On 23 March 2011, 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 UK
operators".
The UK Space Agency has today (31 May 2012)
published a consultation (click here
) seeking views primarily on whether to cap the
unlimited liability requirement currently contained in Section 10
of the Outer Space Act 1986 (Act) to Euros 60 million for most
missions.
Background to the Consultation
The UK Government 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 Government has 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 licences to do so.
Therefore, Section 10 of the Outer Space Act obliges licensed entities to indemnify the UK Government fully against any third-party liability claims that may be brought against the Government. This represents an unlimited liability on licensees.
The issue
The concept of "unlimited liability" offers little financial certainty when fund raising and, compared with other space faring nations, poses a competitive disadvantage to UK operators.
The licensing government in other countries such as US, France,
Sweden and Australia 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 US, an operator is responsible for insuring maximum probable
loss (MPL) up to US$500 million covering the launch participants
and the US Government and any contractors as additional insureds.
The amount of insurance becomes the operator's possible
liability to the US Government – offering some certainty.
The US Government then indemnifies the operator in relation to
third party claims up to US$1.5 billion above the required MPL
insurance. In effect, the government shares the risk with the
operator.
At no cost to the tax payer, the US Government passes the
responsibility of the MPL insurance to the operator by requiring it
to obtain insurance cover. In turn, the US Government covers more
remote liabilities in excess of the MPL.
The UK Act currently does not currently permit such risk
sharing.
The proposals
The UK Space Agency propose to cap the liability placed on
satellite operators at Euros 60 million, which will be managed
through a requirement for licensees to obtain a policy for third
party insurance for Euros 60 million, with the UK Government as a
named insured, for the launch and in-orbit phases of the mission.
The Government will retain the ability to increase the liability
cap and insurance requirement for any non-standard, high-risk
mission.
The capped liability and insurance requirement could be waived for
the in-orbit operation (not the launch) of satellites that fall
under the criteria of "CubeSats". Licence applications
for CubeSats would have to demonstrate scientific or educational
merit, and adhere to space debris mitigation guidelines, to benefit
from this. This will be welcomed by some specialist UK companies
such as Clyde Space and SSTL.
Reforms welcome
The UK space industry is a recent, if a rather unknown, success
story despite the economic slow-down and is growing at about 10%
per year.
As I stated in a recent Parliamentary Scientific Committee and
Parliamentary Space Committee meeting:
"the UK space industry has much to offer but it needs a
supportive regulatory framework, which creates a level playing
field, to encourage growth and investment".
Therefore, these proposals are very welcome, especially to allow UK
companies to compete for international business on a level playing
field. Such proposals also illustrate the UK Government's
commitment to this sector.
Next steps
Responses to the consultation are to be submitted to the UK Space Agency by 31 August 2012. The Government will publish a response to the consultation by the end of November 2012, after which a timetable for any reforms will be announced. Any resulting reforms are likely to be implemented through Legislative Reform Order.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 31/05/2012.