Launching Space Objects: Issues of Liability and Future (Space Regulations Library Series)

LAUNCHING SPACE OBJECTS: ISSUES OF LIABILITY AND FUTURE PROSPECTS

SPACE REGULATIONS LIBRARY VOLUME 1

EDITORIAL BOARD Managing Editor PROF. R. JAKHU, Institute of Air and Space Law, McGill University, Montreal, Canada MEMBERS M. DAVIS, Ward & Partners, Adelaide, Australia S. LE GOUEFF, Le Goueff Law Office, Luxembourg P. NESGOS, Milbank, Tweed, Hadley & McCloy, New York, U.S.A. S. MOSTESHAR, Chambers of Sa’id Mosteshar, London, U.K. & Mosteshar Mackenzie, California, U.S.A. L. I. TENNEN, Law Offices of Sterns and Tennen, Phoenix, Arizona, U.S.A.

LAUNCHING SPACE OBJECTS: ISSUES OF LIABILITY AND FUTURE PROSPECTS by

VALÉRIE KAYSER

KLUWER ACADEMIC PUBLISHERS NEW YORK, BOSTON, DORDRECHT, LONDON, MOSCOW

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Table of Contents Chapter 1: Aims and Context 1.1 Overall Approach 1.2 Risk in Launching Space Objects, An Overview 1.2.1 What Type of Risk? 1.2.2 Risk Location 1.2.3 Communities Exposed 1.3 Approaches to Risk 1.3.1 The Engineer’s Approach 1.3.2 The Legal Counsil’s Approach 1.3.3 The Insurer’s Approach 1.4 Liability Risk Management: Looking to the Future Annex 1. Summary of Main Types of Space Insurance

1 2 3 4 7 7 8 9 11 12 14 17

PART I: THE LABRYNTH OF DAEDALUS Chapter 2: The International Legal Framework 2.1 Space Treaties and Resolutions 2.1.1 Main Principles of Space Law: the context Principle of freedom of exploration and use (i) Principle of non-appropriation (ii) (iii) Principle of applicability of international law Restriction on military activities (iv) Responsibility and liability (v) (vi) Common interest and common heritage principles (vii) International cooperation 2.1.2 Responsibility and Liability in Space Law (i) Entities subject to responsibility/liability States International organizations Non-governmental entities (ii) The compensable damage (iii) Type of liability (iv) Potential claimants (v) Procedure for claiming compensation 2.2 Examples of International Practice 2.2.1 Definition of Objects and Link to a State or Organization 2.2.2 Reference to the Liability Convention 2.2.3 Liability Between the Parties Annex 1. Summary Tables on the Space Treaties v

23 24 25 25 26 28 29 29 29 30 31 33 33 37 40 44 50 51 53 58 59 60 62 67

vi

Chapter 3: Domestic Launch Legislation and Regulations Legal Framework for Launch Services in the United States 3.1 3.1.1 Evolution Towards the Development of a Concise Regulatory Framework (i) Authority of US Government Agencies (ii) Practical consequences of the multitude of Agencies 3.1.2 Initial Steps Towards Improvement of the Regulatory Framework for Launches 3.1.3 The First Regulatory Steps Put to the Test 3.1.4 The Consolidation Phase: the Commercial Space Launch Act (CSLA) and the Associated Regulatory Framework (i) The Commercial Space Launch Act (ii) When is a license required? (iii) The licensing procedure 3.1.5 Liability and Insurance Issues (i) Liability and insurance under the CSLA (ii) The situation of private launch operators (iii) The CLSA Amendments (iv) Final Rule Concerning Financial Responsibility Requirements for Licensed Launch Activities (v) Final Rule Effective 21 June 1999 for Codification of 14 CFR 3.2 European Legal Framework: The Ariane Launch Services 3.2.1 French Approach to Space Legislation 3.2.2 Overall Legal Framework for the Ariane Launch Services (i) The initial phases of the program (ii) The commercialization phase 3.2.3 Institutional Aspects of the Legal Control Exercised Over Arianespace Control via shareholding in the capital of (i) Arianespace (ii) The role of ESA 3.2.4 Liability for Ariane Activities (i) Liabilities related to property of ESA and the participants (ii) Third party liability (iii) Contractual allocations

77 77 79 79 84 86 89 90 91 96 98 114 114 118 122 129 132 134 134 135 136 137 138 138 139 140 141 142 143

vii

Chapter 4: General Rules of Common Law and Civil Law Susceptible of Governing Liability for Launch Services 4.1 Common Law: General US Law Applicable to Liability for Launch Activities 4.1.1 Contract Liability (i) Liability for breach of contract (ii) Warranties (iii) Rules of contract interpretation 4.1.2 Tort Liability Negligence (i) Strict liability (ii) 4.1.3 Classical Means of Defense Defenses related to behavior or (i) characteristics of the victim (ii) Defenses related to limitation of the scope of the liability (iii) Defenses related to time 4.1.4 Cumulation of Contract and Tort Claims 4.1.5 Vicarious Liability 4.1.6 Recoverable Damages Recoverable damages in general (i) Punitive damages (ii) (iii) Liquidated damages, penalty clauses 4.1.7 Force Majeure 4.1.8 Judicial Procedure Aspects 4.1.9 A brief overview of US case law related to space activities Berg v. Reaction Motors Division (i) Smith v. Lockheed Propulsion (ii) (iii) Pigott v. Boeing (iv) Smith v. USA and Smith v. Morton Thiokol Lexington Insurance v. McDonnell Douglas (v) Appalachian Insurance v. (vi) McDonnell Douglas (vii) Martin Marietta v. Intelsat (viii) Hughes Communication Galaxy v. USA (ix) American Satellite Co. v. USA Lloyds of London v. McDonnell Douglas (x) 4.2 Civil Law: The Example of French Law 4.2.1 Contract Liability (i) Liability for breach of contract (ii) Warranty (iii) Rules of contracts interpretation

149

150 151 151 152 153 155 156 161 168 168 171 175 176 177 178 178 180 181 182 182

185 186 187 187 187 187 188 189 192 193 193 194 195 196 202 204

viii 4.2.2

4.2

Tort Liability (i) Provisions of the Civil Code: liability for fault and strict liability (ii) Product liability 4.2.3 Classical Means of Defense (i) Defenses related to the behavior of the victim (ii) Defenses related to the limitation of the scope of liability (iii) Defenses related to time Defenses available under the new product (iv) liability law 4.2.4 Cumulation of Contracts and Torts Claims 4.2.5 Vicarious Liability Specific types of liability for others (i) Towards a general principle of liability (ii) for others established by jurisprudence 4.2.6 Recoverable Damages (i) Recoverable damages in general (ii) Punitive damages (iii) Liquidated damages, penalty clauses 4.2.7 Force Majeure (i) Source in contracts and in torts Criteria to be met by force majeure events (ii) (iii) Effects of the force majeure (iv) Force majeure clauses 4.2.8 Judicial Procedure Issues Practice in Spacecraft Development Contracts: The European Space Agency 4.3.1 Applicable Law 4.3.2 Performance by Contractors and Control of Performance 4.3.3 Liability Provisions in the Contract (i) Liability of the Contractor concerning equipment, supplies and technical documents made available by the Agency (ii) Liability of the Contractor for damage caused to persons, goods or property (iii) Liability of the Contractor for infringments of the law and third-party rights (iv) Liability of the Contractor for performance of his subcontractors Res perit domo (v)

206 206 214 217 217 220 225 227 228 230 230 233 234 234 236 236 237 237 238 239 240 240 244 244 245 246 246 246 247 247 248

ix

4.3.4 4.3.5 4.3.6 4.3.7 4.3.8 4.3.9

Limitation of Liability 248 Penalty Clauses 248 Warranty and Product Liability 249 International Space Station Provisions 252 Liability of the Contractor in case of serious Breach 253 of Contract Settlements of Disputes 253 PART II.- ESCAPING THE LABYRINTH

Chapter 5: Issues in Liability Risk Management and Proposals De Lege Ferenda 5.1 An appraisal of the Legal Situation 5.1.1 A multitude of points of contact and an unadapted international legal environment 5.1.2 The Development of a Lex Mercatoria in the field of Launch Services 5.2 Methodology for our Further Discussions Harmonizing the Practice of Inter-Participant 5.3 Waivers of Liability 5.3.1 The Limitations of Inter-Participants Waivers of Liability Their validity is controversial in (i) certain legal systems (ii) Their validity may be contested in the absence of express acceptance (iii) They cannot exclude wilful misconduct and gross negligence (iv) They cannot exclude claims from individuals for bodily injury They do not always deal clearly and (v) consistently with consequential damages (vi) They are assessed in relation to the balance of the contract (vii) Their interpretation is strict (viii) Third-party liability allocations (ix) The relationship between inter-participant waivers of liability and product liability (x) Flow down requirements

257 258 258 260 261 262 265 265 266 267 268 268 268 269 269 270 273

x

5.4

5.3.2 Moving Forward with Inter-participant 278 Waivers of Liability Harmonization of inter-participant (i) 278 waivers of liability (ii) Clarification of the essential obligations of the launch provider and launch customers 280 (iii) The validation of the inter-party waivers 281 in the public order of States 283 The International Law Framework 5.4.1 The Outer Space Treaty and 284 the Liability Convention 285 (i) The current political atmosphere 287 Should we patch or should we review? (ii) (iii) The need for addressing liability issues 288 related to the launch of space objects 292 5.4.2 Issues and Proposals 292 The launching state: definition (i) 297 (ii) Liability of the launching State 297 (iii) Appropriate State (iv) Establishing the liability of the operator and legal channeling with respect to claims 298 by third-parties 300 (v) Licensing requirements 300 Actions in recourse between States (vi) 301 5.4.3 The Registration Convention Shortcomings of the Registration (i) 301 Convention (ii) Proposals for an efficient registration system to improve the security of determination of 302 the launching State 304 5.4.4 Conclusions on International Law Proposals

Chapter 6: Some Concrete Proposals -Harmonization of Inter-Participant Waivers of Liability 6.1 Inter-Participants Liability Covenants in States with Licensing Requirements (US Model) -Inter-Participants Liability Covenants for States without Licensing Requirements Implementation Arrangements for the Space Treaties 6.2 Proposed Protocol

307 307 309 325 335 336

CONCLUSIONS

347

BIBLIOGRAPHY

351

CHAPTER 1.- AIMS AND CONTEXT

The commercial launch business is fairly young and its opening to private companies is recent. It all started in the early 1980's when a few private operators found their way onto the launch market through their spirit of free-enterprise in the United States, or through the determination of a group of nations to achieve space autonomy in Europe. The trend has developed since then, with more operators, in particular from Russia and China, entering the launch market and the development ofnew launch facilities around the world. The result is that nowadays a number of private (or non-governmental) launch providers offer their services to those wishing to explore or exploit outer space.(1) This new market has brought with it the need for assessing and managing the legal environment of launching activities undertaken by non-governmental operators. The legal framework for launching activities is at the crossroads between a substantial body of public international space law developed since the 1960's, domestic laws applicable in general to the activities of any person or company in a given country, and, since the mid1980's domestic regulations specific to the launch business. Legal counsels advising launch providers, their customers and their respective insurers have been faced with an interesting challenge, which they perceived early as being significant for their community. P.D. Nesgos was thus concluding one of his articles, in 1989: “[...] the challenges facing the private practitioner regarding insurance and liability concerns in commercial space transportation are numerous. A practitioner must be attuned to the needs of an innovative commercial industry, involved in a high risk activity. Moreover, familiarity with a wide spectrum of relevant law - from international law to torts and contracts to regulatory law - is essential. Whether the practitioner represents the interests of the launch services provider, the launch customer, sub-contractors, insurers, or brokers, the fundamental concern is how to allocate and manage the many risks and obligations which arise from commercial launch activities. The solution is a complex risk management structure composed of contractually allocated responsibilities, insurance contracts and government indemnification. The proper implementation of this structure will help assure the future of safe and responsible

(1)

Information on launch companies, launcher manufacturers and satellite manufacturers can be found in : ESA Launcher Catalogue, ESA Publications, Looseleaf updated regularly D. Baker Ed, Jane’s Space Directory, 15th Edition (Coulsdon: Jane’s Information Group Limited, 1999) Jane’s online: (accessed 01/2001) D. Shirvanian Ed, European Space Directory, 14th Edition (Paris: Sevig Press, 1999). Andrews Space & Technology database on launchers online at: (accessed: 01/2001)

1

2 commercial launch transportation”.(2)

1.1.- OVERALL APPROACH The space business, in particular launch and its related activities, operates in a labyrinth of actors and norms, which makes the management of liability risk and exposure daunting and challenging. As an academic as well as a practitioner, we took up the challenge and attempted to bring a contribution to the field, both in academic and practical terms, in two main domains:

The analytical overview of today’s legal environment: The specialized literature has already discussed aspects of liability for space activities and for launches in particular, general and specific treaties, national regulations on launch licensing, litigation of liability cases in the space business, contractual and international practice. However, the overall picture of this global environment of legal norms and practices is not readily available, and the interested reader must find his way through a mass of scattered information, which is nowhere gathered in a synthesized form. Also, linkage between international and domestic norms and practices applicable to the space business, in connection to general domestic laws concerning liability, is a subject which has been only partially studied. We have tried to organize this information and relate its different facets to provide the reader with an overall view of the norms at play in this field of activity. Our aim is not to provide all the detail on each of these, but rather to develop them to the extent necessary for the reader to grasp their importance, their interactions, and their relative weight in an assessment of the liability risk attached to a particular situation. We have endeavored to provide references for further reading on the topics addressed, many of the references online, as Web-based information is nowadays an essential tool for the legal counsel.

The development of proposals to prepare for tomorrow’s challenges: The environment in which private launch providers operate today is highly complex. Readers familiar with international business or international relations, may wonder what makes this environment different from the one in which businessmen and legal counsels across the world find themselves daily. We believe that the space business is in a unique situation where the complexities encountered in classical international legal relationships are increased due to 1) the highly transnational nature of the space business in terms of actors (many firms are involved from many countries in one single endeavor) and effects (launch providers, customers, contractors and potential victims will often be of different nationalities), 2) the sheer number of interfaces involved in all respects (technical, managerial, legal, contractual or corporate), 3) the concentration of exposure and risk in a single launcher/payload package, and 4) by the magnitude of the damage which can be caused by this package in a short time frame.

(2)

P.D. Nesgos, “The Challenges Facing The Private Practitioner: Liability and Insurance Issues in Commercial Space Transportation” (1989) 4 Journal of Law and Technology, 21.

3 Our first aim is to highlight the complexities created by today’s environment, and point out the main areas where such complexities prevent a reliable liability risk management due to the lack of predictability as to the norms eventually applicable. This lack of predictability is primarily caused, in our view, by two main factors: the superposition of a variety of legal norms, which leave gaps in between the layers they constitute and contain ambiguous concepts, and the absence of organized and coherent practices, in particular in the area of contractual allocations of risks between launch participants. This is not helped by the quasi absence of litigation in the field, a positive sign, though it has the consequence that resolution of disputes is often arbitrary and that there is no unification in the interpretation of norms and the solution of similar issues. In view of these complexities, our second aim is to make a contribution to this field by suggesting ways to improve liability risk management and to make the overall legal environment more consistent. We have looked into possible improvements in two domains: the contractual relationships between participants in launch activities, and in public international space law, both of which require, at some stage, intervention of domestic legislation and regulations. Our suggestions are directed to the implementation of harmonized approaches in the contractual relationships between participants in launch activities, and a more practical acknowledgment by international space law of the role of non-governmental entities in the launch business, as an essential part of building a more efficient and predictable legal environment. None of the suggestions are easy to achieve, but we proposed a methodology for addressing them in an adequate forum. Our voyage through today’s legal environment, and tomorrow’s prospects, is meant to inform and aid in developing an awareness of issues regarding liability risk management approaches, provoke the thought process into challenging the reliability of one’s own liability risk management approaches, and convince that concerted effort must be applied to the development of common tools to achieve a better legal environment for launch and related activities. This book is an attempt to start and stimulate this process.

1.2.- RISK IN LAUNCHING SPACE OBJECTS: AN OVERVIEW Prior to moving into our main developments, this introduction will set the frame and describe the types of risks involved in the launch of space objects, the approaches which can be implemented to control risk, and the role of the legal counsel in this environment as well as his specific challenges. For most activities, half a century of practice normally leads to a decreased level of risk in their performance, as compared with their beginnings. However, this is not the case for space activities in general and for launch activities in particular. After years of experience, lift-off remains a stressful moment for the launch team, the customer, the insurers and, sometimes, the public at large. Launching objects into space is a frequent event nowadays, and rarely makes the prime-time news, yet it remains a risky event and this risk is of concern to the legal profession involved in launch activities, from its position of advising either the launch provider, his customers, the insurers and manufacturers. Launching activities should not be considered in isolation. Many activities contributing

4 to a launch, cannot be separated from it in the assessment of risk and its legal ramifications. The root of a particular risk is often found prior to the launch itself, in particular in the design, development and manufacturing of the objects concerned, such as the launcher, the satellite or payload, the adaptor equipment between the launcher and the payload, the equipment used for integration of the payload into the launcher, the launch facilities, ground control equipment and any other equipment taking part in one way or another in the launch activities. These risks weigh considerably on the nature and wording of the contracts entered into for the procurement or purchase of those products and services. Space activities are a technological domain, where the products involved are complex. The practicing legal counsel must develop awareness ofthe technical and operational activities and environments, and thereby the technical risk, which he will need to apprehend in his legal management and in the establishment ofthe legal documentation needed in support of the activities concerned.(3) Therefore, it is important, as a background, to briefly review the types of risks, their location, and those exposed.

1.2.1.- What Type of Risk? We will focus here on the technical risks associated to launch and launch-related activities.(4) Risk can manifest itself in different ways and at different stages of launchrelated activities: transportation of the payload or the launcher around the launch facilities, integration of the payload onto the launcher, transportation of the payload-launcher package to the launch pad, on the launch pad, during launch itself, injection on the transfer orbit, transfer to the target orbit, or in orbit during the life ofthe satellite. The risk can also take various forms: damage to the satellite or the launcher prior to launch, damage to or (3)

On the relationship between technology and law in space law, see: L. Perek, “The Scientific and Technological Basis of Space Law” in N. Jasentuliyana ed., Space Law, Development and Scope (Westport, Conn.: Praeger, 1992), at 175. We believe that legal counsels practicing in connection with space ventures can find significant advantage in actively developing their understanding for the technical aspects of the activities they participate in, for instance through attendance of seminars aiming at presenting space engineering to non-engineers. From his ability to develop awareness to these issues, will depend the professionalism and effectiveness of the legal counsel on the operational field in the area of space activities. For an overall technical presentation, see: P. Fortescue & J. Stark, Spacecraft Systems Engineering (Chichester: Wiley, 1995).

(4)

There are other risks which have to be taken into account by the operators of launch services and owners of satellites, often referred to as the political risks and the market risks. These are not specifically dealt with here. For further developments see P.L. Meredith & G.S. Robinson, Space Law: A Case Study for the Practitioner, Implementing a Telecommunications Satellite Business Concept (Dordrecht: Kluwer, 1992), at 250. Also, even though this will not be addressed in the present thesis, the practitioners will often be confronted with general legal risks such as customs and export controls, intellectual property rights infringements, etc. Some of these are addressed in the above referred book. See also, R. Bender, Launching and Operating Satellites, Legal Issues (The Hague: Kluwer, 1998) On export controls in particular, see H. Peter van Fenema, The International Trade in Launch Services, The Effect of US Laws, Policies and Practices on its Development (Leiden: H.Peter van Fenema, 1999) P.L. Meredith & S.P. Fleming, “US Space Technology Exports: The Current Political Climate” (1999) 27:1 Journal of Space Law, 35.

5 destruction of the satellite at launch or during orbit transfer, or reduction of the life of the satellite either because of one of the previous mentioned causes or because of its injection on an improper orbit leading, for example, to the need for orbit correction by use of the satellites motors, which will then prematurely use propellants normally needed for orbit correction during the lifetime of the satellite. The failure of the launcher upper stage, and the resulting failure to inject the satellite on the proper orbit, seems to be statistically one of the highest cases of failure. There are risks connected to the satellite itself which may also malfunction, leading to complete loss or reduction of life. Failed launch or malfunction of the payload may also cause damage to other satellites through interference, or worse, collision. There is a risk to persons and property in the vicinity of the launch operations, whether they are taking part into the launch operations, or are third parties and to the environment from the toxic products used as propellants, or if the payload carries dangerous products such as nuclear power sources. Another significant risk at all stages on orbit is space debris, which can cause significant damage to or total destruction of the launcher-payload package before separation or to the payload itself thereafter. And, of course, one has to bear in mind the risks related to the design, manufacturing and testing of payloads and launchers. The origins of technical risks are numerous and could be categorized under the following main headlines:

Complexity: Spacecraft are complex technological systems(5) and some functions on board are redundant to minimize the consequences of failures. This complexity generates a degree of risk. An interesting comparison has been made of the degree of complexity of different objects by comparing the order of magnitude of parts items constituting these objects. The following table summarizes this comparison(6): Item

Sewing machine

Order of magnitude of Number of parts

10

2

Television

Car

Jet airplane

Satellite

Launcher

103

104

105

105

106

The complexity of the launcher must be combined with the complexity of the satellite (payload) and of the associated ground infrastructure.

Technology: Although certain satellites and launchers are now built in series, they are nevertheless high technology products. They will always carry the risk associated with the use of such (5)

An idea of such complexity can be given by consulting the International Space Station Familiarization Manual which contains the technical description of the elements making up the International Space Station. Online: (accessed: 01/2001) For the European Laboratory on the International Space Station, see A. Thirkettle & J. Gülpen, Columbus: Europe’s Laboratory on the International Space Station (Noordwijk: ESA Publications, 1999), Publication Reference BR-144 One can also consult the Ariane 4 User Manual and the Ariane 5 Technical Information Booklet online: (accessed: 01/2001).

(6)

H. Yoshida, “Accidents of Space Activities and Insurance” (1993) 36 Colloquium on the Law of Outer Space [hereinafter, Colloquium], 221.

6 technology and the risk due to the absence of large scale statistics data which would allow for accurately predicting the behavior of certain equipment (for example, electronic components, elaborate metal alloys, or new software developments). There are new types of launchers or of satellites,(7) but even in proven launchers or satellite platforms, improvements and upgrades are regularly made which raise the technological complexity and add risk, in particular for maiden launches.

Environment: The launch environment is hostile. Sending a payload from Earth still requires that it must be perched on top of a powerful firework-type vehicle, which burns tons of propellant per second, generating tremendous forces and vibrations. The space environment is also very hostile and unusual: for example gravity and atmosphere are absent, radiation hits spacecraft and upset on-board computers, temperatures change from extremely hot to extremely cold, micro meteoroids hit the spacecraft, etc.

Human failure: Like in any activity, human failure plays a role at all stages of the process leading to the launch. Besides the classical mistakes, there are also failures due to the complexity of the system, design and technology involved, and the consequences of the psychological pressure which builds up in preparation for and during a launch campaign, where time is of the essence.(8)

The industrial risk: Defects in design, manufacture, testing, handling, can also happen, despite the strict monitoring procedures being implemented in space industry and space projects at all stages of the development, manufacturing and testing of the launchers and payloads.

These risks are more or less directly related to the problems often occurring during the launch itself. It appears that in the total number of anomalies affecting satellites, only about 5% are caused by the launcher, and the rest are related to the satellite itself(9). However, the risk associated to the launcher is potentially of higher magnitude than this figure leads to conclude, because of the virtually catastrophic consequences in extreme cases such as the explosion of the launcher on the pad or at lift off, possibly made worse by the presence of nuclear material on board. Besides these risks, which one could refer to as the direct risks, one must consider the consequential risks linked to failures, such as the financial risks resulting from loss of the (7)

Scientific satellites are not produced in series like telecommunications satellites and, although there is a practice to build at least two of each such satellite to take into account the possibility that the first one is destroyed at launch, this practice cannot be implemented in certain cases due to funding constraints.

(8)

The reader may get a feeling for such pressures by reading the Report of the Presidential Commission on the Space Shuttle Challenger accident, in particular Chapter V - The Contributing Cause of the Accident, Chapter VII - The Silent Safety Programme and Chapter VIII - Pressures on the System. Report to the President by the Presidential Commission on the Space Shuttle Challenger Accident, June 6th, 1986, Washington D.C.

(9)

See H. Yoshida, “Accidents of Space Activities and Insurance”, supra note 6, at 4.

7 payload and associated revenues, or resulting from the need for re-design and remanufacturing, delays suffered in subsequent launches, loss of confidence in the launch provider. The ripple effects can be considerable as a given launch may involve multiple payloads and the transponders of some of these payloads may have been leased. All of these risks have legal ramifications, in particular the exposure to liability for damage.

1.2.2.- Risk Location Different geographical locations are affected by the manifestation of the risks we have addressed above. A large part of the risk is concentrated on ground: during the development, manufacturing and testing, transportation, integration of the launcher and then of the payload into the launcher, and at launch. The latter is the time when the highest concentration of risk exists since events may lead, in extreme cases, to the destruction of the launcher and its payload as well as the property of the industrial contractors or the launch facilities, or the property of third-parties. And it is on ground that the risk of injury to persons, either participants in the launch or third-parties, is the highest. Airspace and outer space are also locations where risk is a concern: until injection on orbit, on orbit, and upon the return of space objects. The return of space objects creates a risk on ground and at sea and, in this case, it may not be possible to predict the precise location where the space object will impact Earth. Launching and its related activities are probably the most far reaching activities in terms of geographical impact. All locations are susceptible of being at risk due to these activities, and it is not always possible to completely predict and geographically delimitate the radius within which their effects can materialize. Development and manufacturing activities are more predictable from this point of view.

1.2.3.- Communities Exposed From the above developments, one can conclude that a group of virtually unlimited number and its associated property is exposed. This group is composed of natural persons, States, governmental organizations, private companies, and space agencies. However, the probability of exposure is mostly concentrated on those directly involved in the concerned space activity, and in particular those involved in the launch process. The next most exposed category, especially in terms of legal risk, are the developers and manufacturers of launchers and space objects. Entities exposed to risk are usually classified into the following summarized categories: - first party: the launch provider and his personnel, and the payload owner (customer) and his personnel. - second party: those who, while not included in the first party, are involved in the space activity. This category covers launch facility operators and associated personnel, as well as contractors of those first party.

8 - third party: these are the persons or entities not involved or connected at all to the space activities and launch operations. Although we are not dealing in detail with manned spaceflight here, one should not overlook the crews of manned spacecraft, who are on the front line of risk at launch, during flight and at landing. Data are reproduced here, showing the risk of space flight related fatalities in comparison to other activities:(10) Activity Person struck by lightning

Risk of fatal accident

per day

Industrial worker

per shift

Mine worker

per shift

Car driver or passenger

per trip

Scheduled airline passenger Military pilot Space crew Mountain climber Himalayas above 23000 ft

per flight per flight per mission per expedition

The safety of the flight crew is a complex matter, consideration of which ranges from the design and preparation of the spacecraft to the emergency escape systems both on the pad and in flight on board space stations.(11)

1.3.- APPROACHES TO RISK Whatever the risks are, and however complex their combination is, there are three main types of approaches for their management: - the engineer’s approach: reduce the possibility of the risk and mitigate the consequences of a materialized risk; - the legal counsel’s approach: assess and manage the legal risk associated to technical risks by evaluating the law applicable, providing for the legal framework for risk mitigation approaches, and allocating legal risk among the different participants to a given activity; the involvement ofthe legal counsel from the early stages of a project is essential; - the insurer’s approach: insure the portion of risk allocated to each concerned party, as far as it is insurable and insurance is available, based on the confidence (10)

J.H. Carver, “Factual Issues”, in K.H. Böckstiegel ed, Manned Space Flight, Legal Aspects in the Light of Scientific and Technical Development (Köln: C. Heymanns Verlag, 1993), 149, at 151.

(11)

See N. Jasentuliyana, “Legal Aspects of Human Safety and Rescue in Space”, in K.H.Böckstiegel Ed, Manned Space Flight, supra note 10, at 165.

9

of a sound technical and legal risk management of the insured.

1.3.1.- The Engineer’s Approach Launch vehicle and payload manufacturers’ primary interest is to technically reduce risks or to technically manage risks to ensure full success of the intended mission, even in cases where malfunction would occur in the launch vehicle or the payload. This requires stringent attention and discipline in the design and development phases of the spacecraft. Space agencies like the European Space Agency prescribe strict standards to their contractors in this respect(12), which are applicable to all activities from the start of the design until final acceptance and launch preparation, as well as for operations. These standards aim at obtaining the highest quality in all areas of work, and the structured control and decision-making with respect to choices made and exceptions agreed. These general standards are complemented by specific requirements prescribed for the conduct of each specific project (for example, management requirements, review requirements, verification requirements, product assurance and safety requirements). We can illustrate this with a few examples: A number of functions in a spacecraft have to be redundant, in particular when they are critical for the safe or reliable operation of the spacecraft. Exceptions to such redundancies are subject to numerous analyses to assess the risk taken by the deletion of a redundancy. Software has to be written according to very strict standards. Space software is not more complicated than in other types of applications but the complexity arises from the limitations on the computers placed on board spacecraft, and the types of functions of the software in particular those to be performed in real time. Electronic components used have to be resistant to radiations, to avoid the risk of malfunctions due to radiation hits and components of a lesser quality may be used under strict conditions(13) Only specific materials can be used, from a list of approved materials and deviating from this list requires demonstrating that the proposed material complies with a number of (12)

The ESA standards (PSS standards) can be found online < ESA, ESTEC: http://www/wsmwww /components/pss_overview.html> (accessed: 01/2001). The standards cover disciplines such as Product Assurance and Safety, Electrical Power and Electromagnetic Compatibility, Mechanical Engineering and Human Factors, Space Data Communications, Software Engineering, Management and Project Control, Operations and EGSE, Natural and Induced Environment, Control Systems, Ground Communications and Computer Networking. Each of these is in turn subdivided in lower level standards at an increasing level of detail. These standards are progressively replaced by the ECSS Standards, which are part of an effort of harmonization in Europe for standards in use in the space industry. They are elaborated by a group gathering industry and space agencies, in coordination with standardization organizations. The ECSS main levels of documentation are: Standardization policy document (ECSS-P-00) and Glossary of terms (ECSS-P-001), under which are the three main ECSS branches i.e: Space Project Management, Space Product Assurance, Space Engineering. More information on these standards can be found online at <ECSS Homepage: http://www.estec.esa.nl/ecss> (accessed: 01/2001).

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Space agencies operate systems for the specification, qualification and procurement of electronic, electrical and electro mechanical components (EEE Parts) for use in space projects. On the ESA system, see online <ESA, ESTEC: http://www.estec.esa.nl/qcswww/sccpage.html> (accessed: 01/2001). On the NASA system, see online (accessed: 01/2001).

10 criteria, for example in the area of flammability and production of toxic substances or gases. Manned spaceflight also requires the strict implementation of human factor standards which aim at making space equipment safe for use by astronauts by ensuring, for instance, that they do not contain any sharp edges or operations modes which could lead to injuries of the crew. Compliance with these standards, the quality of the work, and the safety of the design are controlled through a system of reviews and formal controls occurring at the various stages of the design, development and construction of the spacecraft. The major events in the manufacturing and testing of the spacecraft are also strictly controlled by a system of inspection points. A series of tests are prescribed to demonstrate that the spacecraft can tolerate the launch and space environments and meets all the prescribed requirements. The manufacturing processes are also prescribed and controlled and the staff performing them must, in certain cases, be trained and certified to perform specific operations, for example soldering particular alloys, welding, components coating and gluing, glasshandling. Certain manufacturing or integration operations have to be performed in stringent conditions of cleanliness. The standards of quality in the space industry are very high and are controlled by product and quality assurance audits conducted by the product and quality assurance authorities of the customer, and at all levels of the contractual chain.(14) Product and quality assurance authorities usually are granted an independent status in their organization, which helps to ensure the implementation of an adequate level of product, quality and safety assurance independent of the constraints of a specific project. The testing of a spacecraft is strictly controlled and test facilities are monitored to comply with stringent parameters. Rigorous procedures are applied during the performance of a test to avoid damage or accidents, and security measures are taken by the security services of the facilities concerned. As far as launching is concerned, detailed procedures are set by the launch authority for all activities taking place on the launch site. The order in which each operation occurs is strictly prescribed, as well as the conditions in which each phase can be initiated and performed. The launch itself is precisely regulated:(15) for example, the wind conditions are monitored prior to a launch and the launch may be postponed if the wind blows in the direction of populated areas (in case of accident, toxic products would be carried by the wind), all parameters of the launcher and launch complex are permanently monitored and, should any of these parameters exceed the margins prescribed, the countdown may be suspended. The type of standards described above are rather universal in spirit, although details may vary from one organization to another. This technical part is only meant as a background (14)

For additional information these aspects: M. Spada, “Quality Control in Production of Space Objects and Liability in Outer Space Law”, in G. Lafferranderie & D. Crowther Eds, Outlook on Space Law Over the next 30 Years, (The Hague, Kluwer, 1997), 191.

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For an example of a strict launch preparation monitoring, with the example of the Cassini-Huygens mission, see M.V. Frank, “The Decision to Launch: A Nuclear Risk Assessment of the Cassini Mission”, Proceedings of the Workshop on Risk Management, European Space Agency, ESTEC, 30 March - 2 April 1998, ESA Publications WPP-134, 243.

11 for the reader in view of the legal discussions in the following chapters, but the lack of international harmonization as regards standards should be noted. Lack of technical harmonization causes difficulties, and even disasters such as the loss of a recent mission due to miscalculations of orbit corrections caused by the fact that the two cooperating teams were working in different measurement units!(16) Many efforts have been made to achieve harmonisation in technical areas but much work still remains to be done.

1.3.2.- The Legal Counsel’s Approach Once the technical risks are identified, it is the task of the legal counsel to define the areas of risk from a legal standpoint. The final objective is that each participant in the activities concerned achieves a position to predict, calculate and mitigate its legal exposure. One of the fields where such work is most important is that of liability for damage caused by the activities concerned. The legal approach to liability in the domain of space activities has taken different forms. Initially, the rules governing such liability were developed within the frame of public international law. The main actors of space activities at the time were States and governmental space agencies or international organizations. This is why the first body of rules elaborated in this field (the early United Nations resolutions on principles governing outer space activities, the Outer Space Treaty and the Liability Convention) was drawn up under the auspices of the United Nations, and was that dealing with State responsibility for damages caused by space activities of States, and their non-governmental entities, and compensation for such damages. As cooperation increased between space faring nations, another regime of allocation of risk and responsibility was elaborated through a network of inter-participant waivers of liability clauses(17) applied in cooperation agreements, and in commercial agreements entered into by state entities providing launch services. These risk allocation clauses became common practice and were taken over by industry when the private launch market developed. They are often complemented by hold-harmless clauses.(18) There is a large variety in these clauses for the allocation of liability through contractual schemes involving cross-waivers, hold-harmless, but also sometimes through the definition of the (16)

“Mars Climate Orbiter Team Finds Likely Cause of Loss”, Press Release 99-113 NASA JPL, Online a: NASA Jet Propulsion Laboratory (accessed: 01/2001).

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These clauses operate an allocation of risk and liability among the participants to a launch through a reciprocal waiver of liability and claims entered into by such participants (the launch provider, the launch customer, and their respective contractors and insurers). They are referred to as interparticipant waivers of liability because they aim at operating risk allocation not only between the launch provider and the customer but, to the maximum extent possible, to all participants in the launch activities. We will return to these clauses on various occasions in the course of this book.

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A hold harmless agreement is defined as “a contractual arrangement whereby one party assumes the liability inherent to a situation, thereby relieving the other party of responsibility. [...] Agreement or contract in which one party agrees to hold the other without responsibility for damage or other liability arising out of the transaction involved. ” H.C. Black, Black’s Law Dictionary, 6th Ed (St Paul, Minn: West, 1993), at 731.

12 parties obligations under the contract concerned (obligations of the launch services providers are always defined as ‘best efforts’ for example). In the recent years, schemes have developed that dramatically modified the balance of such allocation. They are the so-called turn-key contracts for satellites which consist of the purchase of a satellite with a transfer of ownership from the manufacturer to the customer only upon delivery on orbit of a functioning satellite. The risk is then fully allocated to the satellite manufacturer who has in turn to reallocate this risk among the various contractors involved in the constellation of contracts required for such an endeavor.(19) Domestic legislation and regulations have also developed, in some countries, to deal specifically with space launches. In the US in particular, a very detailed framework has been put into place by the Commercial Space Launch Act, its amendments, and a comprehensive set of implementing regulations, which set mandatory prescriptions for launch and spaceport licensing, allocation of liability through inter-participant waivers of liability clauses, and insurance and financial responsibility requirements. Other States have also adopted national legislation in this field, although less detailed. States, or international organizations and space agencies, have also gradually extended the use of this mechanism of risk allocation. For example, the Intergovernmental Agreement on the International Space Station, concluded between the US, Europe, Russia, Canada and Japan has adopted the system of cross-waivers of liability. The provisions of this agreement are quite complex since it deals with a permanent international cooperation activity in space and the construction of a station made of modules belonging to different nations taking part in the venture. A regime to manage conflict of laws had to be put into place in a number of areas such as intellectual property, but it was not implemented in the area of liability. The latter is supposed to be dealt with through the cross waiver of liability provision. Finally, because space activities are international in scope, significant legal risk is created by the potential applicability of different national laws and legal regimes, which can conflict and cause the design of a very complex legal framework.

1.3.3.- The Insurer’s Approach Once the participants in a given space activity have allocated the risk among themselves, each of them will in turn seek insurance for their own risks. The insurance market of space activities developed slowly since the first space insurance, in 1965, for the INTELSAT’s “Early Bird” satellite. The market initially limited coverage to pre-launch operations, then launch operations were covered, and later on, the on-orbit phase. Now a large variety of insurance coverage exists. The main types are summarized in the table in Annex 1 to the present Chapter. They are in general combined and tailored to meet the (19)

On turn-key arrangements see: J. Chappez, “Le contrat de livraison en orbite” in P. Kahn ed., L’exploitation commerciale de l’espace, Droit positif, Droit prospectif (Paris: Litec, 1992), at 183 L. Ravillon, Les télécommunications par satellite, Aspects Juridiques (Paris: Litec, 1997), at 140 P.D. Nesgos, “Trends in the Acquisition and Financing of Space Projects: Insurance Implications”, paper presented at the 8th Assicurazioni Generali International Conference on Space Insurance, Venice, March 1995.

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specific requirements of each customer. The insurance community takes an active part in the assessment of risk involved in a space project, and the insurer is generally involved in the early stages of such project, often as early as the procurement of the satellite. The insurance broker and his experts are often used as advisors with respect to the risk assessment of the project. All risks are assessed, including the legal risks to which the operator is exposed and the allocations he intends to make through the risk allocation clauses at the various contractual levels in the project. The legal security of his client will be an important element in the assessment of the insurer, as well as the insurer’s own legal security measured, among other factors, by his ability to predict the avenues of recovery by subrogation into his client’s rights, should he have to compensate his client for any loss,(20) or the absence of subrogation rights. The insurer has, therefore, an interest both in the technical risk management approach implemented by those responsible for the development, manufacturing and testing of the spacecraft concerned. This will allow the assessment of the reliability of the launcher and payload and the calculation of the corresponding premium to be paid for insurance, as well as the conditions under which such insurance can be provided. The insurer also has an interest in how well the legal counsel in the organizations concerned can manage the liability risks as the materialization of claims will lead to the call upon the insurer to compensate. One of the specific characteristics of the space business, and in particular the launch business is that the worldwide insurance capacity is not sufficient to cover each launch if one would leave all possible claims open. The intervention of the inter-participant waivers of liability, and of government indemnification has helped overcome this situation, making the insurance of spacecraft launch and operations feasible.(21) But it (20)

We will not study here the insurance aspects as such, but the reader may find additional information in: J.L. Magdelénat, “Spacecraft Insurance” (1982) VII Annals of Air and Space Law, 363 M. Bourély, “L’assurance des activités spatiales” (1983) VII Annuaire de Droit Maritime et Aérien, 361 I.H.Ph Diedericks-Verschoor, “L’assurance satellites” (1985) X Annals of Air and Space Law, 322 J.S. Greenberg & C. Gaelick, “Space Insurance, Comments from an Observer” (1986) 2:4 Space Policy, 307 J.S. Greenberg, “Third Party Liability Insurance and Space Launches” (1988) 4:3 Space Policy, 211 P.D.Nesgos, “Satellite Launch Liability Risks, Products Available as New Industry Gets Off the Ground” (Oct 29, 1990) Business Insurance, 25 D.E. Cassidy, “Current Status and Prospects for Space Insurance” (1991) Journal of Space Law, 166 I.I. Kuskuvelis, “Space Insurance”, in K. Tatsuzawa ed, Legal Aspects of Space Commercialization (Tokyo: CSP, 1992), at 60 P. Daphouars, “L’assurance des risques spatiaux”, in P. Kahn ed, L’exploitation commerciale de l’espace, Droit Positif, Droit Prospectif supra note 19, at 253 P. Meredith & G. Robinson, Space Law, A Case Study for the Practitioner , supra note 4, at 249 on risk management and 335 on procuring insurance G. Catalano-Sgrosso, “Insurance Implications About Commercial and Industrial Activities in Outer Space”(1993) 36 Colloquium, 187 I.I. Kuskuvelis, “The Space Risk and Commercial Space Insurance” (1993) 9:2 Space Policy, 109 R. Ritorto & M. Mitchell, “Telecommunication Satellites Insurance” (1993) XVIII:3 Air and Space Law, 136; G.V. D’Angelo, Aerospace Business Law (Westport:, Quorum Books, 1994), at 65 S. Miyakazi & Y. Fujikawa,”Recent Satellite Insurance and its Difficulties” (1994) 1 Telecommunications and Space Journal, 305 L. Ravillon, Les télécommunications par satellite, Aspects Juridiques, supra note 19, at 409; R. Gimblet, “Space Insurance Into the Next Millennium”, in G. Lafferranderie & D. Crowther eds, Outlook on Space Law Over the Next 30 Years, supra note 14, at 163.

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See some interesting figures online: (continued...)

14 remains a high premium area where risk calculations suffer the same problems as in other area of industry involving complex technological products.(22)

1.4.- LIABILITY RISK MANAGEMENT: LOOKING TO THE FUTURE Legal risk management in the field of commercial space launches, especially with respect to liability, is at the crossroads of the topics addressed so far in this Chapter. The technical choices made often have significant bearing on the legal approach to be taken, as, for example in the case of a new launcher or of a payload carrying nuclear power sources. The cost constraints on a particular project may lead to an increased need for liability risk management. The ability to buy insurance will be closely linked to liability risk management since exposure to potential claims is a fundamental element of the assessment by the insurer. The occasional lack of sufficient insurance will lead to the need for liability risk management focused on the risk allocation and risk sharing among the participants to a launch activity. One of the features of liability risk management for space projects today, and launching in particular, is the complexity of the legal framework in the field of space activities. The combination of space treaties and related international public law, private international law, national legislation, as well as contractual agreements, has led to a labyrinth of legal norms. Launch and space activities take place in an international environment and few launch providers exist, with the consequence that satellite owners often have to buy launch services from a company which is not from their national State. The manufacturing of launchers and satellites is, in a number of cases, performed by transnational consortia. Very often the actors of all these activities have a different statutory nature: the satellite owner may be a State-owned telecommunication operator and the launch provider a private company, or the other way round. A number of space ventures originate in international cooperation agreements which contain provisions that have to be flowed down to all participants in such ventures. In such a complex environment, legal security is difficult to achieve especially because of the connections with numerous legal systems, and because of the uncertainties in the flow down of the provisions concerned. Some of the legal loopholes or contradictions that exist in the present environment have been highlighted in the small number of cases brought to court, until now, on issues related to liability for damage caused by launch activities. Cases up to now usually involved the top level actors (satellite owner, satellite manufacturer, launch provider), but

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(...continued) (accessed: 01/2001).

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See on this subject D.R. Connolly, “Insurance: The Liability Messenger” in J.R. Hunziker & T.O. Jones, ed, Product Liability and Innovation, Managing Risk in an Uncertain Environment (Washington: National Academy Press, 1994), at 131.

15 even for them the scrutiny may go down to component level.(23) Liability risk management is important even for minor contributors to a space activity, to avoid exposure to virtually disastrous liability claims, especially as the risk allocation provisions agreed between the top participants (for instance the launch company and the satellite owner) are often not flowed down adequately to the very lowest contractual levels. The primary need for the legal counsel is to know the overall environment in which he operates. This is a pretty daunting task in the field of liability for launch activities. We have attempted to gather an overall picture of the liability environment for launch activities, de lege lata, in our Part I (The Labyrinth of Daedalus) which follows a top down approach. The public international space law framework is analyzed first, its liability provisions are highlighted, and some examples are provided of the practice of States and international organizations on the subject of liability, in their cooperation agreements (Chapter 2). The complexity ofthe legal environment also lies in the varying approaches adopted by the space faring nations towards fulfilling their international obligations regarding non-governmental launch activities, and the resulting legal frameworks, with the examples of the US regulations and of the Ariane framework (Chapter 3). The domestic laws of contracts and torts play, of course, a significant part and we chose to analyze particularly the US law and French law, as well as an example of satellite procurement contracts practice, that of the European Space Agency (Chapter 4). Our Part 2 (Escaping the Labyrinth) is an attempt to focus on the main issues which hamper the achievement of adequate liability risk management in today’s legal framework, and to offer suggestions, de lege ferenda, to address these main issues (Chapter 5). As suggestions and proposals may often be abstract to the reader, we have also attempted to develop texts and language to support our proposals with actual draft clauses and an international instrument (Chapter 6). Discussions with practitioners in the field have often revealed that, while the space business developed a mode of legal risk management which meets the present needs , there is a doubt in the mind of such practitioners as to its actual adequacy. The pressures of daily work and deadlines prevent them from studying in depth the legal ramifications of all situations and they often get the uneasy feeling that their legal provisions are not “water tight”. A number of court cases, in particular in the United States, have shown the occasional inadequacies of the legal framework set up for a particular launch or activity. These discussions prompted on our part an interest in looking into these issues and we believe that today’s environment is a labyrinth of norms, some of them purely contractual and often highly unreliable, and some international but unadapted the realities of the launch business. There is the need for initiating a consistent effort with a view to harmonizing the practices on the launch market and modernizing a body of space law which still constitutes our present roots. As J.K. Galbraith put it, “ Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof”. We chose not to get busy on the proof, and to question the (23)

“Unprecedented Lawsuit Targets Spar Aerospace”, (August 1997) 1 Space News, at 1 & 21. A settlement was later reached out of court. See “Spar Announces Settlement of AMSC Litigation”, online at: < City Insurance: http:/www.city-ins.com/winter1999.htm#Spar Aerospace settles satellite lawsuit for $15 million> (accessed 01/2001)>

16 current legal framework for launch activities undertaken by private companies, or in general non-governmental entities, and we believe that change is needed for a more coherent and safer legal environment where launch providers will ultimately be able to take more responsibilities, while improving launch prices and thereby allowing access to space for exploration and use by all mankind.

ANNEX 1 SUMMARY OF MAIN TYPES OF SPACE INSURANCE

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Insurance type

Pre-launch insurance

Launch insurance

Generic aim of the coverage

Insurance of the physical damage to Insurance of the physical damage to or loss the satellite before the intentional of the satellite at launch. ignition of the launch vehicle engines (lift-off)

Risk covered

Sequence of coverage can be: - during satellite manufacturing - during satellite testing - payload storage/processing - transportation of the satellite to the launch facilities - integration of the satellite with the launch adaptor and launch vehicle. Coverage can be bought for all or some of these. Coverage covers the repair cost. Coverage may include consequential damages (penalties for launch delay, loss of revenues, payload storage costs) and some force majeure events resulting in delays.

Buyer of insurance

Satellite manufacturer (he will Provider of turn key satellite Satellite owner normally bear risk until lift-off) Provider of turn key satellite (normally also satellite manufacturer) Owner of the satellite, to cover risk beyond contractual liquidated damages, e s p e c i a l l y for consequential damages

Insurance provider

Insurance company

It normally covers the risk after lift-off and up to a period of 120 to 180 days after successful injection of the satellite on orbit, or until in-orbit commissioning of the satellite. May include cost of the launch, as well as loss of revenues and other expenses caused by the launch failure. Launch risk guarantees normally stop upon separation of the satellite from the launch vehicle.

Insurance company Launch provider (launch risk guarantee, relight-refund guarantee)

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Insurance type

In-orbit insurance

Third-party liability insurance

Generic aim of the coverage

All risk coverage against partial or Coverage against liability due to loss or total failure of the satellite after on- damage caused by the satellite, launch orbit commissioning. vehicle or personnel to third parties.

Risk covered

Coverage starts in principle right Coverage needed at all stages from satellite manufacturing up to on-orbit, after the launch insurance. Duration: 1 or 2 years. Renewed and even at discarding a dead satellite. yearly after check up of the health No coverage today for dead satellites. Variable duration. of the satellite. Third-party liability insurance provided Variant of the in-orbit insurance: by launch company normally starts at service interruption coverage arrival of customer’s payload and protects the transponder owner or personnel at launch site and stops about lessee against failure of the 30 days after injection of payload in orbit/transfer orbit. transponder and consequences.

Buyer of insurance

Satellite owner Transponder owner Transponder lessee

Manufacturer (manufacturing, testing, transportation...) Launch company (launch site and launch operations) with customer as named insured as well as his contractors and subcontractors. Satellite owner (launch site operations depending on contractual allocation with launch company; on orbit damage to other satellites)

Insurance provider

Insurance company

Insurance company

CHAPTER 2.- THE INTERNATIONAL LEGAL FRAMEWORK.

The international legal framework which has developed over the years in the field of space activities is extensive and complex. It is composed of treaties, agreements and documents such as UN Resolutions which are binding in various degrees and are either multilateral or bilateral. The original texts of space law were developed during the Cold War and they still bear the mark of their historical context. They were developed by States to govern activities of States. They did not address the commercial activities and the activities downstream of the activities of States, mostly due to the fact that at that time, space applications were not commercialized and non-governmental entities activities were seen as sort of a science fiction prospect. The texts were elaborated essentially to maintain a balance between States carrying out space activities and avoiding that those be used as instruments of conquest, war and domination. The space Treaties therefore have to be read with this context in mind, which permits the understanding of their limitations. In this Chapter, we will provide an overall presentation of this framework, and illustrate its practice further with examples of agreements entered into for specific cooperation. The main space law treaties do not always have direct relevance to the issue of liability, and cover a larger array of subjects, but we chose to devote some discussion to them in order to provide some general background,(24) and to provide for a contextual reading of (24)

For reading on space law in general, the following books can be consulted: M.S. McDougal, H.D. Lasswell & I.A. Vlasic, Law and Public Order in Space (New Haven: Yale University Press, 1963) C. Chaumont, Le Droit de l’Espace, Collection Que Sais-Je, No 883 (Paris: Presses Universitaires de France, 1970) M.G. Markov, Traité de droit international public de l’espace (Fribourg: Editions Universitaires, 1973) C.Q. Christol, The Modern International Law of Outer Space (New York: Pergamon Press, 1982) G.P. Zukho v & Y. Kolosov, International Space Law (New York: Praeger, 1984) N.M. Matte ed., Space Activities and Emerging International Law (Montreal: McGill Institute of Air and Space Law, 1984) [hereinafter referred to as “Emerging International Law”] G. Reynolds & R. Merges, Outer Space: Problems of Law and Policy (Boulder: Westview Press, 1989) C.Q. Christol, Space Law: Past, Present and Future (Deventer, Boston: Kluwer, 1991) S. Gorove, Developments in Space Law (Dordrecht, Boston: MartinusNijhoff,1991) P.M. Martin, Le Droit de l’Espace, Collection Que Sais-Je, No 883 (Paris: Presses Universitaires de France, 1991) N. Jasentuliyana, Space Law, Development and Scope (Westport Conn.: Praeger, 1992) [hereinafter referred to as “Space Law Development” L. Peyrefitte, Droit de l’Espace (Paris: Dalloz, 1993) I.H.Ph Diederiks-Verschoor, Introduction to Space Law (Deventer: Kluwer, 1993) B. Cheng, Studies in International Space Law (Oxford: (continued...)

23

24 the specific liability provisions. These texts are important for those who practice international space cooperation in an international governmental environment. They also impact to a certain extent, and in general indirectly, upon the activities ofprivate operators and need to be properly understood to allow private operators to comprehend the main issues they may encounter in their activities .

2.1.- SPACE TREATIES AND RESOLUTIONS From the early stages of space exploration until now, international space law has developed tremendously in particular through the work of the United Nations, especially its Committee on Peaceful Uses of Outer Space (UNCOPUOS).(25) Very early, States represented in the UNCOPUOS realized thei mportance of establishing rules of conduct for these new activities. At the time, a great energy and willingness existed to bring into existence an increasingly comprehensive body of law to govern these activities. From general resolutions to specific treaties, States built up this body of law and laid down the fundamental principles of space law. In order to provide an over view and background prior to going into the detail concerning liability provisions, the table in Annex 1 to this Chapter presents the various UN resolutions, treaties and conventions adopted in the field of space, with their main features and principles, as well as bibliographical references. The main principles are also summarized below.

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(...continued) Clarendon Press, 1997). For information on the United Nations Committee on Peaceful Uses of Outer Space (UNCOPUOS) and its legal and scientific subcommittees, see: E.M. Galloway, “Consensus Decision making by the United Nations Committee on the Peaceful Uses of Outer Space” (1979) 7 Journal of Space Law, 3 V. Kopal, “Evolution of the Main Principles of Space Law in the Institutional Framework of the United Nations” (1984) 12 Journal of Space Law, 12 M. Benkö, W. De Graaf & G.G.M. Reijnen (eds), Space Law in the United Nations (Dordrecht: Martinus Nijhoff, 1985) N. Jasentuliyana, “Treaty Law and Outer Space: Can the United Nations Play an Effective Role?” (1986) XI Annals of Air and Space Law, 219 United Nations, Space Activities of the United Nations and International Organizations (New York, 1992) at 1 (UN Doc A/AC. 105/521, Sales No. E.92.I.30) N. Jasentuliyana, “The Lawmaking Process in the United Nations”, in N. Jasentuliyana, Space Law Development and Scope, supra note 24, 33 N. Jasentuliyana, “Space Law and the United Nations” (1992) XVII-I, Annals of Air and Space Law, 127 M. Benkö & K.U. Schrogl, International Space Law in the Making, Current Issues in the UN Committee on the Peaceful Uses of Outer Space (Gif-sur-Yvette: Frontières, 1993) [hereinafter referred to as “ International Space Law in the Making” ], at 1 L. Peyrefitte, Droit de l’espace, supra note 24, at 15 N. Jasentuliyana, “The United Nations: Its Role in the Progressive Development of Space Law”, in Proceedings of the Third European Centre for Space Law (ECSL) Summer Course on Space Law and Policy (Paris, ECSL, 1994), 5 M. Andem, “United Nations Functioning with Respect to Space Activities, in Proceedings of the Third European Centre for Space Law (ECSL) Summer Course on Space Law and Policy (Paris, ECSL, 1994), 29 B. Cheng, Studies in International Space Law, supra note 24, at91 F. Pocar, “The Normative Role of UNCOPUOS”, in G.Lafferranderie & D.Crowther eds, Outlook on Space Law Over the Next 30 Years, supra note 14, 415 The UN Office for Outer Space Affairs is online : (accessed 01/2001).

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2.1.1.- Main Principles of Space Law: The Context This section only provides a global summary ofthe main principles which, though they are not of direct relevance to the subject of responsibility and liability, constitute the environment within which liability provisions are ultimately interpreted and implemented. i)

Principle of freedom of exploration and use

This is one of the most important principles which has been recognized since the early 1950's and first practically accepted during the International Geophysical Year,(26) with the absence of protests from States to the overflight of their territories by satellites launched on this occasion. This principle was incorporated in the first space law provisions elaborated in the United Nations,(27) and was repeated(28) in the Outer Space Treaty. It covers three basic rights: right of free access, right of free exploration and right offree use. The definitions ofthe terms “exploration” and “use” are difficult to ascertain, since most of the terms used in the space law texts are not precisely defined or not defined at all. Generally, “exploration” is interpreted in the scientific sense (e.g. scientific satellites for the exploration of planets, for astronomy or fundamental research), while “use” is related to space applications which take advantage of the space environment (e.g. telecommunications satellites). This principle of freedom of exploration is limited by other principles of space law. As for most Earth-based activities, operators of space activities enjoy freedom so long as they do not interfere with freedoms or rights of other operators, and this directly or indirectly linked to principles such as that of non discrimination and equality, common benefit and common interest, non appropriation, responsibility and liability.

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For developments on this period, see B. Cheng, “Recent Developments in Air Law (1956) 9 Current Legal Problems, 208. This article is partly reproduced in B. Cheng, Studies in International Space Law, supra note 24, at 3 N.M. Matte ed, Emerging International Law, supra note 24, at 253.

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The Declaration of Principles provided in its principle 2: “Outer space and celestial bodies are free for exploration and use by all States on a basis of equality and in accordance with international law ”. Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space, UNGA Res 1962 (XVIII), in: N.M. Matte ed, Emerging International Law, supra note 24, at 537 UN Office for Outer Space Affairs, United Nations Treaties and Principles on Outer Space (New York, 1996) UN Doc A/AC.105/572/Rev 1 [hereinafter referred to as UN OOSA “Treaties and Principles” ], at 37 Online (accessed 01/2001). Also online at <McGill Institute ofAir and Space Law: http://www.iasl.mcgill.ca/home.htm> (accessed 01/2001) The principle was further reproduced in the Outer Space Treaty in its Article I On this principle and its evolution, see N.M. Matte, Emerging International Law, supra note 24, at 269 and L. Peyrefitte, Droit de l’Espace, supra note.24, at 55.

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Article I, Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space Including the Moon and Other Celestial Bodies [hereinafter referred to as “ Outer Space Treaty” ], UNGA Res 2222 (XXI) in: N.M. Matte ed, Emerging International Law, supra note 24, at 543 UNOOSA, Treaties and Principles, supra note 27, 4 610 UNTS 205 18 UST241 TIAS 6347 (1993) XVIII-II Annals of Air and Space Law, 615 Online, Office of Outer Space Affairs and McGill Institute of Air and Space Law, supra note 27.

26 The principle of freedom of access and use has played an important role in the development of space law, in particular when combined with the principle of nonappropriation. The elimination by these two principles of the concept of sovereignty in the field of space activities, has certainly also prevented the elaboration of detailed space law regulations.(29)

ii)

Principle of non-appropriation

This principle is directly linked to those of freedom of exploration and use and of common interest, as one of the guarantees of the enjoyment of their rights by other States so that none of them can exercise exclusive control or exclusive use of outer space or celestial bodies on a permanent basis with the intent to do so.(30) Given the repetition of this principle in the Declaration of Principles(31) and in the Outer Space Treaty,(32) as well as a long standing compliance by States, we tend to share the opinion of those who consider that it has become a norm of jus cogens(33) and therefore, applicable even to those States not Parties to the Outer Space Treaty.(34) There is therefore a fundamental difference between Earth and space with respect to the possibility for a State to claim sovereignty over an area. On Earth, and with respect to airspace, State sovereignty is a fundamental element of the legal regime applicable to those areas.(35) Outer space escapes this sovereignty. This difference of regimes could lead to difficulties in the future, in particular as the limit between airspace, subject to such sovereignty, and outer space, has (29)

See also further, para ii).

(30)

N.M. Matte ed, Emerging international Law, supra note 24, at 275

(31)

Declaration of Principles, supra note 27, Principle 3.

(32)

Outer Space Treaty, supra note 27, Article II.

(33)

On the definition of jus cogens, one can refer to the Vienna Convention on the Lew of Treaties, UN Doc A/CONF.39/11/Add.2; 1155 UNTS, 331; (1969) International Legal Material, 679; Online: (accessed 01/2001). Adopted on 22 May 1969. Entered into force 27 January 1980. Article 53 of the Convention states: “ Article 53.- Treaties conflicting with a peremptory norm of general international law (jus cogens).- A treaty is void if, at the time of its conclusion, it conflicts with a peremptory norm of general international law. For the purpose of the present Convention, a peremptory norm of general international law is a norm accepted and recognized by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character”. On this subject see also M.N. Shaw, International Law, 4th edition (Cambridge: Cambridge University Press, 1997), at 97.

(34)

I.A. Csabafi, The concept of State Jurisdiction in International Space Law (The Hague: Nijhoff, 1971), at 47.

(35)

V. Kayser, “Aux confins de l’air et de 1’espace. D’Accursius à 1’avion spatial” (1994) XIX-II Annals of Air and Space Law, 465, at 466. The key principle in air law comes from the latin formula cujus est solum ejus usque ad coelum, which first applied to private law to govern the rights of the owner of a piece of land on the usable space directly over this property, and has become a fundamental principle of air law. The Chicago Convention confirms this principle in its Articles 1 and 2 Convention on International Civil Aviation, ICAO Doc 7300/6 (1980) 15 UNTS 295 (1993)XVIII-II Annals of Air and Space Law, 3 Online: <McGill Institute of Air and Space Law: http://www.iasl.mcgill.ca> (accessed 01/2001).

27 not been agreed, although this subject has been discussed since the establishment of the UNCOPUOS in 1957.(36) This fundamental divider of sovereignty, in view of the various disciplines of law concerned, could create difficulties in determining the regime applicable to a future space plane.(37) These fundamental differences between air and space law, revolving around the concept of sovereignty, have, in our opinion, strongly differentiated the level of regulation between these two areas. In the field of air law, the strength of the concept of sovereignty has left States much more in control of the rules applicable to the circulation of aircraft over their territories. This has ultimately forced them, in order not to hamper air traffic, to coordinate their regulatory actions and framework. For example, this has been the case in the area of mutual recognition of certificates of airworthiness, certificates of operating crew, and conditions to be fulfilled by aircraft, especially when overflying another State.(38) Thereby, a rather regulated control over aircraft flight has been put into place over the years through the International Civil Aviation Organization (ICAO), implementing the Chicago Convention, and the mechanism of standards and recommended practices. As we will see further on in this Chapter, although the United Nations established a legal framework for space flight, this framework is looser than the one established in the field of air law. The major reason for this difference is to be found in the principles of free access, free use, and non-appropriation. By depriving States of the attribute of sovereignty in relation to outer space, these principles have also worked against the motivation of States for establishing a detailed regulatory framework, since such a framework is not needed to ensure their compliance with the international framework which governs their activities in the space (36)

The doctrine has also addressed the issue of appropriation of resources, versus appropriation of the areas. Also, certain authors have argued that while States could not appropriate, private entities could. On these debates, the reader may consult N.M Matte ed., Emerging International Law , supra note 24, at 275. On delimitation between airspace and outer space see: For the latest documents available on the works of the UNCOPUOS: online Office of Outer Space Affairs, supra note 27. For literature: B. Cheng, “The Legal Regime of Airspace and Outer space: The Boundary Problem. Functionalism Versus Spatialism: The Major Premises” (1980) V Annals of Air and Space Law, 323 H. Qizhi, “The Problem of Definition and Delimitation in Outer Space” (1982) 10 Journal of Space Law, 157 M. Benkö & J. Gebhard, “The Definition/Delimitation of Outer Space and Outer Space Activities Including Problems Relating to the Free (Innocent) passage of Spacecraft Through Foreign Airspace for the Purpose of Reaching Orbit and Returning to Earth”, in M. Benkö & K.U. Schrogl eds, International Space Law in the Making, supra note 25, Chapter C., 1 1 1 .

(37)

V. Kayser, “Aux confins de l’air et de l’espace. D’Accursius à l’avion spatial”, supra note 35, at 470 Société Française de Droit Aérien et Spatial, Actes du Colloque L ’avion Spatial et le droit (1991) 180:4 Revue Française de Droit Aérien (complete issue devoted to the subject) T. Masson-Zwaan, “Legal Aspects of Aerospace Planes”, in European Center for Space Law ed, ECSL Space Law and Policy Summer Course, Basic Materials (Dordrecht: Martinus Nijhoff, 1994), 307 S. Courteix, “L’avion spatial et le droit”, in European Center for Space Law ed, ECSL Space Law and Policy Summer Course, Basic Materials, (Dordrecht: Martinus Nijhoff, 1994), 255.

(38)

On the parallel with Air Law, and the concept of sovereignty in Air Law, see: B. Cheng, Studies in International Space Law, supra note 24, 31 M.N. Shaw, International Law, supra note 33, at 369 Shawcross & Beaumont, Air Law (London: Butterworths, 1966-; loose leaf regularly updated) M.de Juglart, Traité de Droit Aérien (Paris: LGDJ, 1989) I.H.Ph.DiederiksVerschoor, An Introduction to Air Law (The Hague: Kluwer, 1997).

28

sector, and is therefore not a prerequisite to the performance of any business related to space, in particular the launch operations. iii)

Principle of applicability of international law

Due to the origins of space activities, space law has developed as, and still is, a branch of public international law,(39) and as such, governs the relationship of States which conduct space activities or whose nationals conduct space activities.(40) The principle of applicability of international law is laid down in Article III of the Outer Space Treaty and is one of the fundamental principles of space law.(41) There has been some debate over the years as to whether international law applies anyway per se, which would mean in the absence of any “codification” in the Outer Space Treaty, or if it needed to be expressly referred to.(42) Article III of the Outer Space Treaty concluded this debate by clarifying the applicability of international law to space activities. This debate has little practical impact for the activities concerned in this thesis, in case they are carried out in States which are Parties to the Outer Space Treaty, since Article III makes the rule clear between them. Most countries involved in space activities are Parties to the Outer Space Treaty.(43) The problem would nevertheless arise where States not Parties to the Outer Space Treaty, or their nationals, would undertake space activities, or even in the case where these activities would be conducted from the high seas. Indeed, in this case, one would be again in the situation where debate could arise as to whether international law applies per se, with the Outer Space Treaty having only played a declaratory role, or if on the contrary, Article III created the rule itself. However, one may argue that due to its wide acceptance and long standing practice, this principle of applicability of international law to space activities can now be considered a general principle of international law.

(39)

Space law has been referred to as lex specialis of international law. H.A. Wassenbergh, “The Exploration and Use of Outer Space as the ‘Province’ of the Society of States (The Moon Agreement in Prospect)”, in H.A.Wassenbergh, Principles of Outer Space Law in Hindsight (Dordrecht: Martinus Nijhoff Publishers, 1991) P. Malanczuk; “Space Law as a Branch of International Law”, in European Center for Space Law ed, ECSL Proceedings of the Third ECSL Summer Course on Space Law and Policy (Dordrecht: Martinus Nijhoff, 1994), 73.

(40)

The subjects of space law will be analyzed more in detail in the context of the developments devoted to liability provisions in space law, further in this Chapter 1.

(41)

Outer Space Treaty, supra note 27, Article III: “States Parties to the Treaty shall carry on activities in the exploration and use of outer space, including the Moon and other celestial bodies, in accordance with international law, including the Charter of the United Nations, in the interest of maintaining international peace and security and promoting international cooperation and understanding”.

(42)

N.M. Matte ed, Emerging International Law, supra note 24, at 286, providing explanations as to the three main views (general international law applicable per se to outer space; international law not adapted to space activities with the need for specific codification; international law applicable both to earth and outer space, with a need for developing specific rules for space).

(43)

It is interesting to note in this respect that Kazakhstan is a Party to the Outer Space Treaty and the Liability Convention. The launch facilities of Baikonur are located in that State. Besides, an agreement has been concluded between Russia and Kazakhstan whereby the Baikonur area is leased by Russia and under Russian control. In these circumstances Russia is the main actor.

29

This principle, although presented here mostly as a background, has relevance in the context of the launch activities in relation to 1) the status of launch companies with regard to the space treaties and the rights and obligations laid down therein (are they subjects of space law, directly or indirectly?), 2) the applicability of space law to launch companies (which rules of space law are to be applied to them?, what are the obligations of States to regulate the launch business?) and 3) the treatment of claims (via the diplomatic channels). We will return to these subjects as we study the liability issues. iv)

Restrictions on military activities

Activities in the exploration and use of outer space have to be carried out for peaceful purposes.(44) Space and celestial bodies have been demilitarized to different degrees. Space law prohibits the use of nuclear weapons and weapons of mass destruction in space. The demilitarization status of the Moon and other celestial bodies has been made even more stringent. v)

Responsibility and “liability”

Responsibility and liability in the context of space activities are examined in full detail below.(45) In this area, space law contains a significant number of provisions which prescribe both a principle of responsibility in international law and a number of provisions on liability for damage caused by space objects and space activities. vi)

Common interest and common heritage principles

The exploration and use of space shall be carried out for the benefit and in the interest of all countries, irrespective of their degree of economic or scientific development and shall be the province of all mankind. This has been explained as effectively meaning “that space activities cannot be pursued to the sole advantage of the big powers or, in other words, for those countries which only are capable of doing so”.(46) There has been some debate as to whether this provision is directly applicable and it is in fact rather difficult to imagine when such a principle could be directly applied, since the (44)

On outer space and military activities: I.A. Vlasic, “Disarmament Decade, Outer Space and International Law”, (1980) 26 McGill Law Journal, 135 N.M Matte ed, Arms Control and Disarmament in Outer Space, 4 Volumes, (Montreal: McGill University Center for Research in Air and Space Law, 1985-1991) B. Jasani ed, Peaceful and Non-Peaceful Uses of Space: Problems of Definition for the Prevention of an Arms Race (Bristol PA: Taylor and Francis, 1991) P. Jankowitsch, “Legal Aspects of Military Space Activities”, in N. Jasentuliyana ed, Space Law Development and Scope, supra note 24, 143 S. Hobe, “Peaceful and Military Uses of Outer Space and Space Technology: The Importance of Space Technology to International Space Law”, ECSL Proceedings of the Third Summer Course on Space Law and Policy (Dordrecht: Martinus NijhoffPublishers, 1994), 165 J. M. Filho, “Total Militarization of Space and Space Law: The Future of The Article IV Of The 67' Outer Space Treaty” (1997) 40 Colloquium, 358 B. Cheng, Studies in International Space Law, supra note 24, 513 (Part V).

(45)

See paragraph 2.1.2 below.

(46)

S. Hobe, “The International Legal Order for Outer Space Activities. An Introduction”, in ECSL Space Law and Policy Summer Course, Basic Materials (I) (Dordrecht: Martinus Nijhoff Publishers, 1993), 28, at 29.

30 provisions of space law in this respect lack specificity. Except for the provisions made for the Moon, where the principle would be implemented via an international regime for the exploitation of the Moon resources, it is difficult to determine how to transpose this principle to other applications. This principle of common interest was further developed in the Moon Agreement into the principle of common heritage of mankind which is stronger and directly relates to the setting up of the international regime mentioned above, as it was also done in the context of the regime of the deep seabed in 1982.(47) These two principles are truly international law principles which govern States. It would be difficult to relate them directly to individual entities and they do not have a direct practical application in the area of the developments in this book. As in the case of the principles of freedom and of non appropriation, this principle of common interest is not working in favor of the development of a detailed regulatory framework for space activities. Indeed, the self-interest of States is certainly an important factor in securing a detailed regulatory framework in a competitive environment, as it has been the case in the area of aviation. The principle of common interest in the field of space activities creates a very different environment. It is important, however, not to overestimate the impact of this principle which remains very difficult to translate in practical terms. There is nowadays a great deal of competition in the field of space activities, and launch and telecommunications activities in particular, and the principle of common interest is certainly not the sole explanation for a loose regulatory environment. vii)

International Cooperation

The principle of international cooperation(48) is applicable in priority to States as well. It was recently detailed in the UNGA Resolution on the Declaration on International Cooperation in the Exploration of Outer Space for the Benefit and in the Interest of All States, Taking into Particular Account the Needs of Developing Countries.(49) Although individual entities are not directly bound by such a principle, they are influenced by all these principles when taking part in cooperative projects where they belong to a larger group of actors that cannot ignore those principles.

(47)

P. Minola, “The Moon Treaty and the Law of the Sea (1981) 18 San Diego Law Review, 455 S.H. Lay, “Some Comparisons of the Draft Convention on the Law of the Sea and the Agreement Governing the Activities of States on the Moon and other Celestial Bodies” (1984) 37 Vanderbilt Law Review, 599 S.M. Williams, “The exploitation and Use of Natural Resources in the New Law of the Sea and the Law of Outer Space” (1986) 29 Colloquium, 198 1982 Convention on the Law of the Sea, UN Doc. A/CONF.62/122; (1982) 21 ILM 1261 and Online:
(48)

Article I of the Outer Space Treaty: “[...] There shall be freedom of scientific investigation in outer space, including the Moon and other celestial bodies, and States shall facilitate and encourage international cooperation in such investigation” . On the cooperation principle: R. Muller & M. Muller, “Cooperation as a Basic Principle of Legal Regimes for Areas Beyond National Sovereignty - With Special Regard to Outer Space Law” (1988) 31 German Yearbook of International Law, 553.

(49)

UNGA Resolution on the Declaration on International Cooperation in the Exploration of Outer Space for the Benefit and in the Interest of All States, Taking into Particular Account the Needs of Developing Countries. Online at the Office for Outer Space Affairs, supra note 27.

31 The principles summarized above, are detailed in the space treaties as presented in the table in Annex 1 to the present Chapter. Their application to specific areas of activities has been clarified in the later adopted resolutions that do not present the same binding character as the original Treaties, Conventions and Agreements.(50) Eventhough they are on occasion qualified as “soft law”,(51) these resolutions continue to repeat the above principles in the heritage of international and space law, thus consolidating their status as part of customary international law by their continued recognition as law.(52)

2.1.2.- Responsibility and Liability in Space Law The international responsibility of States for damage caused by space activities has been addressed with an increasing level of detail in space law. The difference between the terms “responsibility” and “liability” has sometimes been debated. We will follow the definition provided by Professor Cheng: “Responsibility means essentially answerability, answerability for one’s acts and omissions, for their being in conformity with whichever system of norms, whether moral, legal, religious, political or any other, which may be applicable, as well as answerability for their consequences, whether beneficial or injurious. In law, it applies in particular to a person’s answerability for compliance with his or her legal duties, and for any breaches thereof. [...] The term liability is often used specifically to denote the obligation to bear the consequences of a breach of a legal duty, in particular the obligation to make reparation for any damage caused, especially in the form of monetary payment [...]”. (53)

As we will see in these developments, the various applicable texts deal far more with State responsibility than with liability, although the latter word is used. Besides, in our

(50)

The reader can consult the following on UN Resolutions related to Space Law, as well as their status in international law: B. Sloan, “General Assembly Resolutions Revisited (Forty Years Later)” (1987) 59 British Yearbook of International Law, 39 B. Cheng, “United Nations Resolution on Outer Space: ‘Instant’ International Customary Law”, in Studies in International Space Law, supra note 24, at 125 M.N. Shaw, International Law, supra note 33, at 89 A.D. Terekhov, “UN General Assembly Resolutions and Outer Space Law” (1997) 40 Colloquium, 97.

(51)

C.M. Chinkin, “The Challenge of Soft Law: Development and Change in International Law” (1989) 38 International & Comparative Law Quarterly, 850 P. Malanczuk, “Space Law as a Branch of International Law”, supra note 39, at 91 P.M. Dupuy, “Soft Law and the International Law of Environment” (1991) 12 Michigan International Law Journal, 420 M. Ferrazzani, “Soft Law in Space Activities”, in G. Lafferranderie & D. Crowther eds., Outlook on Space Law, supra note 14, at 429.

(52)

Article 38 par 1 b) ofthe Statute of the International Court ofJustice: Customary international law is an expression of a common use recognized as law Statute reprinted in D.J. Harris, Cases and Materials on International Law (London: Sweet & Maxwell, 1998) and online at the site of the International Court of Justice: or mirror site at (accessed: 01/2001) E. Brodermann, “Quelques reflexions sur le rôle de la coutume Internationale dans le droit de l’espace” (1981) 10 Thesaurus Acroasium, 809 Vereschetin & Danilenko, “Custom as a Source of International Law of Outer Space” (1985) 13 Journal of Space Law, 22 M.N. Shaw, International Law, supra note 33, at 56.

(53)

B. Cheng, “Article VI of the 1967 Space Treaty Revisited: ‘International Responsibility’, ‘National Activities’, and ‘The Appropriate State’” (1998) 26:1 Journal of Space Law, 7, at 9.

32 opinion, these two terms are the two facets of one same fact: a State will have to compensate the victim of a damage which that State has caused. We will use the terms “responsibility” and “liability” interchangeably in our developments. In the same manner as the principles addressed above, international responsibility provisions were introduced first in the Declaration of Principles, then in the Outer Space Treaty. The United Nations went one step further and developed these rules in more detail in the Liability Convention. The United Nations General Assembly Resolution 1962 (XVIII) of 13 December 1963 on Principles Governing the Activities of States in the Exploration and Use of Outer Space was the first set of space law provisions addressing the major principles applicable to space activities. Today, this resolution has more of a historical value and is addressed here as such. Its principles have been taken over by the Outer Space Treaty and by later instruments. However, in order to move progressively through the space law liability provisions, it is helpful to use this resolution as an introduction into each point of our discussions below. The liability provisions of the resolution are to be found in its principles 5 and 8.(54) The Outer Space Treaty(55) built upon the principles established in the Declaration of Principles and repeated the principles in its Articles VI and VII.(56) (54)

Declaration of Principles, supra note 27: “ Principle 5.- States bear international responsibility for national activities in outer space, whether carried on by governmental agencies or by non-governmental entities, and for assuring that national activities are carried on in conformity with the principles set forth in the present Declaration. The activities of non-governmental entities in outer space shall require authorization and continuing supervision by the State concerned. When activities are carried on in outer space by an international organization, responsibility for compliance with the principles set forth in this Declaration shall be borne by the international organization and by the States participating in it. Principle 8. - Each State which launches or procures the launching of an object into outer space, and each State from whose territory or facility an object is launched, is internationally liable for damage to a foreign State or its natural or juridical persons by such objects or its component parts on the earth, in air space, or in outer space. ”

(55)

Outer Space Treaty, supra note 27.

(56)

Outer Space Treaty, supra note 27: “Article VI.- States Parties to the Treaty shall 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, and for assuring that national activities are carried out in conformity with the provisions set forth in the present Treaty. The activities of non-governmental entities in outer space, including the moon and other celestial bodies, shall require authorization and continuing supervision by the appropriate State party to the Treaty. When activities are carried on in outer space, including the moon and other celestial bodies, by an international organization, responsibility for compliance with this Treaty shall be borne both by the international organization and by the States Parties to the Treaty participating in such organization. Article VII.- Each State Party to the Treaty that launches or procures the launching of an object into outer space, including the moon and other celestial bodies, and each State Party from whose territory or facility an object is launched, is internationally liable for damage to another State Party to the Treaty or to its natural or juridical persons by such (continued...)

33

Following the Declaration of Principles and the Outer Space Treaty, the Convention on International Liability for Damage Caused by Space Objects(57) was elaborated over an extended period of time. Although it was initiated in 1962, the text was finally agreed in 1971. The difficulties in elaborating this convention were not so much due to a lack of willingness to adopt a legal framework for damage caused by space objects, but more to the fact that establishing such a regime required a great deal of legal work to be done. The negotiations and the drafting of the convention stumbled on major legal points when the approach of the States taking part in the drafting was radically different, reflecting significant differences between legal systems in an area largely dominated by private law concepts. These issues were, among others, the determination of the applicable law (in particular to deal with the amount of damages), the question of whether or not a limit should be placed on liability incurred under the convention, the method for settlement of disputes and the character of the decision rendered, and the status of international organizations with regard to the convention. These issues were ultimately overcome and the convention agreed. The long years of debate have left behind them an important drafting and document trail to which we will sometimes refer when interpreting the provisions of the convention(58) In our next section, these three documents are analyzed in a topical manner, subdivided by 1) Entities subject to responsibility/ liability, 2) Type of damage giving rise to liability, 3) Nature of the liability, 4) Potential claimants and 5) Procedure for claiming compensation. i)

Entities subject to responsibility/liability

a)

States

The Declaration of Principles and the Outer Space Treaty The title of the Declaration of Principles(59) is illustrative: the resolution addresses activities of States. This is mostly due to the situation prevailing at the time, where space activities were nascent and carried out only by States or within States agencies. Private/industrial companies were involved as contractors and suppliers. But the activities concerned were carried out by States and procurement initiated by States. Space, at the time was more about space science, and space applications had not yet become marketable. This is true in overall space law where rules were developed by States for (56)

(...continued) object or its component parts on the Earth, in air or in outer space, including the moon and other celestial bodies ”.

(57)

Convention on Liability for Damage Caused by Space Objects, UNGA Res 2777(XXVI) [hereinafter referred to as “The Liability Convention], N.M. Matte ed., Emerging International Law, supra note 24, at 554 UNOOSA, Treaties and Principles, supra note 27, at 14 961 UNTS, 187 24 UST, 2389 TIAS 7762 (1993) XVIII-II Annals of Air and Space Law, 651 Online, Office of Outer Space Affairs and McGill Institute of Air and Space Law, supra note 27.

(58)

For a detailed account of the drafting history of the Convention see: B. Cheng, Studies in International Space Law, supra note 24, at 286 ff.

(59)

Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space. Supra note 27.

34 their own purposes. Under the Declaration of Principles, States themselves bear responsibility for their activities in outer space. They also bear this responsibility on behalf of their nationals (national activities by governmental agencies or non-governmental entities). Therefore, as far as international law is concerned, States carrying out national space activities are internationally responsible, whether they launch themselves or not. In terms of liability, the Declaration is more specific. States which may incur liability are those which launch or procure the launching of an object in outer space, and those States from whose territory or facility an object is launched . The expression “procures the launching” is rather vague and one may wonder if the notion of procurement is meant to address the buying of a launch contract, the buying of a turn key satellite on orbit, the lease of transponders, or if it extends to transactions not involving an element of sale and an exchange of funds.(60) As we will see further, this notion has continued to be used in the following treaties. Taking into account Principle 7 concerning registration(61) the State of registration will in principle be subject to liability since it launches or procures the launch. Although this seems fairly logical, it may not be automatic since numerous parties may be involved in a launch and the registration may not necessarily be in line with the visible participation of each party. In this respect, it is recommended to those drafting international agreements for intergovernmental cooperation to always clarify which State is going to register the spacecraft, which State is to be qualified as the launching State and if the other State(s) concerned is(are) procuring the launch or if, under space law, the launching State will be the only State liable.(62) The location of the launch and launch facilities is, under the Declaration of Principles, another criteria for determining which State is liable, hence, under this Declaration a potentially large number of States could be liable for damage caused when an object is launched in outer space. The Outer Space Treaty has merely repeated the Declaration of Principles but, as it evolved from a declaration to a full-fledged Treaty, its provisions were made applicable (60)

It is interesting in this respect to consult the definition of three words which show how wide one could interpret the expression “procure the launching”. The Black’s Law Dictionary, supra note 18, provides the following definitions: “ Procure: Initiate a proceeding; to cause a thing to be done; to instigate; to contrive, bring about, effect or cause. To persuade, induce, prevail upon, or cause a person to do something. [...] Procure connotes action and means to cause, acquire, gain, get, obtain, bring about, cause to be done. [...] To find or introduce; - said of a broker who obtains a customer. To bring the seller and the buyer together so that the seller has an opportunity to sell. Procurement: The act of obtaining, attainment, acquisition, bringing about, effecting [...]. Procurement contract: A government contract with a manufacturer or supplier of goods or machinery or services under the terms of which a sale or service is made to the government. Such contracts, including the bidding process, are governed by government regulations, standard forms, etc. ”

(61)

Principle 7: “The State on whose registry an object launched into outer space is carried shall retain jurisdiction and control over such object, and any personnel thereon, while in outer space. [...]”

(62)

An example is provided further in paragraph 2.2 of this Chapter.

35

only to the Parties to the Treaty. However, one could argue that the principles contained in the Outer Space Treaty have become part of customary international law through compliance of States, especially as the principles contained in the Outer Space Treaty do not contain much more than a translation into space terms of the general principles of State responsibility in international law.(63) It cannot be excluded therefore that a claim could be brought by a State not Party to the Treaty or against a State not Party to the Treaty, either in application of the general principles of State responsibility or under the customary rules of space law. However, we believe that such a State would probably not have the possibility to implement all the provisions of the Liability Convention which we detail further, as it could be arguable whether certain provisions of the Liability Convention have become part of customary international law. The Outer Space Treaty did not make a fundamental contribution to further defining the regime of liability applicable to space activities, apart from its article VI on which we will return later in our discussions.(64)

The Liability Convention The Liability Convention has provided for a more detailed regime concerning both the individual liability of States, as well as their joint and several liability when acting together. Individual Liability Articles II and III, which lay the principles from which other provisions are further derived, place the liability on the launching State. This term is defined by the Convention as meaning: (65)

“ (i) A State which launches or procures the launching of a space object, (ii) A State from whose territory or facility a space object is launched”.

This means that there are at least four States which could be held liable according to this definition. The uncertainty linked to the use of the expression “ procure the launching” has already been addressed above.(66) The French version of the wording does not help very much as the launching State (“Etat de lancement”) is defined as “(i) un Etat qui precède ou fait procéder au lancement d ’un objet spatial; (ii) un Etat dont le territoire ou les installations servent au lancement d’un objet spatial”.

This wording brings the same difficulties of interpretation as the English version. However, in the spirit of the Convention which is victim oriented, as it has been made

(63)

At least as far as State responsibility is concerned. We will return later to the issue of liability for non-governmental entities activities, which is different.

(64)

See paragraph c) non governmental entities.

(65)

“Article II: A launching State shall be absolutely liable to pay compensation for damage caused by its space object on the surface of the earth or to aircraft in flight. Article III: In the event of damage being caused elsewhere than the surface of the earth to a space object of one launching State or to persons or property on board such a space object by a space object of another launching State, the latter shall be liable only if the damage is due to its fault or the fault of persons for whom it is responsible”.

(66)

See also K.H. Böckstiegel, “Legal Implications of Commercial Space Activities” (1981) 24 Colloquium,1.

36 clear all during the drafting history but also referred to in the Convention itself, (67) the wide range of possible interpretations of this wording should be seen in the benefit of the claimants, and it will be up to the respondent State to demonstrate that it ought not to be qualified as having procured the launching. It could be for instance that a State which is the final customer in a turn-key satellite contract(68) is qualified as a launching State ifone would consider that the launching is procured as part of the whole package. However, this State could equally defend itself by stating that it is not procuring the launch of the satellite but the satellite on orbit, this being confirmed, in this type of contract, by a transfer of ownership occurring on orbit. Also, one could argue that a State which leases a transponder on board a satellite is not a launching State because it did not procure the launching as such but only the service rendered by a satellite already in orbit. Actual and contractual situation are often not so well delimited and it remains an assessment to be made very much on a case by case basis. Joint and several liability of States The Convention has, besides individual liability of the launching State, provided for circumstances in which States will be jointly and severally liable. The first such case is provided for in Article IV.(69) The basic principle here is that when damage is caused by a launching State to the object of another launching State elsewhere than on the surface of the earth, and that this damage causes in turn damage to a third State, the two first States arejointly and severally liable to the third State. The third State is therefore offered the possibility to recover full compensation from any ofthese two States, and the issue of apportionment of the burden of compensation between the respondent States does not interfere with such right of the third State. This case of joint and several liability is favorable to the victim ofthe damage since it offers a better chance to identity one of the

(67)

Preamble, 4th paragraph, “ Recognizing the need to elaborate effective international rules and procedures concerning liability for damage caused by space objects and to ensure, in particular, the prompt payment under the terms of this Convention, of a full and equitable measure of compensation to victims of such damage”.

(68)

On turn key satellite contracts, see references in note 19 supra.

(69)

“Article IV: 1.- In the event of damage being caused elsewhere than on the surface of the earth to a space object of one launching State or to persons or property on board such a space object by a space object of another launching State, and of damage thereby being caused to a third State or to its natural or juridical persons, the first two States shall be jointly and severally liable to the third State, to the extent indicated by the following: a) If the damage has been caused to the third State on the surface of the earth or to aircraft in flight, their liability to the third State shall be absolute; b) If the damage has been caused to a space object of the third State or to persons or property on board that space object elsewhere than on the surface ofthe earth, their liability to the third State shall be based on the fault of either of the first two States or on the fault of persons for whom either is responsible. 2.-In all cases of joint and several liability referred to in paragraph 1 of this Article, the burden of compensation for the damage shall be apportioned between the first two States in accordance with the extent to which they were at fault; if the extent of the fault of each of these States cannot be established, the burden of compensation shall be apportioned equally between them. Such apportionment shall be without prejudice to the right of the third State to seek the entire compensation due under this Convention from any or all of the launching States which are jointly and severally liable. ”

37 two States having caused the damage, and also the choice, if both were identified, to bring a claim against the one from whom effective recovery seems most likely, in line with the classical “deep pockets”(70) approach one finds across all fields of law and litigation. Another regime of joint and several liability has been set up by the Convention in its Article V(71) to cover the case where two or more States jointly launch a space object. This covers any kind of agreement between the States concerned. Also, in order to dissipate potential interpretations of Article I (c) as providing for alternatives, the Convention expressly states that a State from whose territory or facility a space object is launched shall be regarded as a participant in a joint launching.(72) The States participating in a joint launch may agree among themselves in advance as to the apportionment ofthe burden of compensation between them. But this does not affect in any way the rights of the claimant State who can bring a claim for full recovery against any of them.

b)

International Organizations

The Declaration of Principles and the Outer Space Treaty As far as international organizations are concerned, the Declaration of Principles states that international responsibility for complying with the Declaration resides with the international organization and its Member States. The resolution therefore considers international organizations as a subject of space law. However, when it comes to liability, the resolution is silent about international organizations and refers only to States. It would be logical to infer though that, given the fact that such organizations bear international responsibility, they would logically bear the liability which comes with it. The resolution does not clarify the issue of whether the responsibility of the organization and its member States is joint and several, nor the issue whether the organization has any standing of its own in a liability procedure. The Outer Space Treaty did not change the principles and only reduced its scope of application to States Parties to the Treaty. The Liability Convention In the process of preparing the Liability Convention, the issue of the status of international organizations was one of the difficult subjects which introduced delays in reaching an (70)

Black’s Law Dictionary, supra note 18, provides the following definition: “Deep pocket: A person or corporation of substantial wealth and resources from which a claim or judgement may be made”.

(71)

“Article V: 1.- Whenever two or more States jointly launch a space object, they shall be jointly and severally liable for any damage caused. 2.- A launching State which has paid compensation for damage shall have the right to present a claim for indemnification to other participants in the joint launching. The participants in a joint launching may conclude agreements regarding the apportioning among themselves of the financial obligation in respect of which they are jointly and severally liable. Such agreements shall be without prejudice to the right of a State sustaining damage to seek the entire compensation due under this Convention from any or all of the launching States which are jointly and severally liable. 3.- A State from whose territory or facility a space object is launched shall be regarded as a participant in a joint launching.”

(72)

Article V, para 3. Supra note 71.

38

agreement on the Convention.(73) Eventually, international organizations received recognition andadedicated status inthe Convention. International organizations are not and cannot become Parties to the Convention.(74) Article XXII indeed assimilates international organizations to States except for a series ofArticles which precisely concern ratification, signature and accession. Article XXII provides two essential conditions for assimilation of international organizations to States: - the organization has to declare its acceptance ofthe rights and obligations defined by the Convention. The procedure for making this declaration is not provided by the Convention but one would assume that the same procedure as the one used for ratification or accession is to be used;(75) - a majority ofthe States Members ofthe organization concerned are States Parties to the Liability Convention and the Outer Space Treaty .(76) (73)

The main issue discussed with respect to the status of international organizations was that of whether or not they have a legal personality distinct from that oftheir member States. Behind this question was the concern of the smaller space nations that they would not be able to pool their efforts into international organizations, would those not be recognized in space law, thereby leaving the major space powers free to be the only ones conducting space activities. A concern of some other States was, on the other hand, that some States would use international organizations as a screen which would let them free to conduct their activities outside of any legal framework On this subject see B. Cheng, Studies in International Space Law, supra note 24, at 310 On the status of international organizations in general, their legal personality and their international responsibility see: M.N. Shaw, International Law, supra note 33, at 908 and J. Combacau & S. Sur, Droit International Public (Paris: Montchrestien, 1999), at 693 ff.

(74)

“Article XXII: 1.-ln this Convention, with the exception of Articles XXIV to XXVII, references to States shall be deemed to apply to any international intergovernmental organization which conducts space activities if the organization declares its acceptance of the rights and obligations provided for in this Convention and if a majority of the States members of the organization are States Parties to this Convention and to the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies. 2. - Sates members of any such organization which are States Parties to this Convention shall take all appropriate steps to ensure that the organization makes a declaration in accordance with the preceding paragraph. 3.- If an international intergovernmental organization is liable for damage by virtue of the provisions of this Convention, that organization and those of its members which are States Parties to this Convention shall bejointly and severally liable; provided however, that: (a) any claim for compensation in respect of such damage shall be first presented to the organization; (b) only where the organization has not paid, within a period of six months, any sum agreed or determined to be due as compensation for such damage, may the claimant State invoke the liability of its members which are States Parties to this Convention for the payment of that sum. 4.- Any claim, pursuant to the provisions of this Convention, for compensation in respect of damage caused to an organization which has made a declaration in accordance with paragraph 1 of this Article shall be presented by a State member of the organization which is a State Party to this Convention.”

(75)

This procedure of ratification and accession is provided for in Article XXIV.

(76)

As an example, the European Space Agency, which at the time was still ESRO, declared its acceptance of the Liability Convention (as it has done with the Registration Convention and the Convention on the Rescue and Return of Astronauts). The declaration of acceptance by ESA of the Liability Convention can be found in French in G.Lafferranderie, “Responsabilité juridique internationale et activités de lancement d’objets spatiaux au CSG”, (1994) 80 ESA Bulletin, 58, (continued...)

39

So long as these conditions are met, the organization concerned will be subject to the same rules as individual States under the Convention. For the specific case of international organizations though the Convention has provided for a regime of joint and several liability between the organization and its Member States, which materializes in the compensation procedure.(77) The Convention, however, has not placed international intergovernmental organizations on an equal footing as individual States, insofar as some fundamental provisions of the Convention are not available to international organizations, namely: - signature, ratification and accession are limited to individual States only (Article XXIV); - international organizations are not in a position to propose amendments to the convention, nor do they have the authority to accept or refuse amendments to the Convention (Article XXV). The Convention does not prescribe the procedure whereby such amendments become applicable to the organization. One would expect that the organization would have to declare its acceptance of the amendments as it had to do for the original convention. A significant problem could arise when amendments have been made which are not equally accepted by all or the majority of the States Members of the organization concerned. In such a case, different versions of the convention would be applied by the organization and some of its Members. Given the fact that certain intergovernmental organizations today are carrying out significant space activities, and launching (76)

(...continued) online at (accessed: 01/2001). The Member States of ESA are all Parties to the Outer Space Treaty and to the Liability Convention On the acceptance by ESA of the Registration Convention, see G. Lafferranderie, “L’ application par l’Agence Spatiale Européenne de la Convention sur l’immatriculation des objets lancés dans l’espace extra-atmosphérique”(1986) XI Annals ofAir and Space Law, 229 M. Bourély, “The Contribution Made by International Organizations to the Formation of Space Law” (1982) 10 Journal of Space Law, 139 M. Bourély, “Coopération internationale et droit de l’espace, l’exemple de l’Agence Spatiale Européenne”, in J. Dutheil de la Rochère ed., Aspects récents du droit de l’espace(Paris: Pedone, 1988), at 47 M. Bourély, “Space Law and the European Space Agency”, in N. Jasentuliyana ed., Space Law Development and Scope, supra note 24, at 87 M. Bourély, “Organization politique et administrative Internationale, Organizations à compétence territoriale régionale. Organizations de l’espace”, Jurisclasseur Droit International, Fascicule 195 G. Lafferranderie, “The European Space Agency (ESA) and International Space Law”, in Proceedings of the Third ECSL Colloquium, International Organizations and Space Law, Perugia, Italy, 6-7 May 1999 (Noordwijk: ESA Publications, 1999), ESA Publication ref SP-442, at 19: this Article reprints in its annexes the declaration of acceptance by ESA of the rescue and return agreement, the declaration of acceptance of the registration convention, an exchange of correspondence with the UN Legal Counsel on the subject of the status of international organizations with regard to the registration convention, the declaration of acceptance of the liability convention.

(77)

The Council of the European Space Agency adopted resolution ESA/C/XXII/Res.3 concerning liability of the Agency, on 13 December 1977. This resolution was largely prompted by the expansion of the launching activities in which ESA was involved with the Ariane launcher. The resolution deals with the consequences of the Agency’s liability, where ESA causes a damage, in the course of its activities to any of its Member States or participating States, or to a third State. This resolution can be found in French in G. Lafferranderie, supra note 76, and online in the ESALEX database at <European Center for Space Law: (accessed: 01/2001).

40 activities, such a situation, depending on the substance of the amendments concerned, could be untenable and would introduce significant uncertainties. Upon which version of the Convention would claims brought against the organization be based? How could an organization and its Member States be jointly and severally liable for obligations which may have a different scope for each of them? Should the Liability Convention eventually be amended, the drafters of these amendments should bear these issues in mind and look into the possible ways to find practical solutions to such potential problems; - international organizations are not part of those who can convene a conference to review the Convention. This right is reserved to States Parties (Article XXVI); - the provision on withdrawal (Article XXVII) is not applicable to international organizations. Therefore, once an organization has made its acceptance, it cannot withdraw it. The fate of the acceptance will be linked to the conditions for such acceptance, in particular the one that a majority of States Members of the organization must be Parties to the Convention and the Outer Space Treaty. If this would not be the case anymore, the acceptance of the Convention would cease to exist itself.

c)

Non-governmental entities

The Declaration of Principles and the Outer Space Treaty Non-governmental entities would, today, refer in particular to private companies operating launches, space-ports, satellite communications. As one can gather from reading specialized press, private companies are more and more involved in the space business as the result of a long evolution. In the past, private companies were not excluded from the launch business, but they were not direct participants in these activities either.(78) In the years past, private companies have increasingly entered this business, as well as other areas of space activities. As far as non-governmental entities are concerned, the Declaration of Principles places them logically under the responsibility of their national State, as far as international responsibility is concerned. The resolution sets the important principle that the activities of non-governmental entities in outer space shall require authorization and continuing supervision by the State concerned. So far, this is in line with classical international law principles that a State is responsible for taking measures necessary for its nationals to exercise their activities in a way which does not create harm. In the Outer Space Treaty, the notion of State concerned which was used in Principle 5 and which was already very unclear has been replaced by that of “appropriate State”, which did not introduce any clarification and left this issue open to many possible interpretations. This appropriate State also has to be a Party to the Outer Space Treaty. (78)

K.H. Böckstiegel, “Legal Implications of Commercial Space Activities”, supra note 66, at 4: “ Until recently, it was only the indirect participation which would be found in practice: States and State institutions had a monopoly of space activities and private industry was only linked to these activities as subcontractors or sometimes as customers for the result. The exclusion of private industry from direct participation even in private economy countries, where normally private industry is the motor for technical progress and then transferring such progress into practical use for the community, was due to the enormous size of the technical means involved” .

41 This wording is not very satisfactory. One important principle which was laid down in space law from the beginning, in the Declaration of Principles and in the Outer Space Treaty, is that States bear international responsibility for national activities, including those carried out by non-governmental entities. This principle adopted for space law differs from the classical international law approach, where States are normally not internationally responsible for acts of their nationals. This makes the regime applicable among States parties to the Outer Space Treaty significantly different from that governing States not parties.(79) In practice, as all space nations are parties to the Outer Space Treaty,(80) this should not cause problems. However, a claim brought through the diplomatic channels by a State not party against a State party may not be able to rely on this responsibility of the launching State, unless the principle of guarantee by the launching State for damage caused by its nationals would be considered as a principle of customary international law. So far, this would be difficult to demonstrate, as there are insufficient elements of practice and of opinio juris on this matter among States not parties to the Outer Space Treaty. The Liability Convention The Liability Convention did not provide for any specific rules concerning nongovernmental entities. The question was addressed by treaty makers, legislators and authors, as to whether, under existing rules of space law, private companies were allowed to undertake such activities, and the Outer Space Treaty does not provide an obvious, affirmative answer to this question. On the contrary, it would seem to start from the opposite assumption. Indeed, the use of the expression “for the benefit and in the interest of all countries” (81) seems to be incompatible with the activities of private enterprises. It has been argued,(82) for instance, that this provision could allow private enterprises to undertake space activities under the condition that the profits of these activities would go to all countries. However, it is widely accepted that Article I of the Outer Space Treaty is general in character so that “it is obviously not possible to interpret the provisions as a ban for commercial use of outer space” .(83) Besides, the question of private commercial use of outer space was discussed during the drafting of the Outer Space Treaty. The Soviet Union considered, referring to Article I para 2 and 3 of the Outer Space Treaty, that only States could benefit from the freedom of exploration and exploitation, fearing irresponsible attitudes on the (79)

On this topic see B. Cheng, Studies in International Space Law, supra note 24, at 598 ff See also an interesting analysis, in relation to the issue of whether or not State strict liability for transnational injury due to ultra hazardous activities is an emerging norm of international law, in J.S. Charme, “Transnational Injury and Ultra hazardous Activity: An Emerging Norm of International Strict Liability” (1989) 4 The Journal of Law and Technology, 75.

(80)

See Annex 1 Table of Treaties, for reference to Status of Parties.

(81)

Outer Space Treaty, Article 1, para 1: “The exploration and use of outer space, including the moon and other celestial bodies, shall be carried out for the benefit and in the interests of all countries, irrespective of their degree of economic or scientific development, and shall be the province of all mankind”.

(82)

Markov, Traité de Droit International Public de l’Espace , supra note 24, at 671.

(83)

K.H. Böckstiegel, “Legal Implications of Space Activities”, supra note 66, at 6.

42 part of private enterprises.(84) The United States supported the opposite point of view. Finally, an agreement was reached upon the wording of Article VI of the Outer Space Treaty.(85) The freedom of exploration and exploitation of outerspace is not limited to States but can also be exercised by non-governmental entities, including private enterprises.(86) This statement is also supported by Article IX of the Outer Space Treaty.(87) The involvement in space activities of the nationals of a State, besides the State itself, is thus clearly foreseen by the Outer Space Treaty. Once it is established that private entities may engage in space activities, one needs to address the question of whether or not they have to comply with the principles of space law. The Outer Space Treaty itself provides the answer to this question: “national activities” (i.e activities carried out by nationals of a State, a private company being one such national through the link established by citizenship(88)) must be carried out “ in conformity with the provisions set forth in the present Treaty” .(89) Consequently, private enterprises have to comply with all the principles of space law. Since those principles are part of public international space law, and although they have to be complied with as such, they are addressed to States and one has then to consider how they are applied or “flowed down” to national private entities. Space law allows private entities to enter into space activities, under the condition of the control by the appropriate State,(90) as finally provided in Article VI of the Outer Space Treaty.(91) Also, Article VIII of the Outer Space Treaty provides that a State Party which carries on its registry an object launched into outer space “ shall retain jurisdiction and control over such object” . The Treaty does not, in this respect, make any distinction between the activities of a State and activities of this State’s private enterprises. As noted by Mr Webber(92),

“ Thus, the Treaty clearly contemplates private space activities and mandates that State (84)

UN Doc A/AC.105/C2 (1962). UN Doc A/5181 Annex 3 (1962). UN Doc A/AC.105/C2/C6 (1962).

(85)

Article VI, supra note 56.

(86)

On the legitimacy of non-governmental activities see: S. Gorove, “Implications of International Space Law for Private Enterprise” (1982) VII Annals of Air and Space Law, 319, at 320.

(87)

Article IX: “If a State Party to the Treaty has reason to believe that an activity or experiment planned by it or its nationals [...]”.

(88)

For further discussions about the notion of “national activities” see: H. Bittlinger, “Private Space Activities: Questions of International Responsibility” (1987) 30 Colloquium, 191, at 192-193.

(89)

Article VI Outer Space Treaty, supra note 56.

(90)

For a clear statement in this respect, see UN Doc A/AC.105/PV.22 (1966), 37: “The Soviet delegation considers it essential to point out that in this field it would be possible to consider the question of not excluding from the declaration the possibility of activity in outer space by private companies, on the condition that such activity would be subject to the control of the appropriate State, and the State would bear international responsibility for it”.

(91) (92)

Article VI, supra note 56. A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles” (1984) 49 Journal of Air Law and Commerce, 1, at 36.

43 parties take responsibility for such activities, even if the State does not exercise any direct or indirect control over such activities“. Consequently, it is the responsibility of a given State to ensure compliance with the provisions of the Outer Space Treaty by private enterprises. As for the question of which State would bear this responsibility, the Outer Space Treaty, in Article VI, uses the expression “ the appropriate State” , and Article VII imposes liability on a State for space activities of its nationals. More details are provided in the Liability Convention: the State responsible for damage caused by the space object operated by the private enterprise is the “ launching State” defined as “a State which launches or procures the launching of a space object”, or “a State from whose territory or facility a space object is launched”.(93) The interpretation of the expressions “ launching State” and “ appropriate State” has been discussed at length. It would be natural to consider that the appropriate State is the one connected to the enterprise by way of nationality (apart from the material criteria linked to the launching which would qualify it as the launching State). However, it has been noted that “If the State of nationality is presumed to have jurisdiction, several problems arise. The State of nationality of the PLV [Private Launch Venture] could be the State of incorporation, the State where its home office is located, or where its principal place of business is located. If more than one State is involved, conflicts over which State would have primary jurisdiction, for purposes of the 67 Treaty, would be manifold. No matter which State is obligated to exercise ‘authority andsupervision’ over the user or PL V, any activity in outer space by the user or PL V can be legitimized only by the willingness of a State party to assume responsibility for such ‘authorization and supervision’. In order to adequately supervise any activity, the supervising State must be able to impose sanctions upon the entity in control of the space object after it is launched. That entity would be either the PL V or the user. Thus the location of the PL V or the user and the whereabouts of their respective assets are relevant to determining which State is ’the appropriate State Party’. As a general rule, a State may not exercise its enforcement jurisdiction on the territory of another State without the latter’s consent. Thus the State in which the PLV or the user or their respective assets are located should be the State Party obligated to ‘authorize and supervise’ user or PLV activities.” (94) In the specific case of the United States, it was pointed out that: “ Thus, the United States is primarily liable under international law for purely private space vehicles that launch from the United States or its territorial waters”.(95) We will see, in the course of our discussions concerning US law in this respect,(96) that US law goes further than these two interpretations. These different interpretations show that we have here a major area of risk for actors of launch activities as they have to take into account two layers of rules of conflict of laws: - at the level of private international law, which has to determine, in the light of the law of the relevant forum, which are the rules of conflict of laws applicable to determining the (93)

Liability Convention, Article I c)i) and ii).

(94)

A. Ritholz, “International and Domestic Regulation of Private Launching Ventures” (1985) 20 Stanford Journal of International Law”, 135, at 142.

(95)

A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles, supra note 92, at 39.

(96)

See Chapter 3 infra.

44 nationality of the private enterprise; - at the level of public international space law, which has to determine which State is responsible for the activities of this private company and is meant to have authority and supervision over it. One can already sense, with these remarks that it may be very complex to work out the various layers of these possible criteria of connection and there is much work to be done in this field to narrow down such criteria and improve the identification of the State responsible for a given launch operator in a more predictable manner.

ii)

The compensable damage

a)

The Declaration of Principles and the Outer Space Treaty

The Declaration of Principles refers to the launch as the activity central to its liability provisions. However, liability is not only derived from the launch or the procurement of the launch but also from activities in outer space in general, and from the damage caused by the space object itself or its component parts. The Declaration of Principles does not define a scope of liability in terms of activities from which liability can be derived. The damage addressed by the Declaration is not activity-based but rather damage which can be associated to an object (which in turn will be connected to the State launching it or procuring its launch). The resolution does not even require that the object be launched to apply. The damage can be located on earth, in airspace or in outer space. No definition is given of the object, except that it includes its component parts. The Declaration refers in general to damage. There shall be no doubt that this covers physical damage such as property damage or bodily injuries caused by contact with the space object or immediately caused by the space object. But nothing in the Declaration either allows or prevents the compensation of non-physical damage such as interferences preventing a satellite from working, psychological damage, economical damage and loss of profit, and indirect and consequential damages. The Outer Space Treaty did not make any change.

b)

The Liability Convention

The Liability Convention has significantly detailed this issue. There are three main topics which are to be addressed in this respect: What causes of damage are within the scope of the convention? What geographical areas are within this scope? What type of injuries or damages are covered by the Convention and can give rise to claims? What can be the cause of a damage under the Convention? The damage covered by the convention is the one caused by a space object. The space object, is in turn “defined” by the convention in its Article I as follows: “The term ‘space object’ includes component parts of a space object as well as its launch vehicle and parts thereof”.

45 The space object is no more defined here than it was before the Liability Convention, and in fact, to date, a universally agreed definition of a space object does not exist, due to the debate, still not concluded, about the delimitation of airspace and outer space. Since 1957 this issue has been on the agenda of the UNCOPUOS and has still not been finalized.(97) The two main opposite positions in this respect are the spatialist approach aiming at fixing the border between airspace and outer space at a certain altitude, and the functionalist approach which consists of deciding that objects which have the purpose of carrying out a mission in outer space are space objects, even if they transit via airspace. In any case, our purpose here is not to further contribute to the debate on delimitation of airspace and outer space, but only to point out that this absence of definition introduces an element of insecurity in the functioning of the Liability Convention. As long as no clear definition of a space object is agreed upon, there remains uncertainty on this subject. One possible way would be to progressively clarify that a particular vehicle or payload is a space object, when particular principles are agreed upon in the COPUOS.(98) However, such insecurity has to be tempered by the fact that space objects launched are registered in accordance with the Registration Convention.(99) The Registration Convention defines the space object with an identical formula as that of the Liability Convention. The recording of an object in the registry provided for in the Registration Convention is a strong presumption that it is a space object and was considered as such by the State which performed the registration (and which will be one of the favorites on the list of launching States!). The Registration Convention also provides for the (97)

The latest work on this subject by the Legal Subcommittee of the UNCOPUOS is the preparation of a questionnaire, which was answered by the COPUOS Member States. UN Doc A/AC. 105/635, 15 February 1996. The questionnaire asked 9 questions: 1) Can an aerospace object be defined as an object which is capable both of traveling through outer space and of using its aerodynamic properties to remain in airspace for a certain period of time? 2) Does the regime applicable to the flight of aerospace objects differ according to whether it is located in airspace or outer space? 3) Are there special procedures for aerospace objects, considering the diversity of their functional characteristics, the aerodynamic properties and space technologies used, and their design features, or should a single or unified regime be developed for such objects? 4) Are aerospace objects while in airspace considered as aircraft, and while in outer space as spacecraft, with all the legal consequences that follow therefrom, or does either air law or space law prevail during the flight of an aerospace craft, depending on the destination of such a flight? 5) Are the take off and landing phases specially distinguished in the regime for an aerospace object as involving a different degree of regulation from entry into airspace from outer space orbit and subsequent return to that orbit? 6) Are the norms of national and international law applicable to an aerospace object of one State while it is in the airspace of another State? 7) Are there precedents with respect to the passage of aerospace objects after re-entry into the Earth’s atmosphere and does international customary law exist with respect to such passage? 8) Are there any national and/or international legal norms with respect to the passage of space objects after re-entry into the Earth’s atmosphere? 9) Are the rules concerning the registration of objects launched into outer space applicable to aerospace objects?. The responses to these questions by COPUOS Member States can be found online at the Office for Outer Space Affairs, supra note 27.

(98)

In our proposals presented in Chapter 5 and Chapter 6, we implement this approach.

(99)

Convention on Registration of Objects Launched in Outer Space, UNGA Res 3235(XXIX) [hereinafter referred to as “ The Registration Convention” ] in: N.M. Matte ed., Emerging International Law, supra note 24, at 564 UNOOSA, Treaties and Principles, supra note 27, at 23 1023 UNTS,15 28 UST, 695 TIAS 8480 (1993) XVIII-II Annals of Air and Space Law, at 677 Online at the Office for Outer Space Affairs and at the Institute of Air and Space Law, supra note 27.

46 possibility for a State Party to ask other States Parties for assistance to identify a space object which would have caused damage,(100) where the application of the Convention has not allowed the identification of the object concerned. The provisions of the Registration Convention, although they can be argued to establish a strong presumption and provide help for identification of a concerned object, do not change the fact that either a definition of the space object or other mechanisms of ascertaining the status of an object,(101) would be welcome. States do not always have a very strict practice of registration and therefore there is no guarantee that all space objects launched are properly registered. Also, if it would be left to States to decide whether or not something is a space object by registering it or not, this would potentially lead to abuses. In the meantime, practitioners should keep this issue in mind and provide for the elements needed for the qualification of a space object where needed.(102) The Liability Convention also clarifies that the launcher is considered as part of the definition of the space object, together with its component parts (for instance the rocket boosters or the Shuttle external tank would be part of the definition). The fact that the definition includes the component parts of the space object allows coverage of cases where the satellite breaks down into separate parts (for instance where solar panels would break). Of course, it then remains to determine to which satellite the part belonged that has caused the damage. This will be one of the most difficult problems that the victim of a damage caused by a space object will face: it may be difficult in practice to trace space object pieces back to the launching State, although technical expertise available can determine with more and more accuracy the manufacturing origin of those pieces. Parts numbers for instance, inside the space object, would help identify its origin. Which geographical areas are within the scope of the convention? The geographical area of occurrence of the damage is of fundamental importance for the functioning of the convention as it determines the type of liability applicable.(103) The areas covered by the convention are: - the surface of the Earth: this is clear and does not seem susceptible to diverging interpretations. No distinction is made between land and sea. - airspace: in this case, the convention does not refer to airspace as such but to (100)

Article VI Registration Convention: “Where the application of the provisions of this Convention has not enabled a State Party to identify a space object which has caused damage to it or to any of its natural or juridical persons, or which may be of a hazardous or deleterious nature, other States Parties, including particular States possessing space monitoring and tracking facilities, shall respond to the greatest extent feasible to a request by that State Party, or transmitted through the Secretary-General on its behalf, for assistance under equitable and reasonable conditions in the identification of the object, A State Party making such a request shall, to the greatest extent feasible, submit information as to the time, nature and circumstances of the events giving rise to the request. Arrangements under which such assistance shall be rendered shall be the subject of agreement between the parties concerned”.

(101)

See in particular our Chapters 5 and 6 in Part II on this subject, for proposals.

(102)

Further in this Chapter, some examples will be given as to how this issue was approached in cooperative agreements. Also some proposals can be found in our Chapter 6 in Part II.

(103)

On the types of liability, see para iii)

47 aircraft in flight. This leaves outside of its scope the damage caused to airspace as an environment, as well as damage caused to objects which are not aircraft(104) such as balloons. - elsewhere than on the surface of the Earth: here the convention refers to damage caused to another space object or to persons or property on board this space object. As in the case of airspace, this “by default” area is not defined as an environment itself. Also, the damage to be taken into account in this area is reduced to that in relation to another space object, which brings us back to the problem of the definition of the space object as we have mentioned above. Although this area appears to be unlimited, it has been suggested, based on the drafting history of the Liability Convention, that areas such as the Moon or other celestial bodies and installations placed on them may not be covered by the scope of this convention(105) and this position is supported by the text of the Moon Treaty, in its Article 14 paragraph 2.(106) This may seem far-fetched and not of immediate cause for concern, but this may change as experimental projects under study are aimed at planning for settlements on the Moon in view of further space missions to Mars and elsewhere.(107) Which types of damage are covered by the convention and which compensations? The term “damage” is defined by the Convention in its Article I: “ The term ‘damage’ means loss of life, personal injury or other impairment of health; or loss of or damage to property of States or of persons, natural or juridical, or property of international governmental organizations” . This definition undoubtedly covers the damage caused by direct contact with the space object. This is really the primary case of damage and encompasses direct injuries to persons which result in loss of life or impairment of health. The second category, impairment of health, would in principle allow coverage of a psychological type of damage so long as it is physically manifested. This primary case of damage also encompasses direct interference with property, damage to property, which causes it to be destroyed/dysfunctional for its normal use. Beyond the direct contact with the space object, there are cases where the space object (104)

An aircraft has been defined (Chicago Convention Annex 6, Operation of Aircraft, Chapter 1, Definitions) as “any machine that can derive support in the atmosphere from the reactions of the air other than the reactions of the air against the earth’s surface.”

(105)

W.F. Foster, “The Convention on International Liability for Damage Caused by Space Objects”, (1972) 19 Canadian Yearbook of International Law, 137, at 146 B. Cheng, Studies in International Space Law, supra note 24, at 322.

(106)

“States Parties recognize that detailed arrangements concerning liability for damage caused on the moon, in addition to the provisions of the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies and the Convention on International Liability for Damage Caused by Space Objects, may become necessary as a result of more extensive activities on the moon. Any such arrangements shall be elaborated in accordance with the procedure provided for in article 18 of this Agreement. ”

(107)

Information on Mars Exploration can be found online at NASA Jet Propulsion Laboratory: (accessed: 01/2001).

48 could cause interference or contamination constitutive of damage. This is regarded as being within the realm of the convention so long as it produces the consequences referred to in the Convention.(108) The type of recoveries available for a direct damage are not identical in every system of law and this is an issue which will have to be addressed at the stage of the allocation of the amount of damages where some rules are prescribed by the Convention which, while not referring to a specific national law, implement a mechanism based on equity that ultimately introduces an element ofnational systems of law.(109) As an example, Professor Christol states that “ If the required causation were present and harm were experienced pursuant to US practices, compensation for the following would be appropriate: lost time and earnings; impaired earning capacity; destruction or deprivation of use of property; rendering the property unfit for the use for which it was intended; loss of profits resulting from an interruption in business activities; loss of rents; reasonable medical, hospital, and nursing costs occasioned by harm to the person; physical impairment, including impairment of mental faculties; pain and suffering; humiliation; reasonable costs for the repair of property that has been wrongfully harmed; costs incurred in mitigating existing wrongful harm; and loss of the services of a third party to which the injured party was entitled. The Department of State regularly has taken the position that international law authorizes the recovery of damages for harm produced by personal injury or pecuniary loss. In the event of loss of life, a valid claim could also be made for ‘contributions made by the deceased towards support of the claimant’.” (110) Damage which finds its cause in the space object concerned, whether it is primary or secondary, would in principle be covered by the Convention. A different question is raised by indirect damages, which are in general those for which the line of causation has been interrupted so that it is not direct. With some nuances, damage compensated in international law is direct damage,(111) and it seems that the Convention has pursued this line as the repetition of the terms “caused by” shows. Professor Foster expressed the opinion that “ These considerations [the issue of direct/indirect damages], it is suggested, are irrelevant to a determination of whether compensation should be paid for specific damage arising out of a space object accident. The word “caused” should be interpreted as merely directing attention to the need for some causal connection between the accident and the damage, while leaving a broad discretion so that each claim can be determined (108)

W.F. Foster, “The Convention on International Liability for Damage Caused by Space Objects”, supra note 105, at 155 C.Q. Christol, “International Liability for Damage Caused by Space Objects” (1980) 74 American Journal of International Law, 346, at 359.

(109)

Article XII Liability Convention: “The compensation which the launching State shall be liable to pay for damage under this Convention shall be determined in accordance with international law and the principles of justice and equity, in order to provide such reparation in respect of the damage as will restore the person, natural or juridical, State or international organization on whose behalf the claim is presented to the condition which would have existed if the damage had not occurred. ”

(110)

C.Q. Christol, “International Liability for Damage Caused by Space Objects”, supra note 108, at 359.

(111)

J. Combacau, S. Sur, Droit International Public, supra note 73, at 513 ff.

49 on its merits and in the light of justice and equity; for it is difficult, if not impossible, to foresee all the circumstances that may result in damage.” (112)

It is not clear what the Convention meant with the terms “caused by”. Thus, Professor Christol states: “ The language ‘caused by’ needs to be examined from two perspectives. It might be interpreted as providing that only a direct hit by space debris would allow for the recovery of damages. Or, more reasonably, it would allow for the additional consequences produced as a result of the initial hit. Thus, this expression would allow for the recovery of damages both for a direct hit and for the indirect or consequential aspects of an accident involving a space object. The term “caused by” also can be interpreted in the context of causality, which means that there ‘must be proximate causation between the damage and the activity from which the damage resulted’. Nonetheless, in the light of the positions put forward during the negotiation of the Liability Convention, since no conclusion was reached as to ‘direct’ versus ‘indirect’ cause, clearly the term ‘cause’ should only require a causal connection between the accident and the damage.” (113)

If one refers to the Vienna Convention on the Law of Treaties,(114) in its Section 3 on Interpretation of Treaties, two rules can confirm this position: - Article 31.3.c)(115) whereby shall be taken into account any relevant rules of international law applicable in the relations between the parties. In this case the rule that indirect damages are normally not recovered in international law would come to apply. - Article 32(116) which refers to the recourse to the preparatory works as a means of interpretation. In the case of the Liability Convention, the preparatory works show the absence of an agreement between the parties on the subject of indirect damage,(117) and would also lead to the conclusion that indirect damage cannot be included in the scope of the Liability Convention. Nevertheless, this point is not clear and Professor Christol concluded his discussions referred to above by stating: “Despite the several views put forward by commentators, it may be anticipated that the convention will be interpreted as covering both direct and indirect damage resulting from

(112)

W.F. Foster, “The Convention on International Liability for Damage Caused by Space Objects”, supra note 105, at 158.

(113)

C. Christol, “International Liability for Damage Caused by Space Objects” supra note 108, at 362.

(114)

Vienna Convention on the Law of Treaties, supra note 33.

(115)

Article 31 deals with general rules of interpretation and provides: “There shall be taken into account, together with the context: [...] c) any relevant rules of international law applicable in the relations between the Parties.”

(116)

Article 32: “Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31 (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable.”

(117)

C. Christol, “International Liability for Damage Caused by Space Objects” supra note 108, at 362.

50 the malfunctioning of a space object and its component parts.”(118)

Nuclear damage is not singled out in the convention, but there was much debate about it in the drafting history and it was eventually agreed that such damage is meant to be covered by the provisions of the Convention.(119) In this respect, the Principles on Nuclear Power Sources(120) have quite some importance in the application of the Liability Convention. Indeed, although these principles were agreed as a UN Resolution, they express a minimum duty of care and standard practice which could serve, in combination with State practice, as a measurement of the liability of a defendant State under the Liability Convention. It is important to note that the Liability Convention seems to limit the damages recoverable to compensatory damages only, as suggested by the wording of its Article XII: “[...] in order to provide such reparation in respect of the damage as will restore the person, natural or juridical, State or international organization on whose behalf the claim is presented to the condition which would have existed if the damage had not occurred”.

iii) a)

Type of liability The Declaration of Principles and the Outer Space Treaty

The Declaration of Principles does not define at all the type of liability. It does not refer to the concept of fault or no-fault liability, absolute liability or whatsoever. The general theory of international law would therefore come into play. The Outer Space Treaty did not provide any specific rule in this respect. b)

The Liability Convention

In the Liability Convention, we have mentioned(121) that the geographical location of the occurrence of the damage is a fundamental criteria. There are two types of liability under the Convention, absolute liability and liability based on fault, which are applied as a function of the geographical location of the damage. Absolute Liability When the damage is caused on the surface ofthe Earth or to aircraft in flight, the liability of the launching State is absolute, meaning that the responsibility of the launching State will be sought without the claiming State having to demonstrate a fault or negligence on the part of such launching State as the origin of the damage. The reason behind the (118)

C. Christol, “International Liability for Damage Caused by Space Objects” supra note 108, at 362.

(119)

B. Cheng, Studies in International Space Law, supra note 24, at 323.

(120)

See Annex 1 to the present Chapter M. Benkö & K.U. Schrogl, International Space Law in the Making, supra note 25, at 19. The principles are also reprinted at 98 K.U Schrogl, “The UN Committee on Peaceful Uses of Outer Space Adoption of Principles Relevant to the Use of Nuclear Power Sources in Outer Space and Other Recent Developments”, in Proceedings of the Sixth ECSL Summer Course on Space Law and Policy, Lapland 1997 (Paris: ECSL, 1998), at 77.

(121)

See Section 2b) supra.

51

convention’s introduction of absolute liability is, as it is the case for the application of such theories in national laws, the fact that space activities create an extraordinary risk to persons and property with the supplementary inconvenience of the difficulty to establish the proof of fault in the case of accident caused by a space object. In view of protecting the victims, the burden of compensation was therefore put on the launching State since it is taking the benefit of the activity which ultimately caused the damage. Two other important points are to be noted with respect to this absolute liability. Firstly, it is not a general principle of international law that States can be held absolutely liable. There is normally the need for the establishment of a certain standard of fault before the liability of a State can be sought.(122) The Liability Convention has therefore created a particular and new situation which has not been reproduced in any other treaty to date. Secondly, this is even more interesting due to the fact that no cap has been placed on the amount of compensation to be paid by the launching State for damage caused by its space objects. This thus creates a very stringent case of absolute liability. Fault Liability When damage is caused elsewhere than on the surface of the Earth by a space object of one launching State to the space object of another launching State or the persons or property on board such space object, the liability of the State is based on fault, i.e only if the damage is due to its fault or the fault of persons for whom it is responsible. In space, all Parties in the position to operate a space object are meant to be acting on an equal footing, to have the technology to be able to bring the proof of the fault, and in any case to have assumed the risks of conducting these activities: none should be a privileged victim. This is the reasoning behind the establishment of a fault based liability in these cases. iv)

Potential claimants

a)

The Declaration of Principles and the Outer Space Treaty

The Declaration of Principles refers to international liability towards a foreign State or its natural or juridical persons. It was therefore clear from the beginning that liability relationships within a State are not covered by these provisions, which is logical since these texts are part of international law and therefore govern the relations of States among themselves and not the internal affairs of States. The Outer Space Treaty did not bring any change. b)

The Liability Convention

The Liability Convention, being still a body of rules governing the relations of States, has reserved to States the right to bring claims. The State which can present a claim to the launching State is, as per Article VIII of the Convention, the “ State which suffers damage, or whose natural or juridical persons suffer damage.” (122)

Cases and doctrine are divided on this subject. See Shaw, International Law, supra note 33, at 545.

52

Further, Article IX provides that “a claim for compensation for damage shall be presented to a launching State through diplomatic channels.”

These two provisions are a classical application of international law principles whereby an individual (either natural person or juridical person) has no standing in international law and only States can, on behalf of their nationals, bring claims against other States, through diplomatic channels.(123) The Convention also uses the wording “A State which suffers [...] may present [...] a claim” thereby reflecting also the principle that the decision whether or not to present a claim for its national is at the discretion ofthe State concerned and he is under no obligation to do so.(124) The Convention builds upon the nationality, a key concept in international law since, in principle, a State is meant to take care of the claims of its nationals, but not of foreign nationals. Nationality as a link to a given State has been the subject of many cases and doctrine, with the fundamental contribution of the Nottebohm case.(125) States have the exclusive authority to attribute their nationality with the limitation that, to be recognized by other States, the nationality must be effective.(126) Nationality is also the central link for juridical persons such as companies where the possible criteria for determining nationality are often less directly related to effectiveness of nationality but may be more numerous and often create difficulties.(127) The State of nationality may decide not to bring a claim, either at its own choice, or for instance because there is no acknowledgment of nationality by it. The Convention has provided the possibility for the individual, either natural or juridical, to exercise diplomatic protection via the State in the territory of which the damage has been sustained. This is a significant exception to the principles explained above. It has to be assumed that States Parties to the Liability Convention agree, with this provision, to extend the benefit of their diplomatic protection (also with the “may” formula) to nonnationals. The exercise of this provision could not in any case go beyond the scope of the Convention and therefore: in application of Article VII, a national of a launching State cannot seek diplomatic (123)

M.N. Shaw, International Law, supra note 33, at 562.

(124)

J. Combacau & S. Sur, Droit International Public, supra note 73, at 530 International Law, supra note 33, at 563.

(125)

M.N. Shaw, International Law, supra note 33, at 563

ICJ Reports, 1955, at 4

M.N. Shaw, 22 ILR, at 349.

(126)

J. Combacau & S. Sur, Droit International Public, supra note 73, at 319.

(127)

The nationality of corporations can be associated to criteria such as the place of incorporation, the location of its head office, its main Center of activities, its control and so on, those criteria being often used in combination. In the case of corporations, this multiplicity of criteria leading to the attribution of a nationality may in certain cases lead to a clear determination of nationality, or an attribution of nationality by a number of States. Such a case can seriously disturb the course of claims to be brought by a national State, when the defendant State can also argue to be a national State of the corporation concerned. The effective link behind nationality which was stressed in the Nottebohm case for individuals is much more subjective in the case of corporations. Bilateral investment treaties have endeavored to help clarify this situation in particular cases See: Barcelona Traction Case, ICJ Reports, 1970, at 3 and 46 ILR, at 178. Also partly reprinted in D.J. Harris, Cases and Materials on International Law, supra note 51, at 604 ff Sornarajah, “State Responsibility and Bilateral Investment Treaties” (1986) 20 Journal of World Trade Law, 79.

53

-

protection for a claim against its national State where this claim would not have existed otherwise (it would be likely that in international law, this case could be compared to that of dual nationality where action against one of the States of nationality is only possible when the effective nationality is connected to the claimant State); in application of the same article, foreign nationals participating in the operation of a space object or being in the vicinity of a launch or recovery area as a result of an invitation by the launching State, would not be able to exercise this right (either through their State of nationality, or through the State on the territory of which damage was suffered which in this case would be likely to be the launching State the national concerned therefore being probably covered under separate agreements between the States concerned).

Finally, if none of the two States referred to above has presented a claim, the last possibility is that a State maypresent a claim to a launching State, with respect to damage sustained by its permanent residents, unless such residents are nationals of the launching State, or invitee as per Article VII. Where a State does not maintain diplomatic relations with the launching State, the Convention foresees the possibility for it to ask another State to present this claim or to represent its interests. If both the claimant State and the launching State are members of the United Nations, the claim can also be channeled via the UN Secretary General. The possibility to bring claims against the launching State has therefore been made rather wide by the Convention with a view to ensuring as many avenues for recovery as possible for the victims. However, in establishing these alternative routes for the channeling of an individual’s claim, the Convention has not provided for time limits within which these determinations have to be made by the States concerned as to whether or not they will forward a claim. Bearing in mind the time limit set by Article X.1 for the presentation of claims to the launching State,(128) the functioning of the alternatives provided in Articles VIII and IX can be difficult and the decision to place a claim by the “back-up” States cannot be delayed until the end of the time period mentioned before. They also will not start preparing a file if it could then turn out that the State of nationality has prepared a claim. Needless to say, the potential difficulties of determining the nationality of the victim, the launching State, the relationships between the States concerned and the potential issues of interpretation of agreements concluded between them, are all elements which paradoxically make the bringing of claims very difficult under the Convention.

v)

Procedure for claiming compensation

a)

The Declaration of Principles and the Outer Space Treaty

The Declaration of Principles does not provide for any procedure for claiming (128)

Article X.l “A claim for compensation for damage may be presented to a launching State no later than one year following the date of the occurrence of the damage or the identification of the launching State which is liable.”

54 compensation. In line with its general purpose, the Declaration was limited to setting some general principles, primarily aimed at progressively building a legal framework to govern space activities. This text did not allow for a specific implementation since it did not provide for any mechanism or detail for claiming compensation for damage caused by space objects. One would have had to rely on the general rules and principles of international law to operate these provisions. At the time, in case of a dispute it would even have been difficult to apply the provisions of the resolution as a lex specialis of international law since it was only a UN resolution and practice had not been long enough to establish its principles as being part of customary international law. The Outer Space Treaty did not provide additional provisions on this matter.

b)

The Liability Convention

The Liability Convention has set up procedures to handle claims brought in accordance with its provisions. First, and in accordance with the classical rules of international law, the claim can be presented to the launching State through the diplomatic channels.(129) As we have seen,(130) there are many options as to which State is going to present the claim through diplomatic channels and it may take some time to identify which State is going to do this. The Convention also does not require that local remedies be exhausted before a claim is brought via the diplomatic channels,(131) which is an exception made to the general principle of customary international law that such local remedies shall be exhausted before a claim can be brought via diplomatic channels, based on the idea that the wrong should be redressed first within the legal order of the State having caused it. (l32) The Convention also clarified that nothing prevents a State, or natural or juridical persons it might represent from pursuing a claim in the courts or administrative tribunals or agencies of a launching State.(l33) This could, in particular be of interest for them when the launching State’s law would ensure adequate compensation for the specific damage suffered. One could argue, for instance, that in case of a damage caused by a US launch, a claim brought under the specific provisions of US law concerning liability for launches, and in particular government indemnification, could be considered a better avenue of recovery than an action through the diplomatic channels. In order to avoid duplication of claims, the (129)

Article IX Liability Convention: “A claim for compensation for damage shall be presented to a launching State through diplomatic channels. If a State does not maintain diplomatic relations with the launching State concerned, it may request another State to present its claim to that launching State or otherwise represent its interests under this Convention. It may also present its claim through the Secretary General of the United Nations, provided the claimant State and the launching State are both Members of the United Nations.”

(130)

See section iv)b) supra.

(131)

Article XI.1 Liability Convention: “Presentation of a claim to a launching State for compensation for damage under this Convention shall not require the prior exhaustion of any local remedies which may be available to a claimant State or to natural or juridical persons it represents.”

(132)

On this subject see M.N. Shaw, International Law, supra note 33, at 567 ff.

(133)

Article XI.2. Liability Convention.

55

Convention clarifies that a State is not allowed to present a claim under the Convention for the same damage for which a claim is being pursued in the courts or administrative tribunals or agencies ofa launching State or under another international agreement which is binding on the State concerned.(134) The basic consequence of this provision is that the victim has to elect an avenue of recovery from the beginning and take the consequences of the choice. One interesting point is that the limitation introduced by this Article XI.1 of the Convention on the claims that can be brought for the same damage, uses the word “damage” and not for example the word “event”. One could therefore consider it possible for the victim, depending on the laws potentially applicable, to split his case into different avenues of recovery for different types of damages caused by the same event, but taking advantage of the legal framework applicable. For instance, the more remote damage normally not compensated in international law may find a way to be compensated if addressing the case to national courts of the launching State. Punitive damages could also be obtained from national courts in the US, while they would not be recoverable under international law. The Convention, in its Article X, provides for time limits for the presentation of claims.(135) The wording of these time limits is unfortunately rather loose and the use of the word “may” shows that disregard of those limits does not bear legal consequences. This wording prevents the interpretation of such limits as being comparable to statutes of repose, or statutes of limitations.(136) The Liability Convention also provides for a procedure ofsettlement ofthe claims in case the negotiated settlement fails. As explained by Professor B. Cheng,(137) “ One of the principal objectives of the dispute settlement provisions of the Convention from Article XIV to Article XX is to enable a claimant State, in the absence of a settlement through diplomatic negotiations a year after the claim has been notified to the launching State, to initiate an independent process which will be able, with, but if necessary without, the co-operation of the launching State, to arrive at a definitive conclusion on the question of liability and the quantum of compensation payable, if any, determined in accordance with the terms of the Convention”.

(134)

Article XI.2 Liability Convention.

(135)

Article X: “1.- A claim for compensation for damage may be presented to a launching State not later than one year following the date of the occurrence of the damage or the identification of the launching State which is liable. 2.- If, however, a State does not know of the occurrence of the damage or has not been able to identify the launching State which is liable, it may present a claim within one year following the date on which it learned of the aforementioned facts; however, this period shall in no event exceed one year following the date on which the State could reasonably be expected to have learned of the facts through the exercise of due diligence. 3.- The time-limits specified in paragraphs 1 and 2 of this Article shall apply even if the full extent of the damage may not be known. In this event, however, the claimant State shall be entitled to revise the claim and submit additional documentation after the expiration of such time-limits until one year after the full extent of the damage is known.”

(136)

For developments on statutes of repose and statutes of limitations in domestic laws, see further our Chapter 4.

(137)

B. Cheng, Studies in International Space Law, supra note 24, at 351.

56 The procedure is as follows. If within the year of this notification,(138) the parties have not achieved a negotiated settlement, the parties concerned shall establish a Claims Commission at the request of either party.(139) Within two months of this request, each party(140) has to appoint a member to that Commission.(141) The Chairman of the Commission is chosen jointly by both members appointed or, if these members cannot agree, by the Secretary General ofthe United Nations.(142) The Commission determines its own procedure as well as the place where it shall sit(143) and the decision making within the Commission is by majority vote.(144) The mandate of the Commission is to decide the merits of the claim for compensation and determine the amount of compensation payable(145) based on the provisions of the Convention. The expenses in regard of the Claims Commission are shared equally between the Parties.(146) One of the most difficult issues which the drafters and negotiators of the Liability Convention had to face was the nature of the decisions to be made by this Commission.(147) (138)

When the defendant is an international organization, one has to bear in mind the provisions of Article XXII, 3 b) which states that “only where the organization has not paid, within a period of six months any sum agreed or determined to be due as compensation for such damage, may the claimant State invoke the liability of the members which are States Parties to the convention for the payment of that sum”. So, this delay of 6 months has to expire before the delay of one year referred to in Article XIV of the Convention.

(139)

Article XIV Liability Convention.

(140)

The Liability Convention has provided for the case where claimant States or launching States are joined in the proceedings. Article XVII states on this matter: “No increase in the membership of the Claims Commission shall take place by reason of two or more claimant States or launching States being joined in any one proceeding before the Commission. The claimant States so joined shall collectively appoint one member of the Commission in the same manner and subject to the same conditions as would be the case for a single claimant State. When two or more launching States are so joined, they shall collectively appoint one member of the Commission in the same way. If the claimant States or the launching States do not make the appointment within the stipulated period, the Chairman shall constitute a single member commission”.

(141)

Article XVI of the Liability Convention provides for the case where a party fails to make its appointment and provides in its para 1: “If one of the parties does not make its appointment within the stipulated period, the Chairman shall, at the request of the other party, constitute a single member Claims Commission”. As the Chairman could not be chosen by both parties, since only one member is appointed, one has to assume that the Chairman referred to in this paragraph of Article XVI has been appointed by the Secretary General of the United Nations, upon the request of the party which has made its appointment.

(142)

Article XV Liability Convention

(143)

Article XVI para 3 and 4 Liability Convention

(144)

Article XVI para 5 Liability Convention

(145)

Article XVIII Liability Convention.

(146)

Article XX Liability Convention.

(147)

On the drafting history and the debates at the time, see B. Cheng, Studies in International Space (continued...)

57 The end result of the debates can be found in Article XIX.2 of the Liability Convention which distinguishes two types of decisions, both of which are final decisions, and cannot be appealed: - the Commission will render a binding decision if the parties have so agreed. The text does not state anything concerning this agreement. Of course, the agreement can intervene for a particular claim. The parties may agree, at the time the Commission is constituted that its decisions will be binding. It is certainly not a very adequate manner since, when the parties set up this Commission, they have by definition failed to negotiate and may not be willing on both sides to take the step of agreeing to the binding nature of the decision straight away. The acceptance of the binding nature of the decisions of the Commission can also be made at the time a State becomes a Party to the Convention, or an international organization declares its acceptance ofthe Convention (or at any time later). This possibility is not provided for in the Convention itself, but by UN Resolution 2777 (XXVI) of 29 November 1971(148) which stated: “any State may, on becoming a party to the Convention, declare that it will recognize as binding, in relation to any other State accepting the same obligation, the decision of the Claims Commission concerning any dispute to which it may become a party.” A limited number of States have, to date, made this declaration. (149) - if the parties do not agree to the binding nature of the decision, the Commission will render a recommendatory award, that the parties shall consider in good faith. The decision or award shall be rendered by the Commission no later than a year from the date of establishment of the Commission, unless an extension of this period is found necessary by the Commission.(150) This notion of time seems rather contradictory as it effectively means that the Commission shall render its decision within this time frame unless it has granted itself a time extension. The use of the word “shall” is therefore inadequate in this context. In effect, there seem to be no time limitations for the Commission to render its decision. The decision or award is made public and both parties as well as the UN Secretary General receive a copy. This publicity is certainly an important point as it introduces an element of pressure on the launching State. The procedure established by the Liability Convention for the settlement of disputes has the merit of existing. However, this procedure has never been used so far and the absence of a binding outcome mandatory to all Parties makes it a rather unattractive method of settling claims. If States have difficulties in a claim negotiation, it appears unlikely that they would let third parties get involved in their affairs without such involvement being guaranteed to reach a decision putting an end to the dispute. The end result may be that after months or years of consideration by the Commission, an award is rendered which is (147)

(...continued) Law, supra note 24, at 346 ff.

(148)

This resolution is the one which adopted the Liability Convention, supra note 57.

(149)

Austria, Canada, Denmark, Greece, Ireland, the Netherlands, Norway, New-Zealand, Sweden. See in our Chapters 5 and 6 for further developments on this subject.

(150)

Article XIX.3 Liability Convention.

58 only a recommendation. The parties would still have to continue their negotiation, and in almost all cases this will involve far more than the Liability Convention aspects which are the only ones the Commission will have looked into. Unfortunately, this is not an appealing prospect.

We will return in our Chapters 5 and 6 to some of the issues we started to point out in the course of these discussions devoted to the Liability Convention, as there is clearly considerable matter for further work in this area.

2.2.- EXAMPLES OF INTERNATIONAL PRACTICE Following the discussions above on the various aspects of liability in space law, it is interesting to turn to some examples of their implementation in practice. The complex legal framework surrounding the activities connected to the Ariane launcher, as implemented among the Member States of the European Space Agency will be addressed in Chapter 3 in detail. For the purposes of this Chapter 2, we have chosen the following two topics: - the Intergovernmental Agreement Among the Government of Canada, Governments of the Member States of the European Space Agency, the Government of Japan, the Government of the Russian Federation, and the Government of the United States of America Concerning Cooperation on the Civil International Space Station (ISS IGA), signed in Washington on 29 January 1998.(151) This agreement replaces the one concluded in 1988, taking into consideration the entry of the Russian Federation into the International Space Station venture. The 1998 agreement is not yet entered into force. However, pending the performance of the procedures which will lead to its entry into force, the Parties have agreed, in an Arrangement signed on the same day, to “undertake, to the fullest extent possible, consistent with their domestic laws and regulations, to abide by the terms of the Intergovernmental Agreement until it enters into force or becomes operative with respect to each of them”.

We will therefore devote our developments in the coming paragraphs to the new 1998 ISS IGA only. - provisions and approaches implemented in various recent agreements concluded by ESA in the framework of the implementation of the International Space Station Project. (151)

This agreement can be found in K.H. Böckstiegel & M. Benkö Eds, Space Law, Basic Legal Documents (The Hague: Martinus Nijhoff, looseleaf regularly updated) A. Farand, “The Legal Regime Applicable to the Space Station Cooperation: A Canadian Perspective” (1992) XVII-I Annals of Air & Space Law, 293, at 296 A. Farand, “La station spatiale et son régime juridique” (1990) XV Annals of Air and Space Law, 309 G. Lafferranderie, “Les accords relatifs à la station spatiale internationale” (1989) 93:2 Revue Générale de Droit International Public, 318 A. Farand, “Space Station Cooperation: Legal Arrangements, in G. Lafferranderie & D.Crowther eds., Outlook on Space Law, supra note 14, at 125 A. Farand, “The Space Station Cooperation Framework (1998) 94 ESA Bulletin A. Yakovenko, “The Intergovernmental Agreement on the International Space Station” (1999) 15:2 Space Policy, 79.

59

We will look specifically at three topics, in the light of the earlier discussions of this Chapter: - How have the Parties defined the objects involved and established whose objects they are? - What reference have the Parties made to the Liability Convention and how have they organized its implementation in relation to the activities to be undertaken? - How have the Parties organized the Liability issue between themselves?

2.2.1.- Definition of objects and link to a State or organization In the case of the International Space Station, the definition of ownership, with its consequences in terms of jurisdiction and control was of utmost importance, given the fact that the station is truly an international venture where legal relationships are exceptionally complex. First of all, Article 5 of the IGA provides that each Partner shall register as space objects the flight elements it provides. As far as ESA is concerned, it has been delegated this authority by its Member States and this is specifically referred to in Article 5 of the IGA.(152) Article 5 further states that in accordance with the Outer Space Treaty and the Registration Convention, the Partners retain jurisdiction and control over the elements so registered (as well as over personnel in or on the station). Besides, Article 6 deals more specifically with ownership. Each partner shall own the elements it provides (all these elements are listed in an annex to the IGA). Ownership of the European Partner’s elements is with ESA. All owners on board the station must be space station partners. The IGA forbids ownership of equipment on board the station by non partners or private entities of non partners, unless specifically agreed between the partners. This is an important provision of the IGA whereby a very stringent control is ensured. Whatever flies on the station needs to be adequately registered by a Partner and be under his ownership or responsibility (in the case of private entities ownership). All Partners being signatories of the Outer Space Treaty, the Registration Convention and the Liability Convention, legal issues potentially arising would be dealt with in an agreed legal environment, complemented by the specific provisions of the IGA and the derived implementing memoranda of understanding. In the IGA, therefore, the objects which make up the space station are well defined and listed, and their link to a specific State or organization is provided for. A number ofother arrangements have been concluded to implement specific cooperation, most of them being in the form of barter agreements.(153) In these cases, the issue of ownership of the object has to be addressed, as such ownership is meant to be transferred as part of the arrangement. In general, ownership would be transferred at launch (or before launch if the parties agree), but in certain cases transfer of ownership occurs on orbit after all checks have been made that the equipment delivered is functioning. There is a significant difference between the two approaches in relation to the res perit domino principle which places the risk of destruction of the equipment or its damage on the owner. (152)

Articles 3 and 4 of the IGA provide for the definition of the Partners. The elements provided by each Partner are listed in an Annex to the IGA.

(153)

Black’s Law Dictionary, supra note 18, defines a barter as “ the exchange of goods and productive services for other goods and productive services, without the use of money”.

60 Although legally these two approaches are different, in practice the destruction at launch of the equipment would force the parties to negotiate a resolution. In relation to this transfer of ownership, it is important to establish that the equipment is visible to the international community as belonging to its new owner, and is established as being a space object of the latter through its registration. Clauses dealing with this subject provide for the registration of the equipment as a space object or for the mention of the equipment as a component part of another space object. Clauses in agreements involving Shuttle launch normally provide that such registration concerns the object once it is deployed from the space shuttle (otherwise it is not considered autonomous and not considered as a space object). The specific mention of an equipment as a component part, in the registration, is important to cover cases such as this equipment breaking off from the module or object to which it is attached and cause damage. The piece of equipment could technically be traced back to its producer, and this should be avoided.

2.2.2.- Reference to the Liability Convention As far as the International Space Station is concerned, Article 17,(154) entitled “Liability Convention” is very short, and sets three main principles: - the liability of all Partner States, and ESA, in accordance with the liability convention. In this respect, although the Station is an international venture where the Partners pool their efforts to establish permanent presence and science in space, liability is dealt with on an individual basis. - the principle of consultation in case any claims are brought, on existence of a liability, apportionment and defense. It would have been impossible, given the complexity of the space station endeavor, to agree in advance upon hold harmless agreements, apportionments ofcompensation and procedures. There are many modules and equipment on the station, as well as astronauts. The circumstances of occurrence of damage are impossible to address with the accuracy which would be required to devise hold harmless and apportionment arrangements. - specific regimes can be agreed for launch and return services. Launch services providers have a long standing practice in this respect and there was no reason why the launch of space station equipment needed to be an exception to such practice. The specific regimes for launch apply also to Space Shuttle launches. (154)

Article 17: “1.-Except as otherwise provided in Article 16, the Partner States, as well as ESA, shall remain liable in accordance with the Liability Convention; 2.- In the event of a claim arising out of the Liability Convention, the Partners (and ESA, if appropriate) shall consult promptly on any potential liability, on any apportionment of such liability, and on the defense of such claim; 3.- Regarding the provision of launch and return services provided for in Article 12(2), the Partners concerned (and ESA, if appropriate) may conclude separate agreements regarding the apportionment of any potential joint and several liability arising out of the Liability Convention.”

61

For obvious practical reasons, it could not be expected that the IGA would go further on these aspects. However, the intricate relationship between equipment and personnel of the Partners on board the Station will make it extremely difficult to isolate the cause of a damage and thereby determine the Partner whose liability is involved. One can regret that, in view of this technical reality, the drafters of the IGA did not introduce a provision whereby a predetermined apportionment of liability was agreed between the Partners for cases where the cause of a damage and the corresponding liable State could not be established. From the perspective of a third party, many possibilities are open by the Liability Convention to bring claims against a number of the Partners. Certain Partners would have more risk to be called upon for damages than others because they are the obvious launching States (USA, Russia ESA and France). They will wish to implement the provisions of Article 17.2. The lack of predetermined apportionment will only cause tensions and arguments between the Partners. But also, in the case where the original source of the damage cannot be found, and therefore the primary liable State cannot be determined, difficulties to agree on an apportionment will be even greater. In the meantime, the State which received the claim may have to settle it in full (Liability Convention Article V.2) and will then have to bring actions in recourse against the other Partners. It is certainly a very difficult area, and one can easily imagine that negotiating predetermined apportionment arrangements among the International Space Station Partners is no easy task. Most other arrangements concluded are more straightforward in this respect as they are bilateral. The provisions on transfer of ownership and registration are also devised to clarify that all liability for use of the equipment is with the new owner, who has also registered it. The Parties also agree additional provisions related to international liability. Third parties victim of damage caused by the equipment, could consider either of the two States taking part in the agreement (or the organization as ESA) as a launching State, both being involved in ajoint launching. They could therefore bring a claim for compensation to ESA, for example, under the provisions of the Liability Convention. ESA and the other party therefore include clauses which consider this issue. Some ofthese clauses have gone as far as completely shifting the liability on the other Party.(155) Others leave it open and (155)

As an example, the following language can be used: “ In accordance with Article 2 of the Convention on International Liability for Damage Caused by Space Objects, opened for signature on 29 March 1972 and entered into force on 1 September 1972, State A shall relieve ESA of all claims for compensation from damages due to the launch, use or operation of the [Name of equipment] which may be brought forward either by virtue of the provisions of the said convention, or by virtue of any other legal means. If such claim for compensation is brought forward in the first instance to ESA or to its Member States, ESA shall invite State A and, as the case may be, the State from whose territory the [Name of equipment] has been launched, to join in the proceedings. The amount of compensation determined in accordance with the procedures set forth in the above mentioned Convention on International Liability, or otherwise determined, shall be borne by State A or, as the case may be, be apportioned between State A and the State from whose territory the launch of [Name of equipment] took place, in accordance with the extent to which each of these entities was at fault. This paragraph constitutes an agreement between ESA and State A, in the sense of the provisions of Article V.2 of the Convention on International Liability.” In this text, reference is made to a possible apportionment between State A and the launching State. Of course, the launching State is a third-party to this arrangement. But the use of this reference is (continued...)

62

oblige the parties to consult in such a case.

2.2.3.- Liability between the Parties

As it is the practice in space agreements for many years, the Parties agree to a cross-waiver of liability clause. The issues raised by these cross waivers are at the crossroads between public and private law and as such are the subject of more discussions in our next chapters as well. The negotiators of the IGA have spent a long time addressing the sensitive legal issues at the crossroads of the major legal regimes of the world. The text which was produced had, therefore, the advantage of being acceptable for virtually any legal system. As explained by A. Farand, “the Partners have decided to formulate rules applicable to all aspects of space station cooperation, including human behavior ‘in or on’ the space station. They did so, taking into consideration not only the rules of existing international law but also the stated objective of the Partners to extend to their contribution to the space station a certain part of their national legislation and regulations. The rules constituting the legal regime of the space station cooperation aim generally at recognizing the jurisdiction of the Partner’s courts and to consequently allow for the applications of substantive national law in criminal matters, in civil matters such as liability, and in administrative matters such as intellectual property and exchange of data and goods. Therefore, these rules are concerned primarily by establishing parameters for solving a conflict of law situation between Partner States” (156)

This is a fundamental aspect of the IGA which is necessary to keep in mind in order to understand the scope of its provisions. In certain areas common ground has been found between the national legislation which allowed for a solution to be drafted to a specific issue. Beyond this, the international space station is a paradise for public and private international lawyers. The space station has not really given rise to a new legal regime, but to a system which organizes the application of the Partners’ legislation and existing international law to this specific endeavor. The cross waiver of liability contained in the IGA is the reflection of this approach. A. Farand explained(157) in this respect: “ These carefully drafted provisions started from an all inclusive cross-waiver, to which were carved out exceptions, generally conditioned by a State Partner’s particular legal regime which did not allow for a cross-waiver in particular circumstances”.

The cross waiver of liability provision of the IGA reads as follows: “Article 16. Cross Waiver of Liability. 1. The objective of this Article is to establish a cross-waiver of liability by the Partner States and related entities in the interest of encouraging participation in the exploration, (155)

(...continued) meant to act as a reminder that special arrangements need to be made between State A and the launching State in this respect.

(156)

A. Farand, “The Legal Regime Applicable to the Space Station Cooperation: A Canadian Perspective”, supra note 151, at 296.

(157)

A. Farand, “The Legal Regime Applicable to the Space Station Cooperation: A Canadian Perspective”, supra note 151, at 298.

63 exploitation, and use of outer space through the Space Station. This cross waiver of liability shall be broadly construed to achieve this objective. 2. For the purposes of this Article: (a) A ‘Partner State’ includes its Cooperating Agency. It also includes any entity specified in the MOU between NASA and the Government of Japan to assist the Government of Japan’s Cooperating Agency in the implementation of that MOU. (b) The term ‘related entity’ means: (1) a contractor or subcontractor of a Partner State at any tier; (2) a user or customer of a Partner State at any tier; (3) a contractor or subcontractor of a user or customer of a Partner State at any tier. This subparagraph may also apply to a State, or an agency or institution of a State, having the same relationship to a Partner State as described in subparagraphs 2(b)(1) through 2(b)(3) above or otherwise engaged in the implementation of Protected Space Operations as defined in subparagraph 2(f) below. ‘Contractors’ and ‘subcontractors’ include suppliers of any kind. (c) The term ‘damage’ means: (1) bodily injury to, or other impairment of health of, or death of any person; (2) damage to, loss of, or loss of use of any property; (3) loss of revenue or profits; or (4) other direct, indirect or consequential damage. (d) The term ‘launch vehicle’ means an object (or any part thereof) intended for launch, launched from Earth or returning to Earth which carries payloads or persons, or both. (e) The term ‘payload’ means all property to be flown or used on or in a launch vehicle or the Space Station. (f) The term ‘Protected Space Operations’ means all launch vehicle activities, Space Station activities, and payload activities on Earth, in outer space, or in transit between Earth and outer space in implementation of this Agreement, the MOUs and implementing arrangements. It includes, but is not limited to: (1) research, design, development, test, manufacture, assembly, integration, operation, or use of launch or transfer vehicles, the Space Station, or a payload as well as related support equipment and facilities and services; and (2) all activities related to ground support, test, training, simulation, or guidance and control equipment and related facilities or services. ‘Protected Space Operations’ also includes all activities related to evolution of the Space Station as provided for in Article 14. ‘Protected Space Operations’ excludes activities on Earth which are conducted on return from the Space Station to develop further pay load’s product or process for use other than for Space Station related activities in implementation of this Agreement. 3. (a) Each Partner State agrees to a cross-waiver of liability pursuant to which each Partner State waives all claims against any of the entities or persons listed in subparagraphs 3(a)(1) through 3(a)(3) below based on damage arising out of Protected Space Operations. This cross-waiver shall apply only if the person, entity, or property causing the damage is involved in Protected Space Operations and the person, entity, or property damaged is damaged by virtue of its involvement in Protected Space Operations. The cross-waiver shall apply to any claims for damage, whatever the legal basis for such claims against: (1) another Partner State; (2) a related entity of another Partner State; (3) the employees of any of the entities identified in subparagraphs 3(a)(1) and 3(a)(2) above. (b) In addition, each Partner State shall, by contract or otherwise, extend the cross-

64 waiver of liability as set forth in subparagraph 3(a) above to its related entities by requiring them to: (1) waive all claims against the entities or persons identified in subparagraphs 3(a)(1) though 3(a)(3) above; and (2) require that their related entities waive all claims against the entities or persons identified in subparagraphs 3(a)(1) through 3(a)(3) above. (c) For avoidance of doubt, this cross-waiver of liability includes a cross-waiver of liability arising from the Liability Convention where the person, entity, or property causing the damage is involved in Protected Space Operations and the person, entity or property damaged is damaged by virtue of its involvement in Protected Space Operations. (d) Notwithstanding the other provisions of this Article, this cross-waiver of liability shall not be applicable to: (1) claims between a Partner State and its related entities or between its own related entities; (2) claims made by a natural person, his/her estate, survivors or subrogees (except when a subrogee is a Partner State) for bodily injury to, or other impairment of health of, or death of such natural person; (3) claims for damage caused by willful misconduct; (4) intellectual property claims; (5) claims for damage resulting from a failure of a Partner State to extend the cross-waiver of liability to its related entities, pursuant to subparagraph 3(b) above. (e) With respect to subparagraph 3(2)(d) above, in the event that a subrogated claim of the Government of Japan is not based upon government employee accident compensation law, the Government of Japan shall fulfill its obligation to waive such subrogated claim by ensuring that any assisting entity specified pursuant to subparagraph 2(a) above indemnifies, in a manner consistent with Article 15(2) and in accordance with applicable laws and regulations of Japan, any entity or person identified in subparagraphs 3(a)(1) through 3 (a) (3) above against liability arising from such subrogated claim by the Government of Japan. Nothing in this Article shall preclude the Government of Japan from waiving the foregoing subrogated claims. (f) Nothing in this Article shall be construed to create a basis for a claim or suit where non would otherwise exist.”

This provision is rather self-explanatory. Insofar as relations between States are concerned, it is also a very complete and precise provision which certainly fulfills the needs of an endeavor such as the space station. However, the practical implementation of such a provision in a flow down along the various contractual/legal chains is a very complex matter where the IGA Partners have not provided complete security. While agreeing this very substantial provision, the negotiators of the IGA did not address the elaboration of an harmonized flow-down policy and flow-down language. The practice now shows that they operate in very different ways. For instance ESA flows down the cross waiver one to one to its prime contractors with the strict prescription that this clause shall be flowed down. NASA gives its contracts managers flexibility to appreciate whether the clause needs to be inserted, and has set some amount thresholds in contracts below which such contract may not be subject to the clause.(158) This lack of coordination in the implementation of the cross-waiver is (158)

On this approach, see Chapter 5 in Chapters 5 and 6.

On the ESA Practice, see chapter 3

See also our proposals

65 detrimental to the functioning of this cross-waiver and hampers the security of the parties involved. Other arrangements also contain cross-waiver provisions which are usually along very similar lines, although simplified by the bilateral nature of the agreements concerned. Each agreement is subject to lengthy negotiations and the wording reflects these negotiations which sometimes makes the text very complex. In professional negotiation practice, a full record of negotiations needs to be kept, to support the future interpretation of such complicated wordings. One can foresee with our discussions above, that the technique of cross-waivers, although now universal and well practiced, has not yet reached the level of legal security which it is meant to achieve. We will readdress this issue at a later stage.

This Chapter 2 has briefly presented the international legal framework specific to space activities and liability, as well as some examples of its implementation in actual cooperation ventures. In the course of our discussions, we have indicated a number of issues to which we will return in Chapters 5 and 6 where we will examine the adequacy of this international framework, the main difficulties created by it, and the feasibility of some global avenues for improvement in this area. It is important to note that our discussions have been limited to the legal framework specific to space, which is an area usually unfamiliar to the majority of legal practitioners and, as such, is addressed specifically here in a synthesized way. There are other legal fields of relevance, with which legal practitioners are more familiar. For instance, the developing field of environmental law inevitably must be taken into account when establishing a space venture which has potential consequences in terms of pollution. There are some provisions in space law related to this subject but they will soon prove too limited. The field of nuclear law is also of relevance as the use of nuclear materials in space and their preparation on Earth will certainly increase to accommodate long duration space missions. Those involved in navigation satellite business for aviation will also need to take into account the provisions of air law which, in this field, are intimately related to those of space law. The legal counsel involved in space endeavors always works in a field where all disciplines of law come into play. Thus, it is fundamental when drafting or negotiating agreements for such endeavors at international level, to develop an awareness for areas of law other than space law and make sure they are properly taken into account. In this respect, it is worth noting that although space remains a State oriented type of activity, it has also opened to commercial ventures and private enterprise. Therefore, in some areas the provisions of space law examined in this Chapter also need to be complemented by international trade law and, as far as the European Union is concerned, European law. This international law framework ultimately finds its way through the domestic legal systems, examined in Chapter 3 which addresses specific domestic legal framework governing space activities, in particular launch activities.

ANNEX 1 SUMMARY TABLES ON THE SPACE TREATIES

Notes: Only treaties as such have been included. Principles have not been addressed, apart from the Principles on Nuclear Sources, and the Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space, which we pointed to in the course of the discussions of this Chapter 2 . The information on Parties to the space treaties can be found online at < Office of Outer Space Affairs: http://www.oosa.unvienna.org/SpaceLaw/spacelaw.htm> (accessed: 01/2001).

69 Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space, UNGA Res 1962(XVIII) Adopted 13 December 1963. Reference: Emerging International Law, at 537 UN Office for Outer Space Affairs, United Nations Treaties and Principles on Outer Space (New York, 1996), at 37 (UN Doc A/AC. 105/ 572/Rev. 1), [hereinafter Outer Space Office Texts] Internet: (accessed 01/2001) Principles: Sets the fundamental principles of space law. - exploration and use of outer space for the benefit and interests of all mankind - Outer space & celestial bodies free for use and exploration by all States on the basis of equality and in conformity with international law - non appropriation of outer space & celestial bodies. - Peaceful uses of outer space, peaceful aim of space activities. Cooperation and mutual assistance. Consultations. - International responsibility of States for national activities in outer space. Authorization and continuing supervision of activities of non-governmental entities by the State concerned. Responsibility of international organizations. - State of registration retains jurisdiction & control over the space object & personnel. - Ownership not affected by travel through space. - International liability of the State which launches or procures the launching of a space object. - Astronauts to be regarded as envoys of mankind. Obligation of assistance to and return of astronauts.

70 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space Including the Moon and Other Celestial Bodies, UNGA Res 2222(XXI), referred to as “The Outer Space Treaty”. Adopted on 19 December 1966. Entered into force on 10 October 1967. Reference: Emerging International Law, at 543 Outer Space Office Texts, at 4 610 UNTS, 205 18 UST, 2410 TIAS 6347 (1993) XVIII Part II, McGill Annals of Air and Space Law, at 615 Online: Office of Outer Space Affairs: (date accessed: 01/2001) Principles: - Art I: exploration & use of outer space is in the interest and for the benefit of all countries and is the province ofall mankind. Freedom ofexploration and use. Freedom of access to all areas of celestial bodies. Freedom of scientific investigation. - Art II: Outer space is not subject to national appropriation. - Art III: Application of international law to activities in the exploration and use of outer space. - Art IV: interdiction to place nuclear weapons or weapons of mass destruction in orbit around the Earth. Moon & celestial bodies to be used only for peaceful purposes. - Art V: Astronauts to be regarded as envoys of mankind and be rendered all possible assistance by States Parties to the OST. Obligation to return astronauts. Duty of astronauts to assist other astronauts. - Art VI : International liability ofParties for national activities in outer space. Authorization and continuing supervision of non-governmental national activities. Liability of international organizations. - Art VII: Liability of the launching State. - Art VIII: Jurisdiction and control of the State of registration. Ownership not affected by travel through space. - Art IX: Principle ofcooperation and mutual assistance. Avoidance of contamination and changes in Earth environment due to introduction of extraterrestrial matter. Consultation mechanism in case of potential harmful activities. - Art X: Opportunity to be given to States Parties to observe launch by a State Party. - Art XI: Duty to inform the UN, the public and the international scientific community. - Art XII: Right for Parties to visit installation of other Parties on the Moon & other celestial bodies. - Art XIII: Entities to which the Treaty applies. States. International organizations Parties: Ratified: Afghanistan, Algeria, Antigua and Barbuda, Argentina, Australia, Austria, Bahamas, Bangladesh, Barbados, Belarus, Belgium,, Benin, Brazil, Bulgaria, Burkina Faso, Canada, Chile, China, Cuba, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Fiji, Finland, France, Germany, Greece, Guinea-Bissau, Hungary, Iceland, India, Iraq, Ireland, Israel, Italy, Jamaica, Japan, Kazakstan, Kenya, Kuwait, Lao People’s Dem. Rep, Lebanon, Libyan Arab Jamahirya, Madagascar, Mali, Mauritius, Mexico, Mongolia, Morocco, Myanmar, Nepal, Netherlands, New Zealand, Niger, Nigeria, Norway, Pakistan, Papua New Guinea, Peru, Poland, Portugal, Rep. Of Korea, Romania, Russian Federation, San Marino, Saudi Arabia, Seychelles, Sierra Leone, Singapore, Slovak Republic, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syrian Arab Rep, Thailand, Togo, Tonga, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, United States of America Uruguay, Venezuela, Vietnam, Yemen, Zambia. Signed: Bolivia, Botswana, Burundi, Cameroon, Central Af, Rep, Colombia, Dem. Rep. Of the Congo, Ethiopia, Gambia, Ghana, Guyana, Haiti, Holy See, Honduras, Indonesia, Iran, Jordan, Lesotho, Luxembourg, Malaysia, Nicaragua, Panama, Philippines, Rwanda, Somalia, Trinidad and Tobago, Yugoslavia.

71 Agreement on the Rescue of Astronauts, the Return of Astronauts and the Return of Objects Launched into Outer Space. UNGA Res 2345(XXII), referred to as “The Rescue Agreement” Adopted on 19 December 1967. Entered into force on 3 December 1968. Reference: Emerging International Law, at 550 Outer Space Office Texts, at 10 672 UNTS, 119 19 UST 7570 TIAS 6599 (1993) XVII, Part II McGill Annals of Air and Space Law., at 635 Online: Office of Outer Space Affairs (accessed: 01/2001) Principles: - Duties of Parties with respect to notification of information concerning accident or situation of distress of a spacecraft. - Duty ofParties to rescue and render assistance, if needed with the cooperation ofthe launching authority which shall be informed as well as the Secretary General - If accident in high seas or area not under any State’s jurisdiction, Parties in a position to render assistance shall do so, with information to the launching authority and the Secretary General. - Return of personnel of a spacecraft to the launching authority - Notification of return to Earth of a space object to be given to the launching authority and the Secretary General. Procedure for recovery of space objects returned to Earth, in normal cases and when they are hazardous. Attribution of recovery expenses. - Definition of the launching authority - Possibility for international organizations to declare acceptance of this Treaty and conditions for such declaration. Parties: Ratified: Antigua and Barbuda, Argentina, Australia, Austria, Bahamas, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Cameroon, Canada, Chile, China, Cuba, Cyprus, Czech Republic, Denmark, Ecuador, Egypt, El Salvador, Fiji, Finland, France, Gabon, Gambia, Georgia, Germany, Greece, Guinea-Bissau, Hungary, Iceland, India, Iran, Iraq, Ireland, Israel, Italy, Japan, Kazakstan, Kuwait, Lao People’s Dem. Rep, Lebanon, Madagascar, Maldives, Mauritius, Mexico, Mongolia, Morocco, Nepal, Netherlands, New Zealand, Niger, Nigeria, Norway, Pakistan, Papua New Guinea, Peru, Poland, Portugal, Rep. Of Korea, Romania, Russian Federation, San Marino, Seychelles, Singapore, Slovak Republic, Slovenia, South Africa, Swaziland, Sweden, Switzerland, Syrian Arab Rep, Thailand, Tonga, Tunisia, Ukraine, United Kingdom, United States of America Uruguay, Yugoslavia, Zambia. Signed: Bolivia, Colombia, Congo, Costa Rica, Dem Rep of the Congo, Dominican Republic, Ghana, Haiti, Jamaica, Jordan, Lesotho, Luxembourg, Malaysia, Malta, Monaco, Myanmar, Nicaragua, Philippines, Rwanda, Senegal, Sierra Leone, Somalia, Turkey, Venezuela, Vietnam, Yemen. Acceptance Declared: European Space Agency.

72 Convention on Liability For Damage Caused by Space Objects, UNGA Res 2777 (XXVI), referred to as “The Liability Convention”. Adopted on 29 November 1971 Entered into force on 9 October 1973 Reference: Emerging International Law, at 554 Outer Space Office Texts, at 14 961 UNTS, 187 24 UST, 23 89 TIAS 7762 (1993) XVIII Part II McGill Annals of Air and Space Law, at 651 Online at Office of Outer Space Affairs: (accessed: 01/2001) Principles: - Sets the definitions of the terms “damage”, “launching”, “launching State”, and “space object”. - Principle of absolute liability for damaged caused by space objects on the surface of the Earth or to aircraft in flight. - Liability for fault elsewhere than on the surface of the Earth.. - Joint and several liability for joint launch. - Exoneration of liability in case of gross negligence, or an act or omission done with the intent to cause damage, on the part of the claimant State, except when author of damage was acting in contradiction with international law. - Provisions of the Convention do not apply to damage caused by the space object of a launching State to the nationals of this State and to foreign nationals participating in the operation of that space object from launch to descent. - The Convention defines the procedure for presentation of claims, the relations with the domestic claims, the calculation of damages, the currency of payment, the establishment of a Claims Commission with its composition and procedure. - Possibility for international organizations to declare acceptance of this Treaty and conditions for such declaration. Joint and several liability of the organization and its Members Parties to the Convention and conditions for such liability. Parties: Ratified: Antigua and Barbuda, Argentina, Australia, Austria, Barbados, Belarus, Belgium, Benin, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Canada, Chile, China, Cuba, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Fiji, Finland, France, Gabon, Germany, Greece, Hungary, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Japan, Kazakstan, Kenya, Kuwait, Lao People’s Dem. Rep, Liechtenstein, Luxembourg, Madagascar, Mali, Malta, Mexico, Mongolia, Morocco, Netherlands, New Zealand, Niger, Norway, Pakistan, Panama, Papua New Guinea, Poland, Qatar, Rep. Of Korea, Romania, Russian Federation, Saudi Arabia, Senegal, Seychelles, Singapore, Slovak Republic, Slovenia, Spain, Sri Lanka, Sweden, Switzerland, Syrian Arab Rep, Togo, Trinidad and Tobago, Tunisia, Ukraine, United Kingdom, United States of America Uruguay, Venezuela, Yugoslavia, Zambia. Signed: Algeria, Burundi, Cambodia, Central African Rep, Colombia, Costa Rica, Dem Rep ofthe Congo, Egypt, El Salvador, Gambia, Ghana, Guatemala, Haiti, Honduras, Iceland, Jordan, Lebanon, Nepal, Nicaragua, Oman, Peru, Philippines, Rwanda, Sierra Leone, South Africa, United Rep of Tanzania. Acceptance Declared: European Space Agency, Eutelsat.

73 Convention on Registration of Objects Launched in Outer Space, UNGA Res 3235(XXIX), referred to as “The Registration Convention” Adopted on 12 November 1974 Entered into force on 15 September 1976. Reference: Emerging International Law, at 564 Outer Space Office Texts, at 23 1023 UNTS, 15 28 UST, 695 TIAS 8480 0 (1993) XVIII Part II, McGill Annals of Air and Space Law., at 677 Online at Office of Outer Space Affairs: (accessed: 01/2001). Principles: - The Convention recalls the definitions of “launching State” and “space object”, and defines the “State of registry”. - Obligation for the launching State to register the space object with the Secretary General. - When there are multiple launching States, such States will agree which one will perform the registration and bear the associated obligations, without prejudice to the agreements to be concluded between these States. - The Secretary General maintains the registry which is in full and open access. - The Convention lists the information to be provided to the Secretary General and the timing of the registration. - Possibility for international organizations to declare acceptance of this Treaty and conditions for such declaration. Parties: Ratified: Antigua and Barbuda, Argentina, Australia, Austria, Belarus, Belgium, Bulgaria, Canada, Chile, China, Cuba, Cyprus, Czech Republic, Denmark, France, Germany, Hungary, India, Indonesia, Japan, Mexico, Mongolia, Netherlands, Niger, Norway, Pakistan, Peru, Poland, Rep of Korea, Russian Federation, Seychelles, Slovak Republic, Spain, Sweden, Switzerland, Ukraine, United Kingdom, United States of America, Uruguay, Yugoslavia. Signed: Burundi, Iran, Nicaragua, Singapore. Acceptance Declared: European Space Agency, Eumetsat.

74

Agreement Governing the activities of States on the Moon and Other Celestial Bodies, referred to as “The Moon Treaty” Adopted on 5 December 1979. Entered into force: 11 July 1984. Reference: Emerging International Law, at 570 Outer Space Office Texts, at 28 (1993) XVIII Part II, McGill Annals of Air and Space Law., at 691 UN Doc A/RES/34/68 of 5 December 1979 18 ILM 1434 1363 UNTS 3 Online at Office of O u t e r Space Affairs: (accessed: 01/2001). Principles: - Agreement applies to the Moon and to other celestial bodies within the solar system, as well as the orbits of the Moon. - Activities on the Moon shall be carried out in accordance with international law and for peaceful purposes. - The exploration and use of the Moon is the province of all mankind and States shall be guided by a principle of cooperation and mutual assistance. - The States Parties have a duty to inform the public and the international scientific community on the activities they carry out on the Moon. - Freedom of scientific investigation on the Moon by all States Parties. Right to collect and remove samples. Portion of these samples should possibly be given to other States or the international scientific community for scientific investigation. Possibility to use substances and minerals on the Moon for the support of missions. - Obligation to preserve the environment of the Moon - Right to land on the Moon and launch from the Moon, as well as to place personnel and installations on the Moon (all to be moveable). - Activities of States are always on the basis of non interference with those of other States. - Stations may be installed on the Moon as long as they do not impede access to all areas of the Moon by other States Parties. - The Moon and its natural resources are the common heritage of mankind. The Moon is not subject to national appropriation. Neither the surface nor subsurface of the Moon, nor any resources part thereof, shall become the property of any State, international organization, non governmental entity or natural person. - The States Parties undertake to establish an international regime to govern the exploitation ofthe natural resources of the Moon as such exploitation is about to become feasible. The Agreement lists the main purposes to be included in this international regime. - Installations on the Moon shall be open to all States Parties for assurance of the activities being carried out. - A number of other principles set by the Agreement are the simple translation of the OST principles (liability; ownership, jurisdiction and control...) - Possibility for international organizations to declare acceptance of this Treaty and conditions for such declaration. Parties: Ratified: Australia, Austria, Chile, Mexico, Morocco, Netherlands, Pakistan, Philippines, Uruguay. Signed: France, Guatemala, India, Peru, Romania.

75 Principles Relevant to the Use of Nuclear Power Sources in Outer Space (GA Res 47/68) Adopted on 14 December 1992 Reference: Outer Space Office Texts, at 47 Online at Office of Outer Space Affairs: (accessed: 01/2001) Principles: - Activities to be carried out in accordance with international law. - Goal to reduce the quantity of radioactive material in space. Use limited to space missions which cannot be operated by non-nuclear energy sources in a reasonable way. - Duty to protect individuals, populations and the biosphere. Design and use of concerned spacecraft shall ensure that hazards are kept below acceptable, and such nuclear material does not cause contamination of outer space. The Principles set the limits acceptable and the design features to be observed. - Specific measures are recommended both in the case of nuclear reactors and radioisotope generators. - Duty of the launching State to conduct a thorough and comprehensive safety assessment prior to launch. The results of this assessment are to be made publicly available as well as data on the time frame of the launch. - Duty of launching State to inform other States when malfunction of spacecraft may cause reentry of radioactive materials to the Earth. The Principles prescribe the format in which such notification shall be given, via the Secretary General. - Duty of States to share information gathered on reentry of spacecraft. - Duty of launching State to offer assistance to eliminate actual and possible harmful effects. All other States which have capability to offer assistance should do so. - International responsibility for national activities to be borne by concerned State. International responsibility of international organizations and Member States. - Liability principles of the OST (as detailed by the Liability Convention) apply. - Compensation to restore the victim to the condition which would have existed if the damage had not occurred. Compensation includes search, recovery and cleaning up expenses. - Peaceful settlement of disputes.

CHAPTER 3.- DOMESTIC LAUNCH LEGISLATION AND REGULATIONS

The public international law provisions we addressed in Chapter 2 are, in principle, not directly applicable in the legal system ofStates and require domestic enactment.(159) In the present Chapter, we will analyze how space treaties have been implemented in the domestic legal framework in the area ofspace launches. Although States have approached this issue in different manners, at present they achieve de facto similar control over the activities concerned. Few countries have adopted national space legislation(160) and only the US has a comprehensive and dedicated body ofnational space legislation. France is the launching State of Ariane, but has not yet enacted any specific and comprehensive space launch legislation. The legal framework within which the Ariane launches are carried out is wider than that of French law and involves also the European Space Agency and its Member States. This Chapter will focus on US legislation and regulations and the Ariane launches legal framework, as US launch operators and Arianespace are at present the major actors on the market, thereby describing two different approaches to implementation into domestic legislation and showing how authorization and supervision have been understood in the US and Europe(161) This is the next component of this Daedalus labyrinth, where States individually create a set of norms within their domestic legal system, to specifically address space activities and launch activities.

3.1.- LEGAL FRAME WORK FOR LAUNCH SERVICES IN THE UNITED STATES We have described, in our previous Chapter, the rules of international law governing the (159)

We will address further the issue of whether the Outer Space Treaty is self executing under the US system, but in most legal systems, treaties need special enactment in order to be implemented into domestic legislation.

(160)

They are the US, UK, Sweden, South Africa, Russia, Japan and Australia. See infra notes 423 and 965.

(161)

In the present book, we have focused on the regulation of expendable launch vehicles (ELVs), the only ones operated on a commercial basis nowadays. It is important to note, however, that the US have started the regulatory process to address the re-usable vehicles, which will become commercially operated in the next few years. Commercial Space Transportation Reusable Launch Vehicles and Reentry Licensing Regulations, Final Rule, September 2000, (2000) 65:182 Fed Reg, 56617 and Financial Responsibility Requirements for Licensed Reentry Activities, Final Rule, September 2000, (2000) 65: 182 Fed Reg 56669.

77

78 international responsibility of States for damages caused by their space activities. The US is a party to the Outer Space Treaty and the Liability Convention. However, this does not in itself establish domestic authority to regulate the private space launch industry. When giving its consent to the Outer Space Treaty, Congress did not enact any legislation giving power to any Agency to regulate this industry. Article 6 §2 of the US Constitution provides that “[...] all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme law of the land; [...]”.(162) This would give domestic authority to the US Executive to regulate private launch industry only to the extent that the Outer Space Treaty, or part of it, would be considered self-executing,(163) and as such would not require any implementing legislation. It would seem that the drafters ofthe Outer Space Treaty intended to make it self-executing, at least insofar as it imposes on States an obligation of continuous supervision of space activities undertaken by their nationals, which translates into a positive obligation to regulate these activities(164) This conclusion is supported by the language of the Treaty in its Article VI: (165)

- “ shall” bear international responsibility; - for “ assuring” that private enterprises conduct their activities in conformity with the provisions of the Treaty; - private activities “ shall” require authorization and continuing supervision. Moreover, when the United States ratified the Treaty no implementing legislation was asked by the President. The Department of State itself dealt with the first authorization procedures requested in a way which implied that it recognized the Outer Space Treaty as self-executing. In any event, the absence of domestic legislation does not constitute a justification for a State to leave its international undertakings unfulfilled. First, under international law, a State is responsible for the compliance with the Treaties it has ratified.(166) Moreover, the State has not only a duty to ensure that private operators of space activities (including private enterprises) comply with the provisions of the treaties, but also an important interest in doing so: it would be held internationally responsible, towards other States, for (162)

US Constitution, Black’s Law Dictionary, supra note 18, at 1639.

(163)

“ [a] self-executing treaty is one which furnishes by its own terms (or by reason of the existence of previously enacted statutes which can implement it) a rule of law for the executive branch of the Government, the courts, the States, or for private individuals. An executory, or non self-executing treaty, is one which explicitly or implicitly requires implementation by some executive or legislative agency, either Federal or State, before it can become a rule for the courts or for private individuals”. It is the role of the Executive Branch to decide whether a Treaty is self-executing, this determination being subject to further interpretation by the Courts. American Law Institute, Restatement (second) Foreign Relations Law (St Paul Minn.: American Law Institute Publishers, 1962), § 141 A.E. Evans, “Self-Executing Treaties in the United States of America” (1953) 30 British Yearbook of International Law, 178 Henry, “When is a Treaty Self-Executing?” (1929) 27 Mich Law Review, 776 P.D. Nesgos, National Law and Commercial Activities in Outer Space, DCL Thesis, McGill University, Institute of Air and Space Law, 1983, at 9.

(164)

(165) (166)

See P.D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 22 ff and at 203 Arthur Dula expressed a different opinion in A. Dula, “Regulation of Private Commercial Space Activities” (1981) 24 Colloquium, 25. This article is quoted in extenso supra note 56. Vienna Convention on the Law of Treaties, supra note 33, Article 33, which states that: “a party may not invoke the provisions of its internal law as justification for its failure to perform a Treaty”.

79 damage caused by the activities of these operators, and, as such, it has an interest in authorizing the activities for which it will bear this responsibility.(167) It is worth noting that the authority of the US Executive to regulate private Expandable Launch Vehicles (ELVs) has never been challenged by the operators who sought licenses and authorizations. This aspect may appear to be historical, but for practitioners in countries where legislation for space activities does not exist, as was the case in the US for a long time, the position of the space treaties within the legal framework of a country has to be analyzed in the process of assessing the constraints to be considered by operators.

3.1.1.- Evolution towards the development of a concise regulatory framework In the United States, rockets had been traditionally operated by the US Government. At the beginning of the 1980's, private rocket launch operators entered this developing market.(168) When these operators decided to develop, build and launch commercial Expandable Launch Vehicles (ELVs), it was necessary for them to assess the legal environment within which this activity had to be performed. The first operators therefore had to enquire in a somewhat empirical fashion which authorizations were required to perform launch activities. This state ofaffairs has now been remedied, as we will explain later, but we chose to devote some discussions to the historical context to help understand the evolution towards today’s regulatory framework.

i)

Authority of US Government Agencies

As no specific legislation had been passed by Congress, no Agency ofthe US Government had specific authority to regulate the activities of the private launch operators. Launches used to be operated by NASA or the Department of Defense (DOD), both ofwhich acting under their own regulations and authority. In view ofthe regulatory situation at that time, the launch ofa rocket by any other entity than NASA or DOD was likely to fall within the scope of authority of a number of administrations. A quick review of these agencies and administrations(169) describes the situation as it was when the first private launches were (167)

(168)

(169)

For further developments about the authority and duty of the US Government to regulate private Expandable Launch Vehicle activities under domestic and international law, see: A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra note 92, at 35. The first company to start into this business in the US was Space Services Incorporated of America (SSI), a company created in 1980. SSI wanted to develop a completely private launch capability. See A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expandable Launch Vehicles”, supra note 92, at 50. For a detailed account ofthe situation at that time and of the involvement of the various agencies, see: P.D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163 A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra note 92, at 9 J.T. Stewart Jr, “US Private Enterprise Enters the Space Arena. The Beginning” (1985) 26 Colloquium, 149, at 150 ff J.R. Myers, “Federal Government Regulation of Commercial Operations Using Expendable Launch Vehicles” (1984) 12:1 Journal of Space Law, 40, at 42 ff K.G. Yelton, “Evolution, Organization and Implementation of the Commercial Space Launch Act and Amendments of 1988” (1989) 4:1 Journal of Law and Technology, 117 B. Brumberg, “Regulating Private Space Transportation” (continued...)

80

initiated. It is intended to provide a historical perspective and describe the situation that developed due to the absence of specific regulation regarding launch services. For those countries where no such regulations exist, this experience is pertinent to their legislative and regulatory approach to these activities. The following agencies and administrations were involved at that time: - the Federal Aviation Administration: it was the only agency having express authority in relation to rocket launches. The Federal Aviation Act of 1958(170) grants the Secretary of Transportation authority to develop plans and formulate policies regarding the use of navigable airspace.(171) The Secretary ofTransportation can issue rules and regulations for the prevention ofcollisions between aircraft and airborne objects and, in general, to ensure the safety of aircraft. Moreover, the FAA had some authority over spacecraft (172) as a logical consequence of its authority over airspace, insofar as safety of air navigation is concerned. For this purpose FAA issued regulations related to unmanned model rockets.(173) These were the only regulations applicable to private expendable launch vehicles(174) As unmanned rockets interfere with controlled airspace, private companies (169)

(...continued) (1984) Administrative Law Review, 363 E.R Finch & A.L. Moore, Astrobusiness: A Guide to the Commerce and Law of Outer Space (New York: Praeger, 1985), at 58.

(170)

49 USC Parts 1301-1523.

(171)

49 USC, supra note 170, Part 1348.

(172)

(173) (174)

Except public spacecraft. NASA or DOD spacecraft cannot be regulated by the FAA because the Congress did not give FAA regulatory powers with respect to public aircraft (or airborne objects). The authority of FAA over spacecraft is supported by the statement in the Senate Committee that “ in order for the administrator of the new agency to properly discharge his responsibilities under the new act, particularly those in connection with the allocation of airspace, that his jurisdiction should extend not only to vehicles commonly considered as aircraft, but also during their flight through airspace, other vehicles such as rockets, missiles and other airborne objects.” S. Rep. No 1811. 85th Cong, 2d Sess, 20(1958) 14 CFR Parts 101.21 - 101.25. This regulation defines the term “rocket” as meaning “an unmanned aircraft, whose flight in the air is derived from the thrust of ejected expanding gases generated in the engine from self-contained fuels or propellants and is not dependant on the intake of outside substance. It includes any part which becomes separated during the operations.” 14 CFR Part 48.3. The regulation provides (14 CFR Part 101.23 (a)-(h)) that no unmanned rocket may be operated: - in a manner that creates a collision hazard with other aircraft; - in controlled airspace; - within five miles of the boundary of any airport; - at any altitude where clouds or obscuring phenomena of more than five tenths coverage prevail; - at any altitude where the horizontal visibility is less than five miles; - into any cloud; - within 1500 feet of any person or property that is not associated with the operation; - between sunset and sunrise. Moreover (14 CFR Part 101.25), within twenty four to forty eight hours prior to the launch, the operator of the unmanned rocket must give certain safety information to the nearest FAA Air Traffic Control Facility, these information including: - the names and addresses of the operator; - the number of rockets to be operated; (continued...)

81 operating them had to obtain either a waiver (when the company wanted to operate only one flight, for instance a test flight) or an exemption (in case the company needed clearance for a series of launches)(175) - the Federal Communications Commission: forthe launch and tracking ofspace vehicles, it is essential to use radio communications and under the Communications Act of 1934 no one can operate or use radio equipment without a license obtained pursuant to the Act.(176) This license is granted by the Federal Communications Commission (FCC).(177) Although there was no procedure directly applicable regarding communications involved in spacecraft launches, private launch companies needed to apply for this license with the FCC before launch.(178) - the Department of State (DOS): in view of its foreign affairs responsibility, the DOS has to ensure compliance with treaties in force for the United States. Moreover, the United States has to provide the Secretary General of the United Nations with information concerning the launch of space objects.(179) Consequently, the DOS had to check that the compliance of the proposed launches with the international obligations of the United States and had an interest in concluding an agreement with the operator of the launch, providing for the indemnification of the United States, in case of its liability, either by insurance or other means. Another reason for the involvement ofthe DOS was the fact that rockets, launch vehicles, payloads, specifically designated associated equipment, and related technical data, are included on the “Munition List” determined by the DOS.(180) A license is required for the export of such items under the Arms Export Control Act(181), an export being defined as meaning “the sending or taking out of the United States in any (174)

(175)

(...continued) - the size and weight of each rocket; - the maximum altitude to which each rocket will be operated; - the location of the operation; - the date and time and duration of the operation; - any other pertinent information required by the air traffic control facility. 14 CFR Part 11.71.

(176)

Federal Communications Act of 1934. 47 USC Parts 151-609.

(177)

47 USC Part 151.

(178)

For more detail on the FCC regulations applicable at that time, see P .D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 191.

(179)

Convention on the Registration of Objects Launched in Outer Space, supra note 99.

(180)

“The list comprises a variety of arms, ammunition and implements of war. Category IV, titled ‘Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines’ includes rockets (except meteorological sounding rockets), and launch vehicles, and apparatus, devices and materials for their operation. Also included are missiles and space vehicle power plant. Category VII of the Munitions List mentions spacecraft ‘including manned and unmanned, active and passive satellites’. Category XI includes military space electronics. It is clear from the enumeration that the references to space-related equipment are phrased in such a manner as to comprise virtually all space bound object or vehicle even if it has no defense or military purpose”. P.D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 208-209 See also, A. Dula, “Private Sector Activities in Outer Space” (1985) 19 International Lawyer, 159, at 180, note 75.

(181)

Arms export control act: 22 USC 2778. Regulations: 22 CFR 123.01. On export controls see: A. Dula, “Export Controls Affecting Space Operations, (1986) 51 Journal of Air Law & Commerce”, 927 B. Brumberg, “Regulating Private Space Transportation”, supra note 169, at 380 See also references in note 4 supra and note 184 infra.

82 manner any article, equipment or technical data on the Munition List”.(182) Consequently, in two cases a license was required: 1) if the flight plan implied that the rocket would leave the territorial waters of the United States; 2) if the rocket had to be transferred out of the US territory to international waters or to another State to be launched.(183) These regulations on export control, while still based on the same principles, have significantly changed in recent times towards a stricter regime of control.(184) - The Internal Revenue Service: Under the Gun Control Act of 1968,(185) importers, manufacturers and dealers in firearms, destructive devices, and ammunition for destructive devices must register with the Alcohol, Tobacco and Firearms (ATF) and the Internal Revenue Service (IRS). They also have to pay some tax fees to the IRS in relation with the above activities. The definition of “destructive devices” includes rockets.(186) - NASA: NASA was also interested in private launches but NASA had no regulatory authority over private launches.(187) Nevertheless, because of its technical experience, NASA played an important role from the very beginning of the entry of private launch operators on the market: 1) through its cooperation with other agencies requiring technical (182) (183)

(184)

(185) (186) (187)

22 CFR Part 121.19 On the role of DOS see P.D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 202 ff. For a recent account of those developments and details of the current regulations, see H. Peter van Fenema, The International Trade in Launch Services, The Effect of US Laws, Policies and Practices on its Development, supra note 4 P.L. Meredith & S.P. Fleming, “US Space Technology Exports: The Current Political Climate”, supra note 4. See also online: Department of Commerce (accessed: 01/2001). 18 USCA.921 B. Brumberg, “Regulating Private Space Transportation”, supra note 169, at 381. The language of the National Aeronautics and Space Act of 1958 leads to this conclusion, as for examples: - “ The Congress further declares that such activities [aeronautical and space activities] shall be the responsibility of, and shall be directed by, a civilian agency exercising control over aeronautical and space activities sponsored by the United States(...)” (emphasis added) 42 USC 2451 Section 102(b). On the interpretation of the word “sponsored”, see: A. Dula “Regulation of Private Commercial Space Activities”, supra note 180, at 27 A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra note 92, at 16 B. Brumberg, “Regulating Private Space Transportation”, supra note 169, at 378. In this latter author’s view, since the United States ratified the space treaties, private space launches cannot occur without the United States’ approval. Thus, they are impliedly “sponsored” by NASA. - “the terms ‘aeronautical and space activities’ means (A) research into, and in the solution of, problems of flight within and outside the earth’s atmosphere; (B) the development, construction, testing and operation for research purposes of aeronautical and space vehicles; C ) (...) And (D) such other activities as may be required for the exploration of space (...)”. 42 USC 2452 Section 103 (1). Clearly, the language used by the Act does not give NASA authority to regulate private launches. Indeed, these activities are not “sponsored” by the United States. Moreover, usually they are not for research and exploration purposes but rather for commercial purposes. Research and exploration of space are still mostly conducted by States and Governmental Organizations. Moreover, NASA expressed the wish not to be involved in regulating private ELVs as can be read in: Space Commercialization Hearings before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, 98th Congress, 1st Session 65 (1983), at 36 (Statement of Mr Beggs).

83 support to exercise their regulatory role and issue the necessary licenses, authorizations and exemptions; 2) through the use of its equipment or facilities by launch operators. In the latter case, as owner and operator of the facilities, NASA had the authority to prescribe, on a contractual basis, obligations on the company concerned, in particular relating to insurance to be obtained to cover any liability of NASA.(188) - The Transportation Department’s Material Transportation Bureau and the Bureau of Motor Carrier Safety: pursuant to the Hazardous Materials Transportation Act,(189) both these administrations exercised control over the launch license procedure, as far as transportation ofhazardous materials (rockets propellants) to and from the launch site was concerned.(190) - The Department of Defense: although not considering itself as having any regulatory role relating to private ELVs,(191) played an active role in the activities of operators of private ELVs launching from DOD facilities, to set conditions for access to such DOD facilities, especially insofar as safety is concerned. - the Coast Guard: having the duty to protect commercial and leisure sea vessels against potential hazards, the Coast Guard also had some interest in the activities of private ELVs in case parts of a rocket would fall into the territorial waters of the United States.(192) - the North American Aerospace Defense Command (NORAD): NORAD has to be notified of launches because NORAD tracks all objects in outer space and may recommend to the operator of the ELV some adjustments to the flight plan to prevent collision or damage with other objects in space. - some other agencies also had a role in authorizing launch activities:(193) - the Central Intelligence Agency (CIA) could be involved with respect to national security implications; - the Arms Control and Disarmament Agency could check that possible launch operations comply with arms control agreements; - the Occupational Safety and Health Administration could be involved in developing and enforcing employee health and safety standards; - the Environmental Protection Agency could regulate certain matters relating to hazardous materials, air and water pollution standards, and environmental impact statements concerning launch sites. This brief overview shows the cumbersome process followed at that time, as private (188)

(189) (190)

(191)

(192) (193)

See Mossinghoff, “Managing Tort Liability Risks in the Era of the Space Shuttle” (1979) 7 Journal of Space Law, 121. 49 USCA 1801-1812. K.G. Yelton, “Evolution, Organization and Implementation of the Commercial Space Launch Act and Amendment of 1988” , supra note 169, at 123 B. Brumberg, “Regulating Private Space Transportation”, supra note 169 , at 381. Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology. Supra note 187, at 155 (Statement of Colonel Jacoby, Department of Defense). Port and Safeways Safety Act, 33 USC Parts 1223(c), 1225 (1982). See K.G. Yelton, supra note 169, at 124.

84 operators had to undertake by themselves several separate procedures for obtaining appropriate authorizations from each Agency.(194)

ii) Practical consequence of the multitude of Agencies This multitude of Agencies having competence over the various aspects of a launch operation had considerable impact on the undertakings of private launch operators. We may return to the example of SSI to illustrate this state of affairs. For the launch of its first launcher, Percheron, SSI had to contact every Agency potentially having authority or interest in the launch. The FCC required SSI to obtain a license. The Department of State did not require any formal clearance since the launch was to take place entirely within US territory. NASA had an advisory role in technical matters. The FAA was the Agency most involved in the process, since only the FAA could base its authority on precise regulations with respect to rockets. Because of the short time available before the launch, SSI applied for and obtained a waiver from the FAA. The exemption procedure would have been longer and incompatible with the launch date. While granting the waiver, the FAA imposed a number of conditions related to the safety of the operations.(195)

In the case of the second launcher designed by SSI, the Conestoga, the procedure was heavier, due to the fact that the flight was to take the rocket out of US territorial waters. Moreover, SSI was using for this flight an engine provided by NASA. Finally, SSI wished to obtain an exemption from FAR Part 101, Subpart C, and all other regulations that the FAA may have considered relevant. SSI considered, first, that the existing regulations were not applicable to private launches such as Conestoga, and second that they had taken all necessary safety measures. The exemption was requested for a single launch of Conestoga. SSI filed its petition with FAA on March 16, 1982.(196) It took six months to complete the procedure at a cost of about $ 250,000 . Two notices of the petition were

(194)

(195)

(196)

As Mr Whiting, Executive Director of the American Space Foundation pointed out: “In order to get a private ELV off the launch pad, (...), the average firm has had to run a bureaucratic gauntlet of some 18 Federal Agencies, overseeing 22 statutes or regulatory guidelines, none of them passed or promulgated with the express intent of overseeing commercial launch vehicles”. Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187. On the experience ofPercheron, see: A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation ofPrivate Expendable Launch Vehicles”, supra note 92, at 22 E.R. Finch & A.L. Moore, Astrobusiness: A Guide to the Commerce and Law of Outer Space, supra note 169, at 56 ff; J.R. Myers, “Federal Government Regulation of Commercial Operations Using Expendable Launch Vehicles”, supra note 169, at 40 A. Dula, “Private Sector Activities in Outer Space”, supra note 180, at 178&ff. In the Matter of the Petition of Space Services Inc, FAA Regulatory Docket, 22 775 (16 March 1982). The main information provided in the petition were: - scheduled launch date and request for a two months launch window in case of delays - description of the launcher - description of the launch site - flight path - history of SSI - test flight and future potential of the launcher - safety measures taken by SSI.

85 published by the FAA in the Federal Register.(197) Additional safety requirements were added by the FAA. Finally, the FAA granted the exemption on September 1, 1982 with the following conditions: - SSI was exempt from regulations related to the operation ofa rocket in controlled airspace or within 5 miles of the boundary of an airport (but not from the clear weather conditions requirement); - SSI had to agree with a nearby airport to close the airport during launch; - SSI had to obtain insurance coverage of $ 100 million; - certain parameters had to be fulfilled by the rocket; - direct regular communication was mandatory between SSI and the Houston Air Traffic Control Center and the Houston Center was empowered with the authority to delay the launch for safety reasons; - duty was given to SSI to delay, cancel or terminate the rocket operation at any time if the safety of persons or property was jeopardized. FAA also issued an order restricting airspace temporarily and notified airmen concerning the launch.(198) As for the Department of State, SSI believed that an export license was not necessary but submitted on April 15, 1982, a letter to the Office of Munitions Control of the DOS (OMC). It turned out that an export clearance was necessary and difficult to obtain. In fact, SSI obtained the export authorization under the Arms Export Control Act on September 7, 1982 (one day before launch). The OMC issued this authorization under certain conditions: - the authorization was limited only to the Conestoga launch; - SSI had to comply with the safety measure required by FAA and NASA; - it was understood that SSI had to obtain the $ 100 million insurance; - SSI was required to indemnify the US Government for any damage and expenses in connection with the launch, including payments made pursuant to any Treaty. As for NASA, it sold the Minuteman I rocket motor to SSI.(199) Prior to the sale NASA reviewed technical and safety aspects of the launch. In the sale contract SSI was required to obtain flight insurance to indemnify the United States, its agencies, employees and contractors. The FCC granted SSI a temporary permit to operate a radio frequency for its communications with Conestoga. SSI imported meteorological test rockets from the Federal Republic of Germany, and for this, the ATF considered that a registration approval was necessary. SSI had to fill forms for both the ATF and the IRS.(200) SSI collaborated as well with the United States Navy, the Coast Guard, NORAD and the Department of Defense.(201)

(197)

(198)

(199)

(200) (201)

These notices are aimed at calling the public to comment on the propriety of these activities Fed Reg 16.243 (April 15, 1982) 47 Fed Reg 31.229 (July 26, 1982).

47

On the role of FAA in this case see P. D. Nesgos, National Law and Commercial Activities in Outer Space, supra note 163, at 181 ff. The Conestoga launcher was made of one stage which was in fact the second stage Aerojet M56-A1 of the strategic missile Minuteman 1. See: P. Langereux, “Lancement réussi de la première fusée privée américaine”, (18 Septembre 1982) 920 Air & Cosmos, 25. See B. Brumberg, “Regulating Private Space Transportation”, supra note 169, at 380. For more details on the Conestoga launch see: A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra note 92, at 26; E.R. Finch & A.L. Moore, Astrobusiness: A Guide to the Commerce and Law of Outer Space, supra note 169, at 56 ff; J.R. Myers, “Federal Government Regulation of Commercial Operations Using Expendable Launch Vehicles”, supra note 169, at 40; A. Dula, “Private Sector (continued...)

86

Eventually, the Conestoga launch was successful. On 8 September 1982, Conestoga flew over 300 km into outer space and landed in the international waters of the Gulf of Mexico, over 450 km from its launch site. As the description of the procedures followed for the launch of Percheron and Conestoga show, there was a serious need for streamlining these procedures, coordination of the Agencies and simplification of the overall process. This set of procedures was clearly not going to work in the event of regular launches. The experience of SSI was the start of gradual improvement through the development of a new set of legislation and regulations. 3.1.2.- Initial steps towards improvement of the regulatory framework for launches In parallel to the SSI experience, the idea was developing that a streamlining of the procedures was necessary and that a single point of contact for the issuing of licenses had to be established. In 1981, a bill was proposed,(202) which would have designated the FAA as the lead agency empowered to issue licenses for private launches, with NASA providing technical assistance. The bill also contained provisions related to insurance. This legislation was not enacted. Another initiative was taken in 1982, with a bill entitled “Space Commerce Act”, aimed at encouraging private sector initiative in space activities.(203) The bill gave centralized authority to the Secretary of the Department of Commerce. It was also not enacted.(204) The first initiative taken by the US Government was the establishment of an interagency task force to study the role of each agency in the field of private ELV activities. President Reagan was in favor of the privatization of ELVs and the US National Space Policy of July 4, 1982 was a new step of the evolution. The NASA Space Transportation System, the Space Shuttle, was still considered the primary launch system for the US Government, but the US private sector was encouraged to invest in space activities, in particular ELVs. This policy was seen as having interesting advantages: - reduction of government costs, in particular development costs and launch facilities, which were so far borne by the public budget; - better and higher use of facilities; (201)

(202)

(203)

(204)

(...continued) Activities in Outer Space”, supra note 180, at 178&ff. 2448 Cong Rec April 28, 1982, S.4205-6 See: J.T Stewart Jr, “US Private Enterprise Enters the Space Arena. The Beginning”, supra note 169, at 153. Congressman Akaka, who presented the bill described it as follows: “The bill I’m introducing today simply streamlines the regulatory procedure by establishing a single point of contact within the Federal Government for applicants to obtain permission to launch a space vehicle. Under the terms of this bill, this single point of contact would be responsible for coordinating and facilitating all Federal actions pertinent to private sector space launches. In turn, this single point of contact would issue a comprehensive license for space vehicle launchings to private companies. This bill would in no way abrogate our national security interests, and would certainly result in an efficient and less costly procedure for regulating private space launches”. H.R. 7411, 97th Congress, 2d Session, 128 Cong Rec E 5132-33 (daily ed Dec 13, 1982) See also J.T. Stewart Jr, “US Private Enterprise Enters the Space Arena. The Beginning?”, supra note 169, at note 78. On these congressional actions see: H.R. Marshall Jr, “Outer Space Commercialization in the United States: Effects on Space Law and Domestic Law” (1984) Colloquium, 90, at 94 ff.

87 - improvement ofthe general economy ofthe US and strengthening of the position of the US on the market of commercial ELVs; - NASA could concentrate on the Shuttle; - creation of jobs; - creation of a market for the provision of hardware, equipment and propellants.(205) The administration was well aware of the fact that benefits from private ELV activities were dependent upon a simplification of the licensing and authorization procedures and the institution of a single point of contact for private ELV operators. On May 16, 1983, a Reagan administration policy was issued by the National Security Council on commercialization of ELVs in order to facilitate this activity, thus confirming the published policy of 1982. Two points were outlined in this policy: - governmental regulation should not be an obstacle to private activities. It must be limited to the extent necessary to comply with international and national obligations and to ensure public safety; - private ELV operators will be encouraged to use governmental launch facilities.(206)

This policy set up an interim working group (SIG) for space on commercial launch operations, co-chaired by the Department of State and NASA, and included members of interested agencies.(207) The task of this group was: - to streamline procedures used in the interim to implement existing licensing authority; - to develop and coordinate the requirements and process for the licensing, supervision, and/or regulations applicable to routine commercial launch operations from commercial ranges; - to recommend the appropriate lead agency within the US Government to be responsible for commercial launch activities. The Department of State was designated as central point for commercial ELV authorizations and requests until the designation of the lead agency.(208) On August 3, 1983, President Reagan met with leaders in the area of space commercialization to discuss this issue and in November 1983, he announced his intention to designate the DOT as lead agency.(209) (205)

(206)

(207)

(208)

(209)

See H.R. Marshall Jr, “Outer Space Commercialization in the United States: Effects on Space Law and Domestic Law”, supra note 204, at 92. White House Press Release, Office of the Press Secretary. May 16, 1983 A. Dula, “United States Government Authorization and Supervision of Non-Governmental Space Activities: Present Law and Future Possibilities” (1984) 27 Colloquium, 35, at 40 H.R. Marshall, “Outer Space Commercialization in the United States: Effects on Space Law and Domestic Law” supra note 204, at 93 ff. SIG (Space) was chaired by the Assistant to the President for National Security Affairs, and principal membership included the Deputy Secretary of Defense, Deputy Secretary of Commerce, Director of Central Intelligence Agency, Chairman of the Joint Chiefs of Staff, Director of the Arms Control and Disarmament Agency, and the NASA Administrator. See: P.L. Meredith & G.S. Robinson, “Domestic Commercialization of Space: The Current Political Atmosphere”, in National Legal Centre for the Public Interest, American Enterprise, the Law and the Commercial Use of Space (Washington DC: National Legal Center for the Public Interest, 1986), at 5. Expendable Launch Vehicles. Announcement of US Government Support for Commercial Operations by Private Sector. May 16, 1983. 19 Weekly Comp Pres Doc, 721. For details about reasons for the choice of the DOT see: A.D. Webber, “Launching the Rocket Industry in the United States: Domestic Regulation of Private Expendable Launch Vehicles”, supra (continued...)

88 This decision was confirmed on February 24,1984, with the signature by the President of Executive Order 12465.(210) The Executive Order officially designated the DOT as lead agency for facilitating and encouraging commercial ELV activities by US firms. However, it also provided that all agencies were to keep their regulatory powers. Consequently, the DOT had only a role of coordination. Even though this decision was a significant step in the process of facilitating private ELVs activities, the lack of regulatory power of the DOT was a significant weakness. The Secretary of Transportation established within the Office of the Secretary of Transportation an “Office of Commercial Space Transportation” to develop cooperative procedures between agencies and private firms and facilitate the process through reduction or elimination ofsequential coordination of license applications by Federal Agencies, elimination ofduplicate reviews by different agencies and specification in advance by each agency of the information requested from the applicants.(211) The authority to issue Arms Export Licenses (ITAR) was transferred from the DOS to the DOT as an interim measure. The Office also worked to facilitate access to governmental launch facilities for private enterprises. Moreover, certain firms were thinking of establishing commercial ranges. Consequently, with the help of range safety and operations experts, the Office elaborated standards to be applied to launch facilities in order for them to meet the licensing requirements.(212) Finally, a Commercial Space Transportation Advisory Committee was established on April 12, 1984.(213)

(209)

(210)

(...continued) note 92, at 46. Commercial Expendable Launch Vehicle Activities. Executive Order 12465. February 24, 1984. 20 Weekly Comp Pres Doc. (1984) 49 Fed Reg Nb 40, Tuesday Feb 28, 1984. The President, in his remarks accompanying the signature, outlined the spirit of the new decision: “(...) We’re doing all we can to encourage space work by American industry. Private enterprise made America great. And if our efforts in space are to show the same energy, imagination, and daring as those in our country, we must involve private enterprise to the full. And that’s where today’s important event comes in (...). Until today, private industries interested in ELV’s have had to deal with 17 government agencies. From now on, they’ll only have to get in touch with the Department of Transportation, and the Department will clear away what Secretary Dole has called ‘the thicket of clearances, licenses and regulations that keep industrial space vehicles tethered to their pads .’” February 24, 1984. 20 Weekly Comp Pres Docs, 263.

(211)

E.J. Steptoe, “United States Government Licensing of Commercial Space Activities by Private Enterprise” (1984) 26 Colloquium, 191, at 194.

(212)

E.J. Steptoe, “United States Government Licensing of Commercial Space Activities by Private Enterprise”, supra note 211, at 195 (1984) Fed Reg 14621.

(213)

Department of Transportation. Public Notice 84-5. Establishment of Commercial Space Transportation Advisory Committee. April 12, 1984. 49 Fed Reg 14621 The task of the COMSTAC is defined in the notice as follows: “The COMSTAC, acting as an advisory committee, provides information, advice and recommendations to the Secretary of Transportation on matters relating to all aspects of the commercialization of expendable launch vehicles. The COMSTAC does not exercise program management or regulatory development responsibilities, and makes no decisions directly affecting the programs on which it provides advice. The COMSTAC provides a forum for the development, consideration and communication of information from a knowledgeable, independent perspective”.

89

3.1.3.- The first regulatory steps put to the test In parallel with these governmental efforts to improve the regulatory environment for launch providers, the latter pursued their endeavors and the new procedures could be experimented very quickly. The company Starstruck Inc. had developed the Dolphin launcher. The first launch, which eventually did not succeed, was performed under the “old” procedures. The second launch of the Dolphin took place in August 1984.(214) By that time, the Office of Commercial Space Transportation had been set up and Starstruck was the first company to deal with this single point of contact. Although in this case, Starstruck had already performed the procedures and only applied for a rescheduling of the launch, it seems that the process was less cumbersome.(215) Since Starstruck did not require a completely new authorization, it is difficult to extrapolate to what would have happened in the case a totally new license was requested. Basically, the point of contact was unique, but the procedures and requirements were still the same, although some improvements had been brought about by the role of the OCST(216) and the OCST proved very helpful to Starstruck.(217) The first task of the OCST has been to carry out a systematic investigation of the legal and operational issues that could affect commercial ELVs. It also made a compilation of all information required by the government from industry to ease the procedures to be (214)

(215)

(216)

(217)

“Starstruck Launches Prototype Dolphin Rocket in First Flight” (Aug 13, 1984) Aviation Week & Space Technology, 20. M. Straubel, “The Commercial Space Launch Act: The Regulations of Private Space Transportation” (1987) 52 Journal of Air Law& Commerce, 941, at 947. As the Director of the OCST stated: “The actual prototype launch activity in which we have been involved, which was the test and demonstration launch for a company called Starstruck, allowed the Government to have, for the first time, a hands on experience with the approval process. This has enabled us, even though it was a suborbital launch off international waters, to eliminate some overlapping information and review requirements. We found that there was really an excess of caution on the part of a number of Federal Agencies. They were not sure that there was any other agency in charge, and therefore, they wanted to make sure that legitimate public policy concerns had been met. Now that there is a focal point, I think there is a sense of confidence that a single agency has the responsibility to make sure all public policy needs are met, and that has, as a result, eased the burdens for the industry. We are not home free yet, but I think many of the informational requirements have been minimized”. Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187, at 25. “Our first ‘hands on’ experience was to facilitate the Federal Approval process for Starstruck test launch that was successfully conducted off the coast of California on August 3. To achieve this, we assisted the efforts of the approving agencies - State, NASA, FAA, Materials Transportation Bureau (MTB) and US Coast Guard - to set priorities, to coordinate their activities and thus to expedite the Federal review. No sooner had the final Federal approval been issued that Starstruck faced difficulties with local authorities. Through the Coast Guard and MTB, we were able to alleviate concerns of local safety officials. And, later, when Starstruck’s concept of launching 250 miles off the coast proved infeasible, we worked with the company, the FAA, Coast Guards and the Department of Defense, to develop ways to allow Starstruck to launch in closer proximity to the United States’ coast. This experience has been invaluable in shaping our ideas, actions and recommendations for streamlining the Federal approval process (...)” Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187, at 32.

90 followed. The Office worked with the DOD to encourage the use ofnational ranges, and on the development of criteria for site selection and operating procedures for future commercial sites. At that time, the licensing process contained the basics of what would be the future licensing system. It was composed of two steps: 1) the launch approval: the OCST required the proof ofcapability ofthe applicant to conduct a safe launch and 2) the mission approval: the applicant had to indicate the nature of the payload, where it is launched etc., mainly information necessary for the OCST to assess potential impacts on national security and foreign policy interests. A license could be issued when those two tests were met. This was always a license for one launch, The DOT was in favor of a case by case licensing, though this did not necessarily mean that the whole procedure had to be followed again for each launch.(218) DOT and DOS also agreed that the ITAR be transferred to DOT. Finally, in order to discuss some problems related to the use of radio frequencies,(219) the DOT brought together representatives of the five ELV launch firms, the FCC and the NTIA, and these discussions proved to be very helpful. However, in carrying out its authority, the OCST faced strong opposition and conflicting interests did not facilitate its task. In particular, the OCST had to deal with the strong interests of NASA and of the DOD. The launch industry itself also lobbied in divergent directions. Big established companies supported the authority of NASA while new companies gave support to the OCST.(220)

3.1.4.- The consolidation phase: the Commercial Space Launch Act (CSLA) and the associated regulatory framework

The weakness of the system described so far deprived the ELV operators of the stability and predictability needed to get on with their business.(221) In this view, Congress codified (218)

(219)

(220)

(221)

As its Director stated, in Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187, at 28: “We think it is a good approach for the expendable launch industry. If you have a vehicle that has not yet found a payload, as an example, we could, once they have proved their technical capability to conduct a safe launch, issue a letter or other assurance that could be used to assure potential customers that DOT has approved their proof of capability, and that part of the license test has been met. In other instances, in a case where different payload is launched using a previously approved vehicle, the proof of capability would a pro-forma kind review, because we would have already approved their vehicle and operating procedures. Our objective is to make this as simple as possible while protecting the public. Generic launch licenses, because no two launches are the same, would really be impossible. However, we do not think this would be a burden for the industry”. “The launch firms were concerned that their access to government controlled radio frequencies critical to launch activities might be constrained”, in Space Commercialization Hearings Before the Subcommittee on Space Science and Applications of the House Committee on Science and Technology, supra note 187, at 33. See P.L. Meredith & G.S. Robinson, “Domestic Commercialization of Space: The Current Political Atmosphere” supra note 207. Congress pointed out this problem: “ While the [Commerce, Science and Transportation] Committee believes that there has been no lack of commitment by DOT to implement the provisions of E.O.12465, a change in administrations could lead to de-emphasis or a modification of this policy. A (continued...)

91 many of the policies initiated by the administration and this legislation was eventually incorporated in the Commercial Space Launch Act 1984 (CSLA).(222)

i)

The Commercial Space Launch Act (CSLA)

a)

General context of the CSLA

First of all, it is important to keep in mind that the Act did not wish to change the law, but only to codify an existing system and organize its implementation: “The Act does not create any new substantive requirements for launching a launch vehicle or operating a launch site. The authority it gives to the Secretary of Transportation represents, in effect, consolidation in one licensing process of all existing requirements of Federal Law currently applicable to launches or launch sites” .(223) Congress emphasized(224) that the private sector has the capability of developing and providing launch services, this being in the interest of the United States, and that the United States should encourage private sector launches and associated services and, only to the extent necessary, regulate such launches and services, in order to ensure compliance with international obligations of the United States and to protect the public health and safety, safety of property, and national security interests and foreign policy interests of the United States. In view of these elements, and building on the recent experience, the purposes of the Act were expressed as follows: “(1) to promote economic growth and entrepreneurial activity through utilization of the space environment for peaceful purposes; (2) to encourage the United States private sector to provide launch vehicles and associated launch services by simplifying and expediting the issuance and transfer of commercial launch licenses and by facilitating and encouraging the utilization of Government developed space technology; and (3) to designate an executive department to oversee and coordinate the conduct of commercial launch operations, to issue and transfer commercial launch licenses authorizing such activities, and to protect the public health and safety, safety of property, and national security interests of the United States”.(225) The reference to the need for making sure of the use of the space environment for peaceful purposes finds it origin in the treaty obligations that have to be complied with by the United States.(226) It is also in view of those treaty obligations that the CSLA refers to the need for issuance of launch licenses. Indeed, both the Outer Space Treaty and the Registration Convention call for such authorizations, as was addressed in Chapter 2. (221)

(222)

(223)

(224) (225) (226)

(...continued) Congressional mandate via legislation, would eliminate or reduce the possibility of any arbitrary redirection, restructuring or abandonment of this initiative” S. Rep 656. 98th Cong, 2d Session 2 (1984). 49 USC Par 2601-2623 (Supp II 1984) hereafter called CSLA. All references to the CSLA are as per the current codified version. The CSLA is online at: (accessed: 01 /2001). E.J. Steptoe, “Regulation of Private Commercial Space Transportation by the United States Department of Transportation” (1985) 28 Colloquium, 240, at 243. CSLA, supra note 222, Section 70701. CSLA, supra note 222, Section 70701. See above Chapter 2.

92

b)

Definitions

In its Section 70102, the CSLA provides for a series of definitions(227) and a few of them are examined here.

Launch The CSLA defines the term “launch” as meaning “to place or attempt to place, a launch vehicle and payload, if any, in a suborbital trajectory, in Earth orbit in outer space, or otherwise in outer space”. No mention is made in this definition of the commercial nature of the launch. In other words, was this definition designed to include both commercial and non-commercial launches? It seems that this precision was left aside on purpose as the Senate Report suggests.(228)

Launch Vehicle The Act defines a launch vehicle as “any vehicle constructed for the purpose of operating in, or placing payloads in, outer space, or any suborbital rocket”. There is no doubt that both ELVs and reusable launch vehicles are included in this definition and covered by the Act,(229) but it could be debated whether the so-called upper stages, used to move payloads from a low earth orbit to a higher orbit, are included in the definition. Congress left this matter aside intentionally.(230) In this definition of a “launch vehicle”, Congress also addressed the matter of tooling of a launch vehicle and items used in the manufacturing of a launch vehicle.(231) (227)

CSLA, supra note 222, Section 70102.

(228)

Senate Report 98-656, 98th Congress 2d Session, 2 reprinted in 1984 US Code Cong & Admin News 5328, 5329, at 5335. “While the Committee believes that the Act currently provides adequate supervision for all non-Governmental (commercial and non-commercial) space launches, the Committee currently envisions that, at least in the near term, launches subject to the provisions of the Act will only be commercial in nature. However, the Committee also recognizes that other types of non-governmental space launches, such as those of a university consortium, could eventually occur. A ‘university’ space launch would not be commercial in the true sense of an activity with a profit motive, but could be non-Governmental and thereby be subject to Federal supervision as prescribed in the Act. Since the Committee does not envision this type of non-commercial, non-Governmental launch as one likely to occur in the near term, the definition of “launch” infers a non-Governmental, commercial launch ”.

(229)

On the question of whether a future aerospace plane would be included in the definition, see S. Gorove, “The Growth of Domestic Space Law: A US Example” (1990) 18:2 Journal of Space Law, 99, at 108.

(230)

“While the Committee has intentionally excluded any reference to upper stages in the definitions of ‘launch vehicle’ and ‘payload’ and has not made any provisions in the Act to license upper stages, the Committee recognizes that the question of upper stages is an issue that may warrant additional study in the future. Our nation’s current upper stage capabilities have been in question during the past year. Given these uncertainties and given any unforeseen roles that upper stages might have in the future ELV systems, the Committee believes that upper stages, relative to the licensing of commercial space launches, may warrant future examination”. Senate Report 98-656, supra note 228, at 5335.

(231)

“The Committee is aware that the ‘tooling’ of a launch vehicle and items used in the (continued...)

93

Payload It is defined by the Act as “an object which a person undertakes to place in outer space by means of a launch vehicle, and includes sub-components of the launch vehicle specifically designed or adapted for that object”.

As explained previously, upper stages are not included in this definition. Moreover, telecommunication satellites are exclusively licensed by the FCC and remote sensing satellites by the Department of Commerce, consequently, they are not included in payloads under the authority of the OCST. A question arose due to the definition of payload as “object”, not people. There may be a problem regarding authority of the OCST over private entities who, in the future, would wish to undertake manned launch activities, for example for the purpose of space tourism. The Office considered that it could not see in that definition any impediment to exercising its role.(232) For the OCST, there should be no difference in the treatment of those two types of launches. The major reason expressed is that the OCST does not want private entities planning to launch manned vehicles to be in the situation experienced by the ELV companies prior to issuance of Executive Order 12465 and enactment of the CSLA.(233) Manned space activities involve considerable expertise and investment. Though the time has not yet come when private entities will undertake such activities on their own, one can see from various initiatives in the space tourism sector that it is fast approaching.(234)

United States Citizen The Act defines the term as follows: “United States Citizen means (A) Any individual who is a citizen of the United States; (B) Any corporation, partnership, joint venture, association or other entity organized or existing under the laws of the United States; (C) Any corporation, partnership, joint venture, association, or other entity which is organized or exists under the laws of a foreign nation, if the controlling interest (as defined by the Secretary in regulations) in such entity is held by an individual or entity described in subparagraphs (A) or (B)”.

This definition finds its origin in the “concerns that exist as to the extent of US jurisdiction and control over launch activities, the extraterritorial implications of licensing launches and launch

(231)

(232)

(233) (234)

(...continued) ‘manufacture’ of a launch vehicle may involve tools and processes that have multiple users and may be used for Government activities as well as for private ELV activities. Since the Federal Acquisition Regulations lay out specific guidelines for mixing Government and private activities, the Committee believes that it is inappropriate to include these items in the statutory definition of ‘launch vehicle’. Imposing a separate rule for ELVs could introduce confusion, additional paperwork, and coordination problems, and could contravene the existing statutory language”. Senate Report 98-656, supra note 228, at 5334-5335. “Neither the Act nor the Report that accompanied the Act at passage, indicates that ‘launch of a launch vehicle’ should be read exclusively as launch of an unmanned launch vehicle”.(1988) 53 Fed Reg 110066. See Fed Reg reference supra note 232. For general information about space tourism, industry survey, history and related bibliography, see online the Space Tourism Initiative (accessed 01/2001).

94 operations in foreign nations, and liability considerations of commercial launch activities”.(235) The definition of US Citizen is wide and its combination with the licensing requirements, provides extensive coverage to ensure compliance ofthe US with their treaty obligations. The Act does not provide any definition of “controlling interest” and leaves it to the appreciation of the Secretary.(236) Pursuant to Section 70702 CSLA, the Secretary issued a regulation(237) defining the expression “controlling interest” as “ownership of an amount of equity sufficient to direct management of the entity and to void transactions entered into by management”. There is a rebuttable presumption that 51% ownership is controlling.

c)

The Role of the Secretary of Transportation

The original idea from the start of the reforms was to establish a system allowing companies seeking launch licenses to apply to one agency only. This rule was incorporated in the CSLA which provided the Secretary of Transportation with exclusive authority with respect to commercial space launches by the private sector. Firstly, the Secretary has a general responsibility for carrying out the Act. In doing so, he has the following duties, as stated throughout the CSLA: - to encourage, facilitate and promote commercial space launches by the private sector; - to consult with other agencies to provide consistent application of licensing requirements under this Act and to ensure fair and equitable treatment for all license applicants; - to minimize regulatory guidelines to be issued; - to protect the public health and safety, safety of property, and national security interests and foreign policy interests of the United States. The Secretary is given exclusive authority to issue or transfer a license for launching one or more launch vehicles or for operating one or more launch sites,(238) and to specify the period of time during which this license is valid.(239) The Secretary is also in charge of establishing procedures and timetables for the review of applications and he is also given authority over the licensing requirements. Thus he may: - decide by regulation that a requirement of Federal Law is not needed for obtaining a license if this requirement is not necessary to protect the public health and safety, safety of property and national security interests and foreign policy interests of the United States; (235) (236)

(237)

(238) (239)

Senate Report 98-656, supra note 228, at 5334. The original draft of the Act gave a definition of the expression “controlling interest” as meaning “a direct or indirect legal or beneficial interest in or influence over another person arising through ownership of capital stock, interlocking directorates or officers, contractual relations, or other similar means, which substantially affect the independent business behavior of such persons”. S 2931 to Facilitate Certain Space Launches, and for Other Purposes. Reprinted in Hearing Before the Subcommittee on Science, Technology and Space of the Committee on Commerce, Science and Transportation, US Senate, 98th Congress, 1st Session, S 98-105. Washington USGPO 1984. 14CFR, Par 401.5. The regulations of launch licensing contained in 14 CFR can be found online at the same site as the CSLA, supra note 222. CSLA, supra note 222, Section 70105. CSLA, supra note 222, Section 70107.

95

- prescribe additional requirements to protect the above mentioned interests; - waive the application of any requirements in individual cases if the waiver is in the public interest and will not jeopardize the above mentioned interests. If the applicant meets all the requirements, the Secretary shall issue the license, however, the Secretary may include certain conditions in the license, in particular, means of on-site verification that the operations correspond to what has been provided for in the license. The Act gives the Secretary wide means of verification. The Secretary is allowed to monitor licensed activities,(240) and such monitoring may be used in the following cases: - to check that the operator of the launch complies with the conditions set out in the license;(241) - to ascertain that all necessary licenses, authorizations and permits have been obtained;(242) - to prevent the launch of a payload by the holder of a launch license if the Secretary determines that the launch of this payload would jeopardize the public health and safety, safety of property, or any national security interest or foreign policy interest of the United States.(243) The Secretary issued regulations with respect to this monitoring authority.(244) d)

The Office of Commercial Space Transportation and the Commercial Space Transportation Advisory Committee

To carry out the functions given to it by Executive Order 12465, the Secretary of Transportation established within the Office of the Secretary an Office of Commercial Space Transportation. A regulation was issued by the DOT, effective on February 24, 1984,(245) officially creating the OCST, headed by a Director, and reporting directly to the Secretary. In this regulation, the OCST was defined as the focal point within the Federal Government for private sector space launch contracts and licensing related to commercial expendable launch vehicle operations and for promotion and encouragement of commercial expendable launch vehicle industry.(246) On October 30, 1984, after passage of the CSLA, a new regulation was issued by the DOT,(247) which transferred to the Director of the OCST all authority vested in the Secretary by the Act. The OCST is thus a subdivision, or “unit” ofthe DOT, headed by a Director appointed by the Secretary. The Director is delegated the authority of the Secretary to carry out the CSLA. All obligations and powers given by the Act to the Secretary are exercised by the Office. It is with the Office that applicants have to deal as their unique point of contact.(248) (240) (241) (242) (243) (244) (245) (246) (247) (248)

CSLA, supra note 222, Section 70106. CSLA, supra note 222, Section 70106 CSLA, supra note 222, Section 70104 c) CSLA, supra note 222, Section 70104 c) 14 CFR, supra note 237, Par 405.1. (1985) 50 Fed Reg 7782 14 CFR, supra note 237, Part 1 Par 1.23(0). Delegation of function, Par 1.68. (1985) 50 Fed Reg 9036. 14 CFR, supra note 237, Part 1, Par 1.68(b). Information about the Office can be found online at the Office’s web site: (continued...)

96 On April 12, 1984, Notice was given of the establishment of the Commercial Space Transportation Advisory Committee (COMSTAC).(249) Its role is to advise the Department of the future of the Commercial ELV industry, and DOT’s efforts to stimulate private sector investment in commercial, unmanned space boosters. Three objectives and duties were given to COMSTAC: 1) to gather information on issues to be considered, develop positions on these issues and submit them to the Secretary of Transportation; 2) to evaluate developments of commercial space transportation and communicate its recommendation to the Secretary; and 3) to serve as a forum for the discussion of problems involving the relationship between industry activities and government requirements, with a view to resolving those problems. The COMSTAC is composed of up to 25 members appointed by the Secretary and it meets at least once a year. The rules for the functioning of the COMSTAC are provided for in detail in the Notice.(250) In November 1995, as a consequence of a DOT reorganization the OCST was transferred to the Federal Aviation Administration. The OCST Director was designated as an Associate Administrator, the OCST became the Associate Administrator for Commercial Space Transportation (AST) and AST was established as one of the FAA lines of business.(251)

ii)

When is a license required?

In Section 70104, the CSLA provides for the cases in which a license is required. The current regulations deal with that issue in 14 CFR Par 415.3 and there are four cases.

a)

The launch takes place from US territory

In this case, no one can launch a launch vehicle or operate a launch site without being authorized by a license. This rule takes into account the need to comply with the provisions of the Outer Space Treaty as well as the Liability Convention under which the US is liable for damage caused by space objects launched from within its territory.

b)

The launch takes place outside US territory

US citizens, in the sense of subparagraph (A) and (B) of section 70102(1) of the CSLA, shall obtain a license, that is individuals who are citizens of the US, and corporations, partnerships, joint ventures, associations, or other entities organized or existing under the laws of the United States or any State. This provision aims to control activities of US nationals in order to comply with Article 6 of the Outer Space Treaty which makes the States liable for damage caused by the activities of their nationals. As a consequence of this provision, with respect to activities of US nationals and corporations, the United States has jurisdiction over activities of the concerned persons also in international airspace, on high seas and foreign territory.

(248)

(249) (250) (251)

(...continued) (accessed: 01/2001) (1984) 49 Fed Reg 14621. Information about COMSTAC can be found online, supra note 248. See for this information, online on the AST site, supra note 248.

97

c)

The launch takes place outside US Territory and outside the territory of a foreign nation

US citizens, in the sense of subparagraph C of Section 70102(1) of the CSLA shall obtain a license, that is any corporation, partnership, joint venture, association or other entity which is organized or exists under the laws of a foreign nation, if the controlling interest in such entity is held by an individual or entity described in subparagraphs (A) or (B). With respect to these entities, US jurisdiction applies to activities on the high seas or international airspace. Indeed, in these areas no State is susceptible of exercising its jurisdiction. As the entity is controlled by US interests, the US could be held liable for damage caused by the activities of this entity. However, and because of this very reason, there is an exception to the rule provided for in Section 70104(a)(3), first sentence. In its second part, this provision waives the need for a license in the case of existence of an agreement in force between the United States and a foreign nation which provides that such foreign nation shall exercise jurisdiction over the launch or the operation of the launch site. Thus, the US is primarily responsible for these activities, but it can rely upon another State to take responsibility, by agreement.

d)

The launch takes place in the territory of a foreign nation

The principle is that the Act shall not apply to the launch of a launch vehicle or the operation of a launch vehicle or the operation of a launch site in the territory of a foreign nation by the US citizen in the sense of subparagraph C of Section 70102(1). Indeed, when there is no State jurisdiction over the location where the launch takes place, it is understandable that the US seek to control the activities of an entity controlled by US interests, but here the situation is different. Here there is sovereignty of a State in the location where the launch is to take place and the entity, though it is controlled by US interests, is under the sovereignty of the concerned State. Thus, in principle, no license has to be sought from the US DOT as a consequence of the principle that the State concerned should be sovereign on its territory. This principle has an exception. If there is an agreement in force between the concerned State and the US, which provides that the US shall exercise jurisdiction over the launch of a launch vehicle or the operation of a launch site in the territory of the concerned State, US citizens, in the sense of subparagraph C of Section 70102(1) shall obtain a license from the US DOT to enter such activities. These provisions aim to protect the US wherever their liability could be engaged and in so doing, they provide for extraterritorial application of US law in some instances.(252) The non-extraterritorial application of the US law has been followed as far as the case of entities of subparagraph C of Section 70102(1) CSLA are concerned, launching from foreign territory is concerned. For them, if there is no agreement between the foreign State and the US giving jurisdiction to the US, no license has to be required from the launch operator by the AST. This is not the case for US citizens of subparagraphs A and B. For them, wherever they launch from, even in foreign territory, they have to obtain a license from the AST and no exception is provided to this rule. This extraterritorial application of the US law might create situations of conflict. Indeed, the US citizen who wants to launch from a foreign territory will have to comply with the US law and the law of the State where the launch is to take place. Those two laws might conflict with respect to some of their provisions and hamper or prevent a launch by the US entity. This type of conflict is likely to occur in the areas of national security and foreign policy interests. If (252)

E.J. Steptoe, “Regulation of Private Commercial Space Transportation by the United States Department of Transportation”, supra note 223, at 242.

98 both legislation require that the launch meet these interests, conflict may arise as these interests are proper to each State concerned and cannot always, for obvious reasons, be documented to make a determination predictable to the operators concerned. With respect to the provisions of Section 70104 CSLA, another concern can be expressed. Foreign subsidiaries (US citizens of subparagraph C) do not need to obtain a US license if they launch from the territory of a foreign State, providing that there is no agreement between that State and the US attributing jurisdiction to the US. The foreign State is supposed to exercise jurisdiction and control over the company. But, if that State did not issue regulations and is not a party to the Space Treaties, what is the situation?(253) It seems that there is a gap in that case and if a third State has been victim of some damage because of the launch, it will have difficulties to hold liable the State where the launch occurred.(254) The State victim may turn to the US and ask it for damages since the company having caused the damage is controlled by American interests. This link may turn out to be sufficient to bring about the responsibility of the US which would then be answerable for damages though it did not license the activities ofthe company responsible for the damage, and thus did not have an opportunity to check all aspects of the mission. Such a case does not appear to have been raised in practice so far. Finally, it should be noted that provisions of the Act are not applicable to all launch activities carried out by or on behalf of the US.(255) The provisions of the CSLA do not apply to amateur rockets either.(256)

iii)

The licensing procedure

The CSLA itself does not provide detailed regulations regarding the licensing process. It consists in a general framework within which the Secretary of Transportation, through AST, is to issue specific implementing regulations. One particularly important principle should be noted here, and its importance is stressed by the CSLA in a number of provisions as being a central principle. This principle is that, in carrying out the CSLA, the Secretary should always bear in mind the importance given to the protection of public health and safety, safety of property, and national security interests and foreign policy interests of the United States.(257) As far as licensing procedures are concerned, the Act repeats this principle, stating that the Secretary of Transportation may issue or transfer licenses “ consistent with the public health and safety, safety of property, and national security interests and foreign policy interests of the United States”. (258)

Section 70105(b)(2) and (3) also recall this principle, that the Secretary has to take into account when he decides either to consider a requirement of Federal law not necessary for issuing licenses, or to prescribe additional requirements, or waiver the application of any requirement. The protection ofpublic health and safety and the safety of property may be (253)

(254)

(255) (256) (257)

(258)

M. Howald, “Private Space Activities and National Legislations” (1989) 32 Colloquium, 344, at 345. Of course, there is always the possibility to seek the liability of the State under general international law. CSLA, supra note 222, Section 70117(g). 14 CFR, supra note 162, part 400.2. The definition of “amateur rocket” is given in 14 CFR 401.5 This principle is stressed from the very beginning of the Act in Section 70101, as a general purpose of the Act and one of the underlying ideas considered important by Congress. CSLA, supra note 222, Section 70105(a).

99

a clear notion, but such is not the case as far as national security interests and foreign policy interests of the United States are concerned. These latter notions may be interpreted widely and could give the Secretary extensive authority in the course of the licensing process. When the DOT issued licensing regulations, it received some comments expressing concern aboutthe fact that this expression is undefined, particularly as far as news gathering and distribution are concerned.(259) The DOT dismissed this concern and indicated that “the Act expressly commits to the Department of State and Defense, respectively, responsibility for defining such interests in the context of individual license applications and for informing the Secretary of Transportation of their significance. It is not intended or anticipated that national security or foreign policy interests would be casually invoked by these agencies as a reason for preventing a launch”.(260)

Another comment addressed to the DOT argued that the authority of the AST to weigh national security and foreign policy interests in connection with private space launches does not encompass factors associated with the operations of a payload to be launched. The comment suggested that the Office’s regulatory procedures focus only on the national security and foreign policy implications attending the proposed launch of a payload and not on the payload’s operation in orbit. The DOT expressed doubts about this interpretation and answered that the Act gives the Office the authority to determine whether the launch of a payload is inimical to the national interests specified in the Act and does not exclude any relevant factor from the Office’s consideration. Thus, the Office will exercise its authority by determining whether any circumstances exist under which the proposed launch of a payload would jeopardize national interests.(261) Following comments made on the Interim Final Rule, the AST had to deal with this issue again and stated: “The Office wishes to emphasize again the guiding principle established by the Commercial Space Launch Act in this area: the ‘provision of launch services by the private sector is consistent with the national security interests and foreign policy interests of the United States and would be facilitated by stable, minimal and appropriate guidelines that are fairly and expeditiously applied’. As the Agency charged with implementing the Act, the Department of Transportation views this passage as forming the basis for a presumption that proposed commercial launch activities are consistent with national interests. Thus, the purpose of the licensing process, insofar as national security and foreign policy issues are concerned, is to identify and, whenever possible, ameliorate specific problems with a proposal, not to determine that each and every proposal is generally consistent with those interests” .(262)

It is the responsibility of the Secretary of Transportation, through the AST, to issue regulations necessary to carry out the CSLA and accordingly, the Department of (259)

(260) (261) (262)

(1986) 51 Fed Reg 6871. One comment expressed concern that uncertainties created by the undefined references to national security and foreign policy interests could have a substantially chilling effect upon the exercise of protected First Amendment rights. That is news media organizations seeking to place satellites in orbit or to lease transponders capacity might be deterred due to this concern. Specifically, such uncertainties could thwart efforts to secure commitment of the substantial amounts ofinvestment capital needed for the launch activities associated with such undertakings. Thus, this legislative vagueness could indirectly deter the exercise ofconstitutionally protected activities involving news gathering and distribution. In this context, the comment asserted, Mission Review(nowadays called Policy Review) could ultimately become a vehicle for effecting prior restraint of free speech. Federal Register, supra note 259. Federal Register, supra note 259. (1988) 53 Fed Reg 11005

100 Transportation issued regulations with respect to the licensing process. On Feb 25,1985, a Notice of Policy on Licensing Process for Commercial Space Activities was issued by the Office of the Secretary of Transportation.(263) The purpose of this Notice was to describe the licensing policies and procedures that DOT considers to be the most effective means of satisfying the Secretary’s statutory mandate to oversee and coordinate nongovernmental space launch activities. The DOT intended this Notice to be relied upon as interim guidance by license applicants pending the promulgation by DOT of regulations implementing the Act. The Notice contained the basic principles elaborated by the DOT for licensing of commercial space transportation. The DOT called for comments on this Notice and implemented its authority through this Notice until February 1986. Final official regulations were later released through the Interim Final Rule issued on February 26, 1986.(264) This Interim Final Rule amended Title 14 of the Code of Federal Regulations, by adding Chapter III providing for the regulations governing commercial space transportation. This Interim Rule was an important step in the licensing process development since it organized and codified the rules relating to the licensing process. During that period of time, progress had been made on the development of contractual arrangements with respect to access of commercial launch firms to Government launch technology and safety services. The Shuttle accident in 1986 modified dramatically the structure of the market and the American space policy and a new launch policy was announced in August 1986.(265) A Directive on National Space Policy was issued by the President on February 11, 1988, emphasizing commercial launch services as an integral element of the transportation capability of the United States.(266) As a consequence of those numerous elements, a Final Rule was issued by the AST on April 4, 1988.(267) The licensing procedure is composed of four steps. First, an application has to be submitted by the operator of the launch vehicle to the AST. After the application has been made, the licensing procedure is divided into five steps: the AST conducts 1) a safety review leading to the issuance of a safety approval; 2) a mission review(268) leading to the issuance of a mission approval; 3) a payload review, 4) a financial responsibility determination and 5) and environmental review. If all approvals have been granted, the AST will issue the license.(269)

a)

Applications

The rules relating to the applications procedure are set forth in 14 CFR Par 413.3 to 413.11.(270) (263) (264) (265)

(266) (267) (268)

(269)

(270)

(1985) 50 Fed Reg 7714 (1986) 50 Fed Reg 6870 This policy limited the Shuttle to certain missions, directed the DOT to develop payloads compatible with both expendable launch vehicles and the Shuttle and directed that routine commercial payloads be launched by commercial launch firms. (1988) 53 Fed Reg 11004 Supra note 266. This mission review is now called Policy review, after the recent re-codification of 14 CFR which we will address later. We will therefore now refer to this review as the Policy review. This results from the recent Final Rule which has clarified the licensing procedures. This Final Rule became effective on 21 June 1999 and can be found online , supra note 222. 14 CFR, supra note 237.

101 Information required for applications In Appendix to the regulations, the AST provides for all information to be given by the applicant. It is subdivided in four types of information: 1) general requirements, 2) information related to safety review, 3) information related to policy review and 4) information related to payload determinations.(271) Pre-application consultation It is the spirit of the whole legislation to ease the granting of licenses and, because of the nature of launch activities, especially the timing considerations, the AST has provided for a system of Pre-Application Consultation.(272) Applicants are encouraged by this system to consult with the AST at the earliest planning stages in order to adapt their proposal if problems are foreseen, to avoid delays and costs that would be caused by those problems and to clarify information requirements in order to facilitate the review. This procedure allows the operators of launch services to initiate very early the licensing process so that they can adapt without delay and costs to the requirements of the AST. The preparation of the launch and the licensing process progress simultaneously, adaptations are made to meet the requirements and the review process can be expedited in a shorter amount of time. Applications Two types of applications can be submitted, as far as launch operations are concerned: 1) applications for issuance or transfer of a license authorizing a launch or 2) application made separately and in advance of a license application, requesting an approval or determination that must be secured before a license can be issued or transferred. The second type of application is to be distinguished from the pre-application consultation. The pre-application consultation consists of discussions with a view to making sure that each step ofthe preparation ofthe launch complies with the requirements of the AST. In the advanced application, the applicant does not seek only assistance but a decision of approval, or determination, relating to one component of the launch operations. For example, he may wish to ensure in advance that the type of launcher he wants to use would be approved by the AST, and make necessary changes required by the Office. AST will accept applications for safety review, policy review, or for a determination that the launch of a payload covered by Section 70104 of the CSLA will not be prevented, independent of one another and before submission ofan application for a license. The fact that safety and policy approvals may be requested separately and in advance results from 14 CFR Par 415.5. If such advanced application procedure has been followed, it will be made part of the licensing record. When the applicant eventually requires the license to launch, all previous approvals and determinations remain valid unless substantial changes have been made in the course of the preparation of the launch. The main objective is to make the licensing process as simple and efficient as possible. These procedures should not be a burden for the applicants and they should match closely the steps leading to a launch.

(271)

(272)

Details of information required can be found at the AST online at (accessed: 01/2001). 14 CFR, supra note 162, Par 413.5.

102 Review of applications The AST will accept an application for review when it contains all information required .(273) No particular format has been prescribed by the AST for submitting applications and information.(274) However, if an application is considered by the AST to be incomplete, it will be returned to the applicant to be completed. Then, when the application is complete and accepted by the AST, it initiates the review. There are no standard reviews. Even though AST developed general regulations, in many respects, the licensing procedure remains a case by case process. Until the issuance of the Office’s decision, any modifications, supplements or corrections can be made to the application.

b)

Safety Review

Subpart C of Part 415 deals with the safety review for launches taking place from a Federal Range, and Subpart F with safety review for launches taking place from non Federal launch ranges. As the AST explained in its Notice of Policy 1985, the reason why safety of launches has to be secured is that “As with other transportation systems, the Government has the responsibility to protect the public against any unreasonable risks that space launch activities might pose to either life or property” . (275)

The US also have their own interest to protect. By exercising control over the safety of the launch, they reduce the possibilities of damage leading to their international responsibility according to the Outer Space Treaty and the Liability Convention. The safety review is also an important component of the insurance and financial responsibility determination. Role of the safety review The safety review aims at determining whether an applicant is capable of launching a launch vehicle and its payload without jeopardizing public health and safety and safety of property. Major components of the safety review The safety review will examine first of all from which range the launch will take place. If from a Federal range, the compliance of the operator with the procedures at the range will be checked, and the AST will also examine whether the launch is in line with the experience at that range. The AST will also examine the safety organization of the operator, and request the designation of one safety official. An important element of the safety review is the determination of the acceptable flight risk through orbital insertion (for an orbital launch) or impact (for a suborbital launch). This is the expected number of casualties to the collective members of the public exposed to debris hazards from any one launch. This ratio shall not exceed 0,00003 casualties per launch. In order to demonstrate that he complies with these provisions, the operator has to provide a substantial amount of safety related information such as launch vehicle structure, critical systems (with drawings and schematics). Flight readiness procedures are examined as part ofthe safety review, as well as the communications plan ofthe operator. The safety at end oflaunch is examined and the operator has to demonstrate that there will be no unplanned physical contract between the launcher and its components and the payload after payload (273)

14 CFR, supra note 237, Par 413.11.

(274)

Launch application can however be handled through the Internet, online at AST, supra note 248.

(275)

(1985) 50 Fed Reg 7717.

103 separation, that debris generation will not result from conversion of energy sources into energy that fragments the vehicle or its components, and that stored energy will be removed according to criteria defined in the regulations. The operator also has to submit an accident investigation plan which has to fulfill a number of criteria defined in the regulation. Since the first regulations issued by the AST, it was made clear that a distinction would be made between launches from Federal (or licensed) launch sites and other launches. In its Notice ofPolicy 1985, the AST underlined that if the applicant chooses to launch from an established national range, the number of safety issues to be addressed by the AST would be reduced since, reliable safety procedures are already in place on those sites. With the increase in number of potential launch site operators, the AST had to publish, in 1995, some guidelines on the information required when applying for site operators licenses.(276) Licenses were issued on a case by case basis along those guidelines. (277) The AST then issued a Proposed Rule on 25 June 1999, which contained proposed regulations for the license to operate a launch site.(278) The proposed regulations are technical regulations which go to a significant level of detail into the conditions that a launch range has to comply with. It addresses the criteria and information requirements for obtaining a license in particular: 1) compliance with the National Environmental Policy Act; 2) information on all technical characteristics of the launch complex (i.e flight paths, overflight of populated areas, casualty expectancy) to demonstrate compliance with the technical requirements set forth in the proposed regulation; 3) information on owners of the corporation or participants in the joint venture; 4) explosive flight plan and 5) launch site accident investigation plan. The license is issued when all criteria set forth in the regulations are complied with, and along the same conditions as other licenses, in particular those relating to foreign policy and national security interests of the United States. The license will be in effect for 5 years.

c)

Policy Review

Policy review brings more delicate issues than the safety review because of its national security aspects. (276)

(277)

(278)

See “Site Operators License. Guidelines for Applicants”. 8 August 1995. Online reference, supra note 270. The launch sites currently licensed are California Space Port, Spaceport Florida, Virginia Commercial Space Flight Center, Kodiak Launch Complex. Updates of the list of licenses can be found online (accessed: 01/2001) On private launch ranges initiatives, see: D.J. Marcus, “Spaceport Florida Ready to Buy Rockets” June 11-17, 1990, Space News, 32 Office of Space Industry of Hawai, “Hawai’s Proposed Commercial Launching Facility”, 1990 S. Lessard & F. Nordlund, “Les bases de lancements: évolution et aspects juridiques” (1990) XV Annals of Air & Space Law, 359. (1999) 64 Federal Register Nb 122, 34316. Online: (accessed 01 /2001). The AST published the final rule for licensing and safety requirements for operation of a launch site on October (2000) 65:203 Fed Reg 62811, as this book was being edited, and could not be reviewed here in detail. A summary assessment seems to show that the final rule has not introduced major changes to the proposed rule except for some details in the area of explosive flight plan requirements and explosives requirements. It clarifies that a site operator license is not required for an operator of a launch site using it for his own launches, as this is covered by the relevant launch license. The regulations apply to those operating a launch site as a service to other customers.

104 The aim of the licensing process is to make sure that activities of private launch operators remain with the international obligations of the US, particularly as far as the Outer Space Treaty and the Liability Convention are concerned. Safety Review examines compliance with these obligations only as far as safety of operations is concerned. As the AST explains, “This direct liability forms the basis for a broad interest in proposed private space launch activities, one which intends beyond safety issues to include both the purpose of the launch and the nature of the payload. This unique interest in the launch mission distinguishes regulation of commercial space launch activities from regulation of other modes of transportation” .(279) The role of AST is not only to check the safety issues but all other elements capable of interfering with the treaty obligations of the US. Policy Review is dealt with in Subpart B of 14 CFR Para 415. The major part of this policy review is the performance of an interagency review of the proposed launch. As explained by AST: “An interagency review allows government agencies to examine the proposed mission from their unique perspectives. The FAA consults with the Department of Defense, the Department of State, and other federal agencies such as the National Aeronautics and Astronautics Administration that are authorized to address national security, foreign policy, or international obligations issues.”(280) As evidenced by this definition, the two major subject matters with respect to Mission Review are: compliance with international obligations as well as national security and foreign policy implications of a given launch or payload. One of the major concerns raised in the comments received by the AST when drafting the regulations relates to the definition of “US national security or foreign policy interests”. Neither the Commercial Space Launch Act nor the AST regulations define these terms. A number of commentators were concerned that this vagueness could open the door to varying interpretations and lead to difficulties due to the lack of predictability it would cause(281). An example of foreign policy consideration could be the risk of interference with another nation’s use of space. A national security concern could be the prevention of collisions between proposed payloads and classified Department of Defense satellites.(282) However, one point needs to be emphasized here, with respect to the burden of proof on this matter. The regulations provide that: (279)

50 Fed Reg 7717

(280)

Overview of the licensing process as described by AST on its web site, supra note 248.

(281)

See M.S. Straubel, “The Commercial Space Launch Act: The Regulation of Private Space Transportation”, supra note 215, at 960, where Mr Straubel expressed concern: “The constantly changing definitions of ‘national security interests’ and ‘foreign policy interests and obligations’ may make the advanced planning necessary for space activities very difficult. For example, a joint venture in materials processing between a United States firm and a foreign firm may be acceptable one year, but may run afoul of national security or foreign policy interests the next year because the foreign firm may come from a now unfriendly country. An applicant could obtain mission approval early in a project, but find that mission approval withdrawn when the time comes for issuance of the final license. Such reliance could result in substantial losses. The uncertainty created by the vague terms ‘national security interest’ and ‘foreign policy interests and obligations’ could chill investment in private space activity. Unambiguous criteria and guarantees of continued acceptance and validity need to be put into the mission review process”.

(282)

M.S. Straubel, “The Commercial Space Launch Act: The Regulation of Private Space Transportation”, supra note 215, at 958.

105 “Mission approval is granted unless some element of the proposed launch poses a threat to US national security or foreign policy interests, constitutes a hazard to public health and safety or safety of property, is inconsistent with international obligations of the United States”.(283) This provision appears to place the burden of proof on the AST. Thus it is not for the applicant to demonstrate that his mission, and particularly the payload, complies with all the requirements, but for the AST to establish the reasons why the approval cannot be granted.(284) The CSLA, in its section 70116(a), asks the Secretary of Transportation (by delegation the AST) to consult the Secretary ofDefense on all matters affecting national security, and the Secretary of State on all matters affecting foreign policy, and other agencies as he thinks appropriate. These provisions caused the concern, expressed also in the comments made during the drafting, that called the attention of some commentators who expressed some apprehension that these consultations might not occur in good faith and that they may provide a means by which agencies conducting their own commercial space activities could protect their competitive interests. The AST clarified that Mission Review should afford no such opportunity. “Mission Review is designed expressly to prevent the interagency review process from becoming an unbridled opportunity for agencies to judge, in areas beyond their particular competence, whether proposed launch activities conflict with national interests” .(285)

As far as consultation is concerned, another question may arise. The consultation of most agencies is not compulsory for the AST, it is just “when appropriate”, according to the CSLA Section 70116. But the Act mandates consultations with the Department of State and the Department of Defense. As the criteria of “national security interests” and “foreign policy interests or obligations” is vague, the conclusions of the AST, DOS and DOD may be different, even divergent. Will any conclusion prevail on others and what about arbitrating the dispute? No satisfactory answer has been given to that question. Mr Straubel concluded that: “...the White House will have the final say on disputed matters of national security and foreign policy. Nevertheless, the potential delay and uncertainty created by this unstructured consultation scheme is bound to impede the developments of a private launch industry and an efficient regulatory regime”.(286) The information to be provided for the policy review is listed in 14 CFR Para 415.25. Once the policy determination has been made, in case approval is denied to the applicant, the latter may respond and ask for reconsideration of the decision.

d)

Payload determination

The payload determination was previously made in the course ofthe policy review. Under the recent regulations, the payload determination is a separate item on the list of reviews to be conducted. The purpose of the payload review and determination is to check (283)

14 CFR 411.7

(284)

See P.L. Meredith, “A Comparative Analysis of United States Domestic Licensing Regimes for Private Commercial Space Activities” (1989) Colloquium, 373, at 377.

(285)

51 Fed Reg 6871.

(286)

M.S. Straubel, “The Commercial Space Launch Act: The Regulation of Private Space Transportation”, supra note 215, at 963.

106 whether the license applicant or the payload owner or operator has obtained all the required licenses, authorization and permits. The AST also reviews whether the launch of the payload would jeopardize public health and safety, safety of property, US national security or foreign policy interests, or international obligations of the US. The review is conducted in the same way as the policy review. Not all payloads are subject to this review. The AST does not review payloads that are subject to regulation by the Federal Communications Commission ,(287) the Department of Commerce National Oceanic and Atmospheric Administration.(288) The AST also does not review payloads owned or operated by the US Government.(289) When the proposed payload is not subject to existing payload regulations, either domestic or foreign payloads, the AST will have to initiate a review of the proposed payloads. The AST takes its authority on that matter from the CSLA itself.(290) There are two points worth noting. First, it is possible for payload operators or owners to ask the AST to make the payload determination ahead ofthe request for license or request for mission approval. As the payload is the central element ofa mission, it is important to know prior to entering into the launch license process whether the proposed payload can be launched. Secondly, as far as payloads are concerned, the AST made a first step towards a certain generic or standard license. The current regulations provide that the AST may review and issue findings regarding a proposed class of payloads, e.g communications, remote sensing or navigation, but still each payload is subject to compliance monitoring before launch.(29l) The information required by the AST from the applicant, in order to initiate payload determination are listed in 14 CFR Para 415.59. In the same manner as for the policy review, the payload review places on AST the burden of proof and the regulations provide that the payload determination must be granted unless the AST determines that the launch of the payload would jeopardize public health and (287)

(288)

(289) (290)

(291)

The FCC has authority to license communications satellites under the Communications Act of 1934. 47 USC 151 ff About the FCC licensing authority, some comments of the Senate Committee on Commerce, Science and Transportation are worth noting: “The Committee recognizes that the Orders and Authorizations of the FCC are the official certification for the launch of a communications satellite. Therefore, no separate documentation or certification by the Secretary of Transportation will be required. In order to address the procedural time lag that may occur between the FCC’s open meeting in which the actual authorization is written and released, the committee recognizes that the press release or other public notice of Commission action is sufficient notification that the communications satellite in question has met all regulations of Federal Law that relate to the launch of a payload. In notifying DOT of the FCC’s authorization to launch a communications satellite, the Committee notes that the transmittal of the authorization to launch by the FCC is appropriate. The bill reported here is intended to minimize the burden on agencies, such as FCC, DOT, and on those launching payloads. The Committee, therefore, directs DOT to implement the regulations with this goal in mind”. Senate Report 98-656, supra note 228, at 10. NOAA has authority to license remote sensing satellites under the Land Remote Sensing Commercialization Act of 1984, 15 USC 4201 ff. 14 CFR, supra note 237, para 415.53. CSLA, 49 USC, Section 70104(c): “ If no payload license, authorization, or permit is required by any Federal law, the Secretary may prevent the launch if the Secretary decides that the launch wouldjeopardize the public health and safety, safety of property, or any national security interest or foreign policy interest of the United States”. 14 CFR, supra note 237, para 415.55

107 safety, safety ofproperty, US national security or foreign policy interests, or international obligations of the US. If the determination is unfavorable, the reasons have to be stated, and the applicant may respond and ask reconsideration.(292) A number of comments were received by the AST during the process of elaborating the regulations, on the subject of payloads. One was that the AST had authority to weigh national security and foreign policy interests only insofar as the launch is concerned and not with respect to the operation of the payload in orbit. This comment relied upon the language ofthe Act which did not give express authority to the Secretary ofTransportation with respect to the latter. The Office did not agree with this interpretation and stated that it would consider all matters related to the launch.(293) This position of the AST is understandable in view ofthe fact that, should the AST be denied authority over this issue, one of the fundamental purpose of the regulations - the protection of the US interests would be challenged. The operation of the payload may have far reaching consequences in terms of international responsibility of the United States. The House Committee on Science and Technology also addressed some comments to the AST. One referred to the definition of the term “payload”. The Committee saw in the definition of payload as “object” a possibility that this could create difficulties in the event of manned launch activities. The AST considers that these activities would be in its sphere of activities. Indeed the Act does not restrict the expression “launch of a launch vehicle” to unmanned launches.(294)

e)

Environmental review

In the past, the AST was already required to consider the environmental impacts of licensing commercial launch activities and some information with respect to environmental consequences of launch operations had to be provided by the applicants to the AST.(295) This requirement has now been consolidated into an environmental review during which it is ensured that the proposed launch activities pose no unacceptable danger to the natural environment. AST has to comply with the National Environmental Policy Act (NEPA)(296) and the Council on Environmental Quality Regulations for Implementing the Procedural Provisions of NEPA.(297) The AST has developed guidelines for compliance with these regulations.(298) The information to be provided for this review are defined in 14 CFR para 415.103. This review is not leading to a determination. It seems to be considered as part of the overall process.

f)

Insurance and Financial Responsibility

This determination is an essential part of the licensing process, and one of the conditions under which the license is issued. We address this issue in a specific section further.(299) (292)

14 CFR, supra note 237, para 415.61

(293)

(1986) 51 Fed Reg 6871.

(294)

(1988) 53 Fed Reg 11006. See also discussion on this subject in our paragraph above dealing with definitions in the Commercial Space Launch Act.

(295)

14 CFR 415.31 and 14 CFR 415.33 (prior to present codified version)

(296)

42 USC 4321 ff.

(297) (298) (299)

40 CFR, Parts 1500 to 1508. These guidelines can be found online at AST, supra note 270. See Section 3.1.5 on Liability and Insurance Issues.

108 g)

Issuance of the License

Once reviews have been conducted, and the approvals have been granted, the AST will issue the license.(300) The license issued by the AST is subject to a number of conditions determined by the AST.(301) The license will contain the following elements: specification of the activities authorized by the license, name of each person responsible under the license for the conduct of these activities, period of time during which the license is valid, other terms and conditions as may be required to protect public safety, the safety of property, and national security and foreign policy interests of the United States. The main conditions are to secure the minimum amount of third-party liability insurance specified by the Department,(302) adhere strictly to specified range safety regulations and procedure, comply with Federal inspection verification and enforcement requirements. The license is issued on the basis of the information provided and representations made to the AST by the applicant. The applicant is responsible for constantly providing AST with complete and accurate information. If this information is no longer accurate or if an important change occurs that would influence the decision of the AST, the applicant is responsible for promptly giving the AST corrected information.(303) The AST issues two types of launch licenses: - the launch specific license, which authorizes the licensee to conduct one or more launches, having the same launch parameters, of one type of launch vehicle from one launch site. This license identifies each launch authorized under the license. The licensee’s authorization to launch terminates upon completion of all launches authorized by the license or the expiration date mentioned on the license. - the launch operator license, which authorizes the licensee to conduct launches from one launch site, within a range of launch parameters, of launch vehicles from the same family of vehicles transporting specified classes of payloads. This license remains in effect for five years of the date of issuance.(304) This extension of the duration is accompanied by a closer monitoring: “[...] the FAA proposed in the NPRM that a launch operator with a safe launch record should not be required to apply for a new license every two years. The FAA will continue to verify, through compliance monitoring, that a licensee is operating in accordance with the terms and conditions of its license. In this regard, the longer the license term, the more important the role compliance monitoring plays in enabling the FAA to provide safety oversight regarding how a licensee implements its procedures.”(305)

h)

After Issuance of the License

Monitoring of licensed activities Once the AST has issued a license, the CSLA provides it with the possibility to check that (300)

14 CFR, supra note 237, 413.19 and 415.19

(301)

CSLA, 49 USC, Section 70105(b)(2)(A) provides that the Secretary may prescribe any term necessary to ensure compliance with this Chapter. 14 CFR, supra note 237, para 415.11

(302)

See below for specific discussions on this topic.

(303)

14 CFR 413.19.

(304)

These types of licenses, which have been practiced by the AST in the last years, have been codified in the Final Rule effective 21 June 1999, 14 CFR, supra note 237, para 415.3.

(305)

Final Rule, supra note 421.

109 the conditions set forth in the license are complied with and that the licensee conducts its activities as planned.(306) The AST issued regulations implementing this provision. Three categories of persons can carry out the authority given to the AST: federal officers, employees authorized by the Director of AST, other individuals authorized by the Director of AST. Both the CSLA(307) and the regulations(308) enumerate the places where the AST can exercise its monitoring authority. The regulations use the expression “ [...] including launch sites [...]” . The word “ including” seems to mean that the list of locations set forth in the regulations is not exhaustive. The language of the CSLA is more restrictive by using the word “at” and by the manner in which the enumeration is made. Authority has been given by the Act, thereby supporting the interpretation that the list of locations provided for in the Act and in the regulations is exhaustive. The locations where the AST may monitor the activities of the licensee are the following: any launch site used by the licensee, any production facility or assembly site used by a contractor of the licensee, or the licensee himself in the production or assembly of a launch vehicle, any site where the payload is integrated with a launch vehicle. The AST is given a rather wide authority for the conduct of the monitoring. Under the CSLA and the regulations, there are two reasons why the AST may monitor the activities of the licensee: 1) to determine that the licensee complies with the terms and conditions of the license issued to him and 2) to carry out the Director’s responsibilities pertaining to payloads for which no Federal license, authorization, or permit is required. These are the payloads which are not licensed by FCC or NOAA, but by AST itself. The monitoring can be conducted “at such time and to such extent as the Director considers reasonable and necessary”.(309) This leaves room for interpretation by the AST. The duty of the licensee is to allow the persons sent by the AST to the location and cooperate with them. While commenting on the regulations, the AST emphasized that “Monitoring will be conducted in the least intrusive manner possible and only for the purpose of determining whether such activities conform to applicable requirements”.(310) Modification, extension, revocation, suspension of licenses. Emergency orders. Modifications.- After the license has been issued, it may happen that some changes are made to the launch mission, which will obviously modify the terms of the license. In that case, the licensee may apply to the AST to modify the license. The AST may also modify the license upon its own initiative.(311) Applications for modifications follow the same rules as the applications for the initial license. Modification of the license is not merely the consequence of the non compliance of the licensee with any regulations or conditions, but it would occur also in cases such as changes brought by the licensee to his operations. Extension.- The final rule which became effective on 21 June 1999 included a new

(306) (307) (308) (309) (310) (311)

CSLA, supra note 222, Section 70106 CSLA, supra note 222, Section 70106 14 CFR 405.1 14 CFR 405.1

(1988) 53 Fed Reg 11008. CSLA, 49 USC, Section 70107(b). 14 CFR 405.3(a).

110 provision giving the possibility to renew a license.(312) Suspension and revocation of license.-(313) These two measures are different from the modification procedure: they are a sanction. Suspension or revocation may occur in five situations: 1) the licensee did not comply with any one of the requirements of the Act; 2) the licensee did not comply with any provision of regulations issued under the Act; 3) the licensee did not comply with the terms and conditions ofthe license issued; 4) the licensee did not comply with any other applicable requirements; 5) public health and safety, the safety of property or any national security or foreign policy interest of the United States so requires.(314)

Time considerations.- Modifications, suspension or revocation take effect immediately and remain in effect as long as the administrative review continues.(315) The AST has a duty to notify the licensee immediately of any finding and action with respect to modification, suspension or revocation ofthe license(316) and to make sure that the reaction is proportional to the infraction.(317) Emergency Orders Emergency powers are given to the AST(318) in one particular case: where the launch or operation of a launch site is detrimental to public health and safety, safety of property, or any national security or foreign policy interest of the United States. This is furthermore restricted by the provisions that even in that case, the AST can exercise this authority only if the detriment cannot be eliminated effectively through the exercise of other authority of the AST. If such a situation occurs, the Office may immediately terminate, prohibit or suspend a licensed launch or launch site operation. Some concern was expressed about this power given to the AST because, as we have seen previously, the criteria upon which the intervention of the AST is based is vague and because the consequences for the licensee can be tremendous. The Commercial Space Transportation Advisory Committee called the attention of the AST upon that question and the AST emphasized that “it views the exercise of this authority as an extraordinary measure to be relied upon in

(312) (313) (314) (315)

(316) (317)

(318)

14 CFR, supra note 237, para 413.23 CSLA, 49 USC, Section 70107(c). 14 CFR 405.3 CSLA, 49 USC, Section 70107(d). 14 CFR405.3(c). On administrative review, see further in our paragraph on procedures, 14 CFR 405.3(d). In its report, the Senate Committee on Commerce, Science and Transportation emphasized: “The Committee recognizes that the immediate implementation of such an order might place a licensee at a financial disadvantage, which in some cases may be unwarranted, inappropriate, or detrimental to the licensee. Therefore, the Committee expects the Secretary to take into consideration, before rendering such an order, the nature and severity of any infraction or non-compliance relative to the Act, the license, or applicable regulation. If the infraction or non-compliance is minor, and if the licensee can correct the infraction or non-compliance within a reasonable period oftime after notification by the Secretary of the infraction of non-compliance, the Committee would expect the Secretary to delay the order to suspend, revoke or modify. In this case, this ‘grace’ period would allow the licensee a reasonable period of time to correct the infraction or non-compliance so that the licensee will not be needlessly disadvantaged by such an order”. Senate Report 98-656, supra note 228, at 13. CSLA, 49 USC, Section 70108. 14 CFR 405.5

111 truly emergency circumstances”.(319)

Such termination, prohibition or suspension takes effect immediately and remains in effect as long as the administrative review continues.(320) Penalties(321)

The CSLA declares unlawful the violation of any requirement of the Act, of a regulation issued under the Act, or of any term, condition or restriction of a license. Acts of noncompliance with these rules are sanctioned by a civil penalty of not more than $100,000 for each violation. A violation continued for few days constitutes, each day, a separate violation. The AST has authority to compromise, modify or remit penalties. The AST also has some judicial powers for the purpose of conducting hearings related to these violations.(322)

Enforcement Section 70115 of the CSLA gives the Secretary of Transportation (delegated to the AST) authority to enforce the Act. In order to exercise this authority, the Act gives the Secretary extended powers to “(1) make investigations and inquiries, and administer to or take from any person an oath, affirmation, or affidavit, concerning any matter relating to enforcement of this Act; and (2) pursuant to any lawful process - (A) enter at any reasonable time at any launch site, production facility, or assembly site of a launch vehicle, or any site where a payload is integrated with a launch vehicle, for the purpose of inspecting any object which is subject to this Act and any records or reports required by the Secretary to be made or kept under this Act; and (B) seize any such object, record or report where there is probable cause to believe that such object, record or report was used, is being used, or is likely to be used in violation of this Act”.

i)

Registration requirements

A special regulation deals with registration of space objects, in order to take into account the requirement for compliance with the Registration Convention (Article IV).(323) To assist the US with compliance with the registration convention, the licensee has to provide certain information listed in the regulation. This does not concern payloads owned and registered by the US Government or owned by a foreign entity. The information has to be provided within 30 days of the launch.

(319) (320) (321) (322)

(323)

(1988) 53 Fed Reg 11008. CSLA, supra note 222, Section 70108(b). CSLA, supra note 222, Section 70115. CSLA, supra note 222, Section 70115. Former 14 CFR 405.7, which has been removed and replaced by section 406.9 by a Final Rule issues on January 2001, (2001) 66:7 Fed Reg 2176. This Final Rule prescribes detailed procedures used to assess civil penalties and on the respondent’s rights to adjudication. 14 CFR, supra note 237, para 415.81

112 j)

Procedural aspects

Confidentiality Both the Act(324) and the regulations(325) provide for treatment of confidential data. The person or agency furnishing data or information can designate them, or some of them, as confidential. A precise procedure has to be followed to designate these data as confidential. Once this procedure has been followed, such information will not be disclosed. Such information can be disclosed if the Director of AST determines that the withholding of such data or information is contrary to the public or national interest. Administrative Review The CSLA gives an opportunity for a hearing to the applicants who wish reconsideration of a decision made by the AST.(326) In case of the application for a license, the applicant may challenge the decision of the AST not to issue the license, or the conditions that the AST has placed on it. If the AST makes a decision to modify, suspend or revoke a license, such a decision may also be challenged by the applicant. This is also the case of emergency orders. If a payload owner or operator has been denied the launch of the payload, he can challenge the decision of the AST. Finally, civil penalties may also be subject to administrative review.(327) The hearings are presided by an administrative law judge and the regulations set forth the procedure to be followed.(328) The administrative law judge will issue a recommended decision which shall be reviewed by the Director of the AST who will make the final decision.(329) Final decisions are subject to judicial review.(330) Petitions and rule making Those matters being very procedural are dealt with only briefly here. Two types of petitions may be addressed to the Director of the AST: petitions requiring the Director to waive a requirement of Federal law applicable to commercial launch services.(331) These petitions ask the Director for an individual decision. The Director will grant the waiver if it is in the public interest and will not jeopardize public health and safety, the safety of property, or any national security interest of the United States.(332) Otherwise, the Director will deny the petition for waiver. petitions of a more general nature, having impact on the regulations. These can be petitions to issue, amend or repeal a regulation, or to eliminate as a requirement for a license any requirement of Federal law applicable to commercial launch

(324) (325) (326) (327) (328) (339) (330) (331) (332)

CSLA, supra note 222, Section 70114. 14 CFR, supra note 237, 413.9 CSLA, supra note 222, Section 70110. 14 CFR 406.1. 14 CFR 406.3 14 CFR 406.5 CSLA, 49 USC, Section 70110(b). 14 CFR 404.3 14 CFR 404.5

113 activities.(333) In these cases, if the Director considers that the petition is justified, he will initiate the rulemaking process.(334) Rulemaking procedures are provided for in 14 CFR Part 404 Subpart B. The elaboration of regulations is particularly interesting in the US. Prior to issuing any Final Rule, the AST first issues a Notice of Proposed Rule. The launch industry, insurers and other interested entities may send their comments on the proposed rule to the AST. The AST then publishes its Final Rule with a compilation of the comments and the explanations as to why AST has taken into account or not taken into account certain comments. This rulemaking approach is very effective in our view, as it allows the community affected by those rules to contribute and help the elaboration of a viable set of regulations. Although such a system introduces a time delay in the issuing of regulations, it is a time investment which may prove crucial to the ability of a given regulation to match the realities of the business.

k)

Export controls

Prior to the enactment of the CSLA, the launch of a space launch vehicle was considered as an export subject to the ITAR requirements. The ITAR (International Traffic in Arms Regulation) procedure is handled by the Department of State and designed to address the foreign policy and national security of US armament sales. It was not designed to cover the licensing of commercial space launch activities, but the Federal Government lacked specific authority with respect to those launches and consequently, the ITAR was a substitute.(335) The Senate Committee on Commerce, Science and Transportation stated in its report: “It is the Committee’s intent that the Commercial Space Launch Act be the exclusive authority for the licensing of commercial space launch vehicles”.(336) Indeed, the CSLA, in its Section 70117(f), provided that “A launch vehicle or a payload shall not, by reason of the launching of such vehicle or payload, be considered an export for purposes of any law controlling exports”. In compliance with the provisions of the CSLA, the Department of State regulations were amended. The definition of “export” now provides that “As of the effective date of the Commercial Space Launch Act, a launch vehicle or payload shall not, by reason of the launching of such vehicle, be considered an export for

(333) (334) (335)

(336)

14 CFR 404.3 14 CFR 404.5 Senate Report 98-656, supra note 228, at 17-18 As J. Dorn, Director of the AST explained during the Senate hearings: “The basic authority for approving launches, for licensing private sector operations, continues to be the authority contained in the international traffic in arms regulations, which has been delegated by the President to the Department of State. And, as you know, this provides for the oversight of the international munitions trade. The application of these particular regulations, however, has required a somewhat expansive interpretation of the law and has resulted in the designation of launch vehicles or payloads as exports. We believe that it is more appropriate that a specific operation be licensed under specific authority granted to DOT, rather than relying on authority that belongs to another department and which designates a launch vehicle as an export. It is our view that this expansive interpretation of ITAR could create problems down the road”. Hearing before the Subcommittee on Science, Technology and Space of the Committee on Commerce, Science and Transportation, 98th Congress, 1st Session, (1984) at 24. Senate Report 98-656, supra note 228, at 18.

114 purposes of this sub-chapter”.(337)

However, the Department of Commerce also has some authority on exports of certain commodities intended for commercial space applications and which have a dual use (military and commercial), under the Department of Commerce Export Administration Regulations (EAR).(338) These regulations do not give a definition of “export”, thus leaving some doubt as to whether launch of a launch vehicle or payload would be considered an export by the DOC and subject to license. It seems that this should not be the case. The CSLA uses the expression “for the purpose of any law controlling exports” and this leads to the conclusion that the launch of a launch vehicle will not be considered an export either for DOS or for DOC regulations.(339) 3.1.5.- Liability and insurance issues The rules related to the licensing procedure had been completed and adjusted, but this was not the case for the provisions related to liability and insurance. The CSLA contained imprecise provisions which turned out to be detrimental to the private launch industry. Thus the Act was amended in 1988 with respect to the question of liability and insurance. i)

Liability and insurance under the Commercial Space Launch Act

Before 1984, and with the exception of SSI and Starstruck, launch vehicles were procured by the government and the associated liability insurance was part of such procurement.(340) Most aerospace companies in the market of launch services never had to bear the risks associated with the launch. They were government contractors and any liability arising out of a launch was indemnified by the Government. This situation changed dramatically with the advent of the CSLA. First of all, private companies would be on their own and not government contractors anymore. Second, these companies would use government launch facilities to operate some of their launches. This situation created a new scheme with respect to liability, risk allocation and insurance. The CSLA progressively took this new reality into account. a)

Provisions of the CSLA

As originally passed, the CSLA provided for two insurance requirements. The first (337)

(338) (339)

(340)

22 CFR Chapter 1, Sub-chapter M. Part 120.10. It is important to note that we are dealing here only with the launch regulations. If the launch vehicle or the payload were to be transported to a foreign country to be launched, a license would be required, as it would be an export. Indeed these two articles would fall under the export regulations. 22 CFR Chapter 1, Sub-chapter M, Munition List, and Part 120.10. 15 CFR 770-799 G.H. Reynolds & R.P. Merges, Outer Space, Problems of Law and Policy, supra note 24, at 245 On export controls see also references in supra notes 4, 181 and 184. “Almost invariably, the government contractor was obliged to procure liability insurance for which it was reimbursed for the portion allocable to the contract of the reasonable cost of insurance. Moreover, the Government agreed to compensate the contractor for liability to third parties for personal injury or damage to property for those risks not covered by liability insurance”. P.D. Nesgos, “Managing Liability Risks in US Commercial Space Transportation”, paper presented at Assicurazioni Generali, 5th International Conference on Space Insurance, Rome March 1987.

115

requirement was related to the use of government launch facilities by private enterprise. The following was included in the provisions related to the use of Government property: “The Secretary may establish requirements for liability insurance, hold harmless agreements, proof of financial responsibility, and other assurances as may be needed to protect the United States and its agencies and personnel from liability, loss or injury as a result of a launch or operation of a launch site involving Government facilities or personnel” .(341)

The second requirement was related to another concern of the United States which was the possibility that its international liability is involved and the need to fulfill its international obligations. Ifthe United States is answerable to another State for damages, it would, by action in recourse, ask the amount back from the company which caused the damage. Thus the United States has an interest to ensure that the company obtained an appropriate insurance coverage. The CSLA thus provided that “Each person who launches a launch vehicle or operates a launch site under a license issued or transferred under this Act shall have in effect liability insurance at least in such amount as is considered by the Secretary to be necessary for such launch or operation, considering the international obligations of the United States. The Secretary shall prescribe such amount after consultation with the Attorney General and other appropriate agencies.”(342)

b)

AST proposed rules and licensing regulations

On May 7, 1985, the AST issued proposed rules to carry out the provisions of the Act. These rules recalled the two reasons why insurance is needed: to indemnify the US in case of damage caused to Government launch facilities used by the launch operator, and the provisions of Section 16 of the CSLA. For this latter case, the AST interpreted the provisions ofthe Act in an extensive manner. Section 16 seemed to deal with liability of the US at international level. The AST considered that “Domestically, the Government may also be held liable to private parties for damage caused by the launching of private space vehicles and payloads from the national ranges [...] because of the operational role that the Government plays in these launches. For these reasons, DOT believes that the insurance required under Section 16 should also cover these claims”.(343) Consequently, the launch operator would have to obtain insurance covering: the indemnification of the US Government for damage caused to the launch facilities; the indemnification of the US Government in case it has been held liable to private parties as operator of the launch facilities; the indemnification of the US Government in case it has been held liable to third States for damage caused to them by the space activities of its nationals. In this same comment, the AST added that requiring third-party liability insurance has other advantages: it protects the public because there is assurance that funds are available to compensate the damage and because it encourages industry to operate safely with a view to obtaining lower insurance costs by reducing risk through safer operations; it makes the public feel that their interests are protected, thus avoiding serious (341) (342) (343)

CSLA Section 15 c) (original numbering). 49 USC 2624. CSLA Section 16 (original numbering). 49 USC 2615. 50 Fed Reg 19280.

116 public opposition to this industry.(344) The Act and regulations deal only with liability that might involve US Government. Liability for damage caused to parties participating in launch operations or to their employees, agents and contractors is not dealt with as it is a matter of agreement among the companies involved.(345) Under the proposed rules, the commercial launch services companies, operators of payloads and operators of commercial launch sites, were required to demonstrate financial responsibility for third-party liability to ensure that the US international obligations are properly met and to protect the public in case damage is done. No license can be issued without this financial responsibility ensured by the AST. The burden is on the launch services provider to demonstrate that he obtained the appropriate insurance. The AST proposed two forms of acceptable evidence of financial responsibility: commercial insurance that would name the US (as well as the purchaser of the policy) as an insured party; purchase of a commercial surety bond naming the US (as well as the purchaser of the bond) as a bonded party.(346) Under the CSLA, the Secretary is to determine the level of financial responsibility.(347) In the proposed rules, the AST suggested two means to determine this level of financial responsibility: the AST could require the purchase of the maximum amount of third-party liability insurance or bond available at reasonable rates. This may lead to the consequence of depriving small companies of their cash because of the high insurance premiums they would have to pay; the AST could “do an analysis of the risk posed by a launch and set an appropriate financial responsibility level based on that analysis”(348). The difficulty with that method is that in space transportation there is often no prior launch experience to determine the level of risk. Finally, the proposed rule did not determine what would happen in case of a loss that exceeds the amount of insurance, and whether the Government would seek recovery of the additional amount from the party whose operations gave rise to the loss.

c)

Expendable launch vehicle commercialization agreement

This agreement was proposed by the Department of Defense. Before going further into the provisions of this agreement, particularly with respect to liability and insurance, it is necessary to analyze the provisions of the CSLA related to the use of government launch (344)

(345) (346)

(347) (348)

(1985) 50 Fed Reg 19280. “[...] the assured availability of funds to compensate for loss is a significant element of public acceptability” . 50 Fed Reg 19281. A bond is a guarantee by an insurance or bonding company that, if the insured is required by a court to pay for damages covered by the bond, the insurance or bonding company will pay up to the limits of the bond. With insurance, the contract calls for the insurer to pay most claims. With a bond, the insured pays the claim and the bonding company (the surety) stands ready to pay only in the event of a default by the principal (the insured). The choice of insurance or bond depends on a number of factors such as the level of premiums and the financial strength of the principal. (1985) 50 Fed Reg 19281. CSLA Section 15c) and Section 16. 49 USC 2614&2615. 50 Fed Reg 19281

117 facilities by private launch operators. The CSLA provides for the use of Government property in its section 70111. It directs the Secretary to facilitate the acquisition of excess Government launch property and launch services not otherwise needed for public use. It is under this provision that the three major ELVs companies (McDonnell Douglas, General Dynamics and Martin Marietta) were transferred the license to market commercially the vehicles they developed and manufactured under government contracts.(349) These provisions also allow the use of government launch facilities by private companies. At that time, no private launch sites were in operation. Moreover, the Air Force and NASA had a long and valuable experience of the launch site operations. Consequently, private companies expressed their interest in using government launch facilities. The acquisition of government property by private companies is subject to reimbursement of the Government. The pricing policy set forth in the CSLA is: in case of sale or transaction in lieu of sale: the amount to be paid by the company is determined by the appropriate agency, in consultation with the Secretary, and is equal to the fair market value. The Senate Committee on Commerce, Science and Transportation defined the “fair market value” as meaning “The value of the item(s) on the open market subject to two constraints: 1) all sales shouldguarantee a reasonable return to the Federal Government, and 2) the Federal Government should provide no direct subsidies”.(350) in case of other type of acquisition of launch property or launch services, the price is determined by the appropriate agency, in consultation with the Secretary, in an amount equal to the direct costs incurred by the US. The Committee explained that “In case of launch property, direct costs include any specific wear and tear or damage to the launch property of the launch site; whereas in the case of launch services, direct costs are the salaries of US civilian and contractor personnel applied in a manner consistent with Department of Defense Directive No 3200.11, issued April 18, 1984- ‘Major Range and Test Facility Base’”.(351) The Senate Committee emphasized that “Nothing in this subsection is meant to affect in any way the existing authority of any Federal agency to establish and/or collect reimbursements for the lease, sale, transaction in lieu of sale, or otherwise, of launch property or launch services of the United States”.(352)

This is how, exercising its own authority, the Department of Defense issued the Department of Defense Air Force Model Expendable Launch Vehicle Commercialization Agreement that provided for the conditions under which private companies could use the Air Force launch facilities.(353) The agreement provided that all government property is (349)

J. Steptoe, “Regulation of Private Commercial Space Transportation by the United States Department of Transportation”, supra note 223, at 244.

(350)

Senate Report 98-656, supra note 228, at 15.

(351)

Senate Report 98-656, supra note 228, at 15.

(352)

Senate Report 98-656, supra note 228, at 15

(353)

For details about the Model Launch Agreement, R.L. Kissick, “Commercial Space Launch Contracts: Disputes and Remedies” (1989) 4 Journal of Law and Technology, 31 P.D.Nesgos, “Managing Liability Risks in US Commercial Space Transportation”, supra note 340 K.G. Yelton, “Evolution, Organization and Implementation ofthe Commercial Space Launch Act and (continued...)

118 to be furnished “as is” and the US Government did not make any warranty whatsoever concerning its property. The agreement also contained practical provisions regarding the use of the ranges, e.g safety and accident prevention, furnishing of launch data and disclosure of information, disputes, financial arrangements, termination of the agreement, status of the personnel. In attachments, the agreement detailed the goods and services to be furnished by the Government. The agreement also provided that the Government reserves the right to preempt a launch from its facilities, and should not be held liable for any consequential costs. Apart from those provisions, the Agreement provided for liability issues relating to the use of Government facilities by private launch operators. The User (the launch operator using the Government facilities) was required to assume responsibility for all damage to its own property. With respect to Government property, and regardless of fault, the Agreement provided that the user assumes responsibility for the property of the US government and its contractors or subcontractors to the extent of the maximum available insurance worldwide at reasonable cost for any specific launch. One exception was provided to that rule: the User would not be held responsible for damage caused by the intentional misconduct of the Government, it contractors or subcontractors. The User would also assume third-party liability that might result from a launch and indemnify the Government, its contractors and subcontractors, and the agents, servants, employees and military personnel of each of them, from any third party liability. The two latter types of liability were borne by the User regardless of fault and up to the level of maximum available insurance. The latter type of liability includes third-party claims relating to the production, marketing, use of government facilities and services, environmental incidents and legal violations. The agreement defined the maximum available insurance as the amount of insurance available in the world market at a reasonable premium and on terms considered commercially reasonable for the risks involved to fund the User’s responsibilities under the agreement. This amount was to be determined by the US Government, with no opportunity to appeal that decision. Above the maximum insurance, the Agreement provided that the User is responsible for paying any claims in excess of that amount, under US law (in particular the Federal Torts Claim Act) and the Government had the right to ask the User or any other party for damages in excess of the User’s insurance. NASA had also elaborated an agreement for the use of its launch facilities. This agreement was very similar to that of the Air Force Agreement.

ii)

The situation of private launch operators

As a result of the CSLA and the agreements entered into with NASA and the Air Force, the situation of private launch operators was a classical situation with respect to liability exposure. As far as their own property was concerned, they had to assume responsibility for any damage. They had to protect the Government from any damage that could occur to Government property and personnel. They also had to take insurance for damage caused to third-parties not involved in the launch. The provisions of the CSLA were rather vague and the Air Force and NASA agreements imposed far more conditions on the launch operators. The vagueness of the provisions of the CSLA gave the opportunity to those agencies to impose strict requirements on private (353)

(...continued) Amendments of 1988", supra note 169, at 132 B. Fought, “Legal Aspects of the Commercialization of Space Transportation Systems” (1989) 3:99 High Technology Law Journal, 99, at 116 ff

119 launch operators.(354) The insurance to be taken by the launch provider in all those cases was to be in an amount limited by the Secretary ofTransportation, but above that amount, the company was still liable under the US applicable law(353). In other words, under the CSLA private launch operators were subject to unlimited liability.

a)

The concerns of the space launch industry

This situation created much concern in the launch industry. The industry was certainly acknowledging the need for some protection provided by the launch operator to cover damage caused to Government property and third-parties, however, the modalities and amount of this protection was the subject of discussion. These concerns are to be understood in the context of that time and were as follows.(356) Unlimited liability The major concern was the exposure ofthe companies to unlimited liability, whether they were large size companies or starting up business. As we have already mentioned in the early part ofthis book, the risks in space activities are high, not necessarily in probability of occurrence but in consequences. For example, in April 1986, a rocket exploded 700 feet above the launch pad and after launch at an Air Force base. Significant damage was made to the launch facilities. The cost of the repairs was in the order of 58 million dollars and the duration of the repair work was about six months.(357) This example shows the high risks to which private operators could be exposed. This exposure was referred to by private launch operators as “betting the company”.(358) Indeed, such exposure could easily cause private launch operators to go bankrupt or, in the case oflarge size companies, incur excessive losses. Even established launch companies were threatening to step out of the launch business.(359) Maximum Probable Loss Under the CSLA, companies had to be prepared to bear liability for maximum loss. They were liable without limit even in the case of catastrophic damage. The risk of such a (354)

“While the Secretary of Transportation was required by the Commercial Space Launch Act to take actions to facilitate and encourage the sale or lease by the private sector of excess launch property, the Government agencies having responsibility over launch sites imposed detailed insurance requirements and broad obligations to indemnify the Government and its contractors for losses arising from the conduct of launch operations”. P.D. Nesgos, “Recent Developments in Risk Allocation ofConcern to the US Commercial Launch Industry and the Insurance Community, paper presented at Assicurazioni Generali, 5th International Conference on Space Insurance, Rome, March 1989.

(355)

P.D. Nesgos, “International and Domestic Law Applicable to Commercial Launch Vehicle Transportation” (1984) 27 Colloquium, 98, at 102 ff.

(356)

P.D. Nesgos, “Satellite Launch Liability Risks, Products Available as New Industry Gets Off the Ground” (Oct 29, 1990), Business Insurance, 25, at 25.

(357)

In this case, the costs were borne by the Government because it was a Government launch. Senate Report Nb 100-593, (1988) USCA, 5525, at 5528.

(358)

Senate Report, supra note 357, at 49. Statement of J.F. Yardley, President of Mc Donnell Douglas Astronautics Company.

(359)

“This burden quite likely would force us to consider carefully the practicability of continuing in the commercial launch business”. Statement of the President of McDonnell Douglas. Senate Report, supra note 357.

120 catastrophic event is remote and, in practice, no third-party claim seems to have ever been paid under either a launch liability policy or manufacturer’s aerospace products liability policy.(360) Should such a damage occur, it could go far beyond the resources of the company concerned. Competitive disadvantage The industry stressed that this situation of unlimited liability and unlimited risk was preventing US companies from competing fully with their foreign competitors.(361) Foreign launch services offered much lower insurance costs.(362)

b)

State of the insurance market

Apart from the unlimited liability issue, another issue of concern was the coverage offered by the commercial insurance market. Two problems were mentioned by industry. First, the capacity of the insurance market could be insufficient to meet the need. Second, the premiums to be paid were extremely high. This situation was created by a number of important losses borne by the insurance industry(363) consecutive to a series of launch failures. It is worth quoting extensively the Senate Report to further explain the situation as it was at that point in time. “Although 1983 was a successful year for satellite launches, 1984 was not. The underwriters’ combined ratio went from 90 percent (meaning a 10 percent profit) at the beginning of 1984 to 180 percent (or an 80 percent loss) by June 1984. During a 1984 Shuttle launch, two satellites (Indonesia’s Palapa 2-B and Western Union’s Westar VI) were not placed into the correct orbits. Although they were later recovered during another shuttle mission and the underwriters reportedly netted about $30 million for the satellites (after recovery costs), they paid out a total of $ 182 million in claims. In June (360)

US Department of Commerce, Space Commerce, An Industry Assessment, May 1988; Senate Report, supra note 357. Although this dates back to 1988, it seems that this statement is still correct nowadays.

(361)

Senate Report, supra note 357, Statement of E.F. Kadar, President Conatec Inc, p.54: “At this time, Conatec is competing with foreign providers of research rocket launch services for the provision of launch services in support of several programs. These competitors have one major advantage over our proposed services - they can offer the customer total protection from any liability either at no cost or at very low cost to the customer. Conatec, however, under the current Government requirements for insurance, must obtain commercial insurance for these risks up to the amounts determined by AST to cover the “maximum probably loss” and may be liable for any damages in excess of those amounts. Since Conatec’s customer would almost certainly be held jointly and severally liable for such damages, our company is faced with two equally unpalatable alternatives - 1) we must purchase far more insurance than is necessary to cover the maximum probable loss in order to cover the “maximum possible loss ”, or 2) we, and our customer, must accept the chance that we may be held liable for damages far in excess of the amount of insurance purchased to cover the maximum probable loss. Under the first alternative, our launch service cost rises significantly and can easily make us noncompetitive with foreign launch providers. Under the second alternative, the customer must decide whether he wants to take the risk of a major damage award being levied against him in the event that there is a successful claim, a chance he does not have to take if he elects to launch with our foreign competitors. The competitive disadvantages of both alternatives are thus obvious”. On foreign competition see also, P.D. Nesgos, “Satellite Launch Liability Risks”, supra note 356.

(362)

The conditions under which liability issues are handled in the case ofAriane launches are analyzed later in this Chapter.

(363)

J.S. Greenberg & C. Gaelick, “Space Insurance, Comments from an Observer”, supra note 20.

121 a $ 102 million Intelsat V F-19 was lost during an Atlas Centaur launch. Insurance premiums for a shuttle launch rose from 5- 7 percent in 1983 to 15-2 0 percent of the value of the satellite in June 1984. Several underwriters, including a major London firm, Orion Insurance Company, dropped out of the space insurance business. In 1985, five more satellites suffered launch failures, costing insurers close to $370 million. The losses included: two Hughes satellites, each insured for $85 million, and two satellites destroyed during an Ariane launch failure, insured for a total of $168 million. A leading US underwriter, International Technology Underwriters (Intec), restricted its coverage and no longer would provide on-orbit insurance coverage. The amount of insurance available on the world market dropped to 60-70 million. In January 1986, the space shuttle Challenger exploded during launch killing all seven aboard. Although the shuttle was carrying an uninsured satellite (NASA’s TDRSS-2), the loss had a strong impact on the launch industry itself. The United States also suffered launch failures of a Titan and a Delta launch vehicle in April and May respectively. Also in May, an Ariane vehicle failed, destroying a satellite insured for $82 million, and Arianespace did not resume launches until September 1987. According to one source, after the shuttle and Ariane failures, ‘satellite underwriters lost total confidence in satellite launches...’ as the combined ratio reached 148 percent. According to Ford aerospace, the insurance industry’s combined ratio for 1977-1985 was 200 percent, or, more specifically, the insurers collected $450 million in premiums and paid out $900 million in claims. For 1984-85, the loss ratio was 330 percent. A former insurance executive commented that renewal of on-orbit satellite policies, whose rates had also risen, kept the space insurance industry alive. In January 1987, Business Insurance estimated that launch insurance capacity was $75100 million per launch. At the end of the year, its estimate was 120-150 million. However, even while insurance coverage became more difficult to find, a former underwriter commented, ‘In real terms, there is no capacity crisis. What we have is a crisis of confidence. There is capacity which exists that has not touched the space industry because it (the space industry) is too volatile and unpredictable’. Insurance premiums, which reached a high of 25-30 percent of the value of the satellite, have eased somewhat and are now reportedly at 20-28 percent. Premiums will likely stay high until the insurance companies regain much of their losses. Last year, many underwriters would not write coverage more than 90 days in advance. Currently, the Italian firm Assicurazioni Generali will write a policy 18 months in advance, but maintains the right to review and revise the policy if there is a change in launch vehicle or satellite status. The firm will also grant coverage 12 months in advance, ‘but the wording says that the client must inform us of a change in the risk’. At least one company, RCA, chose not to insure the launch of its communications satellite (Satcom K-2, in November 1985) rather than pay exorbitant rates, essentially self insuring the launch. Other companies have brought partial coverage and self insurance the remainder. Some insurance companies are encouraging self insurance in order to rebuild market confidence. These actions are typical of a “hard” market strategy”.(364) Consequently, not only the companies were exposed to unlimited liability, but also the insurance coverage of their risks was difficult to obtain.

c)

NASA’s practice

One of the arguments brought by industry was that the CSLA was making them unlimitedly liable while the practice of NASA, for years and as far as its commercial activities were concerned, was significantly different. NASA required the customer to obtain the maximum available third-party liability insurance at reasonable cost, with the Government as named insured to protect it at no cost against any claims that might arise out of the launch process. Then, under Section 308 of (364)

Senate Report, supra note 357.

122 the NASA Act, the Government assumed responsibility for third-party liability risks exceeding the limits of insurance commercially available. As far as Government property was concerned, NASA used to waive any right to claim against the party procuring the launch services. More exactly, NASA was requiring a system of cross-waivers of rights involving all parties to the launch.(365) Industry supported the establishment of such a scheme for their own activities.

d)

Comparison with the nuclear industry.

The situation of the private launch industry was that of a nascent industry exposed to a tremendously high amount of risk arising out of the ultra-hazardous nature of its activities. This situation was compared with that of the nuclear industry.(366) In this field, the Price Anderson Act of 1957(367) capped the public liability of nuclear reactors licenses and provided for indemnification by the Government up to that cap, to the extent private insurance capacity was unavailable. The Price-Anderson Act was later revised. The cap on liability was maintained but the level of private insurance protection was increased through retrospective premium assessments on the commercial licensees.(368) Those arguments were stressed by the private launch industry when asking for an adaptation of the rules set forth by the CSLA to the situation of a nascent industry. Those modifications were seen as necessary to maintain a viable and competitive launch industry in the US.(369)

iii)

The CSLA Amendments

The CSLA was amended in 1988 to respond to the situation described above.(370) The rationale of this amendment was described as follows: “It is intended to provide a mechanism in which the domestic launch activities can change from a public activity, which it has traditionally been, to a wholly private endeavor. This bill should create an environment where world insurance markets can grow and mature to meet the needs of a domestic launch industry. This bill will provide an adequate risk sharing arrangement between industry and Government to enable the emerging launch (365)

AIAA Position paper, US Commercial Space Transportation Risk Allocation andInsurance (1988) 16 Journal ofSpace Law, 110, at 111 and113 US Department ofCommerce, Space Commerce, An Industry Assessment, May 1988, at 121 Senate Report, supra note 357, at 5527.

(366)

Senate Report, supra note 357, at 65.

(367)

September 2,1957, Public Law 85-256, 71 Stat 576-77, as amended, 42 USC 2110.

(368)

AIAA Position Paper, US Commercial Space Transportation RiskAllocation and Insurance, supra note 365 For more developments on the situation in the nuclear industry and the Price Anderson Act, see: J.S. Greenberg, “Third Party Liability Insurance and Space Launches”, supra note 20 US Nuclear Regulatory Commission, The Price Anderson Act, The Third Decade, Report to Congress, December 1983 R.L. Rockett et al, Financial Protection Against Nuclear Hazards: Thirty Years Experience under the Price Anderson Act, Trustees of Columbia University in the City of New York, January 19, 1984.

(369)

“If we as a nation are to remain in the forefront of space endeavor and maintain our ability to compete in the world market, we must pull together to eliminate unnecessary impediments to establishment of a strong, domestic commercial launch industry. Only then can US industry compete effectively with international competitors that receive substantial subsidies from their Governments in providing liability protection for their customers at little or no costs”. Senate Report, supra note 357, at 48. Statement of J.F. Yardley, President, McDonnell Douglas.

(370)

Public Law 100-657, Nov 15, 1988. (1988) USCA 102 Stat 3900.

123 industry to compete on a more equal footing with foreign launch concerns. The domestic launch industry is of sufficient importance to the national economic and military security of this nation that this legislation is warranted if this industry is to have a credible chance of meeting foreign competition”.(371)

a)

Definitions

The CSLA Amendment added a definition to the Section 70102 of the CSLA, which is that of the “third-party”, defined as meaning: “a person except (A) the United States Government or the Government’s contractors or subcontractors involved in launch services; (B) a licensee or transferee under this Chapter (C) a licensee’s or transferee’s contractors, subcontractors, or customers involved in launch services; or (D) the customer’s contractors or subcontractors involved in launch services.”

The definition classifies as third-parties mainly people not directly associated with the commercial launch operations. However, the definition of “third-parties” is not clear as to whether it includes Government personnel directly associated with the commercial launch operations. Contractors or concessionaires present on the launch site, incidentally or unrelated to the launch itself, are also included in the definition of third-parties. The Senate Report stressed that “This definition will increase the possibility that comprehensive reciprocal waivers can be reached among all parties associated with the launch of a satellite. Such waivers were a standard element in space shuttle agreements”.(372)

b)

Acquisition of Government Property and Services

The CSLA was amended to clarify the role of the Secretary as far as assurances required from the licensee are concerned. The Secretary has to require assurances as may be necessary to protect the United States, its agencies and personnel from liability, death, bodily injury, or loss of or damage to property resulting from a launch or operation of a launch site involving Government facilities and personnel.(373) As we have noted previously, industry had expressed some concern about the requirements of NASA and the Air Force and there was some confusion about the sharing of authority relating to the use of Government facilities, between AST on one hand and NASA or the Air Force on the other. It seems that with this amendment, authority is clearly attributed to the Secretary of Transportation to determine the assurances to be required from launch companies.(374) In order to further protect the companies, section 70112 also provides that the Secretary may not relieve the Government of liability for loss or injury resulting from wilful misconduct of the United States or its agents. c)

Insurance Requirements

On that matter, the CSLA Amendments have brought important changes. The licensee must provide insurance or financial responsibility in the following conditions. These (371)

Senate Report, supra note 357, at 6.

(372)

Senate Report, supra note 357, at 5532.

(373)

CSLA, 49 USC, Section 70112 e).

(374)

P.D. Nesgos, “Recent Developments in Risk Allocation of Concern to the US Commercial Launch Industry and the Insurance Community”, supra note 354.

124 requirements must be met as a condition for receiving a license to conduct the concerned launch operations. Any insurance policy obtained in that view must protect, at no cost to the Government, the Government, executive agencies and personnel, contractors and subcontractors of the Government, contractors, subcontractors, and customers of the licensee or transferee, and contractors and subcontractors of the customer.(375) First, the licensee must obtain liability insurance or demonstrate financial responsibility in amounts to compensate for the maximum probable loss from claims by a third party for death, bodily injury, or property damage or loss resulting from an activity carried out under the license.(376) The amount of insurance required to protect against maximum probable loss will be determined by the Secretary, in consultation with the US Air Force and NASA.(377) The licensee will not be required to obtain insurance or financial protection in an amount exceeding $500 million.(378) The Secretary may limit this amount if he determines that the maximum liability insurance available on the world market at a reasonable cost is less than $500 million.(379) This alternative was included to take into account the volatility of the insurance market and the potential unavailability of the $500 million coverage. Secondly, the licensee must obtain liability insurance or demonstrate financial responsibility in amounts to compensate for the maximum probable loss from claims by the United States Government against a person for damage or loss to Government property resulting from an activity carried out under the license.(380) This insurance will protect the same persons as above at no cost to the Government. The amount of insurance required in this case is capped, at $ 100 million.(381) The Secretary also has the authority to limit that amount in function of the amount of coverage available on the world market as mentioned above. This insurance is required to protect the property of the United States, but no mention is made of the definition of the expression “property of the United States”. One (375)

CSLA, supra note 222, Section 70112 a) 4).

(376)

CSLA, supra note 222, Section 70112 a) 1).

(377)

CSLA, supra note 222, Section 70112 a) 2).

(378)

“The Committee received testimony which indicated that liability insurance may be available in amounts up to $500 million. NASA required $500 million in liability insurance for payloads carried by the space shuttle, and a total of $750 million when multiple payloads were launched. Liability insurance is routinely available to the commercial airline industry in amounts of $500 million, and there has never been an incident which resulted in claims exceeding $500 million”, Senate Report, supra note 357, at 5534. CSLA, supra note 222, Section 70112 a) 3).

(379)

CSLA, supra note 222, Section 70112 a) 3) B).

(380)

CSLA, supra note 222, Section 70112 a) 1) B)

(381)

“The initial limitations in the legislation are based upon the best estimates that the Committee received of probable damage to Government property. The largest rocket in the commercial fleet is the Titan III. The worst accident in the history of that vehicle damaged two launch pads and disabled them for 9 months. Losses totaled $60 million including environmental impacts and the cost of clean-up operations. An initial limitation of $100 million is appropriate in light of this and other factors such as the strict control on launch operations that will be maintained by the US Air Force. The Committee received testimony from the US Air Force that damage to Government property could reach $300 million, despite their best efforts to minimize risk to Government assets. The Committee also received testimony that property insurance to protect Government launch property was not likely to be available in amounts in excess of $120 million because this type of insurance has never before been required as a condition of launch. The Committee believes that $100 million would protect the Government from the most probable losses that might occur in launch operations, and is an amount that the world insurance markets can provide at reasonable rates”, Senate Report, supra note 357, at 5532. CSLA, supra note 222, Section 70112, a) 2) 3) A).

125 could wonder whether this include property ofUS contractors used by the Government on the site, for example. Sometimes property insurance might not be available by reason of policy exclusion and in that case, the company concerned simply cannot obtain coverage for a certain type of risk. If the Secretary determines that these exclusions are usual for the type of insurance involved, he may waive, after consultation with NASA and the US Air Force, on behalf of the Government, the right to recover any damages for loss of or damage to property of the United States.(382) The maximum amounts of insurance or financial responsibility referred to above, are to be reviewed on a regular basis. A report shall be submitted to Congress about these reviews. Any adjustments made in these conditions will not become effective until the expiration of a 30 day period during which Congress can review and comment upon the proposed adjustments.(383) It is to be noted that the absence of definition of the “maximum probable loss” and the vagueness of the expression lead to full reliance on the AST for the determination of that amount. This could be at the advantage or the disadvantage of the companies. Very important authority is given to AST also with respect to the determination of insurance amounts required(384). Indeed, no provision allows licensees to challenge the decision of the AST determining the amount of insurance required.(385) The AST also has the discretion to let a launch take place without insurance, in case of absence of available coverage on the world insurance markets.(386) However, the Senate Report stresses a number of times that, especially as far as Government property is concerned, in case the amount of insurance coverage available to cover the maximum probability risk standard (382)

CSLA, supra note 222, Section 70112 b) 2).

(383)

CSLA, supra note 222, Section 70112 d) 2).

(384)

The Insurance Determination Requirements can be found online at (accessed 01/2001). This documents indicates, for each type oflauncher, launch site, license and by year, the insurance requirements ($ amounts) which have been placed on the licensees for US Government Property and for Third Party.

(385)

CSLA, supra note 222, Section 70112 c)

(386)

“The Committee recognizes that the world insurance markets may be unable to provide coverage to protect fully against the maximum probable loss. This may occur as a result of constrictions in world liability insurance markets due to the volume of claims being paid or to other factors not related to the space launch business, such as normal business cycles in the insurance industry. The Committee received reports from CRS which stated that losses in the insurance industry totaled more than $450 million in the years between 1977 and 1985. The losses, which resulted from multiple claims, increased premiums to as high as 28 to 30 percent the value of the satellite being insured and restricted total insurance availability. The Committee expects that there will be similar occurrences in the commercial space launch business and that total insurance available for any one launch may be inadequate to meet the requirements of this legislation. For example, a Titan III launch vehicles carrying two communications satellites could easily require $250 million in property insurance for the payloads which must be insured. Add to that $100 million in Government property insurance and up to $500 million in liability insurance, as required by the proposed legislation, and a Titan III launch could require $850 million insurance that must be obtained to protect against the risks that are posed by one single event - the launch of that vehicle. The aggregate risk may overwhelm the capacity of the market-place at a particular time, or the ability of a launch operator to pay the premiums that may be charged for this expansive coverage. Because of the potential for market failure in this segment of the insurance industry, the Committee grants the Secretary the discretion to permit a launch in the absence of insurance coverage to protect against the maximum probable loss”. Senate Report, supra note 357, at 9-10.

126 is insufficient, a part of financial responsibility could be required from the licensee to cover the difference between available insurance and required amount. Moreover, the AST is asked by the Senate to be very cautious in granting licenses when the insurance and financial responsibility requirements are not fully met.(387)

d)

Reciprocal Waivers of Claims

The system of waivers of claims (also often called “cross waivers of liability”) is a technique that has been used by NASA for years in its commercial contracts. It is also used by other launch providers in the world and has become a very standard contractual technique in this field of activity. Waivers of claims required from the licensee Section 70112 b) of the CSLA provides that the licensee is required to enter into reciprocal waivers of claims with its contractors, subcontractors and customers and the contractors, subcontractors of such customers, involved in the launches. The purpose of such waivers is that each party to the waivers agrees to be responsible for any property damage or loss it sustains or for any personal injury(388) to, death of, or property damage or loss sustained by its own employees resulting from activities carried out under the license. The rationale of these provisions is “(1) to limit the total universe of claims that might arise as a result of a launch; and (2) to eliminate the necessity for all of these parties to obtain property and casualty insurance to protect against these claims [...]. This provision will maximize the coverage of available insurance resources, avoiding the costs of duplicate litigation between the parties” .(389) Section 70112 b) uses the language “A license issued or transferred under this chapter shall contain a provision requiring the licensee or transferee to make a reciprocal waivers of claims...” This provision shows that the waivers requirements are an essential and mandatory condition in each license. The opinion was raised that

(387)

“The Committee stresses that the permission to launch where the insurance and financial responsibility is less than the maximum probable loss must be fully justified by the prevailing conditions in the world insurance market; by proof that the operator involved has obtained all of the insurance possible for that particular launch and has offered the maximum amount of financial responsibility within the bounds of sound business practices. The standards for granting a license, where the maximum probably property loss requirement has not been met, must be more stringent than those relating to the liability requirements. There have been losses at Government launch sites, losses which caused millions of dollars in damages. Unless the maximum probable loss is fully compensated by insurance, the Government will be responsible for the added costs of repair and these funds will have to be obtained from existing programs within the US Air Force or from additional appropriations. The Committee expects DOT to be circumspect about granting license in the absence of the statutory property insurance requirements. The legislation requires the DOT to report to the Congress annually regarding all licenses issues and the insurance requirements associated with those licenses. DOTshould be on notice that the Committee will be monitoring all actions taken in this area”. Senate Report, supra note 357, at 5537.

(388)

It seems that the term “personal injury” is intended to mean “bodily injury”. P.D. Nesgos, “Recent Developments in Risk Allocation of Concern to the US Commercial Launch Industry and the Insurance Community”, supra note 354, at 16.

(389)

Senate report, supra note 357, at 5538.

127 “One unfortunate effect of the language contained in Section 16a)1)C)(390) which requires each party to agree to be responsible for any property damage it sustains is that, read literally, it would require the licensee’s customer to assume loss of its payload and would preclude the licensee from offering any form of launch risk guarantee - certainly a situation that would place US commercial launch companies at a competitive disadvantage with their foreign counterparts. [...] Provision should have been made in the legislation to the effect that any claims between any direct contracting parties would (391) not be affected”. However, the Senate emphasized that “The required waivers are not intended to prevent or encumber enforcement of the private entities’ contractual rights and obligations”.(392) Waivers of claims required from the Government The system of waivers of claims can work only if all participants to a launch are part of the network of cross-waivers. As we have explained, the licensee must ensure that the waivers are entered into all along the chain of its contractors and subcontractors. The licensee is one participant to the launch operations. The US, its agencies, contractors and subcontractors must also enter the cross waivers system to give it maximal efficiency. The Secretary of Transportation is required by the CSLA Amendments to enter, on their behalf, into reciprocal waiver of claims with the licensee or transferee, its contractors, subcontractors and customers, and the contractors and subcontractors of such customers, involved in launch services.(393) The waivers have the same purpose as those entered into by the licensee himself, namely that each party to the waivers agrees to be responsible for any property damage or loss it sustains or for any personal injury to, death of, or property damage or loss sustained by its own employees resulting from activities carried out under the license. There are three special cases with respect to Government’s waivers. Section 70112 b)2) provides that “The waiver applies only to the extent that claims are more than the amount of insurance or demonstration of financial responsibility required under subsection a)1)B) of this section” .(394) There is no Government obligation to waive claims when it is the beneficiary of the insurance, but if the damage exceeds the amount of insurance provided by the licensee, the Government has an obligation under these provisions to waive its claims. Government employees. Nothing is said about Government employees in the amendments to the CSLA, but the Senate Report gives a clarification on this matter. Under Section 70102 of the CSLA, government employees seem to be considered as “third-parties” and can benefit from the $500 million insurance required from the licensee under Section 70112 a)3)A) of the CSLA. The Senate considered that Government employees should keep their right of claim above this $500 million limit. “The Secretary is not permitted to waive any claims on behalf of Government

(390)

Former numbering. The new numbering is Section 70112 b) 1).

(391)

P.D. Nesgos,“Recent Developments in Risk Allocation of Concern to the US Commercial Launch Industry and the Insurance Community”, supra note 354, at 16 and 29.

(392)

Senate Report; supra note 357, at 5538.

(393)

CSLA, supra note 222, Section 70112 b) 2).

(394)

Which is the amount of $100 million we have referred to above.

128 employees, whose rights will not be affected” .(395) Thus, there is a difference in the text of the amended Act, between Government property and Government personnel. In case of damage to the former, the Government shall waive claims above the insurance limit. In case of damage to the latter, the Government cannot waive claims on behalf of its employees.(396) In the case of a policy exclusion for a certain type of risk, no insurance can be obtained by the licensee. Section 70112 b) 2) provides that “...the Secretary may waive, for the Government and a department, agency, and instrumentality of the Government, the right to recover damages for damage or loss to Government property to the extent insurance is not available because of a policy exclusion the Secretary of Transportation decides is usual for the type of insurance involved” . The Senate called the attention of the Secretary on the adequate use of this provision, and on the special requirement placed on the Secretary to ensure that this is not abused.(397)

e)

Government indemnification

As we have explained so far, licensees are required to provide a maximum amount of insurance to cover damage to third-parties and Government property. The major provision of the Amendments to the CSLA is found in the handling of damages beyond these coverages. Section 70113 provides for Government indemnification(398) under the following conditions: This indemnification concerns third-party claims only. It covers damage resulting from activities carried out under the license. The type of damage covered are death, bodily injury, or loss of or damage to property resulting from activities carried out under the license. It is worth noting that the expression “bodily injury” is used. Consequently, one may conclude that damage which could be personal but not bodily (e.g. moral damage, pain and suffering) would not be covered by the indemnification. It is the interest of the licensee to make the scope of the license as broad as possible to include the maximum of its activities in relation to the launch, since he will be liable without any limitation for damage resulting from activities not included in the scope of the license. The indemnification also covers the expense of litigation or settlement as long as they are reasonable. Government indemnification is provided on top of the maximum insurance coverage. It is only in case claims are in excess of this amount that Government indemnification is available. Section 70113 a) 2) also provides that in case there is no insurance provided because ofpolicy exclusion, Government indemnification (395)

Senate Report, supra note 357, at 5538.

(396)

See further also the discussion on the new Final Rule, which has brought some modifications and clarifications.

(397)

(398)

“The Committee stresses that this authority is discretionary and expects the Secretary to ensure that the exclusions are in fact ‘usual’ for the type of insurance involved. This provision should not be an inducement for commercial insurers to begin restricting the scope of coverage offered in launch insurance contracts”. Senate Report, supra note 357, at 5539. To indemnify is defined in Black’s Law Dictionary, supra note 18, page 769 as follows: “To restore the victim of a loss, in whole or in part, by payment, repair, or replacement. To save harmless; to secure against loss or damage; to give security for the reimbursement of a person in case of an anticipated loss falling upon him. To make good; to compensate; to make reimbursement to one of a loss already incurred by him [...] ”.

129 exists for the whole claim without regard to the limitation of subparagraph 1). Government indemnification is capped at $ 1,5 billion. This amount is the maximum for each launch. It is important to stress that the CSLA makes it clear that the Government will pay successful claims only. As the Senate Report clarified, the system functions as follows: “ The initial successful claims will be satisfied by the insurance that each launch operator is required to maintain. To the extent that claims against the licensee or other parties subject to this legislation exceed the total liability insurance and self-insurance required by the license, the Government will provide the payments to satisfy the claims. The Government’s responsibility in this area ceases once the aggregate of the successful claims in any one incident exceeds the combination of the total insurance and selfinsurance required and $1,500 million. At this point, the Government would no longer be responsible for payment and all further relief will be the responsibility of private entities”.(399) The past experience in the area ofexpendable launch vehicle services, leads one to believe that such a tremendous amount of damages is a remote risk. All of the above provisions concerning Government indemnification do not apply when damage has been caused by the wilful misconduct of the licensee.(400) This is in fact a reminder of a rule generally applied also in domestic law of liability.(401)

iv)

Final Rule Concerning Financial Responsibility Requirements for Licensed Launch Activities

A Final Rule was issued by the AST to establish procedures for demonstrating compliance with the requirements of the CSLA as presented above, and for implementing risk allocation provisions of the CSLA.(402) This final rule became effective on October 26, 1998. It added a new Part 440 to the 14 CFR regulations. This rule-making follows a long period of preparation of over two years(403) during which extensive consultations took place with the launch and insurance industries, as documented in the introduction to the Federal Register publication of this Final Rule. The AST indicated in this rule-making that it considers these rules to reflect a longstanding practice. It seems to stem from the comments made to the proposed rule-making that, in fact, this final rule modifies the current licensing practice. The efforts of the AST appear to have been focused towards reinforcement of the Government’s limited acceptance of risk under the CSLA. The most important point in this Final Rule is the provision concerning employees. We have indicated in the course of our developments that the inclusion or exclusion of employees of the parties to a launch in the definition of third parties was unclear. In this Final Rule, the AST has taken a clear position on this matter. The AST concludes that although all employees ofthe entities involved in licensed launch activities meet the statutory definition of the term “third-party”, the statutorily mandated liability policy is not intended to respond to the Private Party Launch Participants (399) (400)

Senate Report, supra note 357, at 5541. CSLA, supra note 222, Section 70113 a) 2).

(401)

We will return to these aspects in Chapter 4.

(402)

The full text of the final rule, together with the associated explanations and comments can be found online at (accessed: 01/2001).

(403)

The notice of proposed rule-making was initially issued on July 25, 1996. (1996) 61 Federal Register 38992.

130 (PPLP)(404) employee claims. Under the CSLA, PPLPs are responsible for covering their employees’ claims separately from the launch liability coverage, and each PPLP has to indemnify and hold the other launch participants harmless in the event of claims by one’s own employees for injury, property damage or loss. Insofar as Government Launch Participants (GLP)(405) employees are concerned, because of the cost involved for the Government of assuming additional risks, and the institutional difficulties linked with obtaining appropriations for covering financial responsibility, the Government does not accept the additional financial responsibility of indemnifying other launch participants in the event of GLP employee claims within the limits ofthe liability policy. GLP employee claims against other launch participants must be covered by the licensee’s launch liability policy, together with other third-party claims. In the opinion of the AST, “By removing from the statutorily-required liability coverage those claims that have the greatest probability of occurrence, that is, PPLP claims for property damage or loss, along with the attendant risks and costs that would accompany inter-party litigation in the event of such claims, the universe of risks covered by statutory-based insurance is significantly reduced. In this manner, the launch liability insurance market is able to cover all launch participants’ potential liability to uninvolved persons and claims to GLP employees. The agency understands that insurance satisfying CSLA-based requirements is available at reasonable cost under the current market conditions. ”(406) Although the legislative history would tend to sustain the inclusion of government employees in the definition of third parties, as we have pointed out earlier, there was lack of clarity on this subject as evidenced by the various comments cited by the introduction to the Final Rule. Mainly two types of views were expressed. On the one hand, some held that employees of all launch participants should be considered third parties as the waivers of liability could not be flowed down to them. On the other hand, certain commentators held that the whole purpose ofthe cross waivers was that each launch participant remained responsible for damage sustained on his side, including by his employees and allowing employees to initiate claims against other launch participants defeats the purpose of the whole reciprocal waivers regime. With the inclusion of GLPs employees in the definition of third parties, the licensee has to ensure that his insurance policy covers claims brought by them. The determination of the maximum probable loss by the AST also includes in the calculation the probable loss to GLP employees. The GLPs employees losses will be the responsibility of the Government only where they are not covered by the required liability insurance either because of accepted exclusion, or, due to the fact that the policy limits have been exhausted. As far as PPLPs employees are concerned, they may be included by the licensee in his liability insurance but not as third parties. The insurance required by the AST will not reflect this factor. It is an additional insurance for the PPLP. Consequently, in case the insurance would be exhausted, claims ofemployees ofthe PPLPs will be the responsibility of their employer and not eligible for Government payment under section 70113 of the CSLA insofar as they are not third party claims.

(404)

Private Party Launch Participants is a term referred to in the detailed comments in the Final Rule, which includes the licensee, its customer, and the contractors and subcontractors of each involved in launch services.

(405)

Government Launch Participants include the United States and its agencies, and their contractors and subcontractors involved in launch activities.

(406)

See comments to the Final Rule, supra note 402.

131 The Final Rule provides for a more detailed list of definitions,(407) in particular those of bodily injury, contractors and subcontractors, government personnel, maximum probable loss and, of course, third parties. The definition of bodily injury, for which our previous developments pointed out lack of clarity, is as follows: “Bodily injury means physical injury, sickness, disease, disability, shock, mental anguish, or mental injury sustained by any person, including death”. In order to implement the duty of the Secretary to make maximum probable loss determinations under the CSLA, the Final Rule also clarifies the procedure for this determination(408) and the list of information required from the prospective licensee in order to obtain this determination.(409) Insofar as insurance is concerned, the Final Rule for the most part repeats the CSLA for the insurance requirements as such. Details are added as to the duration of the coverage.(410) The insurance coverage required shall start at the commencement of the licensed launch activities and remain in full force and effect 1) until completion of licensed launch activities at the launch site; and 2) for orbital launches, until the later of i) thirty days following payload separation, or attempted payload separation in the event of a payload separation anomaly; or ii) thirty days from ignition of the launch vehicle. 3) for suborbital launches, until the later of i) motor impact and payload recovery; or ii) the AST determination that risk to third parties and Government property as a result of licensed launch activities is sufficiently small that financial responsibility is no longer necessary, as determined by the Office through the risk analysis conducted before the launch to determine maximum probable loss and specified in a license order. The Rule also provides for the list of standard conditions which the licensee has to ensure in his insurance policies.(411) These conditions are standard in the launch industry. The new rule also specifies in which form the licensee must make the proof of his compliance with the allocation of risk requirements of the CSLA and 14 CFR Part 440.(412) He has to: submit the three party reciprocal waiver of claims agreement required under section 440.17. The model for such agreement is provided in Appendix B to 14 CFR Part 440.(413) It is an agreement entered into between the US Government, the licensee and the licensee’s customer. provide evidence of insurance (or financial responsibility other than insurance) (certification by the licensee, as well as insurance certificate) and explanation on the exclusions with the reason why the concerned risks cannot be insured. Finally, the Rule provides for more details with respect to the payment by the US of the (107)

14 CFR, supra note 237, Section 440.3

(408)

14 CFR, supra note 237, Section 440.7

(409)

14 CFR, supra note 237, Appendix A to part 440.

(410)

14 CFR, supra note 237, Section 440.11

(411)

14 CFR, supra note 237, Section 440.13

(412)

14 CFR , supra note 237, Section 440.15

(413)

This agreement can be found in Chapter 6, as it has been incorporated into our proposals on this topic.

132 excess third-party liability claims. It is worth noting that during the period where the licensee’s insurance is in force, the insurance will pay first for any third party claims. Then the US Government will pay up to $ 1,5 billion. The rule has brought an important clarification related to the time frame ofthe insurance policy. This is confirmed in Section 440.19 d) which provides that upon the expiration of the policy period prescribed in accordance with Section 440.11 a), the US shall provide for payment of claims that are payable under 49 USC 70113 from the first dollar of loss up to $ 1,5 billion. This Final Rule has clarified a significant number ofissues which were debated so far with respect to the liability provision of the CSLA. It certainly increases the security of the operators by stating with better accuracy the rules applicable in terms of allocation ofrisks and related insurances.

v)

Final Rule Effective 21 June 1999 for Codification of 14 CFR

The AST has made a further effort to clarify the applicable regulations by initiating a process of codification into the 14 CFR of the current licensing practices concerning launches operated from Federal ranges, through a Proposed Rule issued on March 19, 1997. (414) This has now been released as a Final Rule effective June 21, 1999.(415) The following changes and clarifications are brought about by this rule. The Final Rule has clarified the definition of “launch” as implemented in the regulations and detailed the rules applied by the AST in determining the activities which are covered by a license. The provisions ofthe regulations referred to so far indicate that the insurance policy, and the Government indemnification in case of damage, start at the point where the license starts and terminate at the point where the license ends. Therefore, the determination of the exact coverage ofthe license is ofutmost importance to the licensee. Prior to the Final Rule, the AST usually applied the “gate to gate” concept, meaning that the license covered all activities of the licensee in the perimeter of the launch range. However, the industrial practice has been changing, and certain licensees extend considerably the activities performed on the launch range to cover activities not only related to the launch itself but also to manufacturing and integration of the launcher. In the new Final Rule, the AST introduces the “vehicle at the gate” concept,(416) thus defining the launch as (414)

(1997) 62 Federal Register 13215.

(415)

Online: (accessed 01/2001).

(416)

The rationale for the choice of this concept was summarized as follows by the AST in its introduction to the Final Rule (see Final Rule, supra note 415): “The FAA considered three possible options in defining ‘launch’ for the purposes of developing proposed regulations. The FAA considered codifying its ‘gate to gate’ definition but was concerned that ‘gate to gate’ created a false impression that indemnification would be available for all commercial activities taking place within the confines of a federal range. The FAA also weighed the most narrow approach, which would employ the ordinary definition of ‘launch’ as only those flight activities beginning at the ‘T minus zero (T-0)’, or intentional first stage ignition; but the FAA initially determined in its NPRM that this approach failed to provide regulatory oversight of certain hazardous activities and that concerns regarding international competition weighed against this formulation. In light of the 1998 change to the Act, the FAA must reject this narrow definition as inconsistent with the new law. A less expansive approach than ‘gate to gate’, one within the scope of the FAA’s mandate, will include within a launch license those activities that are part of a launch as contemplated by the new (continued...)

133

follows: “ Launch means to place or try to place a launch vehicle or reentry vehicle and any payload from Earth in a suborbital trajectory, in Earth orbit in outer space, or otherwise in outer space, and includes activities involved in the preparation of a launch vehicle for flight, when those activities take place at a launch site in the United States. The term launch includes the flight of a launch vehicle and pre-flight ground operations beginning with the arrival of a launch vehicle or payload at a US launch site. Flight ends after the licensee’s last exercise of control over its launch vehicle. ”

The AST has, therefore, reduced the coverage of the license to that specific period, which is also the one during which are concentrated the hazardous operations involved in the launch.(417)

As far as payloads are concerned, the FAA clarified in the introduction to the Final Rule that “The FAA does not consider payload processing absent launch vehicle integration to constitute part of the launch or part of the licensee’s licensed activities. ”(418)

It is clear that the definition of “launch” is rather restrictive and can only be related to activities contributing to the launch proper which would mean, forpayloads, integration into the launcher and immediate preparation for integration. As far as termination ofthe launch is concerned, FAA has clarified in its introduction to the Final Rule, its understanding ofthe termination ofthe launch: “The FAA notes that the end of launch may be expressed both in terms of flight activity and ground operations. For purposes of flight, the FAA will continue to define the end of launch as the point after payload separation when the last action occurs over which the licensee has direct or indirect control over the launch vehicle. For a liquid fueled stage, that point may be when any remaining fuel is emptied from the upper stage, the vehicle propellant and gas tanks are vented and other stored energy is released. For solid rocket motors, that point may arrive when the upper stage is expended or the stage is inert and the payload is released. For purposes of ground operations, launch no longer ends with the cessation of supporting ground operations but when the vehicle leaves the surface. ”(419)

This definition of the end of the launch is only contained in the explanations of the Final Rule but cannot be found in the updates to the 14 CFR themselves. It would be better to find this practice codified as well. One may understand the need to keep flexibility to adapt to the changing technical context but between the definitions of the 14 CFR and the clarifications provided in introduction to the Final Rule, one could certainly finda middle term which would offer better legal security to the licensees. (416)

(...continued) directive to license activities involved in the preparation of a launch vehicle for launch, when those activities take place at a launch site in the United States. This satisfied the requirements of the statutory change and the wishes of those commenting such as Orbital and Spaceport Florida Authority. Under the approach the FAA now adopts, because of the 1998 changes and because risks change shortly after the launch vehicle or its components enter the gate of a launch site, launch begins, for purposes of licensing, upon the arrival of that vehicle to be prepared for flight at a US launch site.”

(417)

The AST, in its introduction to the Final Rule, has developed at length the analysis of these hazardous operations together with their timing in relation to the launch. This analysis provides very helpful clarification to the rationale of the vehicle at the gate concept and the type of activities and risks actually contemplated. See Final Rule, supra note 415.

(418)

Final Rule, supra note 415.

(419)

Final Rule, supra note 415.

134 One has to appreciate the efforts made in the US in the last years to consolidate the set of regulations dealing with launch activities. When comparing with the situation in the early 80's, considerable improvement has been made. Not only these regulations have been developed in a relatively short time, and with the benefit of the transparency allowed through the Notices of Proposed Rule-making, but these regulations have been well organized for public access on the Internet site of the AST(420) such that the new operator is now able to quickly get a clear overview of the licensing regime(421) and some help as to what he needs to do. The AST recently placed on their Internet site a compilation of the regulations which combines the text of all effective regulations and is an advance version of the 14 CFR which will be updated in the course of the year 2000.(422)

3.2.- EUROPEAN LEGAL FRAMEWORK: THE ARIANE LAUNCH SERVICES In Europe one commercial launcher is in operation, Ariane, that was developed within the framework of the cooperation in the European Space Agency. This has created a specific environment which we will now explain after a brief look at the overall French approach to space legislation. France has a central position in Europe with respect to launches as it is the Ariane launching State.

3.2.1.- French Approach to Space Legislation France is the State responsible for the activities carried out by Arianespace, the French incorporated European launch company. There is nevertheless no legislation in France specifically addressing launch activities. In fact, in Europe only two States have adopted such legislation, the United Kingdom and Sweden.(423)

(420)

Online: Associate Administrator for Commercial Space Transportation : (accessed: 01/2001).

(421)

A short description of the current licensing process can be found online: Associate Administrator for Commercial Space Transportation: (accessed: 01/2001).

(422)

Online: Associate Administrator for Commercial (accessed: 01/2001).

(423)

See generally: 1982 Swedish Space Activities Act, 1982:963 and Decree Supplementing the Act, 1982:1069, (1987) 36 Zeitschrift Für Luft und Weltraumrecht, 11 and European Center for Space Law, ESALEX Database online at (accessed: 01/2001) 1986 Outer Space Bill, (1987) 36 Zeitschrift Für Luft und Weltraumrecht, 12 and European Center for Space Law, ESALEX Database, supra A.J. Young, “The Outer Space Act 1986” (1986) XI Annals of Air and Space Law, 412 M. Bourély, “National Space Legislations in Europe (1987) Colloquium, 197 H.L. van Traa-Engelman, Commercial Utilization of Outer Space, Legal Aspects, (Rotterdam: H.L. van Traa Engelman, 1989), at 216 ff for developments on Swedish Law and UK law M. Bourély, “Quelques réflexions au sujet des législations spatiales nationales” (1991) XVI Annals of Air and Space Law, 245 M.Couston, Droit Spatial Economique, (Paris: Sides, 1994), at 149 ff S. Courteix ed., Le cadre institutionnel des activités des états (Paris: Editions Pedone, 1997) F.G. Von der Dunk, Private Enterprise and Public Interest in the European ‘Spacescape’. Towards Harmonized National Space Legislation For Private Space Activities in Europe (Leiden: International Institute of Air and Space Law, 1998), in general and particularly at 129 ff for developments on the Swedish, UK and French laws.

Space

Transportation:

135 In France, the choice has been to organize an institutional control of the entities carrying out these activities rather than legislate them. This approach is self-sustaining since the setup of such institutional control de facto eliminates the need for legislation. The approach is therefore one of institutional control, and no space specific legislations are to be found in France, where authorization, supervision and control of entities carrying out space activities has been organized on an ad hoc basis by the setting up of individual structures. In the field of telecommunications and television broadcasting, state owned companies working under concession of the French Government (France Cables et Radio), commercial governmental entities(424) (Center National d’Etudes Spatiales -CNES; Télédiffusion de France later transformed in a State owned société anonyme, subsequently wholly owned by France Télécom) and private companies controlled by State interests (SPOT IMAGE) have been carrying out these activities, under varying degree of government control and responsibility. CNES itself has prompted the establishment of a number of structures for the promotion of space activities, all strongly and institutionally linked to it (Prospace, Novespace, CLS/ARGOS, Satel Conseil, Intespace).(425) Nevertheless, the regime implemented for the Ariane activities makes up, to a certain extent, for the lack of national legislation(426) insofar as its international character prompted the development of a set of more detailed provisions.

3.2.2.- Overall Legal Framework for the Ariane Launch Services The history of the Ariane program(427) contributed to creating a specific institutional and legal setup in Europe and this is why we have chosen to start this part with some discussion on this historical background. An institutional European approach to space activities started early. The first steps were taken in 1959 with the preparatory work in view of creating a European organization. Based on the work of the European Preparatory Commission on Space Research, set up in December 1960, the European Space Research Organization (ESRO) was created by a Convention signed in Paris on 14 June 1962. Another organization was set up for the development of launchers, the European Launcher Development Organization (ELDO), by a Convention signed on 29 March 1962. These two organizations carried out a substantial amount of activities but, due to the separation of these two activities and due to these organizations’ own institutional difficulties, it was later decided to merge them. This merger gave birth to the European Space Agency, established by a Convention signed

(424)

Called in French: “établissements publics à caractère industriel et commercial”.

(425)

For details about these entities, see M.Couston, Droit Spatial Economique, supra note 423, at 155.

(426)

See: M, Bourély, “National Space Legislations in Europe”, supra note 423, at 199.

(427)

See generally: A. Souchier, P. Baudry, Ariane (Paris: Flammarion, 1986) M. Castello, La Grande Aventure d’Ariane (Paris: Larousse, 1988) M. Bourély, “Le nouveau programme spatial européen” (1974) 28 Revue Française de Droit Aérien, 11 M. Bourély, “La production du lanceur Ariane” (1981) VI Annals of Air and Space Law, 279 M. Bourély, “Coopération internationale et droit de l’espace, l’exemple de l’Agence Spatiale Européenne”, supra note 76 J. Chappez, “Arianespace, première société commerciale de transport spatial” (1983) 110 Journal du Droit International, 702 J. Chappez, “Les systèmes de transport”, in J.Dutheil de la Rochère, Aspects récents du droit de l’espace (Paris: Pedone, 1988), at 103 V. Kayser, “Les services commerciaux de lancement de satellites” (1993) 4 La Lettre du Cerdi (complete issue).

136

on 30 May 1975.(428)

A first effort to develop a European launcher had taken place in the 60's, within the framework of ELDO. It encountered some difficulties, primarily due to the lack of overall system coordination over the development of the launcher which was shared between many entities. Efforts continued and a new program was proposed by the French Government to the ESA Member States in 1972, resulting in a decision of the European Space Conference on 31 July 1973. On 1 August 1973, the ESRO Council approved a Resolution which agreed to the Ariane program becoming an ESRO special program. This was formalized in an Arrangement signed on 21 September 1973 by 9 European States (Belgium, Denmark, France, Germany, Italy, Spain, Sweden, Switzerland and The Netherlands), which entered into force on 28 December 1973. The program was started under the auspices of ESRO/ELDO and was then transferred to the European Space Agency upon its creation. The Arrangement provided for the modalities of the implementation of the development program which started in February 1974. Ariane was launched for the first time on 24 December 1979. i)

The initial phases of the programme

Two main phases were part of this initial period, the development phase and the promotion phase. The participants into the Ariane program entrusted CNES (Centre National d’Etudes Spatiales), the French national space agency,(429) with the responsibility for the implementation of the development phase under the overall control of ESRO. CNES had the responsibility to award contracts to industry in each participating State of ESRO and delegated the prime contractor responsibility to a French company, Aerospatiale, which would then organize a consortium of European firms to carry out the project. During this initial development phase, CNES had been delegated the technical and financial responsibility of the program. ESRO and later ESA exercised control over the activities of CNES and on the financial evolution of the program through the ESA Ariane Program Board (the body composed of delegates of the ESA Member States participating in the Ariane Program), and ESA had the responsibility of equipment used for the program, the contributions to be asked from the participating States and the international agreements to be entered into for the conduct of the project. The Arrangement provided only for the development phase and an additional agreement had to be concluded for the production phase. On 26 April 1978, the ESA Council approved a Resolution on the Ariane Production Phase.(430)A promotion phase of 6 launchers was agreed upon. This promotion phase was pre-financed by the ESA Participating States and it was organized, from an institutional point of view, in the same (428)

See generally for a history of these organizations and the present functioning of ESA: J. Kriege, “An Historian Looks at the ESA Convention”, in European Center for Space Law ed,, The Implementation of the ESA Convention, Lessons from the Past, Proceedings of the ESA/EUI International Colloquium, Florence 25-26 October 1993 (Dordrecht: Martinus Nijhoff Publishers, 1994) [hereinafter Florence Colloquium] J. Kriege & A. Russo, Europe in Space, 1960-1973, (Noordwijk: ESA Publications, 1994), Ref ESA-SP-1172 M. Bourély, “Space Law and the European Space Agency”, supra note 76 A. Russo, “History of the European Space Programmes”, in ECSL Sixth Summer Course on Space Law and Policy, Lapland 1997 (Paris: ECSL, 1998), at 135 The Convention of the European Space Agency can be found in (1975) 14 ILM 864, in K.H. Böckstiegel & M. Benkö Eds, Space Law Basic Legal Documents, supra note 51, or in Florence Colloquium supra this note., in annex.

(429)

On CNES see S. Courteix ed., Le cadre institutionnel des activités spatiales des états, supra note 423, at 63 ff.

(430)

On the Ariane production phase: M. Bourély, “La production du lanceur Ariane”, supra note 427.

137

manner as the development phase. There was no need at that point in time for a commercialization structure since payloads had been already identified for these promotion flights. It was also rather early in the life of the launcher to take active steps for its commercialization. Within ESA, the promotion phase was functioning under the status of operational activities(431) performed for the benefit and with the financial participation of participating States. ii)

The commercialization phase

In view of the availability to ESA of the operational activities mentioned above, one possibility could have been to leave with ESA the responsibility for the commercialization of the launcher. The nature of ESA as a research organization and the prospects of a rough competition on the launch market prompted the choice for commercialization of Ariane by a private commercial entity.(432) Once this choice was made, it was clear that the incorporation of this company under the laws of one of the participating States would be necessary. Due to its role in the Ariane program, France was designated as the host for this company, while other participating States would have their involvement pursued through the shareholding of the company and in June 1979, the European industrial firms agreed with CNES on the shareholding of the company. CNES would own slightly more than a third of the shares, industry and banks would own the other two thirds. The decision to create Arianespace was formalized in the Declaration of Certain Governments relating to the Ariane Production Phase.(433) The company was then formally incorporated under the laws of France on 26 May 1980 by its registration on the “Registre du Commerce et des Sociétés” in Corbeil-Essonnes, under the name of “Arianespace”, a “société anonyme”. Arianespace has taken over, after the promotion phase, the activities of production, commercialization and launch of the Ariane vehicle, and more recently certain development activities.

(431)

The ESA Convention provides for this possibility in its Article V, §2 which states: “In the area of space applications the Agency may, should the occasion arise, carry out operational activities under conditions to be defined by the Council by a majority of all Member States. When so doing the Agency shall: a) place at the disposal of the operating agencies concerned such of its own facilities as may be useful to them; b) ensure as required, on behalf of the operating agencies concerned, the launching, placing in orbit and control of operational application satellites; c) carry out any other activity requested by the users concerned. ” On ESA operational activities see G. Lafferranderie, “La notion d’activités opérationnelles dans la Convention de l’Agence” (1984) 37 ESA Bulletin, 68.

(432)

J. Chappez, “Arianespace, première société commerciale de transport spatial”, supra note 427 M. Couston, Droit Spatial Economique, supra note 423, at 90.

(433)

This Declaration is reprinted in (1981) VI Annals of Air and Space Law, 723. It is important to point out that the term “Declaration” here does not correspond to the type of declarations voted within ESA for implementing ESA programs, but is a self standing international agreement. “While making use of the same terminology, the Declaration shall not be mistaken for a declaration relating to an optional program of the Agency and which would be based on the provisions of the ESA Convention, its Annex III in particular. The Declaration on Production is in itself an international agreement, in a simplified form insofar as it is not subject to a procedure of signature but to a procedure of written acceptance.” G. Lafferranderie, “Responsabilité juridique internationale et activités de lancement d’objets spatiaux au CSG”, supra note 76, [translation provided].

138

3.2.3.- Institutional aspects of the legal control exercised over Arianespace The involvement of private entities in launch activities is not prevented by international space law so long as proper authorization and supervision is ensured by the appropriate State.(434) In the case of Ariane, and given that there was no space legislation in France which is the natural appropriate State, it is interesting to analyze the means through which the control of the activities of Arianespace has been secured. i)

Control via Shareholding in the Capital of Arianespace

Arianespace has 53 shareholders from 12 European countries which are aerospace manufacturers and engineering companies, banks and CNES.(435) Although Arianespace is a private company, its shareholders represent a significant involvement of State controlled entities, in particular from France, where CNES has a significant portion of shares in the company (32.45%) and can under French corporate law exercise a significant influence in Arianespace General Assemblies (in terms of voting majority rules, as well as quorum for meetings). CNES, as well as other entities partially State owned are represented in the Board of Directors.(436) The consequence of this shareholding and control situation, in particular with respect to that of French State owned entities, is that the Board and the General Assemblies have the means to monitor that the activities undertaken by the company are in accordance with the applicable law and with the international obligations of France. Such control is also the logical consequence of the potential liabilities incurred by the French State for Ariane activities.(437)

Also, the fact that the shareholding of the company and its Board of Directors are (434)

See supra Chapter 2.

(435)

France (57.7%): Aerospatiale, Air Liquide, Alcatel Space Industries, Banque Sanpaolo de Paris, Centre National d’Etudes Spatiales (CNES), Clemessy, Compagnie Deutsch, Credit Lyonnais, Geneval SA (Société Générale), In-Snec, Matra Marconi Space France, Paribas, SAFT, Sextant Avionique, SFIM, Snecma, Société Financière Auxiliaire (BNP), Thomson-CSF, Various Individuals; Germany (18.43%): Bayerische Hypo und Vereinsbank, Daimler Chrysler Aerospace AG, Dornier GmbH, MAN Technologie AG, Westdeustche Landesbank Girozentralle; Italy (7.17%): Fiat Avio S.p.A, Finmeccanica S.p.A; Belgium (4.20%): Alcatel ETCA SA, Société Anonyme Belge de Constructions Aeronautiques (SABCA), Techspace Aero; Switzerland (2.58%): Compagnie Industrielle Radio-Electrique (CIR), Oerlikon-Contraves AG, SF-Entreprise Suisse d’Aeronautique et de Systèmes; Spain (2.49%): Construcciones Aeronauticas (CASA), CRISA, Sener Grupo de Ingenieria SA; Sweden (2.29%): SAAB Ericsson Space AB, Volvo Aero Corporation; United Kingdom (1.99%): Matra Marconi Space UK, Meggit (UK) Ltd; The Netherlands (1.97%): ABN AMRO Bank N.V, Fokker Space B.V; Denmark (0.58%): Alcatel Denmark A/S, Den Danske Bank A/S, Christian Rovsing; Norway (0.30%): AME Space AS, Raufoss Technology A/S, Kongsberg Gruppen ASA; Ireland (0.17%): Adtec Teoranta, Devtec Ltd. This is the latest state of the capital of Arianespace, as published online at:
(436)

The Board of Directors, as of June 1st 1999, is as follows: Chairman (J.M. Luton); Directors: Aerospatiale, Alcatel ETCA SA, CNES, Daimler Chrysler Aerospace AG, Fiat Avio S.p.A, Fokker Space B.V., MAN Technologie AG, Matra Marconi Space France, SAAB Ericsson Space AB, SNECMA, G. Brachet (CNES), M. Courtois (CNES), A. Deschatres (Arianespace), D. Groult (Arianespace), M. Roy (Arianespace); Censors: ESA, Credit Lyonnais, Devtec Ltd, Dornier GmbH, Finmeccanica S.p.A, Oerlikon-Contraves AG; Staff Association representative; Auditors. As per supra note 435.

(437)

See further for liability issues concerning the Ariane activities.

139 controlled by the aerospace manufacturers which build the Ariane launcher,(438) ensures collective control of the activities of Arianespace by those who have business interests and risks associated with the launcher.

ii)

The role of ESA

a)

ESA as Censor in the Arianespace Board of Directors

ESA is not a shareholder in the company. However, the Convention signed between ESA and Arianespace to organize their relationship(439) gives ESA a consultative vote in the Board in the quality of censor.(440) ESA also has the right to access all documents necessary for the carrying out of its duties.(441) The role of ESA in the Board is due to historical reasons but also to the contribution of ESA to new developments of the launcher, the fact that ESA has put at the disposal of Arianespace a number of production and launch facilities, and the liabilities which ESA may incur under the program. The role of ESA is also important in view of Article 6 of the Outer Space Treaty and the liability convention which ESA has accepted.(442) Finally, the role of censor gives ESA the possibility to monitor compliance with the ESA/Arianespace Convention. The involvement of ESA also aims at ensuring that the activities undertaken by Arianespace are for peaceful purposes in accordance with the ESA Convention. Such obligation has been expressly included in the Declaration.(443) These provisions also make express reference to compliance with the provisions of the Outer Space Treaty.

b)

The Sales Control Committee

Another strong control tool is the Sales Control Committee.(444) This Committee has been set up by the ESA Ariane Program Participating States for sales to non ESA Member States or customers which are not under the control of an ESA Member State. This Committee is entrusted with the responsibility to control whether or not such sales are in accordance with the provisions of the Outer Space Treaty and in particular the principle of peaceful uses of outer space. This Committee is composed of one representative of each participating State. Arianespace regularly communicates to ESA the list of the planned sales and the ESA (438)

A description of the Ariane 5 Industrial Organization can be found online: Arianespace (accessed: 01/2001).

(439)

The ESA/Arianespace Convention was signed subsequently to the Declaration of certain Governments for the Ariane production. This declaration came to an end in 1989. It was renewed in 1990 and entered into force on 21 May 1992. A new convention was subsequently signed between ESA and Arianespace. Those documents have both been renewed in 1999. The legal structure described in the present developments does not appear to have been changed by these new documents, which are not available for public access.

(440)

The “censeurs” have been created by practice. They are a form of advisors who provide their expertise and advice to the Board. They have only a consultative function and vote. For more information on the status of “censeur” in French société anonyme, see P. Vasseur, “Une création de la pratique, les censeurs dans les sociétés anonymes” (1974) Recueil Dalloz, Chron, 67.

(441)

V. Kayser, “Les services commerciaux de lancement de satellites”, supra note 427, at 7.

(442)

M.Bourély, “Space Law and the European Space Agency, supra note 76, at 92.

(443)

Article 1.2 and 3.1 Ariane Declaration, supra note 433.

(444)

Article 1.6 Ariane Declaration, supra note 433.

140

Director General informs the Committee. If any of the Committee members considers that a planned sale is contrary to the principles above, the Committee can be called to meet if requested by a third of its members. The procedure is short so as not to cause disruption in the launch manifest. The decision is taken by a two-thirds majority of the members.(445) The Committee can veto a sale and such decision is binding for Arianespace and the French government is responsible for enforcing it. It is not clear if such a prohibition were to be enforced on Arianespace by which means it would be done, absent any provision in French law on licensing or control of launch activities. In the worse case, the ultimate means could be through the refusal by the French government acting through CNES to give Arianespace access the launch facilities at Kourou and to provide the ground services in the mission control center. This committee has never had to convene up to now. c)

Other Means of Control by the ESA Ariane Program Participating States

The Declaration also gives the Participating States means of control or pressure on Arianespace. First, if a participating State wishes not to be associated with a launch which has not been forbidden by the Sales Control Committee, such State may disassociate itself from the launch (remove its flag from the launcher) but is committed to fulfill all its obligations under the Declaration.(446) Second, if a participating State considers that a sale by Arianespace is incompatible with its taking part in the Declaration,(447) that State may inform the ESA Director General of its disagreement, and the latter further informs Arianespace. If Arianespace still proceeds with the launch, the State concerned may suspend its participation in the Declaration for that launch. Then, this State has the possibility also to suspend the fulfilling of its obligations for that launch, while still remaining under the obligation to maintain available the national industrial means used for the production of the launcher and not prevent their use, This State may also go as far as to oppose the procurement from its industry of the equipment or subsystems manufactured by this industry, and in such case this State shall facilitate the transfer of manufacturing to industries of other States and may not prevent manufacturing by industries of other participating States. To our knowledge, such cases have not occurred up to now. 3.2.4.- Liability for Ariane Activities Regardless of the provisions of the Declaration and Convention, it appears clear from the institutional setup described above, that France is the primary launching State under the Outer Space Treaty and the Liability Convention. The States participating in the Ariane program wished, however, to clarify the responsibilities and liabilities associated with the operation of the Ariane launcher.

(445)

The former requirement that they should as well represent at least 15% of the contributions to the program seems to have been deleted from the renewed declaration.

(446)

Article 1.6b Ariane Declaration, supra note 433.

(447)

Article 1.6c Ariane Declaration, supra note 433.

141 i)

Liabilities related to property of ESA and the participants

a)

Development facilities and tooling

ESA and the Ariane Program Participating States place at the disposal of Arianespace the facilities, equipment and tooling procured during the development and promotion phases of the launcher and which belong to ESA.(448) Arianespace has the technical and financial obligation to maintain such property. A detailed inventory of this property is maintained. Arianespace has to insure the property with the Agency named insured.

b)

Launch facilities. The Guyana Space Centre (Centre Spatial Guyanais. CSG)(449)

The French Guyana Space Centre (Centre Spatial Guyanais, CSG) has a special status. ESA has concluded agreements with the French Government for the use of the CSG (French Government property) and on the ELA installations (ESA property). These agreements provide that the Agency has to hold harmless the French Government against claims for damage by Member States, third States or their nationals in the context of the use by ESA of the CSG for its programs (with the exception of cases of “faute lourde”, i.e gross negligence on the part of the French authorities or their employees).(450) It is also clearly provided that apart from this case, the Agency will not indemnify the French Government.(451) The French Government, in turn, is fully responsible and holds ESA harmless for all activities performed on the CSG by Arianespace, except when ESA is the customer of Arianespace and the ESA satellite is at the origin of the damage giving rise to the claims concerned.(452) The agreement referred to provides for the facilities and services made available by the French Government at the CSG (standard launch support services and tracking stations). ESA has authorized Arianespace to exercise the rights of use granted to ESA in this respect. The use of these rights by Arianespace is against the payment of a fee. Arianespace is liable for all damages caused by itself, its employees or agents, or third parties, to the ESA property or that of the participants, which has been put at its disposal. ESA remains liable for damages caused by its personnel or agents in carrying out the duties ESA is entrusted with by the participants. Further, Arianespace agrees to waive all claims against ESA for any damage, direct or indirect, suffered by itself, its employees or agents in the framework of the production and launch operations, due to the use of the Agency property or execution of a mission of the Agency. Arianespace will also hold ESA harmless against any claims brought by its agents. This liabilities of ESA arising out of the above arrangements are dealt with in accordance with the provisions of the 1977 Resolution.(453)

(448)

Article I.7 and II.4, Ariane Declaration, supra note 433.

(449)

On the provisions related to the use of the CSG, see G. Lafferranderie, “Responsabilé juridique internationale et activités de lancement d’objets spatiaux au CSG”, supra note 76.

(450)

Article 11.1 CSG Agreement, reprinted in G. Lafferranderie, “Responsabilité juridique internationale et activités de lancement d’objets spatiaux au CSG, supra note 76.

(451)

Article 11.2 CSG Agreement, supra note 450.

(452)

Article 11.3 CSG Agreement, supra note 450.

(453)

See supra Chapter 2, note 76.

142

ii)

Third Party Liability

One may be surprised that it is in an Article IV of the Ariane Declaration called “Various Provisions” that the fundamental point of third party liability is addressed in three lines,(454) which provide that in case of a claim placed by victims for damage caused by any Ariane launch, the French Government will bear the financial burden of the compensation for such damage. The responsibility taken by the French government here is far reaching. There is no limitation in the definition of “victims”. Of course genuine third parties are covered by the provision, but it could also cover French nationals and nationals of other States participating into the Ariane operations and both these categories of victims are not covered by the Liability Convention.(455) This provision could create a cause for liability of the French State to its nationals where such nationals would have normally placed their claims against Arianespace. The same situation would occur for foreign nationals involved in the launch. The Article does not expressly exclude Arianespace itself as such a victim, however, the grammatical structure of the sentence would support the notion that Arianespace was not foreseen as such a victim. ESA could also be included in the term “victim”. There are basically three cases in which ESA could be a victim: 1) ESA personnel as victims are covered already as mentioned above as French or foreign nationals; 2) ESA property is covered by a specific regime and 3) ESA payloads, if damaged would be covered by the provisions of the launch contract between ESA and Arianespace. It is also noted that, since no reference to the 1977 Resolution of the ESA Council on liability can be found in any of the documents defining the liabilities surrounding the Ariane activities (with the exception of those conducted by the Agency or for the Agency(456)), one should conclude that the French Government has fully substituted its liability to that of ESA, and its Member States, for all Ariane launch activities whether or not an ESA payload is being launched. Article 11.3 of the CSG Agreement expressly refers to the case where ESA is the customer of Arianespace and appears to foresee only one case where ESA would indemnify the French Government: the case where the ESA payload is at the origin of the damage(457). This therefore exempts ESA in all other cases of any liability as a launching State in the sense of ESA procuring the launch of a space object.(458) The responsibility is limited to the launch activities themselves when conducted by Arianespace. When the French government has been called for compensation of damages as described above, Arianespace has to reimburse the said government up to a ceiling of 400 million francs per launch.(459)

(454)

Article IV. 1 Ariane Declaration, supra note 433.

(455)

See Chapter 2, para 2.1.2.4

(456)

Article 11 CSG Agreement, supra note 450.

(457)

CSG Agreement, supra note 450.

(458)

Article I,c of the Liability Convention, supra Chapter 2.

(459)

Article III.9 Ariane Declaration., supra note 433. This amount has not changed in the renewed declaration and convention.

143

iii)

Contractual allocations

a)

Industrial contracts

For the production of the launcher, an extensive contractual network has been put in place, with Arianespace in its central position. Arianespace has direct contractual relationships with its level 1 contractors which deliver integrated elements of the launcher and have numerous subcontractors. The level 1 contractors have special relationships with Aérospatiale which is the industrial architect of the launcher. All of these contractors can provide defective items at some point in time, causing the failure of a launch and tremendous financial consequences which may not be bearable by the producer of a component, equipment or sub-assembly, in particular for small firms.(460) Arianespace inserts in its level 1 contracts, a waiver whereby Arianespace undertakes not to bring any claims against its contractors, under the condition of flow down of this waiver into the subcontracts.(461) This clause is the flow down by Arianespace into its industrial contracts of the cross-waiver of liability clause concluded with its customers in the launch contracts.

b)

Launch contracts

As is common in the practice of launch contracts, the Arianespace launch contracts contain cross waivers of liability clauses.(462) The standard clause found in launch contracts with Arianespace is as follows:(463) “Each Party shall bear any and all loss of or damage to property and any bodily harm (including death) and all consequences, whether direct or indirect, of such loss, damage or bodily harm (including death) , and/or of a Launch Mission failure and/or of a Satellite mission failure, which it or its Associates may sustain, that arises in any way in connection with this Agreement, or the performance of this Agreement. Each Party irrevocably agrees to a no-fault, no-subrogation, inter-party waiver of liability, and waives the right to make any claims or to initiate any proceedings whether judicial, arbitral, administrative on this account against the other Party or that other Party’s Associates for any reason whatsoever. Each Party agrees to bear the financial and other consequences of such loss, damage or bodily harm (including death) and/or of a Launch Mission failure and/or a Satellite Mission failure which it or its Associates may sustain, without recourse against the other Party or the other Party’s Associates. In the event that one or more Associates of a Party shall proceed against the other Party and/or that Party’s Associates as a result of such loss, damage or bodily harm (including (460)

See the earlier developments of this Chapter 3 on the American framework, in which this same issue has been extensively addressed by the US industry, the US Senate and the Government, on the occasion of the preparation of the 1988 Amendments to the Commercial Space Launch Act.

(461)

J. Chappez, “Arianespace, première société de transport spatial”, supra note 437, 695. Arianespace has not responded to our request for the current language of this clause.

(462)

For a general presentation on Ariane Launch Contracts, see W. Thoma, “Launch Service Contracts” (1982) ESA Bulletin, 33 K. Iserland, “Contrats de Lancement”, in Société Française de Droit Aérien et Spatial, Colloque Air, espace et droit, (1983) Oct-Dec Revue Française de Droit Aérien et Spatial, at 404 W. Thoma, “A Fresh Look at Launch-Service Contracts” (1988) ESA Bulletin, 49 H.E. Weber, “Concept and Problems of An Ariane 4 Launch Services Contracts” in European Center for Space Law Ed., Proceedings of the Sixth ECSL Space Law and Policy Summer Course, Lapland 1997 (Paris: ECSL, 1998), at 213.

(463)

P.L. Meredith & G.S. Robinson, Space Law, A Case Study for the Practitioner, Implementing a Telecommunications Satellite Business Concept (Dordrecht: Martinus Nijhoff, 1992), at 268ff. In French, in: L.Ravillon, Les Télécommunications par Satellites (Dijon: Litec, 1997), at 225. Arianespace has not responded to our request for the latest language of this clause.

144 death) and/or Mission failure and/or Satellite Mission failure, the first Party shall indemnify, hold harmless, dispose of any claim, and defend, when not contrary to the governing rules of procedure, the other Party and/or its Associates, as the case may be, from any liability and expense, including attorneys’ fees, on account of such loss, damage or bodily harm (including death) and/or Launch Mission failure and/or Satellite Mission failure and shall pay all the expenses and satisfy all judgements and awards which may be incurred or rendered against that other Party and/or its Associates.” In the definition of “Associates” are included the personnel, the contractors and subcontractors of each Party (Arianespace and the customer).(464) In the case of a combined launch of two satellites or more, the network of cross waivers put into place by Arianespace also includes a waiver between the two or more customers, which is added to the network of the participants. These clauses bar any claims between the Parties, and also prevent the subrogation of the Parties' insurers into their rights. They introduce a hold harmless obligation between the Parties, should anyone bring a claim against one of them for damage caused on the occasion of the launch activities. As is always the case with cross waiver clauses, they only acquire their efficiency via a proper flow down into the various related contracts. The Arianespace launch contracts provide for an obligation of both parties to implement this flow down, as follows: “ Each Party obligates itself to take all necessary and reasonable steps to foreclose claims for loss, damage or bodily harm (including death) by any participant in the launch activity. Each Party shall require its Associate(s) to agree to a no-fault, no-subrogation, inter-party waiver of liability and indemnity for loss, damage or bodily harm (including death) its Associates sustain identical to the Party’s(ies’) undertaking under this Article 14 of this Agreement (...)”.(465) Insofar as the customer is concerned, there is no recourse against Arianespace in case of the failure of the launch as it is covered by the cross-waiver of liability clause mentioned above and by limitation of guarantee clauses whereby Arianespace undertakes the launch services on a best efforts basis. However, Arianespace makes available to the customer a voluntary launch risk guarantee. This guarantee is limited in time. It covers the time from intentional ignition of the engines, until injection on the transfer orbit. The coverage is implemented in the form of a relaunch or a reimbursement of the customer for the loss of his satellite, up to a ceiling value.

c)

Third party liability and associated insurance

Cross waivers are only extended among those related through a contractual link. Genuine third parties which suffer damage caused by the launch may bring claims against either Arianespace or the customer(s). Arianespace offers third-party liability coverage to its (464)

“Associates” are defined as: “any individuals or legal entities, organized under public or private law, who shall act directly or indirectly, on behalf or at the direction of either Party to this Agreement or of the Third Party Customer(s) of ARIANESPACE to fulfill the obligations undertaken by any such Party in this Agreement or by the Third-Party Customer(s) of ARIANESPACE including, by way of example only, the employees of each of the Parties, or of the Third-Party Customer(s) of ARIANESPACE, their suppliers and subcontractors”. Article 1, Arianespace Launch Agreement. P.L. Meredith & G.S. Robinson, Space Law, A Case Study for the Practitionner, supra note 463, at 269.

(465)

P.L. Meredith & G.S. Robinson, Space Law, A Case Study for the Practitioner, supra not 463, at 269.

145 clients. The launch contracts contains the following clause: “Arianespace shall, for the Launch, take out an occurrence basis type of insurance policy at Customer’s cost to protect itself and Customer against liability for property and bodily harm which Third Parties may sustain and which are caused by the Combined Space Vehicle or part thereof. In said insurance policy the natural and corporate bodies hereafter shall be named as insured: 1. The Government of France, 2. The Centre National d’Etudes Spatiales ‘CNES’and any state of launch as per Convention of March 29, 1972 related to the international liability for damage caused by spacecraft, 3. The auxiliaries of any kind, whom Arianespace and/or the CNES would call for in view of the preparation and execution of the launching operations, 4. The European Space Agency ‘ESA’ but only in its capacity as owner of certain facility and/or outfits located in the Centre Spatial Guyanais in Kourou and made available to ARIANESPACE and/or the CNES for the purpose of the preparation and the execution of the launches, 5. The firms, who have participated in the design and/or in the execution and/or have provided the components of the Launch Vehicle, of its support equipment including propellants and other products either liquid or gaseous necessary for the functioning of the said Launch Vehicle, their contractors, subcontractors and suppliers, 6. Customer and Third Party Customer(s) of ARIANESPACE on whose behalf ARIANESPACE executes the launch services as well as their co-contractors and sub-contractors, 7. When they act in the scope of their activities, the Officers and Directors, the legal representatives, the Managing Director, the employees agents as well as the interim staff employed by ARIANESPACE or by the ASSURED mentioned in hereabove Paragraphs from a.1 to a.6 (included). Said insurance coverage shall come into effect as of the day of the Launch, and shall be maintained for thirty-six (36) months or for so long as all or part of the Combined Space Vehicle remains in orbit, whichever period is shorter. The insurance policy shall be taken out in the amount of 400 000 000 French Francs. ”(466) In this clause, one can see the implementation by Arianespace of all the provisions we have mentioned above, placed on Arianespace by the Ariane Declaration, the ESA/Arianespace Convention, and its industrial contracts. Point 2 of this clause is not very clear insofar as the terms “and any state of launch” are concerned. While this clause refers to the 1972 Liability Convention, the “state of launch” is not an expression used by the 1972 Convention. The combination of this “any State of launch” with CNES in this point 2 is also puzzling. Bearing in mind the role of CNES in terms of facilities placed at the disposal of Arianespace, one has to assume that this provision should be interpreted as referring to the facilities used for launch, in particular possibly the States which put at the disposal of the Ariane launches their tracking and acquisition stations.(467) But this provision is not clear, and it could also be taken to cover the State of nationality of the customer.

d)

Limitation of liability

It is usually the case in contracts of this type that clarification is added to the scope of (466)

P.L. Meredith & G.S. Robinson, Space Law, A Case Study for the Practitioner, supra not 463, at 292.

(467)

On these additional facilities, see G. Lafferranderie, “Responsabilité juridique Internationale et activités de lancement d’objets spatiaux au CSG”, supra note 76.

146 potential liability of the parties, to make sure that the clauses in the contract which provide for remedies are exhaustive and that no other remedies can be sought outside of these clauses. This type of clause helps to ensure better predictability between the Parties. The standard clause in the Arianespace contracts reads as follows: “Due to the special character of Services, the Parties have agreed that any liability of ARIANESPACE or of Customer arising from the defective, late or non-performance of ARIANESPACE’s Services and Customer’s technical obligations under this Agreement shall, in all circumstances, including termination of this agreement, be strictly limited to the liability expressly provided for in this Agreement, to the exclusion of any other remedies or claims for damages and indemnities” (468) These brief developments have shown that, by comparison to the US legal framework for launch activities, the European approach is very pragmatic and flexible. Instead of regulating in the field, Europe has favored the control of such activities in an institutional manner, with the reliance on France as the launching State. The legal framework is contractual in nature between all actors involved. This certainly supports a significant capacity of the company and its partners to adapt to the changing market conditions. The Ariane legal environment provides legal predictability to all actors involved through a multi-level set of provisions which is finally reflected in an all-encompassing insurance approach. It seems to us that the launch of foreign (non French and non ESA) payloads remains an area of legal uncertainty. Arianespace takes insurance and names the foreign customer insured up to the ceiling we have mentioned above. However, independent from the customer, the responsibility of the foreign State as launching State could be involved. There does not seem to be any requirement placed on Arianespace for controlling this (apart from the Sales Control Committee), in particular by the French Government, and there does not seem to be an agreement on a launch basis between France and the foreign States, allocating responsibilities in case of damage caused by the launch of the object.(469) This introduces uncertainty as to the way third-party damage will be compensated when a foreign customer is involved, at least beyond the ceiling of insurance taken by Arianespace. Besides, the insurance policy taken by Arianespace is limited in time while France remains the launching State for ever, and so does the State of nationality of the customer. There may be some difficulties in those cases, in particular when the Arianespace customer involved is from a State which is not a Party to the Outer Space Treaty, the Registration Convention or the Liability Convention. Also, it needs to be pointed out that the scheme put into place for Ariane activities can function as long as the actors bound by these contractual provisions are in reasonable number. As soon as new operators would want to enter the launch market, or use launch facilities, the current framework would not be appropriate. We have seen in this Chapter two very different approaches to legislating or regulating launch activities. The American approach is very detailed, legislative and regulatory, and all inclusive. It governs all aspects of the launch and will soon also govern the setting up and operation of spaceports. It catches in its sphere of competence a large number of (468)

P.L. Meredith & G.S. Robinson, Space Law, A Case Study for the Practitioner, supra note 463, at 290.

(469)

The only requirement placed on Arianespace with respect to payloads, apart from the Sales Control Committee, is to communicate to ESA or to the launching State concerned, the data necessary for the registration of the payload in the registry (if the State concerned maintains a registry), and the data which have to be notified to the United Nations Secretary General in implementation of the Liability Convention.

147 operators in such a way as to ensure that whichever situation may expose the international responsibility of the US has been checked and licensed in an adequate way. This regulatory approach was necessary as a response to the development of a growing number of private launch operators. This is the normal way law develops: it responds to the development of social interactions which require legal intervention. One may think that the regulation of launch services by the US is heavy and complicated. It is probably the case to some extent but all efforts have been made to ensure that these procedures do not hamper performance of the launch business, and the applicable regulations have been made easily accessible for the operators. Europe has so far chosen a very different approach. Apart from specific regulation in Sweden and the UK, launch services in Europe are not controlled by law and regulations, and they are not licensed.(470) So far though, there is only one commercial launch company in Europe, Arianespace. The choice has been, in this case, to develop a multi-layer legal environment to control the activities of this company. The legal framework created for Arianespace covers all the same aspects as the American licensing regime, but on an adhoc basis. It would not be possible to transpose this regime to other launch operators. Should new non-US commercial launch operators wish to start business in Europe or from Kourou, they would be exactly in the same situation as SSI or Starstruck in the beginning of the 80's in the US. This is probably not a satisfactory situation. However, as we pointed out above, law is to be developed to respond to social needs and to manage social relations. If there are no such needs, one may wonder what is the place for law, and what can law anticipate. Nevertheless, liability risk management requires an adequate level of predictability, which itself relies on transparency of the legal framework. Where the need for transparency arises, undoubtedly legislation has to follow, and, as we will further develop in Chapter 5, the time is coming close where France will need to reconsider the legal environment for Ariane activities and enact appropriate and transparent legislation in this respect. Launch legislation are crucial to clarify the relationship of the launch operator and other participants in the system of law to which they belong, or which is made applicable by conflicts of laws rules. This relationship may be particularly complex, and to further illustrate this, we will now turn to the general domestic laws of liability and pursue in Chapter 3 our travel through Daedalus Labyrinth.

(470)

On launches from Kiruna, San Marco and Sea Launch, in relation to the Swedish Act, UK Act and Italian legislation, see F.G. Von der Dunk, Private Entities and Public Interest in the European ‘Spacescape’. Towards Harmonized National Space Legislation For Private Space Activities in Europe, supra note 423, at 166ff.

CHAPTER 4.- GENERAL RULES OF COMMON LAW AND CIVIL LAW SUSCEPTIBLE OF GOVERNING LIABILITY FOR LAUNCH ACTIVITIES

In Chapters 2 and 3, we studied the existing legal framework at international level, and the domestic legislation concerning launching activities. One could stop now and think that this is already a complex framework. The weakness of the international law framework which is not compensated by the legislation and regulations dedicated to launch activities is the absence of reliable rules for the determination of the applicable law in the case of damage caused by launch activities. The Liability Convention does not contain rules of conflict of laws and the compensation is determined in accordance with international law. Domestic legislation on launch activities have their own scope which, as we have seen in the US legislation, can be far reaching. This results in the complete absence of order in the field of liability for launch activities when it comes to determining which is the applicable law. The utmost complexity exists insofar as damage to third parties are concerned since they will be subject to the classical private international law determinations. A better degree of predictability exists between participants to launch activities, which conclude contracts in which they will normally insert a choice of law clause, but there again if the applicable law is simply called up in the contract without exclusion of its rules of conflict of laws the ultimate law applied in a dispute may not be the law chosen in the contract. Because no instruments exist which provide private international law substantial rules nor conflict of law rules in the field of space activities, their implementation needs to be examined in the light of the general rules of domestic law concerning liability. These general rules embody also private international law instruments adopted in domains not specific to space such as product liability in general or the law of sales. We will therefore examine these domestic laws in this Chapter. Liability is one of the most complex areas of law and it would be impractical in the context of this thesis, to explain in detail the regime of liability in common law and in civil law jurisdictions. It would also be impossible to review the legislation of all countries involved in space and launch activities. But, in support of the further developments of this thesis, it is necessary to place these activities in the general domestic law context to provide an overall assessment of the situation in which space operators carry out their business. 149

150 In a logical sequence to Chapter 3, we will examine the legislation in the United States (4.1) and in France (4.2), and provide a comparison between common law and civil law systems. Issues have been selected for study in the area of liability as such, contractual and tort, but also in other areas which help understanding the overall context, e.g rules of contract interpretation and judicial procedure aspects. Although the legislation are studied separately, the sequence of issues addressed is identical so as to ease the comparison between both systems of law. When analyzing domestic legislation, apart from general case law, we have focused some of our discussions on case law specifically concerning space activities. The space community is not litigating much due to the fact that there are not many actors involved, they have often strong ties among themselves, and are bound by inter-participants waiver of liability clauses which have the effect of blocking litigation. Consequently, case law in the field is scarce but its study provides useful clarifications to the current legal framework and is an input to the further developments in Chapter 5. Launch and related activities are dominated by contractual arrangements and we considered useful, as an example of contractual practice in the field of space activities, to devote some discussions to the procurement practice of the European Space Agency (4.3).

4.1.- COMMON LAW: GENERAL US LAW APPLICABLE TO LIABILITY FOR LAUNCH ACTIVITIES As a civil law trained lawyer, when dealing with US law, it is important to keep in mind that there is no such thing as a “US law”. This terminology is used for ease of reference, but in legal terms, there is the Federal law of the United States, and the law of each of the States which constitute the United States of America. Each State has its own legal system, legislature and courts. In addition, there is another layer of Federal legislation and courts. In the area of contracts and torts, there is some Federal legislation but most of the applicable rules have been determined at State level. Statutes existing on specific issues, such as the Commercial Space Launch Act and subsequent regulations, adopted at Federal level, or the Federal Torts Claims Act, are an example of overruling Federal statutes. As per the common law tradition, the major part of rules relating to liability, either in contract or in tort, have been elaborated through the years by case law, by accumulation of precedents, and generally derived from English law. The fundamental principles developed have been collected in various treatises and by the American Law Institute (ALI) which published a number of “Restatements”, in particular on Contracts and Torts, presenting in a quasi-codified manner the leading principles and reference cases. Although the Restatements are not statutes, they are a doctrinal work recognized by the Courts and practitioners in the US as an authoritative source. In the forthcoming developments, US law in general terms and rules which are generally applied throughout the US will be discussed. However, it has to be kept in mind that there may be rules under specific States laws. It is also a principle throughout the US that there is freedom of contracting and that the general rules can be amended by the Parties in a contract. The Parties will indicate in the contract the State law which shall govern the contract. This will introduce significant consequences since laws and procedures may

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vary from one State to the other.

4.1.1.- Contract Liability In the area of contracts three main topics related to liability are examined: the liability for breach of contract, the role played by warranty clauses and the rules of contract interpretation. i)

Liability for Breach of Contract

In the majority of liability cases in the context of space transportation and spacecraft production, parties to the dispute are contractual parties (parties in privity of contract(471)). This contractual relationship will give rise to potential contractual claims, in particular in the area of non-conformance of the products delivered, especially in contracts involving the manufacturers of the payload or of the launcher itself. The breach of contract terms gives rise to a claim in contract. In the common law system, the claims in contract normally arise from a breach which has actually happened but, in certain cases, as mentioned below, it will be possible to claim anticipatory breach. The contract itself, its nature or its context will define the nature and the extent of the obligations taken by the parties, thereby defining the magnitude of the damage suffered by a party when the other party does not fulfill its obligations. The distinction is then made between a total or a material breach.(472) The claim is said to be for a total breach when it is based on all of the damaged party’s remaining rights to performance under the contract. The claim is said to be for minor or material breach when the receiving party does not receive the substantial benefits of its bargain. The determination of the material character of a breach is usually done by the courts which will look for the presence of the following five elements :(473) - the extent to which the injured party will be deprived of its expected benefit; - the extent to which the injured party can be adequately compensated for the benefit deprived of; - the extent to which the party in breach will suffer forfeiture; - the likelihood that the party in breach will cure his failure; - the extent to which the party in breach has acted in good faith. Only upon an examination of the situation along these criteria will the court determine whether the breach is material and, in particular, if it justifies the claim for damages or a termination of the contract. A minor breach does not relieve the damaged party of its duty to perform under the contract. The parties, beyond the scope of their obligations, sometimes also determine the nature of their obligations by qualifying the nature of their commitment. This is what is found (471)

Black’s Law Dictionary, supra note 18, defines privity as “That connection or relationship which exists between two or more contracting parties ”.

(472)

American Law Institute, Restatement of the Law of Contracts, Second, as adopted and promulgated by the American Law Institute at Washington (St Paul, Minn.: American Law Institute Publishers, 1981-) [hereinafter referred to as Restatement of the Law of Contracts, Second], Sections 236 and 237.

(473)

Restatement of the Law of Contracts, Second, supra note 472, Section 241.

152 in the best effort and reasonable efforts clauses.(474) These clauses are almost always found in launch contracts, because of the risk element present in them. The best effort clause, although appearing to limit the obligations of the party which stipulated it by stating that this party will make its best efforts to fulfill given obligations, has in fact the effect of imposing on that party a reinforced duty to perform according to the highest professional standards which are appreciated in view of the capability of that party, its means and the expectations that the other party could legitimately have. The best efforts clause can therefore hide behind its limiting function, rather far reaching effects. The reasonable efforts clause is often used with the same aim, however, its effects are more genuinely limiting as the word “reasonable” is a better known concept, and largely used in the area of torts as we will see below. Contracts sometimes use both notions together thereby clarifying one by the other.(475) We will return to these clauses in Chapter 5 as they are a recurring pattern in contracts concluded in the space business, in particular launch contracts. In certain circumstances, one of the contractual parties may claim anticipatory breach and suspend his performance when he can prove that the other party is not going to perform his obligations.(476) The usual defenses to a claim in contract will be those related to defects in the formation of the contract, for instance absence of consideration or misrepresentation, impracticability, unconscionability, and non-performance by the other party. It will be shown below that cases where the US Government or its agencies are a defendant raise particular issues and difficulties. Also, force majeure and, to a certain extent, the doctrine of frustration can be used as a defense to a claim of non-performance in contract.(477)

ii)

Warranties

Two types of warranties can be claimed. First, the express warranty which is specifically provided in the contract, especially for the conformity ofgoods (guarantee against defects in workmanship, defects in design). This is a contractual warranty provision and can be limited. The Uniform Commercial Code defines express warranty as follows: “Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.”(478) (474)

On these clauses, see L. Ravillon, Les Telecommunications par Satellites, supra note 19 B. Schmidt-Tedd, “Best Efforts Principle and Terms of Contract in Space Business” (1988) Colloquium, 330.

(475)

As an example, clause contained in NASA/ARABSAT launch agreement: “ The parties recognize that the term ‘best efforts’, as used in this Agreement, means that NASA shall use all reasonable efforts to perform the Launch and Associated Services to be furnished under this Agreement and toward this end NASA will apply its technical and financial resources under the general terms and conditions of this Agreement” . Quoted by L. Ravillon, Les Telecommunications par Satellites, supra note 19, at 202.

(476)

Restatement of Contracts, Second, supra note 472, Sections 251, 253 and 254.

(477)

See further section on force majeure.

(478)

Uniform Commercial Code (UCC), online: (continued...)

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Secondly, the warranty can be implied. Under the Uniform Commercial Code, there are three types of implied warranties: - Implied warranty of title: section 2-313 UCC implies the warranty that the seller is transferring good title, that the transfer is rightful, and that there are no liens or encumbrances against the title at the time of contracting. - Implied warranty of merchantability: in accordance with article 2-314 UCC, in every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are merchantable. The goods have to be fit for the purposes for which they are used. - Implied warranty of fitness for a particular purpose: in accordance with article 2-314 UCC, this particular type of implied warranty exists when the seller has reason to know the particular purpose for which the goods are to be used and that the buyer is relying upon the seller’s skill and judgment to select suitable goods. The particular purpose for which the goods will be used should be known to the seller in reasonable detail and specificity at the time of the sale for this theory to apply.(479)

In principle,(480) the theories of warranty require privity to bring a breach of warranty action.(481) However, states have introduced this requirement in different ways as to the kind of buyers potentially able to claim the benefit of such warranties (family, household, foreseeable user of product), and the type of damage which can be addressed (physical injury, property or economic damage). Understanding this topic in each case calls for a proper analysis of the statutes of the state concerned and of the case law. Warranties, expressed or implied, can be limited or disclaimed.(482) iii)

Rules of contract interpretation

A large number of disputes related to space activities stem from contracts and it is important to address the rules applied for contracts interpretation as they are of considerable consequence to the parties. The written agreement between the parties is given utmost value under US law and this is why precise drafting of contracts and agreements plays an important role in transactions involving a US point of contact. This point will be elaborated later in the context cross waivers of liability agreements introduced in launch contracts, and the associated case law.

(478)

(...continued) (accessed 01/2001), Section 2-313(l)(a)

(479)

As an example, in Jones v. Marcus, 217 Ga App 372, 457 S.E.2d 274 (1995), the court decided that a plaintiff telling a defendant that he wanted to buy tires for his pickup truck was not sufficient to invoke this warranty, absent evidence that the defendant knew what the truck was to be used for.

(480)

We will see below, when we come to tort liability, that the theory of implied warranties has also been the start point for certain developments in tort law, where privity is not required.

(481)

See UCC, supra note 478, Section 2-318 which defines such requirement for privity and its sphere of application.

(482)

See further paragraph devoted to these limitations and disclaimers.

154 A fundamental rule in contracts interpretation is that of parol evidence.(483) When the parties to a contract embody their agreement in writing and intend the writing to be the final expression of their agreement, under this rule the terms of the writing may not be varied or contradicted by evidence of any prior written or oral agreement in the absence of fraud, duress, or mutual mistake.(484) The final expression of agreement of the parties is referred to as an “integration”, which may be partial (document intended to be final, but which is not intended to contain all the details of the agreement) or total (document intended to be final and containing all the details of the agreement(485)). The parol evidence rule applies to partial integration by barring evidence (either oral or in writing) outside of the agreement if it would contradict a term of the written agreement. The parol evidence rule applies to total integration by barring evidence (either oral or in writing) outside of the agreement if it would contradict terms of the written agreement or add to such terms. The parol evidence rule applies to prior agreement but not to subsequent oral agreements (unless otherwise provided in the contract). It does not apply to evidence which can be brought to demonstrate that the contract is void (for instance for lack of consideration(486)), or to the prove that a condition contained in the contract has been achieved, or even in the case of collateral agreements. In court, it is in principle the judge who decides on the qualification of a document as an integration, whether total or partial, and whether evidence supplements or contradicts the terms of the contract. Besides the parol evidence rule which is connected to the substantial content of a contract, it is allowed to introduce evidence to help in the interpretation of particular terms of this contract. The courts apply some general principles of interpretation: - the primary purpose of the parties will be a very strong guideline in the interpretation; - terms which are unclear are normally interpreted against their drafter; the interpretation made by the courts will endeavor to give the terms of the contract reasonable, lawful and effective meaning; - where contracts are concluded based on standard terms and conditions incorporated by reference and amended by a specific contract, the court will let the negotiated specific terms prevail over the general terms and conditions; - it is possible to take into account, for the purpose of interpretation, and by exception to the parol evidence rule, the practice of the parties in implementing the (483)

One version of this rule is codified in UCC, supra note 478, Section 2-202.

(484)

Black’s Law Dictionary, supra note 18.

(485)

The agreement is more likely to be considered a total integration if it contains a clause providing that this agreement constitutes the sole agreement between the parties and shall supersede any other prior agreement. This clause is usually called a “merger clause” due to the fact that it merges all agreements of the parties into one document.

(486)

We have not been studying, in the context of this thesis, the rules related to the formation of contracts. However, one fundamental notion of common law has to be pointed out, and that is the notion of consideration. Consideration is a necessary element for the validity of a contract. It basically contains two elements. On one hand, a promisee gives away something either in value or in rights. On the other hand, the promisor makes his own promise in exchange for the value or rights given away by the promisor. The notion of bargain has to be present to support the existence of a consideration. See Restatement of Contracts, Second, supra note 472, Sections 17(1) and 71.

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concerned agreement, or their practice in past contracts, or even the usage of trade.(487)

If the parties have left some issues undealt with in their contract and remained silent on them, the practice of the courts is generally to provide this term if the intention of the parties as documented in the agreement is clear enough that the court can formulate the term necessary to resolve an issue where the parties were silent.

4.1.2.- Tort Liability The matter of torts is broad. What is generally understood by tort is a civil wrong which takes place outside a contractual relationship.(488) There are three main categories of torts: intentional torts, negligence and strict liability.(489) Due to the complex way in which torts theories have developed, in a somewhat impressionist fashion, it is difficult to perceive a theoretical structure from which a set of general principles can be derived.(490) In the context of the activities focused on in this thesis, the intentional torts are ignored and the (487)

As defined by UCC, supra note 478, Section 1-205(2), it is “ any practice or method of dealing having such regularity and observance in a place, vocation or trade as tojustify an expectation that it will be observed with respect to the transaction in question”.

(488)

See definition provided in R.R. Cummins, Tort Law (Upper Saddle River: Prentice Hall, 1999), at 2 & 3: “ The term originates from the Latin term torquere, meaning to twist. The twisting is the bending of the rules of proper human behavior resulting in harm to another person. The term tort refers to a violation of a civil rule of conduct causing injury to another. Thus, a tort is a civil wrong resulting in injury to the person or property of another. It is any civil wrong that infringes on an individual’s private rights. An individual’s private rights are the enjoyment of one’s property and the maintenance of one’s physical well-being. The infringement may be through an intentional act or omission, or as the result of unintentional behavior. The intentional or unintentional behavior that results in harm to another is called tortious conduct, or conduct that is harmful to another’s individual rights. [...] The goal of tort law is to assign financial responsibility, referred to as liability, to the tortfeasor for tortious conduct that has resulted in injury to an individual’s property or person”.

(489)

These categories are sometimes further divided into nominate torts (which refer to a particular kind of tort such as battery, assault etc.), and innominate torts (which refer to torts in general).

(490)

See W.L. Prosser, Handbook of the Law of Torts, 4th Edition (St Paul, Minn.: West Publishing, 1971), at 2, stating “ Included under the head of torts are miscellaneous civil wrongs. (...) These wrongs have little in common and appear at first glance to be entirely unrelated to one another, except perhaps by accident of historical development; and it is not easy to discover any general principle upon which they may all be based, unless it is the obvious one that injuries are to be compensated, and anti-social behavior is to be discouraged. This led (...) Salmon (...) to contend that there is no such thing as a law of Tort, but only a law of particular unconnected torts -- that is a set of pigeon holes, each bearing a name, into which the act or omission of the defendant must be fitted before the law will take cognizance of it and afford a remedy. This view has been rejected by many other writers, who havefelt that tort law is broader than any named theories, and that some more or less vague general principles run through it, however difficult it may be to formulate them. There is no necessity whatever that a tort have a name”.

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negligence and strict liability theories are examined since the majority of potential tort situations arising out of launch activities and associated industrial activities will not be intentional torts. However, there is one specific area of intentional torts relevant in this type of activity: the traditionally called toxic torts for which liability can be sought under negligence or strict liability but also under trespass and nuisance, which are intentional torts.(491)

i)

Negligence

a)

General notion

The Restatement of Torts Section 282 defines negligence as “[...] a conduct which falls below the standard established by law for the protection of others against unreasonable risk of harm ”.(492)

The notion of negligence is associated with the determination of a standard of conduct in relation to the social environment. From there flows the principle of the existence of a duty of care as a premise to a finding of negligence, central to the tort of negligence. Negligence is the executing of an act which a person of ordinary prudence would not have done under similar circumstances or the failure to do what a person of ordinary prudence would have done under similar circumstances.(493) The standard, as defined by the Restatement Torts,(494) is that “Unless the actor is a child, the standard of conduct to which he must conform to avoid being negligent is that of a reasonable man under like circumstances ”. From this definition, one has to infer that the law of negligence evolves to reflect the changes in the standards of care in society. The plaintiff claiming in negligence must show that:(495) - there was a duty or obligation recognized by law to conform to certain standards

(491)

R.R. Cummins, Torts Law, supra note 488, at 110.

(492)

American Law Institute, Restatement of the Law of Torts, Second, as adopted and promulgated by the American Law Institute at Washington (St Paul, Minn.: American Law Institute Publishers, 1965-) [hereinafter referred to as Restatement of Torts, Second], Section 282.

(493)

Amoco Chemical Corp v. Hill, Del Sup, 318 A.2d 614, 617.

(494)

Restatement of Torts, Second, supra note 492, Section 283.

(495)

The elements to be proven were also well established in English Law. Donoghue v. Stevenson, House of Lords, (1932) A.C.562 (H.L.). The story of the case was about the plaintiff having drank beer from a bottle which turned out to contain a dead snail, and as a result suffered from shock and severe gastro enteritis. He sued the manufacturer of the beer. The court considered that the manufacturer of an article of food, medicine or the like, sold by him to a distributor in circumstances which prevent the distributor or the ultimate purchaser or consumer from discovering by inspection any defect, is under a legal duty to the ultimate purchaser or consumer to take reasonable care that the article is free from defect likely o cause injury to health. Lord Macmillan stated that the burden of proof must always be upon the injured party to establish that the defect which caused the injury was present in the article when it left the hands of the party whom he sues, that the defect was occasioned by the carelessness of that party, and that circumstances are such as to cast upon the defender a duty to take care not to injure the pursuer.

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of conduct for the protection of others against unreasonable risk;(496) - there was an act or omission which resulted in the breach of that duty; - that, as a proximate cause of that breach, there were actual losses, injury or death, i.e a link of causation(497) and an actual damage.(498) b)

The far reaching scope of negligence theories: no need for privity

Originally, in order to bring a negligence action against a manufacturer or a seller of product, the link of privity of contract had to be shown but the important case MacPherson v. Buick(499) brought significant change to this requirement. The court decided in this case (496)

Courts usually consider that where an act is one which a reasonable person would recognize as involving a risk of harm to another, the risk is unreasonable and the act is negligent if the risk is of such magnitude as to outweigh what the law regards as the utility of the act or of the particular manner in which it is done. The reasonableness of the person is measured by the question whether a reasonable person of ordinary prudence would behave the same way as the defendant did.

(497)

Marilyn P. Sievers v. Beechcraft, United States District Court, Eastern District Louisiana, (1980), 750, 2-82, 18.141: the suit arose out of the crash into Lake Pontchartrain of a Beech Air King aircraft, in 1977. The owner of the aircraft was Tidewater Marine Service, Inc. Five persons were killed in the crash, including Gerald Sievers, who was employed by Tidewater as one of the two pilots of the aircraft. The plaintiff, Marilyn Sievers, on her own behalf and as tutrix of her minor children, filed an action against Beech Aircraft Corp, the manufacturer of the aircraft, for the wrongful death of her husband, as well as against a number of other defendants. The plaintiff failed in her action because the court considered that the evidence presented fell short of what was required to prove her claims. And the court added that even if the plaintiff was able to show that a defect existed, she must also prove a causal relation between such a defect and the crash. Generally, the notion of proximate cause goes further than the simple link of causality. It also introduces the notion that the defendant can only be liable for damage caused within a certain sphere of proximity. It introduces the notion of foreseeability. The defendant will be liable for the consequences of his negligence which were reasonably foreseeable at the time he acted negligently.

(498)

It is important in common law that there is an actual damage. In principle courts do not allow recovery for damage which have not yet manifested themselves. Some evolution has taken place. For instance in the area of medical malpractice, the damage represented by the potential development of a medical condition due to the negligent act of a doctor, could be recoverable. Also, such recovery could be allowed in pollution cases where a number of people could potentially suffer consequences of such pollution. But these are isolated cases and the principle remains that common law liability is compensatory in nature and therefore requires the demonstration of an actual damage.

(499)

McPherson v. Buick, New York Court of Appeals; 217 N.Y. 382, 111 N.E. 1050 (1916). The defendant was the manufacturer of an automobile. He sold an automobile to a retail dealer who, in turn resold it to the plaintiff. While the plaintiff was in the car, it suddenly collapsed. He was thrown out and injured. One of the wheels was made of defective wood and its spokes crumbled into fragments. The wheel was not made by the defendant. It was bought from another manufacturer. The suit was brought by the subvendee of the motor car against the manufacturer as the original vendor. The court spelt out the principle that the manufacturer or seller of goods is liable for injuries to persons due to defects therein, and that such liability is not limited to things which in their normal operation are implements of destruction. But, if the nature of the thing is such that it is reasonably certain to place persons in peril when negligently made, the liability attached irrespective of contract for failure properly to inspect and discover defects, coupled with the knowledge of probable danger therefrom. However, the mere fact that damage may possibly result from the character of the goods is insufficient to make the manufacturer liable for injuries and it must appear that injury would probably result. The manufacturer must also have the (continued...)

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that the manufacturer ofan automobile is liable to an injured user even ifthe user bought the automobile from a dealer and not directly from the manufacturer. The rationale for that decision was that the manufacturer, by placing the automobile in the market, assumed responsibility to the purchaser and the users of that automobile for negligent defects in manufacture. The manufacturer owes the ultimate consumers certain duties of care and is liable due to negligence, regardless of privity. The liability recognized in MacPherson for the immediate purchaser was later extended to users and consumers, and then to third parties, based on the criteria that the seller could have expected them to be injured by the probable use of the product.(500) They must be within a certain sphere of foreseeability for the seller/manufacturer. They have to be foreseeable plaintiffs.(501) This foreseeability is determined as a matter of fact, on a case by case basis. c)

Duties giving rise to negligence actions in the area of manufacturer liability

In the field of aviation there is a duty on the part of manufacturers, component part manufacturers and contractors to warn of dangerous defects or characteristics after the vehicle is produced.(502) However, there is no duty to warn of obvious danger.(503) (499)

(...continued) knowledge that in the usual course of events, the danger will be shared by others that the buyer, although mere knowledge alone is insufficient to establish his liability. It was also decided that the duty of a manufacturer to inspect the goods so as to guard against injuries against persons therefrom is independent of contract. The manufacturer was not relieved of liability because he had bought the wheels from another contractor, and he was rendered responsible as manufacturer of the finished product. The court also indicated that the duty of the manufacturer to inspect the goods produced by him varies with the nature of the goods to be inspected and is higher when the goods are dangerous, and greater degree of caution is required. Having established that an automobile is a dangerous product, thereby attracting a higher standard of inspection, the court retained the liability of the manufacturer.

(500)

Restatement of Torts, Second, supra note 492, Section 395.

(501)

Palsgraf v. Long Island R. Co, Court of Appeals of New-York, 248 N.Y. 339, 162 N.E.99, May 29, 1928.

(502)

Braniff Airways v. Curtiss- Wright Corporation, United States Court of Appeals, 2d Circuit, 19 May 1969: The airline and two passengers brought actions against the manufacturer of the airplane engine for injuries sustained in an airplane crash. The court stated that after a product which is used in such a manner as to affect human safety has been sold and defects in design of the product have come to the manufacturer’s attention, the manufacturer has the duty either to remedy the defects, or, if complete remedy is not feasible, at least to give users adequate warnings and instructions concerning methods of minimizing danger. Also Joseph T.Labelle and George Blanchard v. Industrial Corporation McCauley, United States Court of Appeals, 1st Circuit, May 21, 1981: As the pilot advanced the throttle of his little aircraft and began his take off roll, a blade of his starboard propeller broke off and sliced into he fuselage. The pilot was able to abort take off without injury to any person. The plaintiffs sued McCauley, the propeller manufacturer. The court recalled the provisions of Section 388 of the Restatement (Second) of Torts which provides that to be adequate, a warning must reasonably apprize the purchaser of the danger by notice or by an indirect notice which gives warning or eliminates the danger. The fact that an indirect warning fails to reach a particular purchaser does not alone render the manufacturer negligent if the method of warning was adequate. McCauley knew in 1965 [the accident happened in 1972] that repair stations had not be performing the required operations. Despite that knowledge and the availability of alternative means of warning the plaintiffs, such as the belatedly issued Service Bulletin 88, (continued...)

159 Industrial standards or customs are sometimes taken into account by the Courts as a means of establishing the nature of the duty of care or the existence or not of reasonable care in a specific case. However, it is often only an element of evidence, and the conformity of a defendant’s behavior to an industrial custom is not a guarantee of success in a trial. It is also of particular importance to note, in a field such as that of space activities which involve elaborate or new technologies, that the existence of particular professional skills often create higher standards for the duty of care. This is the case where the defendant would have knowledge superior to that of a reasonable person in a field relevant to the issue at dispute. The standard of reasonable care for him will be higher. It is also the case for professionals in specialized areas who are expected to perform at the level maintained in their profession and in accordance with the rules of the art. The theory of negligence per se should also be mentioned, whereby the violation of a statute which imposes certain safety-related obligations and is directly relevant to the facts at trial, is negligence per se (unless the violation can be found excused). On the other hand, compliance with a statute may not suffice to demonstrate the appropriate standard of reasonable care.

d)

Res Ipsa Loquitur

In negligence cases, the burden of proof is on the plaintiff. The plaintiff must both produce the evidence of the constituting elements of the negligence he is asserting against the defendant (burden of production), and convince the jury(504) of those facts and their relation to the damage suffered (burden of persuasion). This has been somewhat relaxed through the theory of res ipsa loquitur (the thing speaks for itself) and allows the plaintiff to establish negligence through the circumstantial evidence surrounding the injury or damage. Once the existence of a duty is proven, as well as the proximate cause, the plaintiff is not required to prove the breach of the duty. This alleviation of the burden of proof will generally be subject to four conditions: - there is no direct evidence of the defendant’s conduct; - such an accident normally does not occur without negligence; - the thing which caused the accident was in the exclusive control of the defendant;(505) (502)

(...continued) McCauley decided to rely solely on whatever indirect notice might result from its service manual revision. The court considered that this did not constitute an adequate method of warning and it was therefore a negligent failure to warn. See also De Vito v.United Airlines - 98 F.Supp 88 (EDNY, 1951)

(503)

Clark v. The Boeing Co, District Court of Appeal, Florida, (1981), 734,681, 17.448. The suit was brought by the husband of a flight attendant who had suffered damage as she opened the aft door of the plane to let in a late passenger, a trauma contended to have been caused by the noise and jet fuel emission. The court stated that Mrs Clark was aware that opening the door would expose her to the noise and fumes. She voiced her objections to the captain. The defendants in this case had no duty to warn under these circumstances.

(504)

See further paragraph on judicial proceedings.

(505)

Mahowald v. Minnesota Gas Co. Minn, 344 N.W.2d 856, 862. See also Mack v.Reading Co, 377 (continued...)

160 - the accident must not be due to any voluntary action or contribution on the part of the plaintiff.(506) This theory is unequally applied by the courts and the degree of alleviation of the burden of proof of the plaintiff certainly varies.(507) The use of the res ipsa loquitur theory can either be authorized by the courts in conjunction with specific allegations of negligence, or be considered as exclusive and cannot be pleaded together with specific allegations of negligence. The opinion of the courts also varies as to whether res ipsa loquitur is a substantive rule of law or a rule of procedure, with all the consequences that it has on which version of res ipsa loquitur will eventually be applied by the court.(508)

e)

Negligence and Space activities

According to J.A. Bosco,(509) under present law there is no doubt that it will be held, under common law negligence principles, that a negligent contractor, manufacturer, seller or other supplier of products, component parts or other objects used for space activities will be liable for damages, injuries or death to third persons. This liability for negligence would extend not only to manufacture, but also to inspection, testing, design and operation of space related equipment and activities. Although very little case law exists as of now with respect to space activities, some specific elements will probably influence the nature and strength of the duty of care with respect to space activities: - due to the complexity of space systems and of the industrial consortia building them (including due to their transnational nature), the foreseeability test will probably be more restrictive and not as far reaching as in the case of a car manufacturer for instance; - the duties owed by a manufacturer will probably be more stringent as he is aware that the products or components he provides are to be used on extremely expensive systems, subject to extreme conditions, often for missions which are unique (encounter with a comet for instance), or even are manned and this would certainly increase significantly the standard of duty of care expected. The result of this will probably be that the duties will be owed to a relatively close circle of potential plaintiffs but the standard of these duties will be considerably higher. The (505)

(...continued) Pa. 135, 103 A.2d 749, 751, which decided that if a thing is shown to be under management of the defendant (or his servants), and accident is such as in ordinary course does not happen if those having management use proper care, it allows reasonable evidence in absence of explanation that the accident arose from lack of care.

(506)

Hillen v. Hooker Const Co, Tex Civ App, 484 S.W.2d 113, 115; Lux Art Van Service Inc v. Pollard, C.A.Ariz, 344 F.2d 883, 886.

(507)

See J.A. Bosco, “Manufacturer’s Liability to Third Parties for Outer Space Activities” (1986) 7:1 Northrop University Law Journal, 1, at 40.

(508)

See J.A. Bosco, “Manufacturer’s Liability to Third Parties for Outer Space Activities”, supra note 507, at 40.

(509)

J.A. Bosco, “Manufacturer Liability to Third Parties for Outer Space Activities”, supra note 507, at 38.

161 standard of the DeVito continuous duty to warn of dangerous defects after the sale of the concerned product will also probably be higher. The burden of proof is on the plaintiff in negligence cases. The satisfaction of this burden of proof may be very difficult in space transportation cases and related manufacturing activities for the same reasons as in aircraft accident cases. Of course, res ipsa loquitur may come to the rescue of the plaintiffs, however, this theory relies on a certain knowledge and experience of the vehicle. As it was in the case of aviation cases in the early days, it will probably be applied reluctantly in the case of space activities.(510)

ii)

Strict Liability

Under strict liability theories, the plaintiff may successfully sue a manufacturer so long as demonstration can be made that a defect in the product caused injury to him. The proof of negligence and of the related breach of a duty of care, is not necessary. This type of liability developed by the courts (and sometimes by Statutes for certain types of products) is very consumer protective and aimed at relieving the consumer of the burden of proof in cases where it may be very difficult to bring such proof for the reason of the very complex nature of the product. “Courts created strict product liability laws to make it easier to sue manufacturers in product defect cases by switching the focus to the safety of the product rather than the conduct of the builder.”(511) The idea was also that manufacturers can better bear the cost of damage caused by their products rather than the victims of such damage.

a)

Abnormally dangerous activities

Some activities are considered abnormally dangerous in consideration of their potentially hazardous nature and participants in these activities will be held strictly liable for damage, injuries and death caused as a result of them. The leading case in this matter was the British case Rylands v. Fletcher,(512) where it was decided by the House of Lords that a person is liable for damage caused by a thing or activity inappropriate to the place where it is maintained, in light of that place and its surroundings. The Restatement of Torts refined this principle and states:(513) “ One who carries on an ultra hazardous activity is liable to another person, land or chattels, the actor should recognize is likely to be harmed by the unpreventable miscarriage of the activity for harm resulting thereto from that which makes the activity ultra hazardous, although the utmost care is exercised to prevent the harm. An activity is ultra hazardous if it a) necessarily involves a risk of serious harm to the person, land or chattels of others (510)

See the case Smith v. Lockheed Propulsion, ref infra note 515, for an example of decision in the early days, where the application of the rule res ipsa loquitur was rejected.

(511)

P.J. Kolczynski, “Aviation Product Liability”, online: (accessed 01/2001)

(512)

House of Lords. 3 LRE & I.App 330 (H.L. 1868)

(513)

Restatement of Torts, Second, supra note 492, Section s 519, 520.

162 which cannot be eliminated by the exercise of utmost care and, b) is not a matter of common usage.” The plaintiff will have to plead and prove that the defendant was engaged in such ultra hazardous activities and that as a proximate cause of such activities the plaintiff suffered actual injuries and damage. There is no need for him to prove the existence of a duty and the breach of that duty as would have been the case in a classical case of negligence.This is a considerably better situation than that of the plaintiff in a negligence case. The main criteria usually used to determine whether an activity is ultra hazardous are: - the existence of a high degree of risk of some harm to the person, land or chattels of others; - likelihood that the harm that results from it will be great; the inability to eliminate the risk by the exercise of reasonable care. This is a fundamental element of this type of tort; - the extent to which the activity is not a matter of common usage; - the inappropriateness of the activity to the place where it is carried out; - the extent to which its value to the community is outweighed by its dangerous attributes. Space activities and especially rockets firings and launches fall under all of these criteria. From the few cases in the US related to space activities, one can conclude that space activities are considered ultra hazardous or abnormally dangerous and that the type of liability defined above applies. In the case Berg v. Reaction Motors Div,(5l4) involving rocket testing causing damage and discomfort to surrounding homes, the Supreme Court of New Jersey declared the defendants strictly liable for property damage to those in the vicinity of the tests, using the reference to blasting operations where such position is traditional. In the case Smith v. Lockheed Propulsion,(515) where firing of a rocket engine caused property damage, it was decided that rocket testing is an ultra hazardous activity and the defendant was declared strictly liable. Pigott v. Boeing Co(516) was less in favor of strict liability and the Supreme Court of Mississippi applied the negligence theory, potentially due to the fact that the US Government was one of the defendants.(517) This case was somewhat of an exception to the common belief at the time that indeed rocket

(514)

37 N.J 396, 181 A.2d 487 (N.J.1962) 16,206: the court stated that “ ...although careful blasting may not involve an unreasonable risk of harm and should therefore not be entirely prohibited, it nonetheless is an ultra hazardous activity which introduces an unusual danger into the community and should pay its own way in the event it actually causes damage to theirs... A business enterprise which engages in blasting operations knows that despite the precautions it takes, neighboring properties may be damaged. If damage does occur, it should in all fairness be absorbed as an operating business expense, for the enterprise may not reasonably expect its wholly innocent neighbors to shoulder the loss. ” This case is reprinted in S. Gorove, Cases on Space Law (University of Mississippi: Journal of Space Law, 1996), at 16 ff.

(515)

247 Cal App 2d 774, 56 Cal Rptr. 128 (1967), 27, 206. Also in S. Gorove, Cases on Space Law, supra note 514, at 27.

(516)

240 So. 2d 63 (1970), 38, 206. Also in S. Gorove, Cases on Space Law, supra note 514, at 38.

(517)

We will address briefly below the particularities associated with the US Government being a defendant.

163 firings and space activities in general, were to be considered abnormally dangerous.(518) J.A. Bosco concluded that “ It would appear from the paltry number of cases which actually deal with the issue that, under existing law, while there is a contrary decision, the majority position in the United States is that rocket testing is an ‘abnormally dangerous’ activity. While it is very valuable to the community at large, it is the type of activity which, regardless of the amount of care taken, carries with it a risk of very serious harm. These principles must also apply to launch activities given the similarities they have to rocket testing. It would also be safe to conclude, under the present state of technology and usage, that outer space activities per se, including launch, orbit, and retrieval or landing operations, may be considered ‘abnormally dangerous’ under the Restatement approach. Outer space activity is not an activity which can as yet be considered ‘commonly carried on’. There exists a high degree of risk of harm to the person, land, or chattels of others if there is an accident. It is likely that if there is any harm which results, that harm will be great. Consequently, it would be likely that if there were an outer space related accident which resulted in damages, injuries or death to third persons unrelated to the outer space activity, courts in the United States could apply absolute liability principles against defendants under the doctrine of Rylands v. Fletcher as modified and adopted by the Restatement.” (519) However, in the light of the evolution which took place in aviation cases,(520) where experience gained reduced the application of the abnormally dangerous activities theory,(521) one could certainly argue that what could have seemed obvious then for space activities may not now. Although space activities, and in particular space transportation, have not reached the degree of development and routine to be found in air transportation, they may not anymore be considered systematically as abnormally dangerous. They are dangerous but not abnormally so. Future liability cases for space related activities such as rocket firings may be dealt with under negligence theories rather than strict liability theories. It is worth noting that, in general, in cases of strict liability due to the exercise of abnormally dangerous activities, liability will be recognized only when the damage claimed resulted from the risk attached to the abnormally dangerous activity itself.

b)

Products liability

The Restatement of Torts states:(522) “Special liability of the seller of product for physical harm to user or consumer. (1) one who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to

(518)

A. Dula, “Regulation of Private Commercial Space Activities” (1983) Jurimetrics Journal, 156 Wilkins, “Substantive Bases for Recovery for Injuries Sustained by Private Individuals” (1978) 6 Journal of Space Law, 161.

(519)

See J.A. Bosco, “Manufacturer Liability to Third Parties for Outer Space Activities”, supra note 507, at 35.

(520)

See J.A. Bosco, “Manufacturer Liability to Third Parties for Outer Space Activities”, supra note 507, at 35 & 36.

(521)

Already pointed out by J.A. Bosco, “Manufacturer Liability to Third Parties for Outer Space Activities”, supra note 507, at 35.

(522)

Restatement, Second, of Torts, supra note 492, Section 402A.

164 the ultimate user or consumer, or to his property, if a) the seller is engaged in the business of selling such a product b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold. (2) The rule stated in Subsection (1) applies although a) the seller has exercised all possible care in the preparation and sale of his product, and b) the user or consumer has not bought the product from or entered into any contractual relation with the seller”.

The Restatement seems to limit the application of this theory to users and consumers, but case law widened this to cover bystanders.(523) In most US jurisdictions, in order to obtain damages from a manufacturer, seller, distributor, contractor or subcontractor for injuries or damage, the plaintiff will have to prove: - the defective condition of the product. Case law usually considers that it needs to be established that the defect led to the unreasonably dangerous condition of the product(524) but this position is not uniform;(525) - the proximate cause of the injuries or damage occurred from that defective condition in the product; - that actual loss or injuries suffered; - that the defect existed at the time the product left the defendant’s control and that the defendant manufactured, sold, or distributed the product or in any way placed it into the stream of commerce. No privity is requested for the implementation of this liability. In fact, bystanders and (523)

A bystander is defined as “One who stands near; a chance looker-on; hence one who has no concern with the business being transacted. One present but not taking part, looker-on, spectator, beholder, observer”. Black’s Law Dictionary, supra note 18, at 201.

(524)

Manos v. TWA, US District Court, Northern District of Illinois, January 11, 1971. 11 Avi, 17,966.

(525)

McGee v. Cessna, 82 Cal App 3J 1005: Cal Rptr 694. An occupant of a private airplane brought and action against the owner and the manufacturer for personal injuries suffered in crash and subsequent fire. The claim against the owner was settled and dismissed before trial. The occupant asserted two theories of liability against the manufacturer, the first charging design defects rendering the manufacturer strictly liable for injuries proximately caused by the defect. The occupant claimed the nose wheel structure of an aircraft was susceptible of failure in a crash, telescoped on impact with the ground, ruptured the aircraft’s fuel system, and caused the fire. After presentation of the evidence, the trial court instructed the jury on the issue of crash worthiness of the aircraft, in accordance with negligence principles. The jury returned a verdict in favor of the manufacturer and the occupant appealed. The Court of Appeal reversed, holding the negligence instructions given by the trial court on the crash worthiness issue were erroneous. It was decided that in California, responsibility is imposed on a manufacturer for a defective or defectively designed part causing an injury in a secondary accident resulting from the first (crash worthiness issue) under strict liability rules, and no showing of unreasonable danger to the unsuspecting customer is required. Under a standard of strict liability in tort, a plaintiff need show only that his injuries were proximately caused by the design of a product. The plaintiff need not prove negligence, foreseeability or failure of the manufacturer to act reasonably in the design or manufacture of its product, and the manufacturer carries the burden of showing that the product is not defective.

165

third parties can also have valid claims when their injuries or damage was reasonably foreseeable. The plaintiff will also not need to bring the proof of an act, omission or misconduct on the part of the defendant. On the other hand, the defendant’s proof that he took all necessary and reasonable measures in the design and manufacturing of the product is not a valid defense. It will be irrelevant in the application to his case of the strict product liability. Across the case law in this domain, three main lines of liability are usually encountered: - the manufacturing defect: if the manufacturer fails to build the product correctly, a manufacturing defect may exist. Thus, if the finished product is substandard by comparison to identical products in that product line, the manufacturer may be held liable for failing to catch the defect before it left the assembly line and was sold to the consumer;(526)

- the design defect: a defect in the design of a specific line of products which, because of the defective design causes damage, even though the individual products have been manufactured properly. In this area, the alternative risk/utility test is very often used by the courts. “[...] defects can be shown revealing that there are risks in the design which outweigh the benefits of the design, coupled with the proof that there was a feasible, safer design, but the manufacturer failed to use it. If there is more risk than usefulness, then the product should have been designed differently or adequate warning should have been issued considering the hazards associated with the use of the product” (527)

- failure to warn: the products in a specific line of products are defective because they are not accompanied by proper instructions or warnings to inform the consumer or user of the dangers of using these products. The courts will have to appreciate the completeness, clarity and adequacy of the warning from all points of view (substantial content of the warning, support of the warning, etc).(528) The assessment of the term “defect” and the determination that a defect made products unreasonably dangerous is a case by case determination by the courts. It is also a factor of (526)

Definition from P. J. Kolczynski, Aviation Law Newsletter, Vol 2, September 1997, page 2; online: (accessed 01/2001).

(527)

P.J. Kolczynski, supra note 516, at 3. Also see from the same author, in “Aviation Product Liability”, supra note 511, a practical example of the application, in a trial, of the risk/benefit test.

(528)

For an example, see J. W. Nesselrode v. Beechcraft, Missouri Supreme Court, N°67428, March 25, 1986. Here, the manufacturer was found liable both on the defect in design test and on the failure to warn test. On the defect in design, the court considered that an aircraft manufacturer was liable for the wrongful death of a passenger on a small aircraft that crash shortly after takeoff, killing all four people on board. Critical flight components, specifically the right and left elevator trim tab actuators that controlled the airflow and allowed the plane to climb, had been switched during routine maintenance shortly before the fatal crash. The evidence showed that the actuators’ design was unreasonably dangerous for its anticipated use in that it allowed for the incorrect reverse installations of two identical-looking, but opposite-functioning parts. On the duty to warn, the court decided that a manufacturer was liable for failure to warn that the two elevator trim tab actuators, critical to the aircraft flight, could be mistaken, one for the other, and inadvertently switched during maintenance procedures. The maintenance manual did not contain any warnings concerning the possibility of reverse installation of the visually identical left and right actuators. The court considered that the jury could properly find that, had warnings been properly affixed to the actuators and/or provided in the maintenance manual, the accident would not have occurred.

166 the knowledge at the time the product was sold. In Greenman v. Yuba Power Products Inc,(529), the case involved an injury caused by a home power tool. It was decided that a manufacturer can be held strictly liable without proof of either fault or liability on a contractual or sales warranty theory if the plaintiff proved that he was injured while using the product in a way in which it was intended to be used and as a result of a defect in design and manufacturing which made the product unsafe for its intended use. In Elmore v. American Motors Corp,(530) the court stated that public policy considerations that extend liability to the ultimate user or consumer should also apply for bystanders: “If anything, bystanders should be entitled to greater protection than the consumer or user where injury to bystanders from the defect is reasonably foreseeable. Consumers and users, at least, have the opportunity to inspect for defects and to limit their purchases to articles manufactured by reputable manufacturers and sold by reputable retailers, whereas the bystander ordinarily has no such opportunities. In short, the bystander is in greater need of protection from defective products which are dangerous, and if any distinction should be made between bystanders and users, it should be made, contrary to the position of defendants, to extend greater liability in favor of the bystanders.” In Vandermark v. Ford Motor Company,(531) it was decided that the liability imposed upon the manufacturer extends to the negligence or defects attributed to a subcontractor or component part manufacturer notwithstanding the fact that the defect was created by a person who made the component rather than by the manufacturer who assembled it into the finished product.

c)

Breach of implied warranty

This theory has been used by the courts to construct a category of torts separate from negligence and ease the burden of proof which is rather heavy in the case of actions based on negligence. In an action based on implied warranty, there is no need for the injured party to prove that a duty has been breached or that the manufacturer has knowledge or notice of the defect. There are two main types of implied warranties: - implied warranty of merchantability: the liability here is established if the plaintiff proves that the defective design, defective material or any other specific act or omission, existed at the time the product left the manufacturer’s control, that the plaintiff relied on the warranty and that he suffered injuries as a proximate result. The presence of the defect can be asserted against the manufacturer or the seller through circumstantial evidence. - implied warranty of fitness for a particular purpose: the liability here is established if it is proven that the product was not reasonably fit for the purposes for which it was sold and that such a lack of fitness was the proximate cause of the injuries. There are some difficulties in relation to the use of these theories: - as these theories are strongly linked to the law of Sales, the Sales Act and the

(529)

59, Cal 2d 57, 27 Cal Reptr 697, 377 P.2d 897 (1963)

(530)

70 Cal 2d 578, 75 Cal Rptr 652, 451 P.2d 84 (1969)

(531)

37 Cal Rptr 896, 391 P.2d 168 (1964)

167

Commercial Code may apply. An area where this has an influence is over the issue of notice to be given to the seller; - it is not easy to determine what statute of limitations applies to these actions: contracts, torts? - these actions may not be available for a mere bystander. Some decisions have stated that privity is not required and that breach of implied warranty claims are available to persons in the vicinity of the product’s use if the product contains a high degree of hazard to third persons.(532) The leading case Henningsen v. Bloomfield(533) extended the implied warranty of merchantability and the implied warranty of fitness for a particular purpose to persons other than those in privity with the manufacturer or seller. The court held that under implied warranty theories both the manufacturer of an automobile and the dealer who sold it were liable to the wife of the purchaser driving the car. The court also held that regardless of any contractual disclaimers of implied warranties, public policy and social justice required that the implied warranty of fitness for a particular purpose and ofmerchantability run with the goods and privity of contract is not required to impose duties upon the manufacturer under these implied warranties. Insofar as the recovery bybystanders is not so clearlyestablished in all states, the factthat such action is open to them cannot be taken as a general principle. In space transportation activities, bystanders may suffer damage but their avenue of recovery will likely be the strict liability rather than breach of implied warranties.The theory of breach of implied warranty has been surpassed by the theory of strict liability in tort(534). The theory of breach of implied warranty was a transition between theories of negligence and the theories of strict liability in tort. It is sometimes called strict liability in contract and was (532)

Lichina v. Futura Inc. 260 F.Supp 252 (D.C. Colo, 1966); Tooms v. Ft Pierce Gas Co, 208 So.2d 615 (Fla, 1968).

(533)

32 N.J.358, 161, A.2d 69 (1960)

(534)

In Kramer v. Piper Aircraft, Florida Supreme Court, N°69-494, February 11, 1988, the Court explained this transition in very clear terms as follows: “The West court fundamentally altered product liability law in Florida by creating a new product liability tort action - strict liability in tort - out of the prior breach of implied warranty cases which had done away with privity of contract. West necessarily swept away such no-privity, breach of implied warranty cases in favor of the new action of strict liability in tort. Stated differently, the doctrine of strict liability in tort supplants all no-privity, breach of implied warranty cases, because it was, in effect, created out of these cases. This ground breaking holding, however, did not result in the demise of the contract action of breach of implied warranty as that action remains, said the West court, where privity of contract is shown. This interpretation of the West doctrine is supported by language from the West opinion itself. As we noted in West our recognition of the strict liability cause of action, in most instances, merely ‘accomplishes a change in nomenclature’ rather than presenting any great departure from present law. The source of warranty law is in contract while the obligation imposed upon a manufacturer is in the nature of enterprise liability and should not be governed by the law of sales. A manufacturer is strictly liable in tort when an article he places on the market, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury to a human being. This doctrine of strict liability applies when harm befalls a foreseeable bystander who comes within range of the danger. Although we did not expressly state in West that the common law implied warranty claim for personal injury no longer exists under Florida law absent privity, it is implicit from the language of the opinion that it was this Court’s intent to abolish that cause of action where the remedy of strict liability is appropriate.”

168 born out of an extension of the effects of a contract to persons extraneous to this contract. One can probably say that theories of implied warranties are a violation of fundamental contracts principles.

4.1.3.- Classical means of defense The basic means of defense will necessarily be the rebuttal of the elements upon which the plaintiff bases his case. Beyond such rebuttal, there are other defenses which act less as a rebuttal and more as countermeasures. The most common of such defenses are briefly presented below.

i)

Defenses related to behavior or characteristics of the plaintiff

Here, defenses which are essentially defenses to tort actions are addressed.

a)

Contributory negligence and comparative fault

The traditional notion of contributory negligence is the conduct by a plaintiff which is below the standard which he is legally required to conform for his own protection(535) and which is a contributing cause which cooperates with the negligence of the defendant and is a proximate cause of the plaintiff’s harm.(536) Such conduct deprives the contributory negligent plaintiff of recovery.(537) The only case where the plaintiff will recover his claim, even with contributory negligence, is when the defendant had a last clear chance(538) to avoid the plaintiff’s injury, in particular where the plaintiff was helpless(539) or inattentive.(540) There are few states which still use this notion of contributory negligence and it is only used in cases where the negligence of the defendant is asserted. A defense of contributory negligence cannot succeed in a case which is not founded on negligence (535)

However, a moment of forgetfulness is not considered contributory negligence. See R.R. Cummins, Tort Law, supra note 488, at 74.

(536)

Li v. Yellow Cab Co of California, 13 Cal 3d 804, 119 Cal Rptr 858, 864, 532 P.2d 1226.

(537)

F.C.Brown v. Piggly-Wiggly Stores, Supreme Court of Alabama, 454 So.2d 1370, July 27, 1984.

(538)

Black’s Law Dictionary, supra note 18, defines the last clear chance doctrine as follows: “The doctrine permits a plaintiff in a negligence action to recover, notwithstanding his own negligence, on a showing that the defendant had the last clear chance to avoid the accident, [...] Under the doctrine of last clear chance (or ‘discovered peril’ doctrine), as applied in automobile law, a plaintiff may recover from a defendant motorist for injuries or damages suffered, notwithstanding his own contributory negligence, where, as stated in terms of the essential elements of the doctrine, the plaintiff was in a place of peril of which he was unaware or from which he was unable to extricate himself, the motorist discovered or had the opportunity to discover plaintiff’s peril, and the motorist had the opportunity to avoid the accident through the exercise of reasonable care. The last clear chance doctrine is not recognized in every jurisdiction and is subject to limitations in others. There are many variant forms and applications of this doctrine in the jurisdictions which apply it. [...]”

(539)

Restatement of Torts, Second, supra note 492, Section 479.

(540)

Restatement of Torts, Second, supra note 492, Section 480.

169 since the use of the defense of contributory negligence accompanies a showing of a negligence situation to start with. When such demonstration of negligence is not required, theories of contributory negligence cannot apply. This notion has been progressively replaced by the notion of comparative negligence, in 46 states. The theories of comparative negligence consist in measuring the negligence of the defendant and of the plaintiff in relative percentages. Damages ultimately allowed to the plaintiff are adjusted taking into account the percentage of negligence attributed to him, if any, provided that by exercise of ordinary care he could not have avoided the consequences of the defendant’s negligence after it was or should have been apparent. The theories of comparative fault(541) also allow the same percentage allocation method to be applied when negligence has to be apportioned to numerous defendants having caused damage together, although the implementation of the notion is more complex in this case, especially where not all defendants have been brought to the suit(542) The doctrine of comparative negligence is not uniformly applied by the Courts in strict liability cases. The major advantage of the theory of comparative negligence over that of contributory negligence is that it allows for a more flexible approach of allocation between defendant(s) and plaintiff instead of the all or nothing avenue which is that of contributory negligence. It therefore allows for more realistic and balanced decisions. In classical manufacturer liability cases, the comparative negligence will involve looking at the negligence of the plaintiff who often is the user of the product. In aircraft manufacturer liability cases, it is common that the issue is more that ofa comparative fault assessment between the aircraft operator and the manufacturer.

b)

Assumption of risk by the plaintiff

This defense consists of demonstrating the victim’s voluntarily consent to take the risk that harm will occur. Such assumption of risk can be in that the victim has expressly agreed, in advance ofthe harm, not to hold the defendant liable for such harm. The victim is protected against its renunciation in certain areas where public policy does not allow express assumption of risk by the victim. This will be the case where the defendant has greater bargaining power due to his position as unique provider of the product or services (541)

As explained in R.R. Cummins, Torts Law, supra note 488, at 79, "There are three principal types of comparative negligence systems: - Pure comparative negligence: A plaintiff’s negligence does not serve to bar a claim, but does reduce damages in proportion to the fault; this system forms the basis of the Uniform Comparative Fault Act. - Modified comparative negligence: Sometimes called the 50 percent system; a plaintiff’s contributory fault does not bar a recovery under this system so long as it remains below a specified level of contribution, usually 50 percent. - Slight-gross system : A plaintiff’s contributory negligence is not a bar to his or her claim as long as his or her negligence is slight and the negligence of the defendant is gross. The modified comparative negligence system is the most common. Each system offers an opportunity for the trier of fact to apportion fault, although limiting the scope of apportionment in all but pure comparative negligence.”

(542)

Courts take different approaches to this specific problem such as joint and several liability, or allocation between represented defendants of the portion of damages which should have been paid by the absent defendant.

170 in question, or where the harm was caused by willful or intentional misconduct by the defendant, or where the victim would have renounced his rights to recover health care expenses. The assumption of risk can also be implied when resulting from the conduct of the victim. The implied assumption of risk in this case can only be established if the defendant proves that the victim was aware of the risk concerned(543) and that the victim consented to bear that risk. This defense is rather difficult to use for the manufacturers, as it must be strongly characterized and is interpreted strictly. The plaintiff can be considered as having assumed the risk of a defective product only if this plaintiff clearly understood the risk of using the product notwithstanding the apparent defect. If the defect is hidden, latent, and the plaintiff could not have appreciated the danger, the defense of assumption of risk will be impossible to argue. In general, the defense of assumption of risk is also applied in strict liability and warranty cases and the same conditions are applied. In some states and for some cases, comparative negligence statutes, have excluded assumption of risk as a defense.(544)

c)

Misuse of product, alteration of product

A defendant may argue misuse of the product when such misuse was not foreseeable. The defendant will remain liable for the consequences of foreseeable misuse. In this case the product is not defective as such. The harm is caused by the misuse of a non-defective product.(545) In the area of space activities, the evidence of a foreseeable misuse compared to an unforeseeable misuse should be relatively easy to deduce, compared to other types of less sophisticated products. Requirements and specifications for space products are extremely detailed and constitute documentary evidence of the parameters for which a product is designed and its operational requirements. Also, apart from product-specific requirements, the various applicable documents in the design, manufacture, testing and operation of a space equipment or vehicle are very detailed as well and would help considerably in establishing a misuse case. Other crucial documents for the establishment of such demonstration will be the operation and user manuals, as well as the training procedures. It is therefore in the interests of manufacturers to make sure that such documents are completely prepared to the extent possible to prevent misuse of the products and support potentially needed evidence in the future. In all cases, whether in negligence or in strict liability, a manufacturer of a product is usually not held liable for damages where, after the product leaves his possession and control, there is a subsequent modification which alters the product and is the proximate

(543)

“Knowledge of the risk is the watchword for assumption of risk. Under ordinary circumstances the plaintiff will not be taken to assume any risk of either activities or conditions of which he has no knowledge. Moreover, he must not only know of the facts which create the danger, but he must comprehend and appreciate the nature of the danger he confronts ”, W. Page Keeton et al., Prosser and Keeton on the Law of Torts, 5th Edition (St Paul Minn.: West Publishers, 1984), §68 at 487.

(544)

See R.R. Cummins, Torts Law, supra note 488, at 88, citing the New York Civil Practice Law and Rules, Article 14A as an example.

(545)

See Clark v.Boeing, supra note 503, end of part II.

171 cause of the plaintiff’s injury.(546)

d)

Actions between large companies

Strict liability is generally not applicable to negotiated transactions between large commercial companies.(547) The assumption on which these rulings rely is that these companies are negotiating from positions of relatively equal economic strength and allocate their risk by contract. The standard of evidence which they then have to bring forth to receive any damages from a manufacturer is higher and falls under negligence theories. Such theory also applies to large commercial companies not bound by contract. Unfortunately, there is no statutory definition of a large commercial company and consequently this introduces significant legal uncertainty.

ii)

Defenses related to limitation of the scope of liability

a)

Waivers and limitations of liability, disclaimer of warranties

It has been shown that the US system provides for express or implied warranties flowing from a contractual relationship.(548) Disclaimers of such warranties are often found in contracts and they are normally allowed with certain limitations. Insofar as express warranties are concerned, the purpose of a disclaimer is limited as the express warranties are normally negotiated in contracts, especially those of a certain size. The scope and terms of express warranties are precisely defined, and the disclaimer is self(546)

Robinson v. Reed Prentice Div of Package Mach Co, 49 NY 2d 471, 475. In the field of aviation, one may refer to the case Joan Sage v. Fairchild Swearingen Corporation Et Al, New York Supreme Court, Appellate Division, Third Judicial Department, N° 52167, January 29,1987. In this case, it was considered that the manufacturer of an aircraft could not be held liable for injuries allegedly caused by a defective aft hanger, a component used to secure a ladder to the baggage compartment door, because the owner of the aircraft had completely replaced the original part. Replacement of the hanger with a product not designed or manufactured by the original manufacturer amounted to more than modification or alteration of the product and relieved the original manufacturer from liability.

(547)

SAS v. United Aircraft Corp 601 F.2d 425 (9th Circ, 1979); Tokio Marine & Fire Ins v. McDonnell Douglas Corp 617 F.2d 936 (2d Circ, 1980). A DC8 plane, manufactured by McDonnell Douglas and owned and operated by JAL, crashed during take off, killing 52 passengers and injuring 10 others. Numerous law suits were brought against McDonnell and JAL on behalf of the injured and deceased persons, and all were settled. McDonnell, JAL and JAL’s subrogated insurance company (Tokio Marine) then litigated to settle their disputes over the apportionment and settlement of the resulting liabilities. Tokio Marine was seeking recovery from McDonnell for loss of the aircraft and contribution or indemnity for payments made in settlement of the passengers’ claims. McDonnell was seeking contribution or indemnity from Tokio Marine and JAL for payments it made to the passengers. Various arguments were made around warranty clauses, negligence and strict liability. The court decided that an airline could not recover from the manufacturer of an aircraft for damage for the craft after expiration of the warranty on a theory of strict liability. The doctrine of strict tort liability would not be applied in California in a case where a sales contract was between two large corporations who had negotiated from positions of relatively equal strength and the plaintiff’s claim was for damage to property sold. This ruling is rather uniform in jurisdictions other than California.

(548)

See above the discussions on contracts and warranties.

172

contained. When express warranties are not precisely defined, they can be disclaimed if the disclaimer is reasonable and clear. This is subject to a case by case assessment and a case law examination needs to be made to ensure the fulfillment of this condition. As far as implied warranties are concerned, because they flow in a more indirect fashion from the contract, they tend to be more controlled by regulatory provisions. As a starting point, one may refer to the UCC. The implied warranties can be subject to an express disclaimer and such express disclaimers are interpreted strictly. In order to control the manifestation of intent by the Parties, it is often provided by statute that they have to contain certain language and be written in a precise and unequivocal manner. The language ofthe contract can also imply a disclaimer (sale as is, inspection ofthe goods by the buyer), or sometimes even the uses in practice between the parties or the usage in the field of business concerned can lead to a disclaimer. There are often stricter provisions made in statutes for consumer protection for consumer goods. There is a rather large flexibility in US law in the area of clauses excluding or limiting liability. Contractual clauses excluding or limiting liability are usually enforced even where they disclaim liability entirely. The regime of such clauses varies from state to state but there are some common features which can be summarized in the following principles: - the parties need to have expressed their intent in unambiguous language, and clearly; - the terms must have been negotiated in good faith; - the provisions concerned must not violate express public policies; - the parties which concluded the clause in question have to be of relatively equal bargaining power. These clauses are allowable also for personal injury and death, so long as these result from negligence. As in most legal systems, it is not possible to exclude these liabilities in cases of gross negligence(549) or willful misconduct. In the space business, the most frequent clauses are the unilateral waivers of liability, the limitations of liability and their associated limits of warranty coupled with relaunch options, the cross waivers of liability whereby the parties mutually waive claims for liability, waivers of subrogation rights of the insurers of the parties, and hold harmless clauses whereby besides a waiver or cross waiver, the parties agree to hold each other harmless (or one party agrees to hold the other harmless) for certain claims potentially brought by third parties including other contractors in the contractual constellation surrounding the parties. All of these are often used together in contracts, leading to very complex clauses which ought, if well drafted, to provide a shield. However, such shield is not always perfect. In fact, important case law has developed in the space business in the US in relation to these clauses,(550) showing that these techniques would require more harmonized and consistent attention.

(549)

Gross negligence is distinguished from ordinary negligence by the element of culpability which is magnified to a high degree in gross negligence. Black’s Law Dictionary defines gross negligence as follows: “The intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting the life or property of another [...] ”.Black’s Law Dictionary, supra note 18, page 1033.

(550)

See further our specific discussions on US case law.

173

b)

Government Contractor Defense, prescribed design, and compliance with statutes

As shown,(55l) the fact that a defendant argues that he complied with applicable statutes or regulations will not necessarily help establishing that he was not negligent in a negligence action. It is only part of the evidence and the courts may consider that the manufacturer ought to have gone further than imposed by the statutes or regulations.(552) When a defendant is a contractor of the Government, it may be tempting for victims to sue that contractor for two main reasons. Firstly, when the victims are employees of the Government they are subject to Worker Compensation Schemes(553) which bar them from actions against the Government. Secondly, the Government is normally difficult to sue due to the basic principle of sovereign immunity which prevents suing the Government. In the US, the Federal Government(554) can be sued under the Federal Tort Claims Act which provides for a restrictive area of potential suits against it.(555) Given the disadvantages of suing the Government directly,(556) in some cases it may be more advantageous to sue a Contractor of the Government. In certain cases, the Government Contractor will not be held liable such as in the case where a product is sold to the US Government for military purposes and the specifications of the product have been approved by the government. This exemption will be accepted even when the design is grossly negligent. (551)

See above discussions on negligence.

(552)

“Even if a manufacturer builds the product in conformity with FAR [Federal Acquisition Regulation] Part 21, et seq, the manufacturer may still be held liable under state product liability laws. How can this be? The answer lies in the fact that many of the certification FARs merely establish minimum standards. State laws usually require that the product be safe for its intended use as well as for misuse which is reasonably foreseeable. The fact that the product received an FAA type certificate does not immunize the manufacturer against a product liability lawsuit. Certainly, a manufacturer may bring evidence to show that they built the product in full conformity with FAA standards, but most Courts do not consider this evidence conclusive. Plaintiffs may still prove that the product is defective because there is an alternative, safer and mechanically feasible way to design the product. In defense of manufacturers, ‘feasible’ should also mean that the FAA would have approved an alternative design and that the plaintiffs’ product design would have been marketable.”, in P.J. Kolczynski, “Aviation Product Liability”, supra note 511.

(553)

These have been introduced by Statutes, in all States. The employer is strictly liable for injuries incurred by its personnel on the job (injuries not suffered in the course of employment are usually not compensated). These workers compensation schemes are the sole remedy of the employee against the employer in those cases (except if the employee can demonstrate that the employer intentionally injured him). The employee will therefore loose his right to sue in tort. He can also normally not recover for pain and suffering. A counterpart to these reductions of benefits is that the employee will be compensated even in case of contributory negligence.

(554)

Local Governments have in general had immunity, but not where they perform functions which are not traditional Government functions (proprietary functions). The protection of this immunity has been abolished or considerably reduced in a number of States.

(555)

Under the Federal Tort Claims Act (FTCA), the Government liability cannot be sought for damage resulting from his exercise of a discretionary or policy-making function. This is true even in cases where such functions would have been abused.

(556)

For more on the liability exposure of the governments (whether Federal or state) and claims against them, see R.R. Cummins, Torts Law, supra note 488, at 145 ff and Restatement of Torts, Second, supra note 492, Section 895.

174 The elements of the military or government contractor defense are that the manufacturer is not liable in tort for design defects when: 1)the US Government is immune from liability; 2) the US Government established or approved reasonably precise specifications; 3) the equipment conformed to those specifications; and 4) the supplier warned the US Government about dangers involved in the use of the equipment that were known to the manufacturer but not to the US Government. These elements are the same under all theories of recovery, whether it is strict liability or negligence.(557)

c)

State of the art

The manufacturer will normally not be held liable under strict liability and general product liability theories, when he could not reasonably know of the danger at the time he manufactured and sold the product. This limitation to the manufacturer’s liability is often called ‘state of the art’ defense.(558) This notion often crosses path with the obligation, enforced by certain courts, although not uniformly, placed on the manufacturer to retrofit his products when a defect is found in one of them. In the area of space products, the implementation of the state of the art notion and the obligation to retrofit are difficult to measure.(559) R. Bender mentions the contractual provisions on this matter, indicating that they would not be applicable to bystanders. Even between the parties such clauses often have limited application. Firstly, space products are not often produced in series, except for off-the-shelf equipments and components produced in series. The notion of retrofitting applies more to products made in series. Once a spacecraft is launched, retrofitting it is in practice usually impossible. This may change in the future in particular in ventures such as the International Space Station where human presence on board and the design of facilities with in orbit replaceable units (ORUs) makes the replacement of parts feasible, as well as the retrofitting. The cost of repairing space products on ground, retesting them, re-qualifying them and the additional warranty obligations connected to those, will make (557)

Feres v. United States, 340 US 135 (1950); Dowd v.Textron, United States Court of Appeals for the Fourth Circuit, N° 85-1704. May 27, 1986. The court here showed the full extent of the interpretation of these elements by also saying: “The decision of the United States Army to contract with Bell for a helicopter rotor system with which the Army had extensive familiarity and field experience operates to shield defendant [the manufacturer] from any liability for alleged design defects in that system.”.

(558)

See Bruce v. Martin Marietta, United States Court of Appeals, l0th Circ, September 24, 1974, 14 Avi 17,472. The court started from the premise that both requirements are necessary for liability: the product must be defective, and the defective condition must make it unreasonably dangerous. The Court recalled comment to para 402A Restatement of Torts Second at 351 and same comment at 353 and stated: “Whether concern is with one or both of the requirements, there is ‘general’ agreement that to prove liability under §402A the plaintiff must show that the product was dangerous beyond the expectation of the ordinary customer. State of art evidence helps to determine the expectation of the ordinary customer. A consumer would not expect a model T to have the safety features which are incorporated in automobiles made today. The same expectation applies to airplanes. Plaintiffs have not shown that the ordinary consumer would expect a plane made in 1952 to have the safety features of one made in 1970.”

(559)

See R. Bender, Space Transportation Liability, National and International Aspects (The Hague: Kluwer Law International, 1995), at 145

175 the negotiation of these arrangements very complex with the manufacturers concerned, and retrofitting obligations many only be partially negotiated into such contracts. Limited warranties with a retrofit element, are sometimes agreed between contractual parties. Another important element, pointed out by R. Bender is the complexity of the systems involved and the fact that upgrading systems to a currently known state of the art will be very difficult. The large majority of space programs take years to be completed and they will fly years after the design was completed. It is obvious that the state of the art will change in this period of time. Some improvements can still be introduced in the design stage but not as the spacecraft enters its manufacturing phase. After this point one has to live with a design which is outdated but the development of modular facilities with replacement units may make upgrades easier in the future.

iii)

Defenses related to time

There are primarily two types of such defenses which are very different: the statutes of limitations, and the statutes of repose.

a)

Statutes of limitations

The statute of limitations is a statute of the Federal government or of states setting maximum time periods during which certain actions can be brought or rights enforced. After the time period set out in the applicable statute of limitations has run, no legal action can be brought regardless of whether any cause of action ever existed.(560) As pointed out previously in these discussions on US law, it is fundamental to remember that the statutes of limitations will be generally different from state to state. Some examples are provided below of statutes of limitations but they should be checked carefully for each practical case. In New York the limitation period for personal injury or injury to property is generally three years. In Texas, it is two years. In California, it is three years for injury to real property, one year for wrongful death or injury and three years for professional negligence actions against health providers. Time limits have been extended in certain states through the discovery rule. This theory started in the area of medical malpractice. Under the discovery rule, limitation statutes in malpractice cases do not start to run until the date of discovery of the malpractice, or the date when, by the exercise of reasonable care and diligence, the patient should have discovered the wrongful act. This theory has been further extended to other areas, such as liability of accountants, architects, lawyers and manufacturers of defective products. It is not applied uniformly by the courts.(561) The discovery rule is sometimes a creation of case law, and sometimes instituted by statute.

(560) (561)

Black’s Law Dictionary, supra note 18, at 927. For an example, in the area of medical malpractice, of a decision which in our view does not follow the discovery rule theory: Henry v. Medical Center Inc, 216 Ga App 893, 456 S.E.2d 216 (1995). In this case, the court considered that the patient’s claim was barred by the statute of limitations, which started running when the injury occurred and physically manifested itself, and not when the patient discovered the medical cause of her injuries.

176

b)

Statutes of repose

The extension oftime limitations through the discovery rule, coupled with the systematic pursuit of the deep pockets defendants by the plaintiffs, have led to reactions in certain states and the adoption of statutes of repose. Statutes of repose terminate any right of action after a specific time has elapsed regardless of whether there has yet been an injury.(562) As Mr Kolczynski(563) puts it, “Here is an easy way to remember the difference between a Statute of Limitations and a Statute of Repose. A “Statute of Limitations” is the date by which the window for a lawsuit must be opened or the right to bring a lawsuit is lost. The “Statute of Repose ” is the date by which the window closes on any potential plaintiffs, after which they cannot sue the manufacturer.” The statute of repose has the effect of an immunity which takes effect after a certain period of time. In the area of aviation, significant problems arose with manufacturer’s liability cases involving old aircraft and the associated litigation. A Federal Statute of Repose was enacted in 1994, called the General Aviation Revitalization Act (GARA).(564) In accordance with GARA, no action can be brought against an aircraft manufacturer for an accident occurring more than 18 years after the delivery of the aircraft to the customer. The field of application of GARA is limited, as it applies only to small aircraft (less than 19 passengers) not engaged in scheduled passenger transportation and it only covers potential claims by passengers. Absent statutes ofrepose, liability continues for the whole life of the product concerned.

4.1.4.- Cumulation of contract and tort claims In the US system it is generally possible to plead together in contracts and in torts. As the common law system is based on the compensatory nature of damages, this cumulation cannot lead to a double recovery. A very good explanation ofthis principle was provided by the Supreme Court of Canada,(565) reflecting also the theory applied in the US system: “Subject to consideration of the other defenses raised by the respondent solicitors, if they were negligent in performing their professional duties, they would be exposed to concurrent liability in contract and in tort. The common law duty ofcare that is created by a relationship of sufficient proximity was not confined to relationships which arise apart from contract. The true question is always whether there is a relationship of sufficient proximity - not how that relationship arose. Thus, a common law duty ofcare may be created by a real relationship of proximity that would not have arisen but for a contract. What is undertaken by the contract will indicate the nature ofthe relationship that gives rise to the common law duty of care, but the nature and scope of the duty of care that is asserted as the foundation of the tortious liability must not depend on specific obligations created on the express terms of the contract. It is in that sense that the (562)

Black’s Law Dictionary, supra note 18, at 927.

(563)

P.J. Kolczynski, “Aviation Product Liability”, supra note 5 1 1 .

(564)

General Aviation Revitalization Act, 103rd Cong. Pub.L 103-298, Aug 17, 1994. 108 Stat 1552. Amended by Pub. L 105-102, Nov 20, 1997, 111 Stat 2215. Codified in 49 USC.

(565)

Central & Eastern Trust Co v. Rafuse, Supreme Court of Canada, October 6, 1986.

177 common law duty of care must be independent from the contract. The distinction, insofar as the terms of the contract are concerned, is, broadly speaking, between what is to be done andhow it is tobe done. A claim cannot be said to be in tort if it depends for the nature and scope of the asserted duty of care on the manner in which an obligation or duty has been expressly and specifically defined by a contract. Where the common law duty of care is co-extensive with that which arises as an implied term of the contract, it obviously does not depend on the terms of the contract, and there is nothing flowing from contractual intention which should preclude reliance on a concurrent or alternative liability in tort. The same is also true of reliance on a common law duty of care that falls short of a specific obligation or duty imposed by the express terms of a contract. A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the alleged tort. Subject to this qualification, where concurrent liability exists in contract and in tort, the plaintiff has the right to assert whichever cause of action seems to him to be most advantageous in respect ofany particular legal consequences. ”

4.1.5.- Vicarious liability This type of liability is often referred to in the US system as respondeat superior, imputed negligence, master-servant liability, principal-agent liability or employer-employee liability. “The doctrine of vicarious liability is a body of tort law based on the principles of negligence. The relationship between the parties determines the liability of one person for the harmful conduct of another. Vicarious simply means the substitution of one person for another. Applied to the doctrine of vicarious liability, it is the substitution of the liability of one person for the liability of another. ”(566) One particular application of this theory is when an employee commits a tort within the scope ofhis employment, whichever tort it is (the theory applies to all torts), his employer will be liable, jointly with him. There is often a fine line between employees, and the myriad of other types of situations, such as that of the independent contractor. Vicarious liability for employees is not generally extended to independent contractors. The distinction between the two will not be only a matter of the existence or not of an employment contract but will lie in an appreciation ofthe facts surrounding the relationship and in particular the existence or not of a close control. The employee will normally be subject to a close control of his employer while the independent contractor has more freedom and decision power in the carrying out of his work. Vicarious liability does not apply to torts of independent contractors. There are some exceptions to that rule in specific cases such as the execution by the independent contractor ofdangerous activities which create an unusual risk. These latter activities can generate vicarious liability for the employer. Vicarious liability will apply only when the tort occurred within the scope of employment. Although trips from home and back before and after work tend not to be considered as within the scope of employment, the scope of employment can be very wide. The (566)

R.R. Cummins, Torts Law, supra note 488, at 212.

178 important point in determining whether the employee was acting within the scope of employment will be whether or not he was acting in furtherance of his employer’s business purpose no matter how he was doing it. Whatever is foreseeable that an employee would do will be considered within the scope of employment. This will largely be a determination of fact where the aim will be to check whether the employee was acting personally or within the scope of his employment. Vicarious liability also arises in the case of joint enterprise. It is defined as the joint prosecution of common purpose under such circumstances that each has authority, express or implied, to act for all in respect to the control, means or agencies employed to execute such common purpose. ·The necessary elements are: 1) an agreement among the group members, either express or implied; 2) a common purpose that the group intends to carry out; 3) community of pecuniary interest among members of the group in that purpose; and 4) an equal right to a voice in control and direction of the enterprise which gives an equal right of control.(567) In such cases each member of such partnership is vicariously liable for the torts of the other member(s). The existence of vicarious liability has had important effects when it comes to contributory negligence (in comparative negligence jurisdictions, the same approach applies to the apportionment of liability and damages). The courts initially invented the rule of imputed contributory negligence to transfer the contributory negligence between the persons tied by the vicarious relationship and bar their recovery where such contributory negligence would be recognized. This turned out to be excessive, in particular in driver/passengers types of relationship. The rule has evolved in a large number of jurisdictions and the scope of the imputed contributory negligence has been reduced to cover only relationships where the plaintiff would be vicariously liable if he were a defendant.

4.1.6.- Recoverable damages i)

Recoverable damages in general

a)

In contract

The direct claims in contract will allow recovery of damages based on the actual loss of the injured party. Recovery will be for the loss which would not have occurred but for the breach, plus any incidental losses.(568) Incidental losses refer to costs and expenses which are directly flowing from the breach. Non labor and labor waste are recoverable under this category. It is important to note that the parties to a contract always have the duty to mitigate their damage.(569) Apart from direct claims in contract, US law allows recovery for consequential or indirect damage although those words are used interchangeably. The important notion in US law (567)

Black’s Law Dictionary, supra note 18, at 838.

(568)

Restatement of Contracts, Second, supra note 472, Section 347.

(569)

Restatement of Contracts, Second, supra note 472, Section 350.

179 (570)

on which recovery of indirect damage is based is that offoreseeability. Consequential losses are recoverable if foreseeable by the party in breach because of special circumstances that he had reason to know at the time of signature of the contract. The distinction is between ordinary and special circumstances and the determination is made with the foreseeability test. This is provided in the Restatement of Contracts, which states: (571) “(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made; (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach: a) in the ordinary course of events, or b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know; (3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance or otherwise if it concludes that in the circumstances, justice so requires in order to avoiddisproportionate compensation”.

Loss of profit is recoverable both under the heading of direct claims and indirect claims, depending on the situation of fact. b)

In tort

In tort, there is no possibility to make the tortfeasor aware in advance of any special circumstances. The consequence is that the more remote type of damages which can be recognized in contract will not be recognized in tort. In tort, the objective ofthe damages is to place the victim back into the situation he would have been if the tort had not been committed. The first layer of recoverable damages are those for the direct physical damage. The plaintiffmust bring proofofphysical damage suffered. The recoverable damages for such physical injury will then be for the direct loss. In the case of personal injury, this direct loss will be the value of any direct loss of bodily functions. Out-of-pocket losses stemming from the injury are also recoverable such as medical expenses.(572) Loss of earnings are also recoverable. As far as mental suffering is concerned, damages are recoverable when it is flows naturally from the physical damage. The right to recover damages for mental suffering when there has been no physical damage is limited. In these cases, courts will usually allow recovery only when the mental suffering has physical (570)

It is the same traditionally in English law. The leading case on this matter was Hadley v. Baxendale (1854) 9 Ex 341. There was a delay in the delivery of a metal shaft for a mill. The court considered that the defendants, given the facts known to them, could not have reasonably deduced that their late delivery of the metal shaft would keep the mill from working. It could have been foreseeable that the plaintiffs would have a spare shaft. There is also the notion of special circumstances in English law. In order to benefit from it, the plaintiff has to show that he had made the defendant aware in clear terms of such special circumstances.

(571)

Restatement of Contracts, Second, supra note 472, note 351.

(572)

As far as out-of-pocket expenses are concerned, the plaintiff is entitled to recover them, even if he has been reimbursed for these expenses by a third party, in accordance with the collateral source rule. Seen in isolation, this allows the plaintiff to recover twice, however, this is minimized either by statute or by the subrogation of such third party (usually an insurance company) into the plaintiff’s right to recover the concerned expenses.

180 consequences. Most courts also allow recovery of hedonistic damage, which is the damages for loss of the ability to enjoy one’s life as prior to the damage. It is worth noting that the plaintiff can recover for past and present damage, as well as for future likely damage. The pure economic loss is not recoverable when not accompanied by a physical injury but this position is in evolution and the courts now sometimes allow recovery for pure economic loss when the injury was relatively foreseeable. Few plaintiffs would be permitted to sue if liability were found for pure economic loss and the defendant’s conduct was relatively blameworthy. Generally the courts also allow the spouse and parents to bring actions of their own to recover for loss of companionship and moral guidance, or for medical expenses due to the injury of a dependant. Where the victim of a personal injury dies, the following actions can arise: - actions resulting from survival statutes. This governs the survival of the victim’s own right of recovery after death. This allows the estate of the victim to recover the same damages as the victim would have if he had continued to live. This usually concerns only cases where the victim did not die instantly and, therefore, accrued expenses and losses which are recoverable, prior to her death. - actions resulting from wrongful death statutes. This governs the own rights of the victim’s survivors to recover. The survivors included are in principle the closest such as the spouse, children and parents. They may recover for the economic support they would have received if the accident and death had not occurred, and for loss of companionship and moral guidance. Recovery for grief is sometimes allowed. It is worth noting that also in a tort situation the victim has a certain obligation to mitigate damages. This is also sometimes referred to as the doctrine of avoidable consequences which places on the victim the obligation to take reasonable measures to prevent further injuries (for example failure to seek proper medical treatment).(573)

ii)

Punitive damages

Punitive damages can be awarded against a defendant whose conduct has been particularly outrageous. Therefore, punitive damages go beyond the general common law principle of the compensatory nature of damages and become a punishment. They are normally awarded only when the defendant’s conduct was reckless or willful and wanton. Punitive damages are normally not available in contract actions, however, when an element of fraud can be brought into a contract action, such action can easily expand into a tort action and punitive damages are likely to be awarded. Case law varies on this and there is no definite test on this subject. In certain states statutes have implemented limits to punitive damages and introduced a higher standard of proof for punitive damages such as the clear and convincing evidence of malice or fraud. Insurance is usually not available against punitive damages and a large

(573)

R.R. Cummins, Tort Law, supra note 488, at 43.

181

number of states consider such insurance to be against public order.(574) iii)

Liquidated damages, penalty clauses

US law, as English law, is based on the fundamental principle ofthe compensatory nature of damages. This fundamental principle often creates difficulties when it comes to liquidated damages clauses. In a liquidated damages clause, the parties to a contract will determine at the time of signature of the contract which damages will be paid in the event of a breach. These clauses are accepted as long as they comply with the principle of compensatory nature of damages.(575) Should this amount be fixed at a level too low, the clause may turn out to be unenforceable as unconscionable.(576) The amount set in these clauses has to be estimated by the parties to the contract as accurately as possible to correspond to a compensation for the damages which would be caused in case of a breach of the obligations covered by the clause. This determination made by the parties has to withstand two tests: - at the time of conclusion of the contract, the damages set must be reasonable in relation to the anticipated or actual loss caused by the breach; it must be a reasonable forecast of compensatory damages; - at the time the contract was concluded, damages for breach must have been difficult to ascertain or claim. Should a court determine that a liquidated damages clause does not withstand these tests, it is not allowed to rewrite this clause by, for example, changing the amount of damages set. The clause would simply be declared null and void and the damaged party would then have to bring full proof of the actual damage suffered and the principle of compensation would then be implemented. When asserting claims based upon a liquidated damages clause, it is usual practice to plead together the normal remedies (in first position) and the liquidated damages as an alternative avenue of recovery. Where penalty clauses are used, which is often the case for breach of contractual delivery dates, the same rules apply as for liquidated damages clauses. The liquidated damages clause is put into action simply as a result ofthe breach occurring and without the claimant having to demonstrate the loss that he has suffered. The party claiming liquidated damages will receive exclusively this amount and may not claim damages above it even where the loss is greater than the amount of liquidated damages.(577) However, the claim for liquidated damages does not deprive the claimant of his right to (574)

For a good presentation of the history and concept of punitive damages see P. Barlow, “Punitive Damages Under the Warsaw Convention: Mixing Apples with Oranges” (1992) XVII:II Annals of Air and Space Law, 71 On punitive damages also see J.Y. Gotanda, “Awarding Punitive Damages in International Commercial Arbitrations in the Wake of Mastrobuono v. Shearson Lehman Hutton Inc.” (1997) 38:1 Harvard International Law Journal, 59 K.A. Jung, “How Punitive Damage Awards Affect US Businesses in the International Arena: The Northcon I v. Mansei Kogyo Co Decision”, (1998) 17:2 Wisconsin International Law Journal, 489.

(575)

Restatement of Contracts, Second, supra note 472, Section 356.

(576)

Restatement of Contracts, Second, supra note 472, Section 208. In this respect, reference is also made to the Uniform Commercial Code, supra note 478, Articles 2-178, 2-719.

(577)

Fischer v. Schmeling, 520 NW, 2d 820.

182

obtain specific performance when such specific performance is still possible.

4.1.7.- Force majeure Parties to a contract may have inserted in their contract a force majeure clause. Force majeure, in the US system, is usually referred to as Act of God or impracticability. Force majeure can also be accepted by the courts in the absence of a contractual provision. The Restatement(578) provides for the circumstances in which impracticability of performance can be asserted. The examples given by the Restatement are such as the death or incapacity of a person who is necessary for performance of the contract, destruction or deterioration of a specific thing, the existence of which is necessary for performance, the prevention of contractual performance by the passing by a domestic or foreign government of a regulation or order which requires compliance by the parties. Also, the destruction of the subject matter of the contract(579)can be considered such a force majeure (examples are embargoes, wars, currency devaluations, labor strikes). As far as the effect of such force majeure is concerned, the Restatement provides that when after a contract is made, performance is made impracticable - without fault “by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made”, the obligor’s duty is discharged “unless the language or circumstancesindicate to the contrary.”(580)

Of course, specific contractual clauses concerning force majeure, depending on their drafting, will increase or decrease the obligations of the obligor’s in this respect. It is important to distinguish the force majeure from the doctrine of frustration. In the case of force majeure, in the sense of impracticability or impossibility, the obligor asserts the occurrence of some circumstance that makes his performance impracticable. In the case of frustration, the obligor asserts the occurrence of some circumstance which has destroyed the value to him of the other party’s performance such as to frustrate his own purpose in making the contract. The Restatement sets the tests for establishing such frustration: 1) the purpose that is frustrated must be a principal purpose of the party in making the contract; 2) the frustration must be substantial; and 3) the non-occurrence of the frustrating event must have been a basic assumption on which the contract was made. The successful assertion of frustration will discharge the frustrated party of her remaining duties under the contract. In negligence actions, if a damage resulted from an Act of God, there is no liability.(581)

4.1.8. - Judicial Procedure Aspects It is not the intention in this section to detail the US judicial system but rather to point out (578)

Restatement of Contracts, Second, supra note 472, Sections 261 to 264

(579)

UCC, supra note 478, Article 2.

(580)

Restatement of Contracts, Second, supra note 472, Section 261.

(581)

R.R. Cummins, Tort Law, supra note 488, at 50.

183

some specific aspects of the common law, and in particular the US system in the area of judicial procedure. One significant difference to other systems such as the civil law systems which we will study afterwards, is the fact that civil trials in the US are conducted with a jury. The jury is the examiner of the facts. The jury will inquire into the circumstances and decide whether the facts support the case for liability or not, and this appreciation will be different according to the type of liability involved. The judge instructs the jury on the relevant law. All disputes in civil cases are subject to jury trials. A jury trial is considered a civil right in the US, recognized by the Constitution, Seventh Amendment(582), for federal trials, which says: “in suits at common law... the right of trial by jury shall be preserved... ”. This amendment applies to federal trials only, The right to a jury in individual states is established by statute. There are differences between federal jury proceedings and state jury proceedings as well as between different states. The number of jurors varies. The requirement for unanimity of the jury in federal trials is not necessarily so in states trials. As trial by jury is a right, the parties may waive their right to a trial by jury. The judge will then examine both the facts and the law. There are also some circumstances in which, during the course of the trial, the case can be taken away from the jury (judgement as a matter of law also called directed verdict when before the verdict, or called judgement notwithstanding verdict after verdict). Coupled to this jury trial, the US system usually provides for extensive examination of witnesses and full pre-trial discovery of relevant documents during which parties are under a duty to disclose even those documents which are damaging their case. Certain information is subject to mandatory disclosure during pre-trial discovery. Information subject to mandatory disclosure can be a) the name, address and phone number of each individual likely to have discoverable information relevant to any disputed facts alleged with particularity in the pleadings, b) copy or description of documents and tangible things in the party’s possession relevant to any disputed fact alleged with particularity, c) expert testimonies. Further to the obligation to disclose, the concerned party also has the obligation to supplement such information if it later turns out to be incomplete or incorrect. The methods of discovery are also comprehensive and include the possibility for a party to request the other to produce documents and objects. The sanctions for not complying with the discovery rules and procedure are various: payment of the cost for the other party of obtaining an compelling order; matters involved in the discovery considered as established; deprivation of certain defenses or claims; deprivation from introducing certain matters in evidence; dismissal of the action; judgement in default; disobedient party held in contempt of court. Needless to say that a large number of cases are settled out of court, if only to avoid lengthy witness cross-examination of the company’s chief executive officer. The existence of long arm statutes is also an important point to be noted in the area of contract law. Every state in the US has a long arm statute which provides for extraterritorial jurisdiction. For such long arm statutes to be applicable, there is usually the requirement for some contact with that state in a fair way, but from one state to another, the requirement can be different. In certain states, the mere fact of having (582)

US Constitution in Black’s Law Dictionary, supra note 18, at 1646.

184 negotiated the contract in that state attracts jurisdiction of its courts. This is the case in Texas for example. This may have surprising and devastating effects on the legal security the parties to a contract thought they had established once they had agreed upon an applicable law and a designation of jurisdiction. Where attachment to a state jurisdiction, in accordance with a long arm statute, brings the case in a state where courts apply severe punitive damages, for instance, the effect can be tremendous. The uncertainty created by the long arm statutes is also rendered more acute when a party at trial decides to use also the avenues offered by the theory of forum non conveniens which leads to the trial being transferred to a different jurisdiction.(583) Another important procedural creation in the US is the notion of class action which has turned out to have considerable importance in the area of product liability. This is a typical common law creation, although as we will see later civilian jurisdictions have gradually started to integrate the notion. The class action is originally brought by one person or a small group of co-parties representing a class, that is a larger group of persons sharing a common interest. It is most often the case that the class is made ofplaintiffs, but it may happen that a plaintiff will bring an action against a class of defendants. Rule 23 of the Federal Rules of Civil Procedure(584) provide for the rules applicable to class actions. To be meritorious, a class action must meet four main tests: 1) the class must be of such size that it is not feasible to join all parties to the action; 2) the issues brought up must be questions of law or fact common to the class; 3) the claims or defenses of the representatives must be typical of those of the class; 4) the representatives must demonstrate that they can fairly and adequately protect the interests of the class. Once these requirements are established, there are three types of class actions available: - rule 23(1)(b) actions: it can be granted in situations where otherwise joinder of necessary parties would arise(585) and this will be in two types of situations: 1)where individual actions would create a risk of inconsistent decisions which (583)

Forum non conveniens is defined as follows by Black’s Law Dictionary, supra note 18: “Term refers to discretionary power of court to decline jurisdiction when convenience of parties and ends of justice would be better served if action were brought and tried in another forum [...] The rule is an equitable one embracing the discretionary power of a court to decline to exercise jurisdiction which it has over a transitory cause of action when it believes that the action may be more appropriately andjustly tried elsewhere [...]. The doctrine presupposes at least two forum in which the defendant is amenable to process and furnishes criteria for choice between such forums [...]. In determining whether doctrine should be applied, court should consider relative ease of access to sources of proof, availability of compulsory process for attendance of unwilling witnesses, cost of obtaining attendance of willing witnesses, possibility of view of premises, and all other practical problems that make trial easy, expeditious and inexpensive [...]. See J.A. Bosco, “Manufacturer Liability to Third Parties for Outer Space Activities” (1986) 7:1 Northrop University Law Journal, 1, at 20 ff D.J. Dorward, “The ForumNonConveniens Doctrine and the Judicial Protection of Multinational Corporations from Forum Shopping Plaintiffs” (1998) 19:1 University of Pennsylvania Journal of International Business Law, 141 D.W. Dunham & E.F. Gladbach, “Forum Non Conveniens and Foreign Plaintiffs in the 1990s” (1999) XXIV:3 Brooklyn Journal of International Law, 665.

(584)

Federal Rules of Civil Procedure, 28 USCA §§ 2071-2074. Online at (accessed: 01/2001).

(585)

On joinder actions, see Federal Rules of Civil Procedure, supra note 584, Rule 19.

185 would lead the opponent to the class to follow incompatible standards of conduct;(586) 2) where it could lead to the impairment of the interests of members of the class who would not be parties to an individual action.(587) The 23(b)( 1) type of class action is used in mass torts cases mainly to ensure that claimants can collect before the defendant becomes insolvent. - rule 23(b)(2) actions: these are used when the party opposing the class has acted or refused to act on grounds generally applicable to the class. This type of suit has the aim of obtaining an injunction against such opponent, and are typically used in discrimination and other civil rights cases. - rule 23(b)(3) actions: it is the general type of class action. To accept this type of action, the court must determine that 1) the questions of law or fact common to members of the class predominate over any questions affecting only individual members and 2) a class action is superior to other available methods of deciding the case.(588) This rule is sometimes used in mass torts and mass products liability cases, except where there is predominance of individual interests. In catastrophic accident cases, such as an airliner crash where a large number of persons are injured as the result of one occurrence, class actions are usually accepted. Courts are far more reluctant to deal with mass product liability cases, in particular in trials on a subject which has large impact but is rather novel (the consequences ofthe decision ofone jury could be fundamental for the future of a complete industry). Members may opt out of a class action in a 23(b)(3) case. The effects of a class action will be that the decision of the court will be binding on all those who have been found by the court to be members ofthe class. In the case where the option to opt out was selected, the decision has no res judicata effect against the person who opted out. That persons remains with its individual rights untouched, however, that person will not be able to use the procedure of collateral estoppel(589) to take advantage of the decision concerned.

4.1.9.-.- A brief overview of US case law related to space activities A limited number of cases have been brought to court in the US and an overview of those cases is provided primarily to point out the areas of the law affected and the principles decided on those occasions. Though these cases did not deal specifically with space law in its application to private activities, but with classical areas of law, in particular contract, torts and insurance, the examples are pertinent, as R.B. Trinder explains: “Indeed, a review of the recent litigation involving space Jaw indicates that it involves (586)

Federal Rules of Civil Procedure, supra note 584,supra note 584, Rule 23(b)(1)(A)

(587)

Federal Rules of Civil Procedure, supra note 584, Rule 23(b)(1)(B)

(588)

This criteria in rum is broken down into four sub-criteria: 1) the interests of class members in controlling their separate actions; 2) the presence ofany suits that have already been commenced involving class members; 3) the desirability of concentrating the litigation of the claims in a particular forum; 4) the difficulties which are likely to be encountered in the management of a class action.

(589)

This concept covers the principle that when an issue ofultimate fact has been determined by a valid judgement, that issue cannot be again litigated between the same parties in future litigation.

186 primarily basic legal concepts with which governments, companies and lawyers have been dealing since long before an object was launched into outer space. Thus in many respects space law litigation differs little from litigation in any other area.”.(590) Another observation is that there is little litigation in the field of space activities. Once more, we would like to quote R.B. Trinder who explained: “Perhaps the most surprising aspect ofrecent space-related case law developments in the United States is that there are relatively few of them as compared with the number and extent of developments in other areas of the law. As is widely known, and indeed is the source of considerable anxiety for those doing business in the United States or with US entities, the United States has developed a thoroughly unwelcome reputation as the world’s most litigious society. All too often in the United States litigation is the first, rather than the last resort. Indeed, it is not unusual for some 18-20 million civil suits to befiled in the United States each year, onefor every ten adults in the country. This has led to many adverse consequences for US society as a whole: it was recently estimated that more than US $80 billion is spent annually in the United States by businesses and individuals on direct litigation costs and higher insurance premiums, while the indirect costs are estimated to be over US $300 billion annually. That’s the bad news. The good news is that, thus far, space law has not followed the normal trend. Indeed, thee has been surprisingly little litigation in the space lawfield in the United States as compared with the amount of litigation in other areas”.(591) The cases discussed below involve issues of liability for damage.(592) For the sake of providing a consistent overview, we will also reproduce here information provided earlier in this Chapter on some of the cases.

i)

Berg v. Reaction Motors Division

In the case Berg v. Reaction Motors Div, (593) involving rocket testing causing damage and discomfort to surrounding homes, the Supreme Court of New Jersey declared the defendants strictly liable for property damage to those in the vicinity ofthe tests, using the (590)

R.B. Trinder, “Recent Developments in Litigation” (1990) 5 Journal of Law and Technology, 45, at 45.

(591)

R.B. Trinder, “Legal Aspects of Commercial Space Activities. US Space Law: Developments in Case Law”, paper presented at the International Conference on Air Transport and Space Applications in a New World, The Use of Airspace and Outer Space for all Mankind in the 21st Century, Tokyo, June 1993.

(592)

For literature addressing case law in the field of space activities see: S. Gorove, “The Growth of Space Law Through the Cases” (1996) 24:1 Journal of Space Law,1 K.H. Böckstiegel, “Case Law on Space Activities”, in N. Jasentuliyana ed. Space Law, Development and Scope, supra note 24, at 205 R. Kröner, “Recent Case Law on Problems Surrounding Launches”, paper presented at the European Center for Space Law First Practitioners’ Forum, Paris, November 18, 1992 R.B. Trinder, “Recent Developments in Litigation”, supra note 590, 45 S. Tucker, “Some Strategic Defense Initiatives Toward Preventing US Space Insurance Related Disputes and Litigation” (1993) 21 Journal of Space Law, 123 R. Bender, Space Transport Liability, National and International Aspects (The Hague: Martinus Nijhoff Publishers, 1995), at 219 &ff P.D. Bostwick, “Liability of Aerospace Manufacturers: MacPherson v. Buick Sputters into the Space Age” (1994) 22:1&2 Journal of Space Law, 75 B.E. Showalter, “In Space, Nobody Can Hear You Scream ‘.Tort’!” (1993) 58 Journal ofAir Law and Commerce, 795 S. Gorove, Cases on Space Law, supra note 514.

(593)

See note 514 above.

187 reference to blasting operations, where such position is traditional.

ii)

Smith v. Lockheed Propulsion

In the case Smith v. Lockheed Propulsion,(594) where firing of a rocket engine had caused property damage, it was decided that rocket testing is an ultra hazardous activity and the defendant was declared strictly liable.

iii)

Pigott v. Boeing

Pigott v. Boeing Co(595) was a similar case where damages were allegedly caused to a residence by the vibrations caused by the testing by Boeing of the Saturn V engine. This case did not call upon strict liability theories and the Supreme Court of Mississippi applied the negligence theory possibly due to the fact that the US Government was one of the defendants. The Court decided that there was no negligence on the part of Boeing, which should not be held liable as it was acting as a contractor in performing a lawfully authorized public function of the US government in accordance with a public contract. This case was somewhat of an exception to the common belief at that time that indeed rocket firings and space activities in general were to be considered abnormally dangerous or ultra hazardous activities. iv)

Smith v. United States and Smith v. Morton Thiokol

The case was brought as a result of the death of Commander M.J. Smith in the Challenger accident, by his wife(596). The main issue involved was whether recovery was possible in view of the doctrine(597) that in accordance with the Federal Tort Claims Act, the US Government is not liable for injuries to servicemen if their injuries arise out of, or are in the course of, activity incident to service. The court decided that the evidence showed that the deceased was under military control at the time of the mission and that, based on the same rationale as the Feres case, the wife of the deceased could not claim against the United States.(598) The decision was upheld by a higher court.(599)

v)

Lexington Insurance Co. v. McDonnell Douglas(600)

On the occasion of a Shuttle launch, the Indonesian satellite Palapa B2 failed to reach its (594)

See note 515 above.

(595)

See supra note 516

(596)

See P.G.Dembling & R.C. Walters, “The 1986 Challenger Disaster: Legal Ramifications” (1991) 19 Journal of Space Law, 1.

(597)

See the Feres decision, supra note 557.

(598)

712 F. Supp 893 (M.D. Fla 1988). See also in S. Gorove, Cases on Space Law, supra note 514, at 39.

(599)

877 F.2d 40 (11th Cir 1989) cert.den. 110 S.Ct 1 1 1 1 (1990). See also in S. Gorove, Cases on Space Law, at 45.

(600)

Lexington Insurance Co v. McDonnell Douglas Corp, N°418713 (Cal.Super.Ct, Orange Co, May 1990).

188

correct orbit, due to a malfunction of the exit cone of the Solid Rocket Motor (SRM) of the Payload Assist Module (PAM) supplied by Hitco, Morton Thiokol and McDonnell Douglas respectively, Perumtel, the Agency of the Indonesian Government responsible for the satellite, received a total loss payment by the insurers. Then, one of the reinsurers, Lexington Insurance Co, together with other insurers, initiated a suit against McDonnell Douglas, Morton Thiokol and Hitco, on negligence and strict liability, as well as breach of warranty of Morton Thiokol. Although there was a risk allocation provision in the contract, the court considered it ambiguous and not sufficient to bar claims on negligence or breach of warranty. The Court found that the LSA between Perumtel and NASA was silent as to the right of Perumtel to sue its subcontractors or contractors and therefore considered that the interparty waiver provision was not applicable to this lawsuit. Thejury did not consider that negligence was demonstrated in this case. With respect to the breach of warranty, the jury decided in favor Lexington, which received damages of $37500, corresponding to its pro rata share of the cost of replacing the motor.(601) vi)

Appalachian Insurance v. McDonnell Douglas(602)

The facts surrounding this case were concomitant with the Lexington case facts. During the same launch, a failure of the PAM had the consequence of placing the Westar VI satellite on an improper orbit. In this case, full force was given to an inter-party waiver of liability which had been concluded between NASA and Western Union in the launch contract and had been adequately flowed down in the subsequent chain of contracts(603). This clause was an extended interparty waiver, compared with the Appalachian case, where the contractors and subcontractors had been properly added into the interparty waiver. The claims of the insurers were denied. The plaintiffs were arguing that strict liability in tort cannot be disclaimed and not being satisfied with the trial court ruling, they appealed. The Appeal Court upheld the decision of the trial court and considered that “Since liability for defective products when commercial entities and a business loss are involved is governed by California Uniform Commercial Code which allows disclaimers of warranties (see Cal. U.Com.Code §2316) and by the parties’ agreement, liabilityfor defects may be disclaimed; the tort theory of strict liability does not apply and thus does not bar the disclaimer.”(604)

An interesting point was raised in this case concerning breach of warranty. In the course of the trial, the insurers discovered the existence of an express warranty clause in the Contract between McDonnell Douglas and Morton Thiokol with respect to the exit cones capabilities. The insurers therefore wanted to add a cause ofaction for breach of express warranty to their claims against Morton Thiokol with the reasoning that 1) Western Union was a third-party beneficiary ofthis express warranty and 2) insurers were subrogated into (601)

On this case see in particular S.R. Ginger, “The Trial of the Palapa B-2 Case. A look at the liability issue in commercial space launches” (1991) 38:3 Federal Bar News and Journal, 132.

(602)

214 Cal App 3d, 1, 262 Cal Rptr 716 (Cal App 4th Dist 1989) On this case see S.R. Ginger, “The Trial of the Palapa B-2 Case. A look at the liability issue in commercial space launches”, supra note 601 see also case note in (1990) 18 Journal of Space Law, 41 See also S. Gorove, Cases on Space Law, supra note 514, at 99.

(603)

Pertinent excerpts of this clause is reproduced in the decision at 214 Cal. App. 3d, 13 (1989) and in S. Gorove, Cases on Space Law, supra note 602.

(604)

Id, at 33.

189 the rights of Western Union and could therefore exercise this right to the express warranty. The court refused the amendment of the insurers’ complaint. The Appeal Court confirmed this decision. The court considered that Appalachian failed to show that the warranty from Morton Thiokol ever formed part of the basis of the bargain and that, therefore, there was no basis for limiting or negating the exculpatory clauses and disclaimers of the Western Union/McDonnell Douglas LSA. This is a tricky issue and it has been pointed out that this decision by the Appeals Court can be contested in view of the provisions of California law on third-party beneficiaries.(605) Benefits recognized to third-parties of certain clauses in contracts may bring complete havoc in relationships which parties had thought were on a one-to-one basis.

vii)

Martin Marietta v. Intelsat(606)

Martin Marietta and Intelsat entered into a Launch Services Agreement (LSA) for the launch of two Intelsat VI satellites on Titan III. The first satellite was launched but did not reach the proper orbit due to a failure of the launcher separation system caused by a wiring error recognized by Martin Marietta. The second satellite was successfully launched. Intelsat requested from Martin Marietta a payment of 120 million dollars or otherwise threatened Martin Marietta to launch a suit on the basis of gross negligence. Martin Marietta launched the suit first by bringing an action for declaratory judgement to the District Court of Maryland. The Martin Marietta argumentation was threefold: 1) the LSA limited remedies of Intelsat to a refund/reflight option or a replacement launch(607), which Intelsat had not taken advantage of, and Martin Marietta was asking the Court to enforce this exclusive remedy clause, 2) a risk allocation provision in the LSA left to each party the risk of loss of its property, to be covered by insurance (Intelsat had decided to selfinsure) (608) and 3) the 1988 Commercial Space Launch Act cross-waivers requirements (605)

See the explanations on this subject provided in P.D. Bostwick, “Liability of Aerospace Manufacturers: MacPherson v. Buick Sputters Into the Space Age”, supra note 592, at 91 and 92.

(606)

For literature on this case: T.L. Masson-Zwaan, “The Martin Marietta Case, Or How to Safeguard Private Commercial Space Activities” (1993) 35 Colloquium, 239 T.L. Masson Zwaan, “Liability for Private Space Activities and Litigation”, in ECSL ed, Proceedings of the Third ECSL Summer Course on Space Law and Policy (Paris: ECSL, 1995), at 273.

(607)

The contract provided in its Article 6 entitled “Best Efforts Replacement Launch”: “Intelsat may request a Replacement Launch in the event that following any Launch under this Contract, the Titan III Mission or the Payload Mission has not been accomplished for any reason”. The replacement launch “shall be the sole and exclusive remedy of Intelsat...in the event the Titan III mission fails for any reason.”

(608)

Excerpt of these provisions contained in Article 17 of the contract: “ 17.5. Inter-party waiver for damages caused to the persons, goods, or property of the Parties. 17.5.1. Martin Marietta and Intelsat agree that, with respect to injury to or death of persons involved in, or damage to property used in connection with, launch services to be furnished under this contract, neither party will make any claim against the other or against the contractors, subcontractors, officers, directors, agents, servants and employees of the other, or any of them, or against any other Titan III launch services buyers, and each party shall bear its own risk of loss with respect to injury to or death of its own employees or damage to its own property howsoever caused. 17. 5. 2. Intelsat and Martin Marietta shall each be responsible for such insurance as they (continued...)

190 shall be read into the LSA and the waiver shall be considered as barring also claims in gross negligence. Intelsat considered that 1) these contractual provisions did not relieve Martin Marietta from its obligations of performance under the contract, 2) these provisions did not relieve Martin Marietta of its potential liability on the basis of negligence, gross negligence, negligent misrepresentations or omissions, 3) Intelsat argued faulty computer programming and lack of pre-launch testing to consider that Martin Marietta had not fulfilled its best efforts obligations, 4) the acts or omissions which caused the failure were negligent or grossly negligent, 5) there were negligent misrepresentations due to the omission by Martin Marietta to disclose certain information. The total damage which Intelsat wanted to claim was over 400 million dollars, including the price of the failed launch, the loss of use of the satellite and damage to the satellite. The District Court of Maryland(609) examined both the breach of contract issues and the tort issues and its decision can be summarized as follows: - on the Commercial Space Launch Act requirement for cross waivers: the Court considered that the cross waivers required by the Commercial Space Launch Act cannot be read into a contract, unless they have been expressly included in such contract. The Court even pointed out provisions of the license granted by the OCST to Martin Marietta, which provided for the consequences ofMartin Marietta not including the required reciprocal waivers of claims in the relevant contracts. The Court therefore decided that it could only look at the provisions contained in the contract itself. - on the issues of tort which were raised by Intelsat, the Court considered that the loss suffered by Intelsat was purely economical. Under Maryland law, and in general across the US, pure economic loss cannot be recovered in tort unless a tort duty of care can be proven to exist separate and apart from the contractual obligations of the party concerned. The Court did not see any evidence of such separate tort duties in this case. The Court decided that: “Equally sophisticated parties who have the opportunity to allocate risks to third party insurance or among one another should be held to only those duties specified by the agreed upon contractual terms and not by general tort duties imposed by state law”.(610) - therefore, the Court proceeded to examine whether the contract defined the scope of Martin Marietta’s duties with respect to the subject matter of the claims brought by Intelsat in tort. As far as the negligent misrepresentation was concerned, the Court considered that there were no circumstances in the case which would warrant the imposition on Martin Marietta of an extra-contractual tort duty to (608)

(609)

(610)

(...continued) may deem necessary to protect their respective property (...)” 17.6. Limitation of Liability.- Martin Marietta’s liability to Intelsat and to persons claiming by or through Intelsat, whether or not arising under the contract, or in negligence, strict liability, or under any other theory or tort or liability, shall not include any loss of use or loss of profit or revenue or any other indirect, special, incidental or consequential damages. In no event shall Martin Marietta’s liability to Intelsat for any claim arising out of a particular launch services exceed the price for that Titan III launch services to be paid by Intelsat (...) ”. 763 F.Supp. 1327 (D.Md. 1991). Case note (1991) 19 Journal of Space Law, 173. See also S. Gorove, Cases on Space Law, supra note 514, at 58. Court Decision, supra note 609, at 1332.

191 exercise reasonable care in making representations, and dismissed Intelsat’s claim on this count. On gross negligence, the Court referred to the public policy as expressed by Congress when enacting the Commercial Space Launch Act and interpreted the requirement of such policy as to bar all recovery, including for gross negligence. Consequently, the Court dismissed Intelsat’s claim.(611) on the contractual issues, after supplemental briefs were submitted, the Court dismissed the Intelsat arguments.(612) Intelsat was arguing that the provisions of Article 6 did not bar Intelsat’s contract claims if Martin Marietta was guilty of willful or intentional misconduct, which includes acts performed with reckless disregard for the rights of others, and Intelsat argued that facts indicated such behavior. Intelsat also argued that Article 6 did not bar its contract claims ifMartin Marietta was guilty of grossly negligent conduct.(613) Intelsat also argued that Article 6 did not bar Intelsat’s contract claims if Martin Marietta committed a material breach of a fundamental obligation which substantially defeated the purpose of the contract. Martin Marietta argued that exculpatory clauses in contracts between highly sophisticated parties will be enforced unless the party seeking enforcement has engaged in intentional misconduct, and that in this case (611)

Excerpt of Judge Garbis Opinion: “In the special context of this case public policy strongly favors enforcement of waivers of all tort claims including those for gross negligence. This case presents that rare instance in which Congress has actually pronounced public policy via legislation, hereby requiring the parties to agree to contractual waivers under which each party assumes it own risk of loss. As noted above, prior to the 1988 Amendments to the 1984 Commercial Space Launch Act, the unwillingness of insurance companies to cover the huge liability risks incurred by private launch service providers seriously threatened the US commercial space launch industry. In a successful effort to revive the industry, Congress passed legislation designed to eliminate the need for insurance, the primary road block to industry expansion, by requiring parties to waive their rights of recovery and assume the risk of their own loss. [...] The legislative history of the Amendments indicates that Congress intended the mandatory waivers to bar recovery in all instances, including cases where parties were grossly negligent. [...] If the courts were to invalidate the subject tort claim waivers as they apply to gross negligence, it would substantially undermine the protections Congress intended for commercial space launchers. Plaintiffs would be able to sue for damages on every imperfect space launch, simply by claiming under a gross negligence theory rather than an ordinary negligence theory. The resulting costs of litigation, as well as the potential exposure would require launch providers to obtain expensive insurance, if available, or alternatively to self-insure and ‘bet the farm’ on every space launch. This is precisely the situation Congress sought to avoid. As mankind ventures forth from the home planet, great hazards, known and as yet unknown, will confront us. Now, and perhaps for as long as the human race seeks to go where it has not gone before, there shall be missions which cannot be ‘safe’ as that term is used in the context of terrestrial activities. Those who seek to explore, and to exploit, outer space must do so charged with acceptance of the unknown, and perhaps unknowable, perils to be faced in that vast and potentially hostile environment. The public policy of this country, as stated by Congress, requires that those using the services of a licensed space launch provider do so at their own risk. Accordingly, in order to carry out the Congressional intent behind the 1988 Amendments, the Court interprets the waivers in Article 17 of the Contract to preclude liabilityfor gross, as well as ordinary negligence.” Court Decision, supra note 609, at 1333 and 1334.

(612)

Martin Marietta Corp v. Intelsat, Civil Action N° MJG-90-1840 (D.Md 19 Nov 1991).

(613)

The contracts arguments were detailed in supplemental briefs, after the first decision ofthe District Court of Maryland, and Intelsat indicated that it thought that the legislation to which the court referred to in its argument on the tort claims to consider that exculpatory clauses also covered gross negligence claims, had no bearing in contract.

192 there was no allegation that Martin Marietta had engaged in intentional, deliberate or willful misconduct. In particular, Martin Marietta argued that its contract performance did not amount to abandonment, one particular type of wilful misconduct. Martin Marietta also argued that the contract imposed substantial enforceable obligations upon it, which would not become illusory by enforcement of the exclusive remedy provision. Intelsat then appealed the decisions above to the Court of Appeals of the Fourth Circuit.(614) The Appeals Court confirmed the decision of the District Court, except on the breach of contract claim decision and the tort claim decision based on gross negligence. The Appeals Court considered that the contractual provisions contained ambiguities, in particular in the combination between Article 6.7 which dealt with the replacement launch as the sole remedy for a mission failure, and article 17.6 which dealt with the limitation of liability,(615) and to that extent the District Court erred in granting Martin Marietta motion to dismiss. On the gross negligence part, the Court considered that neither the language of the Commercial Space Launch Act Amendments not their legislative history reflects a Congressional intent to protect parties from liability for their own gross negligence. The Appeals Court therefore decided that the District Court erred in granting Martin Marietta motion to dismiss on this subject. The judgement of the District Court was therefore affirmed in part, reversed in part and remanded. The case was finally settled by agreement between Martin Marietta and Intelsat.(616)

viii)

Hughes Communication Galaxy v. United States

What was at stake in this case were the provisions of a Launch Services Agreement which had been concluded in 1988 between Hughes and NASA. As a consequence of the Challenger accident, a Presidential Order was issued on 15 August 1986, deciding that NASA would not carry out commercial launches anymore. In view of this situation, and on the basis of the provisions of the LSA which limited NASA’s obligations to the extent (614)

Martin Marietta Corp v. Intelsat, 991 F.2d 94 (4th Cir. 1992). See also S. Gorove, Cases on Space Law, supra note 514, at 64.

(615)

“Intelsat claims that the contract is ambiguous because Article 6.7 states that a replacement launch is Intelsat’s ‘sole and exclusive’ remedy, while the Article 17 ‘Limitation of Liability’ provision puts a damages cap on claims ‘arising under the contract, or in negligence, strict liability, or under any other theory of tort or liability’. Intelsat argues that an Article 6 replacement launch could not be an exclusive remedy when Article 17 recognizes the possibility of other claims, especially when Article 17 stated that it would govern the allocation of risks between the parties ‘notwithstanding any other provisions of this contract’. At the very least, Intelsat contends the two articles together create an ambiguity precluding dismissal. [...] The contract is far from crystal clear and never refers to the ‘pre-launch’ or ‘post-launch’ damages or otherwise mandates Martin Marietta’s interpretation. In light of these ambiguities, it does not appear beyond doubt that Intelsat can prove no set of facts constituting breach of Martin Marietta’s contractual duty to use its ‘Best Efforts’, and we must therefore reverse the district court’s dismissal of Intelsat’s breach of contract claim”. 991 F.2d 94, at 97&98.

(616)

“Martin, Intelsat Agree to Settle Launch Suit, Space News, June 14-20,1993, at 2 Adler, Kaplan & Begy’s, “Intelsat, Martin Marietta Drop Suits, Announce New Deal”, in (Spring 1994) Space Law News, at 7.

193 consistent with United States obligations, law and published policy, NASA refused to perform the LSA. The Claims Court(617), where the suit was filed by Hughes, rejected Hughes claim and upheld the provisions of the LSA which made the performance of NASA subject to potential changes in policy, thereby considering that NASA was not in breach of the LSA. However, due to another provision of the LSA, this decision was reversed by the Court of Appeals.(618) Although a general provision made the NASA obligations subject to changes in policy, another provision dealing with scheduling and launch priority was more specifically calling up a Presidential policy of 6 August 1982 on launch assistance. The Court of Appeals therefore applied classical contract law to decide that the specific clause had to prevail as the parties had provided in the particular case of launch priority and scheduling, for a specific set of provisions applicable. NASA therefore had to compensate Hughes for the costs caused by the new policy.

ix)

American Satellite Co v. United States(619)

This case dealt with facts along the same lines as the Hughes case examined above, and the same decisions were rendered. In this case ASC argued also that NASA had the duty to provide a substitute launch vehicle. From this was derived the claim of ASC for additional costs caused by the need to arrange launch on an ELY which ASC had arranged in the meantime. The court did not support this argument and considered that, although what constitutes “best efforts” may have been less than clear at the time the agreement was signed, it is clear that NASA’s obligations was to use its best efforts to perform the terms of the written agreement. NASA was obligated to make its best efforts to make a Shuttle available, not an ELV. Thus, even assuming that ASC would be correct that NASA acted negligently regarding Challenger, the obligation ASC was seeking to impose was considered by the Court as not bargained for in the LSA.

x)

Lloyds of London v. McDonnell Douglas(620)

This case was concerned with damage which had occurred prior to a launch. The Government of India had signed a contract with Ford Aerospace, whereby Ford Aerospace manufactured the Insat satellite and assumed all responsibility and risk of loss until launch. Ford was insured for such with Lloyds and other insurers. Separately, India had concluded a Launch Services Agreement with McDonnell Douglas for the launch of Insat on board Delta. During the integration of the satellite with the Delta prior to launch, a wire hoist cable of a crane snapped and the satellite was damaged. Lloyds had to pay Ford to repair the Insat satellite and then launched a suit against McDonnell Douglas on counts of negligence, gross negligence, negligence per se and negligent misrepresentation by McDonnell Douglas in the planning, testing and supervision of the launcher-satellite (617)

26 Cl. Ct. 123 (1992)

(618)

Hughes Communication Galaxy v. United States, 998 F.2d 953 (Fed Cir 1993). Case note in (1993) 21:2 Journal of Space Law, 166. See also S. Gorove, Cases on Space Law, supra note 514, at 76.

(619)

Claims Court: 26 Cl Ct 146 (1992); Appeals Court: 998 F. 2d 950 (Fed Cir 1993). See also S. Gorove, Cases on Space Law, supra note 514, at 81 and 96.

(620)

Certain Underwriters at Lloyds et al v. McDonnell Douglas Corp et al., US District Court of the Middle District of Florida Orlando Div, Case 90-833 Civ-ORL-18 and 90-543. June 18, 1990.

194 mounting process and in McDonnell Douglas’s alleged violations of laws, regulations, and of its own procedures for the operation of the crane. The Indian Government on its part, pursued arbitration against McDonnell Douglas, as provided by the LSA. The court applied Florida law and considered that the 1988 Commercial Space Launch Act Amendments provisions were not embracing pre-launch mishaps.

The case law which has developed in the US so far, as summarized above, in the area of liability for damage caused by space launches, and space products liability, is very scarce and one could hardly derive any general conclusions from the above cases in terms of consistent rules of law applicable to space activities. However, these cases can help to design lines of action in terms of liability risk management which we will discuss later in Chapter 5.

4.2.- CIVIL LAW: THE EXAMPLE OF FRENCH LAW Besides the common law briefly studied above through the US example, the other main system of law in the world is the civil law system examined here through the example of French law(62l) due to the fact that the European launch company Arianespace is operating under the laws of France, and under the responsibility of France.(622) It has been shown that in the common law system the most important source of law remains case law. Some of the rules developed by courts are codified into statutes and specific statutes have been enacted more recently, in particular in the area of liability and space transportation. In civil law it is the other way round: the focus is on statutes. There are various levels of statutory provisions(623) but they are always the fundamental source of law. The Courts have to apply the statutes and all courts’ decisions refer to precise statutes in their disposition. In most civil law systems, laws are codified into codes. In France, there are a large number of codes such as the civil code, commercial code, code of civil procedure, criminal code, aviation code, rural code, insurance code and more.(624) Codification of the law in France has a long tradition and has been adopted by other civil law systems. This codification has the advantage of providing access to complete and coherent parts of the legal system where legal counsels can find the largest part of the provisions related to a certain subject. Unfortunately, especially with the introduction of European law into the domestic law of the EU countries, there has been an inflation of statutes, making it difficult now to codify all of them and to refer to comprehensive codes.

(621)

The reader will find more details on the subjects addressed in this title in the following books: F. Terré, P. Simler & Y. Lequette, Droit Civil, Les Obligations (Dalloz: Paris, 1999) F. CollardDutilleul & P. Delebecque, Contrats Civils et Commerciaux (Dalloz: Paris, 1998) H.& L. Mazeaud, J. Mazeaud, F. Chabas, Leçons de Droit Civil, 7th Edition (Monchrestien: Paris, 1985).

(622)

We refer to our developments on this topic in Chapter 3.

(623)

For instance in France there is the law, the implementing decrees, and lower levels of regulations.

(624)

A large number of those codes are available online at (accessed: 01/2001).

195 One should nevertheless not underestimate the role of jurisprudence in French law. The Courts do not merely apply the statutes, but they often play a fundamental role in the expansion of the provisions of certain codes into complex legal theories. This is the case, in particular, in the area of liability. In general, French statutes are very detailed. The law itself is often general but it is complemented by detailed implementation decrees and consequently, Courts often are left only with the function of implementing those provisions to practical cases, which leads them to refine them. The creation by the Courts of a complete theory of law, such as that built on the basis of Article 1384 of the French Civil Code, happens in a limited number of cases. In this respect, the approach to French law by a lawyer not trained in the French system is probably easier than the same exercise by a French lawyer when approaching US law. On the one hand, the collection of statutes into a structured codification provides for greater legal certainty and security which is not matched by the common law systems. On the other hand, it also creates less flexibility for adaptation to changing environments. Both contracts and torts liability are codified in the French civil code. They are studied in the same sequence as in the earlier discussion on US law, to facilitate a comparison, although these two regimes cannot be compared one to one.

4.2.1.- Contract Liability Under French law a large number of contracts are governed by specific rules and these contracts are usually referred to as the “named contracts”.(625) The contract of sale is one example of this and the specific regime of the contract of sale is defined by Article 1582 et seq of the Civil Code.(626) Contracts which do not fit into defined categories follow general principles of contract law and are usually referred to as “un-named contracts”.(627) The qualification of contracts is made essentially by its contents in terms of obligations. The intention of the parties is referred to in order to determine this qualification.(628) A (625)

In French: “contrats Delebecque, Contrats (Paris: Monchrestien, (Paris: LGDJ, 1996) 1998).

(626)

Code Civil (Paris: Litec, 1998-1999), also online, supra note 624.

nommés”. For more details on those, see F. Collard-Dutilleul & P. Civils et Commerciaux, supra note 621 A. Bénabent, Contrats spéciaux 1997) J. Huet, Les principaux contrats spéciaux, Traité de droit civil P. Malaurie & L. Aynes, Droit Civil, Les Contrats Spéciaux (Paris: Cujas,

(627)

In French: “contrats sui generis” or “contrats innommés”.

(628)

But the intention of the parties cannot change the qualification of a contract as resulting from the contents of such contract, except in the case foreseen by Article 12 § 2 of the Nouveau Code de Procédure Civile. This article provides “ Le juge tranche le litige conformément aux règles de droit qui lui sont applicables. Il doit donner ou restituer leur exacte qualification aux faits et actes litigieux sans s’arrêter à la dénomination que les parties en auraient proposée. Toutefois, il ne peut changer la dénomination ou lefondement juridique lorsque les parties, en vertu d’un accord exprès et pour les droits dont elles ont la libre disposition, l’ont lié par les qualifications et points de droit auxquels elles entendent limiter le débat. [...]”. See F. Coliard-Dutilleul & P. Delebecque, Contrats Civils et Commerciaux, supra note 621, at 27.

196 number of different rules also apply when the contract is entered into between commercial parties.(629) These are normally called commercial contracts.(630) They follow the general rules of contract law, amended by specific rules defined in commercial law. It is worth noting that in French law specific rules apply to international contracts, defined as contracts which have some of their constitutive elements connected to different States. French law respects the intention of the parties in international contracts and leaves these parties free to use clauses normally declared void in domestic contracts (this is the case for instance in the domain of arbitration clauses, waivers and disclaimers of liability). Each type of contract is not addressed here but the general rules of contract law are reviewed and reference is made to named contracts where specific rules are worth being mentioned. In any case, most contracts involved in the space business are not named contracts but rather sui generis contracts and they tend to be very complex and put together a large number of very different obligations, which prevent them from being strictly associated to a specific contract type.(631)

i)

Liability for Breach of Contract (Responsabilité contractuelle)

Like US law, there are a number of fundamental elements to the formation of a contract(632) and the first type of claims which can result from a contract are those related to defects in the formation of the contract which we will not enter into here. The main rules regarding contractual liability are to be found in articles 1146ff of the Civil Code. As far as the performance of the contract is concerned, French law gives importance to the definition of the obligations of the contractual parties and makes a distinction between three types of obligations: the obligations to give(633) (especially where a transfer of property is involved as part of the contract), the obligations to do (perform a duty, render a service) and the obligations to not do/abstain from doing something(634) (for instance, in distribution contracts not to sell in a specific area, not to compete in a certain area). All these obligations, in their various nuances, are in turn grouped into two categories, developed by the doctrine and followed by case law:

(629)

Article 1107 of the Civil Code, supra note 626, provides: “Les contrats, soient qu’ils aient une dénomination propre, soit qu ’ils n ’en aient pas, sont soumis à des règles générales, qui sont l’objet du présent titre. Les règles particulières à certains contrats sont établies sous les titres relatifs à chacun d’eux; et les règles particulières aux transactions commerciales sont établies par les lois relatives au commerce”.

(630)

On rules applicable to commercial contracts see, M. Pédamon & R. Houin, Droit commercial (Paris: Dalloz, 1992).

(631)

On this point see the very detailed analysis made on this subject by Laurence Ravillon, Les Télécommunications par Satellite, Aspects Juridiques, supra note 19, page 129ff. The analysis is made for satellite development contracts, launch contracts and satellite exploitation contracts.

(632)

For more details on the formation of contracts in French law, see F. Terré, P. Simler & Y. Lequette, Droit Civil, Les Obligations, supra note 621, at 65.

(633)

Those are defined by Articles 1136 to 1141 of the Civil Code, supra note 626.

(634)

The obligations to do or not to do are defined in Articles 1142 to 1145 of the Civil Code, supra note 626.

197

- the obligations of means,(635) whereby a party undertakes to make its best efforts, or to use the appropriate means, to do something for the other party; - the obligations of result(636), whereby a party undertakes to achieve a defined result. The distinction between these two categories is the role to be played by the fault element in the case of breach of contract. French law works around the concept of fault which is also encountered in torts liability. Here it is the contractual fault, the non-performance of a contractual obligation(s). The proof of such fault is brought differently whether we are dealing with an obligation of means or an obligation of result. The core of this theory lies in the analysis of what the obligee has committed to do and what the obligor can expect to receive. This defines the nature of the obligation taken by the obligee, and, in turn decides whether the conduct of the obligee is of importance and justifies that fault be demonstrated (obligation of means) or whether the result which was supposed to be achieved is the important element in which case the absence of the result promised is sufficient (obligation of result) and there is no need to bring the proof of a fault. In the case of an obligation of result, the notion of fault of the defaulting party is immaterial. There is a contractual liability for non-performance if the result has not been achieved, irrespective of whether the defaulting party has committed a fault or not. In this case, the only defenses of the defaulting party will be either the act of a third party, an act of the injured party or force majeure. In the case of an obligation of means, the injured party will need to bring proof of a fault on the part of the defaulting party in order to show its contractual liability. This fault will be the failure of the obligee to behave in accordance with the standard of conduct appropriate to achieve the obligation at stake. This standard of behavior is often referred to as that of a good head of family (637) This notion is analyzed on a case by case basis, however, the general principle is that this is the conduct of a reasonable and diligent man. The fault is established against the obligee if the proof can be brought that a reasonable and diligent man placed in the same situation would have acted differently and that, as a consequence, the obligee was negligent. The approach to the standard of bon père de famille and its implementation bear some similarity with the standard of care notions we addressed above in the context of US law. French case law has made these obligations of means more or less stringent depending of the standard of the bon père de famille in particular cases. The Courts have made these obligations more stringent in cases where the obligee exercises a profession where insurance is mandatory for example. In doing so, the Courts have blurred the dividing line between obligations of means and obligations of result. But the distinction remains fundamental in French law. Various criteria are used by the Courts to differentiate contractual obligations between obligations of means and obligations of result. The most important criteria is that of uncertainty. Obligations will in principle be qualified as obligations of means when their (635)

In French: “obligations de moyens”, also sometimes called “obligations de diligence”.

(636)

In French: “obligations de résultat”.

(637)

In French: “bon père de famille”. This notion is expressly referred to in Article 1137 of the Civil Code, supra note 626, in relation to the obligation to give but is applied to other types of obligations as well, so long as they are of means.

198

execution bears a significant uncertainty(638) or when the obligor plays a certain role in the execution of the obligation. Of course, one needs to add to these criteria the expression of the intention of the Parties to the contract, supported by the terms of the contract. There are many nuances in the implementation of the distinction between obligations of means and obligations of results, as they are often mixed in a same contract, and as the limits between the two notions is really a factor of the evolution of case law.(639) Besides the obligations to give, to do or not to do, which are the basic contractual obligations, the Courts have developed two additional categories of obligations which cannot be separated from those. These are the obligations of safety(640) and the obligations of information and advice.(641) The obligation of safety was invented with industrialization where the use of machines caused a growing number of accidents in the workplace. This theory was used in other areas such as transportation where the Courts decided that the transporter had an obligation of safety vis a vis the passengers to bring them alive and well at their point of destination.(642) The obligation of safety has been traditionally considered an obligation of result. It remains used but restricted to activities where the client is in the hands of technicians or equipment and has no cooperation or control in the activity concerned. This limitation is the result of considerable changes in the area of torts liability which made the extension of contractual liability by such artificial means as the creation of obligations of result such as that of safety unnecessary.(643) The obligation of information and advice during the execution of a contract(644) is traditionally an obligation of means. Sometimes it can be a rather stringent obligation of means and closer to an obligation of result when it is linked to the specific knowledge of a professional.(645) Apart from the non-performance of the obligee’s obligations, which either has to be proved (obligations of means) or which is derived from the absence of the promised result (obligations of result), two more elements are needed for the contractual liability to be established. First of all, the injured party must suffer damage. The types of damage that (638)

A.Tunc, “La distinction des obligations de résultat et des obligations de diligence” (1945) Semaine Juridique (JCP), I, at 449.

(639)

For more developments on these notions, as well as their implementation in particular cases, including medical cases, see F.Terré, P.Simler, Y.Lequette, Droit Civil, Les Obligations, supra note 621, at 417.

(640)

In French: “obligations de sécurité”.

(641)

In French: “obligations d’information et de conseil”.

(642)

Civ, 21 November 1911(1913) Recueil Dalloz (DP), 1,249 (Annot. Sarrut); (1912) Recueil Sirey, 1, 73 (Annot. Lyon-Caen). This decision is also reproduced in F. Terré & Y.Lequette Eds, Les Grands Arrêts de la Jurisprudence Civile, 10th Edition (Paris: Dalloz, 1994) [hereinafter referred to as “Les Grands Arrêts”], n°188 at 770. The Supreme Court stated: “ ...que l’exécution du contract de transport comporte, en effet, pour le transporteur, l’obligation de conduire le voyageur sain et sauf à destination..”.

(643)

For more examples of the nuances attached to the obligation of safety, see Grands Arrets, supra note 642, annotation under decision n°188, at 770 ff.

(644)

It also exists before the conclusion of the contract, but is not then a contractual obligation.

(645)

Cass. Com., 3 December 1985 (1985) Bulletin Civil, IV, n°284, 212 - (1986) Revue Trimestrielle de Droit Civil, 372; Cass. Civ. 1è, 8 January 1985 (1985) Bulletin Civil, 1, n°12, 12 - (1986) Revue Trimestrielle de Droit Civil, 138; Cass. Com., 12 December 1984 (1984) Bulletin Civil IV, n°346, 281.

199

can be compensated are later. Second, the injured party must establish a causal link(646) between the breach of a contractual obligation and the damage it suffers. This element is applicable to contractual liability as well as to torts liability and this subject is discussed in the developments devoted to torts liability. In contracts, the Civil Code provides that the damages to be paid to the injured party shall only include those due as a direct and immediate consequence of the breach of the contract.(647) There must be a causal link between the fault of the obligee (the breach of his contractual obligations) and the damage caused to the injured party. The causal link is approached on the basis of the same principles in contractual and torts liability. We refer the reader to the discussion on tort liability below for the study of this issue. In French contract law, the classical remedies for breach of contract obligations are the following: - in cases where the obligation concerned can still be performed, its performance can be forced(648). The first step of this forced execution is a notification made by the claimant, instructing the defendant to perform the contractual obligation at stake. If such notification does not lead to the performance required, the notification has two main consequences: 1) in the case where the obligation concerned involves the delivery of goods, the risks are shifted back to the obligee (note: the principle in French law is that the transfer of risks in a sale of goods occurs at the time of exchange of consent between the parties to the sale)(649) with all the consequences which follow; 2) the notification is the start point for the calculation of the interests due for late performance when the obligation is a financial one. These are in principle the only damages which can be sought due to delay in performance of a payment obligation unless the obligee has caused a supplementary damage due to his bad faith, in which case additional damages can be sought.(650) The forced execution, which requires at various stages the involvement of the (646)

In French: “lien de causalité” or “lien de cause à effet”.

(647)

Article 1151 Code Civil, supra note 626: “Dans le cas même où l’inexécution de la convention résulte du dol du débiteur, les dommages et intérêts ne doivent comprendre à l’égard de la perte éprouvée par le créancier et du gain dont il a été privé, que ce qui est une suite immédiate et directe de l’inexécution de la convention.”

(648)

In French: “exécution forcée”.

(649)

Article 1138 of the Civil Code, supra note 626, provides: “L’obligation de livrer la chose est parfaite par le seul consentement des parties contractantes. Elle rend le créancier propriétaire et met la chose à ses risques dès l’instant où elle a dû être livrée, encore que la tradition n’en ait point été faite, à moins que le débiteur ne soit en demeure de la livrer; auquel cas la chose reste aux risques de ce dernier.”

(650)

Article 1153 of the Civil Code, supra note 626, provides: “Dans les obligations qui se bornent au paiement d’une certaine somme, les dommagesintérêts résultant du retard dans l’exécution ne consistent jamais que dans la condamnation aux intérêts au taux légal, sauf les règles particulières au commerce et au cautionnement. Ces dommages et intérêts sont dus sans que le créancier soit tenu de justifier d’aucune perte. Ils ne sont dus que du jour de la sommation de payer, ou d’un autre acte équivalent telle une lettre missive s ’il en ressort une interpellation suffisante, excepté dans le cas où la loi les fait courir de plein droit. Le créancier auquel son (continued...)

200 judicial authority, involves various rights for the claimant: right of pledge on certain assets of the obligee and right to take conservatory measures, right to obtain the performance of the obligation concerned, right to obtain damages. In certain circumstances, the claimant can also exercise rights against third parties. French law goes rather far in this matter, and actions against third parties are mostly in the following cases: - against third parties obliged in solidum together with the obligee; - against a third party who has offered a guarantee of the obligation of the obligee; - against a third party who is in possession of a thing on which the obligee had a right; - the claimant can also act, as though it was on behalf of the obligee, against third parties who owe the performance of obligations to the obligee. This action is called action oblique; - the claimant can also act against third parties who benefit, or who were accomplices, of the fraud committed by the obligee towards him. This action is called action paulienne; - the claimant is also sometimes granted direct actions by law. One important example of this in French law is the direct action of the subcontractor (souscontractant) against the employer (maître de l’ouvrage) in case of default of the prime contractor (entrepreneur principal) to perform an obligation vis-à-vis the subcontractor, usually related to payments. The subcontractor who is not paid by his prime contractor has a direct action recognized by law against the employer.(651) This direct action is possible only when the subcontractor concerned had been accepted by the employer. Due to the existence of this direct action, under French law, contracts often provide for the direct payment by the employer of the subcontractors so as to avoid the possibility of having to pay twice. Contracts placed by State entities are obliged by law to contain such provisions for direct payment.

- the exceptio non adimpleti contractus, or exception of inexecution. This applies in (650)

(...continued) débiteur en retard a causé, par sa mauvaise foi, un préjudice indépendant de ce retard peut obtenir des dommages et intérêts distincts des intérêts moratoires de la créance.” It is worth noting that this article not only applies to contractual obligations of payment, but also applies for payment of sums resulting of judgements. The interest rate applicable under this article is defined by decree every year for one year asthe method for its calculation is defined by law n°75-619 of 11 July 1975 in Code Civil, supra note 626, at 1680. For 1998, for example, it was fixed at 3,36%.

(651)

Law 75-1334 of 31 December 1975, JO 3 January 1976, in Code Civil, supra note 626, at 1681 ff. Article 12 of this law provides: “ Le sous-traitant a une action directe contre le maître de l’ouvrage si l’entrepreneur principal ne paie pas, un mois aprés avoir été mis en demeure, les sommes qui sont dues en vertu du contrat de sous-traitance: copie de cette mise en demeure est addressée au maître de l’ouvrage. Toute renonciation à l’action directe est réputée non écrite. Cette action directe subsiste même si l’entrepreneur principal est en état de liquidation ou de suspension provisoire des poursuites (redressement ou liquidation judiciaire). [...]” . For an important decision on this subject see Cass. Ch Mixte, 13 March 1981 (1981) Recueil Dalloz (D), at 309 (Annot. M.Bénabent); (1981) Revue Trimestrielle de Droit Civil, at 862, (Annot. Ph Rémy); Grands Arrêts, supra note 642, n° 187, at 764. See also: P. Flécheux, “La loi n°75-1334 du 31 Décembre 1975 relative à la sous-traitance” (1976) Semaine Juridique (JCP), I, at 2791.

201 contracts which contain obligations on both parties.(652) This does not require the intervention of the judicial authority and can be implemented directly by the parties. It is mostly a measure of pressure which one party will exercise to force the other party to perform. It does not modify the contractual obligations of any of the parties, but rather leads to the temporary suspension of performance by one party in response to the nonperformance of the other party. If this measure does not lead to performance, other means will then be necessary. The Civil Code does not provide for a general principle on this but refers to it in relation to certain types of contracts.(653) The terms of this exception have been largely defined by case law which developed general principles and does not limit the implementation of this exception to the cases provided for by the Civil Code. In principle, this exception is applicable to obligations which are reciprocal, interdependent and concomitant, this being established on a case by case basis. The exception can be used only when there is non-performance by one of the parties of an obligation which has the above characteristics. There are no formalities required to implement this exception. Between the parties, the exceptio non adimpleti contractus leads to the suspension of the performance of the obligations concerned. It is important to note that this exception cannot be used as a form of black-mail, and that the reaction by one party to the nonperformance of the other party has to be proportional. - in the most extreme cases, non performance may lead to contract termination with damages. There are two types of such termination. First, the termination can be pronounced by the courts.(654) The prerequisite for such termination is the nonperformance of the obligation. This non-performance is not required to be due to a fault of the obligee.(655) It can also be either total or partial. It is the role of the judge to assess that all the conditions are met and exercise a certain power of consideration as to the adequacy of the termination of the contract given the circumstances. The action in termination generally contains, as a first step, an option to force performance.(656) The court can terminate the contract totally or partially. The termination of the contract has (652)

Called in French “contrats synallagmatiques.

(653)

See articles 1651, 1612, 1653, 1704, 1948 Civil Code.

(654)

Article 1184 of the Civil Code provides: “ La condition résolutoire est toujours sous-entendue dans les contrats synallagmatiques, pour le cas où l’une des deux parties ne satisfer a point à son engagement. Dans ce cas, le contrat n’est point résolu deplein droit. La partie envers laquelle l’engagement n’a point été exécuté a le choix de forcer l’autre à l’exécution de la convention lorsqu’ elle est possible, ou d’en demander la résolution avec dommages et intérêts. La résolution doit être demandée en justice, et il peut être accordé qu défendeur un délai selon les circonstances”. It is to be noted that although article 1184 refers only to reciprocal contracts (contrats synallagmatiques), the courts have also allowed this cancellation action in other types of contracts (for some specific cases the Civil Code also contains provisions to that effect. See articles 1912 and 2082).

(655)

In case the non performance is due to a force majeure event or an accident (cas fortuit) the cancellation of the contract still needs to be pronounced by a court (unless the contract contains specific provisions to the contrary). Cass Civ 1 ère, 2 June 1982 (1982) Bulletin Civil I, n°205; Appeal Court Aix, 15 October 1991 (1993) Revue Trimestrielle de Droit Civil, 119, (Annot. Mestre).

(656)

As per the choice given to the creditor by the Civil Code article 1184.

202

identical effects to that of a resolutory condition: the contract is deemed retroactively not to have been concluded and the parties have to take all measures necessary to place the situation back as before the contract.(657) The parties to a contract can renounce to the application of article 1184 of the Civil Code, so long as this is clearly stated in the contract.(658) The parties can then replace it by a contractual termination clause(659) which defines the circumstances under which the creditor can claim termination of the contract. The courts will intervene only in case implementation of the contract is disputed.(660) ii)

Warranty

Insofar as sales contracts are concerned, French law provides for two types of “warranties”. The first one is not called “warranty” but obligation of conformity. The seller has the obligation to deliver exactly the goods subject of the sale.(66l) The non-conformity of the goods is a breach of contractual obligations by the seller. The conformity of the goods includes the conformity to statutes in force (for instance in the areas of health and safety) as well as conformity for a certain purpose (the equivalent of the US warranty of fitness for a particular purpose) if the specific purpose for which the goods were bought had been included in the contract or otherwise entered the scope of the agreement made between the parties. The notion of non-conformity does not imply a notion of defect. The goods may not be in conformity with the contract while being of good quality. The Civil Code does not contain specific provisions regarding the time frame for the buyer to control the conformity of the goods delivered to him. This aspect is left to the practice, which normally is that the conformity has to be checked immediately or within a short time when the goods are more complex and require testing.(662) The consequences of the breach of the obligation of conformity follows the basic principles of the law of obligations: exceptio non adimpleti contractus, cancellation of contract, damages. Besides the obligation of conformity, there is an obligation of warranty. This is the (657)

See for example: Cass Civ 3 November 1948 (1949) Recueil Dalloz (D), at 53 (the parties must return in kind what they had received, except where the items are no integral anymore Cass Civ 3è, 2 March 1994 (1994) Contrats, Conc, Consom, at 133,1ère esp, (Annot. Leveneur) (restitution by the seller of all amounts reeived for a sale) Cass Civ 3è, 26 January 1994 (1994) Contrats, Conc, Consom, comm 133, 2è esp (buyer of a building has to pay an occupancy fee) It is also accepted by the courts that the obligation of the parties to return each other to the situation preceding the contract may be waived or adapted in case such obligation is practically impossible: see Cass Civ 1ère, 7 June 1995 (1996) Semaine Juridique (JCP), II, 22581 (Annot. Françon).

(658)

Com, 7 March 1984 (1984) Bulletin Civil IV, n°93, at 78; (1985) Semaine Juridique (JCP), II, 20407 (Annot. Delebecque).

(659)

Called in French “clause résolutoire” or “pacte commissoire exprès”.

(660)

Although the parties have considerable freedom in agreeing these clauses, there are some domains in which the law has set boundary conditions for such clauses (one example can be found in insurance law, article 113-3 of Code des Assurances), and the courts tend to look at such clauses with rather strict eyes by, firstly, interpreting them restrictively and by, secondly, allowing the creditor to implement them only where he is acting in good faith.

(661)

Articles 1243 to 1246 of the Civil Code, supra note 626.

(662)

See F. Collard-Dutilleul & P. Delebecque, Contrats Civils et Commerciaux, supra note 621, § 235, at 193.

203

statutory warranty, defined in article 1641 et seq ofthe Civil Code, the so-called warranty for latent defects.(663) This warranty does not need to be stipulated in the contract of sale(664) for it to be applicable. Article 1641 ofthe Civil Code defines the conditions under which the warranty for latent defects can be exercised: - the item sold is affected by an inherent defect. The defect must be in the item itself and not in external circumstances; - this defect makes the item unfit for its intended normal use. This condition is assessed by the courts who normally accept the implementation ofthe warranty in cases where the use of the thing is seriously hampered but not when it is a minor trouble or a repairable one; - the defect existed at the time ofthe sale, which is normally interpreted as the time of delivery. The burden of proof is on the buyer that the defect was anterior to the sale; - the defect was not apparent to the buyer because it was latent or hidden. This is determined by the courts on a case by case basis by reference to the characteristics of the buyer (is he a non-professional? is he a professional? Could he possibly discover the defect in the circumstances?). The courts are usually strict with professionals ofthe same speciality. Of course, ifthe seller has informed the buyer of the defect, the defect is not hidden anymore and the buyer will not be able to claim the statutory warranty. French law does not provide for a time limit for the statutory warranty obligation. There is only a time limit once the defect is discovered.(665) The buyer who discovers a latent defect has to bring his claim for warranty within a short period of time, the so-called bref délai.(666) This bref délai is not defined by the law. The determination of this bref delai is a matter of fact which is decided by the Courts on a case by case basis. Overall, the courts assess the bref délai at around one year. The starting point of the bref délai is the discovery of the defect. The buyer who brings a claim for warranty for latent defects has a choice(667) to either terminate the contract and ask for reimbursement of the price,(668) or reduce the purchase price.(669) He can also obtain damages in cases where the seller sold

(663)

In French: “garantie des vices cachés”.

(664)

This type of warranty is mostly applicable in contracts of sale, although it is sometimes stipulated for other types of contracts (for example article 1891 Civil Code). Some contracts have their own regime of warranty as well. This is the case, for instance, for construction contracts (Article 1792 ff of the Civil Code).

(665)

Some exception has been made in the area of product liability following the European Directive on this subject. See further the developments on product liability directive.

(666)

Article 1648 of the Civil Code, supra note 626, provides: “L’action résultant des vices rhédibitoires doit être intentée par l’acquéreur, dans un bref délai, suivant la nature des vices rhédibitoires, et l’usage du lieu où la vente a été faite. [...].

(667)

Article 1644 Civil Code provides: “Dans les cas des articles 1641 et 1643, l’acheteur a le choix de rendre la chose et de se faire restituer le prix ou de garder la chose et de se faire rendre une partie du prix, telle qu’ elle sera arbitrée par experts”.

(668)

This is the “action rhédibitoire” in French.

(669)

This is the “action estimatoire” in French.

204 the goods with the knowledge of the defect (bad faith of the seller).(670) In this respect, it must be noted that the professional seller or reseller is irrefragably deemed to be in bad faith. He is deemed to know any defects in the thing sold.(671) The presumption still applies if the buyer and the seller are both professionals(672) but case law does not always apply the presumption in cases where the buyer and the seller are professionals of the same speciality.(673) In case of successive sales, the last seller who is the subject of the warranty claim has a recursory action against previous sellers based on the same warranty rules. In the case of chains of contracts, the courts have decided that the rights of warranty for conformity and latent defects are accessories to the thing and are transmitted with the thing through the various contracts concerned(674).

iii)

Rules of contract interpretation

The basic rules of contract interpretation are to be found in articles 1135 and 1156 to 1164 of the Civil Code. The practice of the courts has sometimes introduced some flexibility in the implementation of these rules.(675) The fundamental principle is that to interpret the contract, the judge shall always give the primary importance to the common intention of the parties.(676) The main means to determine the common intention of the parties is the contract itself, its text and associated documents. When a clause is clear and precise, it is deemed to reflect the common intention of the parties. The judge is then obliged to give effect to that text no matter how stringent it is.(677) The party who would consider that the clause had a different meaning has the burden of proof to that effect, and the judge will have to

(670)

Article 1645 Civil Code: “Si le vendeur connaissait les vices de la chose, il est tenu, outre la restitution du prix qu ’il en a reçu, de tous les dommages et intérêts envers l’acheteur.”

(671)

Cass Civ 1ère, 24 Nov 1954 (1955) Semaine Juridique (JCP), II, 8565 - Grand Arrêts, supra note 642, n° 177, at 724. This presumption has been validated against the principles ofthe European Union regulations concerning free circulation of goods and free competition by a decision of the European Court of Justice, CJCE 24 Jan 1991 (1991) Recueil Dalloz (D), at 273.

(672)

Cass Com, 27 Nov 1991 (1992) Semaine Juridique (JCP), IV, 409; Bull IV n°367.

(673)

As an example, see Appeal Court Versailles, 31 March 1989 (1989) Recueil Dalloz (D), Inf Rap, at 186.

(674)

See Cass Ass Plen, 7 February 1986 (1986) Recueil Dalloz (D), 293 (Annot. Bénabent) - (1986) Semaine Juridique (JCP), II, 20616 (Annot. Malinvaud) - (1986) Revue Trimestrielle de Droit Civil, 605 (Annot. Rémy) - Grands Arrêts, supra note 642, n° 179, at 734.

(675)

The interpretation of contracts is, in French law, a matter of fact, which is therefore not subject to “cassation” (supreme court overrulling). See Cass. Ch Réunies, 2 February 1808 (1808) Recueil Sirey, 1, at 183. - Grand Arrêts, supra note 642, n°91, at 396.

(676)

Article 1156 Code Civil: “On doit dans les conventions rechercher quelle a été la commune intention des parties contractantes, plutôt que de s’arrêter au sens littéral des termes”.

(677)

This stems from Article 1134 of the Code Civil which assimilates the contract to the law of the parties. The judge, in this respect, is under the control of the Cour de Cassation.

205 substantiate his decision which could be overruled by a higher court if he has wrongly modified a clear text.(678) It is to be noted that the courts have often considered small print clauses as unclear with the rationale that the party against which they are invoked could not have read them. In case of a clear text, and if proof that it does not reflect the intention ofthe parties is not brought to the judge, then the judge has no freedom and has to enforce this text. When the text is not clear, or when some clauses are in contradiction, the judge has full power of interpretation, but he has to give priority to the search of the common intention ofthe parties. But if he cannot find it, he can refer to practice or equity.(679) When the text is unclear or there are contradictions, the judge will be guided by the following rules: - when a clause is unclear, the judge will try to interpret it by reference to the rest of the contract; - when a clause could be interpreted in two different ways, the judge shall interpret the clause in the way which can produce an effect, rather than that which cannot produce any effect; - terms which could possibly have different meanings have to be interpreted along the meaning in relation to the subject of the contract; - the use of an example in a contract to illustrate an obligation shall not be considered as a limitation of the text concerned. When all of the above elements do not bring a final resolution to the issue of finding the common intention of the parties, the judge may combine all the above, with extrinsic elements which can put some light on the intention of the parties, such as negotiation records. Judges are more reluctant to use elements occuring after the signature of the contract. If all of the above has failed to decipher the intention of the parties, or if the parties are completely silent on the issue concerned, the judge will then turn to alternative ways to determine the obligation of the parties: - the statutes:(680) the judge will presume that the parties have by their silence intended to refer to the statutes on the subject concerned. This is a rather logical consequence in countries of civil law where the rules of law are codified or otherwise embodied in statutes. In the case of the named contracts which we referred to earlier (e.g. the contract of sale), the statutes contain the full regime of this type of contract and the parties may actually write very little and rely on the provisions of the statutes. - practice:(681) this tends to be easier to apply in professional circles where practices tend to be better established. In general, the practice needs to be readily applicable into the contract without having to determine elements of fact to make this possible.

(678)

Cass. Civ., 15 April 1872 (1872) Recueil Dalloz, 1, at 176 - Grands Arrêts, supra note 642, n°92, at 398.

(679)

Article 1135 Code Civil: “Les conventions obligent non seulement à ce qui est exprimé, mais encore à toutes les suites que l’équité, l’usage ou la loi donnent à l’obligation d’après sa nature”.

(680)

Article 1135 Civil Code, supra note 626.

(681)

Article 1135,1159 and 1160Civil Code, supra note 626.

206 - equity :(682) equity is really the last resort of the judge who has failed to interpret the contract with all of the above methods. It is a floating notion, very much a factor at the discretionary power of each judge and it introduces significant insecurity in contracts, although limited to the very subsidiary role which the civil code has given to it in the interpretation methodology. One of the rules of equity provided by the civil code is that the contract or clause is interpreted against its drafter and in favor of the one who has taken the obligation concerned.(683) This rule is particularly important in the area of consumer contracts which are not negotiated or standard. In general, courts tend to be very conservative, adhere to the classical rules of interpretation, and avoid deciding on the basis of equity. Equity is used more as a general thread behind decisions made on the basis of the classical rules of interpretation.

The interpretation of the contract by the judge is, as stated above, a question of fact, and for the courts of fact(684) to implement it. In principle the Cour de Cassation, judge of the law, will not intervene unless the judge has not qualified the contract properly, or when the judge changes the terms of a contract which were clear.(685)

4.2.2.- Tort Liability i)

Provisions of the Civil Code: liability for fault and strict liability

Apart from contractual liability, French law contains tort liability, called in French “responsabilité délictuelle”. This field of law is one of the most complex in French law and only its main principles are reviewed here. This is also one ofthe fields of French law which would seem very familiar to common law lawyers, since it has largely been constructed by the courts. The basic regime of torts liability is based on the notion of fault(686) and is rooted in Articles 1382 to 1384 of the Civil Code. What seemed to be adequate to the drafters of the civil code, though, became unwieldy during development of industrialization and the growth of the use of cars. What was common to both these activities was the relative defenseless state of the victims and the inadequacy of the civil code to cope with these developments. Progressively, the courts developed a more complete and complex body of tort law with a view to offering better protection to victims. In some cases, this jurisprudence has been taken over in specific legislation which has been codified in the Code Civil or has supplemented it. (682)

Article 1135 Civil Code, supra note 626.

(683)

With the exception of the specific example of the contract of sale, where the contract is interpreted against the seller, as provided in article 1602 of the Code Civil.

(684)

In French: “juridictions du fond”.

(685)

Cass. Com 18 January 1950 (1950) Bulletin Civil, 17 - (1950) Recueil Dalloz, 397; Cass. Soc. 11 June 1942 (1943) Recueil Dalloz, J, 135.

(686)

Article 1382 of the Code Civil states: “Tout fait quelconque de l’homme, qui cause à autrui un dommage, oblige celui par la faute duquel il est arrivé, à le réparer.”

207 The French tort law system is articulated in three main ideas: - in order to bring about a claim in tort, the injured party must demonstrate that it has suffered damage. There cannot be a tort liability claim without damage; - there must be a fault of the defendant, or a fact generating the damage.(687) In the following explanations it will be shown that the notion of fault has been modified and it is more appropriate now to talk about generating fact; - there must be a causal link between the damage and the generating fact.

a)

The damage

The fundamental principle is that there is no liability if there is no damage. This is what makes the distinction between the tort liability and criminal claims, as in the latter an action can be brought without anyone having suffered a damage.

b)

The generating fact

There are three types of generating facts: one’s fact, the fact of things and the fact of another. Liability for one’s fact (688) This type of liability is provided for in article 1382 of the Code Civil. One can be held liable for his own facts only when the victim of the damage can prove the fault of its author. The burden of proof is on the victim concerning the fault of the author of the damage. Unfortunately, the Code Civil does not define the term fault. The Code Civil indicates that the fault can be an action or an omission.(689) The tort fault involves a material element which is a reprehensible behavior,(690) which can be an active or a passive behavior, and which is assessed by the courts by reference to the behavior of a reasonable person placed in the same circumstances.(691) Besides the material element of the fault, there is a moral element(692) and there are various degrees ofmoral involvement in French torts law.

(687)

In French: “fait générateur du dommage”.

(688)

In French: “responsabilité du fait personnel”.

(689)

Article 1383 of the Code Civil provides: “Chacun est responsable du dommage qu’il a causé non seulement par son fait, mais encore par sa négligence ou par son imprudence”.

(690)

The tort fault is very different from the criminal fault: there is no need, to establish the tort fault, to demonstrate that the author of the damage violated a specific statute. If he did, this will contribute to establish the fault. But the tort fault is far wider than the violation of a statute.

(691)

Cass. Civ, 11 February 1913 (1914) Recueil Dalloz, 1, at 85; Civ, 8 April 1932 (1932) Recueil Dalloz,at 297; Civ 6 October 1960 (1960) Recueil Dalloz, at 721, Civ 1ère 6 June 1966 (1966) Recueil Dalloz, at 481.

(692)

Criminal law only addresses reprehensible behaviors which have a moral content but which are specifically provided for in statutes. Tort law allows to address reprehensible behaviours of such nature (some criminal causes of actions can also have a civil action connected to them) but also much wider.

208 The highest degree of fault is the intentional fault(693), which arises when the author of the damage behaved with the intention to cause damage or when he behaved in a way which he knew was bound to cause damage to someone. This type of fault is assessed by the courts in relation to the person of the author of the damage and to his behavior. The intentional fault cannot be insured(694) and usually deprives its author of a number of defenses. The other types of fault are the classical faults of negligence or imprudence and are of various degrees. They are assessed by the courts, not in relation to the person of the author -as would be the intentional faults -, but by reference to the model of a reasonable person placed in the same situation. The courts do not look at the standard reasonable person but tune the standard reasonable person to the specifics of the case, for instance by looking at a reasonable person in a specific profession. The fault can also lie in the exercise of a right by the author of the damage. This is the theory of the abuse of rights.(695) The system of law confers to each person certain rights which can be exercised so long as it is in respect of others.(696) One who exercises a right in an abusive way may be considered at fault and be held liable for the damage caused by such fault.(697) The abuse of right is one type of fault. The courts have applied various criteria in this area and there is no systematic approach to this subject. The courts will look, for instance, at whether the right has been exercised with the intention to cause damage, or with imprudence or negligence assessed by reference to the behavior of a reasonable man, or whether the right has been used outside of its normal scope. Like other faults, the abuse of right can be by action or by inaction. It is worth noting that in the contractual area, there are some abuse of rights which can lead to such a tort fault as we have described above. This is the case, for example, in certain instances of breach of precontract talks and negotiations, or during the life ofthe contract where for instance a party abusively forces the other to perform. The exercise of court actions can also become abusive and lead to a liability of the author of such procedures.(698) Liability for one’s acts can be claimed against moral persons such as corporations.(699)

(693)

In French: “faute intentionnelle”.

(694)

Article L.113-1 Code des Assurances: “Les pertes et les dommages occasionnés par des cas fortuits ou causés par la faute de l’assuré sone à la charge de l’assureur, sauf exclusion formelle et limitée contenue dans la police. Toutefois, l’assureur ne répond pas des pertes et dommages provenant d'une faute intentionnelle ou dolosive de l’assuré”.

(695)

In French: “abus de droit”.

(696)

Although some rights have been considered by statutes as discretionary and are not subject to the theory of abuse of rights. See F. Terré, Y; Lequette & P. Simler, Droit Civil, Les Obligations, supra note 621, n°710, at 539.

(697)

For an example of abuse of right in the case of the right of property, see Cass. Req. 3 August 1915 (1917) Recueil Dalloz, 1, 79 - Grand Arrêts, supra note 642, n°62, at 276.

(698)

Desdevises, “L’abus du droit d’agir en justice avec succès” (1979) Recueil Dalloz, chron, at 21.

(699)

Cass.Civ. 2è, 17 July 1967 (1967) Gazette du Palais, 2, at 235 - (1968) Revue Trimestrielle de Droit Civil, at 149; Cass. Com., 4 October 1988 (1988) Bulletin Civil IV, n°265, at 182 - (1989) Revue Trimestrielle de Droit Civil, at 86.

209

Liability for damage caused by things(700) This is the area of tort liability where the courts have done significant creative work. In this area, the basic principle is that as soon as a thing has taken part in causing a damage, this type of liability can come into play whether or not the thing was manipulated by man. Originally, the courts were considering only two areas where this type of liability could be implemented: liability for animals(701) and liability for derelict buildings.(702) Outside these two areas defined by the Code Civil, there was no space for liability for damage caused by things. The courts have widened the scope of applicability of this type of liability in the interest of the victims who, in this case, have a much reduced burden of proof compared to that required in the liability for one’s acts. This concern of the courts was due to the development of the use of machines. The evolution started with the return to article 1384 of the Code Civil(703) which appeared to state a general principle of liability for things of which the liability for animals and derelict buildings would be two specific implementations. The courts therefore argued on the basis of article 1384 as the general principle(704) and then proceeded to establish a presumption of fault under this article 1384, which was already one step towards the improvement of the status of the victims. This presumption could be rebutted by the proof given by the defendant that he was not at fault.(705) The courts then reduced the possibilities for the defendants to rebut the presumption by providing them rebutting possibilities only in cases where the damage had been caused by an external factor.(706) The presumption became, therefore, much stronger.(707) The courts also established, in particular through cases related to car accidents, that article 1384 can be applied to things which are manipulated by man.(708) (700)

In French: “responsabilité du fait des choses”.

(701)

Article 1385 Code Civil, supra note 626: “Le propriétaire d’un animal, ou celui qui s’en sert, pendant qu’il est à son usage, est responsable du dommage que l’animal a causé, soit que l’animal fût sous sa garde, soit qu’il fût égaré ou échappé”.

(702)

Article 1386 Code Civil, supra note 626: “Le propriétaire d’un bâtiment est responsable du dommage causé par sa ruine, lorsqu’elle est arrivée par suite du défaut d’entretien ou par le vice de sa construction.”

(703)

Article 1384 Code Civil, supra note 626: “On est responsable non seulement du dommage que l’on cause par son propre fait, mais encore celui qui est causé par le fait des personnes dont on doit répondre, ou des choses que l’on a sous sa garde. [...].”

(704)

The fundamental decision in this respect is Cass. Civ. 16 Jun 1896 (1897) Recueil Dalloz, 1, 433 (1897) Recueil Sirey, 1, 17.

(705)

Cass. Req., 25 March 1908 (1909) Recueil Dalloz, 1, 73; Cass. Req., 29 April 1913 (1913) Recueil Dalloz, 1, 427.

(706)

See further the discussions on means of defense, for explanations on the means of defense related to the external nature of the fact causing the damage.

(707)

This led to the enactment of what is now para 2 of article 1384 in order to correct the excesses of the evolution brought by the courts in this field of law, for the specific case of fires communicating from building to building. In this case, to bring about the liability of the owner of the building, the proof of his fault has to be brought.

(708)

Originally, the courts argued that if the thing causes the damage by itself, then article 1384 applies. But in all cases where man was involved, the liability for one’s act under article 1382 was the only (continued...)

210 In a first step, the courts accepted the liability based on article 1384 for things manipulated by man in the case of dangerous things. This was quickly abandoned. The famous decision Jand’heur of all Chambers of the Cour de Cassation was the main landmark on the subject. This decision denied, first of all, the use of the idea of dangerous thing. But more importantly, the Court changed the theory so far applied of presumption of fault, to a theory of presumption of liability and confirmed the strict limitation of the cases in which the defendant could escape this liability: “La présomption établie par l’article 1384, alinéa 1, à l’encontre de celui qui a sous sa garde la chose inanimée qui a causé un dommage à autrui ne peut être détruite que par la preuve d’un cas fortuit ou de force majeure ou d’une cause étrangère qui ne lui soit pas imputable; il ne suffit pas de prouver qu’il n’a commis aucune faute ou que la cause du fait dommageable est demeurée inconnue.”(709) The theory built by the courts has largely remained up to now and is still applied. However, statutes have also been enacted which have taken over a large number of the cases the courts had tried to address in this evolution.(710) For the liability for damage caused by things, the first element is that a thing must have intervened in causing the damage. All unanimated thing (711) are included in the scope of application of this liability. As pointed out in the Jand ’heur case, no proof is required that the thing concerned was defective or that it was dangerous. It can also be moveable or immovable(712) and it does not make any difference whether the thing is moving or not.(713) This type of liability under article 1384 has also been applied to more immaterial things.(714) The things which are not included in the sphere of article 1384 are animals (Article 1385), derelict buildings (article 1386) and other things which have been addressed in special regimes of liability such as cars, cable cars, ships etc.(7I5) It is worth noting that article 1384 is applicable to aircraft(716). There is no specific legislation in France providing for a special regime for spacecraft, nor any case law on this subject, but (708)

(...continued) way.

(709)

Cass. Ch Réunies, 13 February 1930(1930)Recueil Dalloz, 1,57 - Grands Arrêts, supra note 642, n°122, at 519.

(710)

This is the case, in particular, in the field of car accidents, where special legislation was enacted dated 5 July 1985. See Code Civil, supra note 626, at 1723.

(711)

In French: “choses inanimées”.

(712)

This was established by Cass. Ch des Requêtes, 6 March 1928 (1928) Recueil Dalloz, 1, at 97, in a case involving a lift. It was later applied to a variety of cases such as trees (Cass. Civ., 12 May 1966 (1966) Recueil Dalloz, 700), heating pipes (Cass. Civ., 19 Feb 1941 (1941) Recueil Dalloz, 85 1st case), rocks (Cass. Civ. 2è, 16 June 1961 (1962) Semaine Juridique (JCP), II, 12778).

(713)

Cass. Civ. 19 February 1941 (1941) Recueil Dalloz, 85 (Annot. Flour) - Grand Arrêts, supra note 642, n° 129, at 543.

(714)

For instance to fumes coming out of a cheminey (Cass.Civ. 2è, 11 June 1975 (1975) Semaine Juridique (JCP), IV, 252), or condensation coming out ofa cheminey (Cass. Civ. 2è, 10 February 1967 (1967) Bulletin Civil II, n°66, 47), electromagnetic or sound waves (Appeal Court Paris, 22 January 1936 (1936) Gazette du Palais, 1936, 1, 274).

(715)

See further on special liability regimes

(716)

Cass Civ 2è, 23 Jan 1959 (1959) Semaine Juridique (JCP), II, 11002, 1st case

211 damages caused by spacecraft would be included in the scope of article 1384. The thing in question must have intervened in the damage. However, there is no need that the thing came in contact with the victim of the damage, and as we have mentioned above the thing may be in movement or inert and, if it is in movement, it does not matter whether it is in movement by itself or because it is manipulated by man. In any case, the thing must have intervened actively in the occurrence of the damage, which is a question of fact, the determination of which is often helped by evidence that the thing behaved in an abnormal way. The burden of proof of the intervention of the thing, as well as of the active part played by the thing in the damage, is in principle on the victim. The burden of proof is more or less strict depending on whether the thing was in movement or not: - if the thing was in movement and came into contact with the victim (or the victim’s property), the thing is deemed to be the cause of the damage. The only proof to be brought by the victim is the intervention of the thing. - if the thing was inert, or was in movement but did not come into contact with the victim (or the victim’s property), the victim has to bring the proof both of the intervention of the thing in the damage and of its active role.(717) Therefore, the presumption of liability, in favor of the victim, will only apply to the first type of cases. Who is liable? The liability for things is that of their guardian(718) in the broad sense. This is established both by article 1384 and 1385. The courts have determined three criteria needed for the guardianship of things: their use, control and direction.(719) The first type of person who can be the guardian is the owner of the thing. The owner can also transfer the guardianship of the thing to another party who becomes the guardian only when he effectively has the three elements above.(720) The guardian can be one single person or more persons who collectively are guardians of a thing.(721) The courts refined the notion of collective guardianship, for things which move from the hands of one guardian to another one, and so on. The courts have created a distinction between the guardianship of the structure of the thing (the internal state of the thing) and that of its behavior (the use of the thing)(722) and have applied this distinction in particular for things intrinsically dangerous and having their own dynamics, such as bottles of gas. The courts tend to give more importance to the guardianship of the structure as it is normally easier to check for the manufacturer or owner of the thing, who is usually the one guardian of the structure. The intent of the theory is to attract into the liability another guardian than the prima facie guardian, as far as the thing can be split according to this structure and behavior theory, (717)

For instance, in the case of a car which was badly parked, the victim who claims a damage has to prove that the car intervened in the damage and also that the car was not in a normal position: see Cass. Civ. 2è, 22 November 1984 (1984) Bulletin Civil II, n°175, 122.

(718)

In French: “gardien”.

(719)

Cass. Ch Réunies, 2 December 1941 (Arrêt Franck) (1942) Recueil Dalloz, 25 (Annot. Ripert) (1941) Recueil Sirey, 1, 217(Annot Mazeaud)-(1942)Semaine Juridique (JCP),II, 1766(Annot. Mihura) - Grands Arrêts, supra note 642, n° 123, at 525.

(720)

Cass. Civ. 2è, 6 April 1987 (1987) Recueil Dalloz, Inf Rap, 113; Cass. Civ. 2è 13 February 1991 (1991) Bulletin Civil II, n°55, 29.

(721)

Cass Civ 2è, 7 Nov 1988 (1988) Bulletin Civil II, n°214, at 116.

(722)

In French: “garde de la structure” and “garde du comportement”.

212 and thereby offer to the victim a better avenue of recovery.(723) The liability may be shared between the guardian of the behavior and guardian of the structure.(724) Liability for others This type of liability is addressed further under the heading of vicarious liability, to which the reader is referred.

c)

The causal link (lien de causalité)

Principle The third element of the liability theory is the causal link.(725) There must be a generating fact, a damage and the former must be the cause of the latter. The articles of the civil code which provide for tort liability (articles 1382 to 1386) all contain this element of cause, but do not define it. There must be between the generating fact and the damage, a direct and certain relation from cause to consequence.(726) This leads to the consequence that, in French law, the indirect damage is not repairable.(727) Determination of the causal link in cases of multiple causes A damage is rarely caused by one single event. There are often a multitude of elements contributing to a damage. The Courts address the issue of whether an event connected to a damage has a causal link to that damage, in two different ways. One theory used by the courts is that of the equivalence of conditions.(728) In this theory, all events which have taken part in the damage have to be considered as having caused the damage and all elements are equivalent because without one of them the damage would not have happened. The other theory used by the courts is that of relevant causality.(729) In this case, the court looks for the events which have directly taken part in the occurrence of the damage, and uses the criteria of the foreseeability of the damage arising from such event.(730) (723)

Cass. Civ. 2è, 5 Jan 1956 (1957) Recueil Dalloz,261 (Annot. Rodière) -(1956) Semaine Juridique (JCP), II, 9095 (Annot. Savatier) - Grand Arrêts, supra note 642, n° 125, at 529, for bottles of liquid oxygen; Cass. Civ., 5 June 1971 (1972) Recueil Dalloz, 534 for bottles of beer; Cass. Civ. 1ère, 12 November 1975 (1976) Semaine Juridique (JCP), II, 18479, liability of the manufacturer as guardian of the structure for explosion of a bottle.

(724)

Cass. Civ. 2è, 15 December 1986 (1986) Recueil Dalloz, 221.

(725)

G. Marty, “La relation de cause à effet comme condition de la responsabilité civile” (1939) Revue Trimestrielle de Droit Civil, at 685 P. Esmein, “Le nez de Cléopâtre ou les affres de la causalité” (1964) Recueil Dalloz, Chron, at 205 F. Chabas, “Bilan de quelques années de jurisprudence en matière de rôle causal” (1970) Recueil Dalloz, Chron, at 113.

(726)

In French: “lien direct de cause à effet”.

(727)

This is the tort parallel of the principle provided by article 1151 ofthe Code Civil in contract law as presented above in our discussions on contracts.

(728)

In French: “équivalence des conditions”.

(729)

In French: “causalité adéquate”.

(730)

For an example referring to this theory: Affaire Franck: in this case a stolen car had subsequently (continued...)

213

In practice, the line between these two theories is not always clear in French jurisprudence, and the courts tend to use a mixture of both, with a certain preference for the theory of the adequate or relevant cause. Consequences of multiple causes involving multiple persons Where multiple events have been considered by the Court as having a causal link to the damage claimed, then the victim can obtain compensation against one of the responsible persons for the totality of the damages claimed. All of the responsible persons are condemned in solidum,(731) and therefore the one who compensated the victim will then have an action in recourse against the others. If one of the causes cannot be associated with another responsible person, then the one who has compensated has no action in recourse and will have to bear the totality of the compensation to the victim.(732) The implementation of this approach is sometimes made difficult when the damage has been caused by a member of a group and where this member cannot be identified. A number of such cases have arisen for example in hunting accidents.(733) It is then very difficult to (730)

(731)

(...continued) been involved in an accident which killed somebody. The author of the theft and of the accident was never found. The widow of the deceased was claiming damages against the owner of the car, Franck, both under article 1384 al 1 Code Civil (liability for things, with the argument that Franck was the guardian of the car, even though it has been stolen) and article 1382 Code Civil for his personal liability for fault since he was negligent in looking after his car. The tribunal of Nancy rejected the claim ofthe widow, considering that Franck was not the guardian of the car, and that his imprudence in looking after the car was not the direct cause of the accident. The appeal Court of Nancy confirmed this decision. The Court de Cassation overruled and submitted the case for a new decision to the Appeal Court of Besançon (Civ 3 March 1936 (1936) Recueil Dalloz, at 1, 81, Annot, Capitant). The Appeal Court of Besançon decided that Franck was not the guardian of the car when the accident occured. Then the court decided that Franck was not at fault in parking his car and in the surveillance ofhis vehicle. And the court added that even if such faults had been committed, such faults may have had a link with the theft ofthe car, but not with the accident itself and its consequence in terms of damage. The accident had been caused by the sole fact ofthe thief and the behavior of Franck had no direct and certain causal link to the accident (Appeal Court Besançon, 25 Feb 1937 (1937) Recueil Sirey, 2,1937 Annot. Durand). The widow brought this decision back to the Cour de Cassation both on article 1384 all and on 1382. As 1382 had not been decided upon by the previous decision of the Civil Chamber, the Chambre Réunies sent the case to the Civil Chamber on this matter. The Chambre Réunies only decided upon 1384 al 1 and confirmed the decision of the Appeal Court. The Civil Chamber recalled, first of all, that in cases where the guardianship of a thing has passed to another person, the owner of the thing could still be subject to claims under article 1382 Code Civil. But in this case, there is no presumption and the victim has to prove the fault, the damage and the causal link between them. In this case, the victim did not bring the proof that the damage was the direct consequence of the fault of Franck. Therefore the Cour de Cassation also confirmed the decision ofthe Appeal Court of Besançon on this matter. (Cass Civ, 6 Jan 1943 (1945) Recueil Dalloz, 117 Annot.Tunc). See F. Terré, P. Simler, Y. Lequette, Droit Civil, Les Obligations, supra note 621, n°1147 ff.

(732)

For Doctrine see: G. Starck, “La pluralité des causes de dommages et la responsabilité civile” (1970) Semaine Juridique (JCP), I, 2339 Boré, “La causalité partielle en noir et blanc ou les deux visages de l’obligation ‘in solidum’” (1971) Semaine Juridique (JCP), I, 2369 For an example of court decision see: Cass. Civ. 11 July 1892 (1894) Recueil Dalloz, 1, 513 (Annot. Levillain) - (1892) Recueil Sirey, 1, 508 - Grand Arrêts, supra note 642, n° 170, at 692, with more examples in the annotation.

(733)

In the specific case of hunting accidents, the victims have access to a compensation fund. See (continued...)

214 establish the causal link. In such cases, the courts have tried to ensure the compensation of the victim’s damage by various means such as establishing a common fault to the members of the group,(734) or making them together guardians of a thing which caused the damage.(735) The victim cannot claim against an individual where it is not certain that he was part of the group, nor against a group where it is certain which individual caused the damage. Indirect Damage This requirement of a causal link has also the consequence that in French law, the indirect damage - meaning the one which comes about after a succession of causes - cannot be claimed successfully, except from the immediate tortfeasor. This is established by the civil code itself in the field of contractual liability (Article 1151 Code Civil) but not explicitly in the field of tort liability. The French Cour de Cassation has extended the application of the principle expressed in Article 1151 Code Civil to tort law.(736) The Courts consider that the direct damage is the one which is the necessary consequence of the event whose author is the defendant.(737) In a way, this is an application of the theory of the adequate cause. Burden of proof of the causal link The claimant, in general the victim (or its insurer) has the burden of proof of the causal link.(738) The Courts sometimes require only prima facie type of evidence(739) which then reverses the burden of proof and sometimes use presumptions that there was a causal link.(740)

ii)

Product liability

In 1985, the European Union adopted a directive on product liability.(741) It took France almost 13 years to implement this directive into French law by law n° 98-389 of May 19, 1998. This new law has was introduced into the Civil Code under articles 1386-1 to 138618. (733)

(...continued) Article L421-1 ff of the Code des Assurances. This fund also covers car accidents. It comes into action when the author of the damage is unknown or has no insurance, or when the insurer is not solvable. This allows for compensation of the victim in those cases.

(734)

For an example in a case of hunting accident: Cass. Civ. 2è, 5 June 1957 (1957) Semaine Juridique (JCP), II, 10205 (Annot.Esmein) - (1957) Recueil Dalloz, 493, (Annot.Savatier).

(735)

Cass. Civ. 2è,19 December 1980 (1981) Recueil Dalloz, 455, (Annot. Poisson-Drocourt) - (1981) Revue Trimestrielle de Droit Civil, 638, (Annot.Durry).

(736)

Cass. Civ. 1è, 20 Dec 1960 (1961) Recueil Dalloz, 141, (Annot. Esmein).

(737)

Cass. Civ. 2è, 17May 1973 (1974) Revue Trimestrielle de Droit Civil, 409, (Annot. Durry); Cass. Crim., 14 January 1971 (1971) Recueil Dalloz, 164.

(738)

Cass. Civ. 2è, 21 April 1966 (1966) Semaine Juridique (JCP), II, 14710.

(739)

Cass. Civ. 2è, 13 Oct 1971 (1972) Recueil Dalloz, 117 - (1972) Semaine Juridique (JCP), II, 17044, (Annot. De Juglart & Du Pontavice) (a case involving accident caused by aircraft noise).

(740)

Cass. Civ. 2è, 29 April 1969 (1969) Recueil Dalloz, 534.

(741)

EC Directive n°85/374 of July 25, 1985. (1985) OJEC, n° L210, 29; (1993) 32 ILM, 1352.

215 This new regime created a liability without fault (comparable to the common law strict liability) of the producer for damages caused by his product to anybody, including professionals. It is a general regime also geared to consumer protection and is an alternative for the victim of the damage. In other words, the other regimes of liability presented earlier are still available but the victim, having checked the advantages of the traditional regimes of tort and contract liability, may elect to proceed under the new regime. The basic principle established by this regime is that the producer is liable for the damage caused by a defect of his product, whether or not he is linked to the victim by contract.(742)

a)

Products

The products concerned are movables (including if they have been incorporated into an immovable). Electricity is a product covered by these provisions.(743) The definition of products therefore covers component parts and raw material as well as finished products. The products falling within the scope of this regime must, as an additional criteria, have been put in circulation: the ‘producer’ must have handed them over voluntarily. A product can be placed in circulation only once.

b)

The Producer

French law has introduced one criteria in the definition of a producer, which was not provided in the Directive. The definition in the Directive was: “‘Producer’ means the manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part and any person who, by putting his name, trademark or other distinguishing feature on the product presents himself as its producer.” French law added in the definition:“ Producer means, when he acts in his professional quality....”.(744) The importer of goods into the EU for their further distribution (by any form, such as sale or rent) is also a producer. A number of other professionals are assimilated to the producer under the law when they are professional providers (fournisseurs professionnels) such as vendors or rental agents. Those persons who can be held liable under the civil code in the frame of the provisions concerning construction contracts(745) are not considered producers under this law.

c)

The defective product

A product is defective when it does not provide for the safety which a person is (742)

Article 1386-1 of the Code Civil, supra note 626.

(743)

Article 1386-3 Code Civil, supra note 626: “ Est un produit tout bien meuble, même s’il est incorporé dans un immeuble, y compris les produits du sol, de l’élevage, de la chasse et de la pêche. L’électricité est considérée comme un produit”.

(744)

Article 1386-6 Code Civil, supra note 626.

(745)

Articles 1792 to 1792-6 and Article 1646-1 of the Code Civil, supra note 626.

216 legitimately entitled to expect. The notion of safety legitimately expected is further provided for in the form of criteria which the courts will have to take into account when determining whether the product was defective. The criteria are: all circumstances and in particular the presentation of the product, the use to which it could reasonably be expected that the product would be put, and the time when the product was put in circulation. Contrary to the US law, the defective product is defined only by reference to these criteria, and not by reference to the classical manufacturing defect/design defect/failure to warn categories. This should make it easier to qualify a defective product. In relation to the definition of a defective product, one should note the very important article 1386-4 which states that a product shall not be considered defective for the sole reason that a better product is subsequently put in circulation. We have seen earlier in the discussions concerning US law, that it sometimes happens in product liability trials in the US that the development of an improved product is used by claimants to sustain their evidence that the product which caused the damage to them before the improvement was defective. The EU Directive, has the benefit of making it very clear that this type of evidence will not be admitted in European product liability cases.

d)

Victim and burden of proof

The law does not distinguish between consumers and professionals. The provisions for compensation of damage caused by defective products are applicable to both categories(746) The claimant has the classical burden of proof of 1) the damage, 2) the defect in the product and 3) the causal link between the former and the latter.

e)

Strict liability

Once the claimant has brought the proof referred to above, the producer is strictly liable, unless he can bring the proof of any exculpatory factor listed in the law (Article 1386-11). The damage which is repairable under this law is either damage to the person or damage to property (Article 1386-2). No limitations are brought to the damage which the victim can claim for. The victim can therefore claim for all damage repairable under the general rules of French law.(747) The Directive, in its Article 9, restricted the application of this regime to damage caused by death or by personal injuries, and damage caused to property but in this case only if it is of a type ordinarily intended for private use or consumption and if it was used by the injured person mainly for his own private use or consumption. French law has gone further and has not implemented these restrictions.(748) If a distributor is subject to a claim on product liability by a victim, he has an action in recourse against the producer, which follows the same rules as the action which was

(746)

See our discussions later on liability exemption clauses. In this area, the law provides for a differentiation between the professional and the consumer.

(747)

See further the explanations on the type of damage repairable.

(748)

See however the discussions further on clauses excluding or limiting liability. Via this means, French law has in fact introduced indirectly this restriction.

217

available to the victim.(749) If a damage has been caused by a product which was incorporated in another one‚ the Code Civil now provides for solidarity between the producer and the one who incorporated the product.(750) This ensures that the victim can be compensated. It is then for the two actors to sort out the liability between themselves.(751)

4.2.3.- Classical Means of Defense Like in US law the primary method to counteract a liability claim is to rebut the elements of proof brought by the victim to destroy either of the elements leading to such liability. Although in French law the classical means of defense are slightly different, the categories identified in the US system are maintained, in order to facilitate the comparison. i)

Defenses related to the behavior of the victim

a)

Contributory negligence and comparative fault

In the case of liability for one’s fact‚ the liability can be shared between the author ofthe damage and the victim when the victim was at fault and has provoked the damage. This is based on the notion of shared fault.(752) The courts assess the fault of the victim in the same conditions as the fault of the author of the damage‚ on a case by case basis‚ as a function of the circumstances. In such case of shared fault‚ each of the parties would have a liability action against the other for the damage caused by her fault. By compensation between the two‚ the outcome of a liability action where the victim was at fault‚ is a shared liability. The courts often use a comparative assessment ofthe faults in order to apportion liability. This apportionment can even go as far as exonerating completely the author of the damage from liability.(753) In cases where the victim has not survived‚ the defendant (749)

Article 1386-7 Code Civil‚ supra note 626.

(750)

Article 1386-8 Code Civil

(751)

For an overview of the implementation in Europe of the European Directive on Product Liability‚ see P. Thieffry‚ P. Van Doom & S. Lowe‚ “Strict Product Liability in the EEC: Implementation‚ Practice and Impact on US Manufacturers of Directive 85/374" (1985) Tort and Insurance Law Journal‚ 65 D.M Shettler‚ “Products Liability: A Comparison of US and EEC Approaches” (1986) 13 Syracuse Journal of International Law‚ 155 J. Ghestin‚ “La Directive Communautaire du 25 Juillet 1985 sur la responsabilité du fait des produits défectueux”‚ (1986) D.S.Jur‚ 135 S.N. Hurd & F.E.Zollers‚ “Desperately Seeking Harmony: The European Community’s Search for Uniformity in Product Liability Law” (1992) 30 American Business Law Journal‚ 35 S.N. Hurd & F.E. Zollers‚ “Statutes of the European Community Member States Passed in Response to the Product Liability Directive” (1993) 32 ILM‚ at 1347 S. Hurd & F.E. Zollers‚ “Product Liability in the European Community: Implications for United States Business”‚ (1993) 31 American Business Law Journal‚ 245 W.Hoffman & S.Hill-Arning‚ Guide to Product Liability in Europe‚ The New Strict Product Liability Laws‚ Pre-Existing Remedies‚ Procedure and Costs in the European Union and the European Free Trade Association (Deventer: Kluwer‚ 1994)

(752)

In French: “faute commune”.

(753)

This is the case for instance when the victim intentionally suffered the damage. For example‚ the victim stood in front of a truck in motion in order to commit suicide.

218 can also use the defense of fault of the victim against the estate of the victim and the consequential victims who suffer a personal damage due to the death of the victim (victimes par ricochet).(754) Special provisions to the same effect exist in the domain of aviation(755) and admiralty.(756) In the case of liability for things, the behavior of the victim also bears some effects, although the situation is different due to the presumption of causality placed on the guardian ofthe thing. One possible defense for the guardian is to prove that the fact ofthe victim is the only cause of the damage. In doing so, he reverses the burden of proof of causality to the victim, however, the proof to be brought by the guardian is rather heavy. Indeed, the fact of the victim will only exonerate him fully from liability if he can prove that this fact was unforeseeable and unavoidable for him.(757) When the fault of the victim is not unforeseeable or unavoidable, French courts were classically applying a shared liability between the guardian and the victim when the victim was at fault. The apportionment was a function of the seriousness of the fault of the victim. The courts even accepted in some instances a sharing of liability based on the behavior of the victim which was not faulty as such. The Cour de Cassation shook this tradition to provoke a reform of French law in the domain of car accidents, which were the subject of most cases examined on the subject. In the Desmares decision, the Cour de Cassation decided that the sharing of liability was no longer possible. Either the fact of the victim was unforeseeable and unavoidable for the guardian, in which case he was fully exonerated, or it was not such and he was fully liable.(758) Following this decision, the law of 5 July 1985 on the liability for car accidents was voted. The Cour de Cassation then came back to the more traditional approach which now allows the guardian to defend himself by proving the fault of the victim.(759) The liability is then shared between the guardian and the victim. The behavior ofthe victim which is not a fault is not in principle a defense for the guardian. In the case of liability for others, the defenses are addressed as part of the regime of this (754)

Cass‚ Ch Réunies 25 November 1964 (1964) Recueil Dalloz‚ 733 - (1964) Semaine Juridique (JCP)‚ II‚ 13972 (Annot. P.Esmein) Cass. Ass Plén‚ 19 June 1981 (1982) Recueil Dalloz‚ 85 (Annot. Chabas) - (1982) Semaine Juridique (JCP)‚ II‚ 19712 - (1981) Gazette du Palais‚ 2‚ 529 (Annot. Boré) - (1981) Revue Trimestrielle de Droit Civil‚ 857 (Annot.Durry) Both decisions are reprinted in Grands Arrêts‚ supra note 642‚ n° 118 & 119‚ at 504 For doctrine on this subject: Meurisse‚ “Les ayants cause agissant à titre personnel peuvent-ils se voir opposer la faute de la victime?” (1960) Gazette du Palais‚ II‚ Doctr‚ 73 J. Fossereau‚ “Incidence de la faute de la victime sur le droit à réparation de ses ayants cause agissant à titre personnel (1963) Revue Trimestrielle de Droit Civil‚ 7 G. Viney‚ “L’autonomie du droit à réparation de la victime par ricochet par rapport à celui de la victime initiale” (1974) Recueil Dalloz‚ Chron‚ 3.

(755)

Article 322-3 Code de l’Aviation‚ implementing article 24 of the Warsaw Convention of 12 October 1929.

(756)

Law 18 June 1966 (1967) Semaine Juridique‚ I‚ 2063

(757)

See G. Durry‚ “L’exonération du gardien par le fait de la victime”‚ (1983) Mélanges Weill‚ at 217.

(758)

Cass. Civ. 2è‚ 21 July 1982 (1982) Recueil Dalloz‚ 449‚ (Annot.Larroumet) - (1982) Revue Trimestrielle de Droit Civil‚ 807‚ (Annot. Durry) - (1982) Semaine Juridique (JCP)‚ II‚ 19861 (Annot. Chabas) - Grands Arrêts‚ supra note 642‚ n°134‚ at 556.

(759)

Cass. Civ. 2è‚ 6 April 1987 (1987) Bulletin Civil II‚ n°86‚ 49-(1988) Recueil Dalloz‚ 32‚ (Annot. Mouly) - (1987) Semaine Juridique (JCP)‚ II‚ 20828‚ (Annot.Chabas) - (1987) Revue trimestrielle de Droit Civil‚ 767 (Annot. Huet) - Grands Arrêts‚ supra note 642‚ n°135‚ at 556.

219

liability below. It is worth noting that the principle nemo auditur does not apply in tort liability.(760) b)

Assumption of risk by the plaintiff

In the case of liability for one’s fact‚ the assumption of risk by the victim is not a defense which will exonerate the author of the damage from his liability.(761) The courts have so far only applied theories of assumption of risk in the practice of sports‚ in particular in cases where the liability is presumed (liability for things and vicarious liability) in which case such assumption of risk can be used by the defendant to break the presumption placed on him and reverse the burden of proof.(762) In the liability for one’s fact‚ the assumption of risk could be taken into account as a defense by the author of the damage‚ when such assumption of risk by the victim can be considered a fault on the part of the victim‚ in which case the principles of shared fault/shared liability explained above‚ apply.(763) Close to the notion of assumption of risk is that of consent of the victim‚ where the courts normally apply the principle volenti non fit injuria (those who consent don’t suffer damage) in case of personal liability and material damage. The consent of the victim‚ in cases of bodily damage‚ is not a cause of exoneration for the author of the damage but may sometimes be considered a fault which leads to a shared liability. c)

Misuse of Product‚ Alteration of Product

The misuse of a product or the alteration of a product which subsequently causes a damage to the victim is not a separate defense. In the case of an action brought by the victim who has actually had the product in hand‚ the misuse of a product and its alteration suppose the guardianship of the victim. Therefore‚ the producer of the product can use as a means of defense the classical one related to the transfer of guardianship and be exonerated from liability for things by demonstrating that he was not the guardian‚ with the potential subtleties explained previously on guardianship of the behavior and of the structure of the thing. A victim who happens to suffer a damage caused by such product would claim against its guardian. The guardian‚ having compensated the victim‚ could then exercise an action in recourse action against the one who has altered or misused the product and thereby caused the damage‚ based on the principles of liability for one’s fact. The alteration of a product could be a means of defense in the new product liability law insofar as the defendant can be exonerated if he proves that the defect in the product did not exist when the product was put in circulation or that the default arose at a later stage.

(760)

Cass. Civ. 1ère, 17 November 1993 (1994) Revue Trimestrielle de Droit Civil, 155, (Annot.Jourdain).

(761)

Cass. Civ. 2è, 1st December 1965 (1966) Semaine Juridique (JCP), II, 14657.

(762)

For example Cass. Civ. 2è , 8 March 1995 (1995) Semaine Juridique (JCP), II, 22499 (Annot.Gardach) - (1995) Semaine Juridique (JCP), I, 3893, (Annot.Viney).

(763)

Cass. Civ. 1, 4 March 1980 (1980) Revue Trimestrielle de Droit Civil, 769, (Annot.Durry).

220

d)

Actions between large companies

The main areas where large companies may encounter specific rules relating to their liability for damage, in particular for the products they sell or distribute, are: - in the area ofwarranty for latent defects, particularly with respect to the freedom to disclaim such warranties. Such disclaimers follow specific rules when both parties are professionals from the same speciality; - also, in the area of warranty, the quality of professional seller (which would almost systematically be the case for large companies) has the consequence that such professional seller is deemed in bad faith and therefore in knowledge of the defect. This presumption is irrebuttable; - in the area of the new provisions concerning product liability, established in article 1386 in the Code Civil, where specific rules are provided concerning professionals.

ii)

Defenses related to limitation of the scope of liability

a)

Waivers and limitations of liability‚ disclaimers of warranties

Waivers and limitations of liability As we have seen earlier‚ the best protection for the manufacturer is to limit the scope of his obligations so as to make the limits of his liability better defined. Once his liability is established in relation to an obligation which was in his scope of work‚ he may rely on waivers and limitations of liability‚ as well as disclaimers of warranties. The contract may contain clauses which exonerate completely the manufacturer of liability.(764) These clauses are accepted by French law and have the effect of - reversing the burden of proof (in all those cases where the burden of proof lies on the manufacturer) by obliging the victim to prove the fault of the manufacturer; - absolving the manufacturer of his faults unless these faults are intentional or gross negligence (dol ou faute lourde). In the latter case, the manufacturer cannot benefit of the waiver of liability clause.(765) In line with this, French law does not allow clauses which exclude liability for intentional fault (dol ou faute intentionelle) and gross negligence (faute lourde). Such clauses are considered contrary to public order.(766) Special statutes have also provided that such clauses are null and void, in particular in the area of transportation.(767) They may also be considered abusive clauses, which will be (764)

In French: “clauses de non-responsabilité”.

(765)

Cass Civ, 9 November 1915 (1921) Recueil Dalloz, 1, 23 - (1921) Recueil Sirey, 2, 1; Cass. Civ. Sect Com 15 June 1959 (1960) Recueil Dalloz, 97 (Annot. Rodière). Those two decisions are reprinted in Grands Arrêts, supra note 642, n°95 & 96, 414. For doctrine see: Starck, “Observations sur le régime juridique des clauses de non-responsabilité ou limitatives de responsabilité” (1974) Recueil Dalloz, Chron, 157.

(766)

See same June 1959 decision referred to previous footnote.

(767)

Article 103 Code Commerce for ground transportation; Article L321-3 Code de l’Aviation for air transportation of freight (derived from Warsaw Convention) and article L322-3 for transportation (continued...)

221 discussed below. Contracts more often contain clauses which limit liability.(768) This type of clause concerns cases where the manufacturer’s or debtor’s liability has been established. They will limit the consequences of his liability (the damages). Full force is given to the autonomy of the parties to a contract and the freedom to contract‚ and these clauses are enforced in a much clearer way than clauses providing for complete exoneration of liability.(769) However‚ the manufacturer or debtor cannot limit his liability for intentional fault(770) or gross negligence.(771) In both cases of non-responsibility clauses and limitation of liability clauses‚ the courts have considered as faute lourde the non-performance of essential obligations of the contract(772) and deprived the non-performing party of clauses exonerating or limiting liability.(773)

Both types of clauses are enforceable against the estate of the victim.(774) Both types of clauses can be inserted in all kinds of contracts and‚ in particular‚ the courts have accepted their validity in adhesion contracts(775) with the requirement that the debtor of the obligation has shown his agreement to the clauses in question.(776) Contrary to the US‚ there is no case law in France relating to these clauses in launch contracts or space related contracts. However‚ the legal regime of such clauses as exposed above‚ which has given rise to a number of court decisions and statutes in the area of air and maritime transport‚ tends to leave some doubt as to the validity in French law of the classical “no fault‚ no subrogation‚ interparty waiver” clauses inserted in launch contracts and which leave to the owner of the satellite or his insurer all of the risk associated with the launch of his satellite. The jurisprudence referred to above concerning the non(767)

(...continued) of passengers; Law of 18 June 1966 on transportation by sea.

(768)

In French: “clauses limitatives de responsabilité”.

(769)

The jurisprudence has, however, assimilated them to a non-liability clause in cases where the limit of liability was pushed so far that the damages recoverable were almost inexistent. See for instance Cass Civ 7 June 1952 (1952) Recueil Dalloz, at 113.

(770)

Cass Civ 1ère, 24 Nov 1982 (1983) Recueil Dalloz, at 384, 3rd case, (Annot.Larroumet).

(771)

Cass Ch Req 27 Nov 1934 (1935) Recueil Dalloz, at 51; Cass Civ 1ère, 15 Jan 1976 (1976) Semaine Juridique (JCP), IV, at 80.

(772)

Cass Civ 1ère, 18 Jan 1984 (1984) Revue Trimestrielle de Droit Civil, at 727, (Annot. Huet); Civ 1ère, 23 Feb 1994 (1994) Semaine Juridique (JCP), I, 3809, n°15, (Annot.Viney).

(773)

For more details on the subject see B.Starck, “Observations sur le régime des clauses de nonresponsabilité ou limitatives de responsabilité” (1974) Recueil Dalloz, Chron, at 157

(774)

This has been clarified by the courts in the field of maritime transport (Cass. Civ. 2è, 23 January 1959 (1959) Recueil Dalloz, 281, Annot. Rodière - (1959) Recueil Sirey, 103 - Grands Arrêts, supra note 642, n°191, at 775) and in the field of air transport (Cass. Civ. 2è, 23 Jan 1959, 2d and 3rd case (1959) Recueil Dalloz, at 101, Annot. Savatier). The statutes have even gone one step further and have made the clauses opposable to the estate of the victim even in cases where the action would not be based on the contract but on the rules of tort liability (article L 322-3 Code de l’Aviation and article 42 of the law of 18 June 1966 on maritime transport).

(775)

Cass. Civ. 1ère, 19 January 1982 (1984) Semaine Juridique (JCP), II, 20215, (Annot. Chabas).

(776)

Cass. Com., 9 October 1984 (1984) Semaine Juridique (JCP), IV, 344.

222 availability of exoneration or limitation of liability clauses in cases where the debtor has not performed an essential obligation of the contract‚ could cast doubt on launch contracts using such clauses and not containing any remedies for the customer in case of launch failure. Certainly‚ like in US law‚ the regime of these clauses is rather complex and requires significant work to ensure their validity and to guarantee that they will actually reach the effects expected. Disclaimers of warranties The Code Civil provides for a statutory regime of warranty in the contract of sale. It also provides in the same text‚ Article 1643‚ for the possibility for the seller to restrict his warranty. However‚ the Code Civil provides for the possibility to disclaim warranty only where the seller did not know of the defect.(777) The basic principle is that the seller‚ who is in bad faith‚ cannot disclaim the warranty he owes to the buyer. He can only disclaim the warranty by making the buyer aware of the defect. The courts have built on this principle and extended it to consider that professional sellers are deemed to know the defects of their product and they are‚ consequently‚ deemed to be acting in bad faith. Professional sellers cannot‚ therefore‚ disclaim their obligation of warranty(778) even when the buyer is a professional buyer.(779) However‚ disclaimers of warranty are allowed when the seller and the buyer are professionals of the same speciality.(780) In this case‚ like with disclaimers and limitation of liability‚ the intentional fault or gross negligence of the seller defeats the disclaimer of warranty clause as it places him in bad faith.(781) If the seller is not a professional‚ he can benefit from clauses disclaiming his warranty so long as he was not acting in bad faith‚ i.e. in the knowledge of the defect. The courts have consistently decided that in cases where contractual warranty clauses are agreed‚ the statutory warranty remains available to the buyer.(782) Some statutory provisions aiming at protecting consumers require professional sellers to state in any warranty clauses the availability of the statutory warranty. In practice‚ sellers tend to use such contractual warranty clauses more and more. They offer the buyer warranty conditions which are a mix between extensive and restrictive conditions compared to the statutory warranty. In application of the principles reviewed above‚ the restrictive parts of such clauses can be made ineffective (unless concluded between professionals of the same speciality) and the extending parts enforced. The buyer may therefore choose to initiate his action either on the basis of the statutory warranty‚ or on the basis of the contractual warranty. The significant difference between the two is the time limits. The statutory warranty action has to be initiated within a bref délai of the defect being found. (777)

(778)

Article 1643 Code Civil‚ supra note 626: “Il est tenu des vices cachés‚ quand même il ne les aurait pas connus‚ à moins que dans ce cas‚ il n’ait stipulé qu’il ne sera obligé à aucune garantie.” Cass. Civ. 1ère‚ 24 November 1954 (1954) Bulletin CivilI‚ n°338, 285-(1955) Semaine Juridique (JCP)‚ II‚ 8565 (Annot. HB) - Grand Arrêts‚ supra note 642‚ n°177, at 724.

(779)

Cass. Com.‚ 27 November 1991 (1992) Semaine Juridique (JCP)‚ IV‚ 409.

(780)

Cass. Com.‚ 8 October 1973 (1975) Semaine Juridique (JCP)‚ II‚ 17929 (Annot.Ghestin); Cass. Com.‚ 3 February 1998 (1998) Recueil Dalloz‚ Inf Rap‚ 62.

(781)

Cass. Civ. 1ère‚ 22 November 1978 (1978) Semaine Juridique (JCP)‚ II‚ 19139‚ (Annot.Viney).

(782)

Cass. Com. 28 June 1994 (1995) Revue Trimestrielle de Droit Civil‚ 139‚ (Annot. Gautier).

223

The contractual warranty follows the time limits of any contractual action.(783) Abusive clauses In order to avoid the abuse of one contractual party by the other‚ in particular in adhesion contracts‚ where there is often a dominant position of one of the parties‚ French law has by statute provided for a control ofthe so-called abusive clauses. This statutory provision can be found in Article L 132-1 Code de la Consommation. The clauses addressed in this legislation are those which have the purpose or effect to create‚ to the prejudice of the non professional or the consumer‚ a significant unbalance between the rights and the obligations ofthe parties to the contract. Article L132-1 Code de la Consommation is followed by an annex which lists‚ in a general and non-exhaustive way‚ the types of clauses which can be considered as abusive. In the previous version of this article‚ the clauses to be considered as abusive were those declared as such in a decree of the Conseil d’Etat. The list‚ at that time‚ was therefore indicative‚ and only those clauses published as abusive in a Decree would be subject to the regime of abusive clauses foreseen by the statute. With the new wording of 1995‚ the decrees may be taken by the Conseil d’Etat‚ but even without such decrees‚ clauses can be declared abusive by the courts based on Article L132-1 Code de la Consommation without the need for a specific decree. (784) The consequence ofthe abusive nature of a clause is that the clause concerned is null and void. The contract will remain applicable for all its other provisions‚ if those can survive without the abusive clause. The determination ofthe abusive character of a clause is made on a case by case basis. Disclaimers of liability and of warranty are referred to in the list of examples annexed to the above article. In application of the legislation concerning abusive clauses‚ further restrictions to the disclaimers and limitation of liability and to the disclaimers of warranty can be brought by the courts where the concerned clauses can be considered as abusive‚ which will only be when one of the parties to the contract is not a professional or is a consumer. In effect‚ this legislation would be unlikely to apply to industrial contracts of the type we are addressing here‚ as they would normally be considered to have been concluded between professionals.(785) b)

Government Contractor Defense‚ presribed design and compliance with statutes

French criminal law(786) traditionally accepts as a defense the obligation stemming from

(783)

Cass. Com.‚ 2 May 1990 (1991) Revue Trimestrielle de Droit Civil‚ 136‚ (Annot. Rémy).

(784)

Actually‚ this was already implemented by the Cour de Cassation which accepted the possibility for the courts to declare a clause abusive‚ even in the absence of a decree. Cass. Civ. 1ère‚ 6 December 1989 (1989) Recueil Dalloz‚ 289‚ (Annot. Ghestin); Cass. Civ. 1ère‚ 14 May 1991 (1991) Recueil Dalloz‚ 449‚ (Annot. Ghestin).

(785)

L. Leveneur‚ “Contrats entre professionnels et législation des clauses abusives” (1996) Contrats‚ Conc Consom‚ Chron‚ at 4.

(786)

Article 122-4 Code Pénal.

224 the law(787) or the order given by a legitimate authority.(788) These circumstances make the criminal liability disappear. They have‚ in civil law‚ the effect of making the fault disappear and thereby constitute a defense in civil cases‚ but there are limits to these defenses. As far as the obligation stemming from the law is concerned‚ it must really be a mandatory prescription. An administrative authorization would normally not provide for a means of defense which would release the author of a damage from his liability. As far as the order given by a legitimate authority is concerned‚ this order must be legal. If the order was illegal‚ it cannot be used as a defense. The new law on product liability goes slightly further. The fact that the defect of a product is due to its conformity to a statute or a regulatory provision can be used as a means of defense(789) except where the producer has not taken adequate measures to prevent the damaging consequences of such defect.(790)

c)

State of the art

This means of defense is not traditionally accepted in French law‚ except in the area of medicine development. However‚ this has not been on the basis of the state of the art defense but rather on the basis of the breach of the obligation of information.(791) This tradition has been changed by the new Product Liability law. The development risk‚ another wording for state of the art‚ has been accepted as a defense for the producer.(792) However‚ such defense is not available to the producer if the damage has been caused by a part of the human body or by products made from the human body. Also‚ this defense is not available if‚ in case of a defect appearing during the 10 year period during which the producer is liable‚ such producer has not taken adequate measures to avoid the damage.(793) In such a case‚ the producer should for instance withdraw the product from the market or recall products. The European Court of Justice clarified that reference to the scientific and technical knowledge does not specifically address the practice and safety standards in force in a certain industrial sector within which the producer operates‚ but addresses the state of technical and scientific knowledge‚ up to its most advanced state‚ as it was at the time the product was placed in circulation. The development risk also uses a test which is not that of the actual knowledge of the producer or the knowledge he was reasonably meant to have. It uses the test of the objective state of the art which the producer is deemed to have been informed about. The moment in time which the test looks at to determine whether the producer had such knowledge‚ is that of when the product was placed into (787)

In French: “l’ordre de la loi”.

(788)

In French: “le commandement de l’autorité légitime”.

(789)

Code Civil‚ supra note 594‚ Article 1386-11‚ 5

(790)

Code Civil‚ supra note 594‚ Article 1386-12.

(791)

Cass. Civ. 1ère‚ 8 April 1986 (1986) Bulletin Civil‚ I‚ n°82, which stated that the obligation of information relating to the secondary effects of a medicine can apply only to the extent that the information is available to the manufacturing laboratories at the time the medicine is placed on the market.

(792)

Code Civil‚ supra note 626‚ Article 1386-11.

(793)

Code Civil‚ supra note 626‚ Article 1386-12.

225 circulation.(794) One will have to wait for the courts to decide a few cases in this area to see how French jurisprudence will absorb this new notion.(795) In contract law‚ the state of the art may be a defense against a warranty claim insofar as the debtor of the warranty obligations can use such argument to demonstrate that the defect of the product for which the warranty is claimed could not be detected by him‚ but the fact that a defect cannot be detected is never a defense for the professional seller.(796)

iii)

Defenses related to time

a)

Statutes of limitations

All rights and actions are‚ in principle,(797) subject to statutes of limitations.(798) These do not extinguish the rights concerned‚ but set a time limit for the actions in enforcement of such rights. The default statute of limitation of 30 years is provided for in article 2262 Code Civil‚ but there are also specific time limitations for particular domains. A large number of actions are subject to a time limitation of 10 years. This is the case for construction contracts liability actions‚(799) a number of contract actions‚(800) actions between “commerçants” or against “commerçants”.(801) The largest portion of contract and tort actions are subject to a time limitation of 10 years. A number of other actions are subject to time limitations of 5 years. This is the case for periodical payments such as interests.(802) A time limitation of 2 years applies for actions against a aircraft carrier.(803) A time limitation of 1 year applies‚ for example‚ to the action for damage caused to freight by the rail transporter.(804) In the specific case of product liability‚ the time limit has been set to three years starting on the date when the claimant had or should have had the knowledge of the damage‚ the defect and the identity of the producer.(805) This is longer than the bref delai established in the case of warranty but requires an active behavior of the victim. (794)

ECJ‚ 29 May 1997‚ C/300/95 (1997) Semaine Juridique (JCP)‚ I‚ 4070 (Annot.Viney).

(795)

See V.O. Berg‚ “La notion de risque de développement en matière de responsabilité du fait des produits défectueux” (1996) Semaine Juridique (JCP)‚ I‚ 3945.

(796)

Cass. Com. 27 April 1971 (1972) Semaine Juridique (JCP)‚ II‚ 17280.

(797)

Very few are not. One significant example is the right of ownership which is not subject to limitations. It can be disturbed by the transfer of possession of the property as this possession‚ if in good faith‚ can give the possessor the right of ownership after 30 years of good faith possession. Code Civil‚ supra note 626‚ Article 2279.

(798)

In French: “prescription extinctive”.

(799)

Code Civil‚ supra note 626‚ Article 2270-.

(800)

Code Civil‚ same as previous footnote.

(801)

Article 189bis Code de Commerce

(802)

Article 2277 Code Civil‚ supra note 626.

(803)

Article L321-5 & L322-3 Code de l’Aviation and Article 29 Warsaw Convention for international transport.

(804)

Article 108 Code de Commerce

(805)

Code Civil‚ supra note 626‚ Article 1386-17.

226 Clauses in contracts by which a party would renounce‚ in advance‚ its rights related to the provisions on time limitations‚ would be null and void.(806) This would also be the case of a clause which does not eliminate the time limit but reduces it considerably. It is accepted by the courts that parties may conclude clauses which reduce the time limits in favor of the debtor. The courts do not accept clauses extending the time limits to the benefit of the creditor. The parties can provide for such clauses in the case of time limits already established. In such a case‚ the parties are in fact agreeing to suspend the time limit. A party which acts as though it renounces its rights in relation to a time limit may be deemed to have renounced the benefit of such provisions.(807) The time normally starts to run on the day the right giving rise to the action is born. It is in principle required to serve notice to the other party to stop the time limit running. The time limitations can be interrupted by circumstances defined by the law(808) such as the actions taken by the creditor of an obligation which demonstrate his intention to have it performed or the recognition of his debt by the debtor. Time limits can also be suspended by circumstances defined by the law.(809)

b)

Statutes of Repose

French law also knows this notion‚ although it is not always easy to distinguish it from the time limits mentioned above. As shown above‚ the time limits do not extinguish the obligation or the right itself. They only extinguish the availability of the action to be exercized for their enforcement. Another type of time notion is that of “délai préfix” (also referred to as délais de rigueur)‚ which is close to the notion of statutes of repose addressed earlier in this Chapter. The provision of such délais préfixes is normally motivated by a concern for legal security of a party who has to cease to be exposed to claims after that period of time. Such délais préfixes are often encountered in the law of persons (e.g. marriage‚ paternity). It is not a common institution in the field of obligations but there are a few examples. This is the case of the bref délai provided for in the case of warranty for latent defects. Such a delai préfix is also established for actions in compensation for damage caused by nuclear ships.(810) It is also established for rights of creditors of the State even when such rights arise from the tort liability of the State. The interest of distinguishing between a time limit and a délai préfix is that in the latter case no contractual clauses can modify such delays and the courts have to apply them even when the benefit is not claimed by the parties to a case. Also‚ these délais préfixes cannot be interrupted nor suspended. The determination as to whether a time period is a “prescription” or a “délai préfixe” is very much left to the decisions of the courts‚ which rely on the wording of the law to find some clues as to what the legislator wanted to implement. It is an area where little legal security is provided. The example of the 2 years (806)

Code Civil‚ supra note 626‚ Article 2220.

(807)

Code Civil‚ supra note 626‚ Article 2221.

(808)

Code Civil‚ supra note 626‚ Article 2242 & ff.

(809)

Code Civil‚ supra note 626‚ Articles 2251 & ff.

(810)

Law n°956 of 12 November 1965‚ Article 16

227 time period mentioned above in the case of aviation accidents is one of such hesitations where the time period was dealt with as a délai préfix for some time‚ until the Cour de Cassation admitted the possibility ofsuspension which turned it into a time limitation.(811) Prescriptions and délais préfixes often are to be found together as they address the passing of time from two different points of view. It is similar to the situation in US law where statutes of repose and statutes of limitations can be applied together. The 10 year time period introduced in product liability cases by the new product liability regime‚ is therefore not really a new institution in the French system. Undoubtedly‚ the 10 year time period provided for in article 1386-16 Code Civil is a délai préfix. The time limitation is provided for in article 1386-18 Code Civil and is of 3 years.

iv)

Defenses available under the new Product Liability law

The producer can avoid the strict liability provided for in the new law if he can prove:(812) - that he did not put the product in circulation(813); - that, given the circumstances, it must be assumed(814) that the defect which caused the damage did not exist at the time the product was put in circulation by him or that the defect only occurred afterwards; - that the product was not meant for sale or any other kind of distribution; - that at the time the product was put into circulation, the state of the technical and scientific knowledge did not allow to detect the existence of the defect; - that the defect of the product is due to the conformity of the product to mandatory statutory or regulatory rules; - that the defect is caused by the design of the product in which the defendant component product has been incorporated or by the instructions given to the producer of the product. The state of the art defense, the compliance with existing standards, or the existence of an administrative authorization, are not considered means of defense under the new law.(815) The fact of a third party is also not a means of defense under this law and does not reduce the liability of the producer towards the victim.(816) However, when the damage has been caused jointly by the defect of the product and the fault of the victim or a person under the victim’s responsibility, the producer’s liability can, in the light of the circumstances of the case, bear a reduced liability or no liability at all.(817)

(811)

Cass. Ass Plen‚ 1st July 1977 (1978) Recueil Dalloz‚ IR‚ 28. On this issue of the time period see R. Rodière‚ “L’écoulement du temps et la recevabilité de l’action en responsabilité du transporteur aérien” (1976) Recueil Dalloz‚ Chron‚ 265 P. Chauveau‚ “Réflexions sur un important arrêt de l’Assemblée Plénière de la Cour de Cassation” (1977) Recueil Dalloz‚ Chron‚ 181.

(812)

Code Civil‚ supra note 626‚ Article 1386-11.

(813)

The definition of putting a product in circulation is provided in article 1386-5 Code Civil.

(814)

This approach seems rather close to the US concept of res ipsa loquitur

(815)

Code Civil‚ supra note 626‚ Article 1386-10.

(816)

Code Civil‚ supra note 626‚ Article 1386-14.

(817)

Code Civil‚ supra note 626‚ Article 1386-13.

228 Waivers of liability clauses or limitation of liability clauses are deemed void with respect to the liability provided for in the new law. Consequently, nobody can in principle exclude or limit his product liability under article 1386 of the Civil Code.(818) The time limit for claims brought under these provisions is 3 years, starting from the time when the claimant had or should have had knowledge of the damage, the default and the identity of the producer. The new law provides that except in the case of fault of the producer, his liability on the basis of these provisions, is extinguished 10 years after he put into circulation(819) the product which caused the damage, unless in this period of time the victim has initiated proceedings. The expression “except in case of fault of the producer” is not contained in the European Directive. It has been added by French law to indicate that the liability under these provisions, and the statute of repose created does not deprive the victim of other rights it has under the civil code to claim against the producer under personal liability or liability for things. This formulation is rather unfortunate, as it brings the idea of fault into a set of provisions concerned with strict liability.

4.2.4.- Cumulation of Contracts and Torts Claims In French law these two types of actions cannot be cumulated. If one sues in contract‚ then he cannot sue in tort and the other way round. A choice has to be made by the victim as to which avenue of recovery he elects to pursue. The victim may not benefit from both the action in contract and in tort‚ nor of a hybrid avenue taking advantage of either rules‚ but the victim does not have complete choice. The courts consider that the victim may not exercise an action in tort when the fault of the author of the damage relates to the non-performance of a contractual obligation.(820) The contract is the mandatory law of the parties(821) and the strength of the contract justifies that parties to a contract are not given access to tort liability to settle their contractual problems. This rule of the non-cumulation of contractual and tort liabilities applies only

(818)

Code Civil‚ supra note 626‚ Article 1386-15.

(819)

A product is only once put in circulation‚ as provided for by Article 1386-5. So the time period of 10 years applies only from that time. It does not restart every time the product would be put on the market by intermediate distributors for instance.

(820)

Cass. Civ. 11 Jan 1922 (1922) Recueil Dalloz‚ 1‚ 16 - (1924) Recueil Sirey‚ 1‚ 105‚ (Annot. Demogue)‚ Grands Arrêts‚ supra note 642‚ n°107‚ at 456 For Doctrine see: P. Esmein‚ “Concours de la responsabilité délictuelle avec la responsabilité contractuelle” (1934) Revue Trimestrielle de Droit Civil‚ at 339 R. Rodière‚ “La combinaison des responsabilités” (1950) Semaine Juridique (JCP)‚ I‚ at 868; J. Huet‚ Responsabilité contractuelle et responsabilité délictuelle‚ Essai de délimitation entre les deux ordres de responsabilité‚ Thesis Paris II‚ 1978 G. Durry‚ La distinction de la responsabilité contractuelle et de la responsabilité délictuelle‚ (Montreal: Centre de Recherche en Droit Privé et Comparé du Québec‚ McGill University‚ 1986).

(821)

Code Civil‚ supra note 626‚ Article 1134 : “Les conventions légalement formées tiennent lieu de loi à ceux qui les ont faites. Elles ne peuvent être révoquées que de leur consentement mutuel‚ ou pour les causes que la loiautorise. Elles doivent être exécutées de bonne foi.”

229 between contractual parties.(822) This is not modified in case of intentional fault or gross negligence.(823) This traditional rule has been altered by the new law on Products Liability. Indeed‚ these provisions on product liability are without prejudice to the rights of the victim to invoke contractual or tortious liability‚ or even specific statutes on liability. There is no case law available to date on this subject but this will most certainly give rise to interesting debate since this is clearly outside of the French tradition. The fact that the contractual action and the tort action cannot be cumulated makes the delimitation between tort liability and contractual liability a fundamental point. Contractual liability will arise when one of the contractual party is at fault in the performance of his contractual obligations. Faults which cannot be traced to the performance of a contractual obligation will in principle be tort faults. Third parties to a contract‚ even if they take part in a fault committed by one of the contractual parties‚ will only be liable in torts. They do not have a contractual obligation and the fault they are liable for is not in the performance of a contractual obligation. In principle‚ the liability of a party to a contract towards a third party is also to be based on tort liability‚ as there is no contractual relationship between those. However‚ in this case‚ there are some nuances‚ in particular in the case of successive sales of a good. There‚ the Cour de Cassation‚ after some hesitation‚ decided that the action for latent defects which can be exercised by the buyer against the producer or any intermediate seller‚ is necessarily a contractual action.(824) Consequently‚ this buyer has no tort action. These decisions may seem to be against the principle of privity of contracts‚(825) a strong principle in French law‚ but they are based on different premises related to the theory that some of the rights associated to a thing are transmitted with the thing. On the basis of the transmission of the rights accessory to a thing‚ the Cour de Cassation has applied this principle also in groups of contracts involving contracts of sale and other types of contracts but where a thing was being transferred.(826) The 1st Civil Chamber of the Cour de Cassation later applied the same conclusion to chains of contracts which are not all sales contracts nor involve the transfer of a thing‚ among parties to a group of contracts(827) which were not direct contractual parties but which may be at the two extremes of a (822)

Cass. Soc.‚ 21 May 1972 (1972) Semaine Juridique (JCP)‚ II‚ 17236 (Annot. Saint-Jours).

(823)

Cass. Civ. 23 June 1936 (1936) Gazette du Palais‚ 2‚ 353; Cass. Civ. 1ère‚ 28 November 1967 (1968) Recueil Dalloz‚ 199; Cass. Civ 13 November 1970 (1970) Bulletin Civil III‚ n°596, 436; Cass. Civ. 1ère‚ 30 May 1978 (1978) Bulletin Civil I‚ n°205, 164.

(824)

Cass. Civ. 1ère‚ 9 October 1979 (1980) Recueil Dalloz‚ Inf rapp‚ 222‚(Annot.Larroumet) - (1980) Gazette du Palais‚ 1‚ 124‚ (Annot. Plancqueel).

(825)

In French: “principe de l’effet relatif des contrats”. This principle finds its source in article 1165 of the Code Civil which states : “Les conventions n’ont d’effets qu’entre les parties contractantes; elles ne nuisent point au tiers‚ et elles ne lui profitent que dans le cas prévu par l’article 1121." Article 1121 provides for a French legal institution named “stipulation pour autrui” and which consists in the stipulation of rights to the benefit of a third person.

(826)

Cass. Ass. Plén‚ 7 February 1986‚ supra note 674

(827)

Cass. Civ. 1ère‚ 21 June 1988 (1989) Recueil Dalloz‚ 5 (Annot. Larroumet) - (1988) Semaine Juridique (JCP)‚ II‚ 21125 (Annot. Jourdain) - Grands Arrêts‚ supra note 642‚ n° 103, at 438.

230 contractual chain. However‚ the Third Civil Chamber of the Cour de Cassation had a more traditional approach to the principle of privity of contracts and did not recognize such far reaching effects to groups of contracts. The Plenary Assembly of the Cour de Cassation finally endorsed the traditional approach. In the absence of the transfer of a thing‚ which would carry with it the accessory rights referred to above‚ the action between member of a group of contracts who are not in privity of contract‚ is not a contractual action.(828)

4.2.5.- Vicarious Liability This type of liability is‚ in French law‚ called liability for the fact of others.(829) It is established by article 1384 of the Civil Code. For a long time‚ it was limited to the cases enumerated there‚ and as it in the case of the liability based on guardianship of things‚ the courts established article 1384 as a general principle of liability for others. The specific types of liability for others‚ and the general principle developed by courts will be presented. In all these cases‚ the victim of a damage can also claim against someone other than the one who caused the damage as such‚ and for whom the former is‚ to different degrees‚ presumed responsible.

i)

Specific Types of Liability for Others.

a)

The liability of the principal for his agents

In a business environment‚ one often encounters the relationship of principal(830) and agent.(831) French law provides for a specific liability of the principal for the facts of his agents. The important criteria used to establish that we are in such a situation is the relationship between the principal and the agent. It is essential that there be an actual relationship of authority of the principal over the agent‚ and of subordination of the agent to the principal. This relationship can be evidenced by the existence of a contract between them such as an employment contract‚ so long as there is an authority/subordination relationship‚ but there is no need that a contract exists between principal and agent. In a large number of situations‚ the principal/agent relationship is not so simple. Firstly‚ an agent may have more than one principal who are then all exposed to this liability. This the case in particular when‚ due to the nature of the business‚ the agent can‚ while being under contract with a principal for instance‚ be placed at the service of another principal (828)

Cass. Ass. Plen.‚ 12 July 1991 (1991) Recueil Dalloz‚ 549 (Annot. Ghestin) - (1991) Semaine Juridique (JCP)‚ II‚ 21743 (Annot. Viney) - (1991) Revue Trimestrielle de Droit Civil‚ 750 (Annot. Jourdain) - Grand Arrêts‚ supra note 642‚ n°105, at 438. On this subject see C. Larroumet‚ “L’effet relatif des contrats et la négation d’une action nécéssairement contractuelle dans les ensemble contractuels” (1991) Semaine Juridique (JCP)‚ I‚ 353 P. Jourdain‚ “La nature de la responsabilitié civile dans les chaînes de contrats après l’arrêt d’Assemblée Plénière du 12 Juillet 1991 (1992) Recueil Dalloz‚ Chron‚ 149.

(829)

In French: “responsabilité du fait d’autrui”.

(830)

In French: “commettant”.

(831)

In French: “préposé”.

231 for a punctual task.(832) In general, the principal and the principal-to-be will settle these matters through their contract or other arrangements in advance. Ifthis is not the case, the courts will look at the circumstances of facts and determine who ofthe alleged principals had the actual authority over the agent at the time ofthe facts having caused the damage. For the principal to be held liable for the damage caused by his agent, the fact of the agent must meet to two criteria (to be proven by the plaintiff): - the fact must have been unlawful: the behavior of the agent must be of the nature that it could bring about his personal liability(833) under the theories addressed earlier - liability for his own faults and liability for things he has under his guardianship,(834) - or under specific regimes of liability which will be addressed below. - The damage must have been caused by the agent in the performance of his functions.(835) The implementation of this principle gave rise to considerable jurisprudential battles between the Civil Chamber and the Criminal Chamber of the Cour de Cassation, with Appeal Courts resisting, and the Cour de Cassation had to meet in Chambre Plénière a number of times to define the components of this criterion.(836) The result of this jurisprudence is the relatively stable criterion (832)

For examples related to the rental of vehicle with driver: Appeal Court Paris‚ 1 December 1977 (1978) Gazette du Palais‚ 1‚ 301-(1978) Recueil Dalloz‚ IR‚ 407 (Annot. Larroumet). Cass. Civ.‚ 4 May 1937 (1937) Recueil Dalloz‚ 363 - Grands Arrêts‚ supra note 642‚ n°139, at 575.

(833)

Cass. Civ. 2è‚ 8 October 1969 (1969) Bulletin Civil II n°269, 195; Cass. Civ. 2è‚ 3 March 1977 (1977) Recueil Dalloz‚ 501‚ (Annot. Larroumet) - (1977) Revue Trimestrielle de Droit Civil‚ 556‚ (Annot.Durry).

(834)

An important nuance needs to be pointed out with respect to the relationship between liability for guardianship and liability of the principal for his agent. In a number of cases‚ the agent was using a thing to perform his duties and‚ having caused a damage‚ was sued by plaintiffs on the basis of his liability based on guardianship together with his principal who was sued on the basis of his liability as principal for his agent. Although the Code Civil did not explicitly make it impossible to claim on both counts in such cases‚ the courts considered that the capacity of agent - under authority and control of a principal - and that of guardian - having full control of a thing - were incompatible. The courts decided that the capacity of principal shall prevail over that of guardian. If the principal gives his agent a thing to be used in the agent’s activities‚ the principal remains the guardian of the thing. If the agent uses his own thing to perform an activity under the authority and control of the principal‚ still the principal will be considered the guardian. The principal can in those cases be found liable both as principal and as guardian. This does not apply anymore when the agent is using the thing outside of his functions (see second criteria). See Cass. Civ. 30 December 1936 (1937) Recueil Dalloz‚ 1‚ 5‚ (Annot. Savatier) - (1937) Recueil Sirey‚ 1‚ 137‚ (Annot. Mazeaud) - Grands Arrêts‚ supra note 642‚ n°145, at 592.

(835)

Code Civil‚ supra note 626‚ Article 1384 al 5.

(836)

Cass.Ch.Réunies‚ 9 March 1960 (1960) Recueil Dalloz‚ 329‚ (Annot. Savatier) - (1960) Semaine Juridique (JCP)‚ II‚ 11559‚ (Annot.Rodière) - Grands Arrêts‚supra note 642‚ n° 140, at 580 Cass. Ass. Plén‚ 10 June 1977 (1977) Recueil Dalloz‚ 465‚ (Annot. Larroumet) - (1977) Revue trimestrielle de Droit Civil‚ 74‚ (Annot. Durry) - (1977) Semaine Juridique (JCP)‚ II‚ 18730 Grands Arrêts‚ supra note 642‚ n°141, at 580. Cass. Ass. Plén‚ 17 June 1983 (1983) Revue Trimestrielle de Droit Civil‚ 749‚ (Annot.Durry) - (1983) Semaine Juridique (JCP)‚ II‚ 20120‚ (Annot. Chabas) - Grands Arrêts‚ supra note 642‚ n°142‚ at 580 Cass. Ass. Plén‚ 17 Nov 1985 (1986) Recueil Dalloz‚ 81‚ (Annot. Aubert) -(1986) Semaine Juridique (JCP)‚ II‚ 20568‚(Annot. Viney) - (1986) Revue trimestrielle de Droit Civil‚ 126‚ (Annot. Huet) - Grand Arrêts‚ supra note 642‚ n°143, at 580 Cass.Ass.Plén.‚ 19 May 1988 (1988) Recueil Dalloz‚ 513‚ (Annot. (continued...)

232 which is that the principal can escape this liability only if he can prove that the agent acted outside of the functions for which he was employed‚ without authorization‚ and for purposes outside his functions.(837) In this type of liability‚ the victim has two possible actions. One action can be brought against the agent‚ based on the liability of the agent. The victim can also bring the action against the principal. The victim always has the same burden of proof to bring of the liability of the agent‚ which is identical to the burden of proof the victim would have in the case of personal liability or of liability for guardianship of things. Once this has been established‚ the victim has automatic access to the liability of the principal. The victim can even bring the action directly against the principal‚ without involving the agent. In such a case‚ the principal can call the agent in guarantee‚ or‚ if the principal has already been condemned to repair the damage‚ he is subrogated into the rights of the victim and can exercise an action in recourse against the agent. The agent will have the means of defense corresponding to his own liability(838). He cannot exercise an action in recourse action against the principal‚ nor call the latter in guarantee. The principal can only escape his liability if he can prove that the damage has not been caused by an unlawful act of the agent‚ or that the agent was acting outside of his functions‚ or if the damage was caused by an external factor(839) in relation to the agent (the external factor in relation to the principal is not a means of defense for him). The principal and the agent are liable in solidum.

b)

More liabilities for others

First of all‚ we can mention here the liability of the parents for the facts of their minor children‚(840) and that of artisans for their apprentices.(841) In these cases a presumption of fault was created which the parents or the artisans can rebut. These cases are rather remote from our subject and will not be discussed here. The liability of the State for the judges is also mentioned but not studied here.(842) All the liabilities addressed so far‚ including that of the principal for the agent‚ offer the victim an alternative as to whom to bring their claim against. (836)

(...continued) Larroumet) - (1989) Revue Trimestrielle de Droit Civil, 89, (Annot. Jourdain) - Grand Arrêts, supra note 642, n°144, at 580. For a very good explanation on the developments of this juridsprudence, see F. Terré, P. Simler & Y; Lequette, Droit Civil, Les Obligations, supra note 621, n° 797, at 601.

(837)

According to the 1988 decision of the Assemblée plénière, referred to above, “le commettant ne s’exonère de sa responsabilité que si son préposé a agi hors des fonctions auxquelles il était employé, sans autorisation et à des fins étrangères à ses attributions”.

(838)

See our discussions on means of defense for more detail.

(839)

Id.

(840)

For details about this specific liability see F. Terré, P. Simler & Y. Lequette, Droit Civil, Les Obligations, supra note 621 , n°779 at 590.

(841)

See for details, F. Terré, P. Simler & Y. Lequette, Droit Civil, Les Obligations, supra note 621, n°788 at 595.

(842)

See F. Terré, P. Simler & Y. Lequette, Droit Civil, Les Obligations, supra note 621, n°804, at 610.

233 There are cases where these liabilities for others go further and institute a system of substitution of liability. This is the case for the liability of the State for public education personnel.(843) There is also a liability of government administrations for the damage caused by vehicles used by their agents.(844)

ii)

Towards a General Principle of Liability for Others Established by Jurisprudence

In a very similar way as it was done in the field of liability for things under guardianship‚ the specific cases of liability for others‚ read together with the principle stated in Article 1384 of the Code Civil‚ tend to evolve into examples of a general liability for others. This trend was initiated with an important decision of the Assemblée Plénière of the Cour de Cassation‚ in 1991.(845) In this case‚ an Appeal Court had admitted a case of liability for others which was not listed in the Code Civil.(846) Although the Cour de Cassation did not explicitly state in its decision that there is a general principle of liability for others established by article 1384 al 1‚ the decision assumes the existence of such a principle. The jurisprudence has continued to move towards the recognition of such a principle‚ through decisions in areas such as sports associations(847) and establishments where a minor has been placed by judicial decision.(848) The jurisprudence is not yet fully consolidated but the trend is definitely there. It seems at present‚ that the jurisprudence will apply to this general liability for others‚ principles similar to that of the fact of things or the liability of principals for their agents. It has already been stated by the Cour de Cassation that those held liable under article 1384 al 1‚ general principle‚ cannot use their absence of fault as a means of defense.

(843)

See F. Terré, P. Simler & Y. Lequette, Droit Civil, Les Obligations, supra note 621, n°806, at 611.

(844)

See F. Terré, P. Simler & Y. Lequette, Droit Civil, Les Obligations, supra note 621, n°810, at 614

(845)

Cass. Ass. Plén., 29 March 1991 (1991) Recueil Dalloz, 324, (Annot. Larroumet) - (1991) Semaine Juridique (JCP), II, 21673, (Annot. Ghestin) - (1991) Revue trimestrielle de Droit Civil, 541 (Annot. Jourdain) - Grands Arrêts, supra note 642, n°147, at 600 For doctrine see: See G. Viney, “Vers un élargissement de la catégorie des personnes dont on doit répondre: la porte entrouverte sur une nouvelle interprétation de l’article 1384, al 1er du Code Civil” (1991) Recueil Dalloz, Chron, 157.

(846)

It was a case involving an association taking care of mentally handicapped persons. The Cour de Cassation considered that the association had accepted to organize and control, on a permanent basis, the mode of life of the handicapped persons in its care, and was liable for their acts under article 1384 al 1 of the Code Civil.

(847)

Cass. Civ. 2è, 2 May 1995 (1995) Bulletin Civil II, n°155, 88 - (1995) Revue Trimestrielle de Droit Civil, 899, (Annot. Jourdain).

(848)

Cass. Crim., 26 March 1997 (1997) Semaine Juridique (JCP), II, 22868 - D 1997, 496, (Annot. Jourdain) Cass.Crim., 10 October 1996 (1997) Semaine Juridique (JCP), II, 22833, (Annot.Chabas) - (1997) Recueil Dalloz, 309, (Annot. Huyette).

234

4.2.6.- Recoverable damages i)

Recoverable damages in general

a)

In contract

Most damage suffered in cases of breach of contract are property damage or bodily damage. The moral damage is less frequently claimed in contracts cases‚ however‚ it happens. The courts initially accepted only property and bodily damage‚ but the jurisprudence has evolved to compensate moral damage in contracts cases.(849) In order for the victim to receive compensation for a given damage‚ the victim has to prove that this damage fulfills three conditions: - the damage must be certain: The damage must be certain as opposed to possible. This does not mean that the victim cannot be compensated for a future damage. But the occurrence of this future damage will have to be established without doubt. Damages for loss of opportunity are also recoverable so long as this opportunity was not hypothetical but real.(850) - the damage must not be too remote from the breach of the contract. This is very much a matter of fact which is decided by the Courts on a case by case basis. - the damage must be foreseeable at the time the parties concluded the contract.(851) The foreseeability of the damage is assessed on a case by case basis by the courts. The Courts place emphasis on the foreseeability of the magnitude of the damage and not on the foreseeability of the causes of the damage.(852) In the case of a damage caused intentionally‚ the author of the damage has to compensate for the damage even not foreseeable. Where the contract cannot be executed‚ the victim can obtain compensation by damages.(853) Such damages have to compensate fully for the damage (with the limitation indicated above about foreseeability of the damage) and have to cover the actual loss(854) and the lost gain.(855)

(849)

T. Com. Seine 20 Feb 1932 (1932) Gazette du Palais, 1, 895 Recueil Sirey, 2, 144.

(850)

Cass. Civ. 1ère, 11 June 1996 (1966) Bulletin Civil n°250, 176.

(851)

Code Civil, supra note 626, Article 1150.

(852)

Cass. Civ. 29 December 1913 (1916) Recueil Dalloz, 1, 117. The approach relating to the foreseeability of the magnitude of the damage is sometimes even implemented in statutes, such as in the case of hotel liability as per article 1953 Code Civil, para 3 See also Cass. Civ. 1ère, 17 July 1990 (1991) Semaine Juridique (JCP), II, 21674, (Annot. Paisant).

(853)

In French: “dommages et intérêts”.

(854)

In French: “perte subie”, or, using the latin formula “damnum emergens”.

(855)

In French: “gain manqué”, or, using the latin formula “lucrum cessans”. Both the actual loss and the lost gain are covered by Code Civil, supra note 626, Article 1149.

T. Civ. Seine, 20 Dec 1932 (1932)

235

b)

In tort

As in contracts‚ the damage must be certain and it can be future so long as it can be evaluated with certainty. A hypothetical damage cannot be compensated.(856) The damage can be a loss or a lost gain. The loss of an opportunity/chance can be a compensable damage so long as the chance concerned can be valued by the courts. The courts will not compensate the victim as if the chance had materialized‚ but they will value the chance itself. The courts have accepted that the loss of a real and serious opportunity is a damage which is certain and calls for compensation.(857) In certain areas‚ such as the loss of the opportunity to succeed at an exam or obtain a new job‚ the courts tend to add the criterion that the opportunity must have been in the short term.(858) The circumstances surrounding the loss of an opportunity will be used by the courts to determine if the loss of the opportunity is to be compensated‚ and if so‚ the amount of damages. The damage must be the direct consequence of the accident to be compensated. The estate or the dependants of a victim also suffer a direct damage due to the loss of their relative (moral damage) or of the financial support such relative provided (material damage). The condition that the damage must be direct is the logical conclusion of the developments above concerning the causal link. The victim must also have a legitimate interest in order to receive compensation. Like in contracts liability‚ the first type ofcompensable damage is bodily injury. Included in the notion of bodily injury are all injuries to the person‚ including death‚ but also the deprivation of pleasures of life such as practicing sports(859) or gardening and housekeeping‚(860) pain and suffering (pretium doloris). The material damage is also compensable. This concerns in the first instance the immediate victims and covers both the damnum emergens and the lucrum cessans and includes medical expenses as well as the loss of earnings based on the actual earnings of the victim and his/her career prospects. Others than the immediate victim can obtain compensation for their own material damage resulting from the damage caused to the immediate victim. These are called the “victimes par ricochet” and are typically the dependants of the victim who rely upon the victim for subsistence. Their damage must also be certain to be compensable. The moral damage is also compensable in torts as it is in contracts. It can also exist “par ricochet” as in the case of the material damage. This is often referred to as the affection damage(861) and aims at compensating the suffering caused by the death of a loved one and can be compensated to those persons who suffer a personal‚ direct and certain damage in

(856)

Cass. Civ. 3è, 13 December 1977 (1978) Revue Trimestrielle de Droit Civil, 652, (Annot. Durry).

(857)

Cass. Civ. 2è, 1 April 1965 (1965) Bulletin Civil II n°336, 230.

(858)

Cass. Civ. 2è, 12 May 1966 (1966) Bulletin Civil II, n°564, 404 - (1967) Recueil Dalloz, 3 Grands Arrêts, supra note 642, n° 110, at 469

(859)

Cass. Crim. 26 May 1992 (1992) Semaine Juridique (JCP) IV, 2843.

(860)

Cass. Civ. 2è, 11 October 1989 (1989) Bulletin Civil II, n°178, 91.

(861)

In French: “prejudice d’affection”.

236

relation to the injury or death of a loved one.(862) The compensation shall in principle restore the situation of the victim as ifthe damage had not been caused. In practice‚ this is not always achievable. The courts will decide upon the amount of damages to be attributed to the victim and they have full power to do so. The Cour de Cassation will only check‚ if the case is submitted to it‚ the proportionality of the damages decided by the court with the repair of the damage. ii)

Punitive damages

The institution of punitive damages‚ in the sense of US law‚ does not exist in French law. However‚ as shown above‚ French law allows the compensation of moral damage. In this field‚ the courts‚ based on their large freedom with respect to the determination of the damages to be paid to the victim‚ sometimes use the moral damage as a vehicle for imposing damages which have the character of a sanction more than a compensation against the author ofthe damage who behaved in a reckless way. Although the damages are meant to be allocated to the victim to compensate for the damage suffered and are normally not to be decided as a function of the seriousness of the fault‚ the practice is often different in the courts. The courts cannot ignore the degree of the fault which led to the damage and this element comes into the picture when the determination of the amount of damages is made. Therefore‚ without stating it‚ the courts often introduce the punitive element in their assessment of the amount of damages to be allocated to the victim.(863) However‚ this is not comparable to the US institution of punitive damages. iii)

Liquidated damages‚ penalty clauses

These clauses are allowed under French law‚ under certain conditions and they are usually referred to as “ clauses pénales” .(864) Their purpose is for the parties to a contract to determine in advance the amount of damages which will be due for the breach of contractual obligations. These clauses are only enforceable when the party against which they are applied is in breach of contract. As these clauses play the role of damages‚ they also can in principle only be enforced when the debtor is in a position where he could‚ in application of the rules of contract liability described above‚ be condemned to damages. Such a clause would therefore‚ as a consequence‚ not apply in case the debtor cannot perform his obligations due to a force majeure for instance. In principle also the creditor may not require both performance and application of the clause penale‚ unless the clause pénale was provided only to cover for delays.(865)

(862)

Cass .Civ. 2è, 16 April 1996 (1996) Semaine Juridique (JCP), I, 3985 n°8, (Annot. Viney).

(863)

On the evolution to a punitive function of damages and the relationship with criminal justice, see G. Viney, Droit Civil, Introduction à la responsabilité, 2è Ed (LGDJ: Paris, 1995) S. Carval, La responsabilité civile dans sa fonction de peine privée, (LGDJ: Paris, 1995).

(864)

They are allowed by article 1152 Code Civil and their detailed regime is provided for in articles 1226 to 1233 Code Civil.

(865)

Code Civil, supra note 626, Article 1229 para 2 Code Civil

237 The parties are meant to have assessed the amount of damages and set the clause pénale accordingly. The Code Civil provides(866) that the courts cannot allocate to the victim of the breach an amount higher or lower than the amount set in the clause. Insofar as the judge cannot increase the amount set in the clause‚ these clauses play a role of liability limitation and they are normally also subject‚ therefore‚ to the rules applicable to the clauses limiting liability described above.(867) The problem with these clauses was that they led to the payment of the amount of liquidated damages‚ whatever the actual amount of the damage was‚ and numerous excesses could be seen. This is why‚ in 1975‚ para 2 was added to Article 1152 Code Civil which brought in the possibility for the courts to review these clauses.(868) The judge can review upwards or downwards the amounts provided for in such clauses when they are clearly excessive or ridiculously small. Any clauses concluded by the parties against this are null and void. The judges need to substantiate their decision to review the amounts based on the determination that the amount is excessive or ridiculously small.(869) Although the judge is given this power of review‚ the clause remains with its function of containment ofthe damages. There is no requirement for the judge to review the amount to put it in line with the actual damage suffered.(870) The role of the judge is only to correct the excessive nature of the clause‚ not to deny its existence. The same law of 1975 which added para 2 to article 1152 also added article 1231 of great importance. This article provides that when the obligations have been partially performed‚ the amount set in the clause pénale may be reduced by the judge proportionally to the interest that the partial performance provided to the creditor. This is without prejudice to article 1152. Also in these cases‚ clauses providing for the contrary are null and void. This article will not be applied in case the parties have‚ in advance‚ provided in the clause for the amounts of liquidated damages to be paid in case of partial performance.(871)

4.2.7.- Force Majeure i)

Source in contracts and in torts

Although the parties may introduce specific force majeure clauses‚ force majeure can be claimed even without such a clause being expressly part of the contract. In French law‚

(866)

Code Civil, supra note 626, Article 1152 para 1.

(867)

For example the intentional fault of the debtor will normally deprive him of the benefit of the ceiling amount set by the clause pénale and may authorise the judge to allocate higher damages to the victim. Cass. Civ. 1ère, 4 February 1969 (1969) Recueil Dalloz, 601, (Annot. Mazeaud).

(868)

Ph. Malaurie, “La révision judiciaire de la clause pénale”, (1976) Répertoire Defrénois, at 533 G. Paisant, “Dix ans d’application de la réforme des articles 1152 et 1231 du Code Civil relative à la clause pénale” (1985) Revue Trimestrielle de Droit Civil, 647.

(869)

Cass. Ch. Mixte, 20 January 1978 (1978) Recueil Dalloz, 349.

(870)

Cass. Com., 23 January 1979 (1979) Bulletin Civil IV n°30, 24.

(871)

Cass. Com., 3 February 1975 (1975) Bulletin Civil IV, n°32, 26; Cass. Com., 21 July 1980 (1980) Bulletin Civil, n°309, 250.

238 the force majeure is provided for in article 1148 Code Civil(872) and is also referred to as “cas fortuit” (the two expressions have sometimes been distinguished but are in reality used without distinction). In torts‚ force majeure is also accepted‚ however‚ there is no specific article in the Code Civil for it. It has been established by case law.(873) The force majeure is one of the three types of external causes which can prevent the existence of the causal link and lead to exoneration of liability for the defendant who successfully proves it. Other external causes (the fact of a third party or the fact of the victim) are distinct external causes‚ but they may also be qualified as force majeure‚if they meet its criteria‚ and have more far reaching consequences than when they are only contributory. The force majeure defense will be important for the defendant merely in cases in contracts where the obligation breached is an obligation of result‚ and in torts where the liability is presumed. In all other cases‚ the claimant has to bring proof of the breach of the obligation or of the torts fault. Therefore‚ if he brings the proof of a fault of the defendant‚ he will be held liable.

ii)

Criteria to be met by force majeure events

There are three classical criteria: the force majeure must be exterior‚ unforeseeable and irresistible.(874) The force majeure must be an event exterior to the party claiming the benefit of it.(875) Bankruptcy is not considered a force majeure event for the debtor.(876) The event must also be unforeseeable and it must make performance impossible. If the performance is not impossible but only impractical(877) or more expensive‚(878) it is not a force majeure case. The unforeseeability criteria and the impossibility to perform must be absolute‚ that is they should not only be in relation to the debtor but for anyone. These criteria are therefore assessed in abstracto by the courts‚ for example by reference to a reasonable person placed in the same circumstances. In this respect‚ an event which occurred already before could still be considered unforeseeable in the context of this interpretation in abstracto and in view of the specific circumstances. In general acts of the

(872)

Code Civil, supra note 626, Article 1148: “Il n’y a lieu à aucuns dommages et intérêts lorsque, par suite d’une force majeure on d’un cas fortuit, le débiteur a été empêché de donner on de faire ce à quoi il était obligé, ou a fait ce qui lui était interdit”.

(873)

See for example Cass Ch Réunies, 13 Feb 1930, supra note 709.

(874)

In French: “extérieure, imprévisible et irrésistible”.

(875)

Cass. Civ. 1ère, 26 May 1994 (1994) Semaine Juridique (JCP), I, 3809, n°11, (Annot. Viney).

(876)

Cass. Civ. 15 May 1944 (1945) Recueil Dalloz, 15; Cass Civ 15 May 1945 (1946) Recueil Dalloz, 35.

(877)

Cass. Civ., 5 December 1927 (1928) Recueil Dalloz, 84.

(878)

Cass. Civ., 4 August 1915 (1916) Recueil Dalloz, 1, 22; Cass.Com., 12 Nov 1969 (1971) Semaine Juridique (JCP), II, 16791, (Annot. De Juglart et du Pontavice).

239 Government(879) is a case of force majeure.(880) The theory of force majeure applies also in tort liability along the same criteria. However‚ in the case of liability for guardianship of things‚ the Cour de Cassation has added one criteria to those necessary for the force majeure: the event of force majeure must be exterior to the thing. This additional criteria was aimed at avoiding that a guardian could be released from his obligations due to a defect in the thing which he would turn into a force majeure‚ as it is exterior to him. The Cour de Cassation is rather strict on the criteria allowed to constitute force majeure‚ in particular those of unforeseeability and impossibility‚ and the application of force majeure in French law is very restrictive.(881)

iii)

Effects of the force majeure

In contracts‚ the essential effect of the force majeure is that the debtor is released from his obligation and his liability for the breach of this obligation‚ as provided in Article 1148 Code Civil. He will not be released‚ however‚ when he had been put on notice to perform his obligations prior to the occurrence of the event of force majeure.(882) The release will be absolute if the debtor is in the complete impossibility to perform due to the force majeure. If he cannot perform certain obligations but can perform others‚ he will only be partially released to the extent of the obligations which are impossible to perform. The evaluation has to be made‚ based on the specific terms of the contract concerned‚ as to whether the creditor will require performance of the remaining obligations and if the intention of the parties was that the remainder of the contract survives. In contracts with reciprocal obligations‚ the theory of risks(883) would come into play as well‚ and release the (879)

Referred to in French as “fait du prince”.

(880)

See Cass. Civ. 1ère‚ 29 Nov 1965 (1966) Recueil Dalloz‚ 101.

(881)

Some examples may give an idea of the very restrictive case law in France on these criteria: the state of war cannot in principle constitute force majeure‚ except in certain circumstances (Cass. Req.‚ 25 January 1922 (1922) Recueil Dalloz‚ 1‚71- Cass. Com.‚ 10 October 1950 (1951) Gazette du Palais‚ 1‚ 20) an attack against a train station is not a force majeure if the station manager had received threats (Cass. Civ. 1ère‚ 26 January 1971 (1971) Bulletin Civil I‚ n°27‚ 22) a late frost‚ even when classified as a disaster‚ is not an unforeseeable event (Cass. Soc.‚ 25 October 1995 (1995) Semaine Juridique (JCP)‚ IV‚ 2628 - Cass. Civ. 3è‚ 24 March 1993 (1993) Revue Trimestrielle de Droit Civil‚ 594‚ Annot. Jourdain) the electricity company cannot argue the force majeure as a defense to a claim resulting from electricity cuts which occurred during a period of exceptional frost‚ as it does not justify that it was in the impossibility to cater for a period of unusual frost (TGI Angers‚ 11 March 1986 (1987) Semaine Juridique (JCP)‚ II‚ 20789‚ Annot. Gridel) The jurisprudence is very varied when it comes to strikes‚ where the predominant criteria is that of exteriority.

(882)

Code Civil‚ supra note 626‚ Article 1138 and 1302.

(883)

This theory is also called “res perit debitori”. The risks are for the debtor who is in the impossibility to perform due to force majeure. The Code Civil provides for two specific applications of this rule‚ in articles 1722 and 1790. The obligation of the co-contractor of the debtor who cannot perform due to force majeure‚ is extinguished without the need to resort to a court to cancel the contract. This theory applies both to the extinction of all obligations in case of total non performance‚ or to partial extinction only in case of partial non performance. This theory only applies when the non performance is due to force majeure. For more on the theory of risks‚ (continued...)

240 other party from its reciprocal obligations. In torts‚ the force majeure can only be used as a defense in the case of liability for guardianship of things. The effect of the proof of force majeure by the defendant is to break the presumption of liability which is upon him for damage caused by the thing under his guardianship. So‚ either the criteria for force majeure are met and the guardian is exonerated from liability‚ or these criteria are not met and he is not exonerated. The jurisprudence has‚ in some cases‚ departed from this clear cut approach and accepted solutions for partial exoneration.(884)

iv)

Force majeure clauses

French law accepts clauses relating to agreements between the parties as to force majeure events within the same boundaries as those relating to disclaimer or limitation of liability. The parties are free to agree any force majeure clauses in line with the constraints applicable to limitation of liability clauses. The parties may provide that certain events would not be force majeure or those which could be arguable (as we have seen above‚ for instance for strikes or natural disasters) will be considered as force majeure. The parties may also agree that the debtor will not be released from his obligations by events of force majeure.

4.2.8.- Judicial Procedure issues A comparison is made of the French system to the US one in the areas pointed out for the latter. Some specific aspects of the French system are also discussed here. The trial by jury in the French system applies only to criminal cases and even not all of them. Minor criminal cases are tried by professional judges in Tribunal Correctionnel. The major cases‚ in particular murder or manslaughter‚ are tried by jury in a Cour d’Assises. All non-criminal cases are tried by professional judges. In the area of interest in this thesis‚ the civil law of liability‚ the trial by professional judges is certainly a far better system that the jury trials because it reduces the risk ofarbitrary decisions‚ it allows for a better legal certainty and predictability‚ and it also ensures a certain consistency in the decisions. Long arm statutes and the forum non conveniens rule are not known in the French system‚ since it is not a federal system. The same law applies all over the French territory and there is no much point for parties to a trial to argue a change of venue‚ nor any opportunity to try and benefit from the application of different legal rules. As far as class actions are concerned‚ the French system does not know of class actions in the common law sense. Civil law is traditionally more focused on individual rights. In French law‚ if a group of individuals suffer the same damage‚ each of them must seek (883)

(...continued) see F. Terré‚ P. Simler & Y. Lequette‚ Droit Civil‚ Les Obligations‚ supra note 621‚ n°640 ff‚ at 488 ff.

(884)

Cass. Com.‚ 19 June 1951 (1951) Recueil Dalloz‚ 717‚ (Annot.Ripert).

241

compensation individually. This is derived from the principle that those who have a legitimate interest to claim are the only ones who can bring a claim.(885) The law and the courts have accepted progressively that claims be brought by one entity representing the interests of a group of individuals. This is the case for trade unions(886) for instance. Otherwise, it is not possible, as it would be in US law, for one individual to become the representative of a class of individuals. French case law accepts the claims brought for the defense of collective interests but in a rather restricted manner. First of all, such claims are only accepted when brought by “associations” which are an association of individuals organized with articles, registered and following certain rules of constitution and functioning. These associations are normally not allowed by criminal courts to bring claims when they are associations which were constituted to defend the individual rights of its members.(887) They are allowed to do so by civil courts.(888) Claims are not allowed, either by criminal or by civil courts, from associations which defend interests which are above the individual interests of its members,(889) although there are some exceptions.(890) In principle, these associations can recover damages for their own prejudice only. The specific prejudice of the individuals need to be claimed for by the individual. In some cases, the law has clarified the right for certain associations to present claims for their members in defense of collective interests. The law has also, in a few but very significant cases, given rights to those associations with respect to individual claims of their members. The most significant case of such legislation is related to consumer associations.(891) In accordance with this legislation, consumer associations can present claims based on their own prejudice, but they can also bring claims for personal injury of individual members under the following conditions: - the association must be authorized and recognized as representative at national level; - the association must have received a mandate in writing to bring claims from at least two individual members; - the injuries of the individuals result from the conduct of one person acting in a professional capacity; and - the injuries have a common origin. Even though the law has allowed such actions in some cases, we are still far from the US system of class actions. The major difference lies in the requirement, in France, of a written mandate from each individual to the association for the latter to bring legal (885)

Article 31 Code de Procédure Civile for civil law actions and Article 2 Code Pénal for the civil action attached to a criminal action. See reference for those codes supra note 626.

(886)

Article L-411.11 Code du Travail‚ supra note 626.

(887)

Cass. Crim.‚ 16 December 1954 (1955) Recueil Dalloz‚ 287.

(888)

Cass. Civ.‚ 25 November 1929 (1930) Gazette du Palais‚ I‚ 29; Cass. Civ. 1ère‚ 27 May 1975 (1976) Recueil Dalloz‚ 318.

(889)

Cass. Ch. Réunies‚ 15 June 1923 (1924) Recueil Sirey‚ I‚ 49; (1924) Recueil Dalloz‚ I‚ 153.

(890)

Cass. Crim.‚ 14 January 1971 (1971) Recueil Dalloz‚ 101 - (1971) Semaine Juridique (JCP)‚ II‚ 17022‚ (Annot. Blin); Colmar‚ 10 Feb 1977 (1977) Recueil Dalloz‚ 471‚ (Annot. Mayer).

(891)

Articles L421-1‚ L 422-1‚ L 422-2‚ L 422-3 Code de la Consommation‚ supra note 626.

242 proceedings on their behalf, versus no need for such mandate in the US where class actions produce effects for a whole class without the need for an individual request or even agreement to take part in the class action. One point specific to French law is worth adding to this discussion. French law gives a special status to tradesmen(892) and trade acts(893). It also subjects those to a special category of jurisdictions, the trade courts.(894) Article 1 of the Code de Commerce defines as tradesmen those who perform trade acts as their regular profession.(895) The reference to the regular profession involves a repetition of the acts and the intention to draw benefits or resources from the performance of those acts. There is also the notion that the tradesman performs those acts for his own account and in his name. The qualification of tradesman has to be proven by the party who wishes to take benefit of it. There is no formality which would constitute an irrebutable proof that one is a tradesman.(896) Tradesmen may be individuals or entities such as companies. The exercise of a profession of trade is regulated to avoid, for instance, access to the profession to individuals who have been subject to certain condemnations, individuals without specific qualifications and so on.(897) The acts of trade are defined in the Code de Commerce, Article 632, which provides for a long list ofacts deemed to be trade acts.(898) Starting from this definition, the traditional classification of acts of trade is: - the acts of trade by nature, which are those covered by article 632 Code de Commerce; - the acts of trade by form, which are on the one hand the letter of credit (lettre de change) as stated by article 632, but also the activities of certain types of (892)

In French: “commerçants”.

(893)

In French: “actes de commerce”.

(894)

In French: “tribunaux de commerce”.

(895)

Article 1 Code de Commerce: “Sont commercants ceux qui exercent des actes de commerce et en font leur profession habituelle”.

(896)

There is a requirement in France for registration in the “Registre du commerce et des sociétés”, But this is only creating a presumption of trademanship which is rebuttable.

(897)

M. Pédamon, Droit Commercial, supra note 630.

(898)

Article 632 Code de Commerce, supra note 626: “La loi répute actes de commerce: - Tout achat de biens meubles pour les revendre, soit en nature, soit après les avoir travaillés et mis en oeuvre - Tout achat de biens immeubles aux fins de les revendre, à moins que l’acquéreur n’ ait agi en vue d’édifier un ou plusieurs bâtiments et les vendre en blocs ou par locaux - Toutes opérations d’intermédiare pour l’achat, la souscription ou la vente d’immeubles, de fonds de commerce, d’actions ou parts de sociétés immobilières - Toute entreprise de location de meubles - Toute entreprise de manufactures, de commission, de transport par terre ou par eau - Toute entreprise de fournitures, d’agence, bureaux d’affaires, établissements de ventes à l’encan, de spectacles publics - Toute opération de change, banque et courtage - Toutes les opérations de banques publiques - Toutes obligations entre négociants, marchands et banquiers - Entre toutes personnes, les lettres de change ”.

243 companies, in particular commercial companies; - the acts of trade as accessories (actes de commerce par accessoire): those are the acts performed by a tradesman for the purpose of his trade business. Those acts may not be trade acts by nature or form, but are accomplished by a tradesman in fulfillment of his profession. The courts have established a presumption (which is rebuttable) that the acts performed by a tradesman are acts of trade. - mixed acts: those cover the cases where an activity is a trade act for one party (the professional seller of televisions for instance) and civil for the other party (a consumer, who buys a TV for his home). There are numerous consequences to the qualification of tradesman‚ and to the qualification of certain acts as trade acts. Only two of those consequences are pointed out here. It has been explained earlier that time limits for claims is in principle 30 years. In the case of trade acts‚ the time limits are reduced to 10 years‚ including the case of mixed acts. Disputes between tradesmen‚ or in relation to trade acts‚ are submitted to the trade courts (tribunaux de commerce). In accordance with Article 631 Code de Commerce‚ the trade courts have jurisdiction over disputes between tradesmen in relation to the performance of their trade‚ disputes between associates of a commercial company in relation to this company and disputes relating to trade acts between all persons. Particular laws also give jurisdiction to the trade courts‚ for instance in the area of bankruptcy. In the case of the mixed acts we referred to above‚ the trade courts are not competent when the claimant is a tradesman and the defendant is not. Where the claimant is not a tradesman‚ he has the choice between the civil courts and the trade courts. The judges in the trade courts are not professional judges. They are judges elected from individual or company tradesmen registered on the Registre du Commerce et des Sociétés as well as other candidates close to the commercial profession such as former members of chambers of commerce. Judges are elected for a term of 2 years and can be reelected for further terms of 4 years. The President is elected for 4 years among the judges having served at least 6 years. The procedure before the trade courts is the same as in other courts‚ with certain nuances. First of all‚ the parties are not obliged to be represented by a trial lawyer. They can handle their own representation. Also‚ there are special procedures to expedite decisions (for example the procedure of référé or the procedure of injonction de payer)‚ which tend to make the settlements in the trade courts faster than in civil courts. The decisions of the trade courts are subject to appeal and can go further up to the Cour de Cassation. This subject of trade acts‚ tradesmen and trade courts is far wider of course‚ but we chose to briefly explain this particularity because it has far reaching consequences and parties to a contract need to be aware that certain acts may lead‚ in French law‚ to their qualification as tradesmen‚ with all the consequences this implies. One important consequence is that French law only allows arbitration clauses between tradesmen and not between other parties or between a tradesman and another party. The ignorance of this rule may cause very serious havoc in a contractual relationship which encounters difficulties.

244

4.3.- PRACTICE IN SPACECRAFT DEVELOPMENT CONTRACTS: THE EUROPEAN SPACE AGENCY The European Space Agency places procurement contracts with firms in 14 countries of Europe‚ for the carrying out of its space programs. Occasionally‚ ESA places contracts with firms from countries which are not ESA Member States‚ but this is on a rather exceptional basis as far as direct contracts are concerned.(899) In this section‚ we will indicate in general terms how the overall issues of liabilities and warranties are addressed in ESA contracts. These discussions will refer mostly to project type contracts (by opposition to study contracts) of medium and large size and in principle concluded for the procurement of spacecraft. Contracts placed by ESA are standard-type contracts. They normally incorporate the ESA General Clauses and Conditions of Contracts by reference and provide for additional details or amendments which are also standardized to a large extent due to their repeated use. These contracts are negotiated to a varying extent‚ depending on the specific Contractor concerned and the particularities of a certain project. As far as medium to large size projects are concerned‚ due to the rather limited number of Prime Contractors‚ these contracts have through the years become a standard text and only the specific aspects connected with a project are negotiated‚ as most clauses have become standard practice with those contractors.

4.3.1.- Applicable Law Firstly‚ since the Agency places contracts in different countries one may wonder what principle is followed with respect to the applicable law. The general practice is that the law of the contract is the law of the country where the Prime Contractor is located and it is specified in the Contract. Together with this applicable law‚ it is normally provided that arbitration - which is always provided for in ESA Contracts - will take place in that country as well. ESA Contracts are rather detailed when prepared for space projects. However‚ in a number of areas‚ the detailed effects of the contract are left to the law of the contract. This is the case for instance in the area of force majeure definition‚ or most aspects of liability for damage. The Prime Contractor is in principle free to provide for different laws in his subcontracts. However‚ the ESA General Clauses and Conditions of Contracts (ESA GCC(900)) provide that “ Unless otherwise authorised by the Agency‚ the conditions of the sub-contracts shall secure to the Agency any rights provided for it under the terms of the main contract”.(901) Consequently‚ it is in the interest of the Prime Contractor to implement in his subcontracts the same law as that of the Prime Contract‚ to avoid the introduction of discrepancies in the domestic laws which would prevent him from fulfilling his obligations in relation to (899)

(900) (901)

ESA Contractors often have to place subcontracts or contracts for supplies and purchase orders in other countries‚ e.g the US for the purchase of electronic components or specific materials. The ESA GCC can be obtained from the ESA Contracts Department. ESA GCC Clause 25.4

245 this clause. It has been observed that the general practice in subcontracts is indeed to apply the law of the Prime Contract and also to locate the arbitral proceedings in the same place‚ with the same provisions. This is sometimes difficult to achieve when the subcontractors are small companies which may not feel secure contracting under a foreign law. Also‚ the flow down of the law applicable to the Prime Contract is often impossible with suppliers who provide off the shelf items‚ such as electronic components or raw materials suppliers.

4.3.2.- Performance by Contractors and Control of Performance ESA Project Contracts contain contractual requirements which the Contractor has to fulfill in order for his products to be accepted by the Agency. The Contractor unable to fulfill these requirements may be in two different types of situations: - he may announce such problem in advance and agree with ESA that a particular requirement may be waived. Special procedures are then applied to agree to such waivers and control them so that they can be taken into account in the final acceptance of the product. The waiver therefore has the effect of altering the requirements which the Contractor has to fulfill.(902) - the problem may appear at acceptance, in which case the contractor is in breach of his contract and may see his products rejected by the Agency at the time of acceptance.(903) He must take corrective action on the rejected item at his own risk and within the time set by the Agency and if he fails to correct the deficiencies of his product, the Agency may take action such as doing the work itself or by ways of replacement contract(s) to be charged to the Contractor. Unless the Contractor corrects or replaces the products within the time-frame requested, the Agency may require the delivery at a reduction in price equitable under the circumstances. In a large number of cases, some defects noted prior to acceptance will not lead to a rejection because they are very minor, or because they are not compromising the performance of the spacecraft and their correction would take time which could, for instance, jeopardize the launch date. In this case, the usual procedure is to record those defects as non-conformance and they are traditionally dealt with at technical level. Another way for ESA to follow the progress of work and control performance is through the payment modalities. Contracts are nowadays most often placed for a firm fixed price. The total price of the contract is paid to the Contractor in accordance with a “Milestone Payment Plan”. This plan defines a series of technical milestones demonstrating achievement of work which will allow payment of parts of the price to the Contractor. This practice is somewhere in between the normal contract execution‚ and the (902)

For instance: If a mass requirement was 500 kilos maximum and the Contractor raises a request for waiver saying that he cannot reduce the mass below 510 kilos‚ and if the Agency agrees to waive its requirement of 500 kilos maximum‚ then the Contractor will be allowed to deliver his product which weighs 510 kilos without being in breach of contract.

(903)

If we use again our previous example‚ the requirement for mass has always been 500 kilos‚ there was never a waiver agreed. However‚ during the weighing which is performed prior to acceptance‚ the mass is 510 kilos. The Agency may decide to reject the deliverable which does not meet its requirements.

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implementation of the exceptio non adimpleti contractus referred to before. The Contract creates the payment obligation for the Agency only upon the concerned milestone having been satisfactorily achieved. There are other means of performance control such as technical audits‚ reviews‚ and inspections‚ but these are related more to management of projects than to contractual practice as such. Finally‚ the Agency’s contracts normally define the obligations of the contractor in a strict way and do not often use clauses of best efforts‚ best endeavors‚ reasonable efforts and so forth. In fact‚ Clause 23 of the ESA GCC states: “The work specified in a contract shall be performed in accordance with the relevant trade‚ industrial and technical practice of the country in which the contract is placed. In particular‚ workmanship shall conform with the modern technical standards required for first class work and shall be strictly in accordance with the technical specifications in the contract. ”

This clause not only clarifies the nature of the obligations of the contractor but also provides for the rule of conflict of law used to determine which professional practice the behavior of the Contractor would be assessed against.

4.3.3.- Liability Provisions of the Contract

Apart from those liabilities directly connected with contract performance in relation to the products themselves‚ a number of other provisions in ESA contracts define liabilities of the Contractor as well as the liabilities of ESA. i)

Liability of the Contractor concerning equipment‚ supplies and technical documents made available to him by the Agency

For the performance of his contractual obligations‚ the Contractor will sometimes rely on equipment and documentation supplied by ESA. The ESA GCC(904) provide that these remain the property of the Agency‚ however‚ as custodian‚ the Contractor is required to replace or repair such items at his cost‚ in case of loss‚ destruction or damage‚ except in case of damage caused by proper use or caused by a representative or an employee of the Agency. This liability of the Contractor is sometimes limited‚ as will be shown later. ii)

Liability of the Contractor for damage caused to persons‚ goods or property

The regime of those liabilities is provided for in a very straightforward way by the ESA GCC.(905) These provide that claims occurring during the execution of the contract or during acceptance tests shall be settled as follows. Claims in respect of damage of any nature sustained by the Agency’s or the Contractor’s representatives or employees participating in the execution of the contract or in the acceptance tests shall be settled in (904)

ESA GCC Clause 10.

(905)

ESA GCC Clause 11.

247

accordance with the law governing the Contract. Claims for damage caused to movable or immovable property owned by the Agency or the Contractor shall be settled in accordance with the law governing the Contract (with the exception of items covered by clause 10 - items put at the disposal ofthe contractor by the Agency -‚ as we have seen in para a) above). This clause also provides that the liability for damage occurring to the articles covered by the Contract shall rest with the Contractor until the time specified in the contract. As in the case of para a) above‚ the liabilities provided for in this Clause 11 may be limited. iii)

Liability of the Contractor for infringments of the law and third-party rights

In accordance with the ESA GCC‚(906) the Agency shall not be responsible if the Contractor infringes the laws or statutes of his or of any country whatsoever. In the area of intellectual property significant liabilities may arise and‚ although it is not the focus of this thesis‚ this should not be overlooked in contract practice‚ as well as in the international practice of cooperation agreements. The ESA GCC(907) leave to the Contractor the liability for infringement of intellectual property rights belonging to third parties‚ with respect to the subject of the Contract. The contractor must indemnify the Agency from and against all claims‚ proceedings‚ damages‚ costs and expenses arising from the infringement of patent and intellectual property rights of third parties with respect to the subject of the contract - excluding any infringement resulting from the use of documents‚ patterns‚ drawings or goods supplied by the Agency - which may be made‚ or brought against the Agency‚ or to which the Agency may be put by reason of such infringement or alleged infringement. These liabilities may be far reaching in the context of programs which often involve international cooperation. In a multinational program where equipment is being shipped to various locations for testing or assembly‚ the existence of patents in those countries for certain inventions used in the equipment in question‚ can cause problems and expose the contractor to risks of infringements for which the contract makes him entirely liable. iv)

Liability of the Contractor for performance of his subcontractors

The ESA GCC(908) provide that the Contractor shall be responsible for the proper performance of any subcontract placed by him in connection with the contract. In most legal systems‚ this principle is recognized and the bad performance of a subcontractor can never be argued by the Contractor to excuse a breach of contract. The only exception would possibly be when the impossibility to perform has been caused by a force majeure‚ although the appropriate criteria would have to be met for such an event to be considered as force majeure for higher contracting levels.

(906)

ESA GCC Clause 14

(907)

ESA GCC Clause 15

(908)

ESA GCC Clause 25.3

248

v)

Res perit domino

This principle‚ known by most legal systems‚ is implemented in ESA Contracts. The Contractor bears the risks for the products until their acceptance by the Agency. This principle remains in effect when the Contractor is using test facilities belonging to the Agency to test his spacecraft. Although the Agency could be considered as custodian of the spacecraft‚ the contract normally provides that the contractor bears the risk of damage to the spacecraft while this spacecraft is being tested inside the ESA test facilities. The contract placed by the contractor with the ESA test facilities normally offers the possibility to the contractor to purchase special insurance coverage for property damage to the spacecraft in the test facilities. The logic behind this is that the Agency places the procurement contract for the spacecraft all inclusive. The costs of all insurances required up to final acceptance of the product are meant to be included in the price of the contract. Therefore‚ ESA does not insure spacecraft procured under ESA contract for damage caused to them while in the ESA test facilities. When test facilities are used by third parties to test a spacecraft not procured under an ESA contract‚ the Agency accepts liability in case of fault and insures for those cases. The third party can buy additional insurance coverage to cover damage not caused by the fault of the Agency.

4.3.4.- Limitation of liability Most contracts placed by the Agency do not contain any limitation of liability clause. The contract leaves it to the contract law to address issues of liability for damage. There are always particular cases where such clauses are negotiated. Some of these clauses are straightforward and limit the liability of the contractor and of ESA for damage to persons or property to a certain total amount‚ sometimes also further detailed into an amount per event or per year. Sometimes the Agency and the Contractor do not limit their liability but instead agree on a cross waiver of liability whereby each of them will take care of its own damage. This is a rather uncertain area in the practice of the Agency‚ where the straightforward limitations by amount are well standardized‚ while the more complex clauses are not and depend to a large extent on specific contractual negotiations. The issue of consequential damages is never addressed specifically and is usually left to the law of the contract‚ except in the case of contract cancellation for fault of the Contractor. Limitations of liability clauses are not easily accepted by the Agency‚ and are always a case by case negotiation which takes into account the nature of the activities covered by the contract (study‚ development‚ manufacturing and testing‚ launching)‚ the size of the contractor‚ the potential amounts at risk‚ the insurance available and so on.

4.3.5.- Penalty clauses ESA contracts often contain penalty clauses‚ in particular in medium and large size contracts. These clauses provide for a timetable of delivery milestones of particular importance and subject to penalties. The basis for the calculation of the penalties is also contained in this clause. It is often a significant portion of the total price of the contract.

249

The method for the calculation of penalties is contained in an Annex to the ESA GCC. It is clear from the ESA GCC that these penalties act in reality more like liquidated damages: Clause 28 28.1.- If the Contractor fails to comply with the delivery date laid down in the contract‚ he will be liable to a penalty according to the scale of penalties attached hereto at Annex II‚ except where special provisions are made in the Contract. 28.2.- The total amount of penalties to be recovered from the contractor shall automatically be deducted from the contract price and the Agency shall inform him of the amount to be deducted. 28.3.- Penalties shall be calculated on that part of the contract price which is attributable to that portion of the articles and/or services covered by the contract which cannot‚ owing to the delay‚ be put to the use intended. If the contractor considers that the portion of the articles and/or services on which the Agency proposes to base a penalty could have been put to the use intended‚ it shall be for the contractor to prove it accordingly. 28.4.- The amount of penalties to be applied shall not exceed 10 percent of the value used as a basis for their calculation. 28.5.- Penalties for late delivery are due to the mere fact of expiry of the time-limit and without formal notice‚ except when the Agency has formally renounced such penalties. 28.6.- The detailed amount of penalties shall be notified to the Contractor who may object within 30 days from the date of receipt of notification. Failing such objection within this period‚ the Contractor shall be deemed to have accepted the penalties. 28.7.- Unless the delay is due to gross negligence on the part of the Contractor‚ and without prejudice to the application of Clause 33‚ no damages other than the penalties provided above can be claimed for late delivery.

This clause is a mixture or civil law and common law wordings. It seems to be working like a clause pénale which was described in the section on French law‚ but at the same time‚ it sets a maximum to the penalty to be paid and indicates that this will be the only damages to be paid for late delivery. This is of the type of a liquidated damages clause‚ which in fact Clause 28 is‚ at least insofar as damage caused by late delivery is concerned. It has been pointed‚ and it can easily be understood from our previous discussions on liquidated damages clauses‚ that this clause would probably not stand very strongly in common law.(909) 4.3.6.- Warranty and Product Liability All contracts contain an express warranty clause‚ which implements the provisions of Clause 30 of the ESA General Clauses and Conditions. The warranty period is usually one year‚ starting from final acceptance of the spacecraft or equipment and a provision is sometimes included to make the Agency a third-party beneficiary of better warranty conditions which would be obtained from subcontractors‚ if any. When the equipment is going to be launched‚ the warranty in principle stops at launch. Occasionally‚ on-orbit warranties have been negotiated‚ which extend the warranty clause with some reductions for a certain period of time. This type of warranty has‚ in particular‚ been obtained for facilities which will be placed on board the space station‚ and which are designed to be repairable and maintainable. Clause 30 of the ESA General Clauses and Conditions contains an interesting provision (909)

On this issue‚ as well as on ESA procurement practice in general see S.Kahn‚ “Advanced Technology Projects and International Procurement: the Case of the European Space Agency” (1993) 2 Procurement Law Review‚ at 13.

250 related to product liability. Clause 30.1 b) states: “ b) The Contractor’s guarantee shall not extend to compensation for damage resulting from the use of articles covered by the contract after acceptance. Consequently‚ the Agency shall have no claim against the Contractor for damage suffered by it and shall indemnify the Contractor in respect of any claim for damage to third parties. However‚ the Contractor shall be required to indemnify the Agency for any damage to the Agency or to third parties whenever such damage arises from gross-negligence on his part. Should a third party make a claim‚ the party claimed against shall‚ whenever the other party to the Contract is required to bear the cost of the indemnity‚ be bound to join the latter as co-defendant in the proceedings. ” This provision has not recently been put to the test to our knowledge. However‚ it may require scrutiny in relation to the provisions of the Council Directive 85/734/EEC‚ on the Approximation of the Laws‚ Regulations and Administrative Provisions of the Member States concerning Liability for Defective Products.(910) Indeed‚ the Directive provides‚ in its Article 12: “The liability of the producer arising from this Directive may not‚ in relation to the injured person‚ be limited or excluded by a provision limiting his liability or exempting him from liability ”. We have seen earlier in these developments how French Law implemented this provision‚ adding to it one possibility of such provisions being valid when they are stipulated between professionals‚ and only in relation to things which are not for the own or private use by the victim (911) Most other laws have implemented the Directive as is.(912) Of course‚ one has to bear in mind the type of damage which the Directive was aiming at‚ as defined in its Article 9: “For the purpose of Article 1‚ ‘damage’ means: (a) damage caused by death or by personal injuries; (b) damage to‚ or destruction of‚ any item of property other than the defective product itself‚ with a lower threshold of 500 ECU‚ provided that the item of property: (i) is of a type ordinarily intended for private use or consumption‚ and (ii) was used by the injured person mainly for his own private use or consumption. This Article shall be without prejudice to national provisions relating to non-material damage ”. However‚ at least in French law‚ this limitation has not been introduced. French law has not limited its scope to property used by the injured person for its own private use or consumption. French law applies to all property‚ however‚ as we have seen above‚ it allows clauses limiting or excluding liability between professionals for damage caused to property other than that used by the victim for its private use. Most other laws appear to be in line with the Directive’s scope insofar as property damage is concerned. (910)

For the reference of this Directive see supra note 741.

(911)

Code Civil‚ supra note 626.‚ Article 1386-15: “Les clauses qui visent à écarter on à limiter la responsabilité du fait des produits défectueux sont interdites et réputées non écrites. Toutefois‚ pour les dommages causés aux biens qui ne sont pas utilises par la victime principalement pour son usage ou sa consommation privée‚ les clauses stipulées entre professionnels sont valables”.

(912)

For developments on other European laws‚ and the text of such laws‚ see W.C. Hoffman & S. HillArning‚ Guide to Product Liability in Europe‚ supra note 751 S.N. Hurd & F.E. Zollers‚ “European Community: Council Directive on the Approximation of the Laws‚ Regulations and Administrative Provisions of the Member States Concerning Liability for Defective Products”‚ supra note 751.

251 In view of the above provisions, one may question the following points: - the Contractors may not take benefit of Clause 30.1 b) with respect to damage suffered by the Agency as a result of the use of their product, when such damage is caused by death or personal injury. This would most certainly apply in case of death or personal injury of ESA employees. - under most laws, damage to the Agency’s property caused by the product would not be covered by the product liability law derived from the directive, except in France. - Clause 30.1 b) would be validated under French Law. - insofar as the term “private use” is not defined in the directive, nor in any of the laws passed for its implementation, one could face awkward situations in a case such as that of the Agency. If one considers that “private” is a term to be used by opposition to “commercial”, as it could be understood from certain of the legislation, (913) then, Clause 30.1.b) could be invalidated in the corresponding countries insofar as ESA does not conduct commercial activities. Therefore none of the property of ESA would be considered as being used for commercial purposes and ESA could not be considered as a commercial entity.(914) If one considers that the term “private” is supposed to mean “of a private person” and “private use” to mean “the use of a product by a person for his private activities”, then Clause 30.1.b) is valid between ESA and its Contractor. Where domestic legislation use the term “private”, it will in principle be understood as mentioned above, in particular due account being taken of the consumer protection aim of the European Directive which prescribed these provisions. - the Agency has full right to pursue product liability actions against subcontractors and suppliers. These actions will follow the product liability rules of the applicable law, which in general will be implementing the European Directive. Therefore, the subcontractors and suppliers will have the possibility to defend themselves in particular by showing that the defect is attributable to the design of the product in which the component concerned has been fitted.(915) From the above it appears that a thorough review of this clause could be useful to ensure its functioning under the various laws under which the Agency works, and to clarify between the Agency and its contractors the matter of property damage in particular. The indemnification part of this provision does not appear to be in any way contrary to the provisions of the Directive and of the domestic laws implementing it. Insofar as the Directive has implemented a regime of strict liability, the situation of third-parties has improved considerably, thereby increasing the liability of the Agency under the indemnification clause. On the other hand, the Directive has implemented statutes of repose which reduce the time during which this liability can be sought. Nevertheless, in (913)

For instance in Denmark, Law Concerning Product Liability of 7 June 1989, Chapter 2, 2, (2) which states that “This Act applies to claims for property damage if the particular property by its nature is ordinarily intended for non-commercial use and was mainly so used by the injured person. Damage to the defective product itself is not within the scope of this Act”, and also Austria, Federal Act on the Liability for a Defective Product, which provides in its that “Damage to property shall be compensated only if the injured party is not a commercial enterprise using the product primarily for commercial purposes and in the course of its business”.

(914)

See ESA Convention Article V.

(915)

European Directive, supra note 741, Article 7.

252 this area as well it could be recommended to perform an evaluation of the impact of the new product liability Directive and laws on the magnitude of the Agency’s indemnification obligation under Clause 30.1 .b)‚ and review‚ in the present circumstances of the business‚ whether the contractual balance resulting from this is adequate or needs to be modified.(916)

4.3.7.- International Space Station Provisions In the context of the International Space Station cooperation‚ we have seen in our Chapter 2 that the international governmental agreement governing this endeavor contains a crosswaiver of liability clause. Insofar as ESA has taken the obligation to implement this clause and to flow it down to its contractors‚ a flow down is included in all contracts placed for activities relating to the international space station. This flow down is generally implemented as follows: General This Contract is entered into as the implementation of the International Space Station Intergovernmental Agreement (ISS IGA) signed on 26 January 1998‚ the Memorandum of Understanding between ESA and NASA Concerning the Cooperation on the Civil International Space Station (ISS MOU) signed on 26 January 1998‚ and [sometimes refers to additional agreements concluded within the framework of the international space station programme]. This article 1bis defines the additional undertakings of the Contractor as derived from the provisions of the above agreements. Nothing contained in the above referred agreements does increase the Contractor’s obligations/liabilities over and above the conditions called out in the present Contract. [...] Cross Waiver of Liability The purpose of the present clause is to extend to this Contract the cross waiver of liability regime provided for in the ISS IGA‚ within the scope of the present Contract’s activities implying interface with the International Space Station Partners. The present provision shall in no way lessen the Contractor’s liability under the other clauses of the present Contract and shall not apply in the relations between the Agency and the Contractor. The Parties agree that it is their intention for the present clause to be given the widest application which the applicable law allows. The ISS IGA (Article 16) provides as follows: [entire quote of Article 16‚ omitted here](917). The Contractor shall‚ mutatis mutandis‚ comply‚ and ensure‚ by a proper flow-down of the above cross-waiver of liability‚ that his related entities as defined above comply‚ with the above provisions‚ and follow all relevant ESA instructions required to enable the Agency to abide by and/or implement the above provisions. The Contractor shall be fully responsible for and hold ESA

(916)

One also has to keep in mind that besides the Product Liability Directive‚ the Hague Convention of 1972‚ and the Council of Europe Convention of 1977‚ would apply in the case of those States which have ratified them‚ and intervene in the determination of the solutions through the determination of the conflict of law rules. Both Conventions are reprinted in K.H.Böckstiegel Ed.‚ Product Liability in Air and Space Transportation‚ Proceedings of an International Colloquium in Cologne 1977 (Cologne: Carl Heymanns Verlag‚ 1977)‚ at 313 &ff On those conventions see: Reese‚ “The Hague Convention on the Law Applicable to Product Liability” (1974) 8 International Lawyer‚ 606 Reese‚ “Further Comments on the Hague Convention on the Law Applicable to Products Liability” (1978) 8 Georgia Journal of International and Comparative Law‚ 31 Hanotiau‚ “The Council of Europe Convention on Products Liability‚ (1978) 8 Georgia Journal of International and Comparative Law‚ 325.

(917)

The text of this article 16 is reproduced in Chapter 2.

253 harmless against all claims resulting from his failure to comply with and extend the above provisions as required by the present paragraph.

Although we have taken the example of the International Space Station‚ this type of flowdown is also generally used for other cooperation as well. We will return in Chapter 5 to issues and proposals related to this type of clauses. Although we believe that the flowdown as implemented is adequate‚ we believe that coordination and harmonization with the ISS partners‚ or other entities cooperating with ESA‚ would be essential to the strengthening of these clauses.

4.3.8.- Liability of the contractor in case of serious breach of contract In a number of cases‚ enumerated in Clause 33 of the ESA GCC‚ the Agency has the right to cancel the contract for fault of the contractor. This is the case in particular if the contractor fails to meet the technical requirements of the contract‚ or the progress and/or delivery requirements‚ to such an extent as to jeopardize seriously the Agency’s program. In the case of such cancellation‚ the GCC provide for the portion of the price to be paid to the Contractor. Clause 33 also provides‚ in its para 4 for measures which the Agency can take. The Agency may finish the work itself or have it finished by another contractor and charge all costs as well as compensation based on the penalty clause to the defaulting contractor. The work can also be terminated and the Agency may ask for full compensation of the damage caused by the lack of delivery. In this case‚ the contract may indicate that this damage will be liquidated by an amount equal to at least the ceiling amount indicated in Clause 28.4. This provision‚ if applied‚ extends the implementation of the liquidated damages approach to both the delay in delivery and the damage caused by other breaches of contract falling under Clause 33.

4.3.9.- Settlement of disputes The ESA Convention‚ in its Annex I (Privileges and Immunities)‚ Article XXV provides that‚ when concluding contracts‚ the Agency shall provide for arbitration. The arbitration clause or the arbitration agreement‚ shall specify the applicable law and the country in which the arbitral tribunal shall sit. The arbitration procedure shall be that of that country. The enforcement of the arbitration decision shall be governed by the rules applicable in the State on the territory of which the arbitration decision has to be enforced. This top level rule set by the ESA Convention‚ has been implemented in the ESA GCC Clause 13. ESA Contracts therefore always contain an arbitration clause. This clause is tuned to meet the requirements of each country. The clause provides that each and every dispute arising out of the interpretation or execution of the contract shall‚ at the request of either party‚ be submitted to arbitration. The country where the arbitral tribunal shall sit is specified and is normally the country where the contractor has his legal seat or where the contract is executed. The composition of the arbitral tribunal is also provided. It is normally one arbitrator nominated by each party‚ and a third one nominated by the two first arbitrators. It is usually foreseen that if the two arbitrators cannot agree on the third one‚ the latter can

254 be nominated by the President of the local court (which is referred to as a function of the judicial system in the country concerned). By default‚ the dispute shall be settled in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce and the arbitral tribunal can be designated according to those rules‚ if not defined in the contract. Arbitration clauses are normally bitterly negotiated in the practice of international contracts. Arbitration clauses in Agency’s contracts are usually not negotiated heavily. The reason is that in over 30 years of practice in ESRO‚ ELDO and now ESA‚ not one single dispute has been brought to arbitration. The methods for solving disputes are very different and involve the classical use of the various tools of pressure provided to each Party by the contract‚ the specific context created by the European space community with relatively few providers and few customers‚ and therefore the eagerness of all parties to preserve future relationships. The specific political environment surrounding the activities of ESA also creates a unique balance of interests which does not support initiatives of companies‚ or even of ESA‚ to bring disputes to arbitration where their resolution would fall into the hands of arbitrators not necessarily aware of the specifics of the environment‚ of the interests at stake for future programs‚ of the past history of the relationship in question and so on. The fact that ESA is a big customer for contractors and that ESA in turn is run by an Executive reporting to bodies representing ESA Member States‚ which vote future programs and agree on industrial policy‚ creates an environment where disputes are settled away from any established settlement of disputes mechanism. On the one hand‚ this has the advantage of avoiding lengthy and costly proceedings. However‚ it has the inconvenience that the rules and practices in the business are not put to the test‚ not challenged legally‚ and also do not receive a consistent interpretation in the face of difficulties‚ and this tends to weaken them. Contracts of the Agency never make use of alternative dispute resolution mechanisms such as mediation.

When concluding the reading of this Part I‚ one can probably perceive the complexity of today’s legal environment for launch and related activities and wonder how to escape this Daedalus Labyrinth. We have‚ in the course‚ of the three Chapters of this Part I presented this environment while already assessing it critically and emphasizing its major weaknesses. Having provided the reader with the background information necessary‚ we will now gather this impressionist effort in our Part II which will focus on the main issues‚ suggest tomorrow’s prospects and endeavor to make proposals for overcoming the problems encountered in the present legal context and develop a more predictable framework.

CHAPTER 5.- ISSUES IN LIABILITY RISK MANAGEMENT AND PROPOSALS DE LEGE FERENDA

All areas of social activity are governed by legal regulation to a varying extent. What is essential for any individual or entity is the ability to assess the legal framework within which he has to operate and the legal consequences of his activities including the potential of exposure to risks of claims for damage caused during the activity. Launch operators are no different from this point of view and the high stakes involved require an even higher level of legal predictability. In Part I‚ the overall legal framework within which launch participants operate was analyzed. One could conclude‚ at first sight‚ that this is an unescapable labyrinth and‚ although it is indeed a complex intertwining of legal norms‚ considerable practice has developed in terms of regulations‚ contractual arrangements and insurance in an attempt to circumvent these complexities. Nevertheless‚ today’s legal framework presents some drawbacks pointed out throughout the discussion of Part I and to which we return in this Part II. Some issues have been raised already by authors and practitioners and addressed in the UNCOPUOS but‚ so far‚ they have not been addressed in an overall scheme leading to concrete proposals for their resolution‚ at least not in the field of launch activities. It is not intended to suggest the development of a complete new regime to address present and future issues connected to the launch of space objects. The first private launches took place in the early 1980's‚ and the field is‚ therefore‚ still young. There will be further developments‚ in particular when the current projects of reusable launch vehicles and aerospace planes will become technologically and economically feasible‚ as affordable means of placing objects in orbit and transporting the public through or to outer space. Launch facilities will also develop the flexibility required for them to host different types of launchers and provide access to launch operations to nations without launch facilities but with rocket technology‚ or to private operators not willing to invest in the building of a launch complex. There are many projects still on the drawing board which will require the exercising of legal judgement in due time. Developing a legal framework for long term projects at this stage could be counterproductive insofar as the regime put in place could turn out to lack the flexibility needed to accommodate these developments. Also‚ while a substantial liability regime is understandable in the field of aviation to deal with an industry of large size and with significant exposure of the travelers and public‚ it is difficult to justify in the launch industry which is of much smaller size and where 257

258

exposure is primarily on a sophisticated few. We would run the risk‚ like Icarus‚ of burning our wings. Nonetheless‚ there are areas where the improvement of today’s legal framework is feasible and necessary to reflect the evolution in the launch business‚ support developments in the middle term and prepare a transition for the future. Before discussing our proposals‚ we would like to summarize the current situation resulting from the legal framework discussed in Part I and emphasize the topics considered most critical to the development of an adequate legal framework for launch activities. We then explain our methodology for approaching the issues identified‚ and the proposals are then substantiated in Chapter 6.

5.1.- A GENERAL APPRAISAL OF THE LEGAL SITUATION At first sight‚ the launch community (launch operators‚ launcher manufacturers‚ launch customers‚ satellite manufacturers‚ insurers) seems quiet and the level of legal activity in the field far below that of the aircraft manufacturing and air transportation industry‚ the maritime industry‚ or the chemical industry. The stakes are high due to the monetary value of the launchers‚ satellites and infrastructure involved in the launch‚ the scientific or economic value of the services which the satellite has to perform‚ and the potentially catastrophic damage that can be caused by a malfunction of the launcher to all launch participants and third parties. Insurance capacity has often been stretched for private operators and would not in any case be sufficient to cope with all participants in a launch insuring their potential liabilities arising out of a single launch. Government still largely relies on self-insurance and Government budgets devoted to space have had to be reduced‚ making it more crucial to ensure the success of missions while increasingly drawing resources from the insurance market. In spite of the stakes‚ the level of legal predictability in the field of space launching and related activities is not satisfactory. There are a number of general problems we briefly point out as an overall context within which to frame our proposals.

5.1.1.- A multitude of points of contact and an unadapted international legal environment As pointed out earlier‚(918) launch and related activities are characterized by their transnational nature and the multitude of points of contact these activities have with different jurisdictions. Launch providers and launch facilities are limited in number and are bound to offer their services to international customers for domestic or international services for television‚ telecommunications‚ earth observation‚ and global positioning. Launch contracts are‚ therefore‚ generally international contracts. (918)

See our Chapter 1, Introduction.

259 The development‚ testing and manufacturing of launchers or satellites is also a highly international business. Some countries‚ such as the US or Russia‚ tend to rely on their own domestic manufacturing capacity since they have long established space programs but‚ often‚ launcher and satellite manufacturers will rely on international contracts because some equipment and subassemblies are subcontracted to foreign companies‚ and also because the purchase of components such as electronic components is often made in foreign countries. The European situation is extreme in this respect due to the procurement practice developed through the European Space Agency’s programs. As a heritage of the history of the Ariane Program‚(919) the Ariane launcher is manufactured by companies in the various ESA Member States. Numerous electronic components for European space programs are purchased in the United States or in Japan. Apart from the international nature of the contracts involved in launching and in the production of launchers and payloads‚ the damage which can be caused can also be transnational. The transportation of launcher subassemblies‚ propellants‚ and payloads‚ will take place across countries. The launch itself will sometimes involve the flight of the launcher above certain countries either nominally or because of a malfunction. The environmental damage potentially caused by the toxic substances resulting from a launch failure may also spread transnationally. Due to this international nature‚ launch and related activities find themselves at the crossroads of a large number of legal systems and legal norms. These activities do not expose their participants and the public to more risk than is the case in other fields such as the product liability exposure of manufacturers of materials used in medical activities‚ or of those developing new medicines‚ or even car manufacturers.(920) The probability of exposure in these fields is even probably higher than the field of space activities but the magnitude of exposure is different. In every day activities‚ as we mentioned above‚ the probability of exposure to claims is spread over a wider base as the products concerned are sold to millions of consumers. The liability of their producers tends to be better insurable. In the launch business‚ the base is small and all the risk is concentrated at one point in time: the launch. All participants‚ whether they are manufacturers‚ launch operators‚ customers‚ insurers or money lenders take the risk of losing everything and causing considerable damage in one single event occurring within a short period of time. This concentrated risk brings together during one single event all the points of contacts with the various legal regimes involved which separately would handle differently the consequences of realized risk. Those involved need to consider the international treaties‚ including space law treaties‚ specific cooperation agreements‚ domestic regulations (where they exist) and general domestic laws. The number of foreign points of contacts makes the predictability of the knowledge of the applicable law‚ and of the competent forum‚ fairly poor. The drafters of the space treaties foresaw and addressed the potential large scale damage that could be caused by the launch of objects into space but in a context where space (919)

See our discussions in Chapter 3 on this topic.

(920)

See J.R. Hunziker & T.O. Jones Ed‚ Product Liability and Innovation‚ Managing Risk in an Uncertain Environment‚ supra note 22.

260 activities were conducted by States‚ or in the frame of cooperation among States‚ in a competitive environment exacerbated by the Cold War. It should be remembered that‚ at the time of the drafting of the Outer Space Treaty‚ Russia was in favor of not allowing non-governmental entities to carry out space activities at all‚ and that Article VI was the result of a compromise between this position and the US free enterprise approach.(921) At that time‚ non-governmental entities were allowed through the back door only but, nowadays‚ they walk through the main entrance. They run the business in an increasing portion of space activities among which launch activities. Space treaties did not foresee nor cater to the development of this transnational level of activity with involvement of non-governmental entities. Space treaties did not prevent non-governmental entities’ activities but they also did not provide details about the status‚ rights and obligations of non-governmental launch operators in space law. The ambiguity of certain terms in space treaties‚ in particular those of “launching State” and “appropriate State”‚ make this legal framework even more unadapted to non-governmental launch activities‚ as they do not provide for a reliable method to determine a link of authority between the non-governmental entities and a particular State. Apart from the space law treaties examined in Part I‚ there are no specific private international law treaties dealing specifically with the liability issues resulting from space activities. Therefore‚ there is no dedicated public or private international law between the Outer Space Treaty and the Liability Convention on the one hand‚ and the domestic law of liability on the other. The applicable law determinations are left to the identification of the launching State for those who are claiming under the Liability Convention and to domestic rules of private international law for those who claim in national jurisdictions or in arbitration. The number of potential points of contacts is so large that there is little predictability as to the competent courts and the applicable law. Also‚ the risk of third-party claims against anyone of the launch participants is fairly unpredictable. Third-party liability is normally covered by the insurance of the launch provider (it seems that satellite operators do not take third-party liability insurance to cover the possible return of the satellite to Earth)‚ but this insurance has its limits and Government indemnification may not be available above it. Third-parties may choose to sue anyone. This creates a risk for all involved‚ which some may decide to insure thereby using up insurance capacity. The performance of launch activities in an international context requires a greater predictability of the applicable laws and of the universe of claims potentially arising. This predictability is not offered in the present legal context.

5.1.2.- The development of a lex mercatoria in the field of launch services In this situation and to overcome the problems caused by the limited insurance capacity on the world market to cover each launch‚ launch operators and launch participants in general‚ have developed contractual methods to manage their respective liabilities for damage caused to one another or to third parties‚ and to prevent litigation. One of these (921)

See our discussions in Chapter 2 in relation to the status of non-governmental entities.

261

techniques has been adopted worldwide: the introduction in launch services agreements(922) of inter-participant waivers of liability intended to leave each participant to bear his own loss resulting from the activity. These clauses are accompanied by arrangements regarding third party claims and limitations of warranty by the launch provider and these combined techniques seem to have worked reasonably well so far and their general use in the launch business could lead to consider that they have become part of the lex mercatoria in the field. Nevertheless‚ the use of these techniques is complex and unreliable: - they are not always valid in certain systems of law‚ and the clauses concerned may be declared null and void by courts or arbitral tribunals; - although they are similar from one launch services agreement to another‚ they are not identical and the quantity of nuances makes their legal evaluation difficult; they are also often drafted on the basis of the US clauses in a common law style of language‚ accepted by the launch community but not necessarily adapted to civil law systems; - they rely upon a strict management of the contractual network involved and a careful evaluation of the flow down policies of the various clauses‚ as well as the audit of the laws potentially applicable. The solidity of such a contractual network relies upon its flow down to successive contractual parties‚ and upon its validity in all of the laws potentially applicable‚ two elements which are far from easy to achieve. In these circumstances‚ even though these clauses appear to have worked well so far‚ the case law presented earlier(923) leaves doubt as to their future. The security of the launch participants could be improved by a harmonized effort to review and standardize these clauses.

5.2.- METHODOLOGY FOR OUR FURTHER DISCUSSIONS When starting our investigations and analysis for this thesis‚ our focus was on practiceoriented proposals‚ to be implemented in agreements and contracts with a view to compensating for the weaknesses of the international legal framework for launch and related activities. However‚ in the course of our study‚ it appeared obvious that such proposals‚ though assisting in the short and mid-term‚ would not be sufficient to fully address the issues involved. They would act only as temporary “patches” which would only function between parties in privity. We have therefore considered improvements to the international legal framework as well. Those would require political intervention which we consider essential for securing an orderly development of the law in the field of space launch activities‚ and for allowing a better liability risk management by the participants in those activities.

(922)

“Launch Services Agreement” (LSA) is a terminology commonly used for the launch contract.

(923)

See Chapter 4.

262

As our general appraisal of the situation suggests‚ we focused our attention on two main areas where work should and can be done: - in the area of contractual practice‚ there are possible avenues for developing a harmonized approach to inter-participant waivers of liability‚ and their validity‚ language or flow-down; - international space law needs to be adapted to the realities of today’s launch business. The active role of non-governmental entities needs to be recognized. Clarification has to be made to ensure the more predictable identification of the State responsible. Codification of today’s practice would help achieve enactment of more domestic legislation along a set of common and consistent principles. In the present Chapter‚ we explain our proposals in these domains‚ which cover the large majority of the issues we identified. Proposals are substantiated in this Chapter‚ but narrative discussions do not always allow the precise understanding of the implementation of these those proposals. This is why for both points addressed the in proposals are fully developed into their corresponding concrete legal language and have been placed in Chapter 6. Our focus has been on the situation of non-governmental entities for which the present legal framework is most unadapted.

5.3.- HARMONIZING THE PRACTICE OF PARTICIPANT WAIVERS OF LIABILITY

INTER-

The participants in a given launch are typically the following: - the company/entity providing the launch services (the launch operator or provider); - the customer which enters into the Launch Services Agreement for the launch of his payload (the launch customer); - the launch facilities provider. At present launch facilities and their associated services are still mostly provided by Governments with some exceptions; - the contractors‚ subcontractors and suppliers of the above participants. One particular type of contractor will be the other customer(s) of the launch provider; - the insurers of the participants; - the parties involved in financing the satellite‚ launch or any other related activities; - although they are not willing participants‚ the third-parties innocent bystanders. In the course of launching activities‚ all parties bear a risk in case of launch mishap: - the launch provider runs the risk of causing property and bodily damage to all of the above during the launch phase; he also runs the risk of causing consequential damage to all those parties‚ but in particular to the payload owner‚ who will lose the use of his payload and suffer the associated loss of revenue; this will in turn affect the transponder lessees wherever there are any; and the whole situation will of course drag in the insurers and the financiers. This situation is complicated by

263 the fact that the launch provider sometimes performs combined launches involving two or more customers. - the customer can cause delays to other customers of the launch provider if he is late with his payload; he can lose his payload at launch or see it placed on an incorrect orbit; he will then have to deal with his own customer - either those who have bought the service itself, such as the telecommunications or TV broadcasting service, or those who have leased transponders on board the satellite; he has his own insurers and financiers to deal with; he can cause property or bodily damage to all other participants during the launch preparation and launch phases. - the launch facilities providers’ risk is essentially one of property damage and bodily injury to their employees and contractors who are working on the site; nevertheless, there is also the risk of causing damage to any other participant in the launch - for example damage which could be caused by a defective crane which drops equipment - in terms of property damage or bodily damage. - the contractors and subcontractors of the above participants bear a multitude of risks; the highest risk situation is that of a satellite manufacturer who is also the launch customer, i.e the case of turn key satellite purchase contracts,(924) since this particular contractor will accumulate all possible risks mentioned above as well as the risks of not having performed his contract vis a vis his customer and having to relaunch a second satellite, and also the risks that other contractors have as well; these other risks are the risk of property or bodily damage when they are present on the launch site, the likelihood of being sued by any other participants for damage caused in the course of launch operations, the likelihood of being sued in contract by his co-contractors, or to be sued in tort and in particular in product liability by any of the participants and by any third parties. - the insurers are in the business of compensating for various types of damage; so, paying compensation, although they would prefer not to, is not a risk in itself; the important part of the risk of the insurer will be on the technical side, either on the part of the launcher or of the satellite and on the legal side where weak contract clauses and allocations of liabilities could deprive the insurer of a recourse he thought he had; also, a serious area of risk for the insurer is the fact that it may be difficult to determine the cause of a launch failure or the malfunctioning of a satellite. - the financiers of any of these activities are concerned with the protection of their rights which are at risk, either because of the loss by the customer of his property and of his source of revenues in case of launch mishap, or because of the reimbursement of the launch customer for a total loss by his insurers with transfer of ownership of the satellite to such insurers who may salvage it and resell it, an operation in which the initial financiers may have an interest, or because of their risk of being seen as deep pockets defendants whom other participants could try to drag into suits initiated between themselves. - third parties have the risk of damage to their property or bodily injury, and all (924)

On this type of contracts‚ see our references supra note 19.

264 consequences of those‚ in case of launch mishap or in case‚ later‚ of uncontrolled reentry of pieces of the launcher system‚ either immediately after launch(925) or some time later‚(926) or of the satellite. It would be impossible to address all the relationships described above. In fact‚ most of them would not necessarily show specificity in the space business. We focus here on the following points where we believe the specifics of the space business are not completely satisfactory in connection with liability issues: - the liability sharing and allocation between launch participants are legally arguable: because of their total or partial illegality in certain jurisdictions; because of the very significant unbalance in launch contracts‚ which could be a cause for nullification of these clauses; - the provisions for allocation of liability are often unclear‚ not well articulated with other related provisions of the launch agreements‚ and their scope is not always clear; - the flow down of these provisions to lower tiers is a complex matter which introduces uncertainty in legal relationships. Throughout the years‚ and along the models developed by NASA for the shuttle launch services‚ the practice of inter-participant waivers of liability for the purpose of risk allocation among participants to space launches was developed to deal with the allocation ofrisk among launch participants and limit the total universe ofclaims potentially arising from a given launch.(927) These risk allocation provisions are fairly complex. Although tailored to a specific situation and to the insurance available at a given time‚ they tend to present similar features. They have been efficient in limiting litigation and in organizing the adequate use of limited insurance capacity for each individual launch.(928) (925)

This is the case for example of the main boosters of Ariane 5‚ which fall in principle into the ocean and are recuperated by boat; as well as the external tank and main boosters of the space shuttle.

(926)

This is the case for most ELVs where the upper stages remain some time on orbit prior to reentering the atmosphere and burning. This is actually acknowledged clearly through the registration of space objects with the UN. The UN registry shows for each US ELV launch a registration in the form of “spent boosters‚ spent maneuvering stages‚ shrouds and other non functional objects”‚ and the French registration for Ariane 4 launches reads “Third Stage of Ariane 4". See this information on line at the UN Office for Outer Space Affairs (accessed: 01/2001).

(927)

“It was ascertained early in NASA’s study of the liability ramifications between customer’s payloads and the US Government Space Shuttle that there was not enough capacity in the worldwide insurance market to cover the customers’ contractors’ liability for loss of the Space Shuttle. [...] It would have been unreasonable to expect the customer to cover the risk if commercial insurance was unattainable”. R. Berman‚ “Contractually Contending with the Risk of Space Activity. The Tenuous Thread Between Insurance‚ Indemnification‚ Waiver‚ and Exculpatory Language”‚ paper presented to the International Bar Association‚ Sept 1986‚ at 4.

(928)

On these risk allocation provisions‚ their history‚ development and current practices‚ see: Mjr R.A. (continued...)

265 The review of the domestic laws done in our Chapter 4 leads‚ nevertheless‚ to some reflections with respect to these contractual arrangements which present weaknesses and would benefit of harmonized approaches. Ensuring a better strength of these mechanisms would contribute to achieving their ultimate goal‚ i.e that all participants in a launch venture‚ at all levels‚ are in a position to precisely assess their risk exposure‚ which should in principle be limited to their own losses and to the contractual remedies freely negotiated between contractual parties. We examine below the main difficulties encountered in relation to these provisions‚ their place in the overall balance of the launch services agreements and their relationship to products liability. Based on these observations‚ we offer elements for debating the need and means of a possible harmonization in the field and standardization of the terms of launch services agreements.

5.3.1.- The limitations of inter-participant waivers of liability i) Their validity is controversial in certain legal systems Most legal systems are suspicious when it comes to clauses excluding or limiting liability. Although in international contracts more autonomy is given to the intent of the Parties by most jurisdictions‚ it remains that these clauses may quite often be invalidated by the courts.(929) The precise conditions under which they may be accepted are a function of each domestic law and this requires the careful check by the legal counsel of their regime in the law applicable to the contract. With the examples of French law and US law‚ it has been shown that these clauses may be accepted only between certain categories of parties (equally sophisticated parties‚ professionals) which sometimes leads to their validity being contested in view of their abusive character.(930) In certain legal systems‚ these clauses may also be invalidated when they are invoked by a Party who imposed them on another‚ (928)

(...continued) Tepfer, “Allocation of Tort Liability Risks in the Space Shuttle Program” (1982-83) The Air Force Law Review, 208 J.E. O’Brien, “Allocation of Risk and The Commercial Use of Outer Space” (1986) 33:4 Federal Bar News & Journal, 169 P.D. Nesgos, “The Challenges Facing the Private Practitioner: Liability and Insurance Issues in Commercial Space Transportation” (1989) 4 Journal of Law and Technology, 21 D.E. Cassidy, “Allocation of Liabilities Between Government and Private Sector and Implications on Insurance for Space Commercialization” (1990) 33 Colloquium, 23 P.L. Meredith, “Risk Allocation Provisions in Commercial Launch Contracts” (1991) 34 Colloquium, 264. P.B. Larsen, “Cross-Waivers of Liability” (1992) 35 Colloquium, 91.

(929)

Although we are primarily examining the subject from an international angle, one has to bear in mind that a number of launch contracts can be concluded domestically. For instance, a US satellite being launched on a US launcher, or a French SPOT satellite being launched on Ariane. These contracts will not be international in principle, unless they are necessarily attached to an international contract. Certain jurisdictions will be more restrictive with limitation of warranty or limitation of liability clauses when they are concluded in domestic contracts.

(930)

For a reference regarding disclaimer clauses by aircraft manufacturers see H. DeSaussure, “Product Liability and the Use of Disclaimer Clauses by Aircraft Manufacturers”, in K.H. Böckstiegel, Product Liability in Air and Space Transportation, Proceedings of an International Colloquium in Cologne 1977 (Cologne: Carl Heymanns Verlag, 1977), at 91.

266 due to the former’s position of monopoly. In the case of the launch business‚ it seems likely that clauses would be valid between the launch provider and the customer when they deal with liability for damages to property of either of them. The validity of the inter-party waivers could become questionable as they are flowed-down at lower levels. The equal level of sophistication of the parties could become arguable or their quality of professional. The lower level supplier of materials for instance could argue that he is a professional in the field of materials‚ but may be far from being a professional able to match the professional satellite manufacturer or launcher manufacturer. The interdiction to use such clauses in certain legal systems will lead to them being declared null and void by courts‚ or arbitral tribunals‚ based on the fact that this clause could be considered contrary to public order and policy in this country. This could happen even when the courts of that country have to apply the law of the contract which recognizes such clauses as being valid in the case where public order of the country of jurisdiction justifies nullifying the clause. Hence‚ the important step made in the US‚ where inter-party waivers have been made mandatory and‚ therefore‚ part of public order by the Commercial Space Launch Act. Their consecration by the Commercial Space Launch Act(93l) is limited‚ nevertheless‚ to the activities carried out under the license. We have seen(932) that regulations elaborated by AST define the scope of a license. Due to the provisions for Government indemnification in the case of damage caused by the licensed activities‚ the scope of the license has been kept narrow. The public order justification of the inter-participants waivers would not be arguable outside ofthe activities covered by the license. In practice‚ launch services agreements concluded between the launch company and its customer cover activities which have a wider scope than those covered by the license‚ and during which their property and employees will be in contact‚ thereby making the inter-party waiver necessary and it would be difficult to match an inter-participant waiver only on the scope of the license‚ leaving all other activities aside to the normal regime. The parties to a launch services agreement need to elaborate clauses which provide them security in this respect. It is noted‚ though‚ that the scope of the license covers the time where most risks of damage are present and‚ therefore‚ the risks to be covered by an inter-participant waiver outside of this license scope are comparatively minor. Other countries‚ even when they have enacted legislation addressing launch licensing‚ have not made the practice of inter-participant waivers of liability mandatory.

ii)

Their validity may be contested in the absence ofexpress acceptance

The requirement that such clauses are expressly accepted by the party against which they are invoked is found in most jurisdictions. It is sometimes required that the parties have expressly and in writing accepted the specific clause. This is the case in Italian law for example‚ and for this reason ESA procurement contracts contain a special annex for Italian contractors‚ with a list of clauses referred to as vexatious clauses. This annex signed by the Contractor is an integral part of the contract. (931)

49 USC Section 70112.

(932)

See Chapter 3.

267

Problems with inter-party waivers could most certainly be expected in cases where they would be made part of general conditions‚ or where the contract concerned could be considered as an adhesion contract.(933) There do not seem to be general conditions of launch contracts‚ or at least not any which the launch companies would be prepared to make public. The launch services agreements are standardized‚ and they become less and less tailor made. One needs to be vigilant that such standardization does not lead to the absence ofnegotiation ofthese clauses‚ as is the case in adhesion contracts or with general conditions. This could be an element against the validity of these clauses in an overall evaluation. The express acceptance of an inter-party waiver and the documenting by the parties that such clause has been properly negotiated is a fundamental part of securing its validity. It seems that this express acceptance is not documented in launch services agreements. These clauses are mixed with other clauses‚ not always in a logical sequence‚ and errors of typographic nature lead one to think that they are not even always read in a thorough manner. It is imporant to keep in mind though that the mere fact of ensuring express acceptance may not be sufficient to validate this type of provisions.

iii)

They cannot exclude wilful misconduct and gross negligence

As we have seen through the study of domestic laws‚ as well as through US jurisprudence‚ and as generally accepted in most countries‚ liability for damage caused by wilful misconduct and gross negligence cannot be excluded. These expressions are‚ regrettably‚ interpreted differently in the courts of different jurisdictions. Also‚ the possibility of a principal to exclude or limit his liability for damage caused by wilful misconduct or gross negligence of his agents (vicarious liability) is also treated differently. It is essential to check how the law of the contract treats wilful misconduct and gross negligence‚ and to which extent the parties can exclude their liability in such cases‚ as well as liability for such acts of their employees. One possibility could be‚ as we have seen in certain of these clauses‚ not to make any reference to wilful misconduct or gross negligence‚ and leave the clause open on this point. It is certainly easier to rely on the applicable law to decide‚ however‚ this is not offering good predictability and it leaves the impression that the parties want an all encompassing clause. The Martin Marietta case has shown that this type ofambiguity can (933)

Black’s Law Dictionary‚ supra note 18: “Standardized contract form offered to consumer of goods and services on essentially ‘take it or leave it’ basis without affording consumer realistic opportunity to bargain and under such conditions that consumer cannot obtain desired product or services except by acquiescing in form contract. Distinctive feature of adhesion contract is that weaker party has no realistic choice as to its terms. [...] Recognizing that these contracts are not the result of traditionally ‘bargained’ contracts‚ the trend is to relieve parties from onerous conditions imposed by such contracts. However‚ not every such contract is unconscionable. [...]”. On whether or not the launch contract could be considered an adhesion contract‚ see L. Ravillon‚ Les Télécommunications par Satellites‚ Aspects Juridiques‚ supra note 19‚ at 297‚ where the author expresses her opinion that given a number of characteristics of the launch contracts‚ could potentially lead to it being considered an adhesion contract.

268 lead to litigation. It is probably safer in inter-participant waivers to state that they shall not apply at least in case of wilful misconduct.

iv)

They cannot exclude claims of individuals for bodily injury

In certain jurisdictions‚ an inter-participant waiver cannot exclude claims by victims of bodily injury. Therefore‚ such inter-party waivers should make it clear that the direct claim by the victim for bodily injury is not excluded. What the inter-participant waiver excludes is the recourse of any participant against the other for reimbursement of damages paid for bodily damage to the former’s employees or other parties‚ but the claims directly made by the individual concerned cannot be barred.

v)

They do not always deal clearly and consistently with consequential damages

This is a very difficult issue because the extent of the recoverable damages varies considerably from one jurisdiction to another. The waiver of recovery of consequential damages is usually subject to the same conditions of validity as the main waiver clause itself. The difficulty is to ensure an adequate wording in this domain to exclude all types of consequential damages possibly allowed under the law of the contract. In the US‚ the inter-participant waiver mandated by the regulations does not address consequential damages. The terms “bodily injury” and “property damage” are narrowly defined due to the indemnification provisions by the US Government which has led to the narrow approach to compensation. Hence‚ the need for the launch providers to make sure that those are appropriately covered in their relationship with the Customer and other participants through other provisions or by enlargement of the scope of the interparticipant waiver concluded in their relationship.

vi)

They are assessed in relation to the balance of the contract

In a large number of jurisdictions‚ inter-participant waivers will be checked against the balance of rights and obligations of the parties in the contract. They may be invalidated when their application leads to one party having no remedy under the contract in case of the other party’s lack of performance. It is‚ therefore‚ essential to audit the fundamental obligations of the contract when drafting such clauses and ensure that each party is provided adequate remedies in case of non-performance by the other. The Martin Marietta is an illustration of this issue.(934) The discussion in this case was in fact provoked by the ambiguity of the inter-participant waiver‚ when combined with the limitation of liability and the relaunch/refund option. The inter-participant waivers would‚ of themselves‚ probably not be considered to be emptying the contract of its substance in most LSAs on the market nowadays. Launch providers offer alternative options such as replacement launch‚ relaunch/refund option‚

(934)

See supra chapter 4.

269 which may take varying shapes but allow remedy to the customer(935) It seems though that only the free relaunch or refund option could be considered as balancing properly the contractual situation of the parties. The classical relaunch option which still requires the customer to pay for the new launch does not provide any remedy to the customer at all and it only secures additional launches to the launch provider‚ at the same conditions. The one-sided nature oflaunch services agreements remains flagrant up to now and courts could have difficulties finding balance in some of those contracts. Inter-participants waivers developed originally in the frame of cooperative activities undertaken by NASA where it is understandable that each party bears its own risks for the sake of cooperation In a contract with a private launch company‚ such a clause becomes more difficult to justify if it is not backed up by a counterpart given to the customer in terms of services. One has to admit that the services provided are very professional and state of the art. However‚ under the contract the customer is only entitled to receive reasonable efforts services‚ pays the launch services all in advance of the launch‚ is given no warranties or representations that the services will be what he wanted‚ is given no schedule guarantee but has to pay penalties for his being late to deliver the satellite‚ unless he can argue of a force majeure which is defined for him far more restrictively than it is for the launch company. A rather grim picture that competition has‚ fortunately‚ started to alter in the past years with the entry of the cash back options and the like. Insurance is available to the customer to cover most of the disadvantages he has in the launch services agreements‚(936) and behind a strong unbalance in contract terms‚ there is an actual intention of the parties to allocate risk among themselves‚ and spread of insurance costs. These have so far been sustained by a solidarity in the community of space activities. It is far from certain that this will continue.

vii)

Their interpretation is strict

In most jurisdictions‚ these clauses will be interpreted restrictively. The precise wording will be implemented and the courts will in principle not go beyond the explicit intention ofthe parties who must consequently ensure that the clause reflects expressly and in detail what they have agreed to waive. As we have seen both in the French and in the US system‚ it is also a general principle that a clause is interpreted against its drafter.

viii)

Third-party liability allocations

In the US system‚ the launch provider bears all third party liability exposure during the licensed launch activities. LSAs contain clauses to that effect as prescribed by the Commercial Space Launch Act. The customer is relieved from third-party liability for all activities which are covered by the license. The launch provider takes insurance for third(935)

P.D. Nesgos‚ “Briefing on Issues in Launch Contracts”‚ paper presented at the European Center for Space Law‚ Third Practitioners’ Forum‚ Paris‚ November 1994.

(936)

As an example‚ the pre-launch insurance policy taken by the customer will cover the payments he would have to make to the launch company in respect of a delay in delivering the spacecraft for launch due to damage arising to the spacecraft. The insurance may also cover the loss of revenues consequential to a delay in the launch. Examples of clauses in this respect can be found in P.L. Meredith & G.S. Robinson‚ Space Law‚ A Case Study for the Practitioner‚ supra note 4‚ at 348. More references on space insurance can be found in supra note 20.

270 party liability‚ usually with the waiver by the insurer of his subrogation rights against other participants. The US government will indemnify above the insurance limit and has no recourse against the other participants either. In the European system‚ as we have seen previously‚ Arianespace provides third-party liability insurance.(937) The customer is named insured in the third party liability insurance. The large majority of commercial launch providers nowadays offer similar types of insurance coverage‚ even where they are not subject to licenses or any other form of domestic regulation. (938) The various clauses we have studied sometimes contain language committing the launch provider to inform the customer of the insurance exclusions‚ and sometimes not. It is essential that such language is contained in third-party liability insurance clauses. Insofar as the launch company is committed to take insurance on behalf of the customer‚ this could be argued as creating for the launch company an obligation of information towards its customer in relation to this insurance. The absence of language requesting the customer to promptly inform the launch company of a claim brought by a third party could also cause difficulties for the launch company. If the insurer would refuse to pay the compensation due to the delays incurred in declaring the claim‚ the customer would probably argue the failure of the launch company to place any requirement on him in this respect and seek compensation from the launch company for the default by it to inform the customer of the time limits applicable for the insurance coverage. This would also be the case where the customer would not have been informed of certain exclusions in the launch policy‚ unless these exclusions are common in the field in which case the customer could not have ignored them. It seems that these issues are addressed in insurance policies‚ where the insurer undertakes to make a number of notifications to the additional insured. The correlation between the contents of the insurance policy and the LSA in terms of procedures is an element that requires attention. The third party liability is often addressed in a place separate from the inter-participant waivers of liability. Clauses for assistance to be given to each other by the Parties in case of litigation are also not always present‚ and the same can be said for hold harmless agreements. These are gaps that may ultimately cost parties money in attorney fees or in advance compensations.

ix)

The relationship between inter-participant waivers of liability and product liability

In relation to the Launch Services Agreements concluded at the time by NASA‚ Mjr R.A. Tepfer(939) remarked: “There have been some questions as to the intent and breadth of the Launch Agreement’s waiver of liability provisions and whether they cover the product liability of a payload manufacturer who is not a user. [...] This determination is not related to title but derived from the Launch Agreement’s requirement that the third party waiver flow down to third (937)

See our Chapter 3.

(938)

P.D. Nesgos‚ “Briefing on Issues in Launch Contracts”‚ supra note 935 M. Oehm‚ “Experiences of a German/Russian Commercial Launch Services Provider for LEO Satellites”‚ paper presented at Project 2001 Workshop on Commercial Launch Activities‚ Bremen 18-19 January 2000.

(939)

Mjr R.A. Tepfer‚ “Allocation of Tort Liability Risks in the Space Shuttle Program”‚ supra note 928‚ at 211.

271 parties providing payload or other support services. NASA’s General Counsel has acknowledged that it is not completely clear as to whether the interparty waiver of liability clause would protect the payload manufacturer from a product liability claim where the manufacturer transfers titleprior to thepayload being involved in space shuttle operations‚ continues to provide support services to the user‚ and damage results from a defect in the design in materials or manufacture of the payload. It is the opinion of this writer that under these circumstances the interparty waiver would not protect the payload manufacturers. The manufacturers‚ in their capacity of providing support services‚ have some interest in protecting the payload‚ but when title has passed‚ their interest is hardly analogous to the interest of a user. Furthermore‚ there is no causal connection between the support services the manufacturers are now providing and any defect in design materials‚ or manufacturing of the payload which should‚ in any way‚ distinguish them from the previous case where title had passed and no support services were being provided. The protection offered the manufacturer would‚ therefore‚ have to be confined to protection from claims from other users where the actual damage caused is associated with the support services provided. ” This issue remains today with NASA LSAs as well as commercial LSAs. As shown in the litigation presented earlier in Chapter 4‚ litigation between the launch provider and the customer‚ and their respective insurers and reinsurers‚ will focus on escaping risk allocation provisions and bypassing the no-subrogation clauses‚ and the above will allow such an escape for each of them towards the manufacturers on the basis of warranty and product liability. In the particular case ofthe International Space Station‚ one would reasonably expect that the risks raised by Mjr Tepfer above would not materialize‚ due to the extensive scope of application of the cross waiver(940) agreed between the Parties‚ which covers Protected Operations. One would conclude in this case that product liability is covered by the crosswaiver clause as the definition of Protected Space Operations does not only address activities surrounding the launch but also activities of design‚ development‚ manufacturing‚ testing and so on. In classical LSAs‚ it seems that product liability claims would not be precluded‚ except where the activities that cause the damage are within the scope of the inter-participant waiver‚ which may be defined differently in each LSA. In the US‚ it will cover at least the activities covered by the launch license. The Arianespace inter-participant waivers will cover the performance ofthe LSA as well as the performance of potentially related LSAs concluded with other customers. This would be the case for instance when launching multiple payloads belonging to different customers. One could consider that all manufacturers covered by the inter-party waivers will be protected from product liability suits‚ or any other tort suit‚ by the participants‚ so long as their activity fits into the scope referred to above. All participants to the inter-participant waivers (which we could see as a horizontal line of participants‚ all in privity with respect to the inter-party waiver) are precluded from all claims against each other‚ including product liability claims. Outside of such scope‚ product liability claims‚ on a vertical line‚ against manufacturers of the launcher and of the satellite‚ as well as all associated products‚ would be possible by any of the participants in the launch.

(940)

See the text of this cross waiver in our Chapter 2.

272 The ability of the participants to claim on the basis of the damage caused by a defective product will mostly revolve around the following elements: - whether or not they are in privity of contract and to what extent they are allowed a choice between contractual or tort actions. We have seen in our Chapter 4 that the answer on this point may be differ in the various legal systems. - where they are claiming in contract on the basis of a warranty clause‚ there may be particular difficulties encountered with such warranties in particular the potential non-validity of their limitation‚ the potential difficulties to distinguish between warranty for hidden defects and non-conformity‚ the technical difficulties of proving the defect or the absence of defect‚ and the procedural constraints for exercising the warranties. Warranties are often limited at least in satellite construction contracts‚ and replaced for instance by a system ofincentive payments for the performance of the satellite in orbit. This may‚ in some contracts‚ be the only remedy of the customer against the satellite manufacturer. - participants in privity of contract may try to claim in tort‚ where this is feasible‚ to escape some contractual restrictions. We have seen an example of such attempt in the Martin Marietta case. - those who bring claims in tort will usually be those who are not in privity. For instance‚ the customer‚ not able to bring a claim against the satellite manufacturer‚ will bring a claim in product liability against the manufacturer of a component. In French law‚ such an action could be difficult to carry out: - liability for fault would require proof of the fault of the manufacturer‚ - liability for things would not be applicable against the manufacturer since he does not have use‚ control and direction of the thing (since it has been delivered to the higher level contractor)‚ unless use is made of the theory of guardianship of the structure/guardianship of the behavior to attract the liability of the manufacturer (but this would apply only for things which could have a dynamic behavior‚ for instance in relation to the propellants used in the launcher boosters and engine tanks) - under the new product liability law the claimant would still have to prove the causal link between the defect and the damage‚ and thereafter in any case the manufacturer and his next level contractor who incorporated the component in the higher level product would be jointly and severally liable. The manufacturer may also have taken advantage of Article 138616 of the Code Civil and limited or excluded his product liability for damage to property which is not private property. Insofar as this clause would be concluded between professionals‚ it would be valid. This new French law of product liability is probably introducing some uncertainty with respect to manufacturers who are involved in launcher and satellite manufacturing‚ not forgetting those who are involved in the launch facilities construction‚ maintenance and management. In US law‚ the result is somewhat similar‚ although the exposure to product liability risks is higher due to the long litigant history in the US in this field: - the claimant could try to claim in negligence‚ but he has to prove the negligence‚ which may not always be easy in the space business‚ like in the case of aircraft accidents. On the other hand‚ as we have argued earlier‚ the duty of care on the manufacturers would probably be considered higher in

273 this business‚ but the foreseeable plaintiffs will be less remote than for a car manufacturer for instance. - strict liability for abnormally dangerous activities would be another basis for claims‚ in the specific cases of manufacturers involved with the propellants used in the launcher boosters and engine tanks‚ or with specific testing which could be considered ultra hazardous. - product liability will require the proof that the defect existed when the product left the hands of the manufacturer and the proof of the causal link between the defective condition of the product and the damage suffered. These elements of evidence may be difficult to bring. It does not appear‚ in any case‚ that there is a specific situation of space products with respect to product liability. The rationale for the inter-participants waivers of liability does not justify that they would include product liability claims. Manufacturers of space products have to be responsible for what they produce and it is up to them and their customers to manage their relationship. We recall‚ in this respect‚ the provisions made by the European Space Agency in its spacecraft procurement contracts concerning product liability.(941) A major risk lies with third-parties who have full freedom to sue any of the participants in product liability to obtain compensation for damage caused by a launch. The overall environment would be far more predictable if one could secure that these third-parties can only claim against the launch services provider‚ for example. We will return to this in our proposals related to the international framework.

x)

Flow down requirements

Inter-participants waivers of liability normally require each party to flow down the waivers of claims to their respective contractors‚ subcontractors and suppliers. One may wonder to which extent this flow-down needs to be implemented. The interparticipants waiver is meant to cover damage caused by the activities undertaken under the license or the launch services agreements. Do all contractors‚ subcontractors and suppliers need to be bothered with something in which they will not be involved? A large number of them will come nowhere near the launch pad or the launch preparation area‚ and their role will stop when they have delivered this product. This is a difficult issue since the legal counsel drafting the contracts does not necessarily know the detailed use and technical description of each deliverable and cannot assess by himself whether the supplier or subcontractor will be likely to intervene during the launch preparation and launch period as such. The technical manager himself may not know this either when preparing the contract. The damage for which these suppliers or contractors could claim as a result of their presence on site for support activities‚ is likely to be smaller than the damage they could cause to the launch company or the launch customer. The latter is blocked by the interparticipant waiver anyway. It is suggested that as long as the inter-participant waiver is

(941)

See supra Chapter 4.

274 not invalidated by the absence of lower level flow down‚(942) this should not cause too many problems in practice so long as the parties ensure that all contractors involved in the launch preparation and launch as such are included in the flow down. At the present time‚ it does not seem that inter-participant waivers have addressed this issue in the framework of commercial launch services agreements. It is obvious that in practice these clauses are not being strictly and consistently flowed down‚ ifonly because a number of purchases are done off-the-shelf with purchase orders and not contracts as such and the flow down is probably not implemented past a certain point. Instead of this practice developing underground‚ and to avoid potentially wasting efforts flowing down clauses for the sake of it‚ there would be some benefit in providing for a “stop point” in the inter-participants waiver itself. One example in this respect could be found in the practice of NASA with respect to the space station contracts.(943) The flow down is introduced as follows: The Cross Waiver of Liability for the ISS is prescribed to be used by NASA Contracts Officers in NASA FAR Supplement 1828.371 which reads as follows: 1828.371 Clauses for cross-waivers of liability for Space Shuttle services‚ Expendable Launch Vehicle (EL V) launches‚ and Space Station activities. (a) In agreements covering Space Shuttle services‚ certain ELV launches‚ and Space Station activities‚ NASA and other signatories (the parties) agree not to bring claims against each other for any damage to property or for injury or death of employees that occurs during the time such a cross-waiver is in effect. These agreements involving NASA and other parties include‚ but are not limited to‚ Memoranda of Understanding with foreign Governments‚ Launch Services Agreements‚ and other agreements for the use of NASA facilities. These agreements require the parties to flow down the cross-waiver provisions to their related entities so that contractors‚ subcontractors‚ customers‚ and other users ofeach party also waive their right to bring claims against other parties and their similarly related entities for damages arising out of activities conducted under the agreements. The purpose of the clauses prescribed in this section is to flow down the cross-waivers to NASA contractors and subcontractors. (b) The contracting officer shall insert the clause 1852.228-72‚ Cross-waiver of Liability for Space Shuttle Services‚ in solicitations and contracts of $100‚000 or more when the work to be performed involves "Protected Space Operations" (applicable to the Space Shuttle) as that term is defined in the clause. If Space Shuttle services under the contract are being conducted in support of the Space Station program‚ the contracting officer shall insert the clause prescribed by paragraph (d) of this section and designate application of that clause to those particular activities. (c) The contracting officer shall insert the clause at 1852.228-78‚ Cross-Waiver of Liability for NASA Expendable Launch Vehicle (ELV) Launches‚ in solicitations and contracts of $100‚000 or more for the acquisition of ELV launch services when the service is being acquired by NASA pursuant to an agreement described in paragraph (a) of this section. If‚ under a contract that covers multiple launches‚ only some of the launches are for payloads provided pursuant to such agreements‚ an additional clause shall be inserted in the contract to designate the particular launches to which this clause applies. If a payload is being launched by use of an ELV in support (942)

We refer to the IGA Cross Waiver as an example of a cross waiver which expressly states that it is not applicable if not flowed down. The waiver by a party is therefore functioning on a reciprocity basis. See the text of the cross waiver in Chapter 2.

(943)

These documents can be found online at NASA Headquarters Procurement Office (accessed:01/2001).

275 of the Space Station program‚ the contracting officer shall insert the clause prescribed by paragraph (d) of this section and designate its application to that particular launch. (d) The contracting officer shall insert the clause at 1852.228-76‚ Cross-Waiver of Liability for Space Station Activities‚ in solicitations and contracts of $100‚000 or more when the work is to be performed involves "Protected Space Operations" (relating to the Space Station) as that term is defined in the clause. (e) At the contracting officer's discretion‚ the clauses prescribed by paragraphs (b)‚ (c)‚ and (d) of this section may be used in solicitations‚ contracts‚ new work modifications‚ or extensions‚ to existing contracts under $100‚000 involving Space Shuttle activities‚ ELV launch services‚ or Space Station activities‚ respectively‚ in appropriate circumstances. Examples of such circumstances are when the value of contractor property on a Government installation used in performance of the contract is significant‚ or when it is likely that the contractor or subcontractor will have its valuable property exposed to risk or damage caused by other participants in the Space Shuttle services‚ ELV launches‚ or Space Station activities. The clause which is introduced is prescribed by 1852.228-76‚ which reads as follows: 1852.228-76 Cross-Waiver of Liability for Space Station Activities. As prescribed in 1828.371(d) and (e)‚ insert the following clause: CROSS-WAIVER OF LIABILITY FOR SPACE STATION ACTIVITIES (DECEMBER 1994) (a) The Intergovernmental Agreement for the Space Station contains a broad cross-waiver provision to encourage participation in the exploration and use of outer space through the Space Station. The purpose of this clause is to extend this cross-waiver requirement to Contractors and subcontractors as related entities of NASA. This cross-waiver of liability shall be broadly construed to achieve this objective of encouraging participation in space activities. (b) As used in this clause‚ the term: (1) "Damage" means: (i) Bodily injury to‚ or other impairment of health of‚ or death of‚ any person; (ii) Damage to‚ loss of‚ or loss of use of any property; (iii) Loss of revenue or profits; or (iv) Other direct‚ indirect‚ or consequential damage. (2) "Launch Vehicle" means an object (or any part thereof) intended for launch‚ launched from Earth‚ or returning to Earth which carries payloads or persons‚ or both. (3) "Partner State" means each contracting party for which the "Agreement among the Government of the United States of America‚ Governments of Member States of the European Space Agency‚ Government ofJapan‚ and the Government of Canada on Cooperation in the Detailed Design‚ Development‚ Operation‚ and Utilization of the Permanently Manned Civil Space Station" (the "Intergovernmental Agreement") has entered intoforce‚ in accordance with Article 25 of the Intergovernmental Agreement‚ and also includes any future signatories of the Intergovernmental Agreement. It includes the Cooperating Agency of a Partner State. The National Aeronautics and Space Administration (NASA) for the United States‚ the Canadian Space Agency (CSA) for the Government of Canada‚ the European Space Agency (ESA) and the Science and Technology Agency of Japan (STA) are the Cooperating Agencies responsible for implementing Space Station cooperation. A Partner State also includes any entity specified in the Memorandum of Understanding (MOU) between NASA and the Government ofJapan to assist the Government of Japan Cooperating Agency in the implementation of that MOU. (4) "Payload" means all property to be flown or used on or in a launch vehicle or the Space Station. (5) "Protected Space Operations" means all launch vehicle activities‚ space station activities‚ and payload activities on Earth‚ in outer space‚ or in transit between Earth and outer space performed in furtherance of the Intergovernmental Agreement or performed under this contract. "Protected Space Operations " also includes all activities related to evolution of the Space Station

276 as provided for in Article 14 of the Intergovernmental Agreement. "Protected Space Operations " excludes activities on Earth which are conducted on return from the Space Station to develop further a payload's product or process except when such development is for Space Station-related activities in implementation of the Intergovernmental Agreement or in performance of this contract. It includes‚ but is not limited to: (i) Research‚ design‚ development‚ test‚ manufacture‚ assembly‚ integration‚ operation‚ or use of launch or transfer vehicles‚ payloads‚ related support equipment‚ and facilities and services; (ii) All activities related to ground support‚ test‚ training‚ simulation‚ or guidance and control equipment and related facilities or services. (6) "Related entity" means: (i) A Partner State's Contractors or subcontractors at any tier; (ii) A Partner State's users or customers at any tier; or (iii) A Contractor or subcontractor of a Partner State's user or customer at any tier. (7) "Contractors" and "Subcontractors" include suppliers of any kind. (c)(1) The Contractor agrees to a cross-waiver of liability pursuant to which the Contractor waives all claims against any of the entities or persons listed in paragraphs (c)(1)(i) through (c)(1)(iii) of this clause based on damage arising out of Protected Space Operations. This waiver shall apply only if the person‚ entity‚ or property causing the damage is involved in Protected Space Operations and the person‚ entity‚ or property damaged is damaged by virtue of its involvement in Protected Space Operations. The cross-waiver shall apply to any claims for damage‚ whatever the legal basis for such claims‚ including but not limited to delict (a term used in civil law countries to denote a class of cases similar to tort) and tort (including negligence of every degree and kind) and contract against: (i) Any Partner State other than the United States; (ii) A related entity of any Partner State other than the United States; and (iii) The employees of any of the entities identified in paragraphs (c)(1)(i) and (ii) of this clause. (2) The Contractor agrees to extend the waiver of liability as set forth in paragraph (c)(1) of this clause to subcontractors at any tier by requiring them‚ by contract or otherwise‚ to agree to waive all claims against the entities or persons identified in paragraphs (c)(1)(i) through (c)(1)(iii) of this clause. (3) For avoidance of doubt‚ this cross-waiver includes a cross-waiver of liability arising from the Convention on International Liability for Damage Caused by Space Objects‚ (March 29‚ 1972‚ 24 United States Treaties and other International Agreements (U.S.T.) 2389‚ Treaties and other International Acts Series (T.I.A.S.) No. 7762) in which the person‚ entity‚ or property causing the damage is involved in Protected Space Operations. (4) Notwithstanding the other provisions of this clause‚ this cross-waiver of liability shall not be applicable to: (i) Claims between the United States and its related entities or claims between the related entities of any Partner State (e.g.‚ claims between the Government and the Contractor are included within this exception); (ii) Claims made by a natural person‚ his/her estate‚ survivors‚ or subrogees for injury or death of such natural person; (iii) Claims for damage caused by wilful misconduct; and (iv) Intellectual property claims. (5) Nothing in this clause shall be construed to create the basis for a claim or suit where none would otherwise exist. With respect to flow down of the cross waiver‚ therefore‚ NASA flows it down at any tier (as per the wording of the cross waiver itself). This is confirmed also by the definition of "related entities" and of "contractors and subcontractors" as per the clause. It includes suppliers of any kind. Besides‚ in subpart 44.1 of the NASA FAR‚ the definition of subcontract and subcontractor are as follows:

277 "Subcontract‚" as used in this part‚ means any contract as defined in Subpart 2.1 entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract. It includes but is not limited to purchase orders‚ and changes and modifications to purchase orders. "Subcontractor‚" as used in this part‚ means any supplier‚ distributor‚ vendor‚ or firm that furnishes supplies or services to or for a prime contractor or another subcontractor.

The flow down is therefore applicable at any tier‚ including suppliers. However‚ as mentioned above‚ the clause is included in contracts of $ 100 000 or more (or under $ 100 000 in certain cases mentioned above). This limit applies only to the placing of prime contracts. The wording does not appear to say that the flow down can stop for subcontracts or purchase orders under this amount. If the prime contract exceeds $ 100 000 dollars‚ the clause is inserted and flow down has to be carried out at any tier. One may also note that it appears from the above that NASA still flows-down the crosswaiver contained in the 1988 IGA. ESA‚ based on the interim agreement we mentioned in our Chapter 2‚ implements the 1998 cross-waiver‚ if only because it now covers the Russian Partner. It is not clear from the above provisions how NASA includes the Russian Partner in its flow down of a clause which reflected the previous space station partnership. It would be advisable for the ISS Partners to agree upon which cross-waiver should be implemented and flowed down‚ and in our view it should be the 1998 IGA cross-waiver. This issue will become more and more important as hardware gathers for launch and on orbit. This example illustrates very well a certain lack of coordination and harmonization in current practice‚ where decisions are made unilaterally by one of the participants to an inter-participant waiver‚ that he will allow claims to be made against other participants by contractors below a certain level. This practice can only work if such exceptions to the flow down are agreed by all participants. Otherwise‚ this introduces a legal unpredictability which defeats the purpose of the clause the participants have sought to implement among themselves. It is certainly a practical necessity to stop the flow down at some point‚ and the wording used by NASA can be taken as a starting point in this respect‚ but this ‘stop-clause’ needs to be agreed between the participants‚ especially in the case of the IGA where there are no hold-harmless agreements. If a party does not commit to hold the other harmless against claims from the former’s contractors‚ it is not free to decide that it will allow claims to be made by a whole category of contractors without the consent of the other party. Introducing a ‘stop-clause’ to the flow down of inter-participant waivers should be agreed by the parties in the waiver itself‚ even when they have hold-harmless commitments. The parties need to bear in mind that the introduction of a limit in the flow down of the inter-participant waivers may have consequences in terms of litigation‚ which need to be assessed when addressing this issue. Further‚ we believe that the flow-down clause itself would benefit from being agreed in advance among the participants as part of their inter-participant waiver so that maximum security can be achieved.

278 5.3.2.- Moving forward with inter-participant waivers of liability Although the practice of these clauses is now universal in launch services agreements‚ their validity in various jurisdictions‚ their enforcement and their consequences are not yet fully controlled and harmonized. They contribute to a feeling of security but much remains to be done in the field. To summarize the above discussions‚ first‚ their relationship to the rest of the launch services agreement is crucial. With the standardization of LSAs‚ companies run the risk of using them in disregard of the overall balance of the contract. Launch contracts are “best efforts” types of contracts where the launch companies tends to define in a restrictive way their obligations and accept limited consequences for their failure to perform We do not share the opinion of certain authors that this empties of its substance the obligation of the launch company for the reasons we have explained above(944) but attention needs to be paid by the launch companies to ensure that the deprivation of rights of the customer is matched by an adequate quid pro quo in terms of obligations of the launch company‚ otherwise they run the risk that inter-party waivers‚ as well as disclaimer of warranty clauses‚ could be invalidated. Although launch contracts are less one sided than they used to be‚ they are still open to debate as to the balance of obligations between the parties‚ which is an area which needs to be carefully considered if one wants to validate inter-party waivers of liability and other types of exculpatory clauses. Second‚ their validity depends upon their compliance with strict conditions. These conditions‚ while being specific from one jurisdiction to another‚ are similar worldwide. Third‚ public order and public policy are an important element in their validation. As we have seen‚ they are recognized as public policy in the United States through the Commercial Space Launch Act‚ but this is not the case in other countries. Fourth‚ the elements of inter-party liability and third-party liability tend to be spread in different clauses. This prevents the overall assessment of the liability exposure and increases the chances of confusion or gaps between clauses. Fifth‚ the flow down approach and clauses need harmonization. Without the consolidation of the flow down‚ the whole system is in jeopardy. Nevertheless‚ this does not appear to be a preoccupation for the participants and deserves more attention. We believe that advances could be made in the field through three types of actions: - harmonization of inter-participants waivers of liability; - clarification of the essential obligations of the launch provider and the launch customers in a concise set of terms; - validation of the inter-party waivers in the public orders of all States concerned.

i)

Harmonization of inter-participants waivers of liability

It would be valuable to devote increased efforts to developing harmonized‚ quasi-universal clauses upon which each actor on the launch market can rely‚ independently of the rest of the contract which defines the contents of the services and the rights and obligations of (944)

L. Ravillon‚ Les Télécommunications par satellites‚ Aspects Juridiques‚ supra note 19‚ at 210.

279 each party. Inter-participants waivers of liability have become standard practice without being standardized through a process of legal auditing and matching to the legislation concerned. An effort would most certainly be welcome in this area to develop a set of provisions which could fit any legal system and‚ therefore‚ be extremely flexible to use with clients from any country‚ and address all aspects of the liability relationship between the parties‚ as well as the flow down to be done with subcontractors. Such standard clauses would also be useful for the insurance community which would be able to rely on identical terms and simplify its legal evaluation of the various contracts. We have attempted to contribute to such a work by drafting Inter-Participant Liability Covenants which could serve as a basis for starting discussions and reflections on the development of standard clauses for countries with licensing requirements‚ and those without.(945) These Inter-Participants Liability Covenants are contained in Chapter 6. The following approach was followed for the drafting of the Inter-Participant Liability Covenants: - we believe that it would probably contribute to a greater clarity if inter-party liability provisions would be contained in a self-standing document annexed to the LSA and made an integral part of the LSA. The LSA would contain the description of the services provided‚ the obligations of the customer‚ the schedule and the payments‚ and other classical conditions. This approach would have the advantage of separating the mutual sacrifices made by the parties in terms of liability‚ and a creating hopefully balanced set of conditions in the LSA. Therefore‚ one could more easily demonstrate that the parties have agreed to these sacrifices in view of their satisfaction of an adequate bargain. The other advantage of this approach would be to avoid the clause being rendered void in certain jurisdictions due to the lack of express acceptance. As pointed out above‚ this express signature would not be a guarantee that the clause is clean and legal but at least it would help document the fact that it has been especially brought to the attention of its signatory. - it could also be useful to emphasize where this is the case the fact that the LSA and the Covenant annexed to it‚ are an international contract. In certain legal systems‚ making such a reference will give a better chance to these clauses as they may be validated in an international contract while they would be void otherwise. Of course‚ this does not preclude the judge or arbiter from determining himself whether this is an international contract‚ when such authority is given to him by the applicable law. However‚ it is much better if the parties have clarified their intention to operate under these rules. - third-party liability needs to be addressed in a straightforward manner‚ to avoid the problems mentioned above. In the case where governmental indemnification regime exists‚ we believe that the US approach is the best suited one‚ where all third-party liability is concentrated on the launch provider for all damages caused by the launch activities. The issue is more delicate where no governmental (945)

We will return to this issue of licensing at a later stage‚ as it is connected to domestic legislation‚ and is another subject where work remains to be done in connection with these clauses.

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indemnification regime exists. Ideally‚ the launch provider should still bear all the risk and cover it by insurance‚ however‚ limited insurance capacity may lead to insufficient coverage and the launch provider is exposed to paying all additional damages on top of the insurance coverage. The launch provider would then have no action in recourse against its government under the Liability Convention principles‚ since the Liability Convention does not create a liability obligation of the launching State towards its nationals. In the absence of domestic law providing for indemnification‚ the launch provider and the customer still need to allocate third-party liability risk. - the flow down requirements need to be clarified and implemented in an identical way by the Parties‚ and limitations on flow-down requirements should be clearly agreed as well so as to allow the parties to assess their exposure to claims resulting from the absence of flow-down. In terms of method for harmonization‚ one could imagine for instance the constitution of a working group under the auspices of the International Chamber of Commerce‚ including experts from launch companies‚ insurers‚ satellite operators‚ manufacturers and academics‚ to work on model clauses such as those we have developed in this thesis. The conclusion of this work would follow the ICC procedure of comment by ICC national committees and adoption by the Commission on International Commercial Practice and by the ICC Executive Board. This method has been followed on a number of subjects so far and leads to authoritative documents well received by practitioners.(946) ii)

Clarification of the essential obligations of the launch provider and the launch customers in a concise set of terms

It is a fact that‚ at present‚ the standard contractual terms of launch companies are not made available except to their customers. Information can be gathered indirectly on the typical contents of these contracts but the documents themselves are kept strictly confidential. This confidentiality‚ played at the extreme inside the business itself‚ sometimes even inside a company itself‚ prevents valuable work from being done on this type of contract. It would be a considerable improvement to see these contractual schemes more open for study. This would attract criticism but also promote a great deal of progress for the benefit of all involved. It would‚ in particular‚ allow the systematization of the balance of those contracts and help the demonstration of an equilibrium with the interparticipants waivers of liability and the exclusions of warranty clauses. There is a great deal of competition in the market and the contents of the services offered by each launch provider is‚ to a certain extent‚ his secret ammunition for winning contracts. It is not the purpose here to aim at launch providers opening their books and telling the whole world what they offer to their customers to win contracts from their competitors. Rather‚ consideration is being given to the baseline services which are provided and the baseline commitments taken by the launch provider and the customer in a launch contract. (946)

For two examples in the domains we have studied in this thesis‚ one can consult ICC‚ Force Majeure and Hardship (Paris: ICC‚ 1998)‚ ICC Publication 421E‚ and ICC‚ Guide to Penalty and Liquidated Damages Clauses (Paris: ICC‚ 1995)‚ ICC Publication 478.

281 In the same way as the International Chamber of Commerce developed the INCOTERMS to define the obligations of the buyer and the seller with respect to the standard terms of delivery of goods‚ and the key point of transfer of risks‚ we believe that the launch business would find some benefit in developing equivalent terms. These terms could be defined to cover for example: - the commitments of the Parties prior to arrival of the spacecraft at the launch complex: - Documentation and analyses (for example thermal models‚ dynamic models‚ mass properties‚ interface control documents‚ thermal analysis‚ trajectory study‚ orbit characteristics‚ dynamic coupled load analysis); - Transportation and customs clearance responsibility; - Point of entry: when the spacecraft is considered to be on the range. - the commitments of the Parties at the range: - typical range services provided by the launch company: for example payload preparation facilities‚ storage‚ standards of clean rooms‚ basic services provided to the customer; -typical obligations of the customer when his spacecraft is at the range and his responsibility to deliver spacecraft check-out equipment; - type of range: private/governmental. - the launch: - definition of launch; - orbit (type of orbit. The coordinates cannot be systematized as such); - sole customer/shared launch‚ or even ‘piggy back’ where the conditions are different. Such a systematization would be an investment because of the large amount of work which it would require but it would most definitely simplify launch contracts‚ introduce a better transparency in the basic services which a launch customer is entitled to expect‚ and support the consolidation of standard insurance policies to match the risks identified during each broken down period‚ as it is done with the INCOTERMS. The launch contract would then only have to provide for the details of the launch specification‚ and the other classical clauses in particular the financial clauses (price‚ payment schedule)‚ the legal clauses (allocation of liability)‚ and the competitive clauses. For the latter‚ one could expect that at some point in time that they could also be systematized as part of the approach mentioned above. Without a complete insight into a sufficient number of launch services agreements‚ it would be a moot exercise to start drafting these standard terms in the context of this thesis‚ but this is definitely an idea which could be submitted to the launch providers which‚ if they would confirm its potential benefits‚ could consider pooling together to initiate a project to draft such standardized terms.

iii)

The validation of the inter-party waivers in the public orders of States.

As we have noted above‚ one of the potential issues with inter-participants waivers of liability is that they are often considered as contrary to public order and may be invalidated

282 on such grounds. In order to establish a better security for the participants on this topic‚ it is essential that these clauses are recognized as a benefit in the launch business and in space cooperation in general‚ and are considered legitimate. The example of the Commercial Space Launch Act is certainly to be followed in this respect‚ i.e the recognition that these clauses are valid by the domestic laws in the States involved in the space business‚ or where non-governmental entities are involved in the space business‚ as launch providers or launch customers. The legitimacy of such clauses should be recognized for the launch itself‚ i.e covering the licensed activities in countries having instituted a licensing regime‚ but also all activities involving the close contact of the property of both Parties. The justification for these clauses‚ in particular when combined with a best efforts based performance in launch contracts is argued by some. A recent presentation has summarized the arguments used to defend such a regime and the associated counter-arguments: “ Should the statutory obligation that launch services providers and launch customers have to implement a reciprocal waiver of liability be repealed? 1st issue: Risk (“Betting the Company ”) Argument: launches are ultra-hazardous and are still experimental in nature. Counter-argument: industry representatives stress the maturity of the global space industry (see ISBA 1999 in Washington DC) 2nd issue: Litigation (“No Lawyers Please!”) Argument: potential liability for negligence has a detrimental effect on launch services providers and their insurers. Counter-argument: a party can/will accept an exculpatory clause only if he assumes that the other party will employ reasonable efforts to avoid loss (= ‘pact of guarantee’) quality control problems‚ lack of reliability‚ excessive failure rates undermine ‘pact of guarantee’. 3rd issue: Funds (“Not sufficient funds available ”) Argument: without cross-waivers some funds would be spent on duplicative and expensive insurance. Counter-argument: such distribution of risks imposes on some satellite operators difficulties to obtain adequate financing for their project. some satellite operators are prepared to pay a much higher price‚ if the satellite manufacturer assures the beginning of operation of the satellite in orbit (= “turnkey satellite launch agreements ”).” (947) One can indeed wonder whether such clauses have to continue to be supported as a benefit to the launch industry. We believe that at the present time they still do for the following reasons: they play an essential role in avoiding excessive litigation which would otherwise waste time and a considerable amount of resources. Such litigation would probably also deter anyone from entering the business‚ and deprive both the launch providers and the satellite customers of the support of the insurance and finance industries. (947)

D Knittlemayer‚ “Regulatory Activities and Launch Contracts”‚ paper presented at the Project 2001 Workshop on Commercial Launch Activities‚ Bremen 18-19 January 2000.

283

the insurance business has developed with these clauses‚ and has also adapted itself to the need for taking into account the interests of the financial community. Still work remains to be done in this area‚ but we do not believe that the interparticipant waivers hinder these developments‚ on the contrary. the risk associated with launching obviously remains high‚ as demonstrated on numerous occasions with launch failures in the past years. Insuring the total launch vehicle‚ with payload‚ as well as the consequences of failure to perform the launch contract and the potential litigation in recourse would probably still exceed the capacities of today’s launch market. the practice has been adopted in the business‚ rendered mandatory by law in the US‚ and operators seem to consider it as a usage of their trade. They have themselves started to remedy their abusive effects by generating contractual remedies for launch failure. Apart from recognizing the validity of inter-participant waivers of liability‚ domestic legislation should introduce them as a requirement as part of any launch licensing regime‚ like in the US. In States which would introduce an Government indemnification scheme or which place Government facilities at the disposal of launch operators‚ the signature of such inter-participant waiver between the launch operator and the Government should be mandatory. This would allow also the standardization of these clauses through their entry in the regulatory practice and their top down implementation as part of the licensing regime. In the absence of recognition of these clauses by applicable domestic laws‚ the participants may use other methods to secure their validity such as choosing as the law of the contract a law that validates them and exclude this law’s rules of conflict of laws. They may also make applicable different laws to different parts of the contract. These techniques are used in contractual practice but they are complex and introduce a risk of clashes between applicable laws rendering certain contract clauses impracticable‚ inconsistent or contradictory. Imaginative legal counsels may find ways through these techniques to address the difficulties pointed out in these discussions.

5.4.- THE INTERNATIONAL LAW FRAMEWORK As pointed out in the overall appraisal of today’s situation‚ the international space law instruments are not adapted to launch activities performed by non-governmental entities. The international community has taken note for quite some time of the ambiguities and inadequacies of the space treaties but comprehensive proposals for their modernization have not yet appeared.

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5.4.1.- The Outer Space Treaty and the Liability Convention The regime set up by the Outer Space Treaty and the Liability Convention(948) accompanied the development of space exploration and use up to now. Space activities flourished and private involvement in some of those activities‚ in particular launching‚ has steadily increased. The international legal regime for space activities has not hindered such developments. However‚ one may wonder whether the current legal regime is sufficient in view of the current situation of launch services‚ and for their future development. Certain authors argue that the present regime does not need to be reviewed at present and that we should instead concentrate on perfecting current practices in the field‚ i.e government licensing and insurance coverage in particular for third-party liability.(949) Others‚ although recognizing the weaknesses in the current legal framework‚ in particular the Liability Convention‚ would eventually be satisfied with some informal‚ soft law‚(950) approach to addressing the problems posed(951) or paint a pessimistic picture‚ arguing that the revision of the Liability Convention would suffer of the same difficulties encountered originally in its elaboration.(952) Others have developed complete theories for a regime for international space transportation‚ based on a vision of the future activities of space transportation‚ and the experience and practice of air transportation.(953)

(948)

See Chapter 2 for an analysis of the legal regime provided for by these instruments.

(949)

E.A. Frankle & E.J. Steptoe‚ “Legal Considerations Affecting Commercial Space Launches From International Territory”‚ (1999) 41 Colloquium .

(950)

For references on soft law‚ see supra note 47.

(951)

“ The increase in private involvement in space activities and the growing risks presented by space debris are the two major problems requiring priority treatment when it comes to the Liability Convention. In these areas‚ particular and substantial success should and could be achieved in the enhancement of adherence to‚ and much more prominently‚ effective application of the Liability Convention. Here‚ the essential choice is between formal amendment (in whatever form) or informal but authoritative harmonization of interpretations. In respect of the Liability Convention generally speaking the informal approach seems to provide the best chance of furthering the professed aim. Perharps‚ from the practical and political point of view‚ the threats posed by largely uncontrolled space debris and largely uncontrolled privatization may not require a large measure of priority attention. But it is better to have a well-balanced elaboration of the Liability Convention in place before third party damage caused by space debris or by a privately launched space object actually occurs. ” F.G. Von der Dunk‚ “The 1972 Liability Convention. Enhancing Adherence and Effective Application” (1998) 41 Colloquium‚ 366.

(952)

M.S. Firestone‚ “Problems in the Resolution of Disputes Concerning Damage Caused in Outer Space”‚ (1985) Tulane Law Review‚ 747‚ at 772.

(953)

H. A. Wassenbergh‚ “The Law Governing International Private Commercial Activities of Space Transportation” (1993) 21:2 Journal of Space Law‚ 97 H.A. Wassenbergh‚ “A Launch and a Transportation Law Separate From Outer Space Law? It is Time to Legally Unburden the ‘Launching State”’ (1996) 21:1 Air and Space Law‚ 28 H.A. Wassenbergh‚ “The Law of Commercial Space Activities”‚ in G. Lafferranderie & D.Crowther eds‚ Outlook on Space Law over the Next 30 Years (The Hague‚ Kluwer‚ 1997)‚ at 173 H. A. Wassenbergh‚ “The Art of Regulating International Air and Space Transportation. An Exercise in Regulatory Approaches to Analyzing Air and Space Transportation” (1998) XXIII Annals of Air And Space Law‚ 201.

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i) a)

The current political atmosphere The general atmosphere

The political atmosphere which prevailed at the time of the elaboration of the space treaties‚ in particular as a result ofthe Geophysical Year‚ has changed considerably(954) and the trend is no longer to draft new treaties or amending treaties. Membership of COPUOS has increased and it considerably slows down its decision-making and brings the focus on subjects ofinterest to developing countries‚ in particular in the area ofcooperation and shared benefits of space activities. Space faring nations have been preoccupied with the protection of their situation and do not seem to be taking many initiatives for new subjects. Nevertheless‚ there are some recent and welcome developments in the UN Committee on Peaceful Uses of Outer Space which we will explain briefly.

b)

The Mexico Proposal

The Legal Subcommittee adopted‚ in 1997‚ a proposal made by Mexico to discuss the problems of States preventing them from ratifying the Treaties and it was agreed to follow the three-year plan proposed by Mexico.(955) The purpose of the proposal is defined as follows: “The proposal by the delegation of Mexico is aimed at achieving the widest and fullest adherence to the treaties relating to outer space. Through this initiative‚ it is sought to strengthen the work of the Legal Subcommittee of the Committee on the Peaceful Uses of Outer Space. The initiative will also make it possible to assess the status of the instruments concerned in promoting the peaceful uses of outer space. States that wish to do so may provide relevant information pertaining to other existing space law instruments. This initiative would not lead to reopening of substantive debates on the treaties or any proposals for their revision or amendment. ” This three-year plan will be interesting and will contribute to strengthening the adherence to the space treaties in place‚ but it is not really going to change any of the documents presently available and it is not driven by a vision of future needs to be accommodated.

c)

The Austrian initiative for strengthening the Liability Convention

With respect to the Liability Convention‚ a positive initiative was taken by Austria to strengthen the Liability Convention by suggesting that all States make a declaration of acceptance of the binding character of the decisions of the Claims Commission.(956) There‚

(954)

On these evolutions and comments on trends for new treaty making and revisions of the current treaties‚ see E. Galloway‚ “Guidelines for the Review and Formulation of Outer Space Treaties” (1998) Colloquium‚ 245.

(955)

UN Doc A/AC.105/C.2/L.206 Rev 1‚4April 1997. Reprinted in M.Benkö & K.U.Schrogl.“The UN Committee on the Peaceful Uses of Outer Space: Introducing the Agenda Item ‘Review of the Status of the Five Legal Instruments Governing Outer Space’ and Other Recent Developments”‚ (1998) 47:4 Zeitschrift Für Luft Und Weltraumrecht‚ 523‚ at 533.

(956)

See Chapter 2 for details on the Claims Commission and the nature of its decisions.

286 again‚ no review as such ofthe Liability Convention is foreseen.(957) The European Space Agency has also actively promoted such a suggestion towards its Member States. The recognition of a binding nature of the decisions ofthe claims commission would certainly be an improvement and should be part of any approach to reviewing the Liability Convention but‚ in our view‚ taking this point in isolation is a bit like giving a patient medication without first having diagnosed the disease.

d)

The proposal submitted by Germany on behalf of the ESA Member States and States cooperating with ESA.

With respect to the Registration Convention‚ an important proposal was submitted by Germany on behalf of Member States of ESA and of States having signed cooperation agreements with ESA‚ to improve the Registration Convention.(958) This proposal focuses on five topics: the time limit for registration of objects‚ the information to be included in the registration‚ the definition of launching State‚ the potential questions related to international organizations when implementing the Registration Convention‚ and the introduction of principles relevant to the use of nuclear power sources in outer space in the Registration Convention. This paper makes a very welcome step with respect to review by stating: “ The States submitting the present working paper regard the Registration Convention as an important legal instrument and recognize its close relation with the Outer Space Treaty and the Liability Convention. They do not seek in any way to change the text of the Registration Convention itself‚ but to clarify and possibly supplement the Registration Convention with texts reflecting experience with the Convention and new technological and legal developments. [..‚] All results‚ which would be agreed upon in the Committee on Peaceful Uses of Outer Space should be adopted by the General Assembly in resolutions and eventually be transformed into international law as a supplementary international legal instrument to the Registration Convention‚ ratified by all States. ” All these proposals(959) show that although the space treaties have well resisted the passing of time‚ there are more and more voices to point out their weaknesses and to call for (957)

On this topic‚ see M. Benkö & K.U. Schrogl‚ “The UN Committee on the Peaceful Uses of Outer Space: Introducing the Agenda Item ‘Review of the Status of the Five Legal Instruments Governing Outer Space’ and Other Recent Developments”‚ supra note 955‚ at 526: “[...] it would also [...] be a significant step to strengthen the Liability Convention in the above mentioned way without having to renegotiate or amend it. Even if no other improvements in the field of international space law could be reached during the time period until or during the Conference‚ it would already be a remarkable step forward in the development of space law‚ if the Austrian initiative to strengthen the outer space liability regime could find a positive echo”.

(958)

UN Doc A/AC.105/C.2/L.21 1/Rev 1‚ 30 March 1998. Reprinted in M. Benkö & K.U. Schrogl‚ “The UN Committee on the Peaceful Uses of Outer Space: Introducing the Agenda Item ‘Review of the Status of the Five Legal Instruments Governing Outer Space’ and Other Recent Developments”‚ supra note 955‚ at 534.

(959)

Generally see‚ M. Benkö & K.U. Schrogl‚ “The UN Committee on the Peaceful Uses of Outer Space: Introducing the Agenda Item ‘Review of the Status of the Five Legal Instruments Governing Outer Space’ and Other Recent Developments”‚ supra note 955‚ 523 M. Benkö & K.U. Schrogl‚ “The 1998 European Initiative in the UNCOPUOS Legal Subcommittee to Improve the Registration Convention” (1998) 41 Colloquium‚ 58.

287 changes. The idea that something needs to be done is definitely shared. It seems‚ however‚ that the methodology implemented so far in these proposals is not able to lead to the resolution of the significant number of issues in the area of liability. ii)

Should we patch or should we review?

It is clearly difficult to get international treaties and amendments agreed‚ and then ratified. In the present international context‚ this becomes a more and more difficult task. Nevertheless‚ it is not an impossible task‚ as demonstrated recently for instance with the adoption in Montreal of a new Convention for the Unification of Certain Rules for International Carriage by Air(960) or‚ in the area of nuclear activities‚ of the Convention on Supplementary Compensation.(961) We believe that although the initiatives mentioned above are an excellent sign‚ they fall short of what is needed to address the liability issues involved with non-governmental launch activities. The methodology suggested in the proposals made to the UNCOPUOS tends to avoid reviewing the texts‚ and shows a preference for providing for principles‚ interpretations and other contributions in UN Resolutions or approaches by groups of States. The consolidation of these soft law contributions into further treaty instruments is only seen as a second step. The drawback of this approach in our view is that it complements texts which have full treaty force with others which have a far more limited authoritative value and do not directly impose real obligations upon States. The end result can only be a weakening of the space treaties by an addition of lower level texts. We could end up in a similar situation to that which prevailed in air law prior to the adoption of the Montreal Convention referred to above (and will still prevail‚ until its entry into force)‚ where various protocols were elaborated to the Warsaw Convention‚ agreements were made between IATA airlines (Montreal Agreement of 1966)‚ unilateral actions were taken by airlines with respect to liability rules‚ and European Regulations were adopted on the subject‚ all leading to a rather explosive patchwork.(962) If weaknesses are identified (960)

(961)

(962)

The Convention is reprinted in G.N. Tompkins Jr‚ “The Montreal Convention of 1999: This is the Answer” (1999) Part 3 The Aviation Quarterly‚ 114. On this Convention and on the nuclear regime see B. McRae‚ “The Compensation Convention: Path to a Global Regime for Dealing with Legal Liability and Compensation for Nuclear Damage” (1998) 61 Nuclear Law Bulletin‚ 25; M. Radetzki‚ “Limitation of Third Party Nuclear Liability: Causes‚ Implications and Future Possibilities” (1999) 63 Nuclear Law Bulletin‚ 7. See M. Milde‚ “Warsaw System and Limits of Liability‚ Yet Another Crossroad” (1994) 6 Korean Journal of Air and Space Law”‚ 43 J.S. Mc Kay‚ “Unlimited Liability” (1994 ) 6 Korean Journal Of Air and Space Law‚ 137 K. Abe‚ “The So-Called Japanese Initiative. Japanese Airlines Abolition of Liability Limits for Personal Injury or Death in International Carriage by Air” (1994) 6 Korean Journal of Air and Space Law‚ 149 M. Sekiguchi‚ “Why Japan Was Compelled to Opt for Unlimited Liability” (1995) XXII Annals of Air and Space Law‚ 337 M. Sekiguchi‚ “The Passenger Liability Regime of the New Deal: But New Wine Must be Put Into Fresh Wineskins” (1995) XXII:II Annals of Air and Space Law‚ 249 E. Giemulla & R. Schmid‚ “Council Regulation (EC) N°2027/97 on Air Carrier Liability in the Even of Accidents and Its Implications for Air Carriers” (1998) XXIII:3 Air and Space Law‚ 98 R.D. Margo‚ “Insurance Aspects of the New International Passenger Liability Regime” (1999) XXIV:3 Air and Space Law‚ 134 M. Milde‚ “Liability in International Carriage by Air. The New Montreal Convention of 28 May 1999”‚ (1999) XXIV Annals of Air and Space Law‚ 155 G.N. (continued...)

288

in the space treaties‚ and ifsolutions may be agreed for their resolution‚ then this should be done through proper amendments to the treaties in question and not through a tentative middle way. As pointed out by Professor Milde (although in the context of the Warsaw Convention which has an imperative nature ): “The Convention itself remains as the fundamental international legal framework among the parties and can be amended only in accordance with the international law of treaties. No amount of unilateral or collective ‘patchwork’ can replace the appropriate process of amendment of the Convention and establish a solid international legal regime to be applied by the courts of law ”.(963)

We are not convinced by the present approaches suggested within the UNCOPUOS‚ and we believe that a more radical and intensive work needs to be done. There is the need for addressing launch liability by non-governmental entities at the international level‚ and the methodology for doing so should be efficient and lead to the production of solid legal instruments. iii)

a)

The need for addressing liability issues related to the launch of space objects Adapting to today’s realities

The Liability Convention is‚ in reality‚ more concerned with responsibility than with liability as such.(964) It contains provisions which organize the functioning ofinternational (962)

(963)

(964)

(...continued) Tompkins‚ “The Future ofthe Warsaw Convention Liability System” (1999) Part 2 The Aviation Quarterly‚ 38 G.N. Tompkins Jr‚ “The Montreal Convention of 1999: This is the Answer” (1999) Part 3 The Aviation Quarterly‚ 114 J. Balfour‚ “Council Regulation (EC) 2027/97 on Air Carrier Liability. A Tale of Suspense” (1999) Part 3 The Aviation Quarterly‚ 175. M. Milde‚ “Liability in International Carriage by Air. The New Montreal Convention of 28 May 1999”‚ supra note 962. Prof B. Cheng provides a distinction between the two notions as follows: “Responsibility means essentially answerability‚ answerability for one’s acts and omissions‚ for their being in conformity with whichever system of norms‚ whether moral‚ legal‚ religious‚ political or any other‚ which may be applicable‚ as well as answerability for their consequences‚ whether beneficial or injurious. In law‚ it applies in particular to a person’s answerability for compliance with his or her legal duties‚ and for any breaches thereof. [...] The term liability is often used specifically to denote the obligation to bear the consequences of a breach of a legal duty‚ in particular the obligation to make reparation for any damage caused‚ especially in the form of monetary payment [...] ”. B. Cheng‚ “Article VI ofthe 1967 Space Treaty Revisited:‘InternationalResponsibility’‚ ‘National Activities’‚ and ‘The Appropriate State’” (1998) 26:1 Journal of Space Law‚ 7‚ at 9. Prof S. Gorove also provided a comparison between the two terms as follows: “ It should be stressed that in the field of international space law two closely connected terms have been used: ‘liability’ and ‘responsibility’. Neither of these terms has been defined in space law but the term ‘liability’ has been used to set the launching state’s liability for damage caused by space object‚ whereas the word ‘responsibility’ has been used to mandate international responsibility by the appropriate State party for national activities in outer space. Even from this brief reference to the use of the two terms‚ it appears that in connection with ‘liabilities’ we are dealing with legal consequences (continued...)

289 responsibility of States involved in space activities but it does not provide for liability rules which will allow the efficient presentation of the claims‚ establishment of the damage‚ assessment of the compensation‚ procedural aspects of settling the dispute in a definitive way and compensating the victim. Although the efforts of the drafters of the Liability Convention have been tremendous‚ it has not gone as far as laying down a substantive uniform system of liability for damage caused by space objects and lacks the predictability essential to an efficient liability system.(965) The proposals made so far in the UNCOPUOS have not addressed these issues‚ or only partially as it is the case for the review of the term ‘launching State’ and the exhortations made to States to recognize the binding character of the claims commission. When the space treaties were developed‚ they were addressing activities of States because there were no other actors involved with launching. All the space treaties address the responsibility of States‚ and refer to their responsibility for national activities‚ as well as their obligation of authorization and continuing supervision of the activities of nongovernmental entities. But the actors of space law remain States and States have throughout the years taken their distance from the launch activities‚ allowing private entities to play their own part‚ with a certain degree of autonomy. The space treaties remain ignorant ofthis reality. The relationship between private entities and States when it comes to liability for damage caused by space launches needs to be clarified to allow for proper legal security. b)

States address differently their obligation of authorization and continuing supervision

Insofar as the space treaties did not cater to private activities in much detail‚ the control of States over space activities ofnon-governmental entities‚ in particular launch activities‚ is not harmonized internationally. States are therefore free to implement authorization and continuing supervision as they see fit. We have seen in Chapter 3 that there may be different approaches. The situation at present is that States are free to decide which standards they impose on the operators in terms of safety‚ insurance and so on‚ and also to decide whether and how they implement indemnification provisions in their national laws. This has originally been a matter of much competition on the launch market but there are now well established practices followed by the major launch providers‚ which would better be codified and imposed in full transparency on new entrants in the market as well. (964)

(965)

(...continued) (mostly in terms of damages) arising from a particular behavior. In contrast‚ it seems that when we speak of ‘responsibilities’‚ we are dealing primarily with obligations imposed on people and institutions who are supposed to carry out certain activities or are accountable in given situations‚ though not necessarily in the form of compensation for damages. Thus to some extent‚ the two concepts are interrelated. Normally‚ liability deals with compensation for damages resulting from loss of life‚ personal injury loss or damages to property‚ whereas responsibility may not always include compensation for damages but could include criminal accountability. ” S. Gorove‚ Developments in Space Law (Dordrecht‚ Boston: Martinus Nijhoff‚ 1991)‚ at 224. For a detailed argument in this direction see‚ M.S. Firestone‚ “Problems in the Resolution of Disputes Concerning Damage Caused in Outer Space”‚ supra note 652.

290 A number of States have adopted legislation providing for licensing requirements(966) which cover‚ in particular‚ launch activities. Some have also provided for indemnification and insurance provisions. It would be difficult to argue that this attitude of States could be considered as an emerging norm of customary international law‚ since the licensing and indemnification regimes do not always refer to the Liability Convention and do not demonstrate the belief of the States concerned that they feel an obligation to act in such a way. Therefore‚ the opinio juris element which is essential to qualify rules of customary international law‚ cannot be found in all cases. Nevertheless‚ it is a practice which has developed‚ at least among those States which foresee the use of their territory for launch activities. c)

The terminology of the space treaties has been criticized

As we have addressed earlier in our Chapter 2‚ a number of notions upon which the functioning of the space treaties relies with respect to liability are poorly defined. This is the case for the “launching State”‚ or the “appropriate State” in particular. The weaknesses of the definitions makes it difficult to predict with adequate security which State is responsible for the damage caused by activities of launch companies‚ and which State has to authorize and supervise their activities. The risk is that either no State controls the entity in question‚ or multiple States impose conflicting conditions upon it. The determination of the State against which a claim can be brought can be difficult. We also need to take into account the potential future development of flexible launching systems such as those involving platforms at sea. It is essential that adequate control of such activities be exercised by a State and that other States are able to rely upon such control being effective‚ and liability being resolved in a predictable way. d)

Private launch operators are de facto the entities primarily liable

Due to the weaknesses of the Liability Convention‚ when it comes to the treatment of claims and the settlement of disputes‚ victims would necessarily proceed against the launch operators and not against the launching State via diplomatic channels. Private launch operators cater to such liability as part of their business but their relationship with a particular State is not always clear. This link is essential for the appropriate predictability in the field. The lack of rules governing the implementation of the subsidiary liability of the launching States leads to the consequence that private operators may not be provided with any security as to the extent of their liability for launch activities.

(966)

This is the case in the US‚ the UK‚ South Africa‚ Sweden‚ Russia‚ Australia. See supra note 423for references of information on those legislation See also for Australia: M.E. Davis & R.J. Lee‚ “Financial Responsibility and Government Indemnities For Commercial Launch Activities‚ The Australian Approach”‚ paper presented at the 1999 Colloquium‚ obtained from the authors through their web site online at <Ward & Partners‚ http://www.spacelaw.com.au> (accessed: 01/2001). This site also contains the description of the new licensing regime introduced in Australia with the Space Activities Act 1998. For Japan: M. Sato‚ “The Japanese Legal Framework: Third Party Liability Resulting from NASDA Launch Activities” (1998) 41 Colloquium‚ 127 For Brazil: J. Monserrat Filho‚ “Recent Developments of the Brazilian Space Law” (1998) 41 Colloquium‚ 265.

291 The Liability Convention‚ in its Article VII‚ provides that the rules of this Convention do not apply to damage caused by a space object to nationals of the launching State. This means that‚ absent implementation rules the launch provider is exposed to claims from nationals of the launching State ( the most likely are third-party claims since the exposure to physical injuries is the highest in the vicinity of the launch complex and in the early stages of the flight of the launcher) without limitation; the launch provider will also be the target of all other claims‚ by any foreign nationals‚ which may have to be compensated as a result of normal civil suits simply because the Liability Convention does not offer a serious avenue of recovery for victims. These uncertainties vary from country to country as a function of the relationship between treaties ratified and domestic law.(967) The rights and obligations of the launch operator may be difficult to link directly with the space treaties‚ and he may have no right to rely on his State for indemnification although such State would be liable under the Liability Convention. No provision of the Liability Convention could be enforced by a court as being self-executing and granting to the launch operator a right to indemnification‚ quite the contrary as the Convention does not deal with claims within a State. This can only be done through national legislation. Unless such legislation is enacted‚ the launch operator may have to compensate claims without exoneration and without limit. Whether or not he can be indemnified by his State may then become an interesting challenge in administrative and constitutional law‚ and he will have to face limitations due to the fact that no budget appropriations are available in the budget of the State concerned without legislation being passed for that purpose. This environment can hardly contribute to the development of commercial launch services and the furthering of the exploration and use of outer space for peaceful purposes. It is certainly also not favorable to developing a financial basis necessary to conduct such activities. e)

There is a need for action

The future needs to see a lowering in the cost of launching a kilo of payload to orbit to provide better access to space for all‚ increase the number of launches‚ the number of objects launched and the number of launch facilities. The example of Sea Launch shows that operators will develop innovative and cheaper ideas for launching‚ and will establish (967)

On self executing treaties in the US‚ see our Chapter 3‚ para 3.1 In France‚ Article 55 of the French Constitution provides: “Les traités ou accords régulièrement ratifiés ou approuvés ont‚ dès leur publication‚ une autorité supérieure à celle des lois‚ sous réserve‚ pour chaque accord ou traité‚ de son application par l ’autre partie ”. The Treaties and agreements subject to this provision have to be published in the Journal Officiel de la République Française. Only treaties having been published can be given some effect in domestic courts‚ if also the provisions concerned are clear. The existence of a Treaty and its relation to the justification or condemnation of acts of the Executive government‚ has been primarily addressed by the administrative courts‚ which have so far not given too much effect to treaties in the internal order. See‚ J. Combacau‚ T. Sur‚ Droit International Public‚ supra note 73‚ at 175 ff.

292 launch sites in international waters or in countries where no regulations exist to hamper the installation oftheir business. This will in turn potentially increase the probability that third parties get hurt by these activities. Although catastrophes have not yet occurred‚ it is already clear that social relations created by these activities need to be regulated internationally‚ due to the need for States to implement concerted actions in this respect. The speed at which work can be done on developing an international framework mandates that it starts now and not in reaction to future developments which are already on the horizon. In conclusion to his article on the recent adoption of the 1999 Montreal Convention mentioned above‚ Professor Milde stated: “ How long will it take to bring the new Convention into force? The conventional wisdom and general precedents would suggest that it would be a good success to see the new Convention in force for the initial 30 States during the first five years of the 21st century. Some more patience is required - in the light of the fact that the first work on a fundamental revision of the old system was initiated within ICAO more than 33 years prior to this latest Diplomatic Conference.”(968) Space lawyers always had the reputation ofbeing visionaries and able to provide for future generations’ legal problems. Are they prepared to be criticized for running out of imagination?

5.4.2.- Issues and proposals We are focusing below on the issues addressed in the course of our discussions and on which some different approaches can be suggested. All proposals made below have been consolidated in a proposed Protocol which can be found in Chapter 6 to support the ideas with language for an overall instrument. i)

The launching State: definition

a)

The need for a predictable determination of the launching State

As pointed out earlier‚ the expression “launching State” used in the Liability Convention to determine the State liable to compensate the victims ofdamage caused by a space object is defined in the Convention in such a way that a multiplicity of States may qualify as the launching State. This means that: multiple States may feel they need to regulate a certain activity; the handling of claims by victims of damage can only be delayed and hampered by such a situation. We would like to recall‚ for the purpose of this analysis‚ that the Liability Convention foresees four categories of launching States: 1) the State which launches a space object; 2) the State which procures the launching of a space object; 3) the State from whose territory a space object is launched; (968)

M. Milde‚ “Liability in International Carriage by Air. The New Montreal Convention of 28 May 1999", supra note 962.

293 4) the State from whose facilities a space object is launched. The latter two categories are usually the same State‚ since the facilities and the territory will normally go together but one has to consider the hypothesis of a sea launch‚ where the facilities may be under no jurisdiction‚ as well as some launch systems using aircraft. Categories 1‚3 and 4 have sometimes been referred to in the present thesis as the primary launching State because it is the most obvious launching State to a third-party. The launch has a physical and geographical connection to that State which is easy to establish and it is‚ therefore‚ the State which is most exposed to claims in case of a damage caused on the occasion of the launch‚ the riskiest time to third-parties when compared to all other activities surrounding the operation of a space object. The liability of the primary launching State is perfectly natural during this period of time. The liability of the State which procures the launching is involved as well‚ as the launch operations are done upon its request and financing‚ and in its interest‚ and as the satellite is a part of the whole hardware being launched. However‚ the more time passes after the launch‚ the less the primary launching State has to do with this launch. One may well understand the concerns of the drafters of the Liability Convention at that time. The aim was to ensure that thirdparty victims could always be compensated by one of the States taking part in a launch. By multiplying the number of potential launching States‚ this aim was thought to be achieved. However‚ such a system has the following drawbacks: difficulty in procedure: one has to assume that in case a claim would be brought against a State under the Liability Convention‚ a long time would be spent discussing who is the launching State since States would probably not be prepared to compensate the victim and rely on the claim in recourse provided for in the Convention‚ as they would have no guarantee to obtain indemnification by other launching States. This would lead to lengthy proceedings‚ not helped by the weaknesses of the Liability Convention dispute settlement mechanisms. This‚ ultimately‚ does not offer any guarantee to the victim. deep pockets effect: the State of the victim has the freedom‚ in the present system‚ to do “forum shopping” and choose which of the launching States it prefers to claim against. This State will look for the launching State which has the deepest pockets‚ in exactly the same way as in the domestic litigation we have analyzed in Part I‚ Chapter 4. Other elements of a similar nature will be considered such as the legal experience of the launching State in such matters and its access to legal experts‚ its legal tradition and its interpretation of international law‚ its status vis a vis the Space Treaties and many other elements which would be assessed on a case-by-case basis. Ultimately‚ in a venture involving multiple launching States‚ it will be a lottery as to whom the victim State will claim against for the full compensation‚ and how the State which has compensated the victim will recover. b)

The need to maintain the launching State’s guarantee

While there is the need for clarifying the definition of the States involved with a view to allocating liability between them in a predictable way‚ and for stimulating the enforcement

294 of a clear link in domestic law between the launch companies and a defined State‚ we believe that the liability of the launching State for activities of launch operators is a fundamental principle which needs to be preserved. The Liability Convention has instituted an exceptional regime in public international law which normally does not recognize the responsibility of a State for the acts of its nationals(969) The Liability Convention has gone a step further‚ and it does not seem that today’s context of the launch business would require this regime to be reviewed. Firstly‚ the commercial launch business is still very young and one cannot‚ at this stage‚ consider it as mature. Secondly‚ due to the large damage which can be caused by launches and the absence of legislation in the large majority of States on the subject‚ it is much preferable to leave the ultimate responsibility on States. Thirdly‚ the practice of States as evidenced by the increasing number of them moving towards the institution of indemnification schemes for the launch business‚ shows that they do not consider the launch business as ready yet to absorb the potentially large losses involved with launch activities‚ and they acknowledge their ultimate responsibility through the indemnification regimes. Besides the US and France‚ where indemnification provisions exist as we have detailed in our Chapter 3‚ indemnification provisions have been recently introduced in the laws of Australia and Japan and work is ongoing also in this direction in Brazil.(970) Insurance has been recently made mandatory in Russia for all launches‚ whether commercial or not‚ and amounts of minimum insurance have been set both for third-party liability and for damage to launch facilities. (971) In times where private enterprise develops considerable activities in the space business‚ one could be tempted to return to a classical system of liability where the nongovernmental entities carry the liability for their own acts and the launching State bears no liability whatsoever for these launching activities. This is‚ for instance‚ the position of Professor Wassenbergh‚ who states: “ It should be made possible for victims to directly claim compensation from the nongovernmental entity‚ i. e person or corporate body‚ which engages in the space activity causing damage. To this end‚ and as a first point‚ launching activities should no longer be carried out by states‚ and in any case the launching state should no longer be liable as such‚ even when the state is the launching party‚ or the launch takes place from the territory or facility of the state‚ or is procured by the state‚ to pay full compensation for damage caused by a private space object‚ after that space object is separated from the launch vehicle‚ i.e has been delivered into outer space. ”(972) We believe that such direct actions of victims against launch companies are already (969)

For an overall analysis of this topic‚ see B. Cheng‚ Studies in International Space Law‚ supra note 24‚ at 598 ff See also an interesting analysis‚ in relation to the issue of whether or not State strict liability for transnational injury due to ultra hazardous activities is an emerging norm of international law‚ in J.S. Charme‚ “Transnational Injury and Ultra hazardous Activity: An Emerging Norm of International Strict Liability” (1989) 4 The Journal of Law and Technology‚ 75.

(970)

See references supra note 966.

(971)

“Liability Coverage Ordered” (1999) 11:7 Space News‚ at 4 and 20.

(972)

H.A. Wassenbergh‚ “The Law of Commercial Space Activities”‚ in G. Lafferranderie & D.Crowther eds‚ Outlook on Space Law over the Next 30 Years‚ supra note 14‚ 173‚ at 182. See also H.A. Wassenbergh‚ “A Launch and a Transportation Law Separate From Outer Space Law? It is Time to Legally Unburden the ‘Launching State’” (1996) 21:1 Air and Space Law‚ 28.

295

possible in front of national courts. Of course‚ this is also a difficult avenue to take for the victims as such actions are then subject to private international law rules‚ which in turn designate an applicable law‚ and lead to a decision to be enforced in a foreign country with all the difficulties it implies. However‚ such direct actions would most certainly fail when the victim would be the private operator of a satellite for instance‚ Party X‚ which has been damaged in space by another satellite of Party Y. Assuming that the rule of conflict used for the determination of the applicable law is the lex loci delicti‚ one ends up in the situation where there is no applicable law to decide the private dispute between those two parties. At the present time‚ there is still a legal vacuum in space law which is due to the fact that there is almost no domestic legislation in the area of launching and liability. Therefore‚ between the international treaties and the general domestic law of each country‚ there is basically nothing‚ except in the very few cases of countries which have enacted specific legislation. The approach proposed by Professor Wassenbergh will most certainly come about‚ as one has to consider that space activities will‚ one day‚ be conducted like any other activities under the responsibility of their operators and not under the guarantee or subsidiary liability of a particular State. We believe however that going that far at present would be dangerous due to the very poor level of development of the private international law of liability and of technical standards in the field of space and launching in particular. Although we generally agree with the statement that “Even if the largest freedom of use has to be respected and private enterprise encouraged‚ in outer space like elsewhere‚ we have no long term interest in opening the Pandora box of a total deregulation of fast growing activities in Outer Space or connected with it”‚(973) and that “In outer space we are now at the crossroads. We can choose between a state of anarchy and the maintenance of a special control exercised by states over space activities ”(974)

we believe that there is a median avenue‚ and that launch operators need to be placed on the front-line‚ albeit with the guarantee of their launching State. c)

Definition of the launching State

While maintaining the subsidiary liability of the launching State for national activities‚ it is essential to clarify which is the launching State. The practice in those States where launch operators are active shows that those States take their responsibility seriously. The States which control launch activities are the States on the territory of which launch facilities are located‚ essentially. This is the primary criteria. But States also extend their control to activities of their nationals‚ and activities of entities controlled by their nationals. These are criteria which one can find across the various

(973)

A. Kerrest‚ “Launching Spacecraft from the Sea and the Outer Space Treaty: the Sea Launch Project” (1997) 40 Colloquium‚ 264‚ at 270.

(974)

A. Kerrest‚ “Remarks on the Responsibility and Liability for Damages Caused by Private Activity in Outer Space” (1997) 40 Colloquium‚ 134‚ at 135.

296 licensing regimes already in place in some countries today.(975) The launching State should be the State which has effective territorial or personal jurisdictional control over the activities concerned‚ such jurisdiction being composed of both characters of prescriptive jurisdiction (the capacity to make law) and enforcement jurisdiction (the capacity to ensure compliance with the law)(976) also referred to by Professor B. Cheng as jurisfaction and jurisaction.(977) We would‚ for the field of launching activities‚ propose to eliminate the notion of “State procuring the launching” and to define the launching State by reference to the effective jurisdiction which a State can exercise over the activity concerned. We would concentrate and reduce all definitions of “launching State”‚ “State which procures the launching” and “appropriate State” to one single notion of “State of Launch” during the launch and “State of Operation” during the life of the payload‚ which would be the liable and responsible launching State in the sense of the convention‚ and which could cover the following alternative States: Where the launch is performed from launch facilities‚ including airport facilities when the launch is carried out from an aircraft‚ located on the territory of a State‚ that State would be the launching State. That State would be referred to as the State of Launch. Where the launch is performed from facilities located outside the territory of a State‚ including its exclusive economic zone‚ or from any place not subject to sovereignty ofany State‚ the launching State should be the State of nationality of the launch operator performing the launch‚ such nationality being established by a genuine connection with such State as evidenced by the citizenship in the case of individuals or‚ in the case of corporations or other non-governmental entities‚ by the place of central administration. That State would also be referred to as the State of Launch. Upon completion of the launch activities‚ the launching State should be the State on whose registry the object launched is carried‚ or in the absence of registration‚ the State of nationality of the non-governmental entity exercising technical control over the object (referred to as the payload operator)‚ such nationality being established by a genuine connection with such State as evidenced by the citizenship in the case of individuals or‚ in the case of corporations or other non-governmental entities‚ by the place of central administration. That State would be referred to as the State of Operation. These criteria would allow the jurisdiction of only one State at a time over a certain entity. It would allow the corresponding States to assess what they need to regulate and which activities they may bear responsibility for. We can easily imagine that one would argue against our definitions that they introduce the notion ofnationality‚ which opens the door to potentially different States being involved‚ but we believe that it would have the merit of reintroducing the notion of nationality (975)

See references called up in supra note 966.

(976)

M.N. Shaw‚ International Law‚ supra note 33‚ at 452.

(977)

See‚ for a general discussion of these concepts‚ which Professor B. Cheng has developed since a long time‚ B. Cheng‚ “Article VI of the 1967 Space Treaty Revisited: ‘International Responsibility’‚ ‘National Activities’‚ and ‘the Appropriate State’” (1998) 26:1 Journal ofSpace Law‚ 7.

297

known in international law and interpreted through many cases. This is not the case with “State procuring the launching” or “appropriate State”. ii)

The liability of the launching State

We would propose that‚ for States which would be Parties to the proposed Protocol‚ the State of Launch is liable for damage caused by the launch activities‚ and the State of Operation is liable for damage caused by the operation of the payload. They each may have‚ in certain circumstances‚ an action in recourse against the other after having compensated the victim. However‚ in relation to other States which would not be parties to the Protocol‚ the State of Launch and the State of Operation could be claimed against jointly and severally‚ in accordance with the Liability Convention. In such a case‚ being Parties to the Protocol‚ the clarification of their responsibility as State of Launch or State of Operation would constitute an agreement on apportionment of their liability as foreseen in the Liability Convention. This apportionment is based on the basic idea that liability should in principle be with the State which has effective control over the activity he will bear responsibility for‚ and who can exercise actual enforcement measures on the entity being controlled. Insofar as the State of Launch has the authority to prevent the launch of a potentially dangerous payload‚ it is logical that he should be the first liable for the launch activities. This does not seem to be contested in practice and the insurance requirements placed on the launch operators demonstrate so. On the other hand‚ it is also not justified that‚ having no control over the payload‚ the initial launching State would continue to be first liable after the launch. The primary liability should therefore shift to the launching State of Operation. Based on such principle‚ once the launcher has completed its job and the satellite is on its own‚ on orbit‚ the primary launching State should not bear any liability anymore for the satellite‚ but only for the pieces of the launcher which are‚ as in current practice‚ the only things it needs to register. We will return later to the cases where actions in recourse could be brought. iii)

Appropriate State

The approach we have proposed above for the definition of the launching State is based on the primary importance which is given to the State which has effective jurisdiction both prescriptive jurisdiction and enforcement jurisdiction. The necessary conclusion of this reasoning is that the “appropriate State” which is meant to exercise authorization and control over the launch operator or the payload operator‚ can only be the launching State as we have defined it above‚ either the State of Launch or the State of Operation. One important aspect needs to be addressed in connection with the notion of appropriate State and of effective control. One may indeed fear that our approach would lead to the development of “flags of convenience” which would allow the launch operators or payload operators to arrange for the registration of their objects or the launch in convenient States with relaxed legislation and weak controls. This situation exists today already‚ insofar as the limited number of Parties to the Liability Convention and the Registration Convention

298 leaves a significant portion of the world uncovered from that point of view. We believe however that this risk is fairly low for launch and payload activities. Firstly‚ the investment connected to these activities is extremely high and it is unlikely that these businesses would elect unregulated environments to operate. Secondly‚ as in the field of aviation‚ the role played by insurance and financial institutions is fundamental. These mandatory players in the field will normally require a high degree of safety of the operations and an appropriate protection of financial interests. Countries with poor regulatory framework and weak control over safety of the activities will receive poor ratings in insurance and financial terms which will make launches from such countries either impossible or more expensive. So‚ although the risk exists for such flags of convenience to develop‚ we believe that our proposed approach would not modify the present situation in this respect. The proposals we make further concerning the Registration Convention also require the State of Registration to be‚ for the payload‚ the State of Operation‚ in an attempt to establish an effective connection to a particular State.(978) One should also provide the possibility for States to transfer an object from the responsibility of one State to the responsibility of another. This could be the case‚ for example‚ for the State of Operation which may have authorized and supervised a payload which has subsequently been transferred to a different owner which is under the effective jurisdiction of another State. We will return to this topic when we address the registration aspects of our proposals‚ but one would imagine that such a system could be useful in the future to always ensure that a given operator and object are under the effective jurisdiction of a State. Article 83 bis of the Chicago Convention would be a relevant analogy in this respect.

iv)

Establishing the liability of the launch operator and legal channeling with respect to claims by third-parties

At present‚ a victim of a damage caused by a launch activity would have various avenues of action: it could claim against the launch operator; it could claim against the satellite customer; it could claim against any of the contractors of those two‚ or any deep pockets they may have identified‚ which has some relationship with the operations conducted; it can claim against the government of the launch operator through diplomatic channels; it can claim against the government of the satellite customer through diplomatic channels; it can claim against the government of any other State which it could identify as a launching State under the Liability Convention. This can result in a patchwork of completely counterproductive claims‚ especially as the Liability Convention has also given the victim the possibility to claim from the launching State without having exhausted local remedies‚ an approach rather different from (978)

For a comparison with aviation‚ see A. Kadletz‚ “Some Thoughts on the Application of the Law ofthe Flag in Private International Law” (1998) 47:4 Zeitschrift Für Luft Und Weltraumrecht‚ 490.

299 international law in general. Insofar as launch operators take third-party liability insurance‚ and that the launching State is also liable‚ the regime of the Liability Convention seems to create unnecessary confusion where the operators themselves seem to be prepared and able to face claims. For the specific area of launch activities we believe that it is feasible to implement a legal channeling of all claims to the launch operator. Victims would have to present their claims to this launch operator‚ and the launching State would compensate such claims to the extent that the launch operator is deficient or the insurance limitations have been exhausted. With such a system‚ the confusion which can be created by third-party claims would be eliminated since it would be channeled to the launch operator only. Combined with our proposal for the definition of launching State‚ in our view‚ this would improve legal predictability in this area. In particular‚ it would also avoid the claims brought by third-parties against manufacturers of the launcher or the payload which we have noted earlier were a source of risk. In this approach‚ the issues of liability of manufacturers for damage caused by their product would be a matter to be organized between the launch operator or the satellite owner and their respective contractors. We have attempted to develop provisions to that effect in our proposed Protocol‚ with the inspiration of the framework adopted in nuclear law with the Vienna Convention on Civil Liability for Nuclear Damage of 1963‚ entered into force on November 12‚1977‚ amended by a Protocol adopted on September 12‚ 1997‚ and complemented by a Convention on Supplementary Compensation for Nuclear Damage adopted on September 12‚ 1997.(979) Nuclear law has often been taken as an example in relation to launch activities and once more‚ it could be a source of inspiration.(980) The conventions mentioned above are going much further than we propose to do at this stage for space launches. They establish a substantial regime of private international law dealing with liability for nuclear damage. We have attempted to find an approach for launch activities which would follow similar lines‚ and prepare for a further step towards developing private international law rules for space transportation‚ as we agree with Professor Wassenbergh that we will come to need such a regime at some point in time. The introduction of the direct liability of the launch operators and of legal channeling requires a minimum of private international law provisions such as the determination of the competent court‚ which we have also taken into account in our proposed Protocol. The launch operator‚ although the only one liable vis a vis third parties‚ would have actions in recourse‚ in particular if foreseen by contract‚ against other parties he has contracted with for the activities involved in the manufacturing of the launcher‚ launch preparation‚ launch and so on. This would‚ nevertheless be a second step which he would implement only after having compensated the victim (or if the domestic legislation would (979)

These documents can all be found online at <Malaysian Institute for Nuclear Technology Research: http://www.mint.gov.my/policy> (accessed: 01/2001).

(980)

For more details on the legal framework developed by the Vienna Convention on Civil Liability for Nuclear Damage‚ and on the Convention on Supplementary Compensation‚ see B. Mc Rae‚ “The Compensation Convention: Path to a Global Regime for Dealing with Legal Liability and Compensation for Nuclear Damage”‚ and M. Radetzki‚ “Limitation of Third Party Liability: Causes‚ Implications and Future Possibilities”‚ supra note 961.

300 allow‚ he could call those contractual parties‚ where relevant‚ to the defense of the suit). Among the participants‚ we would be in favor supporting the use of inter-participants waivers of liability as an effective means of managing the insurance available on the market. Implementing legal channeling of claims to the launch operator is only recognizing a situation of fact and should not be in contradiction with the continued efficiency of these inter-participants waivers. This approach would certainly oblige the participants to exercise increased care in the conclusion of all contracts involved at lower levels. v)

Licensing requirements

In order to avoid that each State decides how to implement his obligations‚ we believe that domestic legislation would have to be expressly required. The State of Launch definitely must enact adequate legislation‚ or issue regulations‚ to license the activities of launch operators‚ and certain minimum standards and contents need to be prescribed internationally for such licensing regime. Also‚ as far as the State of launch would have to take over the compensation from the launch operator beyond the limits covered by insurance‚ a requirement has to be imposed for mandatory insurance. This would also be necessary when the State of Launch would leave all liability on the launch operator. Domestic legislation would also be required to implement the legal channeling to the launch operator. As far as this analysis is concerned‚ we have focused on the launch activities and have given limited attention to the payload operator and the State of Operation in terms of implementation details but we would propose that the State of Operation would also have to implement legislation to provide for licensing of payloads. This is why in our proposed Protocol we have made reference to the launch license to be provided by the State of Operation. Insofar as States normally have to authorize the use of orbital positions and the use of frequencies‚ they could‚ at the same time issue a launch authorization for the concerned payload. The proposals made in relation to licensing regimes are‚ to a large extent‚ a codification of current practices. Such a codification would make the current practices transparent at international level and provide for the missing link in the Liability Convention between States and non-governmental entities. The detailed contents of the domestic legislation would be a matter for each State to decide but the standard ofauthorization and continuing supervision prescribed by the Outer Space Treaty would be clarified as far as launch activities are concerned. vi)

Actions in recourse between States

Insofar as we have proposed an alternative liability in the relations between States parties to our Protocol‚ they would have an action in recourse against each other provided they can demonstrate a fault. However‚ this action in recourse would only be available if the claimant State has spent taxpayer funds to compensate victims of a damage‚ i.e if he has indemnified above the insurance provided by the launch provider. If no public funds have been spent to provide the compensation‚ then there would be no action in recourse

301 possible. A different solution would be either unfeasible because the claimant State would not have suffered a damage which requires indemnification‚ or lead to unjust enrichment. If the State is not called for indemnification‚ then the damage is entirely covered by the insurances taken‚ and‚ at least in the US system‚ the insurers would have no claims against the US Government‚ nor against the payload operator (launch customer). We have proposed above that the State of Launch and the State of Operation are not jointly liable‚ but rather each is solely liable for the portion of activity under its jurisdiction.(981)

5.4.3.- The Registration Convention i)

Shortcomings in the Registration Convention

The requirement by the Registration Convention‚ that the launching State registers the space object(982) allows the determination of such launching State easily when it is the sole agent involved in an activity. As soon as more than one State is involved‚ the use of the registry has less evidence value for determining which is the launching State‚ since the States concerned will jointly decide which of them will register the object.(983) The current practice concerning registration(984) of payloads in the frame of commercial launch services appears to be that launch providers only register the launcher on their national registry‚ and even payloads from the same State are in fact registered completely separately. Foreign payloads will only be registered under the responsibility of the payload owner‚ if so required by his national law. This means that the UN registry‚ on which the national entries are transferred(985) will not bear any mention of the payload launching State‚ although in accordance with the Outer Space Treaty and the Liability Convention‚ the owner of the payload would be considered as procuring the launching‚ and the State of which he is a national would therefore be a launching State. This system is the logical consequence of the joint liability of all States which can be qualified as launching States. Considerable uncertainty exists in this area since the obvious launching States‚ even those with licensing requirements‚ do not conclude agreements for prior apportionments of (981)

This being opposable only to those States which would be party to the Protocol. States party only to the Liability Convention for instance‚ could still rely on the joint liability.

(982)

Article II. 1‚ Registration Convention: “When a space object is launched into earth orbit or beyond‚ the launching State shall register the space object by means of an entry in an appropriate registry which it shall maintain. Each launching State shall inform the Secretary General of the United Nations of the establishment of such a registry ”.

(983)

Article II.2 Registration Convention: “When there are two or more launching States in respect of any such space object‚ they shall jointly determine which one of them shall register the object in accordance with paragraph 1 of this article [...].”

(984)

See for example 14 CFR‚ supra note 237‚ § 415.81.

(985)

Article IV Registration Convention.

302

liability‚ nor for registration‚jurisdiction and control‚ with all the States ofpayload owners which use the launch services of their nationals. In fact‚ to date very few States maintain a national registry‚ and only one international organization (ESA). There is‚ consequently‚ quite a large number of satellite operators which are not subject to registration in their national State. It is rather surprising that the States in which launch companies operate have not taken measures to remedy this situation to avoid that they are systematically the potential sole target of claims by victims of damage by the space object they have launched. This situation has so far been tolerated probably because the strongest risk of damage is concentrated at the time of the launch itself and it is less probable that the satellite itself when returning to Earth would cause damage. As far as damage in outer space are concerned‚ the occurrence of claims is also remote‚ due to the fault-based liability in this area which requires the proof of fault. There is a very clear lack of discipline in implementing the Registration Convention‚ which does not help at all the predictability of identification of a launching State. We would like to quote here the conclusion which was reached by Mr. L. Perek in a recent assessment of the situation: “ Some of the above practices‚ in particular incomplete registering‚ long and irregular delays of announcements and different formats of announcements‚ may have adversely affected the usefulness ofthe Convention and may be among the causes ofthe reluctance of some States to become Parties to the Convention. The increase of the percentage of unregistered objects is alarming. Attention should be paid to the fact that one collision of two space objects has already occurred and that the active object participating in the collision was unregistered at the time of collision. A study of legal consequences of such an incident may be of interest. The existing state of affairs‚ in particular the awareness of possible advantages of the Registration Convention‚ could be improved if the COPUOS asked the Office for Outer Space Affairs to publish its processed register or its supplements at regular‚ e.g twice a year. In spite of its weak points‚ the Registration Convention is a valuable instrument. It has the ability to reset rapidly to an urgent situation. Its greatest value‚ however‚ is in the acknowledgment of responsibility of launching States for space objects by registering. Its value is neither in listing space objects‚ nor in their identification.”(986)

This acknowledgment of responsibility is indeed a fundamental aspect of the Registration‚ and the approach we have proposed above with respect to the determination of the launching State‚ needs to be complemented by a reliable and efficient registration system. ii)

Proposals for an efficient registration system to improve the security of determination of the launching State.

The present information technology available‚ and in particular the web based applications which allow access and use ofdatabases at multiple locations through the Internet‚ should definitely be considered as a way to improve the handling of the requirements of the Registration Convention.

(986)

See for a general assessment L. Perek‚ “The 1976 Registration Convention” (1998) 41 Colloquium‚ 374‚ at 378.

303 In this respect‚ reference is made to the Draft Convention on International Interests in High Value Mobile Equipment which has been developed under the auspices of UNIDROIT‚(987) and includes satellites. In order to address specific issues related to satellites‚(988) a Draft Protocol for space objects has been drafted.(989) In view of this Draft Convention and Protocol‚ and its requirements in terms of registration of rights‚ one could suggest that the UN Registry provided for by the Registration Convention is permitted to establish the necessary relationship with the Registry foreseen in the UNIDROIT Convention‚ and that an electronic and modern registry be set up to serve the requirements of the Registration Convention and feed also with information the UNIDROIT Registry. One could also imagine‚ more radically that the UN Registry be transferred into the UNIDROIT Registry with the benefit that the legal personality and rules of evidence put into place by UNIDROIT could provide a more solid standing to registrations made under the Registration Convention. In any case‚ as a first step‚ the UN Registry needs to be modernized and made accessible on line for consultation and for registrations. This would then allow the implementation of an improved registration method. The current situation where launch providers register parts of their launcher and disregard the issue of registration of the payload is not adequate. The launch providers should be given the responsibility to register the launcher as well as the payload. We propose that the launch operator is given the responsibility to register‚ at the latest on the day of the launch‚ the launcher and its payload into the registry of the State of Launch. The registration of the payload would be based on the payload operator’s license certificate which would identify the State of Operation. This double registration would then be transmitted onto the UN Registry. The State of Operation would then be notified by the UN Registry that the registration has been entered. In effect‚ the State of Launch would register the payload on behalf of the State of Operation. We would however limit this obligation of registration by the launch operator to those payloads for which the payload operator is a non-governmental entity. The “registration on behalf ” could encounter some problems when it comes to payloads launched by States such as surveillance satellites or other defense related payloads. In case one of the States in the chain is not a party to the Registration Convention or to the proposed Protocol‚ this would not prevent the registration with the mention of that State. The practice shows that even States not parties to the Registration Convention have made declarations to the UN Secretary General‚ based on Resolution 1721 (XVI) of 20 December 1961 Part B‚ para 1.(990) In those cases‚ the Registration would only be for (987)

(988)

(989)

(990)

Draft Convention online at: (accessed: 01/2001). A draft protocol on Matters Specific to Aircraft Equipment has been approved by the UNIDROIT Governing Council at its session in April 2000. The text of this protocol can be found online at the address above. For a brief explanation on those issues‚ see P.D. Nesgos‚ “Recent Developments in Commercial Space Law” (1997) XXII-I Annals of Air and Space Law‚ 433‚ at 436. The Draft Protocol on Matters Specific to Space Property is not yet available on this site and has been consulted as submitted to the ESA International Relations Committee in an ESA document available to ESA Member States delegations (ESA/IRC(99)34‚ dated 2 November 1999). This Draft was prepared by Peter Nesgos in January 1999 for discussion in the space working group. The bibliographical reference of this resolution can be found in the Table of Treaties‚ in Annex to (continued...)

304 information. But this would already be of great help to the identification of the State of Operation or launching State. The setting up of an improved electronic registration system would be greatly beneficial. It would help provide all those concerned with up-to-date‚ clear information as to the identity of the launching State for each object launched. It would also allow for the dispatch of information to a large number of operators and States‚ for instance in cases of emergency notifications of the return of a space object‚ as provided in the Registration Convention. One also needs to foresee‚ as we pointed out earlier‚ the need to transfer an object from the registry of one State to the registry of another State when this object changes ownership or control and its operator needs to be placed under the responsibility of the State which is in a position to have effective jurisdiction over it. As we mentioned‚ we see an analogy in this respect with the provisions of Article 83bis of the Chicago Convention which states: “ Article 83bis. Transfer of certain functions and duties. a) Notwithstanding the provisions of Article 12‚ 30‚ 31 and 32a)‚ when an aircraft registered in a contracting State is operated pursuant to an agreement for the lease‚ charter or interchange of the aircraft or any similar arrangement by an operator who has his principal place of business or‚ if he has no such place of business‚ his permanent residence in another contracting State‚ the State of registry may‚ by agreement with such other State‚ transfer to it all or part of its functions and duties as State of registry in respect of that aircraft under Articles 12‚ 30‚ 31‚ and 32a). The State of registry shall be relieved of responsibility in respect of the functions and duties transferred. b) The transfer shall not have effect in respect of other contracting States before either the agreement between States in which it is embodied has been registered with the Council and made public pursuant to Article 83 or the existence and scope of the agreement have been directly communicated to the authorities of the other contracting State or States concerned by a State party to the agreement. c) The provisions of paragraph a) and b) above shall also be applicable to cases covered by Article 77.” We suggest that a similar provisions is introduced to implement the Registration Convention in a flexible manner. Notifications of such transfers could be made through the electronic registration system and notified to all States Parties in an accessible way.

5.4.4.- Conclusions on international law proposals The issues and proposals we have addressed above need refinement and are open to challenge. We have tried to make suggestions for what we see as a set of measures to (990)

(...continued) our Part I Chapter 2. This Part B para 1 states: “ The General Assembly‚ Believing that the United Nations should provide a focal point for international cooperation in the peaceful exploration and use of outer space‚ 1. Calls upon States launching objects into orbit or beyond‚ to furnish information promptly to the Committee on the Peaceful Uses of Outer Space‚ through the SecretaryGeneral‚ for the registration of launchings. ”

305

improve the current regime. These suggestions have been consolidated into a proposed Protocol Implementing the Outer Space Treaty‚ the Agreement on Rescue and Return of Astronauts‚ the Liability Convention and the Registration Convention With Respect to Launch Activities Carried out by Non-Governmental Entities. This Protocol is not intended as a review or amendment exercise to the space treaties. The principles of the space treaties are not affected but for the specific field of launching activities‚ and to take care of those activities which are carried out by non-governmental entities‚ practical and more detailed implementation of the treaties are proposed through this protocol. The provisions of this Protocol do not go against the treaties. They go farther but always through the authority found in the treaties themselves. This approach was chosen because it would probably be simpler than amending the treaties‚ in particular because we have addressed only one particular area of activity and one could not defend a complete amendment of the treaties based on that single example. Also‚ we believe that it is a flexible approach which could also be used for other types of activities‚ and would allow to follow developments in the space sector whether nongovernmental or governmental at a faster pace. We believe it would be feasible and useful to address in the Legal Subcommittee this type of approach. Without raising the ghost of review of the space treaties‚ which is a daunting task difficult to suggest at present‚ it would allow a practical way to address issues of operational importance to all States‚ for which a particular implementation of the Treaties could be useful. This would allow the evolution of space law to be acknowledged and discussed seriously. The discussion of legal issues in the Legal Subcommittee is necessary but the work on proposed texts is always far more efficient in terms of addressing the real issues. It is comparatively easy to point out problems and ways to solve them in general words. The work on a draft is the only way to address the real issues which the rigor of text drafting brings out. As a first step‚ it one could present these concepts and approaches as part of a workshop. The Legal Subcommittee usually holds a workshop every year at the occasion of the session‚ and the workshop is usually dealing with one particular topic. As the Legal Subcommittee has started its three year review of the launch systems‚ the definition of the launching state and possible ways forward‚ a workshop specifically on these issues could be organized where the proposals we made here could be presented‚ as an opportunity to test the ground and open the debate. Ultimately‚ the Legal Subcommittee of COPUOS will need anyway to get back to the drafting table and starting from an available text would certainly ease the discussions. In an effort to clarify and support the proposals made in this Chapter 5‚ we include a Chapter 6 which contains concrete wording to match these proposals.

CHAPTER 6.- SOME CONCRETE PROPOSALS

Following the narrative discussions on proposals to improve the current legal framework of launch activities, we include in this Chapter the translation of these discussions into proposed texts of model clauses on the one hand, and international instrument on the other hand. Notes are made occasionally below these documents to clarify the rationale of certain wording or approach.

6.1.- HARMONIZATION OF INTER-PARTICIPANT WAIVERS OF LIABILITY

In this respect, we have developed two types of model clauses: model clauses derived from the US regime, and implementing the interparticipant waiver of liability which AST requires the licensee to enter into with the US Government, together with the launch customer; model clauses inspired from the above, and from other clauses we found in launch services agreements, to be implemented in other cases.

INTER-PARTICIPANTS LIABILITY COVENANTS IN STATES WITH LICENSING REQUIREMENTS (US MODEL)

309

311

ANNEX XXX TO LAUNCH SERVICES AGREEMENT XXX (the “LSA”)(991) INTER-PARTY LIABILITY COVENANT (the “Covenant”) The present Annex, Inter-Party Liability Covenant is an integral part of LSA referred to above (and is therefore included in the term ‘LSA’ as used below), concluded between [Launch Provider] and [Customer], hereinafter also referred to as “the Parties”.

1.-

Context and General Provisions

The Parties agree that the LSA, including the present Covenant, has been concluded in an international context, that it has been the subject of discussions and negotiations, that all its terms and conditions are fully understood by the Parties, and that the price and the other mutual agreements of the Parties set forth in the LSA were arrived at in consideration of, inter alia, all the provisions here of specifically including all waivers, releases and renunciations set out herein.(992) The Parties have agreed upon an Agreement for Waiver of Claims and Assumption of Responsibility, to which the US Government is a party, pursuant to the AST Licensing Regulations, to obtain the Launch License(s) necessary for the performance ofthe Launch Services subject of the present LSA. Such Agreement for Waiver of Claims and Assumption of Responsibility (Attached in Appendix 1 to the Covenant) shall be considered an integral part of the Covenant. With the Covenant, the Parties agree to the detailed implementation between themselves of the provisions of the Agreement for Waiver of Claims and Assumption of Responsibility, as well as additional provisions. Should any of the provisions of the Covenant becomeillegal, invalid, or unenforceable in any jurisdiction, the Parties agree to give the remaining provisions the maximum practicable enforceability which the applicable law allows.(993)

2.-

Liability for LSA Performance(994)

Due to the particular nature of the launch services,(995) and acknowledging that both Parties have achieved satisfactory agreements on their mutual obligations, the Parties agree that any liability of [Launch Provider] or of [Customer] arising from the defective, late, or nonperformance of [Launch Provider] launch services or of [Customer]’s express technical (991)

Launch Services Agreement concluded between the launch provider and the customer.

(992)

This clause could be placed in the Covenant, but could also be placed in the contract itself, either in its opening article, or in an article concerning general conditions.

(993)

This clause could also be placed in the contract itself. It is usual practice to place severability clauses in international contracts.

(994)

This paragraph 1) sets the context of the Covenant insofar as it refers clearly to the remedies which the parties have expressly agreed, and which are stated in the LSA, 2) clarifies that the renunciations made by the parties are due to the specific nature of the launch services, and are based on satisfactory balance between the Parties’ mutual obligations and 3) states that apart from the express remedies indicated in the LSA, the parties have no claim against each other.

(995)

It is assumed that the definition of the launch services is provided in the LSA.

312

obligations(996) under the LSA is, in all circumstances, including termination of this LSA or a launch(997) under this LSA, strictly limited to the liability expressly provided for in the LSA. Except as provided in the LSA, the Parties hereto expressly waive, renounce, and exclude, any and all rights and remedies that may arise at law or in equity with respect to their performance of the LSA.

3.-

No fault no subrogation inter-participant waiver(998)

[Launch Provider] and [Customer] hereby agree to a no-fault, no-subrogation, interparticipant waiver of liability pursuant to which each shall hereby waive and release all claims it may have against the other, and against [other],(999) the contractors, subcontractors officers, directors, agents, servants and employees of the other, or any of them, for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from the LSA,(1000) regardless of fault.

4.-

Assumption of Responsibility, Hold Harmless and Indemnification(1001)

[Launch Provider] and [Customer] shall each be responsible for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from the activities carried out under the LSA, regardless of fault. [Launch Provider] and [Customer] hereby agree to hold each other harmless and indemnify each other, and each other’s Contractors and Subcontractors, for Bodily Injury or Property Damage sustained by its own employees, resulting from the activities carried out under the Contract, regardless of fault. [Launch Provider] and [Customer] hereby agree to hold each other harmless and indemnify each other and its directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, from and against liability, loss or damage arising out of claims that either Party’s Contractors and Subcontractors may have for Property Damage sustained by them and for Bodily Injury or Property Damage sustained by their employees, resulting from the activities carried out under the Contract, regardless of fault. In all such cases, each party accordingly agrees to dispose of any claim and defend (when not contrary to the governing rules of procedure) the other Party and its Contractors, (996)

(997) (998)

(999)

(1000)

(1001)

The technical obligations of the customer are defined in the LSA. We would suggest to use the term ‘express’ to avoid opening the door to litigation as to what implied obligations the customer could have. It is assumed that the definition of launch is provided in the LSA. This does not address obligations of performance, but the potential damage which the parties can cause to each other’s property and personnel during the launch activities. The parties may want to single out other participants, such as another customer of the launch company in the case of a shared launch for instance. We have made these clauses applicable to the entire LSA, as our assumption is that the licensed launch activities and the LSA are superposable and it may be hard to separate the two. With regard to indemnification and insurance mandatory for the license, this is limited to the license, and the waivers of liability are signed both by the launch provider and the customer in the Agreement for Waiver of Claims and Assumption of Responsibility (See Appendix 1 to this Covenant). But it seems safer for the parties to conclude this covenant with an as wide applicability as possible. These provisions complement the inter-participant waiver by an assumption of responsibility of each for his own loss, and a mutual hold harmless to avoid vertical claims.

313 subcontractors, directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, from any loss, damage, liability or expenses, including attorney’s fees, on account of such Bodily Injury or Property Damage and shall pay all expenses to satisfy all judgements which may be incurred by or rendered against the said indemnities.

5.-

Insurance other than third party insurance

[Launch Provider] and [Customer] shall each be responsible for such insurance as they deem necessary to protect their respective property and employees. Any insurance carried in accordance with this paragraph and any policy taken out in substitution or replacement for any such policy, shall provide that the insurers shall waive any rights of subrogation against [Launch Provider], [Customer], the United States, [other],(1002) and their contractors and subcontractors at every tier. Each party shall arrange to have an appropriate certificate issued to the other evidencing any waiver of subrogation required under this paragraph.

6.-

Third Party Liability and Insurance

Pursuant to Commercial Space Launch Act, and to the Regulations issued by the AST, [Launch Provider] must obtain and maintain in effect a policy or policies of liability insurance, in an amount determined by AST, that protects [Customer] and its contractors, subcontractors, and employees of each, involved in the activities carried out under the LSA, as additional insured, to the extent of their respective potential liabilities, against covered claims by a third party for bodily injury or property damage resulting from the activities covered by the LSA.(1003) [Launch Provider] shall, either directly or through the US Government, indemnify and hold [Customer], its contractors, subcontractors and employees, harmless from any and all loss, damage, liability or expense resulting from Property Damage or Bodily Injury caused to Third Parties in relation to the activities carried out under the present LSA(1004) to the extent not covered by said insurance. [Launch Provider] shall at its sole expense, defend any claims, actions, suits and proceedings, whether in law or in equity, brought against [Customer], its contractors, subcontractors or employees, on account of such Property Damage or Bodily Injury, and shall pay all expenses, including attorney’s fees, and satisfy all judgements as may be incurred by or rendered against [Customer], its contractors and subcontractors in connection therewith, provided [Launch Provider] is given prompt notice of any such claim, action, suit or proceeding, and provided [Launch Provider] is given, at [Launch Provider]’s written request and sole expense, such assistance and information as may reasonably be provided by [Customer], its contractors,

(1002)

(1003)

(1004)

The parties may feel the need to single out any other important participant such as another customer on a combined launch. There is a difficulty here, which is that the insurance and indemnification regulatory provisions are related to the license, and not to the LSA. However, insofar as it may not be so easy to split these activities, it may be easier to cover the LSA. This has the consequence of adding an extra liability on the launch provider, but one would expect it is minimal compared to that involved with the licensed activities. Could be limited to the License. This is more a matter of a negotiation, as this can be addressed independently of the government indemnification.

314 subcontractors or employees.(1005)

7.-

Definitions

For the purpose of this Covenant, and in their relationship, [Launch Provider] and [Customer] have agreed upon the following definitions:(1006) “Bodily Injury” means bodily injury, sickness, disease, disability, shock, mental anguish or mental injury sustained by any person, including death and damages for care and loss of services resulting therefrom, and any and all other consequential damages resulting therefrom. “Property Damage” means injury to or destruction of tangible property including the loss of use of such injured or destroyed property and loss of associated revenues, and all and any other consequential damages resulting therefrom. Other definitions shall be as called out in the Agreement for Waiver of Claims and Assumption of Responsibility, Commercial Space Launch Act and Regulations.

8.-

Other Provisions

Nothing contained herein shall be construed as a waiver or release by [Launch Provider] or [Customer] of any claim by an employee of [Launch Provider] or [Customer], respectively, for Bodily Injury or Property Damage, resulting from the activities carried out under the Contract. Notwithstanding any provision of this Covenant to the contrary, any waiver, release, assumption of responsibility or agreement to hold harmless and indemnify herein shall not apply to claims for Bodily Injury or Property Damage resulting from willful misconduct of any of the Parties, the contractors and subcontractors of any of the Parties, and the directors, officers, agents and employees of any of each of them.

9.-

Flow down obligation

With a view to satisfying their flow down obligations, as per the Agreement for Waiver of Claims and Assumption of Responsibility, and as per the present Covenant, [Launch Provider] and [Customer] hereby agree to flow down the text contained in Appendix 2 to the present Covenant to any party with which they enter into an agreement relating to the activities [services or equipments] contemplated by the LSA , including without limitation, all of their respective contractors, subcontractors and suppliers at every tier, and all persons and entities to whom they assign all or part oftheir rights or obligations under the LSA. Without prejudice to the provisions of the Agreement for Waiver of Claims and Assumption of Responsibility (Appendix 1), the Parties agree that in particular cases this (1005)

In such a scheme, there is no need for specific information to be provided to the customer about insurance policy exclusions since the launch provider will settle all claims in any case. This clause may need more details if required in line with the insurance contract, for instance with respect to delays in notification of damage and claims.

(1006)

These definitions are going much further than those contained in the regulations. But the participants have an advantage in making sure that for no damage whatsoever they would be claimed against. The definitions contained in the regulation have been narrowed down to reduce government indemnification.

315 flow down obligation may not be implemented when those concerned are not involved as such in the licensed launch activities and do not place property or personnel on the launch preparation and launch facilities. However, this shall be treated as an exception and the Parties agree to consult on such instances prior to their implementation. Agreement by any of the Parties to the non implementation of the flow down in a particular situation shall not be construed as a waiver by that Party of any of the provisions of the LSA, including the present covenant, and in particular those of paragraph 3 above.

316

APPENDIX 1 AGREEMENT FOR WAIVER OF CLAIMS AND ASSUMPTION OF RESPONSIBILITY This agreement is entered into on ................... [date], by and among [XXX] (the “Licensee”),(1007) [YYY] (the “Customer”) and the Federal Aviation Administration of the Department of Transportation, on behalf of the United States Government (collectively “the Parties”), to implement the provisions of section 440.17(c) of the Commercial Space Transportation Licensing Regulations, 14 CFR Ch III (the “Regulations”). In consideration of the mutual releases and promises contained herein, the Parties hereby agree as follows:

1.-

Definitions

Customer means the above-named Customer; on behalf of the Customer, any person to whom the Customer has sold, leased, assigned, or otherwise transferred its right in the payload (or any part thereof) to be launched by the licensee, including a conditional sale, lease, assignment, or transfer of rights; any person who has placed property on board the payload for launch or payload services; and any person to whom the Customer has transferred its rights to the launch services. License means License N° XXX issued on XXX by the Associate Administrator for Commercial Space Transportation, Federal Aviation Administration, Department of Transportation, to the licensee, including all license orders issued in connection with the License. Licensee means the Licensee and any transferee of the Licensee under 49 USC Subtitle IX, ch 701. United States means the United States and its agencies involved in Licensed Launch Activities. Except as otherwise defined herein, terms used in this Agreement and defined in 49 USC Subtitle IX, ch 701 - Commercial Space Launch Activities, or in the Regulations, shall have the same meaning as contained in 49 USC Subtitle IX ch 701, or the Regulations, respectively.

2.-

Waiver and Release of Claims

(A)

Licensee hereby waives and releases claims it may have against Customer and the United States, and against their respective Contractors and Subcontractors, for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from Licensed Launch Activities, regardless of fault.

(B)

Customer hereby waives and releases claims it may have against Licensee and the United States, and against their respective Contractors and Subcontractors, for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from the Licensed Launch Activities, regardless of fault.

(1007)

The launch provider.

317

(C)

The United States hereby waives and releases claims it may have against the Licensee and Customer, and against their respective Contractors and Subcontractors, for Property Damage it sustains, and for Bodily Injury or Property Damage sustained by its own employees, resulting from Licensed Launch Activities, regardless of fault, to the extent that claims it would otherwise have for such damage or injury exceed the amount of insurance or demonstration of financial responsibility required under sections 440.9(c) and (e), respectively, of the Regulations, 14 CFR 440.9(c) and (e).

3.-

Assumption of Responsibility

(A)

Licensee and Customer shall each be responsible for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from Licensed Launch Activities, regardless of fault. Licensee and Customer shall hold each other harmless and indemnify each other, the United States, and the Contractors and Subcontractors of each Party, for Bodily Injury or Property Damage sustained by its own employees, resulting from Licensed Launch Activities, regardless of fault.

(B)

The United States shall be responsible for Property Damage it sustains, and for Bodily Injury or Property Damage sustained by its own employees, resulting from Licensed Launch Activities, regardless of fault, to the extent that claims it would otherwise have for such damage or injury exceed the amount of insurance or demonstration of financial responsibility required under section 440.9(c) and (e), respectively, of the Regulations, 14 CFR 440.9(c) and (e).

4.-

Extension of Assumption of Responsibility and Waiver

(A)

Licensee shall extend the requirements of the waiver and release of claims, and the assumption of responsibility, hold harmless, and indemnification, as set forth in paragraphs 2(a) and 3 (a), respectively, to its Contractors and Subcontractors by requiring them to waive and release all claims they may have against Customer and the United States, and against the respective Contractors and Subcontractors of each, and to agree to be responsible, for Property Damage they sustain and to be responsible, hold harmless and indemnify Customer and the United States, and the respective Contractors and Subcontractors of each, for Bodily Injury or Property Damage sustained by their own employees, resulting from Licensed Launch Activities, regardless of fault.

(B)

Customer shall extend the requirements of the waiver and release of claims, and the assumption of responsibility, hold harmless, and indemnification, as set forth in paragraphs 2(a) and 3(a), respectively, to its Contractors and Subcontractors by requiring them to waive and release all claims they may have against Licensee and the United States, and against the respective Contractors and Subcontractors of each, and to agree to be responsible, for Property Damage they sustain and to be responsible, hold harmless and indemnify Licensee and the United States, and the respective Contractors and Subcontractors of each, for Bodily Injury or Property Damage sustained by their own employees, resulting from Licensed Launch Activities, regardless of fault.

(C)

The United States shall extend the requirements of the waiver and release of

318 claims, and the assumption of responsibility, hold harmless, and indemnification, as set forth in paragraphs 2(a) and 3(a), respectively, to its Contractors and Subcontractors by requiring them to waive and release all claims they may have against Licensee and Customer, and against the respective Contractors and Subcontractors of each, and to agree to be responsible, for any Property Damage they sustain and for any Bodily Injury or Property Damage sustained by their own employees, resulting from Licensed Launch Activities, regardless of fault, to the extent that claims they would otherwise have for such damage or injury exceed the amount of insurance or demonstration of financial responsibility required under section 440.9(c) and (e), respectively, of the Regulations, 14 CFR 440.9(c) and (e).

5.-

Indemnification

(A)

Licensee shall hold harmless and indemnify Customer and its directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, and the United States and its agencies, servants, agents, subsidiaries, employees and assignees, or any of them, from and against liability, loss or damage arising out of claims that Licensee’s Contractors and Subcontractors may have for Property Damage sustained by them and for Bodily Injury or Property Damage sustained by their employees, resulting from Licensed Launch Activities.

(B)

Customer shall hold harmless and indemnify Licensee and its directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, and the United States and its agencies, servants, agents, subsidiaries, employees and assignees, or any of them, from and against liability, loss or damage arising out of claims that Customer’s Contractors and Subcontractors may have for Property Damage sustained by them and for Bodily Injury or Property Damage sustained by their employees, resulting from Licensed Launch Activities.

(C)

To the extent provided in advance in an appropriations law or to the extent there is enacted additional legislative authority providing for the payment of claims, the United States shall hold harmless and indemnify Licensee and Customer and their respective directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, from and against liability, loss or damage arising out of claims that Contractors and Subcontractors of the United States may have for Property Damage sustained by them, and for Bodily Injury or Property Damage sustained by their employees, resulting from Licensed Launch Activities, to the extent that claims they would otherwise have for such damage or injury exceed the amount of insurance or demonstration of financial responsibility required under sections 440.9(c) and (e) respectively, of the Regulations, 14 CFR 440.9(c) and (e).

6.-

Assurances Under 49 USC 70112(e)

Notwithstanding any provisions of this Agreement to the contrary, Licensee shall hold harmless and indemnify the United States and its agencies, servants, agents, employees and assignees, or any of them, from and against liability, loss or damage arising out of claims for Bodily Injury or Property Damage, resulting from Licensed Launch Activities, regardless of fault, except to the extent that: (i) as provided in section 7(b) of this Agreement, claims result from willful misconduct of the United States or its agents; (ii) claims for Property Damage sustained by the United States or its Contractors and

319 Subcontractors exceed the amount of insurance or demonstration of financial responsibility required under Section 440.9(e) of the Regulations (14 CFR 440.9(e)); (iii) claims by a Third Party for Bodily Injury or Property Damage exceed the amount of insurance or demonstration of financial responsibility required under section 440.9(c) of the Regulations (14 CFR 440.9(c)), and do not exceed $ 1,500,000,000 (as adjusted for inflation after January 1, 1989) above such amount, and are payable pursuant to the provisions of 49 USC 70113 and section 440.19 of the Regulations (14 CFR 440.19); or (iv) Licensee has no liability for claims exceeding $ 1,500,000,000 (as adjusted for inflation after January 1, 1989) above the amount of insurance or demonstration of financial responsibility required under section 440.9(c) of the Regulations (14 CFR 440.9(c)).

7.-

Miscellaneous

(A)

Nothing contained herein shall be construed as a waiver or release by Licensee, Customer or the United States of any claim by an employee of the Licensee, Customer or the United States, respectively, including a member of the Armed Forces of the United States, for Bodily Injury or Property Damage, resulting from Licensed Launch Activities. Notwithstanding any provision of this Agreement to the contrary, any waiver, release, assumption of responsibility or agreement to hold harmless and indemnify herein shall not apply to claims for Bodily Injury or Property Damage resulting from willful misconduct of any of the Parties, the Licensee and Customer and the Contractors and Subcontractors of each of them, the directors, officers, agents and employees of any of the foregoing, and in the case of the United States, its agents. In the event that more than one customer is involved in Licensed Launch Activities, references herein to Customer shall apply to, and be deemed to include, each such customer severally and not jointly. This Agreement shall be governed by and construed in accordance with United States Federal law.

(B)

(C) (D)

IN WITNESS THEREOF, the Parties to this Agreement have caused the Agreement to be duly executed by their respective duly authorized representatives as of the date written above. LICENSEE By: Its: CUSTOMER By: Its: DEPARTMENT OF TRANSPORTATION By: Its:

320

APPENDIX 2: FLOW DOWN LANGUAGE ANNEX XXX TO CONTRACT XXX (the “Contract”(1008)) INTER-PARTY LIABILITY COVENANT (the “Covenant”)

The present Annex, Inter-Party Liability Covenant is an integral part of Contract referred to above (and is therefore included in the term ‘Contract’ as used below) concluded between [Launch Provider/Licensee](1009) and [Contractor], hereinafter also referred to as “the Parties”.

1.-

Context and General Provisions

The Parties agree that the Contract, including the present Covenant, is a contract concluded in an international context, that it has been the subject of discussions and negotiations, that all its terms and conditions are fully understood by the Parties, and that the price and the other mutual agreements of the Parties set forth in the Contract were arrived at in consideration of, inter alia, all the provisions hereof specifically including all waivers, releases and renunciations set out herein.(l010) [Launch Provider] has agreed upon an Agreement for Waiver of Claims and Assumption of Responsibility, with the United States and [Customer] in application of the AST Licensing Regulations, to obtain the Launch License(s) necessary for the performance of the Launch Services which are the subject of the Contract between [Launch Provider] and [Customer]. With the Covenant, the Parties agree to the detailed flow down between themselves of the provisions of the Agreement for Waiver of Claims and Assumption of Responsibility. Should any of the provisions of the Covenant become illegal, invalid, or unenforceable in any jurisdiction, the Parties agree to give the remaining provisions the maximum practicable enforceability which the applicable law allows.(1011) The purpose of the present Covenant is to implement the provisions of the Agreement for Waiver of Claims and Assumption of Responsibility and the associated regulations. The provisions contained herein are intended to apply to the activities coming within the scope (1008)

This is the contract between the launch provider or the customer and their respective contractors. In principle, this flow down language could be transferred as is to all contracting levels. It is assumed that the contract’s scope covers the activities of the Contractor concerned in relation to the LSA.

(1009)

In the case of the flow down performed by [customer] the appropriate substitution has to be done in the text.

(1010)

This clause could be placed in the Covenant, but could also be placed in the contract itself, either in its opening article, or in an article concerning general conditions.

(1011)

This clause could also be placed in the contract itself. It is usual practice to place severability clauses in international contracts. In a flow down to an American company, this would be acceptable anyway because the clauses are made mandatory by law. In a flow down with a non American company, even if American law is applicable, one cannot exclude that the interparticipants waivers would be invalidated. Hence the importance of the qualification of international contract and of the link to the launch contract.

321 of the Launch Activities,(1012) and shall not be construed as a release by [Launch Provider] or [Contractor] from performance of their contractual obligations.

2.- Waiver and Release of Claims(1013) [Launch Provider] and [Contractor] hereby agree to a no-fault, no-subrogation, interparticipant waiver of liability pursuant to which each shall hereby waive and release claims it may have against the other, the United States, [customer/other],(10I4) and the contractors, subcontractors officers, directors, agents, servants and employees of any of them, or any of them, for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from the Launch Activities, regardless of fault.

3.-

Assumption of Responsibility, Hold Harmless and Indemnification

[Contractor] agrees to be responsible, for Property Damage it sustains and to be responsible, hold harmless and indemnify [Launch Provider], [Customer/other] and the United States, and the respective Contractors and Subcontractors of each, for Bodily Injury or Property Damage sustained by its own employees, resulting from Launch Activities, regardless of fault. In such cases, [Contractor] accordingly agrees to dispose of any claim and defend (when not contrary to the governing rules of procedure) the United States, [Launch Provider], [Customer/other] and their Contractors, subcontractors, directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, from any loss, damage, liability or expenses, including attorney’s fees, on account of such Bodily Injury or Property Damage and shall pay all expenses to satisfy all judgements which may be incurred by or rendered against the said indemnities.

4.-

Insurance other than third party insurance

[Contractor] shall be responsible for such insurance as it deems necessary to protect its property and employees. Any insurance carried in accordance with this paragraph and any policy taken out in substitution or replacement for any such policy, shall provide that the insurers shall waive any rights of subrogation against the United States, [Launch Provider], [Customers/other] and their contractors, subcontractors, directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them. [Contractor] shall arrange to have an appropriate certificate issued to the other evidencing any waiver of (1012)

The launch activities have to be defined here to cover the LSA activities, but only in terms of support to the LSA. There should be no doubt left on the subject of product liability between the Parties. This is why we indicated that this does not release the contractor from performance of his contractual obligations.

(1013)

The waiver and release of claims is only with respect to others than the Launch Provider. It is assumed that the liability between the Launch Provider and his contractor is settled in the contract itself. The flow down here is only dealing with the inter-participant waiver flow down and does not enter into the contractual relationships at lower level. Of course, if the contractor concerned is going to have personnel or property at the range, the issue of damage to his property and personnel caused by the Launch Provider needs to be addressed. The inter-participant waiver can be extended to cover this issue.

(1014)

The parties may want to single out other participants, such as another customer of the launch company in the case of a shared launch for instance.

322

subrogation required under this paragraph. 5.-

Third Party Liability and Insurance

Pursuant to Commercial Space Launch Act, and to the Regulations issued by the AST, [Launch Provider] must obtain and maintain in effect a policy or policies of liability insurance, in an amount determined by AST, that protects [Contractor] and its contractors, subcontractors, and employees of each, involved in the Launch Activities, as additional insured, to the extent of their respective potential liabilities, against covered claims by a third party for bodily injury or property damage resulting from the Licensed Launch Activities. [Launch Provider] shall, either directly or through the US Government, indemnify and hold [Contractor], its contractors, subcontractors and employees, harmless from any and all loss, damage, liability or expense resulting from Property Damage or Bodily Injury caused to Third Parties in relation to the Launch Activities to the extent not covered by said insurance. [Launch Provider] shall at its sole expense, defend any claims, actions, suits and proceedings, whether in law or in equity, brought against [Contractor], its contractors, subcontractors or employees, on account of such damage or injury, and shall pay all expenses, including attorney’s fees, and satisfy all judgements as may be incurred by or rendered against [Contractor] in connection therewith, provided [Launch Provider] is given prompt notice of any such claim, action, suit or proceeding, and provided [Launch Provider] is given, at [Launch Provider]’s written request and sole expense, such assistance and information as may reasonably be provided by [Contractor], its contractors, subcontractors or employees.

6.-

Definitions

For the purpose of this Covenant, and in their relationship, [Launch Provider] and [Contractor] have agreed upon the following definitions:(1015) “Bodily Injury” means bodily injury, sickness, disease, disability, shock, mental anguish or mental injury sustained by any person, including death and damages for care and loss of services resulting therefrom, and any and all other consequential damages resulting therefrom. “Property Damage” means injury to or destruction of tangible property including the loss of use of such injured or destroyed property and loss of associated revenues, and all and any other consequential damages resulting therefrom. Other definitions shall be as called out in the Commercial Space Launch Act and Regulations.

7.-

Other Provisions

Nothing contained herein shall be construed as a waiver or release by [Launch provider] or [Customer/other], or the United States, of any claim by an employee of [Launch Provider] or [Customer/other], or the United States respectively, for Bodily Injury or (1015)

These definitions are going much further than those contained in the regulations. But the participants have an advantage in making sure that for no damage whatsoever they would be claimed against. The definitions contained in the regulation have been narrowed down to reduce government indemnification, but this has thereby increased the scope of the claimable damage.

323 Property Damage, resulting from the Launch Activities. Notwithstanding any provision of this Covenant to the contrary, any waiver, release, assumption of responsibility or agreement to hold harmless and indemnify herein shall not apply to claims for Bodily Injury or Property Damage resulting from willful misconduct of any of the Parties, the contractors and subcontractors of any of the Parties, and the directors, officers, agents and employees of any of each of them.

8.-

Flow down

[Launch Provider] and [Contractor] hereby agree to obtain, mutatis mutandis, an identical Covenant from any party with which it enters into an agreement relating to the activities [services or equipments] contemplated for the Launch Activities, including without limitation, all of its respective contractors, subcontractors and suppliers at every tier, and all persons and entities to whom it assigns all or part of its rights or obligations under the Contract. The Parties acknowledge that in particular cases this flow down obligation may not be implemented when those concerned are not involved as such in the licensed launch activities and do not place property or personnel on the launch preparation and launch facilities. However, this shall be treated as an exception and the Parties agree to consult on such instances prior to their implementation, to ensure in particular that [Launch Provider] complies with the conditions under which the launch license has been granted by AST. Agreement by any of the Parties to the non implementation of the flow down in a particular situation shall not be construed as a waiver by that Party of any of the provisions of this Contract, including the present covenant, and in particular those of paragraph 3 above.

INTER-PARTICIPANTS LIABILITY COVENANTS FOR STATES WITHOUT LICENSING REQUIREMENTS

325

327

ANNEX XXX TO LAUNCH SERVICES AGREEMENT XXX (the “LSA”)(1016) INTER-PARTY LIABILITY COVENANT (the “Covenant”)

The present Annex, Inter-Party Liability Covenant is an integral part of LSA referred to above (and is therefore included in the term ‘LSA’ as used below), concluded between [Launch Provider] and [Customer], hereinafter also referred to as “the Parties”.

1.-

Context and General Provisions

The Parties agree that the LSA, including the present Covenant, is a contract concluded in an international context, that it has been the subject ofdiscussions and negotiations, that all its terms and conditions are fully understood by the Parties, and that the price and the other mutual agreements of the Parties set forth in this LSA were arrived at in consideration of, inter alia, all the provisions hereof specifically including all waivers, releases and renunciations set out herein.(1017) [Launch Provider] and [Customer] will respectively utilize their property and employees for the performance of the Contract. Furthermore, the parties recognize that all participants in the launch operations are engaged in the common goal of meaningful exploration, exploitation and uses of outer space. The present Covenant is agreed in furtherance of these goals. Should any of the provisions of the Covenant become illegal, invalid, or unenforceable in any jurisdiction, the Parties agree to give the remaining provisions the maximum practicable enforceability which the applicable law allows.

2.-

Liability for LSA Performance(1018)

Due to the particular nature of the launch services,(1019) and acknowledging that both Parties have achieved satisfactory agreements on their mutual obligations, the Parties agree that any liability of [Launch Provider] or of [Customer] arising from the defective, late, or non-performance of [Launch Provider] launch services or of [Customer]’s express technical obligations(1020) under the LSA is, in all circumstances, including termination of

(1016)

Launch Services Agreement concluded between the launch provider and the customer.

(1017)

This clause could be placed in the Covenant, but could also be placed in the contract itself, either in its opening article, or in an article concerning general conditions.

(1018)

This paragraph 1) sets the context of the Covenant insofar as it refers clearly to the remedies which the parties have expressly agreed, and which are stated in the LSA, 2) clarifies that the renunciations made by the parties are due to the specific nature of the launch services, and are based on satisfactory balance between the Parties’ mutual obligations and 3) states that apart from the express remedies indicated in the LSA, the parties have no claim against each other.

(1019)

It is assumed that the definition of the launch services is provided in the LSA.

(1020)

The technical obligations of the customer are defined in the LSA. We would suggest to use the term ‘express’ to avoid opening the door to litigation as to what implied obligations the customer could have.

328

this LS A or a launch(1021) under this LS A, strictly limited to the liability expressly provided for in the LSA. Except as provided in the LSA, the Parties hereto expressly waive, renounce, and exclude, any and all rights and remedies that may arise at law or in equity with respect to their performance of the LSA.

3.-

No fault no subrogation inter-party waiver

[Launch Provider] and [Customer] hereby agree to a no-fault, no-subrogation, interparticipant waiver of liability pursuant to which each shall not bring a claim against or initiate any proceedings, whether judicial, arbitral or administrative, against the other party,(1022) or the contractors, subcontractors, officers, directors, agents, servants and employees of the other, or any of them, for the financial and any other consequences of any Property Damage it incurs or for any Bodily Injury to, or Property Damage incurred by, its own employees resulting from activities carried out under the LSA, and regardless of fault.

4.-

Assumption of Responsibility, Hold Harmless and Indemnification

[Launch Provider] and [Customer] shall each be responsible for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from the activities carried out under the LSA, regardless of fault. [Launch Provider] and [Customer] hereby agree to hold each other harmless and indemnify each other, and each other’s Contractors and Subcontractors, for Bodily Injury or Property Damage sustained by its own employees, resulting from the activities carried out under the Contract, regardless of fault. [Launch Provider] and [Customer] hereby agree to hold each other harmless and indemnify each other and its directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, from and against liability, loss or damage arising out of claims that either Party’s Contractors and Subcontractors may have for Property Damage sustained by them and for Bodily Injury or Property Damage sustained by their employees, resulting from the activities carried out under the Contract, regardless of fault. In such cases, each party accordingly agrees to dispose of any claim and defend (when not contrary to the governing rules of procedure) the other Party and its Contractors, subcontractors, directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, from any loss, damage, liability or expenses, including attorney’s fees, on account of such Bodily Injury or Property Damage and shall pay all expenses to satisfy all judgements which may be incurred by or rendered against the said indemnities.

5.-

Insurance other than third party insurance

[Launch Provider] and [Customer] shall each be responsible for such insurance as they deem necessary to protect their respective property and employees. Any insurance carried in accordance with this paragraph and any policy taken out in substitution or replacement for any such policy, shall provide that the insurers shall waive any rights of subrogation (1021)

It is assumed that the definition of launch is provided in the LSA.

(1022)

If other parties are involved (for instance launch facilities owner or provider) who are not linked by contract to the launch provider or the customer, they should be expressly included. In principle all participants will qualify as contractors, subcontractors, suppliers etc.

329

against [Launch Provider], [Customer], and their contractors and subcontractors at every tier. Each party shall arrange to have an appropriate certificate issued to the other evidencing any waiver of subrogation required under this paragraph.

6.-

Third Party Liability and Insurance(1023)

[Launch Provider] must obtain and maintain in effect a policy or policies of liability insurance(1024), in an amount of ......., that protect(s) [Customer] and its contractors, subcontractors, and employees of each, involved in the activities carried out under the Contract, as additional insured, to the extent of their respective potential liabilities, against covered claims by a third party for bodily injury or property damage resulting from the activities covered by the License. Such insurance coverage shall come into effect as of the day of the Launch and shall be maintained for ..... months. The insurance policy referred to above shall contain a waiver of the insurer’s rights of subrogation against each of the parties protected by such insurance. The insurance policy shall expressly provide that all of the provisions thereof shall operate in the same manner as if there were a separate policy with and covering each insured. [Launch Provider] shall indemnify and hold [Customer], its contractors, subcontractors and employees, harmless from any and all loss, damage, liability or expense resulting from Property Damage or Bodily Injury caused to Third Parties in relation to the activities carried out under the present Contract to the extent not covered by said insurance. [Launch Provider] shall at its sole expense, defend any claims, actions, suits and proceedings, whether in law or in equity, brought against [Customer], its contractors, subcontractors or employees, on account of such damage or injury, and shall pay all expenses, including attorney’s fees, and satisfy all judgements as may be incurred by or rendered against [Customer] in connection therewith, provided [Launch Provider] is given prompt notice of any such claim, action, suit or proceeding, and provided [Launch provider] is given, at [Launch Provider]’s written request and sole expense, such assistance and information as may reasonably be provided by [Customer], its contractors, subcontractors or employees.

7.-

Definitions

For the purpose of this Covenant, and in their relationship, [Launch Provider] and [Customer] have agreed upon the following definitions: “Bodily Injury” means bodily injury, sickness, disease, disability, shock, mental anguish or mental injury sustained by any person, including death and damages for care and loss of services resulting therefrom, and any and all other consequential damages resulting therefrom. “Property Damage” means injury to or destruction of tangible property including the loss of use of such injured or destroyed property and loss of associated revenues, and any and all other consequential damages resulting therefrom. “Customer” means [name of the customer]; on behalf of [name of customer], any person to whom [name of the customer] has sold, leased, assigned or otherwise transferred its (1023)

This clause may be subject to change as a function of possible regulations in the countries concerned with respect to mandatory insurance.

(1024)

Specific type of insurance can be called out.

330 rights in the payload (or any part thereof) to be launched by [Launch provider], including a conditional sale, lease, assignment, or transfer of rights; any person who has placed property on board the payload for launch or payload services, and any person to whom [Customer] has transferred its rights to the launch services.

8.-

Other Provisions

Nothing contained herein shall be construed as a waiver or release by [Launch provider] or [Customer] of any claim by an employee of [Launch Provider] or [Customer], respectively, for Bodily Injury or Property Damage, resulting from the activities carried out under the Contract. Notwithstanding any provision of this Covenant to the contrary, any waiver, release, assumption of responsibility or agreement to hold harmless and indemnify herein shall not apply to claims for Bodily Injury or Property Damage resulting from willful misconduct of any of the Parties, the contractors and subcontractors of any of the Parties, and the directors, officers, agents and employees of any of each of them.

9.-

Flow down

With a view to satisfying their flow down obligations as per the present Covenant, [Launch Provider] and [Customer] hereby agree to flow down the text contained in Appendix 1 to the present Covenant to any party with which they enter into an agreement relating to the activities [services or equipments] contemplated by the LSA, including without limitation, all of their respective contractors, subcontractors and suppliers at every tier, and all persons and entities to whom they assign all or part of their rights or obligations under the Contract. The Parties acknowledge that in particular cases this flow down obligation may not be implemented when those concerned are not involved as such in the licensed launch activities and do not place property or personnel on the launch preparation and launch facilities. However, this shall be treated as an exception and the Parties agree to consult on such instances prior to their implementation, to ensure in particular that [Launch Provider] complies with the conditions under which the launch license has been granted by AST. Agreement by any of the Parties to the non implementation of the flow down in a particular situation shall not be construed as a waiver by that Party of any of the provisions of this Contract, including the present covenant, and in particular those of paragraph 3 above.

331 APPENDIX 1: FLOW DOWN LANGUAGE ANNEX XXX TO CONTRACT XXX (the “Contract”(1025)) INTER-PARTY LIABILITY COVENANT (the “Covenant”)

The present Annex, Inter-Party Liability Covenant is an integral part of Contract referred to above (and is therefore included in the term ‘Contract’ as used below) concluded between [Launch Provider](1026) and [Contractor], hereinafter also referred to as “the Parties”.

1.-

Context and General Provisions

The Parties agree that the Contract, including the present Covenant, is concluded in an international context, that it has been the subject of discussions and negotiations, that all its terms and conditions are fully understood by the Parties, and that the price and the other mutual agreements of the Parties set forth herein were arrived at in consideration of, inter alia, all the provisions hereof specifically including all waivers, releases and renunciations set out herein.(1027) [Launch provider] and [Contractor] will respectively utilize their property and employees for the performance of the Launch Activities subject of the LSA concluded between [Launch Provider] and [Customer], hereinafter referred to as “the LSA”. Furthermore, the parties recognize that all participants in the launch operations are engaged in the common goal of meaningful exploration, exploitation and uses of outer space. The present Covenant is agreed in furtherance of these goals. Should any of the provisions of the Covenant become illegal, invalid, or unenforceable in any jurisdiction, the Parties agree to give the remaining provisions the maximum practicable enforceability which the applicable law allows.(1028) The provisions contained herein are intended to apply to the activities coming within the

(1025)

This is the contract between the launch provider or the customer and their respective contractors. In principle, this flow down language could be transferred as is to all contracting levels. It is assumed that the contract’s scope covers the activities of the Contractor concerned in relation to the LSA.

(1026)

In the case of the flow down performed by [Customer] then the appropriate substitution in the text has to be done.

(1027)

This clause could be placed in the Covenant, but could also be placed in the contract itself, either in its opening article, or in an article concerning general conditions.

(1028)

This clause could also be placed in the contract itself. It is usual practice to place severability clauses in international contracts. In a flow down to an American company, this would be acceptable anyway because the clauses are made mandatory by law. In a flow down with a non American company, even if American law is applicable, one cannot exclude that the interparticipants waivers would be invalidated.

332 scope of the Launch Activities,(1029) and shall not be construed as a release by [Launch Provider] or [Contractor] from performance of their contractual obligations.

2.- Waiver and Release of Claims(1030) [Launch Provider] and [Contractor] hereby agree to a no-fault, no-subrogation, interparticipant waiver of liability pursuant to which each shall hereby waive and release claims it may have against the other, [other] ,(1031) and the contractors, subcontractors officers, directors, agents, servants and employees of any of them, or any of them, for Property Damage it sustains and for Bodily Injury or Property Damage sustained by its own employees, resulting from the Launch Activities,(1032) regardless of fault.

3.-

Assumption of Responsibility, Hold Harmless and Indemnification

[Contractor] agrees to be responsible, for Property Damage it sustains and to be responsible, hold harmless and indemnify [Launch Provider], [Customer] and [other], and the respective Contractors and Subcontractors of each, for Bodily Injury or Property Damage sustained by its own employees, resulting from Launch Activities, regardless of fault. In such cases, [Contractor] accordingly agrees to dispose of any claim and defend (when not contrary to the governing rules of procedure) [Launch Provider], [Customer], [other] and their Contractors, subcontractors, directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them, from any loss, damage, liability or expenses, including attorney’s fees, on account of such Bodily Injury or Property Damage and shall pay all expenses to satisfy all judgements which may be incurred by or rendered against the said indemnities.

4.-

Insurance other than third party insurance

[Contractor] shall be responsible for such insurance as it deems necessary to protect its property and employees. Any insurance carried in accordance with this paragraph and any policy taken out in substitution or replacement for any such policy, shall provide that the insurers shall waive any rights of subrogation against [Launch Provider], [Customer], [other], and their contractors, subcontractors, directors, officers, servants, agents, subsidiaries, employees and assignees, or any of them. [Contractor] shall arrange to have an appropriate certificate issued to the other evidencing any waiver of subrogation (1029)

The launch activities have to be defined here to cover the LSA activities, but only in terms of support to the LSA. There should be no doubt left on the subject of product liability between the Parties.

(1030)

The waiver and release of claims is only with respect to others than the Launch Provider. It is assumed that the liability between the Launch Provider and his contractor is settled in the contract itself. The flow down here is only dealing with the inter-participant waiver flow down and does not enter into the contractual relationships at lower level. Of course, if the contractor concerned is going to have personnel or property at the range, the issue of damage to his property and personnel caused by the Launch Provider needs to be addressed. The inter-participant waiver can be extended to cover this issue.

(1031)

(1032)

The parties may want to single out other participants, such as another customer of the launch company in the case of a shared launch for instance. In the flow down, it is important to define the Launch Activities such that they match with the LSA, since the subcontractors are third-parties to the LSA.

333 required under this paragraph.

5.-

Third Party Liability and Insurance

[Launch Provider] must obtain and maintain in effect a policy or policies of liability insurance(1033), in an amount of ......., that protects [Contractor] and its contractors, subcontractors, and employees of each, involved in the Launch Activities, as additional insured, to the extent of their respective potential liabilities, against covered claims by a third party for bodily injury or property damage resulting from the Launch Activities. Such insurance coverage shall come into effect as of the day of the Launch and shall be maintained for ..... months. The insurance policy referred to above shall contain a waiver of the insurer’s rights of subrogation against each of the parties protected by such insurance. The insurance policy shall expressly provide that all of the provisions thereof shall operate in the same manner as if there were a separate policy with and covering each insured. [Launch Provider] shall indemnify and hold [Contractor], its contractors, subcontractors and employees, harmless from any and all loss, damage, liability or expense resulting from Property Damage or Bodily Injury caused to Third Parties in relation to the Launch Activities to the extent not covered by said insurance. [Launch Provider] shall at its sole expense, defend any claims, actions, suits and proceedings, whether in law or in equity, brought against [Contractor], its contractors, subcontractors or employees, on account of such damage or injury, and shall pay all expenses, including attorney’s fees, and satisfy all judgements as may be incurred by or rendered against [Contractor] in connection therewith, provided [Launch provider] is given prompt notice of any such claim, action, suit or proceeding, and provided [Launch provider] is given, at [Launch Provider]’s written request and sole expense, such assistance and information as may reasonably be provided by [Contractor], its contractors, subcontractors or employees.

6.-

Definitions

For the purpose of this Covenant, and in their relationship, [Launch provider] and [Contractor] have agreed upon the following definitions: “Bodily Injury” means bodily injury, sickness, disease, disability, shock, mental anguish or mental injury sustained by any person, including death and damages for care and loss of services resulting therefrom, and any and all other consequential damages resulting therefrom. “Property Damage” means injury to or destruction of tangible property including the loss of use of such injured or destroyed property and loss of associated revenues, and any and all other consequential damages resulting therefrom. “Customer” means [name of customer]; on behalf of [name of customer], any person to whom [customer] has sold, leased, assigned or otherwise transferred its rights in the payload (or any part thereof) to be launched by [Launch Provider], including a conditional sale, lease, assignment, or transfer of rights; any person who has placed property on board the payload for launch or payload services, and any person to whom [customer] has transferred its rights to the launch services. (1033)

Specific type of insurance can be called out.

334

7.-

Other Provisions

Nothing contained herein shall be construed as a waiver or release by [Launch provider] or [Contractor], or [Customer] or [other], of any claim by an employee of [Launch Provider] or [Contractor], or [Customer] or [other] respectively, for Bodily Injury or Property Damage, resulting from the Launch Activities. Notwithstanding any provision of this Covenant to the contrary, any waiver, release, assumption of responsibility or agreement to hold harmless and indemnify herein shall not apply to claims for Bodily Injury or Property Damage resulting from willful misconduct of any of the Parties, the contractors and subcontractors of any of the Parties, and the directors, officers, agents and employees of any of each of them.

8.-

Flow down

[Launch Provider] and [Contractor] hereby agree to obtain, mutatis mutandis, an identical Covenant from any party with which it enters into an agreement relating to the activities [services or equipments] contemplated for the Launch Activities, including without limitation, all of its respective contractors, subcontractors and suppliers at every tier, and all persons and entities to whom it assigns all or part of its rights or obligations under the Contract. The Parties acknowledge that in particular cases this flow down obligation may not be implemented when those concerned are not involved as such in the licensed launch activities and do not place property or personnel on the launch preparation and launch facilities. However, this shall be treated as an exception and the Parties agree to consult on such instances prior to their implementation, to ensure in particular that [Launch Provider] complies with the conditions under which the launch license has been granted by AST. Agreement by any of the Parties to the non implementation of the flow down in a particular situation shall not be construed as a waiver by that Party of any of the provisions of this Contract, including the present covenant, and in particular those of paragraph 3 above.

335

6.2.- IMPLEMENTATION ARRANGEMENTS FOR THE SPACE TREATIES

Attached is the proposed Protocol to the Space Treaties, which reflects the approach suggested in our discussions. Annotations are provided occasionally to clarify certain topics.

336

PROPOSED PROTOCOL IMPLEMENTING THE PROVISIONS OF THE TREATY ON PRINCIPLES GOVERNING THE ACTIVITIES OF STATES IN THE EXPLORATION AND USE OF OUTER SPACE, INCLUDING THE MOON AND OTHER CELESTIAL BODIES, THE AGREEMENT ON THE RESCUE OF ASTRONAUTS AND THE RETURN OF OBJECTS LAUNCHED INTO OUTER SPACE, THE CONVENTION ON INTERNATIONAL LIABILITY FOR DAMAGE CAUSED BY SPACE OBJECTS, AND THE CONVENTION ON REGISTRATION OF SPACE OBJECTS LAUNCHED INTO OUTER SPACE WITH RESPECT TO LAUNCH ACTIVITIES CARRIED OUT BY NON GOVERNMENTAL ENTITIES The States Parties to this Protocol,

Recognizing the common interest of all mankind in furthering the exploration and use of outer space for peaceful purposes, Acknowledging the growth of space activities and the multiplication of States involved in such activities, the increasing involvement of non-governmental entities in space activities in the field of launches of space objects and space applications, and the developments of international law in the area of liability, Desiring to maintain the specific regime agreed for space activities while taking into account the needs for legal predictability necessary to create the conditions for the development of space exploration and use by all mankind, Considering that it is desirable, to achieve this goal, to provide for more detailed implementing provisions to the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (the “Outer Space Treaty”), which entered into force on 10 October 1967, the Agreement on the Rescue of Astronauts, the Return of Astronauts and the Return of Objects Launched Into Outer Space (the “Rescue and Return Agreement”), which entered into force on 3 December 1968, the Convention on International Liability for Damage Caused by Space Objects (the “Liability Convention”), entered into force on 1 September 1972, and the Convention on Registration of Objects Launched Into Outer Space (the “Registration Convention”), which entered into force on 15 September 1976, Recalling that the exploration and use of outer space should be carried on for the benefit of all people irrespective of the degree of their economic or scientific development, Have agreed the following: Article 1 Purpose of the Protocol States parties to the present protocol agree upon implementation provisions for the Outer

337 Space Treaty, the Liability Convention and the Registration Convention, with respect to the performance of launch activities by non-governmental entities.

Article 2 Relationship with other Space Treaties This Protocol shall prevail over any rules which apply to launch activities between States Parties to this Protocol by virtue of these States commonly being Party to: the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (the “Outer Space Treaty”), which entered into force on 10 October 1967, the Agreement on the Rescue of Astronauts, the Return of Astronauts and the Return of Objects Launched Into Outer Space (the “Rescue and Return Agreement”), which entered into force on 3 December 1968, the Convention on International Liability for Damage Caused by Space Objects (the “Liability Convention”), entered into force on 1 September 1972, the Convention on Registration of Objects Launched Into Outer Space (the “Registration Convention”), which entered into force on 15 September 1976, Article 3 Launch Activities For the purpose of this protocol, ‘launch activities’ shall be defined as those activities undertaken to place or try to place a launch vehicle and any payload in a suborbital trajectory, in Earth orbit in outer space, or otherwise in outer space. The launch activities include those activities performed at the launch facilities or their immediate vicinity for the purpose of preparing the launch vehicle and integrating the object to be launched on the launch vehicle, as well as the subsequent conduct of the launch sequence, ignition of the launcher’s engines, and, the release of the spacecraft or its injection on orbit. The term ‘launch activities’ shall include attempted launch. It shall also include, in the case of reusable launch vehicles, the return of such reusable launch vehicle on Earth.(1034) The “launch facilities” are any location on Earth from which a launch takes place and the necessary facilities, as well as those facilities where reusable launch vehicle return. The “launch vehicle” is a vehicle built to operate in, or place a payload in, outer space, or a suborbital rocket, or any components thereof. The “payload” is an object which is to be placed in outer space by means of a launch vehicle, including components of the vehicle specifically designed or adapted for that object. TITLE I.- IMPLEMENTATION OF OUTER SPACE TREATY PROVISIONS Article I.1 National activities, authorization and continuing supervision, appropriate State (1034)

The intent here is to have the State of Launch liable for the reentry of the reusable launch vehicle as well. In case the State of Launch would use, for re-entry, the facilities such as runways of another State, the State of Launch would have to enter into agreements with that State insofar as liability is concerned. A launch operator would then obtain one license for the launch and re-entry and the State of launch would be responsible for securing the conditions for the availability to that launch operator of the re-entry location.

338 For the purpose of implementation of Article VI of the Outer Space Treaty: ‘national activities in outer space’ shall include launch activities as defined in article 1 above, conducted by non-governmental entities. ‘authorization and continuing supervision’ shall be understood as requiring the licensing of launch activities as provided in Title III hereafter. the ‘appropriate State’ shall be the launching State as defined in Title III hereafter.

Article I.2 International liability Article VII of the Outer Space Treaty shall be implemented in accordance with the provisions of Title III of the present Protocol. Article I.3 Registration Article VIII of the Outer Space Treaty shall be implemented in accordance with the provisions of Title IV of the present Protocol. TITLE II.- IMPLEMENTATION OF THE PROVISIONS OF THE RESCUE AND RETURN AGREEMENT Article II. 1 Launching authority, State responsible for the launching For the purpose of the present implementing protocol, the terms ‘launching authority’ and ‘State responsible for the launching’ shall mean ‘the launching State’ as defined in Title III of this Protocol. The States Parties to the present Protocol agree to implement their obligations of information under the Agreement with the additional requirements set forth in the Registration Convention as implemented by the present Protocol, with a view to ensuring the timely availability of this information to the non-governmental entities carrying out launch activities. To the maximum extent feasible, the States Parties to the present Protocol shall implement their obligations of information under the Agreement and the additional requirements set forth in the present Protocol, through the electronic registration system provided in Title IV of the present Protocol. TITLE III.- IMPLEMENTATION OF THE PROVISIONS OF THE LIABILITY CONVENTION Article III.1 Launching State. Launch Operator For the purpose of the present Protocol, the definition of ‘launching State’ contained in Article I of the Liability Convention shall be implemented as follows: a) Where the launch is performed from launch facilities, including airport facilities when the launch is carried out from an aircraft, located on the territory of a State Party to the present Protocol, that State shall be the launching State with respect to the launch activities as defined in Article 2 of the present Protocol. That State shall be referred to as

339

the State of Launch. b) Where the launch is performed from facilities located outside the territory of a State Party to the present Protocol, including its exclusive economical zone, or from any place not subject to sovereignty of any State, the launching State with respect to the launch activities as defined in Article 2 of the present Protocol, shall be the State Party to the present Protocol, of nationality of the launch operator performing the launch, such nationality being established by a genuine connection with such State as evidenced by the citizenship in the case of individuals or, in the case of corporations or other nongovernmental entities, by the place of central administration.(1035) That State shall be referred to as the State of Launch. c) Upon completion of the launch activities as defined in Article 2 of the Present Protocol, the launching State shall be the State Party to the present Protocol, on whose registry the object launched is carried, or in the absence of registration, the State of nationality of the non-governmental entity exercising technical control over the object, such nationality being established by a genuine connection with such State as evidenced by the citizenship in the case of individuals or, in the case of corporations or other non-governmental entities, by the place of central administration.(1036) That State shall be referred to as the State of Operation. For the purpose of this Protocol, the launch operator shall be defined as the nongovernmental entity performing the launch activities. Article III.2 Authorization and Continuing Supervision: Launch Licenses The launching State, as defined in Article III. 1 above, shall be considered the appropriate State for the purpose of Article VI of the Outer Space Treaty and shall carry out his obligations of authorization and continuing supervision, through the licensing of launch activities in accordance the present Protocol. Any launch operator shall obtain from the launching State, in advance of the launch, a license authorizing it to operate the launcher and perform the launch, in the form of a domestic legal or administrative document. Where the State of Launch and the State of Operation are distinct, the launch operator shall obtain a license for the launch activities, and the non-governmental entity in the State of Operation shall obtain, in advance of the launch, a license authorizing the payload to be launched and agreeing to the Operation Registration of the payload by the State of Launch. Any licensing regime enacted for the purposes of this Protocol shall, as a minimum, provide for: (1035)

One could also use, as an alternative, the principal place of business or the place of residence in case there is no such principal place of business.

(1036)

For the purpose of drafting this Protocol, we chose this definition, insofar as we focused on the launch activities themselves. However, one would have to review this definition more in depth, for instance to accommodate different criteria such as those used in the European Convention on Transborder Television Broadcasting of 5 May 1989, 28 ILM, 857, or the European Union Directive 89/552 of 30 October 1989 on Transborder Television Broadcasting, OJ, L 298, at 23. In particular, one could look at the State of the operator from whom the uplink to the satellite originates or the State which has allocated the satellite’s frequency or position. See also on this subject A; Kerrest, “Le rattachement aux Etats des activités privées dans l’espace. Réflexions à la lumière du droit de la mer” (1997) XXII-II Annals of Air and Space Law, 113.

340 a state of the art review, as part of the licensing procedure, of the safety of the launch vehicle, of the object to be launched, of the combination thereof, and of the launch operations the definition of the activities covered by the license and the definition of those subject to the licensing regulations. Demonstration of adequate insurance or financial responsibility by the licensed launch operator. Third party liability insurance or financial responsibility shall be mandatory in amounts to compensate for the maximum probable loss all claims susceptible to be made against the launch operator. Where inter-participant waivers of liability are mandated for the licensing, the mandatory insurance may cover third-party claims only. The conditions and amounts of insurance shall be provided as part of the licensing regime. the implementation of the launching State’s liability obligations under the Liability Convention, in its relationship to the launch operator, of the provisions of Article IV.3 of the present Protocol: either by providing for the unlimited liability of such entities; or by providing for limited liability with government indemnification by the launching State above the limit. the implementation of the registration of objects in accordance with the provisions of Title IV of the present Protocol. the authority of the State of Launch to prohibit, suspend or end the licensed launch if such launch would be detrimental to the public health or to the public safety and safety of property. For the implementation of the above licensing, the launching State shall designate or establish one or more competent authorities and one focal point. One competent authority shall be designated for issuing, monitoring and enforcing licenses, and managing registrations to be made in accordance with Title IV of the present Protocol. Licenses issued by the State of Operation to a non-governmental entity, shall be accepted and recognized by the other States Parties, provided that the requirements under which such licenses were issued are in conformity with the provisions of the present Protocol, the Outer Space Treaty and the Liability Convention. Such recognition shall not preclude the State of Launch from exercising its licensing authority insofar as safety aspects of the launching activities are concerned.

Article III.3 Liability of the launch operator a) Liability of the launch operator for damage caused to participants in the launch activities The liability of the participants in the launch activities for damage caused by or suffered by them during the launch activities, shall be subject to the law of the Launching State. In order to achieve the goals of the present Protocol, the States Parties to the present Protocol will ensure that their law recognizes the validity of the inter-party waivers of liability clauses. The definition of the term ‘participants’ shall be provided by the law of the State of Launch establishing the liability of the launch operator. Such law shall provide for coverage of the persons enumerated in Article VII b) of the Liability Convention.

341 b) Liability of the launch operator to third-parties Liability.- The launch operator shall be liable for damage caused by the launch activities. Except as otherwise provided in this Protocol, no entity other than the launch operator shall be liable for damage caused by the launch activities. The liability of the launch operator for damage caused by the launch activities shall be absolute. The launch operator shall have a right of recourse only if 1) this is expressly provided for by a contract in writing, or 2) if the damage results from an act or omission done with intent to cause damage, against the person or entity who has acted or omitted to act with such intent. Insurance and State indemnification.- The launch operator shall be required to maintain insurance, as provided in Article III.2 above. The launching State shall ensure the payment of claims for compensation for damage caused by the launch activities which have been established against the launch operator by providing the necessary funds to the extent that the yield of insurance or other financial security is inadequate to satisfy such claims. Time period for presentation of claims.- Rights of compensation under the present Article, shall be subject to prescription or extinction, as provided by the law of the competent court, if an action is not brought within one year from the date on which the victim of the damage had knowledge, or ought reasonably to have had knowledge of the damage and of the launch operator liable for the damage. Jurisdiction. - Jurisdiction over actions under this paragraph shall lie only with the courts of the State party to the present Protocol within whose territory, including exclusive economic zone, the damage occurred. Where the damage occurred outside the territory of a State Party to the present Protocol, or where the place of the damage cannot be determined with certainty, jurisdiction over such actions shall lie with the courts of the State of Launch. If the courts having jurisdiction are those of a State Party other than the State of Launch, the State Party whose courts have jurisdiction shall take all measures necessary to enable the State of Launch to intervene in proceedings and to participate in any settlement concerning compensation. A judgement that is no longer subject to ordinary forms of review entered by a court of a State Party having jurisdiction under this Article shall be recognized except 1) where the judgement was obtained by fraud, 2) where the party against whom the judgement was pronounced was not given a fair opportunity to present his case, or 3) where the judgement is contrary to the public policy of the State party to the present Protocol within the territory of which recognition is sought, or is not in accord with fundamental standards of justice. A judgement which is recognized in accordance with the above shall, upon being presented for enforcement in accordance with the formalities required by the law of the State Party to this Protocol where enforcement is sought, be enforceable as if it were a judgement of a court of that State Party. The merits of a claim on which the judgement has been given shall not be subject to further proceedings. Third parties. - The definition of the term ‘third parties’ shall be provided by the law of the State of Launch establishing the liability of the launch operator. Such law shall provide for coverage of the persons enumerated in Article VII a) of the Liability Convention.

342

Article III.4 Liability of the Launching State The liability of the launch operator as provided for above, shall be without prejudice to the Liability of the State of Launch as provided by the Liability Convention. The Parties to the present Protocol, where they have the quality of State of Launch or State of Operation as per the present Protocol, insofar as they would be considered as jointly and severally liable for any damage caused, in application of the Liability Convention, agree to settle their mutual liabilities in accordance with the following: The State of Launch shall be liable for damage caused by the launch activities. Insofar as the State of Launch would have provided compensation to third-parties in accordance with the provisions of Article III.3 above, it shall have the right to seek indemnification from the State of Operation, in accordance with any agreement concluded between themselves regarding apportioning among themselves of the compensation, or, in the absence of such agreement, proportionally in accordance with the extent to which the State of Operation or the non-governmental entity it is responsible for, are at fault. The State of Operation shall be liable for damage caused by operation of the payload, including by the return of such payload to Earth. The State of Operation shall have the right to seek indemnification from the State of Launch in accordance with any agreement concluded between themselves regarding apportioning among themselves of the compensation, or , in the absence of such agreement, proportionally in accordance with the extent to which the State of Launch or the launch operator, are at fault. Article III.5 Time frame for presentation of claims In view of the provisions of the present Protocol, a claim presented to the launch operator in accordance with article III.3 above shall be considered as a claim made to the State of Launch for the purposes of application of Article X of the Liability Convention. Article III.6 Compensation The compensation to be paid by the launch operator and the State of Launch shall be determined in accordance with the law of the competent court. Such compensation shall in no case exceed that defined in Article XII of the Liability Convention. TITLE IV.- IMPLEMENTATION OF THE PROVISIONS OF THE REGISTRATION CONVENTION Article IV.1 Domestic Legislation States Parties to the present Protocol shall enact appropriate legislation to ensure the implementation of the registration of launches in accordance with the provisions of the present Protocol. Article IV.2 Launch and Operation Registrations The launching States Parties to the present Protocol shall ensure the following registrations on their registry by the launch operator, at the latest on the day of launch :

343 The Launch Registration which consists in the registration of the launch vehicle The Operation Registration which consists in the registration of the payload (s) which the launch vehicle is launching.

Article IV.3 Information to be provided for Registration a) The information required in accordance with Articles IV and V of the Registration Convention shall be provided by the launching State to the Secretary-General of the United Nations, for the Launch Registration and for the Operation Registration, at the latest within 30 calendar days from the launch. b) Besides the information listed in Articles IV and V of the Registration Convention, the launching State shall indicate the type and name of the launch vehicle, the mass of the objects it registers as components of such launch vehicle, the name of the payload launched, the mass of the payload launched, the name of its licensed payload operator and the State of Operation, in accordance with article III.1 above. c ) The Secretary-General of the United Nations shall ensure that the Operation Registration is notified to the launching State as defined in Article III.1 c) above within 30 calendar days of receipt by the Secretary General of the United Nations of such registration. Article IV.4 Implementation of electronic Register a) The States Parties to the present Protocol agree that the Register maintained by the Secretary General of the United Nations may establish formal and practical relationship with the International Registry provided in the Convention on International Interests in High-Value Mobile Equipment and invites the Secretary-General of the United Nations to enter into appropriate agreement with the International Registry to that effect. b) In order to allow the efficient implementation of the Registration Convention, and the adequate functioning of the provisions of Article IV.4 above, of para a) of the present Article IV.5, of Article VIII of the Outer Space Treaty, Article 5 of the Rescue and Return Agreement, and Article VI of the Registration Convention, the States Parties to the present Protocol agree that the Secretary-General of the United Nations, supported by experts from States Parties to the present Protocol able to provide such support, set up an Internet based electronic system, for such implementation. Such as system shall allow the full and open access to the Register, as provided in Article III of the Registration Convention, the Launch and Operation Registrations, the Operation Registration notification, as well as all other information and notifications foreseen in the Registration Convention or performed on a voluntary basis by any interested State or international organization. The allocation of passwords and identifications necessary for the orderly operation of such system shall not be considered as incompatible with the full and open access provided in Article III of the Registration Convention. Access shall be granted to such system, in particular, to launch operators and payload operators. The electronic system referred to above shall also be capable of dispatching to all those concerned, requests or notifications made under Article VI of the Registration Convention or under Article 5 of the Rescue and Return Agreement, as soon as such requests or notifications are made. States Parties to the present Protocol undertake to use all reasonable efforts to support the setting up and use of such electronic system for the

344 purposes provided in the present Protocol, as well as for the efficient implementation of other provisions of international space law which could benefit from it, the latter being subject to voluntary implementation within the system’s capabilities, or the conclusion of separate implementation protocols.

Article IV.5 Transfer of Registration and Duties Notwithstanding the provisions of the present Protocol, when an object registered in the registry of a State Party is operated pursuant to an agreement for the lease or other similar arrangement operating transfer of technical control over the object to an operator who has his place of central administration in or, ifhe has no such place of central administration, is a national of another State party, the State of registry may, by agreement with such other State, transfer to it all or part of the duties as State of Launch or State of Operation in respect of that object. The State of registry shall be relieved of responsibility in respect of the functions or duties transferred. The transfer shall not have effect in respect of other States parties before either the agreement between States in which it is embodied has been registered with the Secretary General, through the electronic registration system, or the existence and scope of the agreement have been directly communicated to the authorities of the other State party or States concerned by a State party to this protocol. TITLE V.- FINAL PROVISIONS Article V.1 Signature, ratification, accession and entry into force. 1.- This Protocol shall be open for signature by all States at United Nations Headquarters in New York. Any State which does not sign this Protocol before its entry into force in accordance with paragraph 3 of this Article may accede to it at any time. 2.- This Protocol shall be subject to ratification by signatory States. Instruments of ratification and instruments of accession shall be deposited with the Secretary-General of the United Nations. 3.- This Protocol shall enter into force on the deposit of the fifth instrument of ratification. 4.- For States whose instruments of ratification or accession are deposited subsequent to the entry into force of this Protocol, it shall enter into force on the date of the deposit of their instruments of ratification or accession. 5.- The Secretary General shall promptly inform all signatory and acceding States of the date of each signature, the date of deposit of each instrument of ratification of and accession to this Protocol, the date of its entry into force and other notices. Article V.2 Reservations No reservation may be made to the present Protocol. Article V.3 Amendments Any State Party to this Protocol may propose amendments to the Protocol. Amendments shall enter into force for each State Party to the Protocol accepting the amendments upon their acceptance by a majority of the States Parties to the Protocol and thereafter for each

345

remaining State Party to the Convention on the date of acceptance by it. Article V.4 Withdrawal Any State Party to this Protocol may give notice of its withdrawal from the Protocol one year after its entry into force by written notification to the Secretary-General of the United Nations. Such withdrawal shall take effect one year from the date of receipt of this notification, or at the date when claims against the withdrawing State initiated under the present Protocol have been fully compensated or otherwise settled, where this exceeds this one year. Article V.5 Review Ten years after the entry into force of this Protocol, the question of the review of the Protocol shall be included in the provisional agenda of the United Nations General Assembly in order to consider, in the light of past application of the Protocol, whether it requires revision. However, at any time after the Protocol has been in force for five years, at the request of one third of the States Parties to the Protocol and with the concurrence of the majority of the States Parties, a conference of the States Parties shall be convened to review this Protocol. Article V.6 Original The original of this Agreement, of which the Arabic, Chinese, English, French, Russian and Spanish texts are equally authentic, shall be deposited with the Secretary-General of the United Nations, who shall send certified copies thereof to all signatory and acceding States. IN WITNESS THEREOF the undersigned, being duly authorized thereto by their respective Governments, have signed this Protocol, opened for signature at New York on ............

CONCLUSIONS

In this thesis information was presented on the current legal framework for launch activities and on the specifics of their performance by non-governmental entities. We should not, as the Minotaur, be condemned to stay in the Daedalus labyrinth and we pointed to possible ways out by use of original and substantiated proposals, supported by concrete language for model clauses and an international instrument. This start is necessarily focused on particular issues requiring improvement and it should be borne in mind that these proposals have to be placed in a global context where support from other legal areas is needed to achieve a solid legal framework. One aspect of this global context is that of dispute settlement: the solidity of the rules of law relies on an efficient dispute settlement system. In the field of space activities, launch and related activities, the classical method for solving disputes is negotiation since these activities involve a small community of actors often linked by numerous corporate, commercial or cooperative ties. This situation has the advantage that they do not waste time and money litigating. It has also drawbacks as solving disputes by negotiation is long and often leads to unbalanced confidential solutions on a case by case basis. The development of a legal environment where liability risk management is possible requires the confidence that disputes can be solved in a definitive, transparent and fair manner. It is not the case today in private law relationships among launch participants, nor between States. The settlement of disputes needs to be improved and concentrated in single fora to help a more predictable resolution of problems and develop a consistent interpretation of the legal framework. Much has been written on the issue of settlement of disputes in the area of space activities(1037) and we do not wish to extend our discussions excessively on this subject here but this area naturally complements our proposals and we would like to emphasize some possible directions on this subject. The space business does not make much use of (1037)

See for example: I.H. Diedericks-Verschoor, “The Settlement of Disputes in Space: New Developments” (1998) 26:1 Journal of Space Law, 41 K.H. Böckstiegel Ed., Settlement of Space Law Disputes, The Present State of the Law and Perspectives for Further Development (Köln: Carl Heymanns Verlag, 1980)

347

348 other methods of alternative dispute resolution (ADR) than arbitration. A number of modern techniques can be used, which are faster, less expensive and more objective than arbitration, and gives parties a better and quicker result, such as mediation.(1038) Apart from the existing hesitation to use these methods, due to the unequal requirements placed on those implementing them, the enforcement difficulties and the public policy barriers to their use in certain places or cases, and the difficulty probably encountered, excessive confidentiality in the launch business prevents the resolution of disputes in a normal way. It would be of interest to the launch community to use these ADR methods to reach dispute settlement methods fair to both parties. Even when using the ADR methods, one has to face the same drawbacks as with the court system. For each contract with a different customer, the arbitration clause or the arbitral tribunal may vary. It is very difficult to rely on a consistent resolution of disputes through such methods. We believe that, to further develop efficient use of arbitration and other ADR methods in the launch and space business, we need to concentrate disputes in the hands of one arbitral tribunal which would develop expertise in the field. Insofar as space law and air law have particular ties, one could see as such a forum the International Court of Air and Space Arbitration established in 1994 by the Société Française de Droit Aérien et Spatial.(1039) (1038)

On Alternative Dispute Resolution in general see, L.M. Ponte & T.D. Cavenagh, Alternative Dispute Resolution in Business (Cincinnati: West, 1998). With specific emphasis on the space business, see: P.D. Bostwick, “Going Private With the Judicial System: Making Creative Use of ADR Procedures to Resolve Commercial Space Disputes” (1995) 23:1 Journal of Space Law, 19.

(1039)

F. Garnault, “A New International Court of Aviation and Space Arbitration”, 1994, DYP London Space Insurance Conference, 223. The administrative secretariat of the Court is at 29 Avenue Georges Mandel, 75116 Paris. Fax 33 1 44 05 15 20. Phone 33 1 45 77 08 52. The preamble of the Statutes of the Court describes the court as follows: “ The specificity and complexity (rather than the volume) of disputes arising from air and space activities have created difficulties on numerous occasions in cases brought before those national courts required to settle such matters. The Société Française de Droit Aérien et Spatial (SFDAS) has long felt we need to remedy this state of affairs which is a source inter alia of delay, dissatisfaction and even errors, which adversely affect the interests of the parties involved (whether corporations or private individuals). This objective could and should be achieved through recourse to a specialized arbitration tribunal. There is currently no international arbitration organization specifically for air and space. Accordingly the SFDAS has decided to create a Court of Arbitration specifically and exclusively for resolving disputes directly or indirectly related to air and space. As these activities are mainly, and almost by their very nature, international, it has been decided to create an institution with an international vocation and open to non-French participants. This institution is formed as a society with its headquarters in Paris, France. Nevertheless, the international character of the society means that parties may agree to arbitration in venues other than Paris; likewise, parties are entirely free to decide together upon the law applicable, the number of arbitrators and the language of the arbitration. They may also name one or more arbitrators not included on the list drawn up by the Court of Arbitration. Secretarial services shall be provided by the Paris headquarters in all cases. Arbitration costs shall be based on French standards which are considered very reasonable in such a system. Consequently, costs shall be lower than in lawsuits in the national courts of many countries or in certain other arbitration organizations. It is expected than parties will have a financial interest in resorting to such arbitration and will subsequently refer cases more readily and more regularly to the new Court of Arbitration. Lastly, the Rules of Arbitration cover two major points required by the specific nature of the subject matter: first, the Rules provide for an interim arbitration procedure which parties may implement when they deem urgent provisional measures to be necessary; second, the Rules (continued...)

349

The Court has also the ability to nominate technical experts, an essential component of a dispute in the space business not always available at other Courts. One could suggest, in this respect, that the Statutes of the Court be amended to open the possibility of access to an expert available even without a dispute being brought before the Court, such expert being called to give simply a consultative opinion, possibly helping parties to achieve a negotiation to avoid a dispute. This possibility exists at the International Chamber of Commerce International Court of Arbitration under the name of “The International Center for Expertise”.(1040) Of course, the International Chamber of Commerce is one of the other possible arbitral tribunals. What we believe needs to be emphasized is the need for increased cooperation in the business to agree upon the use of one or two particular arbitral or mediation fora for the resolution of their disputes. By doing so, the profession would benefit of a constant jurisprudence and a consolidation of the legal environment. The issue of dispute settlement between States is more complex but we believe that the importance of this issue in relation to liability aspects could be significantly decreased by following the approach proposed in this thesis. By channeling liability claims to non-governmental launch operators, the majority today and used to handle these issues as part of their business, one could reduce the occasions of disputes between States. The drawbacks of the Claims Commission would remain, and we believe that the Legal Subcommittee of COPUOS should increase its efforts in line with proposals to encourage the recognition of the decisions of the Commission as binding. But third-parties suffering damage, and nationals of a State having proper legislation for launch licensing and insurance, would bring claims in priority to the non-governmental launch operator, and those claims would be handled in the regular fashion. State indemnification would only intervene for considerable amounts. This is only a partial help to the weak system of dispute resolution between States, but we believe that our proposals would simplify the issue of disputes between States in this area. Another aspect of the global context is that of domestic legislation. We support the efforts of those who militate in favor of the more systematic legislation by States in the field of space, and launch in particular. We have ourselves suggested in this thesis that domestic legislation has to be produced when it comes to liability issues, but as part of an internationally harmonized effort. The adaptation of the present international framework to the realities of the launch business is, in our view, a necessary step ahead of domestic legislation. If those develop in the current environment where definitions are unclear and many States can claim jurisdiction over launch activities, the result can only be a complicated intertwining of legislation with ultimately counterproductive results. If efforts are made to clarify and adapt the international legal framework, domestic legislation will have an appropriate scope and will stand a chance of functioning harmoniously together. Launch activities are a priority for this international effort because of the need to ensure that health and safety of the public are protected, and that victims are adequately compensated for any damage suffered. Space transportation is a field wide open for space lawyers of today and tomorrow. The (1039)

(...continued) stipulate arrangements for appointing French and foreign experts listed according to their specialist areas and recommended by the Court.”

(1040)

Guide to ICC Arbitration (Paris: ICC Publishing, 1994), at 15.

350

constant in their endeavors will be to invent and sustain a legal framework allowing for these activities to be performed safely and economically within the constraints of their business environment. The proposals we made are a step in this endeavor in an effort to break with the past and look for solutions providing flexibility and predictability to the launch entrepreneurs of today and tomorrow. Our hope is that our approaches and proposals will attract those, practitioners, politicians and academics who are today in a position to set the frame for tomorrow.

BIBLIOGRAPHY

This bibliography gathers the documents which have been quoted in the thesis, as well as other documents consulted and relevant to the various aspects of the topics studied.

BOOKS

American Law Institute

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American Law Institute

Restatement of the Law of Contracts, Second, as adopted and promulgated by the American Law Institute at Washington (St Paul, Minn.: American Law Institute Publishers, 1981-)

American Law Institute

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Baker D. Ed.

Jane’s Space Directory, 15th Edition (Coulsdon: Jane’s Information Group Limited, 1999)

Bénabent A.

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Bender R.

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Bender R.

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Benkö M., De Graaf W. & Space Law in the United Nations (Dordrecht: Martinus Nijhoff, 1985) Reijnen G.G.M. Benkö M., Schrogl K.U

International Space Law in the Making, Current Issues in the UN Committee on the Peaceful Uses of Outer Space (Gif-sur-Yvette: Ed.Frontières, 1993)

Black H.C

Black’s Law Dictionary, 6th Edition (St Paul Minn.: West, 1993)

Böckstiegel K.H. Ed

Product Liability in Air and Space Transportation. Proceedings of an International Colloquium in Cologne 1977. (Cologne: Carl Heymanns Verlag, 1977)

Böckstiegel K.H. Ed

Settlement of Space Law Disputes: The Present State of the Law and Perspectives of Further Development (Cologne: Carl Heymanns Verlag, 1980)

351

352 Böckstiegel K.H. & Benkö M. Eds

Space Law: Basic Legal Documents. 2 loose leaf Volumes regularly updated (Dordrecht/Boston/London: Martinus Nijhoff, 1990)

Böckstiegel K.H. Ed.

Manned Spaceflight, Legal Aspects in the Light of Scientific and Technical Development (Köln: C.Heymanns Verlag, 1993)

Capitant H., (Terré F. & Lequette Y. Eds)

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Carval S.

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Castello M.

La Grande Aventure d’Ariane (Paris: Larousse, 1988)

Chaumont C.

Le Droit de l’Espace. Collection Que Sais-Je, No 883 (Paris: Presses Universitaires de France, 1970)

Cheng B.

Studies in International Space Law (Oxford: Clarendon Press, 1997)

Christol C.Q.

The Modern International Law of Outer Space (New York: Pergamon Press, 1982)

Christol C.Q.

Space Law: Past, Present and Future (Deventer, Boston: Kluwer Law and Taxation Publishers, 1991)

Collard-Dutilleul F. & Delebecque P.

Contrats Civils et Commerciaux (Dalloz: Paris, 1998)

Combacau J. & Sur S.

Droit International Public (Paris: Montchrestien, 1999)

Courteix S. & Manin A.

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Courteix S. Ed.

Le cadre institutionnel des activités des états (Paris: Editions Pedone, 1997)

Couston M.

Droit Spatial Economique (Paris: Sides, 1994)

Csabafi I.A.

The concept of State Jurisdiction in International Space Law (The Hague: Nijhoff, 1971)

Cummins R.R.

Tort Law (Upper Saddle River: Prentice Hall, 1999)

D’Angelo G.V.

Aerospace Business Law (Westport: Quorum Books, 1994)

De Juglart M.

Traité de Droit Aérien (Paris: LGDJ, 1989)

Diederiks-Verschoor I.H.Ph. Introduction to Space Law (Deventer: Kluwer, 1993) Diederiks-Verschoor I.H.Ph. An Introduction to Air Law (The Hague: Kluwer, 1997) Draetta U. & Lake R.

Contrats Internationaux. Pathologie et Remèdes (Bruxelles: Bruylant, 1996)

Durry G.

La distinction de la responsabilité contractuelle et de la responsabilité délictuelle (Montreal: Centre de Recherche en Droit Privé et Comparé du Québec, McGill University, 1986)

353 Dutheil de la Rochère J. Ed.

Aspects récents du droit de l’espace (Paris: Pedone, 1988)

European Centre for Space Law (ECSL) Ed

ECSL Space Law and Policy Summer Course, Basic Materials (I) (Dordrecht: Martinus Nijhoff, 1993)

European Centre for Space Law (ECSL) Ed

ECSL Space Law and Policy Summer Course, Basic Materials (II) (Dordrecht: Martinus Nijhoff, 1994)

European Centre for Space Law (ECSL) Ed

ECSL Proceedings of the Third Summer Course on Space Law and Policy (Dordrecht: Martinus Nijhoff, 1994)

European Centre for Space Law (ECSL) Ed

The Implementation of the ESA Convention, Lessons from the Past, Proceedings of the ESA/EUI International Colloquium, Florence 25-26 October 1993 (Dordrecht: Martinus Nijhoff Publishers, 1994)

European Centre for Space Law (ECSL) Ed

Proceedings of the Third ECSL Colloquium, International Organizations and Space Law, Perugia, Italy, 6-7 May 1999 (Noordwijk: ESA Publications, 1999), ESA Publication ref SP-442

European Centre for Space Law (ECSL) Ed

Proceedings of the Sixth ECSL Summer Course on Space Law and Policy, Lapland 1997 (Paris: ECSL, 1998)

European Space Agency

ESA Launcher Catalogue ESA Publications, Looseleaf updated regularly.

European Space Agency

Risk Management, Proceedings of the Workshop on Risk Management. European Space Agency, ESTEC, 30 March - 2 April 1998, ESA Publications WPP-134.

Finch E.R. & Moore A.L.

Astrobusiness: A Guide to the Commerce and Law of Outer Space (New York: Praeger, 1985)

Fontaine M.

Droit des Contrats Internationaux. Analyse et Rédaction de Clauses (Paris: Forum Européen de la Communication, 1989)

Fortescue P. & Stark J.

Spacecraft Systems Engineering (Chichester: Wiley, 1995)

Gorove S.

Developments in Space Law (Dordrecht, Boston: Martinus Nijhoff, 1991)

Gorove S. Ed.

United States Space Law: National and International Regulation 2 Loose leaf volumes (New York: Oceana, 1982-1994)

Gorove S.

Cases on Space Law (University of Mississippi: Journal of Space Law, 1996)

Harris D.J.

Cases and Materials on International Law (London: Sweet & Maxwell, 1998)

Hartkamp A.S. et al Eds.

Towards a European Civil Code (Dordrecht: Kluwer, 1994)

Hoffman W. & Hill-Arning S.

Guide to Product Liability in Europe, The New Strict Product Liability Laws, Pre-Existing Remedies, Procedure and Costs in the European Union and the European Free Trade Association (Deventer: Kluwer, 1994).

354 Huet J.

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Huet J.

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Hunziker J.R. & Jones T.O., Product Liability and Innovation, Managing Risk in an Uncertain ed Environment.(Washington: National Academy Press, 1994)

Hurwitz B.A.

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International Chamber of Commerce

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International Chamber of Commerce

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International Chamber of Commerce

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Jasani B. ed

Peaceful and Non-Peaceful Uses of Space: Problems of Definition for the Prevention of an Arms Race (Bristol PA: Taylor and Francis, 1991)

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Jasentuliyana N. ed.

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Kahn P. ed.

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Lafferranderie G. & Crowther D. eds

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McDougal M.S, Lasswell H.D & Vlasic I.A.

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Malaurie P. & Aynes L.

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Markov M.G.

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355 Martin P.M.

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Matte N.M. Ed.

Space Activities and Emerging International Law (Montreal: McGill Institute of Air and Space Law, 1984)

Matte N.M. Ed.

Arms Control and Disarmament in Outer Space 4 Volumes, (Montreal: McGill University Centre for Research in Air and Space Law, 19851991)

Mazeaud H & L., Mazeau J., Leçons de Droit Civil 7th Edition (Monchrestien: Paris, 1985) Chabas F. Mercadal B.

Contrats et droits de l’entreprise(Paris: Francis Lefebvre, 1999)

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Meredith P. & Robinson G. American Enterprise, the Law and the Commercial Use of Space (Washington DC: National Legal Center for the Public Interest, 1986). Nesgos P.D

National Law and Commercial Activities in Outer Space. Specific Aspects of United States Law Applicable to Space Industrialization With Particular Emphasis on the Commercialization of Launch Vehicle Transportation (DCL Thesis, Institute of Air and Space Law, Mc Gill University, 1983)

Page Keeton et al.

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Pédamon V., Houin R.

Droit commercial (Paris: Dalloz, 1992)

Peyrefitte L.

Droit de l’Espace (Paris: Dalloz, 1993)

Ponte L.M & Cavenagh T.D Alternative Dispute Resolution in Business (Cincinnati: West, 1998) Prosser W.L.

Handbook of the Law of Torts, 4th Edition (St Paul, Minn.: West Publishing, 1971)

Ravillon L.

Les télécommunications par satellite, Aspects Juridiques (Paris: Litec, 1997)

Reynolds G. & Merges R.

Outer Space: Problems of Law and Policy(San Diego: Westview Press, 1989)

Shaw M.N.

International Law, 4th edition (Cambridge: Cambridge University Press, 1997)

Shawcross & Beaumont

Air Law (London: Butterworths, 1966-; loose leaf regularly updated)

Shirvanian D. Ed

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Société Française de Droit Aérien et Spatial Ed.

Actes du Colloque L’avion Spatial et le Droit (1991) 180:4 Revue Française de Droit Aérien (complete issue)

Souchier A., Baudry P.,

Ariane (Paris: Flammarion, 1986)

356 Tatsuzawa K. ed

Legal Aspects of Space Commercialization (Tokyo: CSP, 1992)

Terré F., Simler P., Lequette Droit Civil, Les Obligations (Dalloz: Paris, 1999) Y. Thirkettle A. & Gülpen J.

Columbus: Europe’s Laboratory on the International Space Station (Noordwijk: ESA Publications, 1999), Publication Reference BR-144.

Fenema, H.Peter van

The International Trade in Launch Services - The Effects of US Laws, Policies and Practices On Its Development (Leiden: H.Peter van Fenema, 1999)

Van Gerven W. Et al Eds

Cases, Materials and Text on National, Supranational and International Tort Law, Scope of Protection (Oxford: Hart Publishing, 1998)

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Commercial Utilization of Outer Space, Legal Aspects (Rotterdam: H.L. van Traa Engelman, 1989).

Viney G.

Droit Civil, Introduction à la responsabilité, 2è Edition (LGDJ: Paris, 1995)

Von der Dunk F.G.

Private Enterprise and Public Interest in the European ‘Spacescape’. Towards Harmonized National Space Legislation For Private Space Activities in Europe (Leiden: International Institute of Space Law, 1998)

Wassenbergh H.A.

Principles of Outer Space Law in Hindsight (Dordrecht: Martinus Nijhoff Publishers, 1991)

Zukhov G. P. & Kolosov Y.

International Space Law (New York: Praeger, 1984)

ARTICLES

In this book as well as in the bibliography, we have normally used the full names of the journals so as to ease the reference. In this bibliography, articles contained in books referred to in the books section above indicate “supra books” with the author and title of the book. The reference “colloquium” corresponds to the yearly IISL Colloquium on the Law of Outer Space.

Abe K.

“The So-Called Japanese Initiative. Japanese Airlines Abolition of Liability Limits for Personal Injury or Death in International Carriage by Air” (1994) 6 Korean Journal of Air and Space Law, 149.

Adler, Kaplan & Begy’s

“Liability/Exposure for Outer Space Activities. Is it Expanding or Contracting?” (Spring 1994) Space Law News, 1.

Adler, Kaplan & Begy’s

“Intelsat, Martin Marietta Drop Suits, Announce New Deal” (Spring 1994) Space Law News, at 7.

357 AIAA

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INTERNET SOURCES

(All internet addresses reported below and in this thesis have been checked and accessed in January 2001. Due to the rapid evolutions on the internet, we have also provided the name of the web page concerned and some information on its contents to help the reader track them in case the corresponding sites are moved). Andrews Space & Technology : A comprehensive database on the existing launchers worldwide. Arianespace:

: The web site of the Arianespace company. General documentation about the company and the launchers.

Archimedes Institute:

: A resource for a large number ofspace law related documentation (treaties, domestic regulations, litterature)

Aviation Law

: product liability.

ECSL

: the home page of the European Center for Space Law, and also the entry point into the ESALEX database.

ESA ESTEC

: ESA Technical Centre website.

ESA ECSS Standards:

: ESA ECSS Standards, structure and texts of the standards.

ESA EEE Parts:

: ESA components page.

ESA ISS

: Information on ESA and its participation in the International Space Station Project.

ESA standards:

: ESA

resources

mostly on

378 PSS standards resource. Federal Register

: access to US official published federal regulations, public laws and presidential documents.

Hieros Gamos

: a general legal site providing information and powerful search capabilities into US laws, cases and litterature, and also international law, laws of various countries. By general topics or by areas of practice.

ICAO

: information on the organization

In Orbit Newsletter:

: Insurance information

Institute of Air and Space Law : Database on air and space law. International Court of Justice:

: home page of the International Court of Justice. : site of the international court of justice.

Mirror

Jane’s:

: Various information on the space business and space actors (commercial databases).

Jurist

: various resources on all field of law, courses and summaries, links.

Legal Information Institute

: various resources in the field of law.

Legifrance

: substantial French law web resources site with legislation, jurisprudence, codes, official journal.

LEXIS (lawschools)

: various information for law students with subject summaries etc.

NASA HQ Procurement Office : documentation used by NASA for its procurements. Regulations, contracts clauses. NASA EEE Parts:

: NASA components page.

NASA ISS:

: NASA International Space Station web page.

Office for Outer Space Affairs

: activities of the OOSA, space law treaties and declarations, status of parties, Unispace information.

UNIDROIT:

: general information about UNIDROIT and works of the UNIDROIT, UNIDROIT Conventions.

Uniform Commercial Code

: Access to the text of the UCC.

US Code

:

access to all

379 chapters of the US Code with cross references to corresponding public laws, amendments. US Department of Commerce

: web site of the Bureau of Export Administration. Extensive information on export controls, with regulations and links to other administrations with export control responsibilities.

Ward & Partners

: Australian Law Firm providing information about the new Australian licensing legislation.

OFFICIAL DOCUMENTS

Agreement on the Rescue of Astronauts, the Return of Astronauts and the Return of Objects Launched into Outer Space, UNGA Res 2345(XXII), Adopted on 19 December 1967. Entered into force on 3 December 1968. Emerging International Law, at 550; UN Office for Outer Space Affairs, United Nations Treaties and Principles on Outer Space (New York, 1996), at 10 (UN Doc A/AC.105/ 572/Rev.1) [hereinafter Outer Space Office Texts]; 672 UNTS, 119; 19 UST 7570; TIAS 6599; (1993) XVII, Part II McGill Ann.Air & Sp.L., at 635. Online at the Institute of Air and Space Law (Ref above) Agreement Governing the activities of States on the Moon and Other Celestial Bodies, Adopted on 5 December 1979, Entered into force: 11 July 1984. Emerging International Law, at 570; Outer Space Office Texts, at 28; (1993) XVIII Part II, McGill Ann.Air & Sp.L., at 691; UN Doc A/RES/34/68 of 5 December 1979; 18 ILM 1434; 1363 UNTS 3. Online at Office of Outer Space Affairs (Ref above) Code Civil (Paris: Litec, 1998-1999). Online at Legifrance (ref above) Commercial Expendable Launch Vehicle Activities. Executive Order 12465. February 24, 1984. 20 Weekly Comp Pres Doc. (1984) 49 Fed Reg Nb 40, Tuesday Feb 28, 1984. Commercial Space Launch Act, 49 USC, online at AST (see address above). Commercial Space Act 1998, Public Law 105-303, October 28, 1998, 112 Stat 2843. Convention on Liability For Damage Caused by Space Objects, UNGA Res 2777 (XXVI), Adopted on 29 November 1971, Entered into force on 9 October 1973. Emerging International Law, at 554; Outer Space Office Texts, at 14; 961 UNTS, 187; 24 UST, 2389; TIAS 7762; (1993) XVIII Part II McGill Ann.Air & Sp.L., at 651. Online at Office of Outer Space Affairs (Ref above). Convention on Registration of Objects Launched in Outer Space, UNGA Res 3235(XXIX), Adopted on 12 November 1974, Entered into force on 15 September 1976. Emerging International Law, at 564; Outer Space Office Texts, at 23; 1023 UNTS, 15; 28 UST, 695; TIAS 8480; (1993) XVIII Part II, McGill Ann.Air & Sp.L., at 677; Online at Office of Outer Space Affairs (Ref above) Convention on the Law of the Sea, UN Doc. A/CONF.62/122; (1982) 21 ILM 1261 and Online:
380 Vienna Convention on Civil Liability for Nuclear Damage of 1963, entered into force on November 12, 1977, amended by a Protocol adopted on September 12, 1997, and complemented by a Convention on Supplementary Compensation for Nuclear Damage adopted on September 12, 1997, online at: <Malaysian Institute for Nuclear Technology Research: http://www.mint.gov.my/policy> (accessed: 01/2001) Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space, UNGA Res 1962(XVIII). Adopted 13 December 1963. Emerging International Law, at 537; Outer Space Office Texts, at 37. Online at Office of Outer Space Affairs (Ref below) Declaration of Certain Government on the Ariane Production Phase (1981) VI Annals of Air and Space Law, 723. Department of Transportation (DOT). Public Notice 84-5. Establishment of Commercial Space Transportation Advisory Committee. April 12, 1984. 49 Federal Register 14621. DOT, Office of the Secretary, Establishment of the Commercial Space Transportation Advisory Committee (1984) 49 Federal Register 14621. DOT, Commercial Space Transportation, Licensing Process for Commercial Space Launch Activities, Notice of Policy and Request for Comments (1985) 50 Federal Register, 7714. DOT, Commercial Space Transportation, Third Party Liability Insurance for Commercial Space Launch Activities, Request for Public Comment (1985) 50 Federal Register 19280. DOT, Commercial Space Transportation, Licensing Regulations, Interim Regulations, Request for comments (1986) Federal Register, 6870. DOT, Commercial Space Transportation, Licensing Regulations, Final Rule (1988) 53 Federal Register, 11004. DOT, Final Rule Concerning Financial Responsibility Requirements for Licensed Launch Activities (1998). Online at AST (address above). DOT, Final Rule Concerning Codification of Current Licensing Regulations (1999). Online at AST (address above). DOT, Final Rule Concerning Reusable Launch Vehicle and Reentry Licensing (2000). Online at AST (address above). DOT, Final Rule Concerning Financial Responsibility Requirements for Licensed Reentry Activities (2000). Online at AST (address above). DOT, Final Rule Concerning the Licensing and Safety Requirements for the Operation of a Launch Site (2000). Online at AST (address above). DOT, All licensing regulations are compiled at the AST web site. European Space Agency, ESA Convention, ESA Publications Division. Ref ISSN 1010-5689; European Center for Space Law, ESALEX Database (see internet address above). European Space Agency Convention, 14 ILM 864, in K.H. Böckstiegel & M. Benkö Eds, Space Law Basic Legal Documents, supra note 51, or in Florence Colloquium supra this note., in annex. European Union Products Liability Directive n°85/374 of July 25, 1985. (1985) OJEC, n° L210, 29; (1993) 32 ILM, 1352. Federal Rules of Civil Procedure, 28 USCA §§ 2071-2074. Online at (accessed: 01/2001). General Aviation Revitalization Act, 1994, 103rd Cong. Pub.L 103-298, Aug 17, 1994. 108 Stat

381 1552. Amended by Pub. L 105-102, Nov 20, 1997, 111 Stat 2215. Codified in 49 USC. ICC, Force Majeure and Hardship (Paris: ICC, 1998), ICC Publication 421E 1CC, Guide to Penalty and Liquidated Damages Clauses (Paris: ICC, 1995), ICC Publication 478. Intergovernmental Agreement Among the Government of Canada, Governments of the Member States of the European Space Agency, the Government of Japan, the Government of the Russian Federation, and the Government of the United States of America Concerning Cooperation on the Civil International Space Station (ISS IGA), signed in Washington on 29 January 1998, in K.H. Böckstiegel & M. Benkö Eds, Space Law, Basic Legal Documents (The Hague: Martinus Nijhoff, looseleaf regularly updated) International Civil Aviation Organization, Convention on International Civil Aviation, ICAO Doc 7300/6 (1980); 15 UNTS 295; (1993)XVIII-II Annals of Air and Space Law, 3; Online at Institute of Air and Space Law (ref above) Mexico Proposal to UNCOPUOS, UN Doc A/AC.105/C.2/L.206 Rev 1, 4 April 1997. Reprinted in M. Benkö & K.U. Schrogl, “The UN Committee on the Peaceful Uses of Outer Space: Introducing the Agenda Item ‘Review of the Status of the Five Legal Instruments Governing Outer Space’ and Other Recent Developments”, supra articles, at 533. Notice of Proposed Rulemaking concerning Financial Responsibility Requirements for Licensed Launch Activities. (1996) 61 Federal Register 38992. Notice of Proposed Rulemaking concerning codification of Current Licensing Practices. (1997) 62 Federal Register 13215. Nouveau Code de Procédure Civile (Paris: Litec, 1998-1999). Online at Legifrance (Ref above) Outer Space Bill, (1987) 36 Zeitschrift Für Luft und Weltraumrecht, 12 and European Center for Space Law, ESALEX Database, ref above. Presidential Policy on Commercialization of ELVs, White House Press Release, Office of the Press Secretary. May 16, 1983. 19 Weekly Comp Pres Doc, 721. Principles Relevant to the Use of Nuclear Power Sources in Outer Space (GA Res 47/68. 1992), Adopted on 14 December 1992, Outer Space Office Texts, at 47. Online at Office of Outer Space Affairs (Ref above) Product Liability Directive: Hague Convention of 1972,and Council of Europe Convention of 1977, in K.H.Böckstiegel Ed., Product Liability in Air and Space Transportation, Proceedings of an International Colloquium in Cologne 1977, supra books, at 313 &ff Report to the President by the Presidential Commission on the Space Shuttle Challenger Accident, June 6th, 1986, Washington D.C. Senate, Space Commercialization Hearing Before the Subcommittee on Space Science and Applications of the House Comm. On Science and Technology, 98th Cong, 1st Sess (Comm Print 1983). Supt Docs N° Y4 Sci 2: 98R. Senate, Commercial Space Launch Act: Hearing on S 2931 Before the Subcommittee on Science, Technology and Space of the Senate Comm on Commerce, Science and Transportation. 98th Cong, 1st Sess (1984). Supt Doc N° Y4 C 73/7: S Hrg 98-1105. Senate, Commercial Space Launch Act, House Comm on Science and Technology, HR Doc N° 3942, 98th Cong 2d Sess (1984) Supt Docs N°Y4 Sci 2: 98-108. Senate Report 656. 98th Cong. 2d Session 2 (1984). 1984 US Code Cong & Admin News 5328.

382 Senate, State of the Commercial Launch Industry, Hearing Before the Subcommittee on Space, Science and Applications of the House Comm on Science, Space and Technology, 100th Cong, 1st Sess. Y4 Sci2: 100/79. Senate, Commercial Space Launch Act Amendments of 1988, Senate Report 100-593, 100th Cong (1988). 1988 US Code Cong & Admin News 5525. Swedish Space Activities Act, 1982:963 and Decree Supplementing the Act, 1982:1069, (1987) 36 Zeitschrift Für Luft und Weltraumrecht, 11 and European Center for Space Law, ESALEX Database online ref above. Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space Including the Moon and Other Celestial Bodies, UNGA Res 2222(XXI), Adopted on 19 December 1966, Entered into force on 10 October 1967. Emerging International Law, at 543; Outer Space Office Texts, at 4; 610 UNTS, 205; 18 UST, 2410; TIAS 6347; (1993) XVIII Part II, McGill Ann.Air & Sp.L., at 615. Online at the Institute of Air and Space Law (Ref above) UNIDROIT, Draft Convention on International Interests in High Value Mobile Equipment, online at: (accessed: 01/2001) United Nations, Space Activities of the United Nations and International Organizations (New York, 1992), UN Doc A/AC.105/521, Sales No. E.92.I.30. United Nations, Office for Outer Space Affairs, United Nations Treaties and Principles on Outer Space (New York, 1996) UN Doc A/AC.105/572/Rev 1. Vienna Convention on the Law of Treaties, UN Doc A/CONF.39/11/Add.2; Adopted on 22 May 1969. Entered into force 27 January 1980. 1155 UNTS, 331; (1969) International Legal Materials, 679; Online: (accessed: 01/2001)

LEADING CASES

1808

Cass. Ch Réunies, 2 February 1808 (1808) Recueil Sirey, 1, at 183. Grand Arrêts, supra books, n°91, at 396.

1854

Hadley v. Baxendale (1854) 9 Ex 341.

1868

Rylands v. Fletcher, House of Lords. 3 LRE & I.App 330 (H.L. 1868)

1872

Cass. Civ., 15 April 1872 (1872) Recueil Dalloz, at 176 - Grands Arrêts, supra books, n °92, at 398.

1892

Cass. Civ. 11 July 1892 (1894) Recueil Dalloz, 1, 513 (Annot. Levillain); (1892) Recueil Sirey, 1, 508; Grand Arrêts, supra books, n°170, at 692

1896

Cass. Civ. 16 Jun 1896 (1897) Recueil Dalloz, 1, 433, (1897) Recueil Sirey, 1, 17.

1911

Civ,21 November 1911 (1913) Recueil Dalloz, 1, 249 (Annot. Sarrut); (1912) Recueil Sirey, 1, 73 (Annot. Lyon-Caen). Grands Arrêts, supra books, n°188 at 770.

1915

Cass. Req. 3 August 1915 (1917) Recueil Dalloz, 1, 79; Grand Arrêts, supra books, n°62, at 276. Cass Civ, 9 November 1915 (1921) Recueil Dalloz, 1, 23; (1921) Recueil Sirey, 2, 1

383 1916

McPherson v. Buick, New York Court of Appeals; 217 N.Y. 382, 111 N.E. 1050 (1916)

1922

Cass. Civ. 11 Jan 1922 (1922) Recueil Dalloz, 1, 16; (1924) Recueil Sirey, 1, 105, (Annot. Demogue), Grands Arrêts, supra books, n°107, at 456

1928

Palsgraf v. Long Island R.Co, Court of Appeals of New-York, 248 N.Y. 339, 162 N.E.99, May 29, 1928

1930

Cass. Ch Réunies, 13 February 1930 (1930) Recueil Dalloz, 1, 57; Grands Arrêts, supra books, n°122, at 519.

1932

Donoghue v. Stevenson, House of Lords, (1932) A.C.562 (H.L.)

1936

Cass. Civ. 30 December 1936 (1937) Recueil Dalloz, 1, 5, (Annot. Savatier); (1937) Recueil Sirey, 1, 137, (Annot. Mazeaud); Grands Arrêts, supra books, n°145, at 592.

1937

Cass. Civ., 4 May 1937 (1937) Recueil Dalloz, 363; Grands Arrêts, supra books, n° 139, at 575.

1941

Cass. Civ. 19 February 1941(1941) Recueil Dalloz, 85 (Annot. Flour); Grand Arrêts, supra books, n°129, at 543. Cass. Ch Réunies, 2 December 1941 (Arrêt Franck) (1942) Recueil Dalloz, 25 (Annot. Ripert); (1941) Recueil Sirey, 1, 217 (Annot Mazeaud); (1942 Semaine Juridique (JCP), II, 1766 (Annot. Mihura); Grands Arrêts, supra books, n°123, at 525.

1950

Feres v. United States, 340 US 135 (1950)

1951

De Vito v. United Airlines - 98 F.Supp 88 (EDNY, 1951)

1954

Cass Civ 1ère, 24 Nov 1954 (1955) Semaine Juridique (JCP), II, 8565; Grand Arrêts, supra books, n° 177, at 724.

1955

Nottebohm Case: ICJ Reports, 1955, at 4; 22 ILR, at 349.

1956

Cass. Civ. 2è, 5 Jan 1956 (1957) Recueil Dalloz, 261 (Annot. Rodière); (1956) Semaine Juridique (JCP), II, 9095 (Annot. Savatier); Grand Arrêts, supra books, n° 125, at 529

1959

Cass. Civ. Sect Com 15 June 1959 (1960) Recueil Dalloz, 97 (Annot. Rodière) Cass. Civ. 2è, 23 January 1959 (1959) Recueil Dalloz, 281 (Annot. Rodière); (1959) Recueil Sirey, 103; Grands Arrêts, supra books, n°191, at 775

1960

Henningsen v. Bloomfield, 32 N.J.358, 161, A.2d 69 (1960) Cass.Ch.Réunies, 9 March 1960 (1960) Recueil Dalloz, 329, (Annot. Savatier); (1960) Semaine Juridique (JCP), II, 11559, (Annot.Rodière); Grands Arrêts, supra books, n° 140, at 580

1962

Berg v. Reaction Motors Div., 37 N.J 396, 181 A.2d 487 (N.J.1962) 16, 206

1963

Greenman v. Yuba Products Inc.,59, Cal 2d 57, 27 Cal Reptr 697, 3 77 P.2d 897 (1963)

1964

Vandermark v. Ford Motor Company, 37 Cal Rptr 896, 391 P.2d 168 (1964) Cass. Ch Réunies 25 November 1964 (1964) Recueil Dalloz, 733; (1964) Semaine Juridique (JCP), II, 13972 (Annot. P.Esmein)

1965

Cass. Civ. 2è, 1st December 1965 (1966) Semaine Juridique (JCP), II, 14657.

1966

Lichina v. Futura Inc. 260 F.Supp 252 (D.C. Colo, 1966);

384 Cass. Civ. 2è, 12 May 1966 (1966) Bulletin Civil II, n°564, 404; (1967) Recueil Dalloz, 3; Grands Arrêts, supra books, n° 110, at 469

1967

Smith v. Lockheed, 247 Cal App 2d 774, 56 Cal Rptr. 128 (1967), 27, 206. Also in S. Gorove, Cases on Space Law, supra books, at 27.

1968

Tooms v. Ft Pierce Gas Co, 208 So.2d 615 (Fla, 1968).

1969

Braniff Airways v. Curtiss-Wright Corporation, United States Court of Appeals, 2d Circuit, 19 May 1969 Elmore v. American Motors Corp., 70 Cal 2d 578, 75 Cal Rptr 652, 451 P.2d 84 (1969)

1970

Barcelona Traction Case, ICJ Reports, 1970, at 3 and 46 ILR, at 178. Also partly reprinted in D.J. Harris, Cases and Materials on International Law, supra books, at 604 ff Pigott v. Boeing Co., 240 So. 2d 63 (1970), 38, 206. Also in S. Gorove, Cases on Space Law, supra books, at 38.

1971

Manos v. TWA, US District Court, Northern District of Illinois, January 11, 1971. 11 Avi, 17,966. Cass. Com. 27 April 1971 (1972) Semaine Juridique (JCP), II, 17280.

1972

Cass. Soc., 21 May 1972 (1972) Semaine Juridique (JCP), II, 17236 (Annot. SaintJours).

1974

Bruce v. Martin Marietta, United States Court of Appeals, 10th Circ, September 24, 1974, 14 Avi 17,472

1975

Jones v. Marcus, 217 Ga App 372, 457. S.E. 2d 274 (1995). Cass. Civ. 1ère, 12 November 1975 (1976) Semaine Juridique (JCP), II, 18479

1977

Cass. Ass. Plén, 10 June 1977 (1977) Recueil Dalloz, 465, (Annot. Larroumet); (1977) Revue Trimestrielle de Droit Civil, 74, (Annot. Durry); (1977) Semaine Juridique (JCP), II, 18730; Grands Arrêts, supra books, n°141, at 580

1979

SAS v. United Aircraft Corp 601 F.2d 425 (9th Circ, 1979)

1980

Tokio Marine & Fire Ins v. McDonnell Douglas Corp 617 F.2d 936 (2d Circ, 1980)

1980

Marilyn P. Sievers v. Beechcraft, United States District Court, Eastern District Louisiana, (1980), 750, 2-82, 18.141 Cass. Civ. 1, 4 March 1980 (1980) Revue Trimestrielle de Droit Civil, 769, (Annot.Durry).

1981

Clark v. The Boeing Co, District Court of Appeal, Florida, (1981), 734, 681, 17.448

1981

Joseph T.Labelle and George Blanchard v. Industrial Corporation McCauley, United States Court of Appeals, 1st Circuit, May 21, 1981 Cass. Ch Mixte, 13 March 1981 (1981) Recueil Dalloz, at 309 (Annot. M.Bénabent); (1981) Revue Trimestrielle de Droit Civil, at 862, (Annot. Ph Rémy); Grands Arrêts, supra books, n°187, at 764. Cass. Ass Plén, 19 June 1981 (1982) Recueil Dalloz, 85 (Annot. Chabas); (1982) Semaine Juridique (JCP), II, 19712; (1981) Gazette du Palais, 2, 529 (Annot. Boré); (1981) Revue Trimestrielle de Droit Civil, 857 (Annot.Durry)

385 1982

Cass. Civ. 2è, 21 July 1982 (1982) Recueil Dalloz, 449, (Annot.Larroumet); (1982) Revue Trimestrielle de Droit Civil, 807, (Annot. Durry); (1982) Semaine Juridique (JCP), II, 19861 (Annot. Chabas); Grands Arrêts, supra books, n°134, at 556.

1983

Cass. Ass. Plén, 17 June 1983 (1983) Revue Trimestrielle de Droit Civil, 749, (Annot.Durry); (1983) Semaine Juridique (JCP), II, 20120, (Annot. Chabas); Grands Arrêts, supra books, n°142, at 580

1984

F.C.Brown v. Piggly-Wiggly Stores, Supreme Court of Alabama, 454 So.2d 1370, July 27, 1984. Cass. Com., 9 October 1984 (1984) Semaine Juridique (JCP), IV, 344.

1985

Cass. Ass. Plén, 17 Nov 1985 (1986) Recueil Dalloz, 81, (Annot. Aubert); (1986) Semaine Juridique (JCP), II, 20568,(Annot. Viney); (1986) Revue Trimestrielle de Droit Civil, 126, (Annot. Huet); Grand Arrêts, supra books, n°143, at 580

1986

J.W. Nesselrode v. Beechcraft, Missouri Supreme Court, N°67428, March 25, 1986. Cass Ass Plen, 7 February 1986 (1986) Recueil Dalloz, 293 (Annot. Bénabent); (1986) Semaine Juridique (JCP), II, 20616 (Annot. Malinvaud); (1986) Revue Trimestrielle de Droit Civil, 605 (Annot. Rémy); Grands Arrêts, supra books, n°179, at 734. Cass. Civ. 2è, 15 December 1986 (1987) Recueil Dalloz, 221.

1987

Joan Sage v. Fairchild Swearingen Corporation Et Al, New York Supreme Court, Appellate Division, Third Judicial Department, N° 52167, January 29, 1987. Cass. Civ. 2è, 6 April 1987 (1987) Bulletin Civil II, n°86, 49; (1988) Recueil Dalloz, 32, (Annot. Mouly); (1987) Semaine Juridique (JCP), II, 20828, (Annot.Chabas); (1987) Revue Trimestrielle de Droit Civil, 767 (Annot. Huet); Grands Arrêts, supra books, n°135, at 556.

1988

Kramer v. Piper Aircraft, Florida Supreme Court, N°69-494, February 11, 1988 Smith v. United States and Smith v. Morton Thiokol, 712 F. Supp 893 (M.D. Fla 1988). See also in S. Gorove, Cases on Space Law, supra books, at 39. Cass.Ass.Plén., 19 May 1988 (1988) Recueil Dalloz, 513, (Annot. Larroumet); (1989) Revue Trimestrielle de Droit Civil, 89, (Annot. Jourdain); Grand Arrêts, supra books, n°144, at 580. Cass. Civ. 1ère, 21 June 1988 (1989) Recueil Dalloz, 5 (Annot. Larroumet); (1988) Semaine Juridique (JCP), II, 21125 (Annot. Jourdain); Grands Arrêts, supra books, n° 103, at 438.

1989

Smith v. United States and Smith v. Morton Thiokol,877 F.2d 40 (11th Cir 1989) cert.den. 110 S.Ct 1111 (1990). See also in S. Gorove, Cases on Space Law, supra books, at 45.

1989

Appalachian Insurance v. McDonnell Douglas, 214 Cal App 3d, 1, 262 Cal Rptr 716 (Cal App 4th Dist 1989). See also S. Gorove, Cases on Space Law, supra books, at 99.

1990

Lexington Insurance Co v. McDonnell Douglas Corp, N°418713 (Cal.Super.Ct, Orange Co, May 1990) Certain Underwriters at Lloyds et al v. McDonnell Douglas Corp et al., US District Court of the Middle District of Florida Orlando Div, Case 90-833 Civ-ORL-18 and 90543. June 18, 1990.

386 1991

Martin Marietta v. Intelsat, 763 F.Supp. 1327 (D.Md. 1991). Case note (1991) 19 Journal of Space Law, 173. See also S. Gorove, Cases on Space Law, supra books, at 58. Martin Marietta Corp v. Intelsat, Civil Action N°MJG-90-1840 (D.Md 19 Nov 1991). Cass. Ass. Plen., 12 July 1991 (1991) Recueil Dalloz, 549 (Annot. Ghestin); (1991) Semaine Juridique (JCP), II, 21743 (Annot. Viney); (1991) Revue Trimestrielle de Droit Civil, 750 (Annot. Jourdain); Grand Arrêts, supra books, n°105, at 438. Cass. Ass. Plén., 29 March 1991 (1991) Recueil Dalloz, 324, (Annot. Larroumet); (1991) Semaine Juridique (JCP), II, 21673, (Annot. Ghestin); (1991) Revue Trimestrielle de Droit Civil, 541 (Annot. Jourdain); Grands Arrêts, supra books, n°147, at 600

1992

Martin Marietta Corp v. Intelsat, 991 F.2d 94 (4th Cir. 1992). See also S. Gorove, Cases on Space Law, supra books, at 64. Hughes Communication Galaxy v. United States, 26 Cl. Ct. 123 (1992) American Satellite Co v. United States, Claims Court: 26 Cl Ct 146 (1992)

1993

Hughes Communication Galaxy v. United States, 998 F.2d 953 (Fed Cir 1993). Case note in (1993) 21:2 Journal of Space Law, 166. See also S. Gorove, Cases on Space Law, supra books, at 76. American Satellite Co v. United States, Appeals Court: 998 F. 2d 950 (Fed Cir 1993). See also S. Gorove, Cases on Space Law, supra books, at 81 and 96. Cass. Civ. 1ère, 17 November 1993 (1994) Revue Trimestrielle de Droit Civil, 155, (Annot.Jourdain).

1995

Civ. 2è, 8 March 1995 (1995) Semaine Juridique (JCP), II, 22499 (Annot.Gardach); (1995) Semaine Juridique (JCP), I, 3893, (Annot.Viney).

1996

Cass. Civ. 1ère, 11 June 1996 (1996), Bulletin Civil n°250, 176. Cass .Civ. 2è, 16 April 1996 (1996) Semaine Juridique (JCP), I, 3985 n°8, (Annot. Viney).