Testimony of Pamela L. Meredith: The Commercial Space Act of 2003 (part 1)
H.R. 3245, “COMMERCIAL SPACE ACT OF 2003”
BEFORE THE
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
Testimony of
Pamela L. Meredith
Co-Chair, Space Law Practice Group
Zuckert Scoutt & Rasenberger, L.L.P.
November 5, 2003
1. SHOULD THE GOVERNMENT REGULATE HUMAN SPACEFLIGHT?
IF SO, WHAT SHOULD THE PUBLIC POLICY OBJECTIVES (E.G.,
ENCOURAGING DEVELOPMENT OF THE INDUSTRY, PROTECTING
THIRD PARTIES, PROTECTING PASSENGERS, ETC.) OF THAT
REGULATION BE AND HOW SHOULD THEY BE BALANCED?
Summary Answer: The government should regulate commercial human spaceflight. The
Commercial Space Launch Act of 1984, as amended and recodified1 (“CSLA”), provides
an appropriate general framework for the regulation of human spaceflight. Some revision
of the act is desirable to clarify that the CSLA applies to human spaceflight and necessary to
establish reasonable safety and liability regimes for human spaceflight.
Current Regulation of Commercial Space Transportation
The Department of Transportation, and by delegation the Federal Aviation Administration’s
Associate Administrator for Commercial Space Transportation (“FAA/AST”),2 licenses
and regulates launches and reentries3 under the CSLA.4 The FAA/AST licenses and
regulates launches and reentries “[c]onsistent with the public health and safety, safety of
property, and national security and foreign policy interests of the United States . . . .”5
Initially, the FAA/AST’s authority applied only to launch operations. The authority was
extended by a 1998 amendment to the CSLA to include reentry operations.6 The purpose
of the amendment was to “establish a statutory framework for the licensing of commercial
reentry activities . . . .”7 Prior to the adoption of that amendment, this Committee noted:
“Currently, there is no licensing procedure to conduct reentry from space. Such reentry is vital if new technologies in reusable launch vehicles are to be exploited and the opportunity
to conduct commercial experiments in space for return to Earth is to be taken.”8
It is not entirely clear that the FAA/AST’s licensing authority under the CSLA extends to
human spaceflight. There is no explicit mention or clear embrace of humans, whether crew
or passengers, in the CSLA. At the same time, there is no prohibition on the licensing of
humans. The FAA/AST appears to have taken the position that it has the authority to
license human spaceflight.9
A license under the CSLA is required “to launch a launch vehicle . . . or to reenter a reentry
vehicle.”10 Launch means “to place or try to place a launch vehicle or reentry vehicle and
any payload from Earth (A) in a suborbital trajectory; (B) in Earth orbit in outer space; or
(C) otherwise in outer space . . . .”11 A “payload” means “an object that a person
undertakes to place in outer space by means of a launch vehicle or reentry vehicle . . . .”12
While the term “payload” does not include humans, the definition of “launch” does not
preclude humans.
The Need to Regulate Commercial Human Spaceflight
There are at least two reasons why the government should, or would want to, regulate
commercial human spaceflight. First, the Treaty on Principles Governing the Activities of
States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial
Bodies13 (“Outer Space Treaty”), to which the United States is a party, provides that States
“bear international responsibility for national activities in outer space, including the Moon
and other celestial bodies, whether such activities are carried on by governmental agencies or
by non-governmental entities . . . .”14
The “activities of non-governmental entities . . . shall require authorization and continuing
supervision . . . .”15 The treaty does not distinguish between manned and unmanned flight.
The treaty does not specify the kind or degree of regulation required; rather it leaves that to
each State party to decide with respect to its national space activities.
Second, there are public policy reasons for regulating commercial human spaceflight. The
government has an interest in ensuring that such flight is consistent with fundamental public
policy objectives, such as public safety, national security, and foreign policy interests of the
United States. This Committee made note of precisely these public policy concerns when
adopting the CSLA:
Government supervision over the activities of private parties who
provide commercial launch services must be exerted to safeguard life
and property, to prevent actions that would jeopardize national
security and foreign policy, and to ensure that U.S. treaty
obligations, such as those in the Outer Space Treaty, are met.16
While it may be clear that some government regulation of commercial human spaceflight is
in order, questions remain as to when to regulate; how to regulate; and how much to
regulate. The answer to the first question depends on the state of the commercial human
spaceflight industry. In other words, how imminent is commercial human spaceflight? The
issue of how and how much to regulate depends to a large extent on the policy objectives
the government seeks to achieve. It also depends on the general philosophy and approach
to regulation of high technology commercial endeavors.
Public Policy Objectives of Commercial Human Spaceflight Regulation
The policy objectives of the CSLA are to: 1) “promote economic growth and
entrepreneurial activity through the use of the space environment . . . ;” 2) “encourage the
United States private sector to provide launch vehicles, reentry vehicles, and associated
services . . . ;” and 3) provide for licensing and regulation of launches and reentries
consistent with “the public health and safety, safety of property, and national security and
foreign policy interests of the United States.”17
These policy objectives also support human spaceflight. To accomplish these objectives
with respect to human spaceflight, the following key ingredients of human spaceflight
regulation should be considered:
- The CSLA requires the licensee to enter into cross waivers of liability with its customers whereby each party agrees not to sue the other and to assume responsibility for loss or damage it sustains and for injury, loss or damage sustained by its employees.18 The licensee and customer must each extend these waivers to their respective contractors and subcontractors involved in launch/reentry services requiring them not to sue the other party or the other party’s contractors and subcontractors.19
- The CSLA requires the licensee to obtain third party liability insurance in an amount stipulated by the FAA/AST.20 This insurance must protect not only the licensee, but also the United States, the licensee’s contractors and subcontractors and the customer, as well as the contractors and subcontractors of the customer.21
- The CSLA provides that indemnification is available against third party claims above the insured amount, subject to certain conditions.22 See question 2, below.
Should a passenger be required to sign a liability waiver by which it relinquishes its
rights to sue the licensee and other launch participants assuming the passenger is
injured?23 The benefit of such a waiver would be that the passenger could not get sued
by the licensee or other launch participants. Currently, launch customers, which are
required to sign waivers, protect themselves through insurance. Is it reasonable to
expect passengers to take out life insurance? Would such insurance even be available
(at a reasonable price) for a risky activity such as spaceflight? Or should the licensee be
required to indemnify the passenger through limited “carrier” liability?
Should crew members be required to sign liability waivers? Assuming crew members
are the employees of the licensee, such employees are not now required to sign waivers.
While the employees are not full beneficiaries of the waivers, they are afforded some
protection.24 Precisely how far this protection extends and whether it would be adequate
is not entirely clear.
Should passengers be considered third parties and, thus, beneficiaries of the licensee’s
third party liability insurance in the event of an accident resulting in passenger injury or
death? If not, should the passenger be protected as an additional insured from claims by
third parties? Should the passengers be entitled to CSLA indemnification? Or should
the licensee be required to indemnify the passenger through limited “carrier” liability?
The same questions apply to the crew. Assuming crew are employees of the licensee,
the FAA/AST does not consider them third parties.25
Minimal regulation. Private industry is best served by minimal regulation, i.e.,
regulation only as necessary to serve essential public policy objectives. This is
especially true for evolving high technology industries, such as, space transportation.
Excessive regulation can stifle technological development. The technology should drive
the regulation, not vice versa. The CSLA espouses this approach. It provides that
launch and reentry should be regulated “only to the extent necessary . . . to ensure
compliance with international obligations of the United States and to protect the public
health and safety, safety of property, and national security and foreign policy interests of
the United States.”26
2. SHOULD THE GOVERNMENT OFFER INDEMNIFICATION FOR
COMMERCIAL HUMAN SPACE FLIGHT, AND IF SO, AGAINST WHAT
SORTS OF LIABILITY? HOW SHOULD ANY INDEMNIFICATION
RELATE TO EXISTING POLICIES AND INTERNATIONAL TREATIES?
Summary Answer: There appears to be no reason to treat a human spaceflight differently
than unmanned flight as far as indemnification of the licensee and its contractors,
subcontractors, and customers and the customers’ contractors and subcontractors are
concerned. However, whether the passenger and crew should be entitled to indemnification
depends on the broader liability regime selected for these individuals.
International Treaty Obligations
The United States may be held internationally liability for damage caused by launch vehicles
or their payloads, or the component parts of launch vehicles or payloads, under certain
conditions. This liability is imposed by the Outer Space Treaty27 and the Convention on
International Liability for Damage Caused by Space Objects28 (“Liability Convention”)
and general principles of international law.
The Liability Convention provides that a launching state is “absolutely liable to pay
compensation for damage caused by its space object on the surface of the Earth or to
aircraft in flight.”29 Absolute liability means that it is not necessary to prove fault. “In the
event of damage being caused elsewhere than on the surface of the Earth to a space object of object of another launching State,” liability is based on fault.30
Liability rests with the “launching state,” which is defined as the State “which launches or
procures the launching of a space object [or a] State from whose territory or facility a space
object is launched.”31
Liability under the Outer Space Treaty and the Liability Convention applies to the United
States, as a party to these treaties. The treaties do not impose liability directly on private
companies, such as launch companies and their contractors or customer. Nor do they
impose liability directly on private individuals, such as crew or passengers. On the other
hand, the United States may be held liable under the treaties for the activities of these entities
and individuals because the United States bears “international responsibility” under the
Outer Space Treaty for national activities in space.32
Needless to say, the Outer Space Treaty and Liability Convention are not the only sources
of liability for the licensee and its contractors, subcontractors and customers, or for
passengers. These parties could also be held liable under private tort law, even for damage
in a foreign country.33
Current Indemnification Regime for Commercial Space Transportation
The CSLA requires that a launch or reentry licensee obtain third party liability insurance (or
demonstrate financial responsibility) to compensate claims from third parties for the
“maximum probable loss.”34 The FAA/AST determines the amount of insurance
required.35 That amount shall not exceed $500 million.36 In practice the FAA/AST requires
considerably less. The amount varies from launch vehicle to launch vehicle.
The CSLA provides for indemnification for claims above the insured amount, subject to
certain conditions. Adopted as part of the 1988 Amendments to the CSLA, the
indemnification provision allows:
To the extent provided in advance in an appropriation law or to the
extent additional legislative authority is enacted providing for paying
claims . . . the Secretary of Transportation shall provide for the
payment by the United States Government of a successful claim . . .
of a third party . . . resulting from an activity carried out under the
license . . . .37
The limit of the indemnification is $1.5 billion above the insurance amount.38 The
indemnification is available for claims of a third party against the licensee or a contractor,
subcontractor or customer of the licensee, as well as a contractor or subcontractor of the
licensee’s customer.39
The rationale behind the indemnification was that there was not sufficient commercial
insurance available at a reasonable price to protect against third party liability resulting from
a catastrophic launch accident. Congress reasoned that “[t]he potential unlimited liability
that the commercial launch industry faces from third party claims is a deterrent to the
development of a domestic commercial [launch] industry.”40 Congress stated:
Commercial operators cannot be expected to provide hundreds of
millions of dollars in liability self-insurance to gain a license to
operate launch vehicles. Nor can domestic commercial operators be
expected to pay exorbitant premiums which would eliminate any
possible profit from these operations or make their services
noncompetitive with foreign launch services.41
The indemnification was intended to be temporary, that is, “to facilitate the transition of the
Nation’s launch industry from a Government activity to a commercial activity.”42 A sunset
provision in the CSLA provides that the indemnification expires unless the request is
received by December 31, 2004.43 The proposed legislation, H.R. 3245, provides for a three
year extension of the indemnification,44 a short horizon given the long lead time involved in
space projects.
Government Indemnification for Commercial Human Spaceflight
The question of whether the Government should indemnify human spaceflight is twofold.
First, the question is whether the current indemnification regime should distinguish between
manned and unmanned flight in terms of providing indemnification in favor of the types of
parties that currently benefit from the indemnification. These parties include the licensee
and its customer and their respective contractors and subcontractors. There does not appear
to be a reason to distinguish, as the rationale that supports indemnification of unmanned
flights applies equally to manned flights.
Second, the question is also whether passengers should benefit from the indemnification,
assuming they may be liable to third parties for any damage they cause. The answer to this
question depends on the broader liability regime selected for them. If they are required to
sign waivers, and if they are considered non-third parties and additional insureds under the
licensee’s third party liability insurance, it may be reasonable to extend the indemnification
to them. On the other hand, if they are considered third parties that may sue the licensee
and its contractors and subcontractors, or if they are otherwise indemnified through some
type of “carrier” liability, it may not make sense to also extend the indemnification to them.
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