The spaceflight industry in the UK is taking off. Spaceports located in Cornwall, Wales and Scotland are planning several rocket-launches in 2022. Plans are underway to develop a total of seven operational spaceports in the UK by 2025, reflecting the goal of the UK government's Space and Innovation and Growth Strategy to capture "10% of the worldwide space market by 2030" – a market currently worth around USD $400 billion and anticipated to triple to USD $1.4 trillion by 2030.
The UK government's commitment to advancing spaceflight over the last decade is quickly becoming a reality. As a result, in 2018, the UK government issued ground-breaking spaceflight laws with the Space Industry Act 2018 (SIA) and subsequent statutory instruments, to regulate space-faring activity in the UK and help space companies navigate this unchartered territory.
In this article we look briefly at the current legislative framework that governs UK spaceflight and some of its key features which may affect investors, in particular, issues around insurance, liability and indemnification.
Overview of the UK regulatory framework
What is the SIA?
The SIA lays the legal framework for the regulation of space-faring activities carried out from the UK, including launching or procuring the launch or the return to Earth of a space object or of an aircraft carrying a space object; operating a space object; or any other activities in outer space (Space Activities).
The SIA enables the Civil Aviation Authority (Regulator) to award three types of licences for space related activities in the UK:
- operator licences (required to authorise a person carrying out a broad range of spaceflight activities, including launching a spacecraft into orbit, operating a spacecraft in orbit and returning or landing a spacecraft)
- spaceport licences (required for operation of a 'spaceport' - a site where spacecraft or carrier aircraft are launched or will be launched; or a site where controlled and planned landings of spacecraft take place or will take place), and
- range control licences (required for the provision of range control services for Space Activities from a designated site, including tracking, surveillance, boundary control and other activities defined as 'range control services' under the SIA).
The SIA explicitly prohibits any person or entity from either carrying out space-faring activities or operating a spaceport in the UK without a licence and provides that any Space Activities carried out from within the UK without the required licence, or, any false statement made in order to obtain a licence, will be considered a criminal offence and could lead to a fine or imprisonment for a term not exceeding two years, or both.
The SIA further sets out the duties and powers of the Regulator and how they should be exercised – that is, with the aim of securing public safety.
The SIA, the OSA and other legal instruments
The SIA, which came into force in July 2021, works in conjunction with the Outer Space Act 1986 (OSA), the UK's first domestic legislation regulating space-faring activities.
The OSA requires entities planning any Space Activities to obtain a licence granted by the Secretary of State before doing so. The OSA also establishes the UK Registry of Outer Space Objects (UK Registry), in line with its international obligations under the United Nations Convention on the Registration of Objects launched into Outer Space 1974. The UK Registry is maintained by the UK Space Agency and registers all space objects that have been launched by the UK, or where the UK has procured the launch of space objects from third parties.
Going forward, the OSA will continue to regulate space-faring activities by UK entities carried out overseas, while the SIA will govern all Space Activities carried out from within the UK.
Although the OSA and the SIA provide a useful framework for governance, several statutory instruments have recently been enacted under the SIA to provide further guidance for space-related activities in the UK, including:
The UK government remains focused on building its spaceports and making the UK a global destination for companies looking for greater flexibility in choosing vertical or horizontal launches and for lower cost launches.
Key features for companies and their investors: insurance, liability and indemnification
The SIA governs important points of consideration for participants operating in the UK's spaceflight industry – particularly insurance requirements and the liability and indemnification obligations of licensees.
Insurance requirements
The SIA contains powers enabling regulations to be passed requiring licence holders to have insurance to cover specific risks and liabilities.
If insurance requirements are prescribed in individual licences, these may specify:
- matters to be covered by the insurance policy
- matters to be excluded from cover, and
- the amount of cover required.
These prescribed requirements will vary depending on the Space Activities being undertaken. For example, an operator licensee and a spaceport licensee will have varying coverage requirements based on their risks and performance requirements.
This insurance requirement is included to ensure a sufficient amount of coverage is available for any event of damage caused by the licensee.
Liability and indemnification
Under the United Nations Convention on International Liability for Damage Caused by Space Objects 1972 (Liability Convention) a State from which a launch takes place is ultimately liable to pay compensation for any damage to another State's nationals if the launching States' Space Activities is the cause of damage.
Under the SIA, the UK government's liability under the Liability Convention and any government liability connected to domestic launch activity, is mitigated by requiring operator licence holders to indemnify the UK government for any claims brought against it in respect of damages carried out by an operator licence holder.
The SIA also imposes strict third-party liability on operator licence holders in respect of damage caused by their respective Space Activities in the UK. This means that, in principle, any third party who suffers damage as a result of the operator licence holder's Space Activities in the UK does not need to prove fault (similar to the strict liability standard under the Liability Convention), subject to specific exclusions referred to below.
Limitations on liability
Despite the strict third-party liability standard imposed on the operator licence holders, their liability is limited in two ways under the SIA and the Space Industry Regulations 2021/798 (SIR).
Firstly, the SIA limits the application of strict third-party liability by applying it only to those deemed to be the 'uninvolved general public', that is, those who are not involved in Space Activities. This follows a policy decision that individuals who actively engage in Space Activities will have been made aware of risks associated with such activities (ie by way of signing informed consent forms before being permitted to participate in them). Although these individuals are still permitted to make claims against an operator licence holder for any damage or injury suffered, unlike the 'uninvolved general public', they would have to prove fault (Regulation 218 of the SIR).
Second, the SIR requires the Regulator to specify a limit in liability in any operator licences issued in respect of injury or damage arising out of Space Activities (Regulation 220 of the SIR). The extent of liability and the level of insurance cover available will both be important considerations for many commercial participants and their investors, as this could impact their competitiveness within the UK spaceflight industry.
In 2021, the UK Space Agency conducted research and concluded that it would not be possible for launch operators to obtain insurance for unlimited liability; and commercial entities would find it challenging to raise finance if they held unlimited liabilities. Therefore, the SIA and the SIR offer assurances to UK investors that they will not face unlimited liability and unlimited strict third-party liability.
We anticipate the SIA and associated regulations will help expedite the development of the spaceflight industry as they offer clarity and guidance for commercial entities and investors looking to participate in Space Activities from within the UK.
We continue to monitor this space and report on relevant regulatory updates.
