UK Space Agency undertakes consultation on orbital liabilities, insurance, charging and sustainability

Summary

The UK space sector is at a critical juncture.

Space presents an abundance of opportunities - thousands of satellites are expected to be launched between now and 2030 as technology and processes continue to be developed which increasingly facilitate novel and innovative missions (particularly with the assistance of AI and robotics).

The orbital environment is, however, becoming congested. Given the increased risk of debris creation in a congested orbit, this issue could become compounded and self-fulfilling if not meaningfully addressed. This could affect the risk profile relating to future missions and, thereby, the licencing conditions that may be imposed by the CAA in respect of such missions. As a result, operators could, for example, become more exposed to liabilities (in terms of number and quantum), and could find it more difficult to obtain insurance policies (or otherwise incur significantly increased insurance premia) in relation to such missions. This could therefore affect the commercial palatability (and, in the worst case scenario, viability) of future missions.

With such great opportunity, therefore, comes responsibility. The above context prompts important policy questions regarding how best to ensure opportunities in space can be accessed and exploited whilst ensuring this is done in a way which is sustainable, responsible, and safe. This will help to ensure risks are better understood, managed and mitigated, but importantly will also help to ensure that future generations are able to continue to benefit from such opportunities.

The UK Space Agency has been grappling with such policy questions with input from sector experts and the CAA; having undertaken a consultation on orbital liabilities, insurance, charging and sustainability. This consultation has now closed following engagement with various stakeholders. The below article provides further context and background to the consultation, and provides an overview of some of the key proposals put forward by the UK Space Agency. The UK Government intends to issue its response to the consultation early in 2024.

The issues addressed in the consultation are inextricably linked, and the proposals posed by the UK Space Agency are clearly intended to provide a holistic solution to current and future concerns of stakeholders in the sector. How these issues are ultimately addressed will be pivotal to the UK and international space sectors. Although the proposals in the consultation demonstrate how seriously such issues are being taken, whether such proposals, however, go far enough to address such issues and the concerns of stakeholders in the sector, and whether these proposals will be implemented in an effective way to quickly enable future missions to launch from the UK is yet to be seen.

At this point, it is very much a case of watch this “space” for the sector whilst such significant decisions are considered, made, and implemented.

Space: A Critical Resource

When we think about space, we often think about astronauts and spaceflight. Space, however, has become a fundamental part of modern life - a resource which underpins, influences, and supports our everyday lives. Space pervades many aspects of today's society - from communications to location services, from remote sensing (e.g. monitoring weather systems and pollution levels) to exploration, research and innovation, and from harnessing natural resources to detecting and preventing natural disasters.

Increasingly, space is set to play a more and more important role in facilitating and supporting critical activities on Earth – with thousands of satellites expected to be launched between now and 2030 as lower barriers to entry emerge, risks and related mitigations in the sector become better understood, and associated costs become more manageable.

As a result of such developments, important policy questions arise regarding how best to implement processes which ensure that both the public and private sectors can best access and utilise opportunities in space whilst ensuring that potential risks are managed and mitigated. With such opportunity, however, inevitably comes responsibility, given the importance of exploiting such opportunities in a way which is sustainable, responsible, safe, and which ensures the benefit of resources for future generations.

Consulting on Orbital Liabilities, Insurance, Charging and Sustainability

The UK Space Agency has been grappling with such policy questions with input from sector experts and the Civil Aviation Authority (CAA) as the UK's spaceflight regulator; having undertaken a consultation on orbital liabilities, insurance, charging and sustainability. Such consultation has been carried out with reference to the UK National Space Strategy which sets out the high-level, long-term framework for the UK's ambitions for the space sector.

The consultation was issued on 14 September 2023, with section one responses required by 26 October 2023, and section 2 and 3 responses required by 5 January 2024 (extended from 7 December 2023), when the consultation closed. The UK Space Agency hosted a number of plenary sessions which summarised the content of the consultation and sought initial feedback from stakeholders.

Wider Context and Background

Liability resulting from space activities is complex.

At a high level, under the 1972 UN Convention on International Liability for Damage Caused by Space Objects (Liability Convention), the UK Government is ultimately liable for damage to the persons or property of other states caused by the space activities of its nationals or caused by such activities carried out from its facilities or territory. This means that another state suffering damage as a result can bring a claim against the UK Government.

In relation to damage on the surface of the Earth and to aircraft in flight, the liability to pay compensation is absolute which means that the state bringing the claim would not need to prove fault. The Liability Convention therefore provides foreign nationals with the ability (via their own governments) to seek compensation from the Launching State for damage or loss without having to prove fault. In relation to damage in space, the liability is fault-based, and the Launching State is liable only if the damage is due to its fault or the fault of persons for whom it is responsible.

Under the Liability Convention, a Launching State is:

• a State that launches or procures the launching of a space object;
• a State from whose territory or facility a space object is launched.

Via the Outer Space Act 1986, the Space Industry Act 2018 (alongside the Space Industry Regulations 2021), and the licencing regime, the UK Government has, to date, sought to manage or offset its potential liability by:

• reducing the risk of collision via licencing and compliance procedures imposed by the CAA;
• requiring an indemnity from licenced operators for claims presented to the state (which the UK Government has confirmed will be subject to the limit on liability contained in the licence issued by the CAA); and
• requiring a minimum level of third-party liability insurance cover (as a condition of the licence issued by the CAA, and which usually aligns with limit on liability referred in relation to the indemnification of the UK Government referred to above).

Overview of the Consultation

The UK Space Agency consulted on a number of proposals relating to orbital liabilities, insurance, charging and sustainability.

Setting and Developing Variable Liability Limits

The UK Space Agency has proposed to move to a variable liability limit approach with respect to the requirement to indemnify the UK Government for claims made against it in relation to orbital operations. Such variable liability limit would range from a minimum value of zero and to a maximum of GBP50 m. The UK Space Agency consulted on a proposed two-stage approach to determine such liability limit for each satellite:

• Stage 1 – Determining the baseline liability limit – this stage would determine a baseline limit of liability which would be based on the activity being undertaken and the orbit in which the activity is to take place. For higher risk missions, the CAA may set the liability limit and insurance amount at a higher level.

• Stage 2 – Sustainability – this stage would then assess the proposed mission against a series of sustainability aspects (and complement the CAA's independent safety regime). The score for this stage would then determine whether the stage 1 baseline liability limit should be reduced, increased or remain the same. This stage would focus on early adoption of regulatory requirements, and promotion of sustainability including by:
• minimising risk through design – including via manoeuvrability, trackability, and compliance with standard guidelines (in relation to sustainability, and dark and quiet skies);
• minimising potential for debris during operations – including data sharing and engagement with other operators to reduce risks of collision in orbit;
• minimising risk post-operations – including active debris removal, and safe de-orbiting/end-of-life processes; and
• use of third-party providers to reduce risk (for example, in relation to the detection of potential collisions in orbit).

Moving to a variable liability approach to make the limit on liability proportionate to measures that operators adopt from a sustainability perspective should help to incentivise reduced debris creation and help to minimise the resulting impact on the orbital environment, which will in turn help to reduce costs/exposure to operators, and could also result in reduced insurance premia; thereby, assisting with the commercial viability of future missions.

No Unlimited Liability

Section 12(2) of the Space Industry Act 2018 states that an operator licence “may” specify a limit on the amount of the licensee's liability in respect of the activities authorised by the licence. The consultation clarifies that the UK Government recognises that changing “may” to “must” in section 12(2) must be considered and that it is considering options in this respect to ensure that no operator faces unlimited liability. This will provide important clarity to operators regarding their potential exposure.

Insuring Risks and Alternative Insurance Models

Insurance is a significant consideration for operators when considering risk mitigation and costs associated with the launch of new missions.

Third Party Liability insurance is also mandated in UK licences issued by the CAA, and, as such, the cost, availability and level of insurance required is key to the market and viability of future missions. Given the nature of orbital risks (particularly in light of current and projected orbital congestion and resulting changes in risk profile), questions have been raised about the insurance market's appetite to insure such risks.

A number of potential alternatives to the current approach to providing Third Party Liability cover on a per-operator basis were presented for consideration in the consultation, including:

• Mutual model
• Decommissioning bonds
• Government “space” bond
• Corporate bonds
• Escrow account
• Options to increase space insurance market capacity
• Catastrophe bonds
• ATOL-type scheme
• Collective insurance policy (purchased either by a space sector body or the UK Government)

The UK Space Agency also posed questions in relation to end-of-life and re-entry insurance policies, given that these insurance policies are relevant to potential future liabilities and the sustainability agenda, and proposals in relation to the waivers of insurance requirements in relation to particularly low risk or innovative missions in order to reduce costs/exposure for operators in relation to such missions.

Charging for Orbital Operator Licences

Charging for orbital operator licences is enabled by law given that licencing, and the subsequent monitoring of spaceflight and associated activities, results in a cost to the CAA. The current fee for a single orbital licence application is GBP6,500. The consultation outlines a proposal whereby the UK Government would apply a variable refund to the fixed fees currently charged by the CAA for orbital operations licences as a means of taking into account the variable liability limit referred to and, thereby, the sustainability aspects of the proposed mission, for example. The UK Space Agency has sought views on this approach. This approach would also be applied to constellation operators who already benefit from an existing refund scheme.

Proposals such as this which largely target reducing costs and/or exposure are is likely to assist in improving the commercial palatability of launching start-up/particularly innovative missions from the UK.

Providing UK Leadership on Space Sustainability

The UK Government has proposed developing a Space Sustainability Roadmap needed to reach an overarching space sustainability goal for 2050 and a UK space sustainability concept to share current and future thinking, and pose related questions; noting that international co-ordination and co-operation will be needed (including through the UN COPUOS). The UK Space Agency has sought views on the development and establishment of Space Sustainability Roadmap and UK space sustainability concept, including, for example, in relation to the viability and feasibility of targets for debris removal.

There are several policy drivers for this, including:

• the current and projected congestion in orbit – resulting in increased importance of tackling debris creation (by mitigating related risks via, for example, manoeuvrability/collision avoidance, and space traffic management) and removal of debris currently in orbit;

• investment and insurance decision-making - future investment and insurance in the UK space sector is intrinsically linked to the space sustainability agenda given that ESG guidelines are increasingly underpinning commercial decision-making, and given the nature of the high-value assets which are being and are likely to be launched (which cannot be easily de-orbited and replaced); and

• emerging commercial models and markets in the space sector – in order to reduce risks of collision in relation to assets in orbit, and to maintain high-value assets in orbit, it is expected that the commercial models and markets relating to in-orbit servicing and active debris removal will develop in the coming years. This is likely to be accelerated as a result of the development of other commercial models and markets in the sector, including in relation to in-space manufacturing, space-based energy and resource extraction, and on-orbit mission launches (likely to enable innovative missions - for example, space-based solar missions).

Encouraging sustainable commercial ventures may also assist in ensuring better availability of policies and greater confidence from the insurance market as risks are mitigated or otherwise better understood, which is likely to result in reduced insurance premia in the longer term.

Conclusion and Next Steps

The issues raised in the consultation are inextricably linked, and the proposals posed by the UK Space Agency are clearly intended to provide a holistic solution to current and future concerns of stakeholders in the sector.

How these issues are ultimately addressed will be pivotal to the UK and international space sectors. Although the proposals in the consultation demonstrate how seriously the UK Government is taking such issues, whether such proposals, however, go far enough to address such issues and the concerns of stakeholders in the sector, and whether, in light of, for example, the recent leap-forward in the areas of AI and robotics, these proposals will be implemented in an effective way to quickly enable future missions to launch from the UK is yet to be seen.

At this point, it is very much a case of watch this “space” for the sector whilst such significant decisions are considered, made, and implemented.

The UK Government intends to issue its response to the consultation early in 2024. Subject to feedback during the consultation, a timeline for implementation of proposals will be outlined in the UK Government's response.

Further Information/Resources

Space is inherently global and complex. DLA Piper has a global team of lawyers that can advise on the whole lifecycle of such projects which are strategically placed around the world to provide the necessary breadth and depth of experience – from the commercial structuring of the transaction, procurement, design and build of the assets, transport and launch of those assets, exploitation and operation of such assets in orbit, through to end-of-life/de-orbiting such assets.

Please contact Louis Head if you have any questions, or if it would be useful to discuss anything further.

This publication is intended to be a general overview and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept not responsibility for any actions taken or not taken on the basis of this publication.