Furthermore, the identity of any direct or indirect shareholders with a qualifying holding or, if there are none, the twenty main shareholders must be notified to the Ministry of the Economy. The financial soundness and professional honourability of the operator's shareholders will also be examined. Finally, the authorisation application must include a risk assessment for the space activity, specifying how the risks are covered, i.e. by the operator's own financial resources, an insurance policy or a bank guarantee.
The application fee will be at least EUR 5,000. Once authorised, the operator will have to pay an annual fee of at least EUR 2,000, depending among other things on the supervision costs. Indeed, space operators are subject to continuous supervision by the Ministry of the Economy and the LSA. Furthermore, operators that have obtained an authorisation will be solely liable for any damage caused by their space activity or preparatory works.
What does it mean for existing space operators?
A transition period applies for existing satellite operators that benefit from a concession pursuant to the Electronic Media Act authorising the space activity and granted before 1 January 2021. They are permitted to continue their activities without an authorisation until 31 December 2022.
Other operators that started carrying out space activities before 1 January 2021 may continue to do so, provided they apply for an authorisation within nine months from the entry into force of the Space Act, thus by 1 October 2021.
In any case, any operator carrying out space activity on the date of entry into force of the Space Act (1 January 2021) has a period of two months, i.e. until 31 March 2021, to provide the Ministry of the Economy and the LSA with all required information with a view to registration of the space objects with the National Register of Space Objects (see below).
Impact on mergers & acquisitions
The transfer to a third party of authorised space activities, including the transfer of any rights entailing the transfer of effective control over a space object, is prohibited unless the Ministry of the Economy approves the transfer. Approval must be requested jointly by the transferor and the transferee. If the transferee is established abroad, the minister will refuse to approve the transfer unless there is a special agreement with the State of which the operator is a national or that bears international responsibility for the space activities in question, guaranteeing that Luxembourg will be held harmless and indemnified in the event of international liability or damage.
In the event of a change in control of a space operator, the Ministry of the Economy must be notified in advance if certain thresholds will be reached. More specifically, a person that decides to acquire or increase, directly or indirectly, a qualifying holding and, as a result, will reach or exceed the threshold of 20%, 30% or 50% of the capital or voting rights of a space operator or will cause the operator to become its subsidiary, must inform the Ministry of its intention prior to the acquisition or capital increase. The same goes for any person that decides to transfer, directly or indirectly, a qualifying holding or to reduce a qualifying holding so that the percentage of capital or voting rights held would fall below the threshold of 20%, 30% or 50% or so that the operator would cease to be its subsidiary.
Sanctions for non-compliance: back to earth?
Criminal sanctions may be imposed for violations of the Space Act, including a prison term of up to five years and fines of up to EUR 1,250,000. The courts may also issue injunctions, which may lead to the abortion of a space mission and the return to earth of space objects.
Register of space objects
Luxembourg intends to ratify the UN Convention on Registration of Objects Launched into Outer Space. In keeping with this convention, the Space Act foresees the creation of a national register of space objects, which will be made publicly available on the LSA's website.
Last but not least, the Space Act amends the Insurance Tax Act of 9 July 1937 and the Income Tax Act of 4 December 1967. It includes a tax exemption for insurance contracts relating to registered space objects and a tax credit for the operators of space objects.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.