Luxembourg Satellites Symposium June 4th-5th 2015 University of Luxembourg IMPACT OF UNIDROIT SPACE ASSETS PROTOCOL ? Professor Dr. Lesley Jane Smith Leuphana University Lüneburg Weber-Steinhaus & Smith

Overview 1. Background/ Genesis 2. Concepts (securities) and Goals 3. Default 4. Remedies against owners of satellite interests 5. Satellite financing models and default 6. Conclusions

1. Background to Space Protocol System of public international law /Duties of states No right to commercial space Private international law not within space law structure Public v. Private International Law Registration (object/~assets) National/UN space register International organisations Presumptions under REG that state of registration is LS Flowdown from International to national structures

2. Genesis of UNIDROIT CTC+ SP Law applicable to cross-border movables = lex rei situ/ Securities over mobile assets Validity = applicable law Private International Law Space objects=no territoriality/no nationality Art VI state of nationality (control) Art VIII state of registry jurisdiction Space assets=Art I (k) (i)-(iii) CTC spacecraft, payload, transponder Parts, equipment, data, manuals Background to Convention and Protocol

(D)evolution in Space industry 3. CAPE TOWN CONVENTION 2001 (D)evolution in Space industry (D)evolution from government-funded to flourishing private (aero)space industry Security rights in context of key international transport and satellite service operations Aviation Protocol (2001; 2006) Cheaper finance; possible benefit to space community Prediction of positive economic impact on aviation sector correct Ergo potential for satellite community

4. Two document approach to Space Protocol (2012) Only for signatories to CTC, not a stand-alone Art 2(1)-(2) CTC = registration of ‘international interest’ in mobile equipment Default remedies over mobile equipment (~ space assets = only constructive repossession) Combat deficiencies of lex situ = security interest over property only recognisable in jurisdiction located where security interest validly created Encourage financial support /lift legal/financial impediments on funding new satellite markets

CTC Legal concepts Art 16 CTC CTC– consensual approach -creditor and debitor (chargee and chargor) agree to provide international security per contract Formalities Art V SP sale; prospective sale of space asset; transfer of ownership Security agreement creating rights in rem over assets as part of satellite finance transaction lex registri register of space assets, debtors’ rights (re) assignments Art II SP Art 20 Consent o register Art 16 CTC A new international public register for space assets right of search public law retsrictions CTC Legal concepts

Some detail, some procedure Art V SP: written contract for registration of interest; Art 20 CTC- parties’ consent to register Art V.3. registration of contract of sale ‘indefinite’ *added value for ITU: Art 7(c) CTC and VII SP - Identification of space assets’ Art IX: rights or prospective interest can also be assigned (incl. subrogation), subject to govt policy IX.(c) Value of loan need not be stated in Register

Summary Cape Town contracting state, signatory to Space Protocol Art 4 CTC: Provisions applicable to contracting state where debtor ‘situated’ (incorporated/ registered office/ place of business/centre of administration) Interpretation subject to international character + need to promote uniformity and predictability Various opt-out Declarations, incl. registration of non-consensual rights Public policy restrictions/ transfer of technology

Default definitions and remedies 10 Priority (1st come 1st serve) Registered creditors rank over unsecured creditors, even if aware of unsecured rights Definition of Debtor (chargor) default per contract, or per Arts 8 Remedies (possession, sale, lease), Art 9 (redemption) Art 13 CTC Expedited relief Preservation Possession (control) custody contracting state to make relevant declarations On insolvency Art XXI SP Options A or B remedies for contracting state

Register does not impact on applicable law or forum for dispute Art VIII SP: parties have freedom of choice of law to govern contractual rights and obligations Art 12 CTC: Additional remedies allowed where available by applicable law Art 42 CTC: Parties have exclusive choice of forum; no connection to contract or parties required, except in insolvency, Art 45. Art 5(3) CTC: applicable law is the domestic law applicable by virtue of collision rules of forum

Satellite financing models Large corporations secure own funding e.g. on capital markets, debt, equity, assignment of stock etc Many contracts (government) project funded; strict performance-related payment structures Smaller cubesat companies may look to own banks Space Protocol as incentive for growth in cube sats market?

Possible Financing Structures ECA - Export credit agencies: EX-IM Bank (US); ECGD (UK); COFACE (France) Financing of satellite projects (Cash-flows, Risk analysis) Capital Markets – new possibilities include crowdfunding

Manufacturer support Finance/ business plans can include various forms of financial support Vendor financing Payment deferrals – Guarantees – Equity Often full payment before launch required

Collateral and contract Collateral Security Package: mortgage on the financed satellite Ground facilities and segments IP rights Vendors may be asked to give guarantees Assignment of the lease (if project on lease basis) Insurance: Launch and in-orbit Licensing and authorization required

Possible default-related situations To be regulated in contract Unable to meet required authorization and licensing compliance standards Termination of project agreements for various financial reasons Failure to enter satellite on ITU Master registry

Further deliberations Goal is debt management/securing rights in rem; not frequency assignment, but security interests Higher number of ratifications required than for aviation (10, not 3), currently 4 (since 2012) State opt-outs (Declarations) could lead to lack of consistency in application Impact of non-consensual interest registration may be useful; depends on national law Impact of ownership and transfer of interests on public international regime? Win-win situation? Next possible step: Supervisory Authority

Important limitations Art XXVI Protocol does not affect government permits, licensing or authorisation Art XXVI (2)8c) restrictions on placement of codes; export of controlled goods continue Notification on Registry describing public service limits exercise of default remedies Insolvency proceedings prevail; Registry itself does not provide enforcement system Of greatest interest to new entrants into satellite user market

Conclusions: Registry at ITU Transfer of satellites and ‚debt‘ –related interests can become open reality via Register Validity of registration certificate in enforcement – prima facie evidence of security right Greater synergy between various registers (SP, UN, national) to accomodate transfers Space Protocol greatest tool to compliance with ITU filing for new generation of cubesats Of interest to new entrants into satellite user market Current Delaware insolvency proceedings NewSat Ltd; SATMAX Legal language

Prof. Dr. Lesley Jane Smith Further Information Contacts: Prof. Dr. Lesley Jane Smith smith@leuphana.de smith@weber-steinhaus.com