The Past, The Future, and Stateless Property Rights

Yesterday’s Wall Street Journal contained a charming  mention of the birth of the credit report. What does this have to do with space law? It provides another example—albeit in the context of extending credit—of private information exchange and its effects on a commercial actor’s reputation to bolster Alex Salter’s proposal for a purely private legal system for space commerce. Such a system could make up for any lack of government enforcement of private property rights arising out of a popular but probably incorrect interpretation of Article II of the Outer Space Treaty.

Salter, as described here last October, focused on the fact that, while it might behoove a barbarian to take another person’s stuff, for those engaged in commerce, and particularly for those who have self-selected for the patience to engage in space commerce, the “discipline of continuous dealings” will lead to more civilized behavior. The barbarian scenario is limited in that it assumes a one-time interaction between the two parties, which is not realistic. In real life, there should be multiple interactions over a lifetime, making vital the need for cooperation and dealing with other players properly. He points to the reputational effects of dealing badly and describes private medieval merchant courts as an example of voluntary private law.

The WSJ outtake reminded me of his thoughts on reputation when it quoted from A Culture of Credit, by Rowena Olegario:

In the late eighteenth century, attempts to improve the flow of information led English mercantile and retail creditors to band together into trade protection societies. …

[T]he Society of Mutual Communication for the Protection of Trade . . . proved longer lasting. . . . The society’s constitution expounded two principles that lay at the heart of all trade protection societies: “Every member is bound to communicate to the Society without delay, the Name and Description of any Person who may be unfit to trust, for the security and satisfaction of the other Members; and shall, on all occasions, impart, without reserve, any information that may be solicited by any of the members.”

Talk about ensuring reputational effects for poor behavior.

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For Whom the Clock Starts, For Whom it Stops, and Tolling

When a launch or reentry operator applies for a launch or reentry license from the Federal Aviation Administration, the FAA has 180 days to determine whether to grant the license or not. This time limit comes from  the Commercial Space Launch Act (CSLA), 51 U.S.C. ch. 509, and the FAA has to follow it. This sounds very simple, but, of course, it isn’t. Because Congress did not specify how the FAA is to count the days, the FAA’s regulations, which it must follow under Supreme Court case law, start and stop the clock based on whether the FAA has enough information in the application to start working on it.

The clock starts. When does the clock start counting down? Might an applicant submit its name and address and have the clock start running? No.

Under the FAA’s rules the clock starts when an applicant submits an accepted application.  An accepted license application is one that is “complete enough for the FAA to start its review.” In other words, the applicant has to provide enough information for the FAA to start figuring out if the operator can satisfy, among other things, the FAA’s safety and financial requirements. That’s when the clock starts ticking.

The FAA can afford this approach because it has the ability to “toll” its review: it can stop the clock. As the regulations note, “[t]he FAA’s acceptance of an application does not mean it has determined that the application is complete.”

The clock stops. If the FAA has an application that does not contain all the necessary information, the FAA will toll the review period under section 413.15(b). To do that, the FAA writes to the applicant and requests the missing information. Although this part is not in the rules, the FAA’s notification of the applicant that the agency needs more information will contain a date by which the applicant should submit the information to avoid tolling. If the applicant provides the information before that date, the clock does not stop. If the FAA does not receive the requested information, the clock stops on the specified date. For example, let’s say that on Day 50 of the review period the FAA writes the applicant requesting information about an applicant’s safety official because the applicant doesn’t seem to have one. The FAA requests the information by April 5, which is Day 60. The applicant does not provide the information. Although the FAA may keep working on the application, it will toll the review period, and the clock doesn’t start again until May 1, when the applicant finally provides the FAA the identity of its safety official.

This system is actually a great benefit to the applicant. If tolling were unavailable, the FAA would have to deny the license application at 180 days for missing information, and the clock would reset to Day 0.

Another interesting point is that both the CSLA and the FAA’s regulations state that the FAA must inform the applicant in writing of any additional information the agency needs if it hasn’t made its final determination at 120 days.

Thus we see that the FAA, in accordance with Congressional direction and expectations, structured its regulations on this topic to allow an applicant to submit an incomplete application, albeit one that is “complete enough” for the FAA to start its review. Were the FAA to change this approach it would have to change its regulations.

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Chairman Babin on International Obligations in Space

On February 7, 2017, at the FAA’s Commercial Space Transportation Conference, Representative Brian Babin, Chairman of the Space Subcommittee of the House Science, Space and Technology Committee spoke on how the U.S. can fulfill its international obligations for commercial actors in outer space.  If you wish to read his whole speech, this link will take you there:   FAA conference Feb 7 2017 .  Among other topics, he addressed questions raised by Article VI.  As GroundBased readers know full well, Article VI of the Outer Space Treaty states that “[t]he activities of non-governmental entities in outer space, including the Moon and other celestial bodies, shall require authorization and continuing supervision by the appropriate State Party to the Treaty.”  The Chairman responded to this provision in a very thoughtful fashion.  First, he lays out the domestic philosophy of governing.

[T]he government’s role isn’t to give you permission to do something. The government’s role should be limited to only those areas that require its intrusion, which is a high bar. The burden of proof shouldn’t be on the individual to demonstrate the “right” to act; the burden of proof should be on the state when it seeks to restrict liberty.

In thinking about how this clear statement of philosophy might play out, I see two possible paths.  In the one path, the executive branch’s agencies would recognize that because Article VI is not self-executing, and if Congress hasn’t passed a law like it did when it told the FAA to authorize launch, reentry and spaceports, then Article VI poses no barrier to any particular activity.  In the second, Congress itself would pass legislation reminding everyone of that point.  (I am nervous about processes where Congress would assign an agency the job of “defaulting to approval.”  I suspect that was the original intent behind the FAA’s payload review, but I’m not sure it’s worked out that way.  The better course might be to create a notification regime, or, better yet, to ensure that an applicant need apply for nothing to operate in outer space.)

The Chairman also discussed what he did not want to see:

[T]he Constitution places the responsibility upon Congress to make legislative determinations regarding what requires federal authorization and supervision. It should not be the case that everything anyone does in outer space requires federal approval. Article 6 grants States the discretion to decide what must be authorized to assure conformity with treaty obligations and how it is to be supervised. Transferring this authority to the executive branch raises serious concerns given how vast the scope of regulatory oversight would be.

Legislative Responsibility and Due Process.  Chairman Babin raises a couple of interesting legal points with this observation.  As he notes, it is Congress, not the Executive Branch that makes the legislative decisions about what requires federal oversight.  Also, if the U.S. decides that more private activities in outer space require oversight, we should identify what those activities are.  As the Supreme Court has said on more than one occasion, due process considerations of notice and transparency require that an ordinary person be able to tell what is forbidden and what is required.  Saying everything must be authorized would be so broad as to create constant confusion.  People would convince themselves that the law cannot possibly apply to playing the piccolo or anything else equally mundane.  But we lawyers read the words of a law with exactitude, and if the law says everything then the law means everything.  The agency charged with enforcing any such law would have to apply the words as written.  Recently, we’ve seen pie in the sky and a proposal for lunar brewing.  Are those activities so hazardous they require the expenditure of taxpayer resources?

Discretion.  The Chairman is correct to note that the treaty “grants States the discretion to decide what must be authorized to assure conformity with treaty obligations and how it is to be supervised….”  (Emphasis added).  This means that a country might decide not to regulate the lunar harpist, but go all in on the lunar brewer.

The Chairman also echoes the Supreme Court in noting that, for a treaty that is not self-executing,

the executive branch, unless explicitly authorized by Congress, should not deny an American citizen the right to explore and use Outer Space. I hope that the incoming Trump Administration will closely examine this topic, because this question of how we will regulate our private sector activities is not simply academic. I believe it is one of the fundamental space policy questions of our time. America is great because it is a country where you have the freedom to create without government permission. We are all free, unless we chose, through our legislative process, to limit our freedoms.

Self-executing.  As this blog has discussed, Article VI is not self-executing, which means that Congress must provide direction before the executive branch may attempt to enforce that provision.  It would be wonderful indeed if the new Administration were to issue a statement recognizing that if Congress has not forbidden a space activity, then that activity  is allowed, thus putting to bed the regulatory uncertainty that plagues some.  Then, if an agency sought more authority over the private sector it would have to go through the usual exercise of demonstrating to Congress a real need to burden the private sector.

 

 

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Thoughts on Current Events in Congress and the Administration: the CRA and an E.O.

Congressional Review Act  The Wall Street Journal’s Kimberly Strassel wrote last week about far-reaching implications of the Congressional Review Act, noting that Congress can overrule some regulations and guidance promulgated since 2009, depending on whether the agency promulgating the rules filed a report with Congress.

The accepted wisdom in Washington is that the CRA can be used only against new regulations, those finalized in the past 60 legislative days. That gets Republicans back to June, teeing up 180 rules or so for override.

***

But what Mr. Gaziano told Republicans on Wednesday was that the CRA grants them far greater powers, including the extraordinary ability to overrule regulations even back to the start of the Obama administration. The CRA also would allow the GOP to dismantle these regulations quickly, and to ensure those rules can’t come back, even under a future Democratic president. No kidding.

Here’s how it works: It turns out that the first line of the CRA requires any federal agency promulgating a rule to submit a “report” on it to the House and Senate. The 60-day clock starts either when the rule is published or when Congress receives the report—whichever comes later.

According to Todd Gaziano, former counsel to a Congressional sponsor of the law, not all agencies file the required reports, so that the clock doesn’t start running for Congress to use the CRA. In other words, if an agency issued a major rule in 2014, but did not send Congress its report on the rule, and the new administration submitted a report today, Congress would have 60 days to use the CRA process.

One point to consider is that Congress has always had the power to undo a regulation it didn’t like. What the CRA does is require the Executive Branch to disclose its regulations to the Congress and provide for a far quicker consideration process, thus making the whole exercise more simple and more likely to happen.

Another interesting point is that the effective date of the rule itself may depend on whether a report gets filed. 5 U.S.C. 801(a)(3) states that a major rule shall take effect 60 days after the latest date on which Congress receives the report or the rule is published in the Federal Register.  If Congress did not receive a report, is the rule not effective?

One of the most interesting questions that the CRA presents is whether the law provides for Congress to invalidate part of a “rule.” A rule means many things in the lingo of an agency. People will say that they are working on a “rule,” and the rule will contain paragraph after paragraph, page after page, of requirements. Despite the vernacular, each of those requirements is a rule.  14 C.F.R. § 417.107 is one section in the FAA regulations governing launch safety, but it alone contains many requirements, many rules. Often an agency determines what a “rule”– in the bureaucratese sense–will contain based on what is ready to change. For example, the FAA’s original spaceport requirements at 14 C.F.R. part 420 addressed a plethora of different topics, including flight safety analysis, explosive siting, coordination with Air Traffic Services, and procedural requirements. The explosive siting requirements in turned addressed the storage and handling of, and safe separation distances for, solid propellants, fuels, and oxidizers. It seems plausible that Congress could invalidate parts of a rulemaking, since so many of them deal with so many different topics. After all, Congress may do so even without the CRA, albeit more slowly.

Executive Order:  One Rule Passed, Two Rules Repealed On January 30, 2017, President Trump released an Executive Order directing agency heads to identify for elimination two regulations for every new one issued:

any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations. Any agency eliminating existing costs associated with prior regulations under this subsection shall do so in accordance with the Administrative Procedure Act and other applicable law.

As in the usual way of things, existing regulations must be repealed through the standard rulemaking process, where a proposed repeal is shared with the public for notice and comment. The E.O.’s real bite comes from its requirement that agency heads keep the total costs of new and repealed regulations to zero, unless otherwise required by law or consistent with written advice from the Office of Management and Budget. In order to achieve a total annual cost of zero, agencies must offset new regulatory costs by the elimination of existing regulatory costs. Each agency will be assigned costs caps, and OMB will provide guidance on how to implement the new order. The WSJ reports that this is not uncommon:

Canada requires every rule that creates another hour of paperwork for business compliance to be offset one for one. The United Kingdom and Australia have harder versions that require the costs of new rules to be offset by deregulation of comparable net value.

What counts as an offsetting cost? It will be interesting to see if OMB allows agencies to offset requirements without regard to the identity of the affected industry. The Federal Aviation Administration, for example, regulates both aviation and space transportation. Could the FAA achieve its annual regulatory budget by increasing costs on one mode of transportation and offsetting those new costs with savings applied to another mode of transportation? Likewise, could the Federal Communications Commission offset costs imposed on satellite services with savings on terrestrial providers?

The Order states that the “regulations” and “rules” to which it applies do not include “regulations issued with respect to a military, national security, or foreign affairs function of the United States.” Although the FAA issues its launch and reentry licenses and permits consistent with the national security interests of the United States, this Order will likely apply to the FAA’s space regulations unless it can be successfully argued that the FAA’s Office of Commercial Space Transportation has a national security function of its own. That seems unlikely.

Practioner’s Note: If one were to be trying to find out whether an agency submitted its required report on a particular rule, the Senate appears to have an accessible list here. Not being a millennial, I have not yet found the House version. If anyone has that, please let me know in comments or through my contact information and I will amend this post. Also, I found the Senate version through pure serendipity, by plugging in the name of a published FAA rule, and the link doesn’t appear to be devoted solely to reports.

 

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