1. 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

2. 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

3. 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

4. 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

5. (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

6. 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

7. 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

8. 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

9. 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

10. Default definitions and remedies10
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

11. 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

12. 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?

13. 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

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

15. 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

16. 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

17. 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

18. 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

19. 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

20. Prof. Dr. Lesley Jane Smith
Further Information
Contacts:
Prof. Dr. Lesley Jane Smith