Space environment and liabilities

by Staff Reporter | April 6th, 2013

Nick Hughes, Partner at the international law firm, Holman Fenwick Willan

Nick Hughes, Partner at the international law firm, Holman Fenwick Willan, outlines what, in his view, are the positive factors in the current space risk environment.

“One undeniable positive is the rarity of collisions involving space objects, the absence of financial default on the part of the commercial operator and the availability of adequate and affordable liability insurance. In many cases, there is a scheme of state-sponsored legal liability” – Nick Hughes, Holman Fenwick Willan

“The reliability of launch vehicles and of satellite performance are important factors. And while the capital values in space assets are large, it is nothing compared to the values of terrestrial assets. Thirdly, the widespread distribution of satellites around the GEO ring is a positive factor. In addition, there is data sharing amongst major commercial operators of GEO satellites.

“The potential for large exposures for failed business plans, loss of property and other liability and the use of space for military purposes are developments that need to be managed … critical factors that need to be managed include the short term nature of insurance versus the long term nature of the liability exposure”

“One undeniable positive is the rarity of collisions involving space objects, the absence of financial default on the part of the commercial operator and the availability of adequate and affordable liability insurance. In many cases, there is a scheme of state sponsored legal liability.”

Some of the positives need management, affirms Hughes.

“The recent experience of satellites subject to a loss of control is among those facts that need to be looked into. The increasing dependencies on space-derived data and the commercialisation of space are critical factors. The potential for large exposures for failed business plans, loss of property and other liability and the use of space for military purposes are developments that need to be managed.”

“In addition, there is an incomplete sharing of data and we are witnessing the growth of many types of space debris and the existence of geo-potential wells of debris concentration. There is a growing potential for relative physical congestion in the GEO ring, in addition to risks faced in the LEO sector.

Liability Convention 1972

Article II – A launching State shall be absolutely liable to pay compensation for damage caused by its space objects on the surface of the earth or to aircraft in flight.

Article III – …damage elsewhere…to a space object… launching State shall be liable only if the damage is due to its fault…

Article V – Whenever two or more States jointly launch a space object, they shall be jointly and severally liable for any damage caused.

Third Party Liability: Outer Space Treaty 1967

Article VI – States Parties to the Treaty shall bear international responsibility for national activities in outer space…the activities of non-governmental entities…shall require authorisation and continuing supervision by the appropriate State Party.

Article VII – Each State Party..that launches or procures the launching of an object into outer space…and each State Party from whose territory or facility an object is launched, is internationally liable for damage to another State Party..or to its natural or juridical persons by such object or its component parts on the Earth, in airspace or in outer space…

Article IX – Parties shall pursue studies of outer space, including the moon and other celestial bodies, and conduct exploration of them so as to avoid their harmful contamination and also adverse changes in the environment of the Earth resulting from the introduction of extraterrestrial matter…

“And lastly, critical factors that need to be managed include the short term nature of insurance versus the long term nature of the liability exposure.”

Limitations of international instruments

Hughes elaborates on third party liability arising out of any of the factors that include launch failure, collision, debris and interference, among others. Are the international instruments fit for all purposes, he asks.

“Some of the benefits include the provision for public interest protection for damage on the surface of the Earth or to aircraft in flight. They do provide for state liability in case of operator default or non existence at time of occurrence. And lastly, they do provide long-tail liability, without time limitation (save following an occurrence).”

However, are these international instruments fit for all purposes? Hughes concedes that there are some uncertainties with these instruments.

“They have not been routinely engaged and used (although separately constituted, inter governmental commissions have been formed in cases of launch failures). But critical questions remain regarding the definition of fault and whether the instruments are engaged in all cases of damage. Also, are they appropriate for occurrences in space involving private parties – will private parties want claims managed by states or prefer self control?

“Questions remain regarding the legal regime and jurisdiction applicable to third party claims, the effect on the licensing arrangements and whether a form of claims management /dispute resolution can be devised in which commercial parties have confidence”

“There are other uncertainties around these international instruments that limit their ‘fitness’ for all purposes. They do not expressly provide the sole and exclusive cause of action. And questions remain regarding the legal regime and jurisdiction applicable to third party claims, the effect on the licensing arrangements and whether a form of claims management /dispute resolution can be devised in which commercial parties have confidence.”

The question of an occurrence of note and how parties will react in the future, remains unanswered. In the event of any major incident, Hughes asks if there will be a new assessment of the long-tail nature of liability exposure and whether the countries will maintain / change the licensing criteria?

“What recourse in an appropriate case would there be to liability outside of the international instruments?” asks Hughes.

Hughes does not rule out the possibility of amending the liability convention in the future or even new rules for dispute solutions with the provision of optional rules for arbitration of disputes relating to outer space activities.

 

 

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