LEO Liability a Growing Area of Concern, but Clarity Not Forthcoming
Despite a growing need for clarity on liability of commercial space operations, no answers are coming soon, said speakers at an American Bar Association air and space law forum Friday in Washington. The nascent on-orbit servicing industry is having trouble getting traction because of that lack of clarity over liability and attribution, such as who ultimately bears financial responsibility for a mishap or cleanup in space, said Chris Kunstadter, AXA XL global space head.
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Every country from which rockets are launched has regulations about liability or financial responsibility to protect the government from third-party suits, but very few -- the U.K. and Singapore among them -- have ongoing requirements for on-orbit financial responsibility or insurance, Kunstadter said. The U.S. doesn't require satellite operators to indemnify it beyond launch, though requiring indemnification is a proposal in the FCC's pending orbital debris rules update, he said. With the White House's 2018 space traffic management space directive essentially giving Commerce some liability oversight, how the government will handle liability is "very much an open issue," though neither the government nor operators want to make the first move, he said.
The investment community is only now starting to pay attention to orbital debris and the threat it poses to sustainable commercial operations, said McKinsey's Chris Daehnick. He said it's also starting to ask questions about mega constellations and oversight of them.
Orbital debris is akin to car emissions, where most limits are happening through regulation rather than market forces, Daehnick said. That could change when there are enough mega constellation operators, each incentivized to not step all over themselves, but the industry isn't there yet, he said.
The liability regime laid out in the Outer Space Treaty isn't adequate, but it would be "virtually impossible" to amend it or come up with a new one, Kunstadter said. University of North Dakota space studies associate professor Michael Dodge said nation-states love the current system because it gives them broad flexibility, but commercial operators are less satisfied.
Insurers urge operators to employ best practices like making every satellite trackable and having propulsion on every satellite orbiting above the International Space Station, Kunstadter said. Complying with that would be relatively cheap and not cost much in terms of weight or power, "but people are messy" and often don't adopt such steps until forced to, he said. However, the insurance industry isn't going as far as requiring or urging on-orbit servicing or cleanup, he said.
It's common for satellite operators to use flags of convenience for tax reasons, registering their companies in places like Luxembourg or Gibraltar, but they aren't likely to similarly go regulator shopping over orbital debris rules and liability issues, Kunstadter said. Even if an operator is domiciled elsewhere, it would still need to follow FCC debris rules to get U.S. market access, he said.
Of roughly 4,000 low earth orbit satellites in orbit, about 1% are insured, compared with close to 50% of geostationary satellites, Kunstadter said. He said big operators tend to insure the launch phase, except for SpaceX's Starlink. He said AXA and LeoLabs are collaborating on creating a tool for quantifying risks of particular satellites in particular altitudes and orbits. Daehnick said there's not much incentive for LEO operators to take out insurance because their satellites are small, relatively cheap and designed for short lifespans.
The FCC's current orbital debris rules update proceeding faces a variety of hurdles, including pretty much "universal opposition" from the commercial space industry against indemnification, Dodge said. It's also potentially unclear whether the agency has legal authority to enforce bonds or indemnification, he said.