Insights / December 3rd, 2019

Crash in Space – who pays?

If you have seen the movie Gravity, you will have seen (in a Hollywood sort of way) that a small wayward object can cause a lot of catastrophic damage in space, not to mention the loss of the George Clooney character and most of his astronaut comrades. Satellites and space vehicles don’t come cheap so if someone damages or destroys one, the owner will want to know who is liable for the loss. Similar questions will arise in relation to terrestrial damage caused by objects falling from space.

There is so much equipment circulating the planet that space near us is getting crowded. It seems likely that sooner rather than later, there is going to be a serious and very expensive accident. One of the first questions will be ‘who pays?’.

Take out Insurance

In 1972, the Convention on International Liability for Damage Caused by Space Objects, more commonly known as the ‘Liability Convention’, entered into force. This treaty, which now has 96 State Parties, outlines how compensation is to be paid between countries when an accident takes place in outer space or when a satellite, rocket or other space object causes damage on the earth. As mentioned in our first insights Space Law... its a real thing, at international law, countries bear the financial cost of accidents involving their nationals and companies. Domestic law across the world becomes an incredibly important compliance aspect for operators.

Australia’s Space Activities Act was introduced in 1998. Its two primary objects were to ‘provide for the payment of adequate compensation for damage caused to person or property as a result of space activities’ and to implement Australia’s international obligations. A key mechanism was the imposition of insurance requirements. Anyone subject to the legislation was required to procure insurance on specific terms before a launch permit was granted, an approach used in countries such as the United States and United Kingdom. This insurance obligation is an essential component of domestic laws across the globe today.

The 1998 Act has been recast as the Space (Launches and Returns) Act 2018 (“Act”), the Australian law applicable to space activities conducted by Australian nationals and companies locally and overseas. The Act expresses a series of rules to govern how financial compensation is to be paid, who pays compensation and who incurs liability in the case of an accident.

Insurance: Who, What, When and How Much?

Australians launching space vehicles from Australia or overseas or contributing to the kit being launched, must insure both themselves and the Commonwealth of Australia for $100 million for the launches and the return of space objects to Australian territories. This headline number plays an important role, with the Federal Government underwriting claims for damages that exceed this value. This effectively limits the maximum liability for an Australian launch licence holder to $100 million, provided it operates in compliance with the Act and any licence it holds. The maximum compensation the Commonwealth of Australia will pay as compensation for damage under the Act is $3 billion.

There are a series of complex and lesser known provisions that limit the ability for third parties to bring actions against operators except in compliance with the Act. The Act mandates exclusive jurisdiction of the Federal Court and Federal Circuit Court over claims for damage caused by space objects. A third party making a claim for loss or damage must bring the claim against the launch licensee.

The Australian legal regime only covers those activities licenced by Australian authorities. When an Australian individual or company is launching overseas, the liability-for-damage issues increase in complexity, requiring consideration of local and international legal frameworks. This is in addition to the complex contracts that operate between launch service providers, contractors, brokers and insurers. Players in this space (bad pun) must navigate and mitigate the effect of the intricate liability apportionment provisions in Australian and international laws that will come into effect following any incident during space-related operations.

Unfortunately, there is no easy answer to ‘who pays for the damage?’. Contact us if you would like to discuss this in more detail.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.