Launching Space Objects: Issues of Liability and Future (Space Regulations Library Series)

LAUNCHING SPACE OBJECTS: ISSUES OF LIABILITY AND FUTURE PROSPECTS

SPACE REGULATIONS LIBRARY VOLUME 1

EDITORIAL BOARD Managing Editor PROF. R. JAKHU, Institute of Air and Space Law, McGill University, Montreal, Canada MEMBERS M. DAVIS, Ward & Partners, Adelaide, Australia S. LE GOUEFF, Le Goueff Law Office, Luxembourg P. NESGOS, Milbank, Tweed, Hadley & McCloy, New York, U.S.A. S. MOSTESHAR, Chambers of Sa’id Mosteshar, London, U.K. & Mosteshar Mackenzie, California, U.S.A. L. I. TENNEN, Law Offices of Sterns and Tennen, Phoenix, Arizona, U.S.A.

LAUNCHING SPACE OBJECTS: ISSUES OF LIABILITY AND FUTURE PROSPECTS by

VALÉRIE KAYSER

KLUWER ACADEMIC PUBLISHERS NEW YORK, BOSTON, DORDRECHT, LONDON, MOSCOW

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Table of Contents Chapter 1: Aims and Context 1.1 Overall Approach 1.2 Risk in Launching Space Objects, An Overview 1.2.1 What Type of Risk? 1.2.2 Risk Location 1.2.3 Communities Exposed 1.3 Approaches to Risk 1.3.1 The Engineer’s Approach 1.3.2 The Legal Counsil’s Approach 1.3.3 The Insurer’s Approach 1.4 Liability Risk Management: Looking to the Future Annex 1. Summary of Main Types of Space Insurance

1 2 3 4 7 7 8 9 11 12 14 17

PART I: THE LABRYNTH OF DAEDALUS Chapter 2: The International Legal Framework 2.1 Space Treaties and Resolutions 2.1.1 Main Principles of Space Law: the context Principle of freedom of exploration and use (i) Principle of non-appropriation (ii) (iii) Principle of applicability of international law Restriction on military activities (iv) Responsibility and liability (v) (vi) Common interest and common heritage principles (vii) International cooperation 2.1.2 Responsibility and Liability in Space Law (i) Entities subject to responsibility/liability States International organizations Non-governmental entities (ii) The compensable damage (iii) Type of liability (iv) Potential claimants (v) Procedure for claiming compensation 2.2 Examples of International Practice 2.2.1 Definition of Objects and Link to a State or Organization 2.2.2 Reference to the Liability Convention 2.2.3 Liability Between the Parties Annex 1. Summary Tables on the Space Treaties v

23 24 25 25 26 28 29 29 29 30 31 33 33 37 40 44 50 51 53 58 59 60 62 67

vi

Chapter 3: Domestic Launch Legislation and Regulations Legal Framework for Launch Services in the United States 3.1 3.1.1 Evolution Towards the Development of a Concise Regulatory Framework (i) Authority of US Government Agencies (ii) Practical consequences of the multitude of Agencies 3.1.2 Initial Steps Towards Improvement of the Regulatory Framework for Launches 3.1.3 The First Regulatory Steps Put to the Test 3.1.4 The Consolidation Phase: the Commercial Space Launch Act (CSLA) and the Associated Regulatory Framework (i) The Commercial Space Launch Act (ii) When is a license required? (iii) The licensing procedure 3.1.5 Liability and Insurance Issues (i) Liability and insurance under the CSLA (ii) The situation of private launch operators (iii) The CLSA Amendments (iv) Final Rule Concerning Financial Responsibility Requirements for Licensed Launch Activities (v) Final Rule Effective 21 June 1999 for Codification of 14 CFR 3.2 European Legal Framework: The Ariane Launch Services 3.2.1 French Approach to Space Legislation 3.2.2 Overall Legal Framework for the Ariane Launch Services (i) The initial phases of the program (ii) The commercialization phase 3.2.3 Institutional Aspects of the Legal Control Exercised Over Arianespace Control via shareholding in the capital of (i) Arianespace (ii) The role of ESA 3.2.4 Liability for Ariane Activities (i) Liabilities related to property of ESA and the participants (ii) Third party liability (iii) Contractual allocations

77 77 79 79 84 86 89 90 91 96 98 114 114 118 122 129 132 134 134 135 136 137 138 138 139 140 141 142 143

vii

Chapter 4: General Rules of Common Law and Civil Law Susceptible of Governing Liability for Launch Services 4.1 Common Law: General US Law Applicable to Liability for Launch Activities 4.1.1 Contract Liability (i) Liability for breach of contract (ii) Warranties (iii) Rules of contract interpretation 4.1.2 Tort Liability Negligence (i) Strict liability (ii) 4.1.3 Classical Means of Defense Defenses related to behavior or (i) characteristics of the victim (ii) Defenses related to limitation of the scope of the liability (iii) Defenses related to time 4.1.4 Cumulation of Contract and Tort Claims 4.1.5 Vicarious Liability 4.1.6 Recoverable Damages Recoverable damages in general (i) Punitive damages (ii) (iii) Liquidated damages, penalty clauses 4.1.7 Force Majeure 4.1.8 Judicial Procedure Aspects 4.1.9 A brief overview of US case law related to space activities Berg v. Reaction Motors Division (i) Smith v. Lockheed Propulsion (ii) (iii) Pigott v. Boeing (iv) Smith v. USA and Smith v. Morton Thiokol Lexington Insurance v. McDonnell Douglas (v) Appalachian Insurance v. (vi) McDonnell Douglas (vii) Martin Marietta v. Intelsat (viii) Hughes Communication Galaxy v. USA (ix) American Satellite Co. v. USA Lloyds of London v. McDonnell Douglas (x) 4.2 Civil Law: The Example of French Law 4.2.1 Contract Liability (i) Liability for breach of contract (ii) Warranty (iii) Rules of contracts interpretation

149

150 151 151 152 153 155 156 161 168 168 171 175 176 177 178 178 180 181 182 182

185 186 187 187 187 187 188 189 192 193 193 194 195 196 202 204

viii 4.2.2

4.2

Tort Liability (i) Provisions of the Civil Code: liability for fault and strict liability (ii) Product liability 4.2.3 Classical Means of Defense (i) Defenses related to the behavior of the victim (ii) Defenses related to the limitation of the scope of liability (iii) Defenses related to time Defenses available under the new product (iv) liability law 4.2.4 Cumulation of Contracts and Torts Claims 4.2.5 Vicarious Liability Specific types of liability for others (i) Towards a general principle of liability (ii) for others established by jurisprudence 4.2.6 Recoverable Damages (i) Recoverable damages in general (ii) Punitive damages (iii) Liquidated damages, penalty clauses 4.2.7 Force Majeure (i) Source in contracts and in torts Criteria to be met by force majeure events (ii) (iii) Effects of the force majeure (iv) Force majeure clauses 4.2.8 Judicial Procedure Issues Practice in Spacecraft Development Contracts: The European Space Agency 4.3.1 Applicable Law 4.3.2 Performance by Contractors and Control of Performance 4.3.3 Liability Provisions in the Contract (i) Liability of the Contractor concerning equipment, supplies and technical documents made available by the Agency (ii) Liability of the Contractor for damage caused to persons, goods or property (iii) Liability of the Contractor for infringments of the law and third-party rights (iv) Liability of the Contractor for performance of his subcontractors Res perit domo (v)

206 206 214 217 217 220 225 227 228 230 230 233 234 234 236 236 237 237 238 239 240 240 244 244 245 246 246 246 247 247 248

ix

4.3.4 4.3.5 4.3.6 4.3.7 4.3.8 4.3.9

Limitation of Liability 248 Penalty Clauses 248 Warranty and Product Liability 249 International Space Station Provisions 252 Liability of the Contractor in case of serious Breach 253 of Contract Settlements of Disputes 253 PART II.- ESCAPING THE LABYRINTH

Chapter 5: Issues in Liability Risk Management and Proposals De Lege Ferenda 5.1 An appraisal of the Legal Situation 5.1.1 A multitude of points of contact and an unadapted international legal environment 5.1.2 The Development of a Lex Mercatoria in the field of Launch Services 5.2 Methodology for our Further Discussions Harmonizing the Practice of Inter-Participant 5.3 Waivers of Liability 5.3.1 The Limitations of Inter-Participants Waivers of Liability Their validity is controversial in (i) certain legal systems (ii) Their validity may be contested in the absence of express acceptance (iii) They cannot exclude wilful misconduct and gross negligence (iv) They cannot exclude claims from individuals for bodily injury They do not always deal clearly and (v) consistently with consequential damages (vi) They are assessed in relation to the balance of the contract (vii) Their interpretation is strict (viii) Third-party liability allocations (ix) The relationship between inter-participant waivers of liability and product liability (x) Flow down requirements

257 258 258 260 261 262 265 265 266 267 268 268 268 269 269 270 273

x

5.4

5.3.2 Moving Forward with Inter-participant 278 Waivers of Liability Harmonization of inter-participant (i) 278 waivers of liability (ii) Clarification of the essential obligations of the launch provider and launch customers 280 (iii) The validation of the inter-party waivers 281 in the public order of States 283 The International Law Framework 5.4.1 The Outer Space Treaty and 284 the Liability Convention 285 (i) The current political atmosphere 287 Should we patch or should we review? (ii) (iii) The need for addressing liability issues 288 related to the launch of space objects 292 5.4.2 Issues and Proposals 292 The launching state: definition (i) 297 (ii) Liability of the launching State 297 (iii) Appropriate State (iv) Establishing the liability of the operator and legal channeling with respect to claims 298 by third-parties 300 (v) Licensing requirements 300 Actions in recourse between States (vi) 301 5.4.3 The Registration Convention Shortcomings of the Registration (i) 301 Convention (ii) Proposals for an efficient registration system to improve the security of determination of 302 the launching State 304 5.4.4 Conclusions on International Law Proposals

Chapter 6: Some Concrete Proposals -Harmonization of Inter-Participant Waivers of Liability 6.1 Inter-Participants Liability Covenants in States with Licensing Requirements (US Model) -Inter-Participants Liability Covenants for States without Licensing Requirements Implementation Arrangements for the Space Treaties 6.2 Proposed Protocol

307 307 309 325 335 336

CONCLUSIONS

347

BIBLIOGRAPHY

351

CHAPTER 1.- AIMS AND CONTEXT

The commercial launch business is fairly young and its opening to private companies is recent. It all started in the early 1980's when a few private operators found their way onto the launch market through their spirit of free-enterprise in the United States, or through the determination of a group of nations to achieve space autonomy in Europe. The trend has developed since then, with more operators, in particular from Russia and China, entering the launch market and the development ofnew launch facilities around the world. The result is that nowadays a number of private (or non-governmental) launch providers offer their services to those wishing to explore or exploit outer space.(1) This new market has brought with it the need for assessing and managing the legal environment of launching activities undertaken by non-governmental operators. The legal framework for launching activities is at the crossroads between a substantial body of public international space law developed since the 1960's, domestic laws applicable in general to the activities of any person or company in a given country, and, since the mid1980's domestic regulations specific to the launch business. Legal counsels advising launch providers, their customers and their respective insurers have been faced with an interesting challenge, which they perceived early as being significant for their community. P.D. Nesgos was thus concluding one of his articles, in 1989: “[...] the challenges facing the private practitioner regarding insurance and liability concerns in commercial space transportation are numerous. A practitioner must be attuned to the needs of an innovative commercial industry, involved in a high risk activity. Moreover, familiarity with a wide spectrum of relevant law - from international law to torts and contracts to regulatory law - is essential. Whether the practitioner represents the interests of the launch services provider, the launch customer, sub-contractors, insurers, or brokers, the fundamental concern is how to allocate and manage the many risks and obligations which arise from commercial launch activities. The solution is a complex risk management structure composed of contractually allocated responsibilities, insurance contracts and government indemnification. The proper implementation of this structure will help assure the future of safe and responsible

(1)

Information on launch companies, launcher manufacturers and satellite manufacturers can be found in : ESA Launcher Catalogue, ESA Publications, Looseleaf updated regularly D. Baker Ed, Jane’s Space Directory, 15th Edition (Coulsdon: Jane’s Information Group Limited, 1999) Jane’s online: (accessed 01/2001) D. Shirvanian Ed, European Space Directory, 14th Edition (Paris: Sevig Press, 1999). Andrews Space & Technology database on launchers online at: (accessed: 01/2001)

1

2 commercial launch transportation”.(2)

1.1.- OVERALL APPROACH The space business, in particular launch and its related activities, operates in a labyrinth of actors and norms, which makes the management of liability risk and exposure daunting and challenging. As an academic as well as a practitioner, we took up the challenge and attempted to bring a contribution to the field, both in academic and practical terms, in two main domains:

The analytical overview of today’s legal environment: The specialized literature has already discussed aspects of liability for space activities and for launches in particular, general and specific treaties, national regulations on launch licensing, litigation of liability cases in the space business, contractual and international practice. However, the overall picture of this global environment of legal norms and practices is not readily available, and the interested reader must find his way through a mass of scattered information, which is nowhere gathered in a synthesized form. Also, linkage between international and domestic norms and practices applicable to the space business, in connection to general domestic laws concerning liability, is a subject which has been only partially studied. We have tried to organize this information and relate its different facets to provide the reader with an overall view of the norms at play in this field of activity. Our aim is not to provide all the detail on each of these, but rather to develop them to the extent necessary for the reader to grasp their importance, their interactions, and their relative weight in an assessment of the liability risk attached to a particular situation. We have endeavored to provide references for further reading on the topics addressed, many of the references online, as Web-based information is nowadays an essential tool for the legal counsel.

The development of proposals to prepare for tomorrow’s challenges: The environment in which private launch providers operate today is highly complex. Readers familiar with international business or international relations, may wonder what makes this environment different from the one in which businessmen and legal counsels across the world find themselves daily. We believe that the space business is in a unique situation where the complexities encountered in classical international legal relationships are increased due to 1) the highly transnational nature of the space business in terms of actors (many firms are involved from many countries in one single endeavor) and effects (launch providers, customers, contractors and potential victims will often be of different nationalities), 2) the sheer number of interfaces involved in all respects (technical, managerial, legal, contractual or corporate), 3) the concentration of exposure and risk in a single launcher/payload package, and 4) by the magnitude of the damage which can be caused by this package in a short time frame.

(2)

P.D. Nesgos, “The Challenges Facing The Private Practitioner: Liability and Insurance Issues in Commercial Space Transportation” (1989) 4 Journal of Law and Technology, 21.

3 Our first aim is to highlight the complexities created by today’s environment, and point out the main areas where such complexities prevent a reliable liability risk management due to the lack of predictability as to the norms eventually applicable. This lack of predictability is primarily caused, in our view, by two main factors: the superposition of a variety of legal norms, which leave gaps in between the layers they constitute and contain ambiguous concepts, and the absence of organized and coherent practices, in particular in the area of contractual allocations of risks between launch participants. This is not helped by the quasi absence of litigation in the field, a positive sign, though it has the consequence that resolution of disputes is often arbitrary and that there is no unification in the interpretation of norms and the solution of similar issues. In view of these complexities, our second aim is to make a contribution to this field by suggesting ways to improve liability risk management and to make the overall legal environment more consistent. We have looked into possible improvements in two domains: the contractual relationships between participants in launch activities, and in public international space law, both of which require, at some stage, intervention of domestic legislation and regulations. Our suggestions are directed to the implementation of harmonized approaches in the contractual relationships between participants in launch activities, and a more practical acknowledgment by international space law of the role of non-governmental entities in the launch business, as an essential part of building a more efficient and predictable legal environment. None of the suggestions are easy to achieve, but we proposed a methodology for addressing them in an adequate forum. Our voyage through today’s legal environment, and tomorrow’s prospects, is meant to inform and aid in developing an awareness of issues regarding liability risk management approaches, provoke the thought process into challenging the reliability of one’s own liability risk management approaches, and convince that concerted effort must be applied to the development of common tools to achieve a better legal environment for launch and related activities. This book is an attempt to start and stimulate this process.

1.2.- RISK IN LAUNCHING SPACE OBJECTS: AN OVERVIEW Prior to moving into our main developments, this introduction will set the frame and describe the types of risks involved in the launch of space objects, the approaches which can be implemented to control risk, and the role of the legal counsel in this environment as well as his specific challenges. For most activities, half a century of practice normally leads to a decreased level of risk in their performance, as compared with their beginnings. However, this is not the case for space activities in general and for launch activities in particular. After years of experience, lift-off remains a stressful moment for the launch team, the customer, the insurers and, sometimes, the public at large. Launching objects into space is a frequent event nowadays, and rarely makes the prime-time news, yet it remains a risky event and this risk is of concern to the legal profession involved in launch activities, from its position of advising either the launch provider, his customers, the insurers and manufacturers. Launching activities should not be considered in isolation. Many activities contributing

4 to a launch, cannot be separated from it in the assessment of risk and its legal ramifications. The root of a particular risk is often found prior to the launch itself, in particular in the design, development and manufacturing of the objects concerned, such as the launcher, the satellite or payload, the adaptor equipment between the launcher and the payload, the equipment used for integration of the payload into the launcher, the launch facilities, ground control equipment and any other equipment taking part in one way or another in the launch activities. These risks weigh considerably on the nature and wording of the contracts entered into for the procurement or purchase of those products and services. Space activities are a technological domain, where the products involved are complex. The practicing legal counsel must develop awareness ofthe technical and operational activities and environments, and thereby the technical risk, which he will need to apprehend in his legal management and in the establishment ofthe legal documentation needed in support of the activities concerned.(3) Therefore, it is important, as a background, to briefly review the types of risks, their location, and those exposed.

1.2.1.- What Type of Risk? We will focus here on the technical risks associated to launch and launch-related activities.(4) Risk can manifest itself in different ways and at different stages of launchrelated activities: transportation of the payload or the launcher around the launch facilities, integration of the payload onto the launcher, transportation of the payload-launcher package to the launch pad, on the launch pad, during launch itself, injection on the transfer orbit, transfer to the target orbit, or in orbit during the life ofthe satellite. The risk can also take various forms: damage to the satellite or the launcher prior to launch, damage to or (3)

On the relationship between technology and law in space law, see: L. Perek, “The Scientific and Technological Basis of Space Law” in N. Jasentuliyana ed., Space Law, Development and Scope (Westport, Conn.: Praeger, 1992), at 175. We believe that legal counsels practicing in connection with space ventures can find significant advantage in actively developing their understanding for the technical aspects of the activities they participate in, for instance through attendance of seminars aiming at presenting space engineering to non-engineers. From his ability to develop awareness to these issues, will depend the professionalism and effectiveness of the legal counsel on the operational field in the area of space activities. For an overall technical presentation, see: P. Fortescue & J. Stark, Spacecraft Systems Engineering (Chichester: Wiley, 1995).

(4)

There are other risks which have to be taken into account by the operators of launch services and owners of satellites, often referred to as the political risks and the market risks. These are not specifically dealt with here. For further developments see P.L. Meredith & G.S. Robinson, Space Law: A Case Study for the Practitioner, Implementing a Telecommunications Satellite Business Concept (Dordrecht: Kluwer, 1992), at 250. Also, even though this will not be addressed in the present thesis, the practitioners will often be confronted with general legal risks such as customs and export controls, intellectual property rights infringements, etc. Some of these are addressed in the above referred book. See also, R. Bender, Launching and Operating Satellites, Legal Issues (The Hague: Kluwer, 1998) On export controls in particular, see H. Peter van Fenema, The International Trade in Launch Services, The Effect of US Laws, Policies and Practices on its Development (Leiden: H.Peter van Fenema, 1999) P.L. Meredith & S.P. Fleming, “US Space Technology Exports: The Current Political Climate” (1999) 27:1 Journal of Space Law, 35.

5 destruction of the satellite at launch or during orbit transfer, or reduction of the life of the satellite either because of one of the previous mentioned causes or because of its injection on an improper orbit leading, for example, to the need for orbit correction by use of the satellites motors, which will then prematurely use propellants normally needed for orbit correction during the lifetime of the satellite. The failure of the launcher upper stage, and the resulting failure to inject the satellite on the proper orbit, seems to be statistically one of the highest cases of failure. There are risks connected to the satellite itself which may also malfunction, leading to complete loss or reduction of life. Failed launch or malfunction of the payload may also cause damage to other satellites through interference, or worse, collision. There is a risk to persons and property in the vicinity of the launch operations, whether they are taking part into the launch operations, or are third parties and to the environment from the toxic products used as propellants, or if the payload carries dangerous products such as nuclear power sources. Another significant risk at all stages on orbit is space debris, which can cause significant damage to or total destruction of the launcher-payload package before separation or to the payload itself thereafter. And, of course, one has to bear in mind the risks related to the design, manufacturing and testing of payloads and launchers. The origins of technical risks are numerous and could be categorized under the following main headlines:

Complexity: Spacecraft are complex technological systems(5) and some functions on board are redundant to minimize the consequences of failures. This complexity generates a degree of risk. An interesting comparison has been made of the degree of complexity of different objects by comparing the order of magnitude of parts items constituting these objects. The following table summarizes this comparison(6): Item

Sewing machine

Order of magnitude of Number of parts

10

2

Television

Car

Jet airplane

Satellite

Launcher

103

104

105

105

106

The complexity of the launcher must be combined with the complexity of the satellite (payload) and of the associated ground infrastructure.

Technology: Although certain satellites and launchers are now built in series, they are nevertheless high technology products. They will always carry the risk associated with the use of such (5)

An idea of such complexity can be given by consulting the International Space Station Familiarization Manual which contains the technical description of the elements making up the International Space Station. Online: (accessed: 01/2001) For the European Laboratory on the International Space Station, see A. Thirkettle & J. Gülpen, Columbus: Europe’s Laboratory on the International Space Station (Noordwijk: ESA Publications, 1999), Publication Reference BR-144 One can also consult the Ariane 4 User Manual and the Ariane 5 Technical Information Booklet online: (accessed: 01/2001).

(6)

H. Yoshida, “Accidents of Space Activities and Insurance” (1993) 36 Colloquium on the Law of Outer Space [hereinafter, Colloquium], 221.

6 technology and the risk due to the absence of large scale statistics data which would allow for accurately predicting the behavior of certain equipment (for example, electronic components, elaborate metal alloys, or new software developments). There are new types of launchers or of satellites,(7) but even in proven launchers or satellite platforms, improvements and upgrades are regularly made which raise the technological complexity and add risk, in particular for maiden launches.

Environment: The launch environment is hostile. Sending a payload from Earth still requires that it must be perched on top of a powerful firework-type vehicle, which burns tons of propellant per second, generating tremendous forces and vibrations. The space environment is also very hostile and unusual: for example gravity and atmosphere are absent, radiation hits spacecraft and upset on-board computers, temperatures change from extremely hot to extremely cold, micro meteoroids hit the spacecraft, etc.

Human failure: Like in any activity, human failure plays a role at all stages of the process leading to the launch. Besides the classical mistakes, there are also failures due to the complexity of the system, design and technology involved, and the consequences of the psychological pressure which builds up in preparation for and during a launch campaign, where time is of the essence.(8)

The industrial risk: Defects in design, manufacture, testing, handling, can also happen, despite the strict monitoring procedures being implemented in space industry and space projects at all stages of the development, manufacturing and testing of the launchers and payloads.

These risks are more or less directly related to the problems often occurring during the launch itself. It appears that in the total number of anomalies affecting satellites, only about 5% are caused by the launcher, and the rest are related to the satellite itself(9). However, the risk associated to the launcher is potentially of higher magnitude than this figure leads to conclude, because of the virtually catastrophic consequences in extreme cases such as the explosion of the launcher on the pad or at lift off, possibly made worse by the presence of nuclear material on board. Besides these risks, which one could refer to as the direct risks, one must consider the consequential risks linked to failures, such as the financial risks resulting from loss of the (7)

Scientific satellites are not produced in series like telecommunications satellites and, although there is a practice to build at least two of each such satellite to take into account the possibility that the first one is destroyed at launch, this practice cannot be implemented in certain cases due to funding constraints.

(8)

The reader may get a feeling for such pressures by reading the Report of the Presidential Commission on the Space Shuttle Challenger accident, in particular Chapter V - The Contributing Cause of the Accident, Chapter VII - The Silent Safety Programme and Chapter VIII - Pressures on the System. Report to the President by the Presidential Commission on the Space Shuttle Challenger Accident, June 6th, 1986, Washington D.C.

(9)

See H. Yoshida, “Accidents of Space Activities and Insurance”, supra note 6, at 4.

7 payload and associated revenues, or resulting from the need for re-design and remanufacturing, delays suffered in subsequent launches, loss of confidence in the launch provider. The ripple effects can be considerable as a given launch may involve multiple payloads and the transponders of some of these payloads may have been leased. All of these risks have legal ramifications, in particular the exposure to liability for damage.

1.2.2.- Risk Location Different geographical locations are affected by the manifestation of the risks we have addressed above. A large part of the risk is concentrated on ground: during the development, manufacturing and testing, transportation, integration of the launcher and then of the payload into the launcher, and at launch. The latter is the time when the highest concentration of risk exists since events may lead, in extreme cases, to the destruction of the launcher and its payload as well as the property of the industrial contractors or the launch facilities, or the property of third-parties. And it is on ground that the risk of injury to persons, either participants in the launch or third-parties, is the highest. Airspace and outer space are also locations where risk is a concern: until injection on orbit, on orbit, and upon the return of space objects. The return of space objects creates a risk on ground and at sea and, in this case, it may not be possible to predict the precise location where the space object will impact Earth. Launching and its related activities are probably the most far reaching activities in terms of geographical impact. All locations are susceptible of being at risk due to these activities, and it is not always possible to completely predict and geographically delimitate the radius within which their effects can materialize. Development and manufacturing activities are more predictable from this point of view.

1.2.3.- Communities Exposed From the above developments, one can conclude that a group of virtually unlimited number and its associated property is exposed. This group is composed of natural persons, States, governmental organizations, private companies, and space agencies. However, the probability of exposure is mostly concentrated on those directly involved in the concerned space activity, and in particular those involved in the launch process. The next most exposed category, especially in terms of legal risk, are the developers and manufacturers of launchers and space objects. Entities exposed to risk are usually classified into the following summarized categories: - first party: the launch provider and his personnel, and the payload owner (customer) and his personnel. - second party: those who, while not included in the first party, are involved in the space activity. This category covers launch facility operators and associated personnel, as well as contractors of those first party.

8 - third party: these are the persons or entities not involved or connected at all to the space activities and launch operations. Although we are not dealing in detail with manned spaceflight here, one should not overlook the crews of manned spacecraft, who are on the front line of risk at launch, during flight and at landing. Data are reproduced here, showing the risk of space flight related fatalities in comparison to other activities:(10) Activity Person struck by lightning

Risk of fatal accident

per day

Industrial worker

per shift

Mine worker

per shift

Car driver or passenger

per trip

Scheduled airline passenger Military pilot Space crew Mountain climber Himalayas above 23000 ft

per flight per flight per mission per expedition

The safety of the flight crew is a complex matter, consideration of which ranges from the design and preparation of the spacecraft to the emergency escape systems both on the pad and in flight on board space stations.(11)

1.3.- APPROACHES TO RISK Whatever the risks are, and however complex their combination is, there are three main types of approaches for their management: - the engineer’s approach: reduce the possibility of the risk and mitigate the consequences of a materialized risk; - the legal counsel’s approach: assess and manage the legal risk associated to technical risks by evaluating the law applicable, providing for the legal framework for risk mitigation approaches, and allocating legal risk among the different participants to a given activity; the involvement ofthe legal counsel from the early stages of a project is essential; - the insurer’s approach: insure the portion of risk allocated to each concerned party, as far as it is insurable and insurance is available, based on the confidence (10)

J.H. Carver, “Factual Issues”, in K.H. Böckstiegel ed, Manned Space Flight, Legal Aspects in the Light of Scientific and Technical Development (Köln: C. Heymanns Verlag, 1993), 149, at 151.

(11)

See N. Jasentuliyana, “Legal Aspects of Human Safety and Rescue in Space”, in K.H.Böckstiegel Ed, Manned Space Flight, supra note 10, at 165.

9

of a sound technical and legal risk management of the insured.

1.3.1.- The Engineer’s Approach Launch vehicle and payload manufacturers’ primary interest is to technically reduce risks or to technically manage risks to ensure full success of the intended mission, even in cases where malfunction would occur in the launch vehicle or the payload. This requires stringent attention and discipline in the design and development phases of the spacecraft. Space agencies like the European Space Agency prescribe strict standards to their contractors in this respect(12), which are applicable to all activities from the start of the design until final acceptance and launch preparation, as well as for operations. These standards aim at obtaining the highest quality in all areas of work, and the structured control and decision-making with respect to choices made and exceptions agreed. These general standards are complemented by specific requirements prescribed for the conduct of each specific project (for example, management requirements, review requirements, verification requirements, product assurance and safety requirements). We can illustrate this with a few examples: A number of functions in a spacecraft have to be redundant, in particular when they are critical for the safe or reliable operation of the spacecraft. Exceptions to such redundancies are subject to numerous analyses to assess the risk taken by the deletion of a redundancy. Software has to be written according to very strict standards. Space software is not more complicated than in other types of applications but the complexity arises from the limitations on the computers placed on board spacecraft, and the types of functions of the software in particular those to be performed in real time. Electronic components used have to be resistant to radiations, to avoid the risk of malfunctions due to radiation hits and components of a lesser quality may be used under strict conditions(13) Only specific materials can be used, from a list of approved materials and deviating from this list requires demonstrating that the proposed material complies with a number of (12)

The ESA standards (PSS standards) can be found online < ESA, ESTEC: http://www/wsmwww /components/pss_overview.html> (accessed: 01/2001). The standards cover disciplines such as Product Assurance and Safety, Electrical Power and Electromagnetic Compatibility, Mechanical Engineering and Human Factors, Space Data Communications, Software Engineering, Management and Project Control, Operations and EGSE, Natural and Induced Environment, Control Systems, Ground Communications and Computer Networking. Each of these is in turn subdivided in lower level standards at an increasing level of detail. These standards are progressively replaced by the ECSS Standards, which are part of an effort of harmonization in Europe for standards in use in the space industry. They are elaborated by a group gathering industry and space agencies, in coordination with standardization organizations. The ECSS main levels of documentation are: Standardization policy document (ECSS-P-00) and Glossary of terms (ECSS-P-001), under which are the three main ECSS branches i.e: Space Project Management, Space Product Assurance, Space Engineering. More information on these standards can be found online at <ECSS Homepage: http://www.estec.esa.nl/ecss> (accessed: 01/2001).

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Space agencies operate systems for the specification, qualification and procurement of electronic, electrical and electro mechanical components (EEE Parts) for use in space projects. On the ESA system, see online <ESA, ESTEC: http://www.estec.esa.nl/qcswww/sccpage.html> (accessed: 01/2001). On the NASA system, see online (accessed: 01/2001).

10 criteria, for example in the area of flammability and production of toxic substances or gases. Manned spaceflight also requires the strict implementation of human factor standards which aim at making space equipment safe for use by astronauts by ensuring, for instance, that they do not contain any sharp edges or operations modes which could lead to injuries of the crew. Compliance with these standards, the quality of the work, and the safety of the design are controlled through a system of reviews and formal controls occurring at the various stages of the design, development and construction of the spacecraft. The major events in the manufacturing and testing of the spacecraft are also strictly controlled by a system of inspection points. A series of tests are prescribed to demonstrate that the spacecraft can tolerate the launch and space environments and meets all the prescribed requirements. The manufacturing processes are also prescribed and controlled and the staff performing them must, in certain cases, be trained and certified to perform specific operations, for example soldering particular alloys, welding, components coating and gluing, glasshandling. Certain manufacturing or integration operations have to be performed in stringent conditions of cleanliness. The standards of quality in the space industry are very high and are controlled by product and quality assurance audits conducted by the product and quality assurance authorities of the customer, and at all levels of the contractual chain.(14) Product and quality assurance authorities usually are granted an independent status in their organization, which helps to ensure the implementation of an adequate level of product, quality and safety assurance independent of the constraints of a specific project. The testing of a spacecraft is strictly controlled and test facilities are monitored to comply with stringent parameters. Rigorous procedures are applied during the performance of a test to avoid damage or accidents, and security measures are taken by the security services of the facilities concerned. As far as launching is concerned, detailed procedures are set by the launch authority for all activities taking place on the launch site. The order in which each operation occurs is strictly prescribed, as well as the conditions in which each phase can be initiated and performed. The launch itself is precisely regulated:(15) for example, the wind conditions are monitored prior to a launch and the launch may be postponed if the wind blows in the direction of populated areas (in case of accident, toxic products would be carried by the wind), all parameters of the launcher and launch complex are permanently monitored and, should any of these parameters exceed the margins prescribed, the countdown may be suspended. The type of standards described above are rather universal in spirit, although details may vary from one organization to another. This technical part is only meant as a background (14)

For additional information these aspects: M. Spada, “Quality Control in Production of Space Objects and Liability in Outer Space Law”, in G. Lafferranderie & D. Crowther Eds, Outlook on Space Law Over the next 30 Years, (The Hague, Kluwer, 1997), 191.

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For an example of a strict launch preparation monitoring, with the example of the Cassini-Huygens mission, see M.V. Frank, “The Decision to Launch: A Nuclear Risk Assessment of the Cassini Mission”, Proceedings of the Workshop on Risk Management, European Space Agency, ESTEC, 30 March - 2 April 1998, ESA Publications WPP-134, 243.

11 for the reader in view of the legal discussions in the following chapters, but the lack of international harmonization as regards standards should be noted. Lack of technical harmonization causes difficulties, and even disasters such as the loss of a recent mission due to miscalculations of orbit corrections caused by the fact that the two cooperating teams were working in different measurement units!(16) Many efforts have been made to achieve harmonisation in technical areas but much work still remains to be done.

1.3.2.- The Legal Counsel’s Approach Once the technical risks are identified, it is the task of the legal counsel to define the areas of risk from a legal standpoint. The final objective is that each participant in the activities concerned achieves a position to predict, calculate and mitigate its legal exposure. One of the fields where such work is most important is that of liability for damage caused by the activities concerned. The legal approach to liability in the domain of space activities has taken different forms. Initially, the rules governing such liability were developed within the frame of public international law. The main actors of space activities at the time were States and governmental space agencies or international organizations. This is why the first body of rules elaborated in this field (the early United Nations resolutions on principles governing outer space activities, the Outer Space Treaty and the Liability Convention) was drawn up under the auspices of the United Nations, and was that dealing with State responsibility for damages caused by space activities of States, and their non-governmental entities, and compensation for such damages. As cooperation increased between space faring nations, another regime of allocation of risk and responsibility was elaborated through a network of inter-participant waivers of liability clauses(17) applied in cooperation agreements, and in commercial agreements entered into by state entities providing launch services. These risk allocation clauses became common practice and were taken over by industry when the private launch market developed. They are often complemented by hold-harmless clauses.(18) There is a large variety in these clauses for the allocation of liability through contractual schemes involving cross-waivers, hold-harmless, but also sometimes through the definition of the (16)

“Mars Climate Orbiter Team Finds Likely Cause of Loss”, Press Release 99-113 NASA JPL, Online a: NASA Jet Propulsion Laboratory (accessed: 01/2001).

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These clauses operate an allocation of risk and liability among the participants to a launch through a reciprocal waiver of liability and claims entered into by such participants (the launch provider, the launch customer, and their respective contractors and insurers). They are referred to as interparticipant waivers of liability because they aim at operating risk allocation not only between the launch provider and the customer but, to the maximum extent possible, to all participants in the launch activities. We will return to these clauses on various occasions in the course of this book.

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A hold harmless agreement is defined as “a contractual arrangement whereby one party assumes the liability inherent to a situation, thereby relieving the other party of responsibility. [...] Agreement or contract in which one party agrees to hold the other without responsibility for damage or other liability arising out of the transaction involved. ” H.C. Black, Black’s Law Dictionary, 6th Ed (St Paul, Minn: West, 1993), at 731.

12 parties obligations under the contract concerned (obligations of the launch services providers are always defined as ‘best efforts’ for example). In the recent years, schemes have developed that dramatically modified the balance of such allocation. They are the so-called turn-key contracts for satellites which consist of the purchase of a satellite with a transfer of ownership from the manufacturer to the customer only upon delivery on orbit of a functioning satellite. The risk is then fully allocated to the satellite manufacturer who has in turn to reallocate this risk among the various contractors involved in the constellation of contracts required for such an endeavor.(19) Domestic legislation and regulations have also developed, in some countries, to deal specifically with space launches. In the US in particular, a very detailed framework has been put into place by the Commercial Space Launch Act, its amendments, and a comprehensive set of implementing regulations, which set mandatory prescriptions for launch and spaceport licensing, allocation of liability through inter-participant waivers of liability clauses, and insurance and financial responsibility requirements. Other States have also adopted national legislation in this field, although less detailed. States, or international organizations and space agencies, have also gradually extended the use of this mechanism of risk allocation. For example, the Intergovernmental Agreement on the International Space Station, concluded between the US, Europe, Russia, Canada and Japan has adopted the system of cross-waivers of liability. The provisions of this agreement are quite complex since it deals with a permanent international cooperation activity in space and the construction of a station made of modules belonging to different nations taking part in the venture. A regime to manage conflict of laws had to be put into place in a number of areas such as intellectual property, but it was not implemented in the area of liability. The latter is supposed to be dealt with through the cross waiver of liability provision. Finally, because space activities are international in scope, significant legal risk is created by the potential applicability of different national laws and legal regimes, which can conflict and cause the design of a very complex legal framework.

1.3.3.- The Insurer’s Approach Once the participants in a given space activity have allocated the risk among themselves, each of them will in turn seek insurance for their own risks. The insurance market of space activities developed slowly since the first space insurance, in 1965, for the INTELSAT’s “Early Bird” satellite. The market initially limited coverage to pre-launch operations, then launch operations were covered, and later on, the on-orbit phase. Now a large variety of insurance coverage exists. The main types are summarized in the table in Annex 1 to the present Chapter. They are in general combined and tailored to meet the (19)

On turn-key arrangements see: J. Chappez, “Le contrat de livraison en orbite” in P. Kahn ed., L’exploitation commerciale de l’espace, Droit positif, Droit prospectif (Paris: Litec, 1992), at 183 L. Ravillon, Les télécommunications par satellite, Aspects Juridiques (Paris: Litec, 1997), at 140 P.D. Nesgos, “Trends in the Acquisition and Financing of Space Projects: Insurance Implications”, paper presented at the 8th Assicurazioni Generali International Conference on Space Insurance, Venice, March 1995.

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specific requirements of each customer. The insurance community takes an active part in the assessment of risk involved in a space project, and the insurer is generally involved in the early stages of such project, often as early as the procurement of the satellite. The insurance broker and his experts are often used as advisors with respect to the risk assessment of the project. All risks are assessed, including the legal risks to which the operator is exposed and the allocations he intends to make through the risk allocation clauses at the various contractual levels in the project. The legal security of his client will be an important element in the assessment of the insurer, as well as the insurer’s own legal security measured, among other factors, by his ability to predict the avenues of recovery by subrogation into his client’s rights, should he have to compensate his client for any loss,(20) or the absence of subrogation rights. The insurer has, therefore, an interest both in the technical risk management approach implemented by those responsible for the development, manufacturing and testing of the spacecraft concerned. This will allow the assessment of the reliability of the launcher and payload and the calculation of the corresponding premium to be paid for insurance, as well as the conditions under which such insurance can be provided. The insurer also has an interest in how well the legal counsel in the organizations concerned can manage the liability risks as the materialization of claims will lead to the call upon the insurer to compensate. One of the specific characteristics of the space business, and in particular the launch business is that the worldwide insurance capacity is not sufficient to cover each launch if one would leave all possible claims open. The intervention of the inter-participant waivers of liability, and of government indemnification has helped overcome this situation, making the insurance of spacecraft launch and operations feasible.(21) But it (20)

We will not study here the insurance aspects as such, but the reader may find additional information in: J.L. Magdelénat, “Spacecraft Insurance” (1982) VII Annals of Air and Space Law, 363 M. Bourély, “L’assurance des activités spatiales” (1983) VII Annuaire de Droit Maritime et Aérien, 361 I.H.Ph Diedericks-Verschoor, “L’assurance satellites” (1985) X Annals of Air and Space Law, 322 J.S. Greenberg & C. Gaelick, “Space Insurance, Comments from an Observer” (1986) 2:4 Space Policy, 307 J.S. Greenberg, “Third Party Liability Insurance and Space Launches” (1988) 4:3 Space Policy, 211 P.D.Nesgos, “Satellite Launch Liability Risks, Products Available as New Industry Gets Off the Ground” (Oct 29, 1990) Business Insurance, 25 D.E. Cassidy, “Current Status and Prospects for Space Insurance” (1991) Journal of Space Law, 166 I.I. Kuskuvelis, “Space Insurance”, in K. Tatsuzawa ed, Legal Aspects of Space Commercialization (Tokyo: CSP, 1992), at 60 P. Daphouars, “L’assurance des risques spatiaux”, in P. Kahn ed, L’exploitation commerciale de l’espace, Droit Positif, Droit Prospectif supra note 19, at 253 P. Meredith & G. Robinson, Space Law, A Case Study for the Practitioner , supra note 4, at 249 on risk management and 335 on procuring insurance G. Catalano-Sgrosso, “Insurance Implications About Commercial and Industrial Activities in Outer Space”(1993) 36 Colloquium, 187 I.I. Kuskuvelis, “The Space Risk and Commercial Space Insurance” (1993) 9:2 Space Policy, 109 R. Ritorto & M. Mitchell, “Telecommunication Satellites Insurance” (1993) XVIII:3 Air and Space Law, 136; G.V. D’Angelo, Aerospace Business Law (Westport:, Quorum Books, 1994), at 65 S. Miyakazi & Y. Fujikawa,”Recent Satellite Insurance and its Difficulties” (1994) 1 Telecommunications and Space Journal, 305 L. Ravillon, Les télécommunications par satellite, Aspects Juridiques, supra note 19, at 409; R. Gimblet, “Space Insurance Into the Next Millennium”, in G. Lafferranderie & D. Crowther eds, Outlook on Space Law Over the Next 30 Years, supra note 14, at 163.

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See some interesting figures online: (continued...)

14 remains a high premium area where risk calculations suffer the same problems as in other area of industry involving complex technological products.(22)

1.4.- LIABILITY RISK MANAGEMENT: LOOKING TO THE FUTURE Legal risk management in the field of commercial space launches, especially with respect to liability, is at the crossroads of the topics addressed so far in this Chapter. The technical choices made often have significant bearing on the legal approach to be taken, as, for example in the case of a new launcher or of a payload carrying nuclear power sources. The cost constraints on a particular project may lead to an increased need for liability risk management. The ability to buy insurance will be closely linked to liability risk management since exposure to potential claims is a fundamental element of the assessment by the insurer. The occasional lack of sufficient insurance will lead to the need for liability risk management focused on the risk allocation and risk sharing among the participants to a launch activity. One of the features of liability risk management for space projects today, and launching in particular, is the complexity of the legal framework in the field of space activities. The combination of space treaties and related international public law, private international law, national legislation, as well as contractual agreements, has led to a labyrinth of legal norms. Launch and space activities take place in an international environment and few launch providers exist, with the consequence that satellite owners often have to buy launch services from a company which is not from their national State. The manufacturing of launchers and satellites is, in a number of cases, performed by transnational consortia. Very often the actors of all these activities have a different statutory nature: the satellite owner may be a State-owned telecommunication operator and the launch provider a private company, or the other way round. A number of space ventures originate in international cooperation agreements which contain provisions that have to be flowed down to all participants in such ventures. In such a complex environment, legal security is difficult to achieve especially because of the connections with numerous legal systems, and because of the uncertainties in the flow down of the provisions concerned. Some of the legal loopholes or contradictions that exist in the present environment have been highlighted in the small number of cases brought to court, until now, on issues related to liability for damage caused by launch activities. Cases up to now usually involved the top level actors (satellite owner, satellite manufacturer, launch provider), but

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(...continued) (accessed: 01/2001).

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See on this subject D.R. Connolly, “Insurance: The Liability Messenger” in J.R. Hunziker & T.O. Jones, ed, Product Liability and Innovation, Managing Risk in an Uncertain Environment (Washington: National Academy Press, 1994), at 131.

15 even for them the scrutiny may go down to component level.(23) Liability risk management is important even for minor contributors to a space activity, to avoid exposure to virtually disastrous liability claims, especially as the risk allocation provisions agreed between the top participants (for instance the launch company and the satellite owner) are often not flowed down adequately to the very lowest contractual levels. The primary need for the legal counsel is to know the overall environment in which he operates. This is a pretty daunting task in the field of liability for launch activities. We have attempted to gather an overall picture of the liability environment for launch activities, de lege lata, in our Part I (The Labyrinth of Daedalus) which follows a top down approach. The public international space law framework is analyzed first, its liability provisions are highlighted, and some examples are provided of the practice of States and international organizations on the subject of liability, in their cooperation agreements (Chapter 2). The complexity ofthe legal environment also lies in the varying approaches adopted by the space faring nations towards fulfilling their international obligations regarding non-governmental launch activities, and the resulting legal frameworks, with the examples of the US regulations and of the Ariane framework (Chapter 3). The domestic laws of contracts and torts play, of course, a significant part and we chose to analyze particularly the US law and French law, as well as an example of satellite procurement contracts practice, that of the European Space Agency (Chapter 4). Our Part 2 (Escaping the Labyrinth) is an attempt to focus on the main issues which hamper the achievement of adequate liability risk management in today’s legal framework, and to offer suggestions, de lege ferenda, to address these main issues (Chapter 5). As suggestions and proposals may often be abstract to the reader, we have also attempted to develop texts and language to support our proposals with actual draft clauses and an international instrument (Chapter 6). Discussions with practitioners in the field have often revealed that, while the space business developed a mode of legal risk management which meets the present needs , there is a doubt in the mind of such practitioners as to its actual adequacy. The pressures of daily work and deadlines prevent them from studying in depth the legal ramifications of all situations and they often get the uneasy feeling that their legal provisions are not “water tight”. A number of court cases, in particular in the United States, have shown the occasional inadequacies of the legal framework set up for a particular launch or activity. These discussions prompted on our part an interest in looking into these issues and we believe that today’s environment is a labyrinth of norms, some of them purely contractual and often highly unreliable, and some international but unadapted the realities of the launch business. There is the need for initiating a consistent effort with a view to harmonizing the practices on the launch market and modernizing a body of space law which still constitutes our present roots. As J.K. Galbraith put it, “ Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof”. We chose not to get busy on the proof, and to question the (23)

“Unprecedented Lawsuit Targets Spar Aerospace”, (August 1997) 1 Space News, at 1 & 21. A settlement was later reached out of court. See “Spar Announces Settlement of AMSC Litigation”, online at: < City Insurance: http:/www.city-ins.com/winter1999.htm#Spar Aerospace settles satellite lawsuit for $15 million> (accessed 01/2001)>

16 current legal framework for launch activities undertaken by private companies, or in general non-governmental entities, and we believe that change is needed for a more coherent and safer legal environment where launch providers will ultimately be able to take more responsibilities, while improving launch prices and thereby allowing access to space for exploration and use by all mankind.

ANNEX 1 SUMMARY OF MAIN TYPES OF SPACE INSURANCE

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Insurance type

Pre-launch insurance

Launch insurance

Generic aim of the coverage

Insurance of the physical damage to Insurance of the physical damage to or loss the satellite before the intentional of the satellite at launch. ignition of the launch vehicle engines (lift-off)

Risk covered

Sequence of coverage can be: - during satellite manufacturing - during satellite testing - payload storage/processing - transportation of the satellite to the launch facilities - integration of the satellite with the launch adaptor and launch vehicle. Coverage can be bought for all or some of these. Coverage covers the repair cost. Coverage may include consequential damages (penalties for launch delay, loss of revenues, payload storage costs) and some force majeure events resulting in delays.

Buyer of insurance

Satellite manufacturer (he will Provider of turn key satellite Satellite owner normally bear risk until lift-off) Provider of turn key satellite (normally also satellite manufacturer) Owner of the satellite, to cover risk beyond contractual liquidated damages, e s p e c i a l l y for consequential damages

Insurance provider

Insurance company

It normally covers the risk after lift-off and up to a period of 120 to 180 days after successful injection of the satellite on orbit, or until in-orbit commissioning of the satellite. May include cost of the launch, as well as loss of revenues and other expenses caused by the launch failure. Launch risk guarantees normally stop upon separation of the satellite from the launch vehicle.

Insurance company Launch provider (launch risk guarantee, relight-refund guarantee)

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Insurance type

In-orbit insurance

Third-party liability insurance

Generic aim of the coverage

All risk coverage against partial or Coverage against liability due to loss or total failure of the satellite after on- damage caused by the satellite, launch orbit commissioning. vehicle or personnel to third parties.

Risk covered

Coverage starts in principle right Coverage needed at all stages from satellite manufacturing up to on-orbit, after the launch insurance. Duration: 1 or 2 years. Renewed and even at discarding a dead satellite. yearly after check up of the health No coverage today for dead satellites. Variable duration. of the satellite. Third-party liability insurance provided Variant of the in-orbit insurance: by launch company normally starts at service interruption coverage arrival of customer’s payload and protects the transponder owner or personnel at launch site and stops about lessee against failure of the 30 days after injection of payload in orbit/transfer orbit. transponder and consequences.

Buyer of insurance

Satellite owner Transponder owner Transponder lessee

Manufacturer (manufacturing, testing, transportation...) Launch company (launch site and launch operations) with customer as named insured as well as his contractors and subcontractors. Satellite owner (launch site operations depending on contractual allocation with launch company; on orbit damage to other satellites)

Insurance provider

Insurance company

Insurance company

CHAPTER 2.- THE INTERNATIONAL LEGAL FRAMEWORK.

The international legal framework which has developed over the years in the field of space activities is extensive and complex. It is composed of treaties, agreements and documents such as UN Resolutions which are binding in various degrees and are either multilateral or bilateral. The original texts of space law were developed during the Cold War and they still bear the mark of their historical context. They were developed by States to govern activities of States. They did not address the commercial activities and the activities downstream of the activities of States, mostly due to the fact that at that time, space applications were not commercialized and non-governmental entities activities were seen as sort of a science fiction prospect. The texts were elaborated essentially to maintain a balance between States carrying out space activities and avoiding that those be used as instruments of conquest, war and domination. The space Treaties therefore have to be read with this context in mind, which permits the understanding of their limitations. In this Chapter, we will provide an overall presentation of this framework, and illustrate its practice further with examples of agreements entered into for specific cooperation. The main space law treaties do not always have direct relevance to the issue of liability, and cover a larger array of subjects, but we chose to devote some discussion to them in order to provide some general background,(24) and to provide for a contextual reading of (24)

For reading on space law in general, the following books can be consulted: M.S. McDougal, H.D. Lasswell & I.A. Vlasic, Law and Public Order in Space (New Haven: Yale University Press, 1963) C. Chaumont, Le Droit de l’Espace, Collection Que Sais-Je, No 883 (Paris: Presses Universitaires de France, 1970) M.G. Markov, Traité de droit international public de l’espace (Fribourg: Editions Universitaires, 1973) C.Q. Christol, The Modern International Law of Outer Space (New York: Pergamon Press, 1982) G.P. Zukho v & Y. Kolosov, International Space Law (New York: Praeger, 1984) N.M. Matte ed., Space Activities and Emerging International Law (Montreal: McGill Institute of Air and Space Law, 1984) [hereinafter referred to as “Emerging International Law”] G. Reynolds & R. Merges, Outer Space: Problems of Law and Policy (Boulder: Westview Press, 1989) C.Q. Christol, Space Law: Past, Present and Future (Deventer, Boston: Kluwer, 1991) S. Gorove, Developments in Space Law (Dordrecht, Boston: MartinusNijhoff,1991) P.M. Martin, Le Droit de l’Espace, Collection Que Sais-Je, No 883 (Paris: Presses Universitaires de France, 1991) N. Jasentuliyana, Space Law, Development and Scope (Westport Conn.: Praeger, 1992) [hereinafter referred to as “Space Law Development” L. Peyrefitte, Droit de l’Espace (Paris: Dalloz, 1993) I.H.Ph Diederiks-Verschoor, Introduction to Space Law (Deventer: Kluwer, 1993) B. Cheng, Studies in International Space Law (Oxford: (continued...)

23

24 the specific liability provisions. These texts are important for those who practice international space cooperation in an international governmental environment. They also impact to a certain extent, and in general indirectly, upon the activities ofprivate operators and need to be properly understood to allow private operators to comprehend the main issues they may encounter in their activities .

2.1.- SPACE TREATIES AND RESOLUTIONS From the early stages of space exploration until now, international space law has developed tremendously in particular through the work of the United Nations, especially its Committee on Peaceful Uses of Outer Space (UNCOPUOS).(25) Very early, States represented in the UNCOPUOS realized thei mportance of establishing rules of conduct for these new activities. At the time, a great energy and willingness existed to bring into existence an increasingly comprehensive body of law to govern these activities. From general resolutions to specific treaties, States built up this body of law and laid down the fundamental principles of space law. In order to provide an over view and background prior to going into the detail concerning liability provisions, the table in Annex 1 to this Chapter presents the various UN resolutions, treaties and conventions adopted in the field of space, with their main features and principles, as well as bibliographical references. The main principles are also summarized below.

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(...continued) Clarendon Press, 1997). For information on the United Nations Committee on Peaceful Uses of Outer Space (UNCOPUOS) and its legal and scientific subcommittees, see: E.M. Galloway, “Consensus Decision making by the United Nations Committee on the Peaceful Uses of Outer Space” (1979) 7 Journal of Space Law, 3 V. Kopal, “Evolution of the Main Principles of Space Law in the Institutional Framework of the United Nations” (1984) 12 Journal of Space Law, 12 M. Benkö, W. De Graaf & G.G.M. Reijnen (eds), Space Law in the United Nations (Dordrecht: Martinus Nijhoff, 1985) N. Jasentuliyana, “Treaty Law and Outer Space: Can the United Nations Play an Effective Role?” (1986) XI Annals of Air and Space Law, 219 United Nations, Space Activities of the United Nations and International Organizations (New York, 1992) at 1 (UN Doc A/AC. 105/521, Sales No. E.92.I.30) N. Jasentuliyana, “The Lawmaking Process in the United Nations”, in N. Jasentuliyana, Space Law Development and Scope, supra note 24, 33 N. Jasentuliyana, “Space Law and the United Nations” (1992) XVII-I, Annals of Air and Space Law, 127 M. Benkö & K.U. Schrogl, International Space Law in the Making, Current Issues in the UN Committee on the Peaceful Uses of Outer Space (Gif-sur-Yvette: Frontières, 1993) [hereinafter referred to as “ International Space Law in the Making” ], at 1 L. Peyrefitte, Droit de l’espace, supra note 24, at 15 N. Jasentuliyana, “The United Nations: Its Role in the Progressive Development of Space Law”, in Proceedings of the Third European Centre for Space Law (ECSL) Summer Course on Space Law and Policy (Paris, ECSL, 1994), 5 M. Andem, “United Nations Functioning with Respect to Space Activities, in Proceedings of the Third European Centre for Space Law (ECSL) Summer Course on Space Law and Policy (Paris, ECSL, 1994), 29 B. Cheng, Studies in International Space Law, supra note 24, at91 F. Pocar, “The Normative Role of UNCOPUOS”, in G.Lafferranderie & D.Crowther eds, Outlook on Space Law Over the Next 30 Years, supra note 14, 415 The UN Office for Outer Space Affairs is online : (accessed 01/2001).

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2.1.1.- Main Principles of Space Law: The Context This section only provides a global summary ofthe main principles which, though they are not of direct relevance to the subject of responsibility and liability, constitute the environment within which liability provisions are ultimately interpreted and implemented. i)

Principle of freedom of exploration and use

This is one of the most important principles which has been recognized since the early 1950's and first practically accepted during the International Geophysical Year,(26) with the absence of protests from States to the overflight of their territories by satellites launched on this occasion. This principle was incorporated in the first space law provisions elaborated in the United Nations,(27) and was repeated(28) in the Outer Space Treaty. It covers three basic rights: right of free access, right of free exploration and right offree use. The definitions ofthe terms “exploration” and “use” are difficult to ascertain, since most of the terms used in the space law texts are not precisely defined or not defined at all. Generally, “exploration” is interpreted in the scientific sense (e.g. scientific satellites for the exploration of planets, for astronomy or fundamental research), while “use” is related to space applications which take advantage of the space environment (e.g. telecommunications satellites). This principle of freedom of exploration is limited by other principles of space law. As for most Earth-based activities, operators of space activities enjoy freedom so long as they do not interfere with freedoms or rights of other operators, and this directly or indirectly linked to principles such as that of non discrimination and equality, common benefit and common interest, non appropriation, responsibility and liability.

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For developments on this period, see B. Cheng, “Recent Developments in Air Law (1956) 9 Current Legal Problems, 208. This article is partly reproduced in B. Cheng, Studies in International Space Law, supra note 24, at 3 N.M. Matte ed, Emerging International Law, supra note 24, at 253.

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The Declaration of Principles provided in its principle 2: “Outer space and celestial bodies are free for exploration and use by all States on a basis of equality and in accordance with international law ”. Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space, UNGA Res 1962 (XVIII), in: N.M. Matte ed, Emerging International Law, supra note 24, at 537 UN Office for Outer Space Affairs, United Nations Treaties and Principles on Outer Space (New York, 1996) UN Doc A/AC.105/572/Rev 1 [hereinafter referred to as UN OOSA “Treaties and Principles” ], at 37 Online (accessed 01/2001). Also online at <McGill Institute ofAir and Space Law: http://www.iasl.mcgill.ca/home.htm> (accessed 01/2001) The principle was further reproduced in the Outer Space Treaty in its Article I On this principle and its evolution, see N.M. Matte, Emerging International Law, supra note 24, at 269 and L. Peyrefitte, Droit de l’Espace, supra note.24, at 55.

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Article I, Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space Including the Moon and Other Celestial Bodies [hereinafter referred to as “ Outer Space Treaty” ], UNGA Res 2222 (XXI) in: N.M. Matte ed, Emerging International Law, supra note 24, at 543 UNOOSA, Treaties and Principles, supra note 27, 4 610 UNTS 205 18 UST241 TIAS 6347 (1993) XVIII-II Annals of Air and Space Law, 615 Online, Office of Outer Space Affairs and McGill Institute of Air and Space Law, supra note 27.

26 The principle of freedom of access and use has played an important role in the development of space law, in particular when combined with the principle of nonappropriation. The elimination by these two principles of the concept of sovereignty in the field of space activities, has certainly also prevented the elaboration of detailed space law regulations.(29)

ii)

Principle of non-appropriation

This principle is directly linked to those of freedom of exploration and use and of common interest, as one of the guarantees of the enjoyment of their rights by other States so that none of them can exercise exclusive control or exclusive use of outer space or celestial bodies on a permanent basis with the intent to do so.(30) Given the repetition of this principle in the Declaration of Principles(31) and in the Outer Space Treaty,(32) as well as a long standing compliance by States, we tend to share the opinion of those who consider that it has become a norm of jus cogens(33) and therefore, applicable even to those States not Parties to the Outer Space Treaty.(34) There is therefore a fundamental difference between Earth and space with respect to the possibility for a State to claim sovereignty over an area. On Earth, and with respect to airspace, State sovereignty is a fundamental element of the legal regime applicable to those areas.(35) Outer space escapes this sovereignty. This difference of regimes could lead to difficulties in the future, in particular as the limit between airspace, subject to such sovereignty, and outer space, has (29)

See also further, para ii).

(30)

N.M. Matte ed, Emerging international Law, supra note 24, at 275

(31)

Declaration of Principles, supra note 27, Principle 3.

(32)

Outer Space Treaty, supra note 27, Article II.

(33)

On the definition of jus cogens, one can refer to the Vienna Convention on the Lew of Treaties, UN Doc A/CONF.39/11/Add.2; 1155 UNTS, 331; (1969) International Legal Material, 679; Online: (accessed 01/2001). Adopted on 22 May 1969. Entered into force 27 January 1980. Article 53 of the Convention states: “ Article 53.- Treaties conflicting with a peremptory norm of general international law (jus cogens).- A treaty is void if, at the time of its conclusion, it conflicts with a peremptory norm of general international law. For the purpose of the present Convention, a peremptory norm of general international law is a norm accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character”. On this subject see also M.N. Shaw, International Law, 4th edition (Cambridge: Cambridge University Press, 1997), at 97.

(34)

I.A. Csabafi, The concept of State Jurisdiction in International Space Law (The Hague: Nijhoff, 1971), at 47.

(35)

V. Kayser, “Aux confins de l’air et de 1’espace. D’Accursius à 1’avion spatial” (1994) XIX-II Annals of Air and Space Law, 465, at 466. The key principle in air law comes from the latin formula cujus est solum ejus usque ad coelum, which first applied to private law to govern the rights of the owner of a piece of land on the usable space directly over this property, and has become a fundamental principle of air law. The Chicago Convention confirms this principle in its Articles 1 and 2 Convention on International Civil Aviation, ICAO Doc 7300/6 (1980) 15 UNTS 295 (1993)XVIII-II Annals of Air and Space Law, 3 Online: <McGill Institute of Air and Space Law: http://www.iasl.mcgill.ca> (accessed 01/2001).

27 not been agreed, although this subject has been discussed since the establishment of the UNCOPUOS in 1957.(36) This fundamental divider of sovereignty, in view of the various disciplines of law concerned, could create difficulties in determining the regime applicable to a future space plane.(37) These fundamental differences between air and space law, revolving around the concept of sovereignty, have, in our opinion, strongly differentiated the level of regulation between these two areas. In the field of air law, the strength of the concept of sovereignty has left States much more in control of the rules applicable to the circulation of aircraft over their territories. This has ultimately forced them, in order not to hamper air traffic, to coordinate their regulatory actions and framework. For example, this has been the case in the area of mutual recognition of certificates of airworthiness, certificates of operating crew, and conditions to be fulfilled by aircraft, especially when overflying another State.(38) Thereby, a rather regulated control over aircraft flight has been put into place over the years through the International Civil Aviation Organization (ICAO), implementing the Chicago Convention, and the mechanism of standards and recommended practices. As we will see further on in this Chapter, although the United Nations established a legal framework for space flight, this framework is looser than the one established in the field of air law. The major reason for this difference is to be found in the principles of free access, free use, and non-appropriation. By depriving States of the attribute of sovereignty in relation to outer space, these principles have also worked against the motivation of States for establishing a detailed regulatory framework, since such a framework is not needed to ensure their compliance with the international framework which governs their activities in the space (36)

The doctrine has also addressed the issue of appropriation of resources, versus appropriation of the areas. Also, certain authors have argued that while States could not appropriate, private entities could. On these debates, the reader may consult N.M Matte ed., Emerging International Law , supra note 24, at 275. On delimitation between airspace and outer space see: For the latest documents available on the works of the UNCOPUOS: online Office of Outer Space Affairs, supra note 27. For literature: B. Cheng, “The Legal Regime of Airspace and Outer space: The Boundary Problem. Functionalism Versus Spatialism: The Major Premises” (1980) V Annals of Air and Space Law, 323 H. Qizhi, “The Problem of Definition and Delimitation in Outer Space” (1982) 10 Journal of Space Law, 157 M. Benkö & J. Gebhard, “The Definition/Delimitation of Outer Space and Outer Space Activities Including Problems Relating to the Free (Innocent) passage of Spacecraft Through Foreign Airspace for the Purpose of Reaching Orbit and Returning to Earth”, in M. Benkö & K.U. Schrogl eds, International Space Law in the Making, supra note 25, Chapter C., 1 1 1 .

(37)

V. Kayser, “Aux confins de l’air et de l’espace. D’Accursius à l’avion spatial”, supra note 35, at 470 Société Française de Droit Aérien et Spatial, Actes du Colloque L ’avion Spatial et le droit (1991) 180:4 Revue Française de Droit Aérien (complete issue devoted to the subject) T. Masson-Zwaan, “Legal Aspects of Aerospace Planes”, in European Center for Space Law ed, ECSL Space Law and Policy Summer Course, Basic Materials (Dordrecht: Martinus Nijhoff, 1994), 307 S. Courteix, “L’avion spatial et le droit”, in European Center for Space Law ed, ECSL Space Law and Policy Summer Course, Basic Materials, (Dordrecht: Martinus Nijhoff, 1994), 255.

(38)

On the parallel with Air Law, and the concept of sovereignty in Air Law, see: B. Cheng, Studies in International Space Law, supra note 24, 31 M.N. Shaw, International Law, supra note 33, at 369 Shawcross & Beaumont, Air Law (London: Butterworths, 1966-; loose leaf regularly updated) M.de Juglart, Traité de Droit Aérien (Paris: LGDJ, 1989) I.H.Ph.DiederiksVerschoor, An Introduction to Air Law (The Hague: Kluwer, 1997).

28

sector, and is therefore not a prerequisite to the performance of any business related to space, in particular the launch operations. iii)

Principle of applicability of international law

Due to the origins of space activities, space law has developed as, and still is, a branch of public international law,(39) and as such, governs the relationship of States which conduct space activities or whose nationals conduct space activities.(40) The principle of applicability of international law is laid down in Article III of the Outer Space Treaty and is one of the fundamental principles of space law.(41) There has been some debate over the years as to whether international law applies anyway per se, which would mean in the absence of any “codification” in the Outer Space Treaty, or if it needed to be expressly referred to.(42) Article III of the Outer Space Treaty concluded this debate by clarifying the applicability of international law to space activities. This debate has little practical impact for the activities concerned in this thesis, in case they are carried out in States which are Parties to the Outer Space Treaty, since Article III makes the rule clear between them. Most countries involved in space activities are Parties to the Outer Space Treaty.(43) The problem would nevertheless arise where States not Parties to the Outer Space Treaty, or their nationals, would undertake space activities, or even in the case where these activities would be conducted from the high seas. Indeed, in this case, one would be again in the situation where debate could arise as to whether international law applies per se, with the Outer Space Treaty having only played a declaratory role, or if on the contrary, Article III created the rule itself. However, one may argue that due to its wide acceptance and long standing practice, this principle of applicability of international law to space activities can now be considered a general principle of international law.

(39)

Space law has been referred to as lex specialis of international law. H.A. Wassenbergh, “The Exploration and Use of Outer Space as the ‘Province’ of the Society of States (The Moon Agreement in Prospect)”, in H.A.Wassenbergh, Principles of Outer Space Law in Hindsight (Dordrecht: Martinus Nijhoff Publishers, 1991) P. Malanczuk; “Space Law as a Branch of International Law”, in European Center for Space Law ed, ECSL Proceedings of the Third ECSL Summer Course on Space Law and Policy (Dordrecht: Martinus Nijhoff, 1994), 73.

(40)

The subjects of space law will be analyzed more in detail in the context of the developments devoted to liability provisions in space law, further in this Chapter 1.

(41)

Outer Space Treaty, supra note 27, Article III: “States Parties to the Treaty shall carry on activities in the exploration and use of outer space, including the Moon and other celestial bodies, in accordance with international law, including the Charter of the United Nations, in the interest of maintaining international peace and security and promoting international cooperation and understanding”.

(42)

N.M. Matte ed, Emerging International Law, supra note 24, at 286, providing explanations as to the three main views (general international law applicable per se to outer space; international law not adapted to space activities with the need for specific codification; international law applicable both to earth and outer space, with a need for developing specific rules for space).

(43)

It is interesting to note in this respect that Kazakhstan is a Party to the Outer Space Treaty and the Liability Convention. The launch facilities of Baikonur are located in that State. Besides, an agreement has been concluded between Russia and Kazakhstan whereby the Baikonur area is leased by Russia and under Russian control. In these circumstances Russia is the main actor.

29

This principle, although presented here mostly as a background, has relevance in the context of the launch activities in relation to 1) the status of launch companies with regard to the space treaties and the rights and obligations laid down therein (are they subjects of space law, directly or indirectly?), 2) the applicability of space law to launch companies (which rules of space law are to be applied to them?, what are the obligations of States to regulate the launch business?) and 3) the treatment of claims (via the diplomatic channels). We will return to these subjects as we study the liability issues. iv)

Restrictions on military activities

Activities in the exploration and use of outer space have to be carried out for peaceful purposes.(44) Space and celestial bodies have been demilitarized to different degrees. Space law prohibits the use of nuclear weapons and weapons of mass destruction in space. The demilitarization status of the Moon and other celestial bodies has been made even more stringent. v)

Responsibility and “liability”

Responsibility and liability in the context of space activities are examined in full detail below.(45) In this area, space law contains a significant number of provisions which prescribe both a principle of responsibility in international law and a number of provisions on liability for damage caused by space objects and space activities. vi)

Common interest and common heritage principles

The exploration and use of space shall be carried out for the benefit and in the interest of all countries, irrespective of their degree of economic or scientific development and shall be the province of all mankind. This has been explained as effectively meaning “that space activities cannot be pursued to the sole advantage of the big powers or, in other words, for those countries which only are capable of doing so”.(46) There has been some debate as to whether this provision is directly applicable and it is in fact rather difficult to imagine when such a principle could be directly applied, since the (44)

On outer space and military activities: I.A. Vlasic, “Disarmament Decade, Outer Space and International Law”, (1980) 26 McGill Law Journal, 135 N.M Matte ed, Arms Control and Disarmament in Outer Space, 4 Volumes, (Montreal: McGill University Center for Research in Air and Space Law, 1985-1991) B. Jasani ed, Peaceful and Non-Peaceful Uses of Space: Problems of Definition for the Prevention of an Arms Race (Bristol PA: Taylor and Francis, 1991) P. Jankowitsch, “Legal Aspects of Military Space Activities”, in N. Jasentuliyana ed, Space Law Development and Scope, supra note 24, 143 S. Hobe, “Peaceful and Military Uses of Outer Space and Space Technology: The Importance of Space Technology to International Space Law”, ECSL Proceedings of the Third Summer Course on Space Law and Policy (Dordrecht: Martinus NijhoffPublishers, 1994), 165 J. M. Filho, “Total Militarization of Space and Space Law: The Future of The Article IV Of The 67' Outer Space Treaty” (1997) 40 Colloquium, 358 B. Cheng, Studies in International Space Law, supra note 24, 513 (Part V).

(45)

See paragraph 2.1.2 below.

(46)

S. Hobe, “The International Legal Order for Outer Space Activities. An Introduction”, in ECSL Space Law and Policy Summer Course, Basic Materials (I) (Dordrecht: Martinus Nijhoff Publishers, 1993), 28, at 29.

30 provisions of space law in this respect lack specificity. Except for the provisions made for the Moon, where the principle would be implemented via an international regime for the exploitation of the Moon resources, it is difficult to determine how to transpose this principle to other applications. This principle of common interest was further developed in the Moon Agreement into the principle of common heritage of mankind which is stronger and directly relates to the setting up of the international regime mentioned above, as it was also done in the context of the regime of the deep seabed in 1982.(47) These two principles are truly international law principles which govern States. It would be difficult to relate them directly to individual entities and they do not have a direct practical application in the area of the developments in this book. As in the case of the principles of freedom and of non appropriation, this principle of common interest is not working in favor of the development of a detailed regulatory framework for space activities. Indeed, the self-interest of States is certainly an important factor in securing a detailed regulatory framework in a competitive environment, as it has been the case in the area of aviation. The principle of common interest in the field of space activities creates a very different environment. It is important, however, not to overestimate the impact of this principle which remains very difficult to translate in practical terms. There is nowadays a great deal of competition in the field of space activities, and launch and telecommunications activities in particular, and the principle of common interest is certainly not the sole explanation for a loose regulatory environment. vii)

International Cooperation

The principle of international cooperation(48) is applicable in priority to States as well. It was recently detailed in the UNGA Resolution on the Declaration on International Cooperation in the Exploration of Outer Space for the Benefit and in the Interest of All States, Taking into Particular Account the Needs of Developing Countries.(49) Although individual entities are not directly bound by such a principle, they are influenced by all these principles when taking part in cooperative projects where they belong to a larger group of actors that cannot ignore those principles.

(47)

P. Minola, “The Moon Treaty and the Law of the Sea (1981) 18 San Diego Law Review, 455 S.H. Lay, “Some Comparisons of the Draft Convention on the Law of the Sea and the Agreement Governing the Activities of States on the Moon and other Celestial Bodies” (1984) 37 Vanderbilt Law Review, 599 S.M. Williams, “The exploitation and Use of Natural Resources in the New Law of the Sea and the Law of Outer Space” (1986) 29 Colloquium, 198 1982 Convention on the Law of the Sea, UN Doc. A/CONF.62/122; (1982) 21 ILM 1261 and Online: (accessed: 01/2001).

69 Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space, UNGA Res 1962(XVIII) Adopted 13 December 1963. Reference: Emerging International Law, at 537 UN Office for Outer Space Affairs, United Nations Treaties and Principles on Outer Space (New York, 1996), at 37 (UN Doc A/AC. 105/ 572/Rev. 1), [hereinafter Outer Space Office Texts] Internet: (accessed 01/2001) Principles: Sets the fundamental principles of space law. - exploration and use of outer space for the benefit and interests of all mankind - Outer space & celestial bodies free for use and exploration by all States on the basis of equality and in conformity with international law - non appropriation of outer space & celestial bodies. - Peaceful uses of outer space, peaceful aim of space activities. Cooperation and mutual assistance. Consultations. - International responsibility of States for national activities in outer space. Authorization and continuing supervision of activities of non-governmental entities by the State concerned. Responsibility of international organizations. - State of registration retains jurisdiction & control over the space object & personnel. - Ownership not affected by travel through space. - International liability of the State which launches or procures the launching of a space object. - Astronauts to be regarded as envoys of mankind. Obligation of assistance to and return of astronauts.

70 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space Including the Moon and Other Celestial Bodies, UNGA Res 2222(XXI), referred to as “The Outer Space Treaty”. Adopted on 19 December 1966. Entered into force on 10 October 1967. Reference: Emerging International Law, at 543 Outer Space Office Texts, at 4 610 UNTS, 205 18 UST, 2410 TIAS 6347 (1993) XVIII Part II, McGill Annals of Air and Space Law, at 615 Online: Office of Outer Space Affairs: (date accessed: 01/2001) Principles: - Art I: exploration & use of outer space is in the interest and for the benefit of all countries and is the province ofall mankind. Freedom ofexploration and use. Freedom of access to all areas of celestial bodies. Freedom of scientific investigation. - Art II: Outer space is not subject to national appropriation. - Art III: Application of international law to activities in the exploration and use of outer space. - Art IV: interdiction to place nuclear weapons or weapons of mass destruction in orbit around the Earth. Moon & celestial bodies to be used only for peaceful purposes. - Art V: Astronauts to be regarded as envoys of mankind and be rendered all possible assistance by States Parties to the OST. Obligation to return astronauts. Duty of astronauts to assist other astronauts. - Art VI : International liability ofParties for national activities in outer space. Authorization and continuing supervision of non-governmental national activities. Liability of international organizations. - Art VII: Liability of the launching State. - Art VIII: Jurisdiction and control of the State of registration. Ownership not affected by travel through space. - Art IX: Principle ofcooperation and mutual assistance. Avoidance of contamination and changes in Earth environment due to introduction of extraterrestrial matter. Consultation mechanism in case of potential harmful activities. - Art X: Opportunity to be given to States Parties to observe launch by a State Party. - Art XI: Duty to inform the UN, the public and the international scientific community. - Art XII: Right for Parties to visit installation of other Parties on the Moon & other celestial bodies. - Art XIII: Entities to which the Treaty applies. States. International organizations Parties: Ratified: Afghanistan, Algeria, Antigua and Barbuda, Argentina, Australia, Austria, Bahamas, Bangladesh, Barbados, Belarus, Belgium,, Benin, Brazil, Bulgaria, Burkina Faso, Canada, Chile, China, Cuba, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Fiji, Finland, France, Germany, Greece, Guinea-Bissau, Hungary, Iceland, India, Iraq, Ireland, Israel, Italy, Jamaica, Japan, Kazakstan, Kenya, Kuwait, Lao People’s Dem. Rep, Lebanon, Libyan Arab Jamahirya, Madagascar, Mali, Mauritius, Mexico, Mongolia, Morocco, Myanmar, Nepal, Netherlands, New Zealand, Niger, Nigeria, Norway, Pakistan, Papua New Guinea, Peru, Poland, Portugal, Rep. Of Korea, Romania, Russian Federation, San Marino, Saudi Arabia, Seychelles, Sierra Leone, Singapore, Slovak Republic, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syrian Arab Rep, Thailand, Togo, Tonga, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, United States of America Uruguay, Venezuela, Vietnam, Yemen, Zambia. Signed: Bolivia, Botswana, Burundi, Cameroon, Central Af, Rep, Colombia, Dem. Rep. Of the Congo, Ethiopia, Gambia, Ghana, Guyana, Haiti, Holy See, Honduras, Indonesia, Iran, Jordan, Lesotho, Luxembourg, Malaysia, Nicaragua, Panama, Philippines, Rwanda, Somalia, Trinidad and Tobago, Yugoslavia.

71 Agreement on the Rescue of Astronauts, the Return of Astronauts and the Return of Objects Launched into Outer Space. UNGA Res 2345(XXII), referred to as “The Rescue Agreement” Adopted on 19 December 1967. Entered into force on 3 December 1968. Reference: Emerging International Law, at 550 Outer Space Office Texts, at 10 672 UNTS, 119 19 UST 7570 TIAS 6599 (1993) XVII, Part II McGill Annals of Air and Space Law., at 635 Online: Office of Outer Space Affairs (accessed: 01/2001) Principles: - Duties of Parties with respect to notification of information concerning accident or situation of distress of a spacecraft. - Duty ofParties to rescue and render assistance, if needed with the cooperation ofthe launching authority which shall be informed as well as the Secretary General - If accident in high seas or area not under any State’s jurisdiction, Parties in a position to render assistance shall do so, with information to the launching authority and the Secretary General. - Return of personnel of a spacecraft to the launching authority - Notification of return to Earth of a space object to be given to the launching authority and the Secretary General. Procedure for recovery of space objects returned to Earth, in normal cases and when they are hazardous. Attribution of recovery expenses. - Definition of the launching authority - Possibility for international organizations to declare acceptance of this Treaty and conditions for such declaration. Parties: Ratified: Antigua and Barbuda, Argentina, Australia, Austria, Bahamas, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Cameroon, Canada, Chile, China, Cuba, Cyprus, Czech Republic, Denmark, Ecuador, Egypt, El Salvador, Fiji, Finland, France, Gabon, Gambia, Georgia, Germany, Greece, Guinea-Bissau, Hungary, Iceland, India, Iran, Iraq, Ireland, Israel, Italy, Japan, Kazakstan, Kuwait, Lao People’s Dem. Rep, Lebanon, Madagascar, Maldives, Mauritius, Mexico, Mongolia, Morocco, Nepal, Netherlands, New Zealand, Niger, Nigeria, Norway, Pakistan, Papua New Guinea, Peru, Poland, Portugal, Rep. Of Korea, Romania, Russian Federation, San Marino, Seychelles, Singapore, Slovak Republic, Slovenia, South Africa, Swaziland, Sweden, Switzerland, Syrian Arab Rep, Thailand, Tonga, Tunisia, Ukraine, United Kingdom, United States of America Uruguay, Yugoslavia, Zambia. Signed: Bolivia, Colombia, Congo, Costa Rica, Dem Rep of the Congo, Dominican Republic, Ghana, Haiti, Jamaica, Jordan, Lesotho, Luxembourg, Malaysia, Malta, Monaco, Myanmar, Nicaragua, Philippines, Rwanda, Senegal, Sierra Leone, Somalia, Turkey, Venezuela, Vietnam, Yemen. Acceptance Declared: European Space Agency.

72 Convention on Liability For Damage Caused by Space Objects, UNGA Res 2777 (XXVI), referred to as “The Liability Convention”. Adopted on 29 November 1971 Entered into force on 9 October 1973 Reference: Emerging International Law, at 554 Outer Space Office Texts, at 14 961 UNTS, 187 24 UST, 23 89 TIAS 7762 (1993) XVIII Part II McGill Annals of Air and Space Law, at 651 Online at Office of Outer Space Affairs: (accessed: 01/2001) Principles: - Sets the definitions of the terms “damage”, “launching”, “launching State”, and “space object”. - Principle of absolute liability for damaged caused by space objects on the surface of the Earth or to aircraft in flight. - Liability for fault elsewhere than on the surface of the Earth.. - Joint and several liability for joint launch. - Exoneration of liability in case of gross negligence, or an act or omission done with the intent to cause damage, on the part of the claimant State, except when author of damage was acting in contradiction with international law. - Provisions of the Convention do not apply to damage caused by the space object of a launching State to the nationals of this State and to foreign nationals participating in the operation of that space object from launch to descent. - The Convention defines the procedure for presentation of claims, the relations with the domestic claims, the calculation of damages, the currency of payment, the establishment of a Claims Commission with its composition and procedure. - Possibility for international organizations to declare acceptance of this Treaty and conditions for such declaration. Joint and several liability of the organization and its Members Parties to the Convention and conditions for such liability. Parties: Ratified: Antigua and Barbuda, Argentina, Australia, Austria, Barbados, Belarus, Belgium, Benin, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Canada, Chile, China, Cuba, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Fiji, Finland, France, Gabon, Germany, Greece, Hungary, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Japan, Kazakstan, Kenya, Kuwait, Lao People’s Dem. Rep, Liechtenstein, Luxembourg, Madagascar, Mali, Malta, Mexico, Mongolia, Morocco, Netherlands, New Zealand, Niger, Norway, Pakistan, Panama, Papua New Guinea, Poland, Qatar, Rep. Of Korea, Romania, Russian Federation, Saudi Arabia, Senegal, Seychelles, Singapore, Slovak Republic, Slovenia, Spain, Sri Lanka, Sweden, Switzerland, Syrian Arab Rep, Togo, Trinidad and Tobago, Tunisia, Ukraine, United Kingdom, United States of America Uruguay, Venezuela, Yugoslavia, Zambia. Signed: Algeria, Burundi, Cambodia, Central African Rep, Colombia, Costa Rica, Dem Rep ofthe Congo, Egypt, El Salvador, Gambia, Ghana, Guatemala, Haiti, Honduras, Iceland, Jordan, Lebanon, Nepal, Nicaragua, Oman, Peru, Philippines, Rwanda, Sierra Leone, South Africa, United Rep of Tanzania. Acceptance Declared: European Space Agency, Eutelsat.

73 Convention on Registration of Objects Launched in Outer Space, UNGA Res 3235(XXIX), referred to as “The Registration Convention” Adopted on 12 November 1974 Entered into force on 15 September 1976. Reference: Emerging International Law, at 564 Outer Space Office Texts, at 23 1023 UNTS, 15 28 UST, 695 TIAS 8480 0 (1993) XVIII Part II, McGill Annals of Air and Space Law., at 677 Online at Office of Outer Space Affairs: (accessed: 01/2001). Principles: - The Convention recalls the definitions of “launching State” and “space object”, and defines the “State of registry”. - Obligation for the launching State to register the space object with the Secretary General. - When there are multiple launching States, such States will agree which one will perform the registration and bear the associated obligations, without prejudice to the agreements to be concluded between these States. - The Secretary General maintains the registry which is in full and open access. - The Convention lists the information to be provided to the Secretary General and the timing of the registration. - Possibility for international organizations to declare acceptance of this Treaty and conditions for such declaration. Parties: Ratified: Antigua and Barbuda, Argentina, Australia, Austria, Belarus, Belgium, Bulgaria, Canada, Chile, China, Cuba, Cyprus, Czech Republic, Denmark, France, Germany, Hungary, India, Indonesia, Japan, Mexico, Mongolia, Netherlands, Niger, Norway, Pakistan, Peru, Poland, Rep of Korea, Russian Federation, Seychelles, Slovak Republic, Spain, Sweden, Switzerland, Ukraine, United Kingdom, United States of America, Uruguay, Yugoslavia. Signed: Burundi, Iran, Nicaragua, Singapore. Acceptance Declared: European Space Agency, Eumetsat.

74

Agreement Governing the activities of States on the Moon and Other Celestial Bodies, referred to as “The Moon Treaty” Adopted on 5 December 1979. Entered into force: 11 July 1984. Reference: Emerging International Law, at 570 Outer Space Office Texts, at 28 (1993) XVIII Part II, McGill Annals of Air and Space Law., at 691 UN Doc A/RES/34/68 of 5 December 1979 18 ILM 1434 1363 UNTS 3 Online at Office of O u t e r Space Affairs: (accessed: 01/2001). Principles: - Agreement applies to the Moon and to other celestial bodies within the solar system, as well as the orbits of the Moon. - Activities on the Moon shall be carried out in accordance with international law and for peaceful purposes. - The exploration and use of the Moon is the province of all mankind and States shall be guided by a principle of cooperation and mutual assistance. - The States Parties have a duty to inform the public and the international scientific community on the activities they carry out on the Moon. - Freedom of scientific investigation on the Moon by all States Parties. Right to collect and remove samples. Portion of these samples should possibly be given to other States or the international scientific community for scientific investigation. Possibility to use substances and minerals on the Moon for the support of missions. - Obligation to preserve the environment of the Moon - Right to land on the Moon and launch from the Moon, as well as to place personnel and installations on the Moon (all to be moveable). - Activities of States are always on the basis of non interference with those of other States. - Stations may be installed on the Moon as long as they do not impede access to all areas of the Moon by other States Parties. - The Moon and its natural resources are the common heritage of mankind. The Moon is not subject to national appropriation. Neither the surface nor subsurface of the Moon, nor any resources part thereof, shall become the property of any State, international organization, non governmental entity or natural person. - The States Parties undertake to establish an international regime to govern the exploitation ofthe natural resources of the Moon as such exploitation is about to become feasible. The Agreement lists the main purposes to be included in this international regime. - Installations on the Moon shall be open to all States Parties for assurance of the activities being carried out. - A number of other principles set by the Agreement are the simple translation of the OST principles (liability; ownership, jurisdiction and control...) - Possibility for international organizations to declare acceptance of this Treaty and conditions for such declaration. Parties: Ratified: Australia, Austria, Chile, Mexico, Morocco, Netherlands, Pakistan, Philippines, Uruguay. Signed: France, Guatemala, India, Peru, Romania.

75 Principles Relevant to the Use of Nuclear Power Sources in Outer Space (GA Res 47/68) Adopted on 14 December 1992 Reference: Outer Space Office Texts, at 47 Online at Office of Outer Space Affairs: (accessed: 01/2001) Principles: - Activities to be carried out in accordance with international law. - Goal to reduce the quantity of radioactive material in space. Use limited to space missions which cannot be operated by non-nuclear energy sources in a reasonable way. - Duty to protect individuals, populations and the biosphere. Design and use of concerned spacecraft shall ensure that hazards are kept below acceptable, and such nuclear material does not cause contamination of outer space. The Principles set the limits acceptable and the design features to be observed. - Specific measures are recommended both in the case of nuclear reactors and radioisotope generators. - Duty of the launching State to conduct a thorough and comprehensive safety assessment prior to launch. The results of this assessment are to be made publicly available as well as data on the time frame of the launch. - Duty of launching State to inform other States when malfunction of spacecraft may cause reentry of radioactive materials to the Earth. The Principles prescribe the format in which such notification shall be given, via the Secretary General. - Duty of States to share information gathered on reentry of spacecraft. - Duty of launching State to offer assistance to eliminate actual and possible harmful effects. All other States which have capability to offer assistance should do so. - International responsibility for national activities to be borne by concerned State. International responsibility of international organizations and Member States. - Liability principles of the OST (as detailed by the Liability Convention) apply. - Compensation to restore the victim to the condition which would have existed if the damage had not occurred. Compensation includes search, recovery and cleaning up expenses. - Peaceful settlement of disputes.

CHAPTER 3.- DOMESTIC LAUNCH LEGISLATION AND REGULATIONS

The public international law provisions we addressed in Chapter 2 are, in principle, not directly applicable in the legal system ofStates and require domestic enactment.(159) In the present Chapter, we will analyze how space treaties have been implemented in the domestic legal framework in the area ofspace launches. Although States have approached this issue in different manners, at present they achieve de facto similar control over the activities concerned. Few countries have adopted national space legislation(160) and only the US has a comprehensive and dedicated body ofnational space legislation. France is the launching State of Ariane, but has not yet enacted any specific and comprehensive space launch legislation. The legal framework within which the Ariane launches are carried out is wider than that of French law and involves also the European Space Agency and its Member States. This Chapter will focus on US legislation and regulations and the Ariane launches legal framework, as US launch operators and Arianespace are at present the major actors on the market, thereby describing two different approaches to implementation into domestic legislation and showing how authorization and supervision have been understood in the US and Europe(161) This is the next component of this Daedalus labyrinth, where States individually create a set of norms within their domestic legal system, to specifically address space activities and launch activities.

3.1.- LEGAL FRAME WORK FOR LAUNCH SERVICES IN THE UNITED STATES We have described, in our previous Chapter, the rules of international law governing the (159)

We will address further the issue of whether the Outer Space Treaty is self executing under the US system, but in most legal systems, treaties need special enactment in order to be implemented into domestic legislation.

(160)

They are the US, UK, Sweden, South Africa, Russia, Japan and Australia. See infra notes 423 and 965.

(161)

In the present book, we have focused on the regulation of expendable launch vehicles (ELVs), the only ones operated on a commercial basis nowadays. It is important to note, however, that the US have started the regulatory process to address the re-usable vehicles, which will become commercially operated in the next few years. Commercial Space Transportation Reusable Launch Vehicles and Reentry Licensing Regulations, Final Rule, September 2000, (2000) 65:182 Fed Reg, 56617 and Financial Responsibility Requirements for Licensed Reentry Activities, Final Rule, September 2000, (2000) 65: 182 Fed Reg 56669.

77

78 international responsibility of States for damages caused by their space activities. The US is a party to the Outer Space Treaty and the Liability Convention. However, this does not in itself establish domestic authority to regulate the private space launch industry. When giving its consent to the Outer Space Treaty, Congress did not enact any legislation giving power to any Agency to regulate this industry. Article 6 §2 of the US Constitution provides that “[...] all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme law of the land; [...]”.(162) This would give domestic authority to the US Executive to regulate private launch industry only to the extent that the Outer Space Treaty, or part of it, would be considered self-executing,(163) and as such would not require any implementing legislation. It would seem that the drafters ofthe Outer Space Treaty intended to make it self-executing, at least insofar as it imposes on States an obligation of continuous supervision of space activities undertaken by their nationals, which translates into a positive obligation to regulate these activities(164) This conclusion is supported by the language of the Treaty in its Article VI: (165)

- “ shall” bear international responsibility; - for “ assuring” that private enterprises conduct their activities in conformity with the provisions of the Treaty; - private activities “ shall” require authorization and continuing supervision. Moreover, when the United States ratified the Treaty no implementing legislation was asked by the President. The Department of State itself dealt with the first authorization procedures requested in a way which implied that it recognized the Outer Space Treaty as self-executing. In any event, the absence of domestic legislation does not constitute a justification for a State to leave its international undertakings unfulfilled. First, under international law, a State is responsible for the compliance with the Treaties it has ratified.(166) Moreover, the State has not only a duty to ensure that private operators of space activities (including private enterprises) comply with the provisions of the treaties, but also an important interest in doing so: it would be held internationally responsible, towards other States, for (162)

US Constitution, Black’s Law Dictionary, supra note 18, at 1639.

(163)

“ [a] self-executing treaty is one which furnishes by its own terms (or by reason of the existence of previously enacted statutes which can implement it) a rule of law for the executive branch of the Government, the courts, the States, or for private individuals. An executory, or non self-executing treaty, is one which explicitly or implicitly requires implementation by some executive or legislative agency, either Federal or State, before it can become a rule for the courts or for private individuals”. It is the role of the Executive Branch to decide whether a Treaty is self-executing, this determination being subject to further interpretation by the Courts. American Law Institute, Restatement (second) Foreign Relations Law (St Paul Minn.: American Law Institute Publishers, 1962), § 141 A.E. Evans, “Self-Executing Treaties in the United States of America” (1953) 30 British Yearbook of International Law, 178 Henry, “When is a Treaty Self-Executing?” (1929) 27 Mich Law Review, 776 P.D. Nesgos, National Law and Commercial Activities in Outer Space, DCL Thesis, McGill University, Institute of Air and Space Law, 1983, at 9.

(164)

(165) (166)

See P.D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 22 ff and at 203 Arthur Dula expressed a different opinion in A. Dula, “Regulation of Private Commercial Space Activities” (1981) 24 Colloquium, 25. This article is quoted in extenso supra note 56. Vienna Convention on the Law of Treaties, supra note 33, Article 33, which states that: “a party may not invoke the provisions of its internal law as justification for its failure to perform a Treaty”.

79 damage caused by the activities of these operators, and, as such, it has an interest in authorizing the activities for which it will bear this responsibility.(167) It is worth noting that the authority of the US Executive to regulate private Expandable Launch Vehicles (ELVs) has never been challenged by the operators who sought licenses and authorizations. This aspect may appear to be historical, but for practitioners in countries where legislation for space activities does not exist, as was the case in the US for a long time, the position of the space treaties within the legal framework of a country has to be analyzed in the process of assessing the constraints to be considered by operators.

3.1.1.- Evolution towards the development of a concise regulatory framework In the United States, rockets had been traditionally operated by the US Government. At the beginning of the 1980's, private rocket launch operators entered this developing market.(168) When these operators decided to develop, build and launch commercial Expandable Launch Vehicles (ELVs), it was necessary for them to assess the legal environment within which this activity had to be performed. The first operators therefore had to enquire in a somewhat empirical fashion which authorizations were required to perform launch activities. This state ofaffairs has now been remedied, as we will explain later, but we chose to devote some discussions to the historical context to help understand the evolution towards today’s regulatory framework.

i)

Authority of US Government Agencies

As no specific legislation had been passed by Congress, no Agency ofthe US Government had specific authority to regulate the activities of the private launch operators. Launches used to be operated by NASA or the Department of Defense (DOD), both ofwhich acting under their own regulations and authority. In view ofthe regulatory situation at that time, the launch ofa rocket by any other entity than NASA or DOD was likely to fall within the scope of authority of a number of administrations. A quick review of these agencies and administrations(169) describes the situation as it was when the first private launches were (167)

(168)

(169)

For further developments about the authority and duty of the US Government to regulate private Expandable Launch Vehicle activities under domestic and international law, see: A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra note 92, at 35. The first company to start into this business in the US was Space Services Incorporated of America (SSI), a company created in 1980. SSI wanted to develop a completely private launch capability. See A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expandable Launch Vehicles”, supra note 92, at 50. For a detailed account ofthe situation at that time and of the involvement of the various agencies, see: P.D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163 A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra note 92, at 9 J.T. Stewart Jr, “US Private Enterprise Enters the Space Arena. The Beginning” (1985) 26 Colloquium, 149, at 150 ff J.R. Myers, “Federal Government Regulation of Commercial Operations Using Expendable Launch Vehicles” (1984) 12:1 Journal of Space Law, 40, at 42 ff K.G. Yelton, “Evolution, Organization and Implementation of the Commercial Space Launch Act and Amendments of 1988” (1989) 4:1 Journal of Law and Technology, 117 B. Brumberg, “Regulating Private Space Transportation” (continued...)

80

initiated. It is intended to provide a historical perspective and describe the situation that developed due to the absence of specific regulation regarding launch services. For those countries where no such regulations exist, this experience is pertinent to their legislative and regulatory approach to these activities. The following agencies and administrations were involved at that time: - the Federal Aviation Administration: it was the only agency having express authority in relation to rocket launches. The Federal Aviation Act of 1958(170) grants the Secretary of Transportation authority to develop plans and formulate policies regarding the use of navigable airspace.(171) The Secretary ofTransportation can issue rules and regulations for the prevention ofcollisions between aircraft and airborne objects and, in general, to ensure the safety of aircraft. Moreover, the FAA had some authority over spacecraft (172) as a logical consequence of its authority over airspace, insofar as safety of air navigation is concerned. For this purpose FAA issued regulations related to unmanned model rockets.(173) These were the only regulations applicable to private expendable launch vehicles(174) As unmanned rockets interfere with controlled airspace, private companies (169)

(...continued) (1984) Administrative Law Review, 363 E.R Finch & A.L. Moore, Astrobusiness: A Guide to the Commerce and Law of Outer Space (New York: Praeger, 1985), at 58.

(170)

49 USC Parts 1301-1523.

(171)

49 USC, supra note 170, Part 1348.

(172)

(173) (174)

Except public spacecraft. NASA or DOD spacecraft cannot be regulated by the FAA because the Congress did not give FAA regulatory powers with respect to public aircraft (or airborne objects). The authority of FAA over spacecraft is supported by the statement in the Senate Committee that “ in order for the administrator of the new agency to properly discharge his responsibilities under the new act, particularly those in connection with the allocation of airspace, that his jurisdiction should extend not only to vehicles commonly considered as aircraft, but also during their flight through airspace, other vehicles such as rockets, missiles and other airborne objects.” S. Rep. No 1811. 85th Cong, 2d Sess, 20(1958) 14 CFR Parts 101.21 - 101.25. This regulation defines the term “rocket” as meaning “an unmanned aircraft, whose flight in the air is derived from the thrust of ejected expanding gases generated in the engine from self-contained fuels or propellants and is not dependant on the intake of outside substance. It includes any part which becomes separated during the operations.” 14 CFR Part 48.3. The regulation provides (14 CFR Part 101.23 (a)-(h)) that no unmanned rocket may be operated: - in a manner that creates a collision hazard with other aircraft; - in controlled airspace; - within five miles of the boundary of any airport; - at any altitude where clouds or obscuring phenomena of more than five tenths coverage prevail; - at any altitude where the horizontal visibility is less than five miles; - into any cloud; - within 1500 feet of any person or property that is not associated with the operation; - between sunset and sunrise. Moreover (14 CFR Part 101.25), within twenty four to forty eight hours prior to the launch, the operator of the unmanned rocket must give certain safety information to the nearest FAA Air Traffic Control Facility, these information including: - the names and addresses of the operator; - the number of rockets to be operated; (continued...)

81 operating them had to obtain either a waiver (when the company wanted to operate only one flight, for instance a test flight) or an exemption (in case the company needed clearance for a series of launches)(175) - the Federal Communications Commission: forthe launch and tracking ofspace vehicles, it is essential to use radio communications and under the Communications Act of 1934 no one can operate or use radio equipment without a license obtained pursuant to the Act.(176) This license is granted by the Federal Communications Commission (FCC).(177) Although there was no procedure directly applicable regarding communications involved in spacecraft launches, private launch companies needed to apply for this license with the FCC before launch.(178) - the Department of State (DOS): in view of its foreign affairs responsibility, the DOS has to ensure compliance with treaties in force for the United States. Moreover, the United States has to provide the Secretary General of the United Nations with information concerning the launch of space objects.(179) Consequently, the DOS had to check that the compliance of the proposed launches with the international obligations of the United States and had an interest in concluding an agreement with the operator of the launch, providing for the indemnification of the United States, in case of its liability, either by insurance or other means. Another reason for the involvement ofthe DOS was the fact that rockets, launch vehicles, payloads, specifically designated associated equipment, and related technical data, are included on the “Munition List” determined by the DOS.(180) A license is required for the export of such items under the Arms Export Control Act(181), an export being defined as meaning “the sending or taking out of the United States in any (174)

(175)

(...continued) - the size and weight of each rocket; - the maximum altitude to which each rocket will be operated; - the location of the operation; - the date and time and duration of the operation; - any other pertinent information required by the air traffic control facility. 14 CFR Part 11.71.

(176)

Federal Communications Act of 1934. 47 USC Parts 151-609.

(177)

47 USC Part 151.

(178)

For more detail on the FCC regulations applicable at that time, see P .D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 191.

(179)

Convention on the Registration of Objects Launched in Outer Space, supra note 99.

(180)

“The list comprises a variety of arms, ammunition and implements of war. Category IV, titled ‘Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines’ includes rockets (except meteorological sounding rockets), and launch vehicles, and apparatus, devices and materials for their operation. Also included are missiles and space vehicle power plant. Category VII of the Munitions List mentions spacecraft ‘including manned and unmanned, active and passive satellites’. Category XI includes military space electronics. It is clear from the enumeration that the references to space-related equipment are phrased in such a manner as to comprise virtually all space bound object or vehicle even if it has no defense or military purpose”. P.D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 208-209 See also, A. Dula, “Private Sector Activities in Outer Space” (1985) 19 International Lawyer, 159, at 180, note 75.

(181)

Arms export control act: 22 USC 2778. Regulations: 22 CFR 123.01. On export controls see: A. Dula, “Export Controls Affecting Space Operations, (1986) 51 Journal of Air Law & Commerce”, 927 B. Brumberg, “Regulating Private Space Transportation”, supra note 169, at 380 See also references in note 4 supra and note 184 infra.

82 manner any article, equipment or technical data on the Munition List”.(182) Consequently, in two cases a license was required: 1) if the flight plan implied that the rocket would leave the territorial waters of the United States; 2) if the rocket had to be transferred out of the US territory to international waters or to another State to be launched.(183) These regulations on export control, while still based on the same principles, have significantly changed in recent times towards a stricter regime of control.(184) - The Internal Revenue Service: Under the Gun Control Act of 1968,(185) importers, manufacturers and dealers in firearms, destructive devices, and ammunition for destructive devices must register with the Alcohol, Tobacco and Firearms (ATF) and the Internal Revenue Service (IRS). They also have to pay some tax fees to the IRS in relation with the above activities. The definition of “destructive devices” includes rockets.(186) - NASA: NASA was also interested in private launches but NASA had no regulatory authority over private launches.(187) Nevertheless, because of its technical experience, NASA played an important role from the very beginning of the entry of private launch operators on the market: 1) through its cooperation with other agencies requiring technical (182) (183)

(184)

(185) (186) (187)

22 CFR Part 121.19 On the role of DOS see P.D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 202 ff. For a recent account of those developments and details of the current regulations, see H. Peter van Fenema, The International Trade in Launch Services, The Effect of US Laws, Policies and Practices on its Development, supra note 4 P.L. Meredith & S.P. Fleming, “US Space Technology Exports: The Current Political Climate”, supra note 4. See also online: Department of Commerce (accessed: 01/2001). 18 USCA.921 B. Brumberg, “Regulating Private Space Transportation”, supra note 169, at 381. The language of the National Aeronautics and Space Act of 1958 leads to this conclusion, as for examples: - “ The Congress further declares that such activities [aeronautical and space activities] shall be the responsibility of, and shall be directed by, a civilian agency exercising control over aeronautical and space activities sponsored by the United States(...)” (emphasis added) 42 USC 2451 Section 102(b). On the interpretation of the word “sponsored”, see: A. Dula “Regulation of Private Commercial Space Activities”, supra note 180, at 27 A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra note 92, at 16 B. Brumberg, “Regulating Private Space Transportation”, supra note 169, at 378. In this latter author’s view, since the United States ratified the space treaties, private space launches cannot occur without the United States’ approval. Thus, they are impliedly “sponsored” by NASA. - “the terms ‘aeronautical and space activities’ means (A) research into, and in the solution of, problems of flight within and outside the earth’s atmosphere; (B) the development, construction, testing and operation for research purposes of aeronautical and space vehicles; C ) (...) And (D) such other activities as may be required for the exploration of space (...)”. 42 USC 2452 Section 103 (1). Clearly, the language used by the Act does not give NASA authority to regulate private launches. Indeed, these activities are not “sponsored” by the United States. Moreover, usually they are not for research and exploration purposes but rather for commercial purposes. Research and exploration of space are still mostly conducted by States and Governmental Organizations. Moreover, NASA expressed the wish not to be involved in regulating private ELVs as can be read in: Space Commercialization Hearings before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, 98th Congress, 1st Session 65 (1983), at 36 (Statement of Mr Beggs).

83 support to exercise their regulatory role and issue the necessary licenses, authorizations and exemptions; 2) through the use of its equipment or facilities by launch operators. In the latter case, as owner and operator of the facilities, NASA had the authority to prescribe, on a contractual basis, obligations on the company concerned, in particular relating to insurance to be obtained to cover any liability of NASA.(188) - The Transportation Department’s Material Transportation Bureau and the Bureau of Motor Carrier Safety: pursuant to the Hazardous Materials Transportation Act,(189) both these administrations exercised control over the launch license procedure, as far as transportation ofhazardous materials (rockets propellants) to and from the launch site was concerned.(190) - The Department of Defense: although not considering itself as having any regulatory role relating to private ELVs,(191) played an active role in the activities of operators of private ELVs launching from DOD facilities, to set conditions for access to such DOD facilities, especially insofar as safety is concerned. - the Coast Guard: having the duty to protect commercial and leisure sea vessels against potential hazards, the Coast Guard also had some interest in the activities of private ELVs in case parts of a rocket would fall into the territorial waters of the United States.(192) - the North American Aerospace Defense Command (NORAD): NORAD has to be notified of launches because NORAD tracks all objects in outer space and may recommend to the operator of the ELV some adjustments to the flight plan to prevent collision or damage with other objects in space. - some other agencies also had a role in authorizing launch activities:(193) - the Central Intelligence Agency (CIA) could be involved with respect to national security implications; - the Arms Control and Disarmament Agency could check that possible launch operations comply with arms control agreements; - the Occupational Safety and Health Administration could be involved in developing and enforcing employee health and safety standards; - the Environmental Protection Agency could regulate certain matters relating to hazardous materials, air and water pollution standards, and environmental impact statements concerning launch sites. This brief overview shows the cumbersome process followed at that time, as private (188)

(189) (190)

(191)

(192) (193)

See Mossinghoff, “Managing Tort Liability Risks in the Era of the Space Shuttle” (1979) 7 Journal of Space Law, 121. 49 USCA 1801-1812. K.G. Yelton, “Evolution, Organization and Implementation of the Commercial Space Launch Act and Amendment of 1988” , supra note 169, at 123 B. Brumberg, “Regulating Private Space Transportation”, supra note 169 , at 381. Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology. Supra note 187, at 155 (Statement of Colonel Jacoby, Department of Defense). Port and Safeways Safety Act, 33 USC Parts 1223(c), 1225 (1982). See K.G. Yelton, supra note 169, at 124.

84 operators had to undertake by themselves several separate procedures for obtaining appropriate authorizations from each Agency.(194)

ii) Practical consequence of the multitude of Agencies This multitude of Agencies having competence over the various aspects of a launch operation had considerable impact on the undertakings of private launch operators. We may return to the example of SSI to illustrate this state of affairs. For the launch of its first launcher, Percheron, SSI had to contact every Agency potentially having authority or interest in the launch. The FCC required SSI to obtain a license. The Department of State did not require any formal clearance since the launch was to take place entirely within US territory. NASA had an advisory role in technical matters. The FAA was the Agency most involved in the process, since only the FAA could base its authority on precise regulations with respect to rockets. Because of the short time available before the launch, SSI applied for and obtained a waiver from the FAA. The exemption procedure would have been longer and incompatible with the launch date. While granting the waiver, the FAA imposed a number of conditions related to the safety of the operations.(195)

In the case of the second launcher designed by SSI, the Conestoga, the procedure was heavier, due to the fact that the flight was to take the rocket out of US territorial waters. Moreover, SSI was using for this flight an engine provided by NASA. Finally, SSI wished to obtain an exemption from FAR Part 101, Subpart C, and all other regulations that the FAA may have considered relevant. SSI considered, first, that the existing regulations were not applicable to private launches such as Conestoga, and second that they had taken all necessary safety measures. The exemption was requested for a single launch of Conestoga. SSI filed its petition with FAA on March 16, 1982.(196) It took six months to complete the procedure at a cost of about $ 250,000 . Two notices of the petition were

(194)

(195)

(196)

As Mr Whiting, Executive Director of the American Space Foundation pointed out: “In order to get a private ELV off the launch pad, (...), the average firm has had to run a bureaucratic gauntlet of some 18 Federal Agencies, overseeing 22 statutes or regulatory guidelines, none of them passed or promulgated with the express intent of overseeing commercial launch vehicles”. Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187. On the experience ofPercheron, see: A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation ofPrivate Expendable Launch Vehicles”, supra note 92, at 22 E.R. Finch & A.L. Moore, Astrobusiness: A Guide to the Commerce and Law of Outer Space, supra note 169, at 56 ff; J.R. Myers, “Federal Government Regulation of Commercial Operations Using Expendable Launch Vehicles”, supra note 169, at 40 A. Dula, “Private Sector Activities in Outer Space”, supra note 180, at 178&ff. In the Matter of the Petition of Space Services Inc, FAA Regulatory Docket, 22 775 (16 March 1982). The main information provided in the petition were: - scheduled launch date and request for a two months launch window in case of delays - description of the launcher - description of the launch site - flight path - history of SSI - test flight and future potential of the launcher - safety measures taken by SSI.

85 published by the FAA in the Federal Register.(197) Additional safety requirements were added by the FAA. Finally, the FAA granted the exemption on September 1, 1982 with the following conditions: - SSI was exempt from regulations related to the operation ofa rocket in controlled airspace or within 5 miles of the boundary of an airport (but not from the clear weather conditions requirement); - SSI had to agree with a nearby airport to close the airport during launch; - SSI had to obtain insurance coverage of $ 100 million; - certain parameters had to be fulfilled by the rocket; - direct regular communication was mandatory between SSI and the Houston Air Traffic Control Center and the Houston Center was empowered with the authority to delay the launch for safety reasons; - duty was given to SSI to delay, cancel or terminate the rocket operation at any time if the safety of persons or property was jeopardized. FAA also issued an order restricting airspace temporarily and notified airmen concerning the launch.(198) As for the Department of State, SSI believed that an export license was not necessary but submitted on April 15, 1982, a letter to the Office of Munitions Control of the DOS (OMC). It turned out that an export clearance was necessary and difficult to obtain. In fact, SSI obtained the export authorization under the Arms Export Control Act on September 7, 1982 (one day before launch). The OMC issued this authorization under certain conditions: - the authorization was limited only to the Conestoga launch; - SSI had to comply with the safety measure required by FAA and NASA; - it was understood that SSI had to obtain the $ 100 million insurance; - SSI was required to indemnify the US Government for any damage and expenses in connection with the launch, including payments made pursuant to any Treaty. As for NASA, it sold the Minuteman I rocket motor to SSI.(199) Prior to the sale NASA reviewed technical and safety aspects of the launch. In the sale contract SSI was required to obtain flight insurance to indemnify the United States, its agencies, employees and contractors. The FCC granted SSI a temporary permit to operate a radio frequency for its communications with Conestoga. SSI imported meteorological test rockets from the Federal Republic of Germany, and for this, the ATF considered that a registration approval was necessary. SSI had to fill forms for both the ATF and the IRS.(200) SSI collaborated as well with the United States Navy, the Coast Guard, NORAD and the Department of Defense.(201)

(197)

(198)

(199)

(200) (201)

These notices are aimed at calling the public to comment on the propriety of these activities Fed Reg 16.243 (April 15, 1982) 47 Fed Reg 31.229 (July 26, 1982).

47

On the role of FAA in this case see P. D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 181 ff. The Conestoga launcher was made of one stage which was in fact the second stage Aerojet M56-A1 of the strategic missile Minuteman 1. See: P. Langereux, “Lancement réussi de la première fusée privée américaine”, (18 Septembre 1982) 920 Air & Cosmos, 25. See B. Brumberg, “Regulating Private Space Transportation”, supra note 169, at 380. For more details on the Conestoga launch see: A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra note 92, at 26; E.R. Finch & A.L. Moore, Astrobusiness: A Guide to the Commerce and Law of Outer Space, supra note 169, at 56 ff; J.R. Myers, “Federal Government Regulation of Commercial Operations Using Expendable Launch Vehicles”, supra note 169, at 40; A. Dula, “Private Sector (continued...)

86

Eventually, the Conestoga launch was successful. On 8 September 1982, Conestoga flew over 300 km into outer space and landed in the international waters of the Gulf of Mexico, over 450 km from its launch site. As the description of the procedures followed for the launch of Percheron and Conestoga show, there was a serious need for streamlining these procedures, coordination of the Agencies and simplification of the overall process. This set of procedures was clearly not going to work in the event of regular launches. The experience of SSI was the start of gradual improvement through the development of a new set of legislation and regulations. 3.1.2.- Initial steps towards improvement of the regulatory framework for launches In parallel to the SSI experience, the idea was developing that a streamlining of the procedures was necessary and that a single point of contact for the issuing of licenses had to be established. In 1981, a bill was proposed,(202) which would have designated the FAA as the lead agency empowered to issue licenses for private launches, with NASA providing technical assistance. The bill also contained provisions related to insurance. This legislation was not enacted. Another initiative was taken in 1982, with a bill entitled “Space Commerce Act”, aimed at encouraging private sector initiative in space activities.(203) The bill gave centralized authority to the Secretary of the Department of Commerce. It was also not enacted.(204) The first initiative taken by the US Government was the establishment of an interagency task force to study the role of each agency in the field of private ELV activities. President Reagan was in favor of the privatization of ELVs and the US National Space Policy of July 4, 1982 was a new step of the evolution. The NASA Space Transportation System, the Space Shuttle, was still considered the primary launch system for the US Government, but the US private sector was encouraged to invest in space activities, in particular ELVs. This policy was seen as having interesting advantages: - reduction of government costs, in particular development costs and launch facilities, which were so far borne by the public budget; - better and higher use of facilities; (201)

(202)

(203)

(204)

(...continued) Activities in Outer Space”, supra note 180, at 178&ff. 2448 Cong Rec April 28, 1982, S.4205-6 See: J.T Stewart Jr, “US Private Enterprise Enters the Space Arena. The Beginning”, supra note 169, at 153. Congressman Akaka, who presented the bill described it as follows: “The bill I’m introducing today simply streamlines the regulatory procedure by establishing a single point of contact within the Federal Government for applicants to obtain permission to launch a space vehicle. Under the terms of this bill, this single point of contact would be responsible for coordinating and facilitating all Federal actions pertinent to private sector space launches. In turn, this single point of contact would issue a comprehensive license for space vehicle launchings to private companies. This bill would in no way abrogate our national security interests, and would certainly result in an efficient and less costly procedure for regulating private space launches”. H.R. 7411, 97th Congress, 2d Session, 128 Cong Rec E 5132-33 (daily ed Dec 13, 1982) See also J.T. Stewart Jr, “US Private Enterprise Enters the Space Arena. The Beginning?”, supra note 169, at note 78. On these congressional actions see: H.R. Marshall Jr, “Outer Space Commercialization in the United States: Effects on Space Law and Domestic Law” (1984) Colloquium, 90, at 94 ff.

87 - improvement ofthe general economy ofthe US and strengthening of the position of the US on the market of commercial ELVs; - NASA could concentrate on the Shuttle; - creation of jobs; - creation of a market for the provision of hardware, equipment and propellants.(205) The administration was well aware of the fact that benefits from private ELV activities were dependent upon a simplification of the licensing and authorization procedures and the institution of a single point of contact for private ELV operators. On May 16, 1983, a Reagan administration policy was issued by the National Security Council on commercialization of ELVs in order to facilitate this activity, thus confirming the published policy of 1982. Two points were outlined in this policy: - governmental regulation should not be an obstacle to private activities. It must be limited to the extent necessary to comply with international and national obligations and to ensure public safety; - private ELV operators will be encouraged to use governmental launch facilities.(206)

This policy set up an interim working group (SIG) for space on commercial launch operations, co-chaired by the Department of State and NASA, and included members of interested agencies.(207) The task of this group was: - to streamline procedures used in the interim to implement existing licensing authority; - to develop and coordinate the requirements and process for the licensing, supervision, and/or regulations applicable to routine commercial launch operations from commercial ranges; - to recommend the appropriate lead agency within the US Government to be responsible for commercial launch activities. The Department of State was designated as central point for commercial ELV authorizations and requests until the designation of the lead agency.(208) On August 3, 1983, President Reagan met with leaders in the area of space commercialization to discuss this issue and in November 1983, he announced his intention to designate the DOT as lead agency.(209) (205)

(206)

(207)

(208)

(209)

See H.R. Marshall Jr, “Outer Space Commercialization in the United States: Effects on Space Law and Domestic Law”, supra note 204, at 92. White House Press Release, Office of the Press Secretary. May 16, 1983 A. Dula, “United States Government Authorization and Supervision of Non-Governmental Space Activities: Present Law and Future Possibilities” (1984) 27 Colloquium, 35, at 40 H.R. Marshall, “Outer Space Commercialization in the United States: Effects on Space Law and Domestic Law” supra note 204, at 93 ff. SIG (Space) was chaired by the Assistant to the President for National Security Affairs, and principal membership included the Deputy Secretary of Defense, Deputy Secretary of Commerce, Director of Central Intelligence Agency, Chairman of the Joint Chiefs of Staff, Director of the Arms Control and Disarmament Agency, and the NASA Administrator. See: P.L. Meredith & G.S. Robinson, “Domestic Commercialization of Space: The Current Political Atmosphere”, in National Legal Centre for the Public Interest, American Enterprise, the Law and the Commercial Use of Space (Washington DC: National Legal Center for the Public Interest, 1986), at 5. Expendable Launch Vehicles. Announcement of US Government Support for Commercial Operations by Private Sector. May 16, 1983. 19 Weekly Comp Pres Doc, 721. For details about reasons for the choice of the DOT see: A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra (continued...)

88 This decision was confirmed on February 24,1984, with the signature by the President of Executive Order 12465.(210) The Executive Order officially designated the DOT as lead agency for facilitating and encouraging commercial ELV activities by US firms. However, it also provided that all agencies were to keep their regulatory powers. Consequently, the DOT had only a role of coordination. Even though this decision was a significant step in the process of facilitating private ELVs activities, the lack of regulatory power of the DOT was a significant weakness. The Secretary of Transportation established within the Office of the Secretary of Transportation an “Office of Commercial Space Transportation” to develop cooperative procedures between agencies and private firms and facilitate the process through reduction or elimination ofsequential coordination of license applications by Federal Agencies, elimination ofduplicate reviews by different agencies and specification in advance by each agency of the information requested from the applicants.(211) The authority to issue Arms Export Licenses (ITAR) was transferred from the DOS to the DOT as an interim measure. The Office also worked to facilitate access to governmental launch facilities for private enterprises. Moreover, certain firms were thinking of establishing commercial ranges. Consequently, with the help of range safety and operations experts, the Office elaborated standards to be applied to launch facilities in order for them to meet the licensing requirements.(212) Finally, a Commercial Space Transportation Advisory Committee was established on April 12, 1984.(213)

(209)

(210)

(...continued) note 92, at 46. Commercial Expendable Launch Vehicle Activities. Executive Order 12465. February 24, 1984. 20 Weekly Comp Pres Doc. (1984) 49 Fed Reg Nb 40, Tuesday Feb 28, 1984. The President, in his remarks accompanying the signature, outlined the spirit of the new decision: “(...) We’re doing all we can to encourage space work by American industry. Private enterprise made America great. And if our efforts in space are to show the same energy, imagination, and daring as those in our country, we must involve private enterprise to the full. And that’s where today’s important event comes in (...). Until today, private industries interested in ELV’s have had to deal with 17 government agencies. From now on, they’ll only have to get in touch with the Department of Transportation, and the Department will clear away what Secretary Dole has called ‘the thicket of clearances, licenses and regulations that keep industrial space vehicles tethered to their pads .’” February 24, 1984. 20 Weekly Comp Pres Docs, 263.

(211)

E.J. Steptoe, “United States Government Licensing of Commercial Space Activities by Private Enterprise” (1984) 26 Colloquium, 191, at 194.

(212)

E.J. Steptoe, “United States Government Licensing of Commercial Space Activities by Private Enterprise”, supra note 211, at 195 (1984) Fed Reg 14621.

(213)

Department of Transportation. Public Notice 84-5. Establishment of Commercial Space Transportation Advisory Committee. April 12, 1984. 49 Fed Reg 14621 The task of the COMSTAC is defined in the notice as follows: “The COMSTAC, acting as an advisory committee, provides information, advice and recommendations to the Secretary of Transportation on matters relating to all aspects of the commercialization of expendable launch vehicles. The COMSTAC does not exercise program management or regulatory development responsibilities, and makes no decisions directly affecting the programs on which it provides advice. The COMSTAC provides a forum for the development, consideration and communication of information from a knowledgeable, independent perspective”.

89

3.1.3.- The first regulatory steps put to the test In parallel with these governmental efforts to improve the regulatory environment for launch providers, the latter pursued their endeavors and the new procedures could be experimented very quickly. The company Starstruck Inc. had developed the Dolphin launcher. The first launch, which eventually did not succeed, was performed under the “old” procedures. The second launch of the Dolphin took place in August 1984.(214) By that time, the Office of Commercial Space Transportation had been set up and Starstruck was the first company to deal with this single point of contact. Although in this case, Starstruck had already performed the procedures and only applied for a rescheduling of the launch, it seems that the process was less cumbersome.(215) Since Starstruck did not require a completely new authorization, it is difficult to extrapolate to what would have happened in the case a totally new license was requested. Basically, the point of contact was unique, but the procedures and requirements were still the same, although some improvements had been brought about by the role of the OCST(216) and the OCST proved very helpful to Starstruck.(217) The first task of the OCST has been to carry out a systematic investigation of the legal and operational issues that could affect commercial ELVs. It also made a compilation of all information required by the government from industry to ease the procedures to be (214)

(215)

(216)

(217)

“Starstruck Launches Prototype Dolphin Rocket in First Flight” (Aug 13, 1984) Aviation Week & Space Technology, 20. M. Straubel, “The Commercial Space Launch Act: The Regulations of Private Space Transportation” (1987) 52 Journal of Air Law& Commerce, 941, at 947. As the Director of the OCST stated: “The actual prototype launch activity in which we have been involved, which was the test and demonstration launch for a company called Starstruck, allowed the Government to have, for the first time, a hands on experience with the approval process. This has enabled us, even though it was a suborbital launch off international waters, to eliminate some overlapping information and review requirements. We found that there was really an excess of caution on the part of a number of Federal Agencies. They were not sure that there was any other agency in charge, and therefore, they wanted to make sure that legitimate public policy concerns had been met. Now that there is a focal point, I think there is a sense of confidence that a single agency has the responsibility to make sure all public policy needs are met, and that has, as a result, eased the burdens for the industry. We are not home free yet, but I think many of the informational requirements have been minimized”. Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187, at 25. “Our first ‘hands on’ experience was to facilitate the Federal Approval process for Starstruck test launch that was successfully conducted off the coast of California on August 3. To achieve this, we assisted the efforts of the approving agencies - State, NASA, FAA, Materials Transportation Bureau (MTB) and US Coast Guard - to set priorities, to coordinate their activities and thus to expedite the Federal review. No sooner had the final Federal approval been issued that Starstruck faced difficulties with local authorities. Through the Coast Guard and MTB, we were able to alleviate concerns of local safety officials. And, later, when Starstruck’s concept of launching 250 miles off the coast proved infeasible, we worked with the company, the FAA, Coast Guards and the Department of Defense, to develop ways to allow Starstruck to launch in closer proximity to the United States’ coast. This experience has been invaluable in shaping our ideas, actions and recommendations for streamlining the Federal approval process (...)” Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187, at 32.

90 followed. The Office worked with the DOD to encourage the use ofnational ranges, and on the development of criteria for site selection and operating procedures for future commercial sites. At that time, the licensing process contained the basics of what would be the future licensing system. It was composed of two steps: 1) the launch approval: the OCST required the proof ofcapability ofthe applicant to conduct a safe launch and 2) the mission approval: the applicant had to indicate the nature of the payload, where it is launched etc., mainly information necessary for the OCST to assess potential impacts on national security and foreign policy interests. A license could be issued when those two tests were met. This was always a license for one launch, The DOT was in favor of a case by case licensing, though this did not necessarily mean that the whole procedure had to be followed again for each launch.(218) DOT and DOS also agreed that the ITAR be transferred to DOT. Finally, in order to discuss some problems related to the use of radio frequencies,(219) the DOT brought together representatives of the five ELV launch firms, the FCC and the NTIA, and these discussions proved to be very helpful. However, in carrying out its authority, the OCST faced strong opposition and conflicting interests did not facilitate its task. In particular, the OCST had to deal with the strong interests of NASA and of the DOD. The launch industry itself also lobbied in divergent directions. Big established companies supported the authority of NASA while new companies gave support to the OCST.(220)

3.1.4.- The consolidation phase: the Commercial Space Launch Act (CSLA) and the associated regulatory framework

The weakness of the system described so far deprived the ELV operators of the stability and predictability needed to get on with their business.(221) In this view, Congress codified (218)

(219)

(220)

(221)

As its Director stated, in Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187, at 28: “We think it is a good approach for the expendable launch industry. If you have a vehicle that has not yet found a payload, as an example, we could, once they have proved their technical capability to conduct a safe launch, issue a letter or other assurance that could be used to assure potential customers that DOT has approved their proof of capability, and that part of the license test has been met. In other instances, in a case where different payload is launched using a previously approved vehicle, the proof of capability would a pro-forma kind review, because we would have already approved their vehicle and operating procedures. Our objective is to make this as simple as possible while protecting the public. Generic launch licenses, because no two launches are the same, would really be impossible. However, we do not think this would be a burden for the industry”. “The launch firms were concerned that their access to government controlled radio frequencies critical to launch activities might be constrained”, in Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187, at 33. See P.L. Meredith & G.S. Robinson, “Domestic Commercialization of Space: The Current Political Atmosphere” supra note 207. Congress pointed out this problem: “ While the [Commerce, Science and Transportation] Committee believes that there has been no lack of commitment by DOT to implement the provisions of E.O.12465, a change in administrations could lead to de-emphasis or a modification of this policy. A (continued...)

91 many of the policies initiated by the administration and this legislation was eventually incorporated in the Commercial Space Launch Act 1984 (CSLA).(222)

i)

The Commercial Space Launch Act (CSLA)

a)

General context of the CSLA

First of all, it is important to keep in mind that the Act did not wish to change the law, but only to codify an existing system and organize its implementation: “The Act does not create any new substantive requirements for launching a launch vehicle or operating a launch site. The authority it gives to the Secretary of Transportation represents, in effect, consolidation in one licensing process of all existing requirements of Federal Law currently applicable to launches or launch sites” .(223) Congress emphasized(224) that the private sector has the capability of developing and providing launch services, this being in the interest of the United States, and that the United States should encourage private sector launches and associated services and, only to the extent necessary, regulate such launches and services, in order to ensure compliance with international obligations of the United States and to protect the public health and safety, safety of property, and national security interests and foreign policy interests of the United States. In view of these elements, and building on the recent experience, the purposes of the Act were expressed as follows: “(1) to promote economic growth and entrepreneurial activity through utilization of the space environment for peaceful purposes; (2) to encourage the United States private sector to provide launch vehicles and associated launch services by simplifying and expediting the issuance and transfer of commercial launch licenses and by facilitating and encouraging the utilization of Government developed space technology; and (3) to designate an executive department to oversee and coordinate the conduct of commercial launch operations, to issue and transfer commercial launch licenses authorizing such activities, and to protect the public health and safety, safety of property, and national security interests of the United States”.(225) The reference to the need for making sure of the use of the space environment for peaceful purposes finds it origin in the treaty obligations that have to be complied with by the United States.(226) It is also in view of those treaty obligations that the CSLA refers to the need for issuance of launch licenses. Indeed, both the Outer Space Treaty and the Registration Convention call for such authorizations, as was addressed in Chapter 2. (221)

(222)

(223)

(224) (225) (226)

(...continued) Congressional mandate via legislation, would eliminate or reduce the possibility of any arbitrary redirection, restructuring or abandonment of this initiative” S. Rep 656. 98th Cong, 2d Session 2 (1984). 49 USC Par 2601-2623 (Supp II 1984) hereafter called CSLA. All references to the CSLA are as per the current codified version. The CSLA is online at: (accessed: 01 /2001). E.J. Steptoe, “Regulation of Private Commercial Space Transportation by the United States Department of Transportation” (1985) 28 Colloquium, 240, at 243. CSLA, supra note 222, Section 70701. CSLA, supra note 222, Section 70701. See above Chapter 2.

92

b)

Definitions

In its Section 70102, the CSLA provides for a series of definitions(227) and a few of them are examined here.

Launch The CSLA defines the term “launch” as meaning “to place or attempt to place, a launch vehicle and payload, if any, in a suborbital trajectory, in Earth orbit in outer space, or otherwise in outer space”. No mention is made in this definition of the commercial nature of the launch. In other words, was this definition designed to include both commercial and non-commercial launches? It seems that this precision was left aside on purpose as the Senate Report suggests.(228)

Launch Vehicle The Act defines a launch vehicle as “any vehicle constructed for the purpose of operating in, or placing payloads in, outer space, or any suborbital rocket”. There is no doubt that both ELVs and reusable launch vehicles are included in this definition and covered by the Act,(229) but it could be debated whether the so-called upper stages, used to move payloads from a low earth orbit to a higher orbit, are included in the definition. Congress left this matter aside intentionally.(230) In this definition of a “launch vehicle”, Congress also addressed the matter of tooling of a launch vehicle and items used in the manufacturing of a launch vehicle.(231) (227)

CSLA, supra note 222, Section 70102.

(228)

Senate Report 98-656, 98th Congress 2d Session, 2 reprinted in 1984 US Code Cong & Admin News 5328, 5329, at 5335. “While the Committee believes that the Act currently provides adequate supervision for all non-Governmental (commercial and non-commercial) space launches, the Committee currently envisions that, at least in the near term, launches subject to the provisions of the Act will only be commercial in nature. However, the Committee also recognizes that other types of non-governmental space launches, such as those of a university consortium, could eventually occur. A ‘university’ space launch would not be commercial in the true sense of an activity with a profit motive, but could be non-Governmental and thereby be subject to Federal supervision as prescribed in the Act. Since the Committee does not envision this type of non-commercial, non-Governmental launch as one likely to occur in the near term, the definition of “launch” infers a non-Governmental, commercial launch ”.

(229)

On the question of whether a future aerospace plane would be included in the definition, see S. Gorove, “The Growth of Domestic Space Law: A US Example” (1990) 18:2 Journal of Space Law, 99, at 108.

(230)

“While the Committee has intentionally excluded any reference to upper stages in the definitions of ‘launch vehicle’ and ‘payload’ and has not made any provisions in the Act to license upper stages, the Committee recognizes that the question of upper stages is an issue that may warrant additional study in the future. Our nation’s current upper stage capabilities have been in question during the past year. Given these uncertainties and given any unforeseen roles that upper stages might have in the future ELV systems, the Committee believes that upper stages, relative to the licensing of commercial space launches, may warrant future examination”. Senate Report 98-656, supra note 228, at 5335.

(231)

“The Committee is aware that the ‘tooling’ of a launch vehicle and items used in the (continued...)

93

Payload It is defined by the Act as “an object which a person undertakes to place in outer space by means of a launch vehicle, and includes sub-components of the launch vehicle specifically designed or adapted for that object”.

As explained previously, upper stages are not included in this definition. Moreover, telecommunication satellites are exclusively licensed by the FCC and remote sensing satellites by the Department of Commerce, consequently, they are not included in payloads under the authority of the OCST. A question arose due to the definition of payload as “object”, not people. There may be a problem regarding authority of the OCST over private entities who, in the future, would wish to undertake manned launch activities, for example for the purpose of space tourism. The Office considered that it could not see in that definition any impediment to exercising its role.(232) For the OCST, there should be no difference in the treatment of those two types of launches. The major reason expressed is that the OCST does not want private entities planning to launch manned vehicles to be in the situation experienced by the ELV companies prior to issuance of Executive Order 12465 and enactment of the CSLA.(233) Manned space activities involve considerable expertise and investment. Though the time has not yet come when private entities will undertake such activities on their own, one can see from various initiatives in the space tourism sector that it is fast approaching.(234)

United States Citizen The Act defines the term as follows: “United States Citizen means (A) Any individual who is a citizen of the United States; (B) Any corporation, partnership, joint venture, association or other entity organized or existing under the laws of the United States; (C) Any corporation, partnership, joint venture, association, or other entity which is organized or exists under the laws of a foreign nation, if the controlling interest (as defined by the Secretary in regulations) in such entity is held by an individual or entity described in subparagraphs (A) or (B)”.

This definition finds its origin in the “concerns that exist as to the extent of US jurisdiction and control over launch activities, the extraterritorial implications of licensing launches and launch

(231)

(232)

(233) (234)

(...continued) ‘manufacture’ of a launch vehicle may involve tools and processes that have multiple users and may be used for Government activities as well as for private ELV activities. Since the Federal Acquisition Regulations lay out specific guidelines for mixing Government and private activities, the Committee believes that it is inappropriate to include these items in the statutory definition of ‘launch vehicle’. Imposing a separate rule for ELVs could introduce confusion, additional paperwork, and coordination problems, and could contravene the existing statutory language”. Senate Report 98-656, supra note 228, at 5334-5335. “Neither the Act nor the Report that accompanied the Act at passage, indicates that ‘launch of a launch vehicle’ should be read exclusively as launch of an unmanned launch vehicle”.(1988) 53 Fed Reg 110066. See Fed Reg reference supra note 232. For general information about space tourism, industry survey, history and related bibliography, see online the Space Tourism Initiative (accessed 01/2001).

94 operations in foreign nations, and liability considerations of commercial launch activities”.(235) The definition of US Citizen is wide and its combination with the licensing requirements, provides extensive coverage to ensure compliance ofthe US with their treaty obligations. The Act does not provide any definition of “controlling interest” and leaves it to the appreciation of the Secretary.(236) Pursuant to Section 70702 CSLA, the Secretary issued a regulation(237) defining the expression “controlling interest” as “ownership of an amount of equity sufficient to direct management of the entity and to void transactions entered into by management”. There is a rebuttable presumption that 51% ownership is controlling.

c)

The Role of the Secretary of Transportation

The original idea from the start of the reforms was to establish a system allowing companies seeking launch licenses to apply to one agency only. This rule was incorporated in the CSLA which provided the Secretary of Transportation with exclusive authority with respect to commercial space launches by the private sector. Firstly, the Secretary has a general responsibility for carrying out the Act. In doing so, he has the following duties, as stated throughout the CSLA: - to encourage, facilitate and promote commercial space launches by the private sector; - to consult with other agencies to provide consistent application of licensing requirements under this Act and to ensure fair and equitable treatment for all license applicants; - to minimize regulatory guidelines to be issued; - to protect the public health and safety, safety of property, and national security interests and foreign policy interests of the United States. The Secretary is given exclusive authority to issue or transfer a license for launching one or more launch vehicles or for operating one or more launch sites,(238) and to specify the period of time during which this license is valid.(239) The Secretary is also in charge of establishing procedures and timetables for the review of applications and he is also given authority over the licensing requirements. Thus he may: - decide by regulation that a requirement of Federal Law is not needed for obtaining a license if this requirement is not necessary to protect the public health and safety, safety of property and national security interests and foreign policy interests of the United States; (235) (236)

(237)

(238) (239)

Senate Report 98-656, supra note 228, at 5334. The original draft of the Act gave a definition of the expression “controlling interest” as meaning “a direct or indirect legal or beneficial interest in or influence over another person arising through ownership of capital stock, interlocking directorates or officers, contractual relations, or other similar means, which substantially affect the independent business behavior of such persons”. S 2931 to Facilitate Certain Space Launches, and for Other Purposes. Reprinted in Hearing Before the Subcommittee on Science, Technology and Space of the Committee on Commerce, Science and Transportation, US Senate, 98th Congress, 1st Session, S 98-105. Washington USGPO 1984. 14CFR, Par 401.5. The regulations of launch licensing contained in 14 CFR can be found online at the same site as the CSLA, supra note 222. CSLA, supra note 222, Section 70105. CSLA, supra note 222, Section 70107.

95

- prescribe additional requirements to protect the above mentioned interests; - waive the application of any requirements in individual cases if the waiver is in the public interest and will not jeopardize the above mentioned interests. If the applicant meets all the requirements, the Secretary shall issue the license, however, the Secretary may include certain conditions in the license, in particular, means of on-site verification that the operations correspond to what has been provided for in the license. The Act gives the Secretary wide means of verification. The Secretary is allowed to monitor licensed activities,(240) and such monitoring may be used in the following cases: - to check that the operator of the launch complies with the conditions set out in the license;(241) - to ascertain that all necessary licenses, authorizations and permits have been obtained;(242) - to prevent the launch of a payload by the holder of a launch license if the Secretary determines that the launch of this payload would jeopardize the public health and safety, safety of property, or any national security interest or foreign policy interest of the United States.(243) The Secretary issued regulations with respect to this monitoring authority.(244) d)

The Office of Commercial Space Transportation and the Commercial Space Transportation Advisory Committee

To carry out the functions given to it by Executive Order 12465, the Secretary of Transportation established within the Office of the Secretary an Office of Commercial Space Transportation. A regulation was issued by the DOT, effective on February 24, 1984,(245) officially creating the OCST, headed by a Director, and reporting directly to the Secretary. In this regulation, the OCST was defined as the focal point within the Federal Government for private sector space launch contracts and licensing related to commercial expendable launch vehicle operations and for promotion and encouragement of commercial expendable launch vehicle industry.(246) On October 30, 1984, after passage of the CSLA, a new regulation was issued by the DOT,(247) which transferred to the Director of the OCST all authority vested in the Secretary by the Act. The OCST is thus a subdivision, or “unit” ofthe DOT, headed by a Director appointed by the Secretary. The Director is delegated the authority of the Secretary to carry out the CSLA. All obligations and powers given by the Act to the Secretary are exercised by the Office. It is with the Office that applicants have to deal as their unique point of contact.(248) (240) (241) (242) (243) (244) (245) (246) (247) (248)

CSLA, supra note 222, Section 70106. CSLA, supra note 222, Section 70106 CSLA, supra note 222, Section 70104 c) CSLA, supra note 222, Section 70104 c) 14 CFR, supra note 237, Par 405.1. (1985) 50 Fed Reg 7782 14 CFR, supra note 237, Part 1 Par 1.23(0). Delegation of function, Par 1.68. (1985) 50 Fed Reg 9036. 14 CFR, supra note 237, Part 1, Par 1.68(b). Information about the Office can be found online at the Office’s web site: (continued...)

96 On April 12, 1984, Notice was given of the establishment of the Commercial Space Transportation Advisory Committee (COMSTAC).(249) Its role is to advise the Department of the future of the Commercial ELV industry, and DOT’s efforts to stimulate private sector investment in commercial, unmanned space boosters. Three objectives and duties were given to COMSTAC: 1) to gather information on issues to be considered, develop positions on these issues and submit them to the Secretary of Transportation; 2) to evaluate developments of commercial space transportation and communicate its recommendation to the Secretary; and 3) to serve as a forum for the discussion of problems involving the relationship between industry activities and government requirements, with a view to resolving those problems. The COMSTAC is composed of up to 25 members appointed by the Secretary and it meets at least once a year. The rules for the functioning of the COMSTAC are provided for in detail in the Notice.(250) In November 1995, as a consequence of a DOT reorganization the OCST was transferred to the Federal Aviation Administration. The OCST Director was designated as an Associate Administrator, the OCST became the Associate Administrator for Commercial Space Transportation (AST) and AST was established as one of the FAA lines of business.(251)

ii)

When is a license required?

In Section 70104, the CSLA provides for the cases in which a license is required. The current regulations deal with that issue in 14 CFR Par 415.3 and there are four cases.

a)

The launch takes place from US territory

In this case, no one can launch a launch vehicle or operate a launch site without being authorized by a license. This rule takes into account the need to comply with the provisions of the Outer Space Treaty as well as the Liability Convention under which the US is liable for damage caused by space objects launched from within its territory.

b)

The launch takes place outside US territory

US citizens, in the sense of subparagraph (A) and (B) of section 70102(1) of the CSLA, shall obtain a license, that is individuals who are citizens of the US, and corporations, partnerships, joint ventures, associations, or other entities organized or existing under the laws of the United States or any State. This provision aims to control activities of US nationals in order to comply with Article 6 of the Outer Space Treaty which makes the States liable for damage caused by the activities of their nationals. As a consequence of this provision, with respect to activities of US nationals and corporations, the United States has jurisdiction over activities of the concerned persons also in international airspace, on high seas and foreign territory.

(248)

(249) (250) (251)

(...continued) (accessed: 01/2001) (1984) 49 Fed Reg 14621. Information about COMSTAC can be found online, supra note 248. See for this information, online on the AST site, supra note 248.

97

c)

The launch takes place outside US Territory and outside the territory of a foreign nation

US citizens, in the sense of subparagraph C of Section 70102(1) of the CSLA shall obtain a license, that is any corporation, partnership, joint venture, association or other entity which is organized or exists under the laws of a foreign nation, if the controlling interest in such entity is held by an individual or entity described in subparagraphs (A) or (B). With respect to these entities, US jurisdiction applies to activities on the high seas or international airspace. Indeed, in these areas no State is susceptible of exercising its jurisdiction. As the entity is controlled by US interests, the US could be held liable for damage caused by the activities of this entity. However, and because of this very reason, there is an exception to the rule provided for in Section 70104(a)(3), first sentence. In its second part, this provision waives the need for a license in the case of existence of an agreement in force between the United States and a foreign nation which provides that such foreign nation shall exercise jurisdiction over the launch or the operation of the launch site. Thus, the US is primarily responsible for these activities, but it can rely upon another State to take responsibility, by agreement.

d)

The launch takes place in the territory of a foreign nation

The principle is that the Act shall not apply to the launch of a launch vehicle or the operation of a launch vehicle or the operation of a launch site in the territory of a foreign nation by the US citizen in the sense of subparagraph C of Section 70102(1). Indeed, when there is no State jurisdiction over the location where the launch takes place, it is understandable that the US seek to control the activities of an entity controlled by US interests, but here the situation is different. Here there is sovereignty of a State in the location where the launch is to take place and the entity, though it is controlled by US interests, is under the sovereignty of the concerned State. Thus, in principle, no license has to be sought from the US DOT as a consequence of the principle that the State concerned should be sovereign on its territory. This principle has an exception. If there is an agreement in force between the concerned State and the US, which provides that the US shall exercise jurisdiction over the launch of a launch vehicle or the operation of a launch site in the territory of the concerned State, US citizens, in the sense of subparagraph C of Section 70102(1) shall obtain a license from the US DOT to enter such activities. These provisions aim to protect the US wherever their liability could be engaged and in so doing, they provide for extraterritorial application of US law in some instances.(252) The non-extraterritorial application of the US law has been followed as far as the case of entities of subparagraph C of Section 70102(1) CSLA are concerned, launching from foreign territory is concerned. For them, if there is no agreement between the foreign State and the US giving jurisdiction to the US, no license has to be required from the launch operator by the AST. This is not the case for US citizens of subparagraphs A and B. For them, wherever they launch from, even in foreign territory, they have to obtain a license from the AST and no exception is provided to this rule. This extraterritorial application of the US law might create situations of conflict. Indeed, the US citizen who wants to launch from a foreign territory will have to comply with the US law and the law of the State where the launch is to take place. Those two laws might conflict with respect to some of their provisions and hamper or prevent a launch by the US entity. This type of conflict is likely to occur in the areas of national security and foreign policy interests. If (252)

E.J. Steptoe, “Regulation of Private Commercial Space Transportation by the United States Department of Transportation”, supra note 223, at 242.

98 both legislation require that the launch meet these interests, conflict may arise as these interests are proper to each State concerned and cannot always, for obvious reasons, be documented to make a determination predictable to the operators concerned. With respect to the provisions of Section 70104 CSLA, another concern can be expressed. Foreign subsidiaries (US citizens of subparagraph C) do not need to obtain a US license if they launch from the territory of a foreign State, providing that there is no agreement between that State and the US attributing jurisdiction to the US. The foreign State is supposed to exercise jurisdiction and control over the company. But, if that State did not issue regulations and is not a party to the Space Treaties, what is the situation?(253) It seems that there is a gap in that case and if a third State has been victim of some damage because of the launch, it will have difficulties to hold liable the State where the launch occurred.(254) The State victim may turn to the US and ask it for damages since the company having caused the damage is controlled by American interests. This link may turn out to be sufficient to bring about the responsibility of the US which would then be answerable for damages though it did not license the activities ofthe company responsible for the damage, and thus did not have an opportunity to check all aspects of the mission. Such a case does not appear to have been raised in practice so far. Finally, it should be noted that provisions of the Act are not applicable to all launch activities carried out by or on behalf of the US.(255) The provisions of the CSLA do not apply to amateur rockets either.(256)

iii)

The licensing procedure

The CSLA itself does not provide detailed regulations regarding the licensing process. It consists in a general framework within which the Secretary of Transportation, through AST, is to issue specific implementing regulations. One particularly important principle should be noted here, and its importance is stressed by the CSLA in a number of provisions as being a central principle. This principle is that, in carrying out the CSLA, the Secretary should always bear in mind the importance given to the protection of public health and safety, safety of property, and national security interests and foreign policy interests of the United States.(257) As far as licensing procedures are concerned, the Act repeats this principle, stating that the Secretary of Transportation may issue or transfer licenses “ consistent with the public health and safety, safety of property, and national security interests and foreign policy interests of the United States”. (258)

Section 70105(b)(2) and (3) also recall this principle, that the Secretary has to take into account when he decides either to consider a requirement of Federal law not necessary for issuing licenses, or to prescribe additional requirements, or waiver the application of any requirement. The protection ofpublic health and safety and the safety of property may be (253)

(254)

(255) (256) (257)

(258)

M. Howald, “Private Space Activities and National Legislations” (1989) 32 Colloquium, 344, at 345. Of course, there is always the possibility to seek the liability of the State under general international law. CSLA, supra note 222, Section 70117(g). 14 CFR, supra note 162, part 400.2. The definition of “amateur rocket” is given in 14 CFR 401.5 This principle is stressed from the very beginning of the Act in Section 70101, as a general purpose of the Act and one of the underlying ideas considered important by Congress. CSLA, supra note 222, Section 70105(a).

99

a clear notion, but such is not the case as far as national security interests and foreign policy interests of the United States are concerned. These latter notions may be interpreted widely and could give the Secretary extensive authority in the course of the licensing process. When the DOT issued licensing regulations, it received some comments expressing concern aboutthe fact that this expression is undefined, particularly as far as news gathering and distribution are concerned.(259) The DOT dismissed this concern and indicated that “the Act expressly commits to the Department of State and Defense, respectively, responsibility for defining such interests in the context of individual license applications and for informing the Secretary of Transportation of their significance. It is not intended or anticipated that national security or foreign policy interests would be casually invoked by these agencies as a reason for preventing a launch”.(260)

Another comment addressed to the DOT argued that the authority of the AST to weigh national security and foreign policy interests in connection with private space launches does not encompass factors associated with the operations of a payload to be launched. The comment suggested that the Office’s regulatory procedures focus only on the national security and foreign policy implications attending the proposed launch of a payload and not on the payload’s operation in orbit. The DOT expressed doubts about this interpretation and answered that the Act gives the Office the authority to determine whether the launch of a payload is inimical to the national interests specified in the Act and does not exclude any relevant factor from the Office’s consideration. Thus, the Office will exercise its authority by determining whether any circumstances exist under which the proposed launch of a payload would jeopardize national interests.(261) Following comments made on the Interim Final Rule, the AST had to deal with this issue again and stated: “The Office wishes to emphasize again the guiding principle established by the Commercial Space Launch Act in this area: the ‘provision of launch services by the private sector is consistent with the national security interests and foreign policy interests of the United States and would be facilitated by stable, minimal and appropriate guidelines that are fairly and expeditiously applied’. As the Agency charged with implementing the Act, the Department of Transportation views this passage as forming the basis for a presumption that proposed commercial launch activities are consistent with national interests. Thus, the purpose of the licensing process, insofar as national security and foreign policy issues are concerned, is to identify and, whenever possible, ameliorate specific problems with a proposal, not to determine that each and every proposal is generally consistent with those interests” .(262)

It is the responsibility of the Secretary of Transportation, through the AST, to issue regulations necessary to carry out the CSLA and accordingly, the Department of (259)

(260) (261) (262)

(1986) 51 Fed Reg 6871. One comment expressed concern that uncertainties created by the undefined references to national security and foreign policy interests could have a substantially chilling effect upon the exercise of protected First Amendment rights. That is news media organizations seeking to place satellites in orbit or to lease transponders capacity might be deterred due to this concern. Specifically, such uncertainties could thwart efforts to secure commitment of the substantial amounts ofinvestment capital needed for the launch activities associated with such undertakings. Thus, this legislative vagueness could indirectly deter the exercise ofconstitutionally protected activities involving news gathering and distribution. In this context, the comment asserted, Mission Review(nowadays called Policy Review) could ultimately become a vehicle for effecting prior restraint of free speech. Federal Register, supra note 259. Federal Register, supra note 259. (1988) 53 Fed Reg 11005

100 Transportation issued regulations with respect to the licensing process. On Feb 25,1985, a Notice of Policy on Licensing Process for Commercial Space Activities was issued by the Office of the Secretary of Transportation.(263) The purpose of this Notice was to describe the licensing policies and procedures that DOT considers to be the most effective means of satisfying the Secretary’s statutory mandate to oversee and coordinate nongovernmental space launch activities. The DOT intended this Notice to be relied upon as interim guidance by license applicants pending the promulgation by DOT of regulations implementing the Act. The Notice contained the basic principles elaborated by the DOT for licensing of commercial space transportation. The DOT called for comments on this Notice and implemented its authority through this Notice until February 1986. Final official regulations were later released through the Interim Final Rule issued on February 26, 1986.(264) This Interim Final Rule amended Title 14 of the Code of Federal Regulations, by adding Chapter III providing for the regulations governing commercial space transportation. This Interim Rule was an important step in the licensing process development since it organized and codified the rules relating to the licensing process. During that period of time, progress had been made on the development of contractual arrangements with respect to access of commercial launch firms to Government launch technology and safety services. The Shuttle accident in 1986 modified dramatically the structure of the market and the American space policy and a new launch policy was announced in August 1986.(265) A Directive on National Space Policy was issued by the President on February 11, 1988, emphasizing commercial launch services as an integral element of the transportation capability of the United States.(266) As a consequence of those numerous elements, a Final Rule was issued by the AST on April 4, 1988.(267) The licensing procedure is composed of four steps. First, an application has to be submitted by the operator of the launch vehicle to the AST. After the application has been made, the licensing procedure is divided into five steps: the AST conducts 1) a safety review leading to the issuance of a safety approval; 2) a mission review(268) leading to the issuance of a mission approval; 3) a payload review, 4) a financial responsibility determination and 5) and environmental review. If all approvals have been granted, the AST will issue the license.(269)

a)

Applications

The rules relating to the applications procedure are set forth in 14 CFR Par 413.3 to 413.11.(270) (263) (264) (265)

(266) (267) (268)

(269)

(270)

(1985) 50 Fed Reg 7714 (1986) 50 Fed Reg 6870 This policy limited the Shuttle to certain missions, directed the DOT to develop payloads compatible with both expendable launch vehicles and the Shuttle and directed that routine commercial payloads be launched by commercial launch firms. (1988) 53 Fed Reg 11004 Supra note 266. This mission review is now called Policy review, after the recent re-codification of 14 CFR which we will address later. We will therefore now refer to this review as the Policy review. This results from the recent Final Rule which has clarified the licensing procedures. This Final Rule became effective on 21 June 1999 and can be found online , supra note 222. 14 CFR, supra note 237.

101 Information required for applications In Appendix to the regulations, the AST provides for all information to be given by the applicant. It is subdivided in four types of information: 1) general requirements, 2) information related to safety review, 3) information related to policy review and 4) information related to payload determinations.(271) Pre-application consultation It is the spirit of the whole legislation to ease the granting of licenses and, because of the nature of launch activities, especially the timing considerations, the AST has provided for a system of Pre-Application Consultation.(272) Applicants are encouraged by this system to consult with the AST at the earliest planning stages in order to adapt their proposal if problems are foreseen, to avoid delays and costs that would be caused by those problems and to clarify information requirements in order to facilitate the review. This procedure allows the operators of launch services to initiate very early the licensing process so that they can adapt without delay and costs to the requirements of the AST. The preparation of the launch and the licensing process progress simultaneously, adaptations are made to meet the requirements and the review process can be expedited in a shorter amount of time. Applications Two types of applications can be submitted, as far as launch operations are concerned: 1) applications for issuance or transfer of a license authorizing a launch or 2) application made separately and in advance of a license application, requesting an approval or determination that must be secured before a license can be issued or transferred. The second type of application is to be distinguished from the pre-application consultation. The pre-application consultation consists of discussions with a view to making sure that each step ofthe preparation ofthe launch complies with the requirements of the AST. In the advanced application, the applicant does not seek only assistance but a decision of approval, or determination, relating to one component of the launch operations. For example, he may wish to ensure in advance that the type of launcher he wants to use would be approved by the AST, and make necessary changes required by the Office. AST will accept applications for safety review, policy review, or for a determination that the launch of a payload covered by Section 70104 of the CSLA will not be prevented, independent of one another and before submission ofan application for a license. The fact that safety and policy approvals may be requested separately and in advance results from 14 CFR Par 415.5. If such advanced application procedure has been followed, it will be made part of the licensing record. When the applicant eventually requires the license to launch, all previous approvals and determinations remain valid unless substantial changes have been made in the course of the preparation of the launch. The main objective is to make the licensing process as simple and efficient as possible. These procedures should not be a burden for the applicants and they should match closely the steps leading to a launch.

(271)

(272)

Details of information required can be found at the AST online at (accessed: 01/2001). 14 CFR, supra note 162, Par 413.5.

102 Review of applications The AST will accept an application for review when it contains all information required .(273) No particular format has been prescribed by the AST for submitting applications and information.(274) However, if an application is considered by the AST to be incomplete, it will be returned to the applicant to be completed. Then, when the application is complete and accepted by the AST, it initiates the review. There are no standard reviews. Even though AST developed general regulations, in many respects, the licensing procedure remains a case by case process. Until the issuance of the Office’s decision, any modifications, supplements or corrections can be made to the application.

b)

Safety Review

Subpart C of Part 415 deals with the safety review for launches taking place from a Federal Range, and Subpart F with safety review for launches taking place from non Federal launch ranges. As the AST explained in its Notice of Policy 1985, the reason why safety of launches has to be secured is that “As with other transportation systems, the Government has the responsibility to protect the public against any unreasonable risks that space launch activities might pose to either life or property” . (275)

The US also have their own interest to protect. By exercising control over the safety of the launch, they reduce the possibilities of damage leading to their international responsibility according to the Outer Space Treaty and the Liability Convention. The safety review is also an important component of the insurance and financial responsibility determination. Role of the safety review The safety review aims at determining whether an applicant is capable of launching a launch vehicle and its payload without jeopardizing public health and safety and safety of property. Major components of the safety review The safety review will examine first of all from which range the launch will take place. If from a Federal range, the compliance of the operator with the procedures at the range will be checked, and the AST will also examine whether the launch is in line with the experience at that range. The AST will also examine the safety organization of the operator, and request the designation of one safety official. An important element of the safety review is the determination of the acceptable flight risk through orbital insertion (for an orbital launch) or impact (for a suborbital launch). This is the expected number of casualties to the collective members of the public exposed to debris hazards from any one launch. This ratio shall not exceed 0,00003 casualties per launch. In order to demonstrate that he complies with these provisions, the operator has to provide a substantial amount of safety related information such as launch vehicle structure, critical systems (with drawings and schematics). Flight readiness procedures are examined as part ofthe safety review, as well as the communications plan ofthe operator. The safety at end oflaunch is examined and the operator has to demonstrate that there will be no unplanned physical contract between the launcher and its components and the payload after payload (273)

14 CFR, supra note 237, Par 413.11.

(274)

Launch application can however be handled through the Internet, online at AST, supra note 248.

(275)

(1985) 50 Fed Reg 7717.

103 separation, that debris generation will not result from conversion of energy sources into energy that fragments the vehicle or its components, and that stored energy will be removed according to criteria defined in the regulations. The operator also has to submit an accident investigation plan which has to fulfill a number of criteria defined in the regulation. Since the first regulations issued by the AST, it was made clear that a distinction would be made between launches from Federal (or licensed) launch sites and other launches. In its Notice ofPolicy 1985, the AST underlined that if the applicant chooses to launch from an established national range, the number of safety issues to be addressed by the AST would be reduced since, reliable safety procedures are already in place on those sites. With the increase in number of potential launch site operators, the AST had to publish, in 1995, some guidelines on the information required when applying for site operators licenses.(276) Licenses were issued on a case by case basis along those guidelines. (277) The AST then issued a Proposed Rule on 25 June 1999, which contained proposed regulations for the license to operate a launch site.(278) The proposed regulations are technical regulations which go to a significant level of detail into the conditions that a launch range has to comply with. It addresses the criteria and information requirements for obtaining a license in particular: 1) compliance with the National Environmental Policy Act; 2) information on all technical characteristics of the launch complex (i.e flight paths, overflight of populated areas, casualty expectancy) to demonstrate compliance with the technical requirements set forth in the proposed regulation; 3) information on owners of the corporation or participants in the joint venture; 4) explosive flight plan and 5) launch site accident investigation plan. The license is issued when all criteria set forth in the regulations are complied with, and along the same conditions as other licenses, in particular those relating to foreign policy and national security interests of the United States. The license will be in effect for 5 years.

c)

Policy Review

Policy review brings more delicate issues than the safety review because of its national security aspects. (276)

(277)

(278)

See “Site Operators License. Guidelines for Applicants”. 8 August 1995. Online reference, supra note 270. The launch sites currently licensed are California Space Port, Spaceport Florida, Virginia Commercial Space Flight Center, Kodiak Launch Complex. Updates of the list of licenses can be found online (accessed: 01/2001) On private launch ranges initiatives, see: D.J. Marcus, “Spaceport Florida Ready to Buy Rockets” June 11-17, 1990, Space News, 32 Office of Space Industry of Hawai, “Hawai’s Proposed Commercial Launching Facility”, 1990 S. Lessard & F. Nordlund, “Les bases de lancements: évolution et aspects juridiques” (1990) XV Annals of Air & Space Law, 359. (1999) 64 Federal Register Nb 122, 34316. Online: (accessed 01 /2001). The AST published the final rule for licensing and safety requirements for operation of a launch site on October (2000) 65:203 Fed Reg 62811, as this book was being edited, and could not be reviewed here in detail. A summary assessment seems to show that the final rule has not introduced major changes to the proposed rule except for some details in the area of explosive flight plan requirements and explosives requirements. It clarifies that a site operator license is not required for an operator of a launch site using it for his own launches, as this is covered by the relevant launch license. The regulations apply to those operating a launch site as a service to other customers.

104 The aim of the licensing process is to make sure that activities of private launch operators remain with the international obligations of the US, particularly as far as the Outer Space Treaty and the Liability Convention are concerned. Safety Review examines compliance with these obligations only as far as safety of operations is concerned. As the AST explains, “This direct liability forms the basis for a broad interest in proposed private space launch activities, one which intends beyond safety issues to include both the purpose of the launch and the nature of the payload. This unique interest in the launch mission distinguishes regulation of commercial space launch activities from regulation of other modes of transportation” .(279) The role of AST is not only to check the safety issues but all other elements capable of interfering with the treaty obligations of the US. Policy Review is dealt with in Subpart B of 14 CFR Para 415. The major part of this policy review is the performance of an interagency review of the proposed launch. As explained by AST: “An interagency review allows government agencies to examine the proposed mission from their unique perspectives. The FAA consults with the Department of Defense, the Department of State, and other federal agencies such as the National Aeronautics and Astronautics Administration that are authorized to address national security, foreign policy, or international obligations issues.”(280) As evidenced by this definition, the two major subject matters with respect to Mission Review are: compliance with international obligations as well as national security and foreign policy implications of a given launch or payload. One of the major concerns raised in the comments received by the AST when drafting the regulations relates to the definition of “US national security or foreign policy interests”. Neither the Commercial Space Launch Act nor the AST regulations define these terms. A number of commentators were concerned that this vagueness could open the door to varying interpretations and lead to difficulties due to the lack of predictability it would cause(281). An example of foreign policy consideration could be the risk of interference with another nation’s use of space. A national security concern could be the prevention of collisions between proposed payloads and classified Department of Defense satellites.(282) However, one point needs to be emphasized here, with respect to the burden of proof on this matter. The regulations provide that: (279)

50 Fed Reg 7717

(280)

Overview of the licensing process as described by AST on its web site, supra note 248.

(281)

See M.S. Straubel, “The Commercial Space Launch Act: The Regulation of Private Space Transportation”, supra note 215, at 960, where Mr Straubel expressed concern: “The constantly changing definitions of ‘national security interests’ and ‘foreign policy interests and obligations’ may make the advanced planning necessary for space activities very difficult. For example, a joint venture in materials processing between a United States firm and a foreign firm may be acceptable one year, but may run afoul of national security or foreign policy interests the next year because the foreign firm may come from a now unfriendly country. An applicant could obtain mission approval early in a project, but find that mission approval withdrawn when the time comes for issuance of the final license. Such reliance could result in substantial losses. The uncertainty created by the vague terms ‘national security interest’ and ‘foreign policy interests and obligations’ could chill investment in private space activity. Unambiguous criteria and guarantees of continued acceptance and validity need to be put into the mission review process”.

(282)

M.S. Straubel, “The Commercial Space Launch Act: The Regulation of Private Space Transportation”, supra note 215, at 958.

105 “Mission approval is granted unless some element of the proposed launch poses a threat to US national security or foreign policy interests, constitutes a hazard to public health and safety or safety of property, is inconsistent with international obligations of the United States”.(283) This provision appears to place the burden of proof on the AST. Thus it is not for the applicant to demonstrate that his mission, and particularly the payload, complies with all the requirements, but for the AST to establish the reasons why the approval cannot be granted.(284) The CSLA, in its section 70116(a), asks the Secretary of Transportation (by delegation the AST) to consult the Secretary ofDefense on all matters affecting national security, and the Secretary of State on all matters affecting foreign policy, and other agencies as he thinks appropriate. These provisions caused the concern, expressed also in the comments made during the drafting, that called the attention of some commentators who expressed some apprehension that these consultations might not occur in good faith and that they may provide a means by which agencies conducting their own commercial space activities could protect their competitive interests. The AST clarified that Mission Review should afford no such opportunity. “Mission Review is designed expressly to prevent the interagency review process from becoming an unbridled opportunity for agencies to judge, in areas beyond their particular competence, whether proposed launch activities conflict with national interests” .(285)

As far as consultation is concerned, another question may arise. The consultation of most agencies is not compulsory for the AST, it is just “when appropriate”, according to the CSLA Section 70116. But the Act mandates consultations with the Department of State and the Department of Defense. As the criteria of “national security interests” and “foreign policy interests or obligations” is vague, the conclusions of the AST, DOS and DOD may be different, even divergent. Will any conclusion prevail on others and what about arbitrating the dispute? No satisfactory answer has been given to that question. Mr Straubel concluded that: “...the White House will have the final say on disputed matters of national security and foreign policy. Nevertheless, the potential delay and uncertainty created by this unstructured consultation scheme is bound to impede the developments of a private launch industry and an efficient regulatory regime”.(286) The information to be provided for the policy review is listed in 14 CFR Para 415.25. Once the policy determination has been made, in case approval is denied to the applicant, the latter may respond and ask for reconsideration of the decision.

d)

Payload determination

The payload determination was previously made in the course ofthe policy review. Under the recent regulations, the payload determination is a separate item on the list of reviews to be conducted. The purpose of the payload review and determination is to check (283)

14 CFR 411.7

(284)

See P.L. Meredith, “A Comparative Analysis of United States Domestic Licensing Regimes for Private Commercial Space Activities” (1989) Colloquium, 373, at 377.

(285)

51 Fed Reg 6871.

(286)

M.S. Straubel, “The Commercial Space Launch Act: The Regulation of Private Space Transportation”, supra note 215, at 963.

106 whether the license applicant or the payload owner or operator has obtained all the required licenses, authorization and permits. The AST also reviews whether the launch of the payload would jeopardize public health and safety, safety of property, US national security or foreign policy interests, or international obligations of the US. The review is conducted in the same way as the policy review. Not all payloads are subject to this review. The AST does not review payloads that are subject to regulation by the Federal Communications Commission ,(287) the Department of Commerce National Oceanic and Atmospheric Administration.(288) The AST also does not review payloads owned or operated by the US Government.(289) When the proposed payload is not subject to existing payload regulations, either domestic or foreign payloads, the AST will have to initiate a review of the proposed payloads. The AST takes its authority on that matter from the CSLA itself.(290) There are two points worth noting. First, it is possible for payload operators or owners to ask the AST to make the payload determination ahead ofthe request for license or request for mission approval. As the payload is the central element ofa mission, it is important to know prior to entering into the launch license process whether the proposed payload can be launched. Secondly, as far as payloads are concerned, the AST made a first step towards a certain generic or standard license. The current regulations provide that the AST may review and issue findings regarding a proposed class of payloads, e.g communications, remote sensing or navigation, but still each payload is subject to compliance monitoring before launch.(29l) The information required by the AST from the applicant, in order to initiate payload determination are listed in 14 CFR Para 415.59. In the same manner as for the policy review, the payload review places on AST the burden of proof and the regulations provide that the payload determination must be granted unless the AST determines that the launch of the payload would jeopardize public health and (287)

(288)

(289) (290)

(291)

The FCC has authority to license communications satellites under the Communications Act of 1934. 47 USC 151 ff About the FCC licensing authority, some comments of the Senate Committee on Commerce, Science and Transportation are worth noting: “The Committee recognizes that the Orders and Authorizations of the FCC are the official certification for the launch of a communications satellite. Therefore, no separate documentation or certification by the Secretary of Transportation will be required. In order to address the procedural time lag that may occur between the FCC’s open meeting in which the actual authorization is written and released, the committee recognizes that the press release or other public notice of Commission action is sufficient notification that the communications satellite in question has met all regulations of Federal Law that relate to the launch of a payload. In notifying DOT of the FCC’s authorization to launch a communications satellite, the Committee notes that the transmittal of the authorization to launch by the FCC is appropriate. The bill reported here is intended to minimize the burden on agencies, such as FCC, DOT, and on those launching payloads. The Committee, therefore, directs DOT to implement the regulations with this goal in mind”. Senate Report 98-656, supra note 228, at 10. NOAA has authority to license remote sensing satellites under the Land Remote Sensing Commercialization Act of 1984, 15 USC 4201 ff. 14 CFR, supra note 237, para 415.53. CSLA, 49 USC, Section 70104(c): “ If no payload license, authorization, or permit is required by any Federal law, the Secretary may prevent the launch if the Secretary decides that the launch wouldjeopardize the public health and safety, safety of property, or any national security interest or foreign policy interest of the United States”. 14 CFR, supra note 237, para 415.55

107 safety, safety ofproperty, US national security or foreign policy interests, or international obligations of the US. If the determination is unfavorable, the reasons have to be stated, and the applicant may respond and ask reconsideration.(292) A number of comments were received by the AST during the process of elaborating the regulations, on the subject of payloads. One was that the AST had authority to weigh national security and foreign policy interests only insofar as the launch is concerned and not with respect to the operation of the payload in orbit. This comment relied upon the language ofthe Act which did not give express authority to the Secretary ofTransportation with respect to the latter. The Office did not agree with this interpretation and stated that it would consider all matters related to the launch.(293) This position of the AST is understandable in view ofthe fact that, should the AST be denied authority over this issue, one of the fundamental purpose of the regulations - the protection of the US interests would be challenged. The operation of the payload may have far reaching consequences in terms of international responsibility of the United States. The House Committee on Science and Technology also addressed some comments to the AST. One referred to the definition of the term “payload”. The Committee saw in the definition of payload as “object” a possibility that this could create difficulties in the event of manned launch activities. The AST considers that these activities would be in its sphere of activities. Indeed the Act does not restrict the expression “launch of a launch vehicle” to unmanned launches.(294)

e)

Environmental review

In the past, the AST was already required to consider the environmental impacts of licensing commercial launch activities and some information with respect to environmental consequences of launch operations had to be provided by the applicants to the AST.(295) This requirement has now been consolidated into an environmental review during which it is ensured that the proposed launch activities pose no unacceptable danger to the natural environment. AST has to comply with the National Environmental Policy Act (NEPA)(296) and the Council on Environmental Quality Regulations for Implementing the Procedural Provisions of NEPA.(297) The AST has developed guidelines for compliance with these regulations.(298) The information to be provided for this review are defined in 14 CFR para 415.103. This review is not leading to a determination. It seems to be considered as part of the overall process.

f)

Insurance and Financial Responsibility

This determination is an essential part of the licensing process, and one of the conditions under which the license is issued. We address this issue in a specific section further.(299) (292)

14 CFR, supra note 237, para 415.61

(293)

(1986) 51 Fed Reg 6871.

(294)

(1988) 53 Fed Reg 11006. See also discussion on this subject in our paragraph above dealing with definitions in the Commercial Space Launch Act.

(295)

14 CFR 415.31 and 14 CFR 415.33 (prior to present codified version)

(296)

42 USC 4321 ff.

(297) (298) (299)

40 CFR, Parts 1500 to 1508. These guidelines can be found online at AST, supra note 270. See Section 3.1.5 on Liability and Insurance Issues.

108 g)

Issuance of the License

Once reviews have been conducted, and the approvals have been granted, the AST will issue the license.(300) The license issued by the AST is subject to a number of conditions determined by the AST.(301) The license will contain the following elements: specification of the activities authorized by the license, name of each person responsible under the license for the conduct of these activities, period of time during which the license is valid, other terms and conditions as may be required to protect public safety, the safety of property, and national security and foreign policy interests of the United States. The main conditions are to secure the minimum amount of third-party liability insurance specified by the Department,(302) adhere strictly to specified range safety regulations and procedure, comply with Federal inspection verification and enforcement requirements. The license is issued on the basis of the information provided and representations made to the AST by the applicant. The applicant is responsible for constantly providing AST with complete and accurate information. If this information is no longer accurate or if an important change occurs that would influence the decision of the AST, the applicant is responsible for promptly giving the AST corrected information.(303) The AST issues two types of launch licenses: - the launch specific license, which authorizes the licensee to conduct one or more launches, having the same launch parameters, of one type of launch vehicle from one launch site. This license identifies each launch authorized under the license. The licensee’s authorization to launch terminates upon completion of all launches authorized by the license or the expiration date mentioned on the license. - the launch operator license, which authorizes the licensee to conduct launches from one launch site, within a range of launch parameters, of launch vehicles from the same family of vehicles transporting specified classes of payloads. This license remains in effect for five years of the date of issuance.(304) This extension of the duration is accompanied by a closer monitoring: “[...] the FAA proposed in the NPRM that a launch operator with a safe launch record should not be required to apply for a new license every two years. The FAA will continue to verify, through compliance monitoring, that a licensee is operating in accordance with the terms and conditions of its license. In this regard, the longer the license term, the more important the role compliance monitoring plays in enabling the FAA to provide safety oversight regarding how a licensee implements its procedures.”(305)

h)

After Issuance of the License

Monitoring of licensed activities Once the AST has issued a license, the CSLA provides it with the possibility to check that (300)

14 CFR, supra note 237, 413.19 and 415.19

(301)

CSLA, 49 USC, Section 70105(b)(2)(A) provides that the Secretary may prescribe any term necessary to ensure compliance with this Chapter. 14 CFR, supra note 237, para 415.11

(302)

See below for specific discussions on this topic.

(303)

14 CFR 413.19.

(304)

These types of licenses, which have been practiced by the AST in the last years, have been codified in the Final Rule effective 21 June 1999, 14 CFR, supra note 237, para 415.3.

(305)

Final Rule, supra note 421.

109 the conditions set forth in the license are complied with and that the licensee conducts its activities as planned.(306) The AST issued regulations implementing this provision. Three categories of persons can carry out the authority given to the AST: federal officers, employees authorized by the Director of AST, other individuals authorized by the Director of AST. Both the CSLA(307) and the regulations(308) enumerate the places where the AST can exercise its monitoring authority. The regulations use the expression “ [...] including launch sites [...]” . The word “ including” seems to mean that the list of locations set forth in the regulations is not exhaustive. The language of the CSLA is more restrictive by using the word “at” and by the manner in which the enumeration is made. Authority has been given by the Act, thereby supporting the interpretation that the list of locations provided for in the Act and in the regulations is exhaustive. The locations where the AST may monitor the activities of the licensee are the following: any launch site used by the licensee, any production facility or assembly site used by a contractor of the licensee, or the licensee himself in the production or assembly of a launch vehicle, any site where the payload is integrated with a launch vehicle. The AST is given a rather wide authority for the conduct of the monitoring. Under the CSLA and the regulations, there are two reasons why the AST may monitor the activities of the licensee: 1) to determine that the licensee complies with the terms and conditions of the license issued to him and 2) to carry out the Director’s responsibilities pertaining to payloads for which no Federal license, authorization, or permit is required. These are the payloads which are not licensed by FCC or NOAA, but by AST itself. The monitoring can be conducted “at such time and to such extent as the Director considers reasonable and necessary”.(309) This leaves room for interpretation by the AST. The duty of the licensee is to allow the persons sent by the AST to the location and cooperate with them. While commenting on the regulations, the AST emphasized that “Monitoring will be conducted in the least intrusive manner possible and only for the purpose of determining whether such activities conform to applicable requirements”.(310) Modification, extension, revocation, suspension of licenses. Emergency orders. Modifications.- After the license has been issued, it may happen that some changes are made to the launch mission, which will obviously modify the terms of the license. In that case, the licensee may apply to the AST to modify the license. The AST may also modify the license upon its own initiative.(311) Applications for modifications follow the same rules as the applications for the initial license. Modification of the license is not merely the consequence of the non compliance of the licensee with any regulations or conditions, but it would occur also in cases such as changes brought by the licensee to his operations. Extension.- The final rule which became effective on 21 June 1999 included a new

(306) (307) (308) (309) (310) (311)

CSLA, supra note 222, Section 70106 CSLA, supra note 222, Section 70106 14 CFR 405.1 14 CFR 405.1

(1988) 53 Fed Reg 11008. CSLA, 49 USC, Section 70107(b). 14 CFR 405.3(a).

110 provision giving the possibility to renew a license.(312) Suspension and revocation of license.-(313) These two measures are different from the modification procedure: they are a sanction. Suspension or revocation may occur in five situations: 1) the licensee did not comply with any one of the requirements of the Act; 2) the licensee did not comply with any provision of regulations issued under the Act; 3) the licensee did not comply with the terms and conditions ofthe license issued; 4) the licensee did not comply with any other applicable requirements; 5) public health and safety, the safety of property or any national security or foreign policy interest of the United States so requires.(314)

Time considerations.- Modifications, suspension or revocation take effect immediately and remain in effect as long as the administrative review continues.(315) The AST has a duty to notify the licensee immediately of any finding and action with respect to modification, suspension or revocation ofthe license(316) and to make sure that the reaction is proportional to the infraction.(317) Emergency Orders Emergency powers are given to the AST(318) in one particular case: where the launch or operation of a launch site is detrimental to public health and safety, safety of property, or any national security or foreign policy interest of the United States. This is furthermore restricted by the provisions that even in that case, the AST can exercise this authority only if the detriment cannot be eliminated effectively through the exercise of other authority of the AST. If such a situation occurs, the Office may immediately terminate, prohibit or suspend a licensed launch or launch site operation. Some concern was expressed about this power given to the AST because, as we have seen previously, the criteria upon which the intervention of the AST is based is vague and because the consequences for the licensee can be tremendous. The Commercial Space Transportation Advisory Committee called the attention of the AST upon that question and the AST emphasized that “it views the exercise of this authority as an extraordinary measure to be relied upon in

(312) (313) (314) (315)

(316) (317)

(318)

14 CFR, supra note 237, para 413.23 CSLA, 49 USC, Section 70107(c). 14 CFR 405.3 CSLA, 49 USC, Section 70107(d). 14 CFR405.3(c). On administrative review, see further in our paragraph on procedures, 14 CFR 405.3(d). In its report, the Senate Committee on Commerce, Science and Transportation emphasized: “The Committee recognizes that the immediate implementation of such an order might place a licensee at a financial disadvantage, which in some cases may be unwarranted, inappropriate, or detrimental to the licensee. Therefore, the Committee expects the Secretary to take into consideration, before rendering such an order, the nature and severity of any infraction or non-compliance relative to the Act, the license, or applicable regulation. If the infraction or non-compliance is minor, and if the licensee can correct the infraction or non-compliance within a reasonable period oftime after notification by the Secretary of the infraction of non-compliance, the Committee would expect the Secretary to delay the order to suspend, revoke or modify. In this case, this ‘grace’ period would allow the licensee a reasonable period of time to correct the infraction or non-compliance so that the licensee will not be needlessly disadvantaged by such an order”. Senate Report 98-656, supra note 228, at 13. CSLA, 49 USC, Section 70108. 14 CFR 405.5

111 truly emergency circumstances”.(319)

Such termination, prohibition or suspension takes effect immediately and remains in effect as long as the administrative review continues.(320) Penalties(321)

The CSLA declares unlawful the violation of any requirement of the Act, of a regulation issued under the Act, or of any term, condition or restriction of a license. Acts of noncompliance with these rules are sanctioned by a civil penalty of not more than $100,000 for each violation. A violation continued for few days constitutes, each day, a separate violation. The AST has authority to compromise, modify or remit penalties. The AST also has some judicial powers for the purpose of conducting hearings related to these violations.(322)

Enforcement Section 70115 of the CSLA gives the Secretary of Transportation (delegated to the AST) authority to enforce the Act. In order to exercise this authority, the Act gives the Secretary extended powers to “(1) make investigations and inquiries, and administer to or take from any person an oath, affirmation, or affidavit, concerning any matter relating to enforcement of this Act; and (2) pursuant to any lawful process - (A) enter at any reasonable time at any launch site, production facility, or assembly site of a launch vehicle, or any site where a payload is integrated with a launch vehicle, for the purpose of inspecting any object which is subject to this Act and any records or reports required by the Secretary to be made or kept under this Act; and (B) seize any such object, record or report where there is probable cause to believe that such object, record or report was used, is being used, or is likely to be used in violation of this Act”.

i)

Registration requirements

A special regulation deals with registration of space objects, in order to take into account the requirement for compliance with the Registration Convention (Article IV).(323) To assist the US with compliance with the registration convention, the licensee has to provide certain information listed in the regulation. This does not concern payloads owned and registered by the US Government or owned by a foreign entity. The information has to be provided within 30 days of the launch.

(319) (320) (321) (322)

(323)

(1988) 53 Fed Reg 11008. CSLA, supra note 222, Section 70108(b). CSLA, supra note 222, Section 70115. CSLA, supra note 222, Section 70115. Former 14 CFR 405.7, which has been removed and replaced by section 406.9 by a Final Rule issues on January 2001, (2001) 66:7 Fed Reg 2176. This Final Rule prescribes detailed procedures used to assess civil penalties and on the respondent’s rights to adjudication. 14 CFR, supra note 237, para 415.81

112 j)

Procedural aspects

Confidentiality Both the Act(324) and the regulations(325) provide for treatment of confidential data. The person or agency furnishing data or information can designate them, or some of them, as confidential. A precise procedure has to be followed to designate these data as confidential. Once this procedure has been followed, such information will not be disclosed. Such information can be disclosed if the Director of AST determines that the withholding of such data or information is contrary to the public or national interest. Administrative Review The CSLA gives an opportunity for a hearing to the applicants who wish reconsideration of a decision made by the AST.(326) In case of the application for a license, the applicant may challenge the decision of the AST not to issue the license, or the conditions that the AST has placed on it. If the AST makes a decision to modify, suspend or revoke a license, such a decision may also be challenged by the applicant. This is also the case of emergency orders. If a payload owner or operator has been denied the launch of the payload, he can challenge the decision of the AST. Finally, civil penalties may also be subject to administrative review.(327) The hearings are presided by an administrative law judge and the regulations set forth the procedure to be followed.(328) The administrative law judge will issue a recommended decision which shall be reviewed by the Director of the AST who will make the final decision.(329) Final decisions are subject to judicial review.(330) Petitions and rule making Those matters being very procedural are dealt with only briefly here. Two types of petitions may be addressed to the Director of the AST: petitions requiring the Director to waive a requirement of Federal law applicable to commercial launch services.(331) These petitions ask the Director for an individual decision. The Director will grant the waiver if it is in the public interest and will not jeopardize public health and safety, the safety of property, or any national security interest of the United States.(332) Otherwise, the Director will deny the petition for waiver. petitions of a more general nature, having impact on the regulations. These can be petitions to issue, amend or repeal a regulation, or to eliminate as a requirement for a license any requirement of Federal law applicable to commercial launch

(324) (325) (326) (327) (328) (339) (330) (331) (332)

CSLA, supra note 222, Section 70114. 14 CFR, supra note 237, 413.9 CSLA, supra note 222, Section 70110. 14 CFR 406.1. 14 CFR 406.3 14 CFR 406.5 CSLA, 49 USC, Section 70110(b). 14 CFR 404.3 14 CFR 404.5

113 activities.(333) In these cases, if the Director considers that the petition is justified, he will initiate the rulemaking process.(334) Rulemaking procedures are provided for in 14 CFR Part 404 Subpart B. The elaboration of regulations is particularly interesting in the US. Prior to issuing any Final Rule, the AST first issues a Notice of Proposed Rule. The launch industry, insurers and other interested entities may send their comments on the proposed rule to the AST. The AST then publishes its Final Rule with a compilation of the comments and the explanations as to why AST has taken into account or not taken into account certain comments. This rulemaking approach is very effective in our view, as it allows the community affected by those rules to contribute and help the elaboration of a viable set of regulations. Although such a system introduces a time delay in the issuing of regulations, it is a time investment which may prove crucial to the ability of a given regulation to match the realities of the business.

k)

Export controls

Prior to the enactment of the CSLA, the launch of a space launch vehicle was considered as an export subject to the ITAR requirements. The ITAR (International Traffic in Arms Regulation) procedure is handled by the Department of State and designed to address the foreign policy and national security of US armament sales. It was not designed to cover the licensing of commercial space launch activities, but the Federal Government lacked specific authority with respect to those launches and consequently, the ITAR was a substitute.(335) The Senate Committee on Commerce, Science and Transportation stated in its report: “It is the Committee’s intent that the Commercial Space Launch Act be the exclusive authority for the licensing of commercial space launch vehicles”.(336) Indeed, the CSLA, in its Section 70117(f), provided that “A launch vehicle or a payload shall not, by reason of the launching of such vehicle or payload, be considered an export for purposes of any law controlling exports”. In compliance with the provisions of the CSLA, the Department of State regulations were amended. The definition of “export” now provides that “As of the effective date of the Commercial Space Launch Act, a launch vehicle or payload shall not, by reason of the launching of such vehicle, be considered an export for

(333) (334) (335)

(336)

14 CFR 404.3 14 CFR 404.5 Senate Report 98-656, supra note 228, at 17-18 As J. Dorn, Director of the AST explained during the Senate hearings: “The basic authority for approving launches, for licensing private sector operations, continues to be the authority contained in the international traffic in arms regulations, which has been delegated by the President to the Department of State. And, as you know, this provides for the oversight of the international munitions trade. The application of these particular regulations, however, has required a somewhat expansive interpretation of the law and has resulted in the designation of launch vehicles or payloads as exports. We believe that it is more appropriate that a specific operation be licensed under specific authority granted to DOT, rather than relying on authority that belongs to another department and which designates a launch vehicle as an export. It is our view that this expansive interpretation of ITAR could create problems down the road”. Hearing before the Subcommittee on Science, Technology and Space of the Committee on Commerce, Science and Transportation, 98th Congress, 1st Session, (1984) at 24. Senate Report 98-656, supra note 228, at 18.

114 purposes of this sub-chapter”.(337)

However, the Department of Commerce also has some authority on exports of certain commodities intended for commercial space applications and which have a dual use (military and commercial), under the Department of Commerce Export Administration Regulations (EAR).(338) These regulations do not give a definition of “export”, thus leaving some doubt as to whether launch of a launch vehicle or payload would be considered an export by the DOC and subject to license. It seems that this should not be the case. The CSLA uses the expression “for the purpose of any law controlling exports” and this leads to the conclusion that the launch of a launch vehicle will not be considered an export either for DOS or for DOC regulations.(339) 3.1.5.- Liability and insurance issues The rules related to the licensing procedure had been completed and adjusted, but this was not the case for the provisions related to liability and insurance. The CSLA contained imprecise provisions which turned out to be detrimental to the private launch industry. Thus the Act was amended in 1988 with respect to the question of liability and insurance. i)

Liability and insurance under the Commercial Space Launch Act

Before 1984, and with the exception of SSI and Starstruck, launch vehicles were procured by the government and the associated liability insurance was part of such procurement.(340) Most aerospace companies in the market of launch services never had to bear the risks associated with the launch. They were government contractors and any liability arising out of a launch was indemnified by the Government. This situation changed dramatically with the advent of the CSLA. First of all, private companies would be on their own and not government contractors anymore. Second, these companies would use government launch facilities to operate some of their launches. This situation created a new scheme with respect to liability, risk allocation and insurance. The CSLA progressively took this new reality into account. a)

Provisions of the CSLA

As originally passed, the CSLA provided for two insurance requirements. The first (337)

(338) (339)

(340)

22 CFR Chapter 1, Sub-chapter M. Part 120.10. It is important to note that we are dealing here only with the launch regulations. If the launch vehicle or the payload were to be transported to a foreign country to be launched, a license would be required, as it would be an export. Indeed these two articles would fall under the export regulations. 22 CFR Chapter 1, Sub-chapter M, Munition List, and Part 120.10. 15 CFR 770-799 G.H. Reynolds & R.P. Merges, Outer Space, Problems of Law and Policy, supra note 24, at 245 On export controls see also references in supra notes 4, 181 and 184. “Almost invariably, the government contractor was obliged to procure liability insurance for which it was reimbursed for the portion allocable to the contract of the reasonable cost of insurance. Moreover, the Government agreed to compensate the contractor for liability to third parties for personal injury or damage to property for those risks not covered by liability insurance”. P.D. Nesgos, “Managing Liability Risks in US Commercial Space Transportation”, paper presented at Assicurazioni Generali, 5th International Conference on Space Insurance, Rome March 1987.

115

requirement was related to the use of government launch facilities by private enterprise. The following was included in the provisions related to the use of Government property: “The Secretary may establish requirements for liability insurance, hold harmless agreements, proof of financial responsibility, and other assurances as may be needed to protect the United States and its agencies and personnel from liability, loss or injury as a result of a launch or operation of a launch site involving Government facilities or personnel” .(341)

The second requirement was related to another concern of the United States which was the possibility that its international liability is involved and the need to fulfill its international obligations. Ifthe United States is answerable to another State for damages, it would, by action in recourse, ask the amount back from the company which caused the damage. Thus the United States has an interest to ensure that the company obtained an appropriate insurance coverage. The CSLA thus provided that “Each person who launches a launch vehicle or operates a launch site under a license issued or transferred under this Act shall have in effect liability insurance at least in such amount as is considered by the Secretary to be necessary for such launch or operation, considering the international obligations of the United States. The Secretary shall prescribe such amount after consultation with the Attorney General and other appropriate agencies.”(342)

b)

AST proposed rules and licensing regulations

On May 7, 1985, the AST issued proposed rules to carry out the provisions of the Act. These rules recalled the two reasons why insurance is needed: to indemnify the US in case of damage caused to Government launch facilities used by the launch operator, and the provisions of Section 16 of the CSLA. For this latter case, the AST interpreted the provisions ofthe Act in an extensive manner. Section 16 seemed to deal with liability of the US at international level. The AST considered that “Domestically, the Government may also be held liable to private parties for damage caused by the launching of private space vehicles and payloads from the national ranges [...] because of the operational role that the Government plays in these launches. For these reasons, DOT believes that the insurance required under Section 16 should also cover these claims”.(343) Consequently, the launch operator would have to obtain insurance covering: the indemnification of the US Government for damage caused to the launch facilities; the indemnification of the US Government in case it has been held liable to private parties as operator of the launch facilities; the indemnification of the US Government in case it has been held liable to third States for damage caused to them by the space activities of its nationals. In this same comment, the AST added that requiring third-party liability insurance has other advantages: it protects the public because there is assurance that funds are available to compensate the damage and because it encourages industry to operate safely with a view to obtaining lower insurance costs by reducing risk through safer operations; it makes the public feel that their interests are protected, thus avoiding serious (341) (342) (343)

CSLA Section 15 c) (original numbering). 49 USC 2624. CSLA Section 16 (original numbering). 49 USC 2615. 50 Fed Reg 19280.

116 public opposition to this industry.(344) The Act and regulations deal only with liability that might involve US Government. Liability for damage caused to parties participating in launch operations or to their employees, agents and contractors is not dealt with as it is a matter of agreement among the companies involved.(345) Under the proposed rules, the commercial launch services companies, operators of payloads and operators of commercial launch sites, were required to demonstrate financial responsibility for third-party liability to ensure that the US international obligations are properly met and to protect the public in case damage is done. No license can be issued without this financial responsibility ensured by the AST. The burden is on the launch services provider to demonstrate that he obtained the appropriate insurance. The AST proposed two forms of acceptable evidence of financial responsibility: commercial insurance that would name the US (as well as the purchaser of the policy) as an insured party; purchase of a commercial surety bond naming the US (as well as the purchaser of the bond) as a bonded party.(346) Under the CSLA, the Secretary is to determine the level of financial responsibility.(347) In the proposed rules, the AST suggested two means to determine this level of financial responsibility: the AST could require the purchase of the maximum amount of third-party liability insurance or bond available at reasonable rates. This may lead to the consequence of depriving small companies of their cash because of the high insurance premiums they would have to pay; the AST could “do an analysis of the risk posed by a launch and set an appropriate financial responsibility level based on that analysis”(348). The difficulty with that method is that in space transportation there is often no prior launch experience to determine the level of risk. Finally, the proposed rule did not determine what would happen in case of a loss that exceeds the amount of insurance, and whether the Government would seek recovery of the additional amount from the party whose operations gave rise to the loss.

c)

Expendable launch vehicle commercialization agreement

This agreement was proposed by the Department of Defense. Before going further into the provisions of this agreement, particularly with respect to liability and insurance, it is necessary to analyze the provisions of the CSLA related to the use of government launch (344)

(345) (346)

(347) (348)

(1985) 50 Fed Reg 19280. “[...] the assured availability of funds to compensate for loss is a significant element of public acceptability” . 50 Fed Reg 19281. A bond is a guarantee by an insurance or bonding company that, if the insured is required by a court to pay for damages covered by the bond, the insurance or bonding company will pay up to the limits of the bond. With insurance, the contract calls for the insurer to pay most claims. With a bond, the insured pays the claim and the bonding company (the surety) stands ready to pay only in the event of a default by the principal (the insured). The choice of insurance or bond depends on a number of factors such as the level of premiums and the financial strength of the principal. (1985) 50 Fed Reg 19281. CSLA Section 15c) and Section 16. 49 USC 2614&2615. 50 Fed Reg 19281

117 facilities by private launch operators. The CSLA provides for the use of Government property in its section 70111. It directs the Secretary to facilitate the acquisition of excess Government launch property and launch services not otherwise needed for public use. It is under this provision that the three major ELVs companies (McDonnell Douglas, General Dynamics and Martin Marietta) were transferred the license to market commercially the vehicles they developed and manufactured under government contracts.(349) These provisions also allow the use of government launch facilities by private companies. At that time, no private launch sites were in operation. Moreover, the Air Force and NASA had a long and valuable experience of the launch site operations. Consequently, private companies expressed their interest in using government launch facilities. The acquisition of government property by private companies is subject to reimbursement of the Government. The pricing policy set forth in the CSLA is: in case of sale or transaction in lieu of sale: the amount to be paid by the company is determined by the appropriate agency, in consultation with the Secretary, and is equal to the fair market value. The Senate Committee on Commerce, Science and Transportation defined the “fair market value” as meaning “The value of the item(s) on the open market subject to two constraints: 1) all sales shouldguarantee a reasonable return to the Federal Government, and 2) the Federal Government should provide no direct subsidies”.(350) in case of other type of acquisition of launch property or launch services, the price is determined by the appropriate agency, in consultation with the Secretary, in an amount equal to the direct costs incurred by the US. The Committee explained that “In case of launch property, direct costs include any specific wear and tear or damage to the launch property of the launch site; whereas in the case of launch services, direct costs are the salaries of US civilian and contractor personnel applied in a manner consistent with Department of Defense Directive No 3200.11, issued April 18, 1984- ‘Major Range and Test Facility Base’”.(351) The Senate Committee emphasized that “Nothing in this subsection is meant to affect in any way the existing authority of any Federal agency to establish and/or collect reimbursements for the lease, sale, transaction in lieu of sale, or otherwise, of launch property or launch services of the United States”.(352)

This is how, exercising its own authority, the Department of Defense issued the Department of Defense Air Force Model Expendable Launch Vehicle Commercialization Agreement that provided for the conditions under which private companies could use the Air Force launch facilities.(353) The agreement provided that all government property is (349)

J. Steptoe, “Regulation of Private Commercial Space Transportation by the United States Department of Transportation”, supra note 223, at 244.

(350)

Senate Report 98-656, supra note 228, at 15.

(351)

Senate Report 98-656, supra note 228, at 15.

(352)

Senate Report 98-656, supra note 228, at 15

(353)

For details about the Model Launch Agreement, R.L. Kissick, “Commercial Space Launch Contracts: Disputes and Remedies” (1989) 4 Journal of Law and Technology, 31 P.D.Nesgos, “Managing Liability Risks in US Commercial Space Transportation”, supra note 340 K.G. Yelton, “Evolution, Organization and Implementation ofthe Commercial Space Launch Act and (continued...)

118 to be furnished “as is” and the US Government did not make any warranty whatsoever concerning its property. The agreement also contained practical provisions regarding the use of the ranges, e.g safety and accident prevention, furnishing of launch data and disclosure of information, disputes, financial arrangements, termination of the agreement, status of the personnel. In attachments, the agreement detailed the goods and services to be furnished by the Government. The agreement also provided that the Government reserves the right to preempt a launch from its facilities, and should not be held liable for any consequential costs. Apart from those provisions, the Agreement provided for liability issues relating to the use of Government facilities by private launch operators. The User (the launch operator using the Government facilities) was required to assume responsibility for all damage to its own property. With respect to Government property, and regardless of fault, the Agreement provided that the user assumes responsibility for the property of the US government and its contractors or subcontractors to the extent of the maximum available insurance worldwide at reasonable cost for any specific launch. One exception was provided to that rule: the User would not be held responsible for damage caused by the intentional misconduct of the Government, it contractors or subcontractors. The User would also assume third-party liability that might result from a launch and indemnify the Government, its contractors and subcontractors, and the agents, servants, employees and military personnel of each of them, from any third party liability. The two latter types of liability were borne by the User regardless of fault and up to the level of maximum available insurance. The latter type of liability includes third-party claims relating to the production, marketing, use of government facilities and services, environmental incidents and legal violations. The agreement defined the maximum available insurance as the amount of insurance available in the world market at a reasonable premium and on terms considered commercially reasonable for the risks involved to fund the User’s responsibilities under the agreement. This amount was to be determined by the US Government, with no opportunity to appeal that decision. Above the maximum insurance, the Agreement provided that the User is responsible for paying any claims in excess of that amount, under US law (in particular the Federal Torts Claim Act) and the Government had the right to ask the User or any other party for damages in excess of the User’s insurance. NASA had also elaborated an agreement for the use of its launch facilities. This agreement was very similar to that of the Air Force Agreement.

ii)

The situation of private launch operators

As a result of the CSLA and the agreements entered into with NASA and the Air Force, the situation of private launch operators was a classical situation with respect to liability exposure. As far as their own property was concerned, they had to assume responsibility for any damage. They had to protect the Government from any damage that could occur to Government property and personnel. They also had to take insurance for damage caused to third-parties not involved in the launch. The provisions of the CSLA were rather vague and the Air Force and NASA agreements imposed far more conditions on the launch operators. The vagueness of the provisions of the CSLA gave the opportunity to those agencies to impose strict requirements on private (353)

(...continued) Amendments of 1988", supra note 169, at 132 B. Fought, “Legal Aspects of the Commercialization of Space Transportation Systems” (1989) 3:99 High Technology Law Journal, 99, at 116 ff

119 launch operators.(354) The insurance to be taken by the launch provider in all those cases was to be in an amount limited by the Secretary ofTransportation, but above that amount, the company was still liable under the US applicable law(353). In other words, under the CSLA private launch operators were subject to unlimited liability.

a)

The concerns of the space launch industry

This situation created much concern in the launch industry. The industry was certainly acknowledging the need for some protection provided by the launch operator to cover damage caused to Government property and third-parties, however, the modalities and amount of this protection was the subject of discussion. These concerns are to be understood in the context of that time and were as follows.(356) Unlimited liability The major concern was the exposure ofthe companies to unlimited liability, whether they were large size companies or starting up business. As we have already mentioned in the early part ofthis book, the risks in space activities are high, not necessarily in probability of occurrence but in consequences. For example, in April 1986, a rocket exploded 700 feet above the launch pad and after launch at an Air Force base. Significant damage was made to the launch facilities. The cost of the repairs was in the order of 58 million dollars and the duration of the repair work was about six months.(357) This example shows the high risks to which private operators could be exposed. This exposure was referred to by private launch operators as “betting the company”.(358) Indeed, such exposure could easily cause private launch operators to go bankrupt or, in the case oflarge size companies, incur excessive losses. Even established launch companies were threatening to step out of the launch business.(359) Maximum Probable Loss Under the CSLA, companies had to be prepared to bear liability for maximum loss. They were liable without limit even in the case of catastrophic damage. The risk of such a (354)

“While the Secretary of Transportation was required by the Commercial Space Launch Act to take actions to facilitate and encourage the sale or lease by the private sector of excess launch property, the Government agencies having responsibility over launch sites imposed detailed insurance requirements and broad obligations to indemnify the Government and its contractors for losses arising from the conduct of launch operations”. P.D. Nesgos, “Recent Developments in Risk Allocation ofConcern to the US Commercial Launch Industry and the Insurance Community, paper presented at Assicurazioni Generali, 5th International Conference on Space Insurance, Rome, March 1989.

(355)

P.D. Nesgos, “International and Domestic Law Applicable to Commercial Launch Vehicle Transportation” (1984) 27 Colloquium, 98, at 102 ff.

(356)

P.D. Nesgos, “Satellite Launch Liability Risks, Products Available as New Industry Gets Off the Ground” (Oct 29, 1990), Business Insurance, 25, at 25.

(357)

In this case, the costs were borne by the Government because it was a Government launch. Senate Report Nb 100-593, (1988) USCA, 5525, at 5528.

(358)

Senate Report, supra note 357, at 49. Statement of J.F. Yardley, President of Mc Donnell Douglas Astronautics Company.

(359)

“This burden quite likely would force us to consider carefully the practicability of continuing in the commercial launch business”. Statement of the President of McDonnell Douglas. Senate Report, supra note 357.

120 catastrophic event is remote and, in practice, no third-party claim seems to have ever been paid under either a launch liability policy or manufacturer’s aerospace products liability policy.(360) Should such a damage occur, it could go far beyond the resources of the company concerned. Competitive disadvantage The industry stressed that this situation of unlimited liability and unlimited risk was preventing US companies from competing fully with their foreign competitors.(361) Foreign launch services offered much lower insurance costs.(362)

b)

State of the insurance market

Apart from the unlimited liability issue, another issue of concern was the coverage offered by the commercial insurance market. Two problems were mentioned by industry. First, the capacity of the insurance market could be insufficient to meet the need. Second, the premiums to be paid were extremely high. This situation was created by a number of important losses borne by the insurance industry(363) consecutive to a series of launch failures. It is worth quoting extensively the Senate Report to further explain the situation as it was at that point in time. “Although 1983 was a successful year for satellite launches, 1984 was not. The underwriters’ combined ratio went from 90 percent (meaning a 10 percent profit) at the beginning of 1984 to 180 percent (or an 80 percent loss) by June 1984. During a 1984 Shuttle launch, two satellites (Indonesia’s Palapa 2-B and Western Union’s Westar VI) were not placed into the correct orbits. Although they were later recovered during another shuttle mission and the underwriters reportedly netted about $30 million for the satellites (after recovery costs), they paid out a total of $ 182 million in claims. In June (360)

US Department of Commerce, Space Commerce, An Industry Assessment, May 1988; Senate Report, supra note 357. Although this dates back to 1988, it seems that this statement is still correct nowadays.

(361)

Senate Report, supra note 357, Statement of E.F. Kadar, President Conatec Inc, p.54: “At this time, Conatec is competing with foreign providers of research rocket launch services for the provision of launch services in support of several programs. These competitors have one major advantage over our proposed services - they can offer the customer total protection from any liability either at no cost or at very low cost to the customer. Conatec, however, under the current Government requirements for insurance, must obtain commercial insurance for these risks up to the amounts determined by AST to cover the “maximum probably loss” and may be liable for any damages in excess of those amounts. Since Conatec’s customer would almost certainly be held jointly and severally liable for such damages, our company is faced with two equally unpalatable alternatives - 1) we must purchase far more insurance than is necessary to cover the maximum probable loss in order to cover the “maximum possible loss ”, or 2) we, and our customer, must accept the chance that we may be held liable for damages far in excess of the amount of insurance purchased to cover the maximum probable loss. Under the first alternative, our launch service cost rises significantly and can easily make us noncompetitive with foreign launch providers. Under the second alternative, the customer must decide whether he wants to take the risk of a major damage award being levied against him in the event that there is a successful claim, a chance he does not have to take if he elects to launch with our foreign competitors. The competitive disadvantages of both alternatives are thus obvious”. On foreign competition see also, P.D. Nesgos, “Satellite Launch Liability Risks”, supra note 356.

(362)

The conditions under which liability issues are handled in the case ofAriane launches are analyzed later in this Chapter.

(363)

J.S. Greenberg & C. Gaelick, “Space Insurance, Comments from an Observer”, supra note 20.

121 a $ 102 million Intelsat V F-19 was lost during an Atlas Centaur launch. Insurance premiums for a shuttle launch rose from 5- 7 percent in 1983 to 15-2 0 percent of the value of the satellite in June 1984. Several underwriters, including a major London firm, Orion Insurance Company, dropped out of the space insurance business. In 1985, five more satellites suffered launch failures, costing insurers close to $370 million. The losses included: two Hughes satellites, each insured for $85 million, and two satellites destroyed during an Ariane launch failure, insured for a total of $168 million. A leading US underwriter, International Technology Underwriters (Intec), restricted its coverage and no longer would provide on-orbit insurance coverage. The amount of insurance available on the world market dropped to 60-70 million. In January 1986, the space shuttle Challenger exploded during launch killing all seven aboard. Although the shuttle was carrying an uninsured satellite (NASA’s TDRSS-2), the loss had a strong impact on the launch industry itself. The United States also suffered launch failures of a Titan and a Delta launch vehicle in April and May respectively. Also in May, an Ariane vehicle failed, destroying a satellite insured for $82 million, and Arianespace did not resume launches until September 1987. According to one source, after the shuttle and Ariane failures, ‘satellite underwriters lost total confidence in satellite launches...’ as the combined ratio reached 148 percent. According to Ford aerospace, the insurance industry’s combined ratio for 1977-1985 was 200 percent, or, more specifically, the insurers collected $450 million in premiums and paid out $900 million in claims. For 1984-85, the loss ratio was 330 percent. A former insurance executive commented that renewal of on-orbit satellite policies, whose rates had also risen, kept the space insurance industry alive. In January 1987, Business Insurance estimated that launch insurance capacity was $75100 million per launch. At the end of the year, its estimate was 120-150 million. However, even while insurance coverage became more difficult to find, a former underwriter commented, ‘In real terms, there is no capacity crisis. What we have is a crisis of confidence. There is capacity which exists that has not touched the space industry because it (the space industry) is too volatile and unpredictable’. Insurance premiums, which reached a high of 25-30 percent of the value of the satellite, have eased somewhat and are now reportedly at 20-28 percent. Premiums will likely stay high until the insurance companies regain much of their losses. Last year, many underwriters would not write coverage more than 90 days in advance. Currently, the Italian firm Assicurazioni Generali will write a policy 18 months in advance, but maintains the right to review and revise the policy if there is a change in launch vehicle or satellite status. The firm will also grant coverage 12 months in advance, ‘but the wording says that the client must inform us of a change in the risk’. At least one company, RCA, chose not to insure the launch of its communications satellite (Satcom K-2, in November 1985) rather than pay exorbitant rates, essentially self insuring the launch. Other companies have brought partial coverage and self insurance the remainder. Some insurance companies are encouraging self insurance in order to rebuild market confidence. These actions are typical of a “hard” market strategy”.(364) Consequently, not only the companies were exposed to unlimited liability, but also the insurance coverage of their risks was difficult to obtain.

c)

NASA’s practice

One of the arguments brought by industry was that the CSLA was making them unlimitedly liable while the practice of NASA, for years and as far as its commercial activities were concerned, was significantly different. NASA required the customer to obtain the maximum available third-party liability insurance at reasonable cost, with the Government as named insured to protect it at no cost against any claims that might arise out of the launch process. Then, under Section 308 of (364)

Senate Report, supra note 357.

122 the NASA Act, the Government assumed responsibility for third-party liability risks exceeding the limits of insurance commercially available. As far as Government property was concerned, NASA used to waive any right to claim against the party procuring the launch services. More exactly, NASA was requiring a system of cross-waivers of rights involving all parties to the launch.(365) Industry supported the establishment of such a scheme for their own activities.

d)

Comparison with the nuclear industry.

The situation of the private launch industry was that of a nascent industry exposed to a tremendously high amount of risk arising out of the ultra-hazardous nature of its activities. This situation was compared with that of the nuclear industry.(366) In this field, the Price Anderson Act of 1957(367) capped the public liability of nuclear reactors licenses and provided for indemnification by the Government up to that cap, to the extent private insurance capacity was unavailable. The Price-Anderson Act was later revised. The cap on liability was maintained but the level of private insurance protection was increased through retrospective premium assessments on the commercial licensees.(368) Those arguments were stressed by the private launch industry when asking for an adaptation of the rules set forth by the CSLA to the situation of a nascent industry. Those modifications were seen as necessary to maintain a viable and competitive launch industry in the US.(369)

iii)

The CSLA Amendments

The CSLA was amended in 1988 to respond to the situation described above.(370) The rationale of this amendment was described as follows: “It is intended to provide a mechanism in which the domestic launch activities can change from a public activity, which it has traditionally been, to a wholly private endeavor. This bill should create an environment where world insurance markets can grow and mature to meet the needs of a domestic launch industry. This bill will provide an adequate risk sharing arrangement between industry and Government to enable the emerging launch (365)

AIAA Position paper, US Commercial Space Transportation Risk Allocation andInsurance (1988) 16 Journal ofSpace Law, 110, at 111 and113 US Department ofCommerce, Space Commerce, An Industry Assessment, May 1988, at 121 Senate Report, supra note 357, at 5527.

(366)

Senate Report, supra note 357, at 65.

(367)

September 2,1957, Public Law 85-256, 71 Stat 576-77, as amended, 42 USC 2110.

(368)

AIAA Position Paper, US Commercial Space Transportation RiskAllocation and Insurance, supra note 365 For more developments on the situation in the nuclear industry and the Price Anderson Act, see: J.S. Greenberg, “Third Party Liability Insurance and Space Launches”, supra note 20 US Nuclear Regulatory Commission, The Price Anderson Act, The Third Decade, Report to Congress, December 1983 R.L. Rockett et al, Financial Protection Against Nuclear Hazards: Thirty Years Experience under the Price Anderson Act, Trustees of Columbia University in the City of New York, January 19, 1984.

(369)

“If we as a nation are to remain in the forefront of space endeavor and maintain our ability to compete in the world market, we must pull together to eliminate unnecessary impediments to establishment of a strong, domestic commercial launch industry. Only then can US industry compete effectively with international competitors that receive substantial subsidies from their Governments in providing liability protection for their customers at little or no costs”. Senate Report, supra note 357, at 48. Statement of J.F. Yardley, President, McDonnell Douglas.

(370)

Public Law 100-657, Nov 15, 1988. (1988) USCA 102 Stat 3900.

123 industry to compete on a more equal footing with foreign launch concerns. The domestic launch industry is of sufficient importance to the national economic and military security of this nation that this legislation is warranted if this industry is to have a credible chance of meeting foreign competition”.(371)

a)

Definitions

The CSLA Amendment added a definition to the Section 70102 of the CSLA, which is that of the “third-party”, defined as meaning: “a person except (A) the United States Government or the Government’s contractors or subcontractors involved in launch services; (B) a licensee or transferee under this Chapter (C) a licensee’s or transferee’s contractors, subcontractors, or customers involved in launch services; or (D) the customer’s contractors or subcontractors involved in launch services.”

The definition classifies as third-parties mainly people not directly associated with the commercial launch operations. However, the definition of “third-parties” is not clear as to whether it includes Government personnel directly associated with the commercial launch operations. Contractors or concessionaires present on the launch site, incidentally or unrelated to the launch itself, are also included in the definition of third-parties. The Senate Report stressed that “This definition will increase the possibility that comprehensive reciprocal waivers can be reached among all parties associated with the launch of a satellite. Such waivers were a standard element in space shuttle agreements”.(372)

b)

Acquisition of Government Property and Services

The CSLA was amended to clarify the role of the Secretary as far as assurances required from the licensee are concerned. The Secretary has to require assurances as may be necessary to protect the United States, its agencies and personnel from liability, death, bodily injury, or loss of or damage to property resulting from a launch or operation of a launch site involving Government facilities and personnel.(373) As we have noted previously, industry had expressed some concern about the requirements of NASA and the Air Force and there was some confusion about the sharing of authority relating to the use of Government facilities, between AST on one hand and NASA or the Air Force on the other. It seems that with this amendment, authority is clearly attributed to the Secretary of Transportation to determine the assurances to be required from launch companies.(374) In order to further protect the companies, section 70112 also provides that the Secretary may not relieve the Government of liability for loss or injury resulting from wilful misconduct of the United States or its agents. c)

Insurance Requirements

On that matter, the CSLA Amendments have brought important changes. The licensee must provide insurance or financial responsibility in the following conditions. These (371)

Senate Report, supra note 357, at 6.

(372)

Senate Report, supra note 357, at 5532.

(373)

CSLA, 49 USC, Section 70112 e).

(374)

P.D. Nesgos, “Recent Developments in Risk Allocation of Concern to the US Commercial Launch Industry and the Insurance Community”, supra note 354.

124 requirements must be met as a condition for receiving a license to conduct the concerned launch operations. Any insurance policy obtained in that view must protect, at no cost to the Government, the Government, executive agencies and personnel, contractors and subcontractors of the Government, contractors, subcontractors, and customers of the licensee or transferee, and contractors and subcontractors of the customer.(375) First, the licensee must obtain liability insurance or demonstrate financial responsibility in amounts to compensate for the maximum probable loss from claims by a third party for death, bodily injury, or property damage or loss resulting from an activity carried out under the license.(376) The amount of insurance required to protect against maximum probable loss will be determined by the Secretary, in consultation with the US Air Force and NASA.(377) The licensee will not be required to obtain insurance or financial protection in an amount exceeding $500 million.(378) The Secretary may limit this amount if he determines that the maximum liability insurance available on the world market at a reasonable cost is less than $500 million.(379) This alternative was included to take into account the volatility of the insurance market and the potential unavailability of the $500 million coverage. Secondly, the licensee must obtain liability insurance or demonstrate financial responsibility in amounts to compensate for the maximum probable loss from claims by the United States Government against a person for damage or loss to Government property resulting from an activity carried out under the license.(380) This insurance will protect the same persons as above at no cost to the Government. The amount of insurance required in this case is capped, at $ 100 million.(381) The Secretary also has the authority to limit that amount in function of the amount of coverage available on the world market as mentioned above. This insurance is required to protect the property of the United States, but no mention is made of the definition of the expression “property of the United States”. One (375)

CSLA, supra note 222, Section 70112 a) 4).

(376)

CSLA, supra note 222, Section 70112 a) 1).

(377)

CSLA, supra note 222, Section 70112 a) 2).

(378)

“The Committee received testimony which indicated that liability insurance may be available in amounts up to $500 million. NASA required $500 million in liability insurance for payloads carried by the space shuttle, and a total of $750 million when multiple payloads were launched. Liability insurance is routinely available to the commercial airline industry in amounts of $500 million, and there has never been an incident which resulted in claims exceeding $500 million”, Senate Report, supra note 357, at 5534. CSLA, supra note 222, Section 70112 a) 3).

(379)

CSLA, supra note 222, Section 70112 a) 3) B).

(380)

CSLA, supra note 222, Section 70112 a) 1) B)

(381)

“The initial limitations in the legislation are based upon the best estimates that the Committee received of probable damage to Government property. The largest rocket in the commercial fleet is the Titan III. The worst accident in the history of that vehicle damaged two launch pads and disabled them for 9 months. Losses totaled $60 million including environmental impacts and the cost of clean-up operations. An initial limitation of $100 million is appropriate in light of this and other factors such as the strict control on launch operations that will be maintained by the US Air Force. The Committee received testimony from the US Air Force that damage to Government property could reach $300 million, despite their best efforts to minimize risk to Government assets. The Committee also received testimony that property insurance to protect Government launch property was not likely to be available in amounts in excess of $120 million because this type of insurance has never before been required as a condition of launch. The Committee believes that $100 million would protect the Government from the most probable losses that might occur in launch operations, and is an amount that the world insurance markets can provide at reasonable rates”, Senate Report, supra note 357, at 5532. CSLA, supra note 222, Section 70112, a) 2) 3) A).

125 could wonder whether this include property ofUS contractors used by the Government on the site, for example. Sometimes property insurance might not be available by reason of policy exclusion and in that case, the company concerned simply cannot obtain coverage for a certain type of risk. If the Secretary determines that these exclusions are usual for the type of insurance involved, he may waive, after consultation with NASA and the US Air Force, on behalf of the Government, the right to recover any damages for loss of or damage to property of the United States.(382) The maximum amounts of insurance or financial responsibility referred to above, are to be reviewed on a regular basis. A report shall be submitted to Congress about these reviews. Any adjustments made in these conditions will not become effective until the expiration of a 30 day period during which Congress can review and comment upon the proposed adjustments.(383) It is to be noted that the absence of definition of the “maximum probable loss” and the vagueness of the expression lead to full reliance on the AST for the determination of that amount. This could be at the advantage or the disadvantage of the companies. Very important authority is given to AST also with respect to the determination of insurance amounts required(384). Indeed, no provision allows licensees to challenge the decision of the AST determining the amount of insurance required.(385) The AST also has the discretion to let a launch take place without insurance, in case of absence of available coverage on the world insurance markets.(386) However, the Senate Report stresses a number of times that, especially as far as Government property is concerned, in case the amount of insurance coverage available to cover the maximum probability risk standard (382)

CSLA, supra note 222, Section 70112 b) 2).

(383)

CSLA, supra note 222, Section 70112 d) 2).

(384)

The Insurance Determination Requirements can be found online at (accessed 01/2001). This documents indicates, for each type oflauncher, launch site, license and by year, the insurance requirements ($ amounts) which have been placed on the licensees for US Government Property and for Third Party.

(385)

CSLA, supra note 222, Section 70112 c)

(386)

“The Committee recognizes that the world insurance markets may be unable to provide coverage to protect fully against the maximum probable loss. This may occur as a result of constrictions in world liability insurance markets due to the volume of claims being paid or to other factors not related to the space launch business, such as normal business cycles in the insurance industry. The Committee received reports from CRS which stated that losses in the insurance industry totaled more than $450 million in the years between 1977 and 1985. The losses, which resulted from multiple claims, increased premiums to as high as 28 to 30 percent the value of the satellite being insured and restricted total insurance availability. The Committee expects that there will be similar occurrences in the commercial space launch business and that total insurance available for any one launch may be inadequate to meet the requirements of this legislation. For example, a Titan III launch vehicles carrying two communications satellites could easily require $250 million in property insurance for the payloads which must be insured. Add to that $100 million in Government property insurance and up to $500 million in liability insurance, as required by the proposed legislation, and a Titan III launch could require $850 million insurance that must be obtained to protect against the risks that are posed by one single event - the launch of that vehicle. The aggregate risk may overwhelm the capacity of the market-place at a particular time, or the ability of a launch operator to pay the premiums that may be charged for this expansive coverage. Because of the potential for market failure in this segment of the insurance industry, the Committee grants the Secretary the discretion to permit a launch in the absence of insurance coverage to protect against the maximum probable loss”. Senate Report, supra note 357, at 9-10.

126 is insufficient, a part of financial responsibility could be required from the licensee to cover the difference between available insurance and required amount. Moreover, the AST is asked by the Senate to be very cautious in granting licenses when the insurance and financial responsibility requirements are not fully met.(387)

d)

Reciprocal Waivers of Claims

The system of waivers of claims (also often called “cross waivers of liability”) is a technique that has been used by NASA for years in its commercial contracts. It is also used by other launch providers in the world and has become a very standard contractual technique in this field of activity. Waivers of claims required from the licensee Section 70112 b) of the CSLA provides that the licensee is required to enter into reciprocal waivers of claims with its contractors, subcontractors and customers and the contractors, subcontractors of such customers, involved in the launches. The purpose of such waivers is that each party to the waivers agrees to be responsible for any property damage or loss it sustains or for any personal injury(388) to, death of, or property damage or loss sustained by its own employees resulting from activities carried out under the license. The rationale of these provisions is “(1) to limit the total universe of claims that might arise as a result of a launch; and (2) to eliminate the necessity for all of these parties to obtain property and casualty insurance to protect against these claims [...]. This provision will maximize the coverage of available insurance resources, avoiding the costs of duplicate litigation between the parties” .(389) Section 70112 b) uses the language “A license issued or transferred under this chapter shall contain a provision requiring the licensee or transferee to make a reciprocal waivers of claims...” This provision shows that the waivers requirements are an essential and mandatory condition in each license. The opinion was raised that

(387)

“The Committee stresses that the permission to launch where the insurance and financial responsibility is less than the maximum probable loss must be fully justified by the prevailing conditions in the world insurance market; by proof that the operator involved has obtained all of the insurance possible for that particular launch and has offered the maximum amount of financial responsibility within the bounds of sound business practices. The standards for granting a license, where the maximum probably property loss requirement has not been met, must be more stringent than those relating to the liability requirements. There have been losses at Government launch sites, losses which caused millions of dollars in damages. Unless the maximum probable loss is fully compensated by insurance, the Government will be responsible for the added costs of repair and these funds will have to be obtained from existing programs within the US Air Force or from additional appropriations. The Committee expects DOT to be circumspect about granting license in the absence of the statutory property insurance requirements. The legislation requires the DOT to report to the Congress annually regarding all licenses issues and the insurance requirements associated with those licenses. DOTshould be on notice that the Committee will be monitoring all actions taken in this area”. Senate Report, supra note 357, at 5537.

(388)

It seems that the term “personal injury” is intended to mean “bodily injury”. P.D. Nesgos, “Recent Developments in Risk Allocation of Concern to the US Commercial Launch Industry and the Insurance Community”, supra note 354, at 16.

(389)

Senate report, supra note 357, at 5538.

127 “One unfortunate effect of the language contained in Section 16a)1)C)(390) which requires each party to agree to be responsible for any property damage it sustains is that, read literally, it would require the licensee’s customer to assume loss of its payload and would preclude the licensee from offering any form of launch risk guarantee - certainly a situation that would place US commercial launch companies at a competitive disadvantage with their foreign counterparts. [...] Provision should have been made in the legislation to the effect that any claims between any direct contracting parties would (391) not be affected”. However, the Senate emphasized that “The required waivers are not intended to prevent or encumber enforcement of the private entities’ contractual rights and obligations”.(392) Waivers of claims required from the Government The system of waivers of claims can work only if all participants to a launch are part of the network of cross-waivers. As we have explained, the licensee must ensure that the waivers are entered into all along the chain of its contractors and subcontractors. The licensee is one participant to the launch operations. The US, its agencies, contractors and subcontractors must also enter the cross waivers system to give it maximal efficiency. The Secretary of Transportation is required by the CSLA Amendments to enter, on their behalf, into reciprocal waiver of claims with the licensee or transferee, its contractors, subcontractors and customers, and the contractors and subcontractors of such customers, involved in launch services.(393) The waivers have the same purpose as those entered into by the licensee himself, namely that each party to the waivers agrees to be responsible for any property damage or loss it sustains or for any personal injury to, death of, or property damage or loss sustained by its own employees resulting from activities carried out under the license. There are three special cases with respect to Government’s waivers. Section 70112 b)2) provides that “The waiver applies only to the extent that claims are more than the amount of insurance or demonstration of financial responsibility required under subsection a)1)B) of this section” .(394) There is no Government obligation to waive claims when it is the beneficiary of the insurance, but if the damage exceeds the amount of insurance provided by the licensee, the Government has an obligation under these provisions to waive its claims. Government employees. Nothing is said about Government employees in the amendments to the CSLA, but the Senate Report gives a clarification on this matter. Under Section 70102 of the CSLA, government employees seem to be considered as “third-parties” and can benefit from the $500 million insurance required from the licensee under Section 70112 a)3)A) of the CSLA. The Senate considered that Government employees should keep their right of claim above this $500 million limit. “The Secretary is not permitted to waive any claims on behalf of Government

(390)

Former numbering. The new numbering is Section 70112 b) 1).

(391)

P.D. Nesgos,“Recent Developments in Risk Allocation of Concern to the US Commercial Launch Industry and the Insurance Community”, supra note 354, at 16 and 29.

(392)

Senate Report; supra note 357, at 5538.

(393)

CSLA, supra note 222, Section 70112 b) 2).

(394)

Which is the amount of $100 million we have referred to above.

128 employees, whose rights will not be affected” .(395) Thus, there is a difference in the text of the amended Act, between Government property and Government personnel. In case of damage to the former, the Government shall waive claims above the insurance limit. In case of damage to the latter, the Government cannot waive claims on behalf of its employees.(396) In the case of a policy exclusion for a certain type of risk, no insurance can be obtained by the licensee. Section 70112 b) 2) provides that “...the Secretary may waive, for the Government and a department, agency, and instrumentality of the Government, the right to recover damages for damage or loss to Government property to the extent insurance is not available because of a policy exclusion the Secretary of Transportation decides is usual for the type of insurance involved” . The Senate called the attention of the Secretary on the adequate use of this provision, and on the special requirement placed on the Secretary to ensure that this is not abused.(397)

e)

Government indemnification

As we have explained so far, licensees are required to provide a maximum amount of insurance to cover damage to third-parties and Government property. The major provision of the Amendments to the CSLA is found in the handling of damages beyond these coverages. Section 70113 provides for Government indemnification(398) under the following conditions: This indemnification concerns third-party claims only. It covers damage resulting from activities carried out under the license. The type of damage covered are death, bodily injury, or loss of or damage to property resulting from activities carried out under the license. It is worth noting that the expression “bodily injury” is used. Consequently, one may conclude that damage which could be personal but not bodily (e.g. moral damage, pain and suffering) would not be covered by the indemnification. It is the interest of the licensee to make the scope of the license as broad as possible to include the maximum of its activities in relation to the launch, since he will be liable without any limitation for damage resulting from activities not included in the scope of the license. The indemnification also covers the expense of litigation or settlement as long as they are reasonable. Government indemnification is provided on top of the maximum insurance coverage. It is only in case claims are in excess of this amount that Government indemnification is available. Section 70113 a) 2) also provides that in case there is no insurance provided because ofpolicy exclusion, Government indemnification (395)

Senate Report, supra note 357, at 5538.

(396)

See further also the discussion on the new Final Rule, which has brought some modifications and clarifications.

(397)

(398)

“The Committee stresses that this authority is discretionary and expects the Secretary to ensure that the exclusions are in fact ‘usual’ for the type of insurance involved. This provision should not be an inducement for commercial insurers to begin restricting the scope of coverage offered in launch insurance contracts”. Senate Report, supra note 357, at 5539. To indemnify is defined in Black’s Law Dictionary, supra note 18, page 769 as follows: “To restore the victim of a loss, in whole or in part, by payment, repair, or replacement. To save harmless; to secure against loss or damage; to give security for the reimbursement of a person in case of an anticipated loss falling upon him. To make good; to compensate; to make reimbursement to one of a loss already incurred by him [...] ”.

129 exists for the whole claim without regard to the limitation of subparagraph 1). Government indemnification is capped at $ 1,5 billion. This amount is the maximum for each launch. It is important to stress that the CSLA makes it clear that the Government will pay successful claims only. As the Senate Report clarified, the system functions as follows: “ The initial successful claims will be satisfied by the insurance that each launch operator is required to maintain. To the extent that claims against the licensee or other parties subject to this legislation exceed the total liability insurance and self-insurance required by the license, the Government will provide the payments to satisfy the claims. The Government’s responsibility in this area ceases once the aggregate of the successful claims in any one incident exceeds the combination of the total insurance and selfinsurance required and $1,500 million. At this point, the Government would no longer be responsible for payment and all further relief will be the responsibility of private entities”.(399) The past experience in the area ofexpendable launch vehicle services, leads one to believe that such a tremendous amount of damages is a remote risk. All of the above provisions concerning Government indemnification do not apply when damage has been caused by the wilful misconduct of the licensee.(400) This is in fact a reminder of a rule generally applied also in domestic law of liability.(401)

iv)

Final Rule Concerning Financial Responsibility Requirements for Licensed Launch Activities

A Final Rule was issued by the AST to establish procedures for demonstrating compliance with the requirements of the CSLA as presented above, and for implementing risk allocation provisions of the CSLA.(402) This final rule became effective on October 26, 1998. It added a new Part 440 to the 14 CFR regulations. This rule-making follows a long period of preparation of over two years(403) during which extensive consultations took place with the launch and insurance industries, as documented in the introduction to the Federal Register publication of this Final Rule. The AST indicated in this rule-making that it considers these rules to reflect a longstanding practice. It seems to stem from the comments made to the proposed rule-making that, in fact, this final rule modifies the current licensing practice. The efforts of the AST appear to have been focused towards reinforcement of the Government’s limited acceptance of risk under the CSLA. The most important point in this Final Rule is the provision concerning employees. We have indicated in the course of our developments that the inclusion or exclusion of employees of the parties to a launch in the definition of third parties was unclear. In this Final Rule, the AST has taken a clear position on this matter. The AST concludes that although all employees ofthe entities involved in licensed launch activities meet the statutory definition of the term “third-party”, the statutorily mandated liability policy is not intended to respond to the Private Party Launch Participants (399) (400)

Senate Report, supra note 357, at 5541. CSLA, supra note 222, Section 70113 a) 2).

(401)

We will return to these aspects in Chapter 4.

(402)

The full text of the final rule, together with the associated explanations and comments can be found online at (accessed: 01/2001).

(403)

The notice of proposed rule-making was initially issued on July 25, 1996. (1996) 61 Federal Register 38992.

130 (PPLP)(404) employee claims. Under the CSLA, PPLPs are responsible for covering their employees’ claims separately from the launch liability coverage, and each PPLP has to indemnify and hold the other launch participants harmless in the event of claims by one’s own employees for injury, property damage or loss. Insofar as Government Launch Participants (GLP)(405) employees are concerned, because of the cost involved for the Government of assuming additional risks, and the institutional difficulties linked with obtaining appropriations for covering financial responsibility, the Government does not accept the additional financial responsibility of indemnifying other launch participants in the event of GLP employee claims within the limits ofthe liability policy. GLP employee claims against other launch participants must be covered by the licensee’s launch liability policy, together with other third-party claims. In the opinion of the AST, “By removing from the statutorily-required liability coverage those claims that have the greatest probability of occurrence, that is, PPLP claims for property damage or loss, along with the attendant risks and costs that would accompany inter-party litigation in the event of such claims, the universe of risks covered by statutory-based insurance is significantly reduced. In this manner, the launch liability insurance market is able to cover all launch participants’ potential liability to uninvolved persons and claims to GLP employees. The agency understands that insurance satisfying CSLA-based requirements is available at reasonable cost under the current market conditions. ”(406) Although the legislative history would tend to sustain the inclusion of government employees in the definition of third parties, as we have pointed out earlier, there was lack of clarity on this subject as evidenced by the various comments cited by the introduction to the Final Rule. Mainly two types of views were expressed. On the one hand, some held that employees of all launch participants should be considered third parties as the waivers of liability could not be flowed down to them. On the other hand, certain commentators held that the whole purpose ofthe cross waivers was that each launch participant remained responsible for damage sustained on his side, including by his employees and allowing employees to initiate claims against other launch participants defeats the purpose of the whole reciprocal waivers regime. With the inclusion of GLPs employees in the definition of third parties, the licensee has to ensure that his insurance policy covers claims brought by them. The determination of the maximum probable loss by the AST also includes in the calculation the probable loss to GLP employees. The GLPs employees losses will be the responsibility of the Government only where they are not covered by the required liability insurance either because of accepted exclusion, or, due to the fact that the policy limits have been exhausted. As far as PPLPs employees are concerned, they may be included by the licensee in his liability insurance but not as third parties. The insurance required by the AST will not reflect this factor. It is an additional insurance for the PPLP. Consequently, in case the insurance would be exhausted, claims ofemployees ofthe PPLPs will be the responsibility of their employer and not eligible for Government payment under section 70113 of the CSLA insofar as they are not third party claims.

(404)

Private Party Launch Participants is a term referred to in the detailed comments in the Final Rule, which includes the licensee, its customer, and the contractors and subcontractors of each involved in launch services.

(405)

Government Launch Participants include the United States and its agencies, and their contractors and subcontractors involved in launch activities.

(406)

See comments to the Final Rule, supra note 402.

131 The Final Rule provides for a more detailed list of definitions,(407) in particular those of bodily injury, contractors and subcontractors, government personnel, maximum probable loss and, of course, third parties. The definition of bodily injury, for which our previous developments pointed out lack of clarity, is as follows: “Bodily injury means physical injury, sickness, disease, disability, shock, mental anguish, or mental injury sustained by any person, including death”. In order to implement the duty of the Secretary to make maximum probable loss determinations under the CSLA, the Final Rule also clarifies the procedure for this determination(408) and the list of information required from the prospective licensee in order to obtain this determination.(409) Insofar as insurance is concerned, the Final Rule for the most part repeats the CSLA for the insurance requirements as such. Details are added as to the duration of the coverage.(410) The insurance coverage required shall start at the commencement of the licensed launch activities and remain in full force and effect 1) until completion of licensed launch activities at the launch site; and 2) for orbital launches, until the later of i) thirty days following payload separation, or attempted payload separation in the event of a payload separation anomaly; or ii) thirty days from ignition of the launch vehicle. 3) for suborbital launches, until the later of i) motor impact and payload recovery; or ii) the AST determination that risk to third parties and Government property as a result of licensed launch activities is sufficiently small that financial responsibility is no longer necessary, as determined by the Office through the risk analysis conducted before the launch to determine maximum probable loss and specified in a license order. The Rule also provides for the list of standard conditions which the licensee has to ensure in his insurance policies.(411) These conditions are standard in the launch industry. The new rule also specifies in which form the licensee must make the proof of his compliance with the allocation of risk requirements of the CSLA and 14 CFR Part 440.(412) He has to: submit the three party reciprocal waiver of claims agreement required under section 440.17. The model for such agreement is provided in Appendix B to 14 CFR Part 440.(413) It is an agreement entered into between the US Government, the licensee and the licensee’s customer. provide evidence of insurance (or financial responsibility other than insurance) (certification by the licensee, as well as insurance certificate) and explanation on the exclusions with the reason why the concerned risks cannot be insured. Finally, the Rule provides for more details with respect to the payment by the US of the (107)

14 CFR, supra note 237, Section 440.3

(408)

14 CFR, supra note 237, Section 440.7

(409)

14 CFR, supra note 237, Appendix A to part 440.

(410)

14 CFR, supra note 237, Section 440.11

(411)

14 CFR, supra note 237, Section 440.13

(412)

14 CFR , supra note 237, Section 440.15

(413)

This agreement can be found in Chapter 6, as it has been incorporated into our proposals on this topic.

132 excess third-party liability claims. It is worth noting that during the period where the licensee’s insurance is in force, the insurance will pay first for any third party claims. Then the US Government will pay up to $ 1,5 billion. The rule has brought an important clarification related to the time frame ofthe insurance policy. This is confirmed in Section 440.19 d) which provides that upon the expiration of the policy period prescribed in accordance with Section 440.11 a), the US shall provide for payment of claims that are payable under 49 USC 70113 from the first dollar of loss up to $ 1,5 billion. This Final Rule has clarified a significant number ofissues which were debated so far with respect to the liability provision of the CSLA. It certainly increases the security of the operators by stating with better accuracy the rules applicable in terms of allocation ofrisks and related insurances.

v)

Final Rule Effective 21 June 1999 for Codification of 14 CFR

The AST has made a further effort to clarify the applicable regulations by initiating a process of codification into the 14 CFR of the current licensing practices concerning launches operated from Federal ranges, through a Proposed Rule issued on March 19, 1997. (414) This has now been released as a Final Rule effective June 21, 1999.(415) The following changes and clarifications are brought about by this rule. The Final Rule has clarified the definition of “launch” as implemented in the regulations and detailed the rules applied by the AST in determining the activities which are covered by a license. The provisions ofthe regulations referred to so far indicate that the insurance policy, and the Government indemnification in case of damage, start at the point where the license starts and terminate at the point where the license ends. Therefore, the determination of the exact coverage ofthe license is ofutmost importance to the licensee. Prior to the Final Rule, the AST usually applied the “gate to gate” concept, meaning that the license covered all activities of the licensee in the perimeter of the launch range. However, the industrial practice has been changing, and certain licensees extend considerably the activities performed on the launch range to cover activities not only related to the launch itself but also to manufacturing and integration of the launcher. In the new Final Rule, the AST introduces the “vehicle at the gate” concept,(416) thus defining the launch as (414)

(1997) 62 Federal Register 13215.

(415)

Online: (accessed 01/2001).

(416)

The rationale for the choice of this concept was summarized as follows by the AST in its introduction to the Final Rule (see Final Rule, supra note 415): “The FAA considered three possible options in defining ‘launch’ for the purposes of developing proposed regulations. The FAA considered codifying its ‘gate to gate’ definition but was concerned that ‘gate to gate’ created a false impression that indemnification would be available for all commercial activities taking place within the confines of a federal range. The FAA also weighed the most narrow approach, which would employ the ordinary definition of ‘launch’ as only those flight activities beginning at the ‘T minus zero (T-0)’, or intentional first stage ignition; but the FAA initially determined in its NPRM that this approach failed to provide regulatory oversight of certain hazardous activities and that concerns regarding international competition weighed against this formulation. In light of the 1998 change to the Act, the FAA must reject this narrow definition as inconsistent with the new law. A less expansive approach than ‘gate to gate’, one within the scope of the FAA’s mandate, will include within a launch license those activities that are part of a launch as contemplated by the new (continued...)

133

follows: “ Launch means to place or try to place a launch vehicle or reentry vehicle and any payload from Earth in a suborbital trajectory, in Earth orbit in outer space, or otherwise in outer space, and includes activities involved in the preparation of a launch vehicle for flight, when those activities take place at a launch site in the United States. The term launch includes the flight of a launch vehicle and pre-flight ground operations beginning with the arrival of a launch vehicle or payload at a US launch site. Flight ends after the licensee’s last exercise of control over its launch vehicle. ”

The AST has, therefore, reduced the coverage of the license to that specific period, which is also the one during which are concentrated the hazardous operations involved in the launch.(417)

As far as payloads are concerned, the FAA clarified in the introduction to the Final Rule that “The FAA does not consider payload processing absent launch vehicle integration to constitute part of the launch or part of the licensee’s licensed activities. ”(418)

It is clear that the definition of “launch” is rather restrictive and can only be related to activities contributing to the launch proper which would mean, forpayloads, integration into the launcher and immediate preparation for integration. As far as termination ofthe launch is concerned, FAA has clarified in its introduction to the Final Rule, its understanding ofthe termination ofthe launch: “The FAA notes that the end of launch may be expressed both in terms of flight activity and ground operations. For purposes of flight, the FAA will continue to define the end of launch as the point after payload separation when the last action occurs over which the licensee has direct or indirect control over the launch vehicle. For a liquid fueled stage, that point may be when any remaining fuel is emptied from the upper stage, the vehicle propellant and gas tanks are vented and other stored energy is released. For solid rocket motors, that point may arrive when the upper stage is expended or the stage is inert and the payload is released. For purposes of ground operations, launch no longer ends with the cessation of supporting ground operations but when the vehicle leaves the surface. ”(419)

This definition of the end of the launch is only contained in the explanations of the Final Rule but cannot be found in the updates to the 14 CFR themselves. It would be better to find this practice codified as well. One may understand the need to keep flexibility to adapt to the changing technical context but between the definitions of the 14 CFR and the clarifications provided in introduction to the Final Rule, one could certainly finda middle term which would offer better legal security to the licensees. (416)

(...continued) directive to license activities involved in the preparation of a launch vehicle for launch, when those activities take place at a launch site in the United States. This satisfied the requirements of the statutory change and the wishes of those commenting such as Orbital and Spaceport Florida Authority. Under the approach the FAA now adopts, because of the 1998 changes and because risks change shortly after the launch vehicle or its components enter the gate of a launch site, launch begins, for purposes of licensing, upon the arrival of that vehicle to be prepared for flight at a US launch site.”

(417)

The AST, in its introduction to the Final Rule, has developed at length the analysis of these hazardous operations together with their timing in relation to the launch. This analysis provides very helpful clarification to the rationale of the vehicle at the gate concept and the type of activities and risks actually contemplated. See Final Rule, supra note 415.

(418)

Final Rule, supra note 415.

(419)

Final Rule, supra note 415.

134 One has to appreciate the efforts made in the US in the last years to consolidate the set of regulations dealing with launch activities. When comparing with the situation in the early 80's, considerable improvement has been made. Not only these regulations have been developed in a relatively short time, and with the benefit of the transparency allowed through the Notices of Proposed Rule-making, but these regulations have been well organized for public access on the Internet site of the AST(420) such that the new operator is now able to quickly get a clear overview of the licensing regime(421) and some help as to what he needs to do. The AST recently placed on their Internet site a compilation of the regulations which combines the text of all effective regulations and is an advance version of the 14 CFR which will be updated in the course of the year 2000.(422)

3.2.- EUROPEAN LEGAL FRAMEWORK: THE ARIANE LAUNCH SERVICES In Europe one commercial launcher is in operation, Ariane, that was developed within the framework of the cooperation in the European Space Agency. This has created a specific environment which we will now explain after a brief look at the overall French approach to space legislation. France has a central position in Europe with respect to launches as it is the Ariane launching State.

3.2.1.- French Approach to Space Legislation France is the State responsible for the activities carried out by Arianespace, the French incorporated European launch company. There is nevertheless no legislation in France specifically addressing launch activities. In fact, in Europe only two States have adopted such legislation, the United Kingdom and Sweden.(423)

(420)

Online: Associate Administrator for Commercial Space Transportation : (accessed: 01/2001).

(421)

A short description of the current licensing process can be found online: Associate Administrator for Commercial Space Transportation: (accessed: 01/2001).

(422)

Online: Associate Administrator for Commercial (accessed: 01/2001).

(423)

See generally: 1982 Swedish Space Activities Act, 1982:963 and Decree Supplementing the Act, 1982:1069, (1987) 36 Zeitschrift Für Luft und Weltraumrecht, 11 and European Center for Space Law, ESALEX Database online at (accessed: 01/2001) 1986 Outer Space Bill, (1987) 36 Zeitschrift Für Luft und Weltraumrecht, 12 and European Center for Space Law, ESALEX Database, supra A.J. Young, “The Outer Space Act 1986” (1986) XI Annals of Air and Space Law, 412 M. Bourély, “National Space Legislations in Europe (1987) Colloquium, 197 H.L. van Traa-Engelman, Commercial Utilization of Outer Space, Legal Aspects, (Rotterdam: H.L. van Traa Engelman, 1989), at 216 ff for developments on Swedish Law and UK law M. Bourély, “Quelques réflexions au sujet des législations spatiales nationales” (1991) XVI Annals of Air and Space Law, 245 M.Couston, Droit Spatial Economique, (Paris: Sides, 1994), at 149 ff S. Courteix ed., Le cadre institutionnel des activités des états (Paris: Editions Pedone, 1997) F.G. Von der Dunk, Private Enterprise and Public Interest in the European ‘Spacescape’. Towards Harmonized National Space Legislation For Private Space Activities in Europe (Leiden: International Institute of Air and Space Law, 1998), in general and particularly at 129 ff for developments on the Swedish, UK and French laws.

Space

Transportation:

135 In France, the choice has been to organize an institutional control of the entities carrying out these activities rather than legislate them. This approach is self-sustaining since the setup of such institutional control de facto eliminates the need for legislation. The approach is therefore one of institutional control, and no space specific legislations are to be found in France, where authorization, supervision and control of entities carrying out space activities has been organized on an ad hoc basis by the setting up of individual structures. In the field of telecommunications and television broadcasting, state owned companies working under concession of the French Government (France Cables et Radio), commercial governmental entities(424) (Center National d’Etudes Spatiales -CNES; Télédiffusion de France later transformed in a State owned société anonyme, subsequently wholly owned by France Télécom) and private companies controlled by State interests (SPOT IMAGE) have been carrying out these activities, under varying degree of government control and responsibility. CNES itself has prompted the establishment of a number of structures for the promotion of space activities, all strongly and institutionally linked to it (Prospace, Novespace, CLS/ARGOS, Satel Conseil, Intespace).(425) Nevertheless, the regime implemented for the Ariane activities makes up, to a certain extent, for the lack of national legislation(426) insofar as its international character prompted the development of a set of more detailed provisions.

3.2.2.- Overall Legal Framework for the Ariane Launch Services The history of the Ariane program(427) contributed to creating a specific institutional and legal setup in Europe and this is why we have chosen to start this part with some discussion on this historical background. An institutional European approach to space activities started early. The first steps were taken in 1959 with the preparatory work in view of creating a European organization. Based on the work of the European Preparatory Commission on Space Research, set up in December 1960, the European Space Research Organization (ESRO) was created by a Convention signed in Paris on 14 June 1962. Another organization was set up for the development of launchers, the European Launcher Development Organization (ELDO), by a Convention signed on 29 March 1962. These two organizations carried out a substantial amount of activities but, due to the separation of these two activities and due to these organizations’ own institutional difficulties, it was later decided to merge them. This merger gave birth to the European Space Agency, established by a Convention signed

(424)

Called in French: “établissements publics à caractère industriel et commercial”.

(425)

For details about these entities, see M.Couston, Droit Spatial Economique, supra note 423, at 155.

(426)

See: M, Bourély, “National Space Legislations in Europe”, supra note 423, at 199.

(427)

See generally: A. Souchier, P. Baudry, Ariane (Paris: Flammarion, 1986) M. Castello, La Grande Aventure d’Ariane (Paris: Larousse, 1988) M. Bourély, “Le nouveau programme spatial européen” (1974) 28 Revue Française de Droit Aérien, 11 M. Bourély, “La production du lanceur Ariane” (1981) VI Annals of Air and Space Law, 279 M. Bourély, “Coopération internationale et droit de l’espace, l’exemple de l’Agence Spatiale Européenne”, supra note 76 J. Chappez, “Arianespace, première société commerciale de transport spatial” (1983) 110 Journal du Droit International, 702 J. Chappez, “Les systèmes de transport”, in J.Dutheil de la Rochère, Aspects récents du droit de l’espace (Paris: Pedone, 1988), at 103 V. Kayser, “Les services commerciaux de lancement de satellites” (1993) 4 La Lettre du Cerdi (complete issue).

136

on 30 May 1975.(428)

A first effort to develop a European launcher had taken place in the 60's, within the framework of ELDO. It encountered some difficulties, primarily due to the lack of overall system coordination over the development of the launcher which was shared between many entities. Efforts continued and a new program was proposed by the French Government to the ESA Member States in 1972, resulting in a decision of the European Space Conference on 31 July 1973. On 1 August 1973, the ESRO Council approved a Resolution which agreed to the Ariane program becoming an ESRO special program. This was formalized in an Arrangement signed on 21 September 1973 by 9 European States (Belgium, Denmark, France, Germany, Italy, Spain, Sweden, Switzerland and The Netherlands), which entered into force on 28 December 1973. The program was started under the auspices of ESRO/ELDO and was then transferred to the European Space Agency upon its creation. The Arrangement provided for the modalities of the implementation of the development program which started in February 1974. Ariane was launched for the first time on 24 December 1979. i)

The initial phases of the programme

Two main phases were part of this initial period, the development phase and the promotion phase. The participants into the Ariane program entrusted CNES (Centre National d’Etudes Spatiales), the French national space agency,(429) with the responsibility for the implementation of the development phase under the overall control of ESRO. CNES had the responsibility to award contracts to industry in each participating State of ESRO and delegated the prime contractor responsibility to a French company, Aerospatiale, which would then organize a consortium of European firms to carry out the project. During this initial development phase, CNES had been delegated the technical and financial responsibility of the program. ESRO and later ESA exercised control over the activities of CNES and on the financial evolution of the program through the ESA Ariane Program Board (the body composed of delegates of the ESA Member States participating in the Ariane Program), and ESA had the responsibility of equipment used for the program, the contributions to be asked from the participating States and the international agreements to be entered into for the conduct of the project. The Arrangement provided only for the development phase and an additional agreement had to be concluded for the production phase. On 26 April 1978, the ESA Council approved a Resolution on the Ariane Production Phase.(430)A promotion phase of 6 launchers was agreed upon. This promotion phase was pre-financed by the ESA Participating States and it was organized, from an institutional point of view, in the same (428)

See generally for a history of these organizations and the present functioning of ESA: J. Kriege, “An Historian Looks at the ESA Convention”, in European Center for Space Law ed,, The Implementation of the ESA Convention, Lessons from the Past, Proceedings of the ESA/EUI International Colloquium, Florence 25-26 October 1993 (Dordrecht: Martinus Nijhoff Publishers, 1994) [hereinafter Florence Colloquium] J. Kriege & A. Russo, Europe in Space, 1960-1973, (Noordwijk: ESA Publications, 1994), Ref ESA-SP-1172 M. Bourély, “Space Law and the European Space Agency”, supra note 76 A. Russo, “History of the European Space Programmes”, in ECSL Sixth Summer Course on Space Law and Policy, Lapland 1997 (Paris: ECSL, 1998), at 135 The Convention of the European Space Agency can be found in (1975) 14 ILM 864, in K.H. Böckstiegel & M. Benkö Eds, Space Law Basic Legal Documents, supra note 51, or in Florence Colloquium supra this note., in annex.

(429)

On CNES see S. Courteix ed., Le cadre institutionnel des activités spatiales des états, supra note 423, at 63 ff.

(430)

On the Ariane production phase: M. Bourély, “La production du lanceur Ariane”, supra note 427.

137

manner as the development phase. There was no need at that point in time for a commercialization structure since payloads had been already identified for these promotion flights. It was also rather early in the life of the launcher to take active steps for its commercialization. Within ESA, the promotion phase was functioning under the status of operational activities(431) performed for the benefit and with the financial participation of participating States. ii)

The commercialization phase

In view of the availability to ESA of the operational activities mentioned above, one possibility could have been to leave with ESA the responsibility for the commercialization of the launcher. The nature of ESA as a research organization and the prospects of a rough competition on the launch market prompted the choice for commercialization of Ariane by a private commercial entity.(432) Once this choice was made, it was clear that the incorporation of this company under the laws of one of the participating States would be necessary. Due to its role in the Ariane program, France was designated as the host for this company, while other participating States would have their involvement pursued through the shareholding of the company and in June 1979, the European industrial firms agreed with CNES on the shareholding of the company. CNES would own slightly more than a third of the shares, industry and banks would own the other two thirds. The decision to create Arianespace was formalized in the Declaration of Certain Governments relating to the Ariane Production Phase.(433) The company was then formally incorporated under the laws of France on 26 May 1980 by its registration on the “Registre du Commerce et des Sociétés” in Corbeil-Essonnes, under the name of “Arianespace”, a “société anonyme”. Arianespace has taken over, after the promotion phase, the activities of production, commercialization and launch of the Ariane vehicle, and more recently certain development activities.

(431)

The ESA Convention provides for this possibility in its Article V, §2 which states: “In the area of space applications the Agency may, should the occasion arise, carry out operational activities under conditions to be defined by the Council by a majority of all Member States. When so doing the Agency shall: a) place at the disposal of the operating agencies concerned such of its own facilities as may be useful to them; b) ensure as required, on behalf of the operating agencies concerned, the launching, placing in orbit and control of operational application satellites; c) carry out any other activity requested by the users concerned. ” On ESA operational activities see G. Lafferranderie, “La notion d’activités opérationnelles dans la Convention de l’Agence” (1984) 37 ESA Bulletin, 68.

(432)

J. Chappez, “Arianespace, première société commerciale de transport spatial”, supra note 427 M. Couston, Droit Spatial Economique, supra note 423, at 90.

(433)

This Declaration is reprinted in (1981) VI Annals of Air and Space Law, 723. It is important to point out that the term “Declaration” here does not correspond to the type of declarations voted within ESA for implementing ESA programs, but is a self standing international agreement. “While making use of the same terminology, the Declaration shall not be mistaken for a declaration relating to an optional program of the Agency and which would be based on the provisions of the ESA Convention, its Annex III in particular. The Declaration on Production is in itself an international agreement, in a simplified form insofar as it is not subject to a procedure of signature but to a procedure of written acceptance.” G. Lafferranderie, “Responsabilité juridique internationale et activités de lancement d’objets spatiaux au CSG”, supra note 76, [translation provided].

138

3.2.3.- Institutional aspects of the legal control exercised over Arianespace The involvement of private entities in launch activities is not prevented by international space law so long as proper authorization and supervision is ensured by the appropriate State.(434) In the case of Ariane, and given that there was no space legislation in France which is the natural appropriate State, it is interesting to analyze the means through which the control of the activities of Arianespace has been secured. i)

Control via Shareholding in the Capital of Arianespace

Arianespace has 53 shareholders from 12 European countries which are aerospace manufacturers and engineering companies, banks and CNES.(435) Although Arianespace is a private company, its shareholders represent a significant involvement of State controlled entities, in particular from France, where CNES has a significant portion of shares in the company (32.45%) and can under French corporate law exercise a significant influence in Arianespace General Assemblies (in terms of voting majority rules, as well as quorum for meetings). CNES, as well as other entities partially State owned are represented in the Board of Directors.(436) The consequence of this shareholding and control situation, in particular with respect to that of French State owned entities, is that the Board and the General Assemblies have the means to monitor that the activities undertaken by the company are in accordance with the applicable law and with the international obligations of France. Such control is also the logical consequence of the potential liabilities incurred by the French State for Ariane activities.(437)

Also, the fact that the shareholding of the company and its Board of Directors are (434)

See supra Chapter 2.

(435)

France (57.7%): Aerospatiale, Air Liquide, Alcatel Space Industries, Banque Sanpaolo de Paris, Centre National d’Etudes Spatiales (CNES), Clemessy, Compagnie Deutsch, Credit Lyonnais, Geneval SA (Société Générale), In-Snec, Matra Marconi Space France, Paribas, SAFT, Sextant Avionique, SFIM, Snecma, Société Financière Auxiliaire (BNP), Thomson-CSF, Various Individuals; Germany (18.43%): Bayerische Hypo und Vereinsbank, Daimler Chrysler Aerospace AG, Dornier GmbH, MAN Technologie AG, Westdeustche Landesbank Girozentralle; Italy (7.17%): Fiat Avio S.p.A, Finmeccanica S.p.A; Belgium (4.20%): Alcatel ETCA SA, Société Anonyme Belge de Constructions Aeronautiques (SABCA), Techspace Aero; Switzerland (2.58%): Compagnie Industrielle Radio-Electrique (CIR), Oerlikon-Contraves AG, SF-Entreprise Suisse d’Aeronautique et de Systèmes; Spain (2.49%): Construcciones Aeronauticas (CASA), CRISA, Sener Grupo de Ingenieria SA; Sweden (2.29%): SAAB Ericsson Space AB, Volvo Aero Corporation; United Kingdom (1.99%): Matra Marconi Space UK, Meggit (UK) Ltd; The Netherlands (1.97%): ABN AMRO Bank N.V, Fokker Space B.V; Denmark (0.58%): Alcatel Denmark A/S, Den Danske Bank A/S, Christian Rovsing; Norway (0.30%): AME Space AS, Raufoss Technology A/S, Kongsberg Gruppen ASA; Ireland (0.17%): Adtec Teoranta, Devtec Ltd. This is the latest state of the capital of Arianespace, as published online at: