The 40th Anniversary of the 1963 Treaty Banning Nuclear Weapon Test in the Atmosphere, in Outer Space and Under Water (1963 NTB)

Abstract

The shift from a state/government dependant to a commercially oriented industry and the global context of the space business require new ways to finance space equipment. This is also supported by the immense amount of financial resources that are involved in the space industry. In response to this trend, the International Institute for the Unification of Private Law (UNIDROIT), has elaborated a Convention on Mobile Equipment. As regards space equipment a group of international experts formed the “Space Working Group” and commenced drafting a protocol specific to space assets, which shall provide the legal frame for modern asset based financing. This paper provides economic and legal background information for the raison d’etre of the Convention/Protocol and identifies its merits. The main focus is the comparison of the current draft Space Protocol with German Law, in particular the different opt-ins and opt-outs. Due to these options a state is given the opportunity to choose between certain provisions by way of declaration. The paper examines different options and offers recommendations from a German industrial point of view. In conclusion, it points out the compatibility of the Convention/Protocol with German law and underlines its importance for the German Space Industry. The significance of the Convention/Protocol may even increase in the future, when production in space and permanent space transport through reusable launch vehicles will be technically achieved. 1. A NEW INTERNATIONAL LEGAL REGIMEN FOR SPACE ASSETS: The development from a state/government dependant to a commercially oriented space industry and the global context of the space business require new ways to finance space equipment. This is also supported by the immense amount of financial resources that are involved in the space industry. In response to this trend, UNIDROIT has elaborated the “Convention on International Interests in Mobile Equipment”, hereinafter referred to as the 1 UNIDROIT is the acronym of the International Institute for the Unification of Private Law. It is an independent intergovernmental organisation with a history reaching back to the year 1926. Its purpose is to study needs and methods for modernising, harmonising and co-ordinating private and in “Convention”. As regards space equipment, a group of international experts formed the “Space Working Group” (SWG) in 1997 and commenced drafting the “Protocol on Matters specific to Space Assets, hereinafter referred to as the “Protocol”, which shall provide the legal frame for modern asset based financing. This paper refers to the draft Protocol after the Rome meeting of the Space Working Group dated January 2002, UNIDROIT 2 The full text of the Convention is available for download under http://www.unidroit.org 3 The text of the current preliminary draft Protocol can be accessed via: http://www.unidroit.org/english/internationalinteres ts/draftspaceprotocol/72j-10-e.pdf 54th International Astronautical Congress of the International Astronautical Federation, the International Academy of Astronautics, and the International Institute of Space Law 29 September 3 October 2003, Bremen, Germany IAC-03-IISL.1.13 Copyright © 2003 by the author(s). Published by the American Institute of Aeronautics and Astronautics, Inc., with permission. Released to IAF/IAA/AIAA to publish in all forms. 2 Doc. No. 10. The development of the Protocol is still an ongoing process. 2. BACKGROUND, MERITS AND STRUCTURE OF THE CONVENTION/PROTOCOL: Before analysing the implications with German law, it is required to extract the relevant rationales and merits of the Convention/Protocol. 2.1 Economic Background: The evolution of the international space industry shows a shift from a formerly state/government dependent to a more and more privatised industry. To a great extent the satellite industry is the motor of this privatisation process. Whilst during the times of cold war many satellites were used for military purposes, more and more of today’s satellites are utilized commercially. The spectrum of modern satellite applications ranges from telephony and mobile services over internet access to television and radio broadcasting. Growing revenues and profit margins of the majority of satellite operators show the economic success and profitability of the satellite operating business. From 1965 until the end of 2001 531 geostationary satellites were sold with an estimated value of 47.9 billion USD plus another 227 satellites worth 2.8 billion USD for low earth orbit constellations. However, after the Globalstar and Iridium disasters and due to an overcapacity in the telecommunication market, it became more difficult to obtain financial resources and 4 For revenues of satellite operators see Euroconsult: “Operating revenue of satellite operators 1998-2000”, page 24; for profit margins see Euroconsult: “Profit margins of satellite service providers 1997-2000”, page 28 5 See Euroconsult page 81; for a complete overview see Euroconsult “Commercial geostationary communication satellites: Past deliveries and estimated backlog of prime contractors, 19652001”, page 82. the commercialisation process experienced a slow-down. In particular new satellite operators suffer from financing difficulties since many of them do not have the financial standing to be attractive for lenders. A shift from debtor-based to assetbased financing, as provided by the UNIDROIT initiative, would enable these operators to obtain the required resources giving lenders the opportunity to sell the respective assets in case the borrower is in default. 2.2. Legal Background: Apart from the aforementioned economic background the UNIDROIT initiative has also a legal dimension. Many legal systems as regards security rights follow the rule “lex rei sitae” and apply the rules of the State where the asset is situated. Due to the international context of the space industry where a space asset during its construction phase may move across various national borders and due to the fact that space assets, once they are launched, are located in outer space and then beyond the jurisdiction of any State, this approach seems inappropriate for space assets. 2.3. The Convention and its two-tier approach: In order to overcome the problems connected with high value assets passing national frontiers, UNIDROIT has elaborated the Convention, which was originally intended to cover various categories of movable assets. However, this plan was later abandoned in favour of a two-tier approach where all the general rules are contained in the Convention and the asset-specific rules are provided by the 3 respective protocols for aircraft equipment, railway rolling stock and space assets. The driving force behind this decision was the aviation industry, which 6 See Article II 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, 1967, UNTS 205, 208, hereinafter referred to as OST.