1. Luxembourg Workshop on Space and Satellite Communication Law,
Key Contractual Aspects in Hosted Payload and Condominium Satellite Projects
Dr. Ingo Baumann
Luxembourg Workshop on Space and Satellite Communication Law,
4, June 2015

2. Overview Typology of Hosted Payloads Projects & Contract Structures
Allocation of Risks
Delays & Failures
In-Orbit Operations
Insurance
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

3. Typology of Hosted Payload Projects
&
Contract Structures
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

4. Typology of (Hosted) Payload Projects
HP under responsibility of Host
a) Construction/Procurement
- Host
b) Ownership of Payload
- Host or
- Client
c) Ownership of Common Systems
‘True’ Hosted Payload
Condominium Satellite
- each party constructs/procures
- each party owns its payload(s)
- shared ownership
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

5. Contractual Structure – HP under Responsibility of Host
(e.g. commercial operator)
Client
Manufacturer
Launch Service Provider
Insurer
Note: either a joint insurance approach is agreed between Client and Host, or each party takes out insurance separately.
Note: typically, the Host contracts with the Launch Service Provider.
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

6. Contractual Structure – ‘True’ Hosted Payload
(e.g. commercial operator)
Client
Manufacturer
Launch service Provider
Insurer
Note: either a joint insurance approach is agreed between Client and Host, or each party takes out insurance separately.
Note: several approaches on the procurement of the payload(s) are possible, e.g. contract with the same or with different manufacturers.
Note: typically, the Host contracts with the Launch Service Provider.
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

7. Contractual Structure – Condominium Satellite
Owner A
Owner B
Manufacturer
Launch service Provider
Insurer
Note: either a joint insurance approach is agreed between Client and Host, or each party takes out insurance separately.
Note: several approaches on the procurement of the payload(s) are possible. Owner(s) may, e.g., contract with the same or with different manufacturers.
Note: several approaches on the procurement of the launch are possible, e.g. either procured by Owner A or three-side contract with both Owner A and Owner B.
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

8. Contractual Structures – Key Considerations
All (Hosted) Payload Projects have complex contractual structures:
several entities at the table, including Host, Client, Manufacturer(s), Launch Service Provider, Insurers
several contracts between several entities, which need to be aligned to each other
Even if there is a certain typology, approaches differ very much for each project and require individual contractual solutions
Depending on the individual approach, ownership levels (on payload(s), on common systems) and resulting rights and obligations may differ significantly.
Risk allocation depends on the individual approach
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

9. Allocation of Risks
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

10. Identification of Risks
Identification of risks is key for the drafting of a Hosted Payload or Condominium Satellite contract
Risks may include:
Client not able to ensure funding
late delivery of the payload
delays in satellite manufacturing (if separate procurements)
launch delay or launch failure
harm (e.g. interference) caused by one payload to the other
degradation or failure of satellite payload
degradation or failure of satellite bus
changes of orbital slot during lifetime
bankruptcy of the client
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

11. Allocation of risks
Allocation of risks is strongly linked to technical & operational issues, such as:
physical location and mass requirements of the Hosted Payload
power requirements of the Hosted Payload
interface of the Hosted Payload with the satellite bus
interoperability of the payloads
In Orbit Validation (IOV) and acceptance procedures
satellite operations, including contingency manoeuvres
payload operations
These technical and operational issues involve risks that should be contractually allocated between the parties.
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

12. Allocation of risks – General Rules
As a general rule, each party shall bear responsibility for the risks in its sphere and the harm it may cause
However, allocation of risks may vary dependent on the individual approach for the Hosted Payload or Condominium Satellite arrangement
General rule for Hosted Payload is that the payload(s) of the hosting entity has priority over the Hosted Payload(s)
General rule for Condominium Satellites is that both payloads have equal priorities
Within the general typology, there may be highly individualized contractual solutions
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

13. Delays & Failures
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14. Late Delivery of the (Hosted) Payload
This may become an issue for
‘True’ Hosted Payloads (payload is constructed/procured by the Client) and
Condominium Satellites (in case the satellite and/or the payload(s) are constructed/procured separately by each party)
Payload needs to be delivered in time to complete the integration prior to the scheduled launch date
Late delivery may cause severe consequences for the Host, including
the Host can be obliged to pay penalties
loss of revenues
the Host might lose the frequency rights under ITU
However, there may also severe consequences for the Client, namely if he needs to find another ‘ride’ or even a completely new hosting partner
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

15. Contractual Aspects on Late Delivery
‘True’ Hosted Payloads
Contract usually provides that the Host is under no obligation to delay the launch.
Parties usually mitigate the risk of a launch delay caused by late delivery of the Hosted Payload by
requiring the Client to provide a ‘dummy’
fixing the required delivery date well before the day the payload must be integrate at the latest
requiring the Client to pay penalties for every day that the payload is late, if the payload is not delivered by the delivery date
proceeding with the integration of the ‘dummy’, when the payload is not delivered by the integration deadline
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

16. Contractual Aspects on Late Delivery (Cont’d)
Condominium Satellites
Priorities not that clear as with ‘True’ Hosted Payloads – no ‘primary’ payload
However, severe consequences for both parties in case of late delivery
Accordingly, to be carefully assessed whether one party is under the obligation to wait for another
Parties must agree on the consequences of a launch delay caused by late delivery and on suitable mitigation measures
Several factors to be taken into account, such as
financial engagement of each of the parties
expected loss of revenues
attribution of responsibility (risk sphere)
fault of either party
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

17. Launch Delay Launch service contracts usually provide:
substantial penalties for causing an ‘inexcusable’ delay
termination rights against the party that causes substantial and/or inexcusable delays
Hosted Payloads
Host typically contracts with the Launch Service Provider:
the Host is exposed to the direct risks
these risks must be properly reflected in the Hosted Payload arrangement
Condominium Satellites
it may be that both parties contract with the Launch Service Provider
accordingly, risks with regard to launch delays may be allocated directly between the parties in the launch service contract and/or in the underlying Condominium Satellite arrangement
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

18. Launch Delay (Cont’d) Launch delay caused by one of the parties
Typically, each party bears responsibility for delays in its sphere
Legal and financial risks depend on contractual terms of the launch service contract and of the Hosted Payload/Condominium Satellite arrangement
Hosted Payload arrangement may foresee penalties or compensation rights of the other party
In Condominium Satellite arrangements, risk may also be shared between both parties
In case of a launch delay attributable to third party, risks are usually shared proportionally between both parties.
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

19. Launch Failure – Contractual Aspects
Total loss or destruction of the launch vehicle and the satellite (including the payloads), generally, leaves the parties with no recourse.
Discounted re-launch may be included in the launch service contract
Further consequences and mitigation actions should be provided for in the Hosted Payload/Condominium Satellite arrangement
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

20. In-Orbit Operations
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21. In-Orbit Operations – Contractual Aspects
Hosted Payloads
In case of a failure or malfunction of the Hosted Payload that could jeopardize the operations of the ‘primary’ payload or of the satellite bus, the Host is entitled to take all actions possible to protect the primary payload and/or the satellite bus at the expense of the client, e.g. ‘shut off’ the hosted payload
Host typically agrees to use ‘best efforts’ to ensure hosted payload operations, subject to ‘primary’ payload priorities
In case of a degradation of the satellite bus, the Host typically is entitled to allocate power (or other) resources to the ‘primary’ payload
However, in such cases, the Client may have a right for financial compensation
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

22. In-Orbit Operations – Contractual Aspects (Cont’d)
Condominium Satellites
In general, in such cases there is no ‘primary’ payload
In case of a failure or malfunction of one payload that could jeopardize the operations of the other payload or of the satellite bus, the contract must foresee proper consequences and mitigation measures
In case of a degradation of the satellite bus, power (or other resources) need to be re-allocated among the two parties
In general, risks and responsibilities are shared, if the failure concerns the common systems
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

23. Movement of the Satellite to a Different Orbital Slot
Movement to a different orbital slot could occur during lifetime
for operational reasons
in case of harmful interference
when the operator sells the satellite
Movement to a different orbital slot may render the other (Hosted) Payload inoperable or reduce its commercialization potential
In such cases, the contract may grant to the Client the right to
terminate the contract and claim compensation, or
continue operations of the Hosted Payload from the new position and to claim compensation for resulting consequences (loss of clients etc.)
In Condominium Satellite arrangements, decision-making regarding orbital movements may need to be taken by both parties
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

24. Insurance
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

25. Insurance
Generally, the use of insurance can be an effective way to protect a party against heavy losses at a relatively low cost
Insurance may either be taken out
by the Host, including for the Hosted Payload
separately by the Client for the Hosted Payload
jointly, namely in case of Condominium Satellite
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

26. Insurance (Cont’d) Insurance may cover: launch failure
in-orbit failure or degradation
third party damage
Insurance may, however, not cover all special risks:
can consequences of power degradations be covered by insurance?
generally, limited coverage available in the space insurance market
Contract should specify for which risks insurance coverage should be taken out
Contract must cover the allocation of costs for insurances
Contract should also provide for sharing of compensation paid by insurers
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

27. Conclusions
While there is certain typology (Hosted Payload, Condominium Satellite), solutions widely differ and require strong individualization of contract terms and conditions
Drafting Payload contracts is basically concerned with the allocation of responsibilities and risks between the parties
Dependent on individual project, responsibilities and risks may either be allocated to one of the parties or shared among them
There is no standard solution for Hosted Payload and Condominium Satellite projects!
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015

28. Contact BHO Legal Cologne BHO Legal Munich
Hohenstaufenring Cologne
Tel.: + 49 (0) Fax: + 49 (0)
BHO Legal Munich
Hermann-Schmid-Str Munich
Tel.: + 49 (0) Fax: + 49 (0)
Luxembourg Workshop on Space and Satellite Communication Law | 4 June 2015