As interest in CubeSats and other small satellites grows, the UK government is working to catch up by updating its regulations regarding the licensing of such spacecraft. (credit: NASA)

A very British coup: Lessons from the draft UK regulations for CubeSats

by Christopher J. Newman and Michael J. Listner
Monday, August 31, 2015

From an apparent standing start in the early years of the 21st century, the United Kingdom has recently embraced the challenges of diversifying its economy by investing heavily in space activity. One of the perceived obstacles to developing this area of growth was the regulatory framework enshrined within the Outer Space Act 1986 was overly burdensome on small companies. Recognizing this, the UK Space Agency has recently promulgated draft recommendations for changes to the regulatory framework governing CubeSats.¹ These proposals, if enacted, will trim much of the unnecessary administration and repetition from the process of obtaining a license while retaining enough regulation to effectively discharge the UK government’s responsibility under the Outer Space Treaty of 1967.

This discussion does not attempt to evaluate the technical or engineering implications of the CubeSat phenomenon, nor it does not attempt to critique the draft UK recommendations from that perspective. Instead, this discussion will focus on the legal and regulatory efficacy of the proposals. This article will critically evaluate the proposed UK CubeSat regulations in the context of the current UK attempts to expand its share of the world space economy. Crucially, however, this discussion will also look beyond the UK and explore the role of regulation more broadly within the small satellite industry. The light touch solution proposed by the British will be compared and contrasted to the current regulation employed by the United States. It will be discussed how the British approach might benefit the current US system and influence other state actors as well as the broader international community.

The UK space economy: Setting the context for reform

The economic imperative for a revised legislative approach can be found in the “Case for Space” study commissioned by the UK Space Agency, and conducted by London Economics.² This report found the UK space economy had tripled in real terms since the turn of the century. In 2012–13 it was valued at an aggregate turnover of £11.8 billion (around $18.5 billion), with a compound annual growth rate of 8.6 percent since 2008–09.³ Closer examination of these figures shows the vast majority of this turnover is accounted for by the direct-to-home (so-called satellite) television market.⁴ Space manufacturing accounts for just under £1 billion ($1.5 billion) of the UK space economy, and it is in this area government and private industry are looking to expand.

The UK Innovation and Growth Strategy (IGS), published in 2010, set a target of growing the UK’s share of the global space market to 10 percent by 2030.⁵ Such a target may appear ambitious given the country’s relatively late entry in the arena of space activity. It is, however, not without substance. Satellite manufacturers such as Surrey Satellite Technology Limited (SSTL) and Airbus Defence and Space have recently signed high profile contracts to produce small satellite constellations covering a wide range of applications.⁶ Recent trade missions to Asia⁷ and America⁸ have sought to develop the UK space market share. The mission to America focused specifically on fostering links between nine small satellite startup companies and counterparts in the US. In addition to all of this commercial activity is the prospect of the UK finally entering the sphere of human spaceflight and the attendant domestic attention this will bring to nascent UK space ambitions.

Regulation in the UK: The Outer Space Act 1986

While the UK wasting no time in trying to cultivate commercial space opportunities, it is somewhat surprising that the underpinning regulatory regime has remained untouched for nearly 30 years. The legal basis for all space activity carried out by the United Kingdom is to be found in the Outer Space Act 1986. This piece of primary legislation is the way in which the UK Government discharges its obligations under the Outer Space Treaty of 1967. The Act establishes a regime of regulation to which all entities under its jurisdiction must comply if connected with space activity in the UK and confers the power to license space activities upon the Secretary of State.⁹

The regulatory burden that this licensing requirement imposes upon (especially but not exclusively) small space startups is considerable. Section 4 of the 1986 Act provides the conditions under which a license will be granted. A license will not be granted unless the Secretary of State (via the UK Space Agency regulator) is satisfied the activities authorized will not jeopardize public health,¹⁰ will be consistent with the international obligations of the UK,¹¹ and will not impair the national security of the UK.¹² The grant of a license, in practice, involves an assessment process during which there will be a financial, safety, and environmental assessment of the application.¹³ Recognized as being “high cost,” this process looks back over the development of the project and also seeks to look forward, assessing potential areas of risk and liability arising from the proposed activity. Section 5 of the 1986 Act states that the grant of a license is conditional on the requirement that the licensee prevents the contamination of outer space, prevents adverse changes in the environment of the Earth, and avoids interference with the activities of others in the peaceful exploration and use of outer space. In the consultation document first promulgated in June 2015, the UK Space Agency recognized the current regulatory regime is not well suited to deal with CubeSats. It is against the backdrop of this concern the UK Space Agency has made recommendations to reform the regulations regarding the licensing of CubeSats.

Regulating CubeSats: The traffic light approach

In redrafting the regulations, the UK Space Agency has had to balance the regulatory duties in respect of risk and liability with need to fully explore the undoubted economic potential offered by low-cost, modular CubeSat platforms. The stated aim of the consultation into the specifics of CubeSat regulation is to:

…evaluate the risk presented to, and posed by, such systems and consider how its regulatory approach might be tailored for Cubesat systems. Recognising the common aspects of such missions, there is an opportunity for the UK Space Agency to exploit a range of pre-determined technical assessments and associated likely regulatory outcomes for a range of likely Cubesat systems, presented in the form of a traffic light system (GREEN = low risk, AMBER = medium risk—may require further consideration such as evaluation of safety- critical systems, RED = high risk—likely to present unacceptable hazard to operational population which cannot be mitigated cost-effectively.)¹⁴

For those within the commercial sector, these outcomes could, at the discretion of the regulator, be “reflected in the need for insurance and other requirements normally included in the license.” This points to two key characteristics of the new CubeSat regime. First, the regulators are seeking to develop a system with a number of harmonized elements that can be used to speed up the application and reduce costs. Second, rather than creating blanket immunity from regulation for CubeSat missions, the UK Space Agency recognizes the need for some form of ongoing regulatory oversight in this area.

The standardized nature of CubeSat systems has enabled the consultation to break down the risks posed by any CubeSat mission into three fundamental elements: the launch system, platform characteristics, and the orbit into which the CubeSat will be inserted.¹⁵ From this, the report outlines eight recommendations designed to facilitate the introduction of a traffic light system, providing a matrix of the three elements above, which will be “Green” in terms of licensing requirements. As the report states: “This is analogous to but not equivalent to certification of tried and trusted systems.” Recommendation 7 seeks to promote the creation of a series of criteria that correspond to the Green evaluation for each element of the mission outlined above.¹⁶ In effect, this traffic light system will enable developers to produce CubeSat platforms that, upon successful mapping to the Green rating, will be able to be certified in a streamlined, harmonized process.

The first two recommendations are focused towards the launch system and are relatively straightforward. By virtue of Articles III and IV of the Liability Convention of 1972 (which themselves build on Article VII of the Outer Space Treaty of 1967), a state attracts absolute liability for compensation for damage caused by a space object either on the surface of the Earth or to an aircraft in flight (as opposed to fault-based liability for damaged caused to other space objects in orbit.) Given the small mass of a CubeSat, it is unlikely any elements reentering from orbit would survive. The UK Space Agency therefore recognizes that absolute liability for damage caused by a CubeSat is likely to be limited to the launch phase of the mission. From a regulatory perspective, ensuring the use of recognized launch providers can largely discharge the burden of absolute liability, which rests upon the state. Using such providers means launch insurance (and in-orbit liability cover for a year) will usually be provided as part of the launch contract.¹⁷

Recommendation 1 requires an assessment of CubeSat launch systems and scenarios, and the UK Space Agency website to identify those launchers/situations that would attract a Green rating under particular conditions.¹⁸ Recommendation 2 looks to build on this and reuse launch vehicle specific data and information regarding the characteristics of the launch systems. This would then provide evidence for potential customers of both mission assurance and safety assurance with only incremental changes to the operation of a launcher needing to be reassessed. Both of these recommendations are sensible and, if enacted, there is little doubt they would “reduce the burden on the licence applicant and the regulatory authority.”¹⁹

The platform considerations for CubeSat regulation are, for the most part, also rooted in common sense and appear to be relatively uncontroversial. The report identifies that CubeSats differ from other satellite systems in they follow standardized approaches for many aspects of the mission. Accordingly, Recommendation 3 specifies “applicable international standards should be employed to specify those standard aspects of Cubesats platforms that can provide safety assurances about the intrinsic hazards presented by the Cubesat satellite and its subsystems to other space systems”²⁰ . Recommendation 5 recognizes there will be a great deal of this commonality inherent when dealing with constellations of CubeSats and proposes such sets of satellites could be collectively authorized under a single license fee. Given that “smallsat constellations are, for now, the wave of the future for the space industry,”²¹’ adopting this recommendation represents a crucial step forward in unburdening the space manufacturing industry of oppressive regulation.

Environmental considerations: Managing and encouraging sustainable growth

The recent proliferation of CubeSat constellations has, however, led to concerns by some regarding the dangers of congestion in space and, by extension, issues in relation to cleaning up orbital debris. This is a crucial area of CubeSat regulation as there is a lingering perception they represent an increasing menace to operations in low Earth orbit (LEO).²² The Outer Space Treaty does not specifically address the issue of orbital debris. This, however, merely reflects the modern predilection of states to subscribe to more agile, non-binding guidelines.²³ . Given the increasing profile of the danger posed to current and future space activity from orbital debris, this is an area that a regulator would neglect at his or her peril. Recommendations 4 and 6 are aimed squarely at ensuring the regulatory role of the UK Space Agency is fully discharging its duties in respect of the long-term sustainability of space.

Recommendation 4 can be categorized as an attempt at monitoring the overall volume of CubeSats licensed, “both in terms of the number on a particular launch and the overall constellation involved, in terms of the collision risks posed to other orbital systems both during and after the operational phase of the mission, and the potential impact on long term sustainability of the orbital environment.”²⁴ A CubeSat constellation can significantly increase the number and frequency of conjunctions when compared with a monolithic satellites.²⁵ Recommendation 4 is somewhat opaque as to when a constellation may be unduly onerous upon the space environment. It may be, therefore, this is intended to work in harness with the specific measures outlined in Recommendation 6.

Simulations have shown that given their ubiquity and the likelihood of their increased use, CubeSats will be inevitably be responsible for millions of additional conjunctions, which have the potential to lead to collisions.²⁶ Serving to satisfy UN Debris Mitigation Guideline 6,²⁷ Recommendation 6 seeks to limit the longer-term presence of CubeSats in LEO once they have ended their useful life. The recommendation looks to prohibit CubeSats without propulsive capability from being injected into orbits with a natural decay of more than 25 years. Where a mission does require a CubeSat to be inserted into an orbit with a natural decay beyond the 25-year limit, there must sufficient reliability and fuel, or a proven onboard disposal system, to enable the CubeSat to deorbit to a lower disposal altitude that will comply with the 25-year rule.

While this is the absolute minimum of what might be expected, it could be argued given the dramatic increase in the CubeSat population (which these regulations are, after all, seeking to bring about), these regulations could actually be more robust in terms of their requirements. Incentivizing low perigee orbits so, where necessary, CubeSats deorbit within five years of end-of-life, prompting constellations to spread perigee altitude to remove the burden on specific orbits, and encouraging measures to reduce tracking uncertainty would serve to tackle orbital congestion²⁸ and demonstrate that the UK regulators are committed to ensuring space sustainability.²⁹

Waiving insurance: The key to unlocking the sector?

Crucially, however, it is the final recommendation is potentially the most far reaching. In recognizing the Outer Space Act regulatory regime is not conducive to growth within the CubeSat industry, the unspoken central issue for much of the report is not technical but economic. The expense of the application process is only part of the story. The main criticism of the 1986 Act is reserved for the requirement under section 10. This imposes an obligation upon all applicants (irrespective of the nature of the project) to indemnify the government fully against any third party liability (TPL) claims brought as a result of damage or loss arising out of activities. Currently, this represents unlimited liability on licensees and, according to one observer, “the concept of ‘unlimited liability’ offers little financial certainty when fund raising and, compared with other space faring nations, poses a competitive disadvantage to UK operators.”³⁰ This concern aligned with the view of the Regulatory Policy Committee, which stated, “the treatment of contingent liabilities under the Act is inconsistent with practice in other space faring nations and in other UK sectors that have comparable contingent liabilities.”³¹

Accordingly, starting October 1, licenses for space activity granted under the 1986 Act now include a cap on the unlimited liability. While a risk assessment will be performed for each new license application to determine the appropriate liability cap, it is expected that, in the majority of cases, the cap will be set at €60 million ($67 million).³² The cap will not apply automatically to existing licenses; however, there is provision for the cap to be applied to existing satellites upon request to the UK Space Agency. According to a report commissioned by Innovate UK, when this reform occurs, the UK regulatory regime will be on a similar level to other players in the space industry.³³

While this offers an obvious improvement in the commercial environment, there are two critical issues must be considered. First, the 1986 Act retains the requirement that TPL insurance is needed for all aspects of the mission, including on-orbit TPL insurance, whereas most other countries require TPL insurance for launch only. Second, the 1986 Act requires TPL insurance for all aspects of the mission, irrespective of the size and expense of the satellite.

Despite the aforementioned desire to empower the space manufacturing sector, it is clear the ongoing licensing requirement for TPL insurance, (notwithstanding the cap at €60 million, including on-orbit coverage) poses a challenge to precisely the sort of space startup that the government is seeking to encourage. Assuming a premium of 0.1 percent of the rate covered, the TPL insurance requirement would typically see a small startup having to pay €60,000 for a CubeSat that may well have cost less than that to manufacture. This means many small space startups looking to utilize CubeSats are stillborn.

Any attempt to reform the regulation of CubeSats clearly needed to address this issue. Accordingly, Recommendation 8 states that the UK Space Agency should conduct a financial impact assessment examining the benefit to the CubeSat industry of waiving the TPL insurance requirement for CubeSat missions judged not to expose the UK to potential in-orbit liability. The example given in the report was of a CubeSat launched into a low orbit with a lifetime of five years. Given this is well below the 25-year limit and in accordance with best practice, it is unlikely the UK would be liable on the fault basis associated with on-orbit collisions. In such circumstances, the requirement for TPL insurance could be waived. The report goes on to state, “As it is often argued that third party liability insurance is a major barrier to entry for some Cubesat operators, this measure in itself could facilitate the emergence of new actors within the Cubesat market.”³⁴

It is clear the UK Space Agency is reluctant to introduce a blanket waiver for CubeSats. Given the aforementioned tension between the regulatory role and the need to champion the emerging CubeSat industry, this is perhaps not surprising. But it is clear that the purchase of ongoing TPL insurance presents UK startups with a disadvantage. The requirement of a financial impact assessment on this will provide the policy impetus within the government to lessen this disadvantage. Given the choice of traffic light regulation for Cubesat, a blanket waiver was never a realistic prospect, nor is it necessarily desirable. A regulatory framework needs flexibility and, rather than have a waiver with the risk some missions may be refused a license because of their risk, a discretionary waiver for low-risk missions seems a sensible way to proceed. The litmus test for success will not be in the granting of the waiver, but whether the waiver actually does serve to unshackle the nascent space manufacturing base within the UK.

page 2: a comparative view and possible lessons >>