Purpose and modes of State indemnification Project 2001 Plus Towards an harmonised approach for Nations Space Legislation in Europe. Berlin, 29/30 January 2004 Purpose and modes of State indemnification Armel Kerrest Institute of Law of International Spaces and Telecommunications University of Western Brittany

2 I Indemnification among launching States. Launching States are jointly and severally liable How can they get indemnification if they have to pay for the whole amount of the damage ? Article V of the liability convention : 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. "agreements regarding the apportioning among themselves of the financial obligation in respect of which they are jointly and severally liable".

3 II Indemnification of a State having paid compensation to a victim in the case of a private activity. When may indemnification be required ? the launching States are liable the State of the "national activity"

4 How indemnification may be organised ? There is a simple way to organise the state’s indemnification : to require reimbursement of any payment made by the State because of the private activity in outer space. It may be done by the private entity itself or by the insurer.

5 An other solution is to take this opportunity to modify the sharing of the risk by modulating the indemnification. If they want to support their private space activities or even to make them possible, States will do so. They may of course subject this support to a closer control.

6 III The limitation of indemnification as support to national space private activities. As insurance is needed, the obligation of indemnification must be limited in amount and in duration.

7 If they want to support their national space activities, States should keep a part of the risk. For indemnification purpose, they may accept a ceiling in amount accept a ceiling in duration increase the exonerations from absolute liability (act of God, fault of the victim) or even put a fault liability.

8 They have two ways to limit the obligations of their private entities. They can limit the indemnification they require if the State has to pay. They may try to limit the liability of the company if sued before a domestic judge under domestic rules.

9 This limitation cannot prejudice the potential victim under the liability convention It is possible under domestic legislation –The point to know if it is desirable is something else –If such a limitation is put in the domestic law victim will use foreign judges and foreign law

10 In practice it may not be so easy to limit private entities’ liability. (the ceiling issue) Problematic: there no ceiling for States ceiling are needed for insurance purposes

11 Let us have a look to the procedures: There are two possibilities: First one : Action under the liability convention A State to State procedure The Launching State will pay The private company will indemnify the State until the agreed ceiling. It is OK for the ceiling

12 Second possibility: Action against the private company under general domestic liability rules. Before an “Utopian” judge The “Utopian” law will apply It may set a ceiling to compensation to the victim (as far as this ceiling does not apply to claims against Utopia under the liability convention, we are not under the liability convention but under the Utopian law) But if there is such a ceiling the victim will try to get full compensation before an other judge. (Risk of forum shopping)

13 Before a foreign judge The foreign law will apply, it may have no ceiling. The company will have to pay for the whole damage without a ceiling and without any limitation of the kind. (and perhaps without insurance above the ceiling or if the duration of the insurance contract is over)

14 How the “Utopian” company will get its money back for the amount over the ceiling of the “Utopian” law ? Will the “Utopian” government pay ?

15 The US CSLA seems to answer the question. It does not work the general way. The logic of most laws is organized according to the liability convention and thus according to the possibility for the State to be liable for a private activity. Then the problem for this State is to know how it can get its money back from the company or its insurer. “Indemnification of the State.”

16 The logic of the US CSLA seems different The purpose is clearly to support private space activities. The findings and purposes of the law as stated in § at 1 to 9, is quite clear on this point. Liability Risk-Sharing Regime For U.S. Commercial Space Transportation: Dot FAA (April 2002) When this study deals with “indemnification”, it does not mean indemnification by private entities to State but indemnification of private entities by State. This point is very significant of the supportive logic of the US CSLA

17 The US CSLA does not exclude the liability convention and the US Government’s liability as a launching State. It considers only the case of “a successful claim of a third party against a licensee” Under the Maximum Probable Loss (MPL) the insurer will pay Over the MPL and under 1,5 billion $ the US gvt will pay. Over 1,5 billion $ the company will pay (?)

18 In practice the consequence is that –at least under 1,5 billion of damage, a US licensee is much better protected than an other one. The MPL applies whatever the procedure may be. If the victim uses the liability convention mechanism, the US government will pay, it is beneficiary of the insurance under the ceiling If the victim uses general liability rules before any domestic judge, the US government will indemnify the company if a successful claim goes over the ceiling

19 Conclusion On the first issue, States should pass agreements to apportion the obligation to pay among launching States (liability convention article V)

20 Conclusion (2) As far as private entities are concerned, States must be in a position to get indemnification if they have to pay because of private activities in Outer space (either on article VI or article VII of the OST

21 States must be aware of the sharing of the risk, they must choose and control the private entities they want to subsidize. If they have no domestic space legislation they will not be in a position to do so. As a “Launching State” or as an “appropriate State”, they may be liable without having a real possibility to get their money back or even to control activities they may be responsible or liable for.

22 Conclusion (3) They also must consider the way to support their national space activities It may be by lowering the obligation to reimburse them It may also be by limiting the risk for private entities –The installation of a ceiling within domestic law seems insufficient –Indemnification by the State of the companies sued for the damage over the ceiling seems necessary (cf US CSLA)

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