Christmas Cheer from the UK Space Agency - A Cap on Unlimited Indemnity

Perhaps with a not-so-gentle nudge from the recent UK Space Innovation and Growth Strategy work, the UK Space Agency (UKSA) has published the Government's response to its May 2012 consultation document entitled ‘Reform of the Outer Space Act 1986’. The publication also summarises the 15 responses received to the consultation.

The Government’s response will be welcomed by the UK space industry; the Government has decided to action the proposal to cap the unlimited indemnity in the Outer Space Act to €60 million. More consideration is to be given by the Government, however, to waiving the capped liability and insurance requirements for the in-orbit operation of CubeSats.

Unlimited Indemnity

The Outer Space Act 1986 (OSA) regulates individuals and organisations from the UK, the Crown Dependencies and the Overseas Territories who launch or procure the launch of space objects, who operate space objects, and/or who conduct any activities in outer space. It aims to ensure compliance with the UK’s international obligations in relation to outer space through a licensing system administered by the UKSA.

Section 10 of the OSA requires regulated individuals and organisations to provide an unlimited indemnity to the UK Government against “any claims brought against the government in respect of damage or loss arising out of activities carried on by him to which this Act applies”. This seeks to mitigate risks to the UK Government under the UN Liability Convention, which makes the UK State internationally liable for third party costs for accidental damage arising from UK space activities.

UK space operators have long argued that the unlimited indemnity required under Section 10 OSA should be capped. It is not, in general, reflected in the legislation of other space-faring nations, so poses a competitive disadvantage to UK companies. It can also be an issue when seeking to raise finance.

The UK Government responded to these arguments in 2011 by proposing in its Government Growth Review to cap the Section 10 indemnity. The May 2012 consultation asked stakeholders to give their views on this proposed change. Most of the 15 respondents to the consultation were positive about the benefits of capping the unlimited liability requirement for most missions.

CubeSats

Respondents to the May 2012 consultation were separately asked to comment on the benefits of waiving the liability cap for the in-orbit operation of CubeSats that meet specific criteria. They were also asked to give their views on whether the operators of certain CubeSats should be exempt from the requirement usually placed on those regulated under the OSA to obtain at least €60 million of third party liability insurance for the satellite’s launch and in-orbit phases.

The responses to these questions were much more varied, and the UK Government has stated that it must consider its policy regarding the treatment of CubeSats and nanosatellites in more depth before making any related regulatory changes.

Next Steps

The Government will proceed to cap the liability requirement to €60 million for the majority of missions by way of a Legislative Reform Order (LRO). The LRO may give the Secretary of State powers to vary the liability limit in the future. By using an LRO, the UK Government will ensure that future changes to the liability cap for the majority of missions can be implemented without the need to amend the OSA.

The unlimited indemnity has long been the cause of the UK being deemed to be "space unfriendly". With this change, and the success of the IGS work - it is clear that the UK is showing that it is open for business, inward investment and is seeking to foster a competitive regulatory environment.

For further information, please contact the author below or refer to:

UK Space Agency, "Reform of the Outer Space Act 1986: Summary of responses and Government response to consultation" (6 December 2013) (please click here for link).