Presented to: By: Date: Federal Aviation Administration Office of Commercial Space Transportation Plans to Modify Part 440 COMSTAC, Business/Legal WG Randy Repcheck May 14, 2013

Federal Aviation Administration Outline Background Customer Flow-Down Third Party Beneficiaries Cross Waiver With No Customer 5/14/2013Part 440 Modifications2

Federal Aviation Administration Background A licensee must sign reciprocal waivers of claims with its contractors, its customers, and the U.S. government. Each party waives and releases claims against the other parties to the waivers and agrees to assume financial responsibility for: –Property damage it sustains, and –For bodily injury or property damage sustained by its own employees. Purpose is to reduce litigation expenses by requiring launch participants to assume responsibility for their own losses. Crew and space flight participants must execute reciprocal waivers of claims with the federal government. 5/14/2013Part 440 Modifications3

Federal Aviation Administration Customer Flow-Down Under current rules, each customer must sign a reciprocal waiver of claims with the licensee and the FAA. Historically not a major problem: –FAA licensees usually had no more than one customer, usually a manufacturer or operator of a large satellite. –Only occasionally would other, smaller satellites be part of the manifest. We are now seeing and expect to see more launches having multiple customers or “customers of customers.” 5/14/2013Part 440 Modifications4

Federal Aviation Administration Customer Flow-Down (cont.) We are interested in COMSTAC’s views on customer flow-down: –Require licensee to sign cross-waivers only with customers that have directly contracted with the licensee. –A customer of a customer contracting with a licensee would sign cross-waiver only with the original customer, not all launch participants. To work: –A “second-tier” customer would still have to agree to waive claims against all launch participants, and –The original customer would have to indemnify other launch participants if it failed to obtain such a waiver from the “second- tier” customers. 5/14/2013Part 440 Modifications5

Federal Aviation Administration Third Party Beneficiaries In a 2011 Rulemaking:* –The FAA amended the cross-waiver appendices in part 440 to change the language to clarify that one customer could not indemnify on behalf of another customer. –By doing so, it became unclear that the customer was waiving any claims it had against all other customers. Statute requires that customers waive claims against all the customers involved in the launch or reentry, including those signing a different set of cross-waivers. Future rulemaking will clear this up. * Clarification of Reciprocal Waivers of Claims for Multiple-Customer Commercial Space Launch and Reentry Amendment, 76 FR 8629 (Feb. 15, 2011). 5/14/2013Part 440 Modifications6

Federal Aviation Administration Cross Waiver With No Customer No cross-waiver template exists for permitted activity with no customer. So … –Every permit applicant has needed to modify the existing cross- waiver templates. The FAA plans to add a new appendix to part 440 that is a sample reciprocal waiver of claims agreement for permitted activities with no customer. In interim, will place a template on AST’s web site. 5/14/2013Part 440 Modifications7