In February the Federal Communications Commission (FCC or Commission) released a notice of proposed rulemaking for orbital debris from satellites. The Commission proposes to modify and add to its 2004 debris requirements in parts 5 and 25 of its regulations. Among many other things, the FCC proposes to make satellite operators indemnify the U.S. Government for harm the licensee might cause. The FCC does not disclose the basis for its belief that it has the legal authority to impose such a requirement. Nonetheless, it sought comments:
Given the potential risk of a claim being presented to the United States under international law, the Commission seeks comment on whether an indemnification by these U.S.- licensed private operators is appropriate. Such an indemnification could take the form of an indemnity agreement, for example, created in consultation with interagency partners, including the U.S. Department of State, to establish the parameters of such an agreement, including the scope of the indemnification and the means to execute the agreement, including by an appropriate U.S. government agency. In the event that a requirement was established, what would be the appropriate form and content of such an agreement?
Again without disclosing where Congress authorized it to impose such a requirement, the FCC proposes to require satellite operators to obtain insurance:
The Commission seeks comment on how insurance might serve as an economic incentive by incentivizing operators to adopt debris mitigation strategies that reduce risk and lower insurance premiums. How might this impact the amount of insurance that might be required? Could insurance requirements in fact encourage industry to be licensed by or launch from the United States rather than other countries? In the context of insurance, the Commission seeks comment on whether there are any distinctions that might be made between different types of operations that are higher or lower risk. The Commission also seeks comment on whether any distinctions could be made between on- orbit liability and spacecraft re-entry liability, since on-orbit liability is addressed through a fault regime and re-entry liability is addressed through a strict liability regime under the Convention on International Liability for Damage Caused by Space Objects (Liability Convention).
There was opposition to these proposed requirements. As noted earlier here, the FCC appears not to have statutory authority to impose an indemnification requirement. Nor do the statutory provisions the Commission cites in its proposed regulatory text contain authority from Congress to impose insurance requirements. When Congress wants to impose insurance requirements, the statute looks like 51 U.S.C. 50914 which says, “When a launch or reentry license is issued or transferred under this chapter, the licensee or transferee shall obtain liability insurance or demonstrate financial responsibility… . ” The FCC’s cited provisions do not say that or anything comparable.
Usually, allocation of risk involves the type of policy choices that are made by Congress, that is, the type of policy determinations that are legislative in nature. Just as it is rational for Congress to decide to protect the launch industry to some extent from claims for damage, see 51 U.S.C. 50915, so might it have chosen not to. Likewise with the satellite industry. If, however, Congress has not said that the satellite industry must protect the U.S. Government, one might ask, first, how the FCC thinks it has the authority to do so, and, second, why it has chosen a different path for a related industry? Moreover, if the U.S. government has already taken on a liability obligation by treaty, how does the FCC have the authority to change the government’s obligations? Because it is the legislative branch, Congress has that ability. The FCC is not technically part of the executive branch, but neither is it a legislative entity.
Orbcomm objected to the FCC’s proposed indemnification and insurance requirements:
With respect to indemnification, it is not clear whether it will be possible for satellite system operators to obtain insurance at reasonable rates. And without insurance to fund an indemnification liability, it is very likely that defaults on such obligations could easily occur, rendering such a requirement ineffective and unenforceable. The on-orbit liability is based on a fault regime, but it is far from clear how fault can be assigned in the case of a collision. Re-entry liability is assessed based on a strict liability regime, but the re-entry is unlikely to occur for many years, which could make the setting of insurance rates somewhat arbitrary. In addition, rather than proposing a standardized indemnification agreement or licensing condition, the Orbital Debris NPRM instead indicates that the Commission might work with other agencies “to establish the parameters of such an agreement, including the scope of the indemnification.” The Commission goes on to propose that an agreement be “completed” within 30-days after grant of a license, which suggests that such agreements may be the subject of individual negotiation. But the lack of uniformity that would be inherent to such an approach is likely to have various negative repercussions that would be contrary to the public interest. For all of these reasons, it does not appear that there is a sufficient basis for any decision regarding the proposed new indemnification requirement that will result from the Orbital Debris NPRM.
OneWeb argued in its comments that the FCC should not impose indemnification or insurance requirements on foreign licensees:
For non-U.S. licensees who retain indemnification or similar obligations to other nations, requirement of such obligations from the Responsible Agency would be unnecessary and place such licensees at a competitive disadvantage. In such a capital-intensive industry, forcing non-U.S. licensees with indemnification or insurance requirements to other nations to effectively double (relative to U.S. licensees and assuming similar levels of financial obligations among nations) the capital allocated to these requirements. Making additional financial commitments to the Responsible Agency would unjustly penalize non-U.S. licensees.The anti-competitive impacts of such a requirement may also violate the U.S. market-opening commitments made in the World Trade Organization (“WTO”) Agreement on Basic Telecommunications Services and first implemented in the DISCO II Order by placing non-U.S. licensed NGSO operators at a competitive disadvantage.
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[S]uch requirements could discourage non-U.S. licensees from seeking market access in the United States. U.S. consumers are well-positioned to benefit from the new frontier of connectivity services offered by NGSO FSS systems and other innovative satellite-based providers. Indirectly punishing U.S. consumers by making the United States a less attractive place to invest substantial capital, create hundreds of high-paying jobs, and provide cutting edge connectivity to the otherwise unconnected96 is surely not an outcome that is consistent with the stated intention of the Administration and the Commission to maintain U.S. leadership in space.97
Any attempt to impose indemnification or insurance obligations on non-U.S. licensed market access applicants would also be based on shaky jurisdictional grounds. As both the 2004 Orbital Debris Order and the NPRM detail, the Liability Convention specifies that “launching states” can be held liable for any costs or claims caused by satellite operators.98 The Liability Convention defines “launching state” as a state which launches or procures the launching of a space object or a state from whose territory or facility a space object is launched.99 For a satellite licensed and launched outside the United States, merely granting U.S. market access is unlikely toresult in the United States incurring any “launching state” liability. Therefore, the imposition of indemnification/insurance requirements lacks a sound jurisdictional basis, as non-U.S. licensees would be forced to financially account for claims that likely could not be successfully prosecuted against the U.S.
In fact, imposing indemnification/insurance requirements on non-U.S. licensees who already retain similar obligations to other nations could have the perverse effect of increasing claims against the United States. Claimants under the Liability Convention are likely to bring claims against any nation that could be considered a launching state. For non-U.S. licensees with U.S. market access, as noted above, there would likely be too much attenuation for a claimant to reasonably define the United States as a launching state. However, if the Responsible Agency were to require non-U.S. licensees with market access to have indemnification/insurance requirements, claimants may use the financial commitments as evidence of the United States’ “launching state” status, irrespective of whether the United States is in fact a “launching state.” Such a rule could unintentionally increase the United States’ exposure to potential liability under the Liability Convention, which is not an ideal outcome from this proceeding. The proposal to require non-U.S. licensees to undertake indemnification and insurance requirements as a condition of U.S. market access unfairly prejudices non-U.S. licensees, is anti-competitive, and is based on dubious jurisdictional claims.
For more comments to the FCC on this rulemaking, see here.