1. Presented to: Risk Management Working Group, COMSTAC By: Laura Montgomery, Senior Attorney for Commercial Space Transportation, FAA Date: October 13, 2011 Federal Aviation Administration Federal Aviation Administration Exploring Limits on Liability

2. Federal Aviation Administration October 13, 2011 2 FAA Responsibilities The FAA shall “encourage, facilitate and promote commercial space launches and reentries by the private sector including those involving space flight participants.” 51 U.S.C. 50903(b). E.O. No. 12465 tells the agency to –Identify Federal statutes, treaties, regulations and policies with adverse impacts on ELV commercialization efforts

3. Federal Aviation Administration October 13, 2011 3 Adverse Impacts of Liability and Uncertainty General aviation –Annual sales dropped from 18,000 to 928 between 1978 and 1994 –100,000 jobs lost Vaccines –Vaccine manufacturers dropped from 25 in 1967 to 3 by the mid 1980s

4. Federal Aviation Administration October 13, 2011 Adverse Impacts (cont’d) Asbestos –Over 600,000 claims filed as of 2002 –Bankruptcies of manufacturers with attendant job losses and direct costs in the hundreds of millions 35 bankruptcy filings between 1998 and 2002 15 filings in 2002 –Spread of litigation beyond the asbestos industry to related industries in

5. Federal Aviation Administration October 13, 2011 Adverse Impacts (cont’d) Planning for insurance and litigation costs –Int’l Bar Assoc’n: US tort litigation costs have increased nearly three times faster than GDP between 1950 and 2003 Direct costs, settlement costs, inability to recoup costs associated with non-meritorious claims Reallocation of resources from productivity to defense of claims State responses may provide incomplete solution

6. Federal Aviation Administration October 13, 2011 Space is a Frontier Environment Congress recognized the inherent risks and seeks its development Informed consent ensures that participants know the risks they face Participants will be sophisticated individuals Employees of companies with an ability to plan ahead to deal with financial risks

7. Federal Aviation Administration October 13, 2011 Benefits of Liability Protection Certainty in managing financial risk may promote –Lower costs –Increased market entry –Increased availability of private capital –Space-related economic activity and employment –International competitiveness

8. Federal Aviation Administration October 13, 2011 Federal Responses CSLA –Insurance and possibility of indemnification –Reciprocal waivers of claims –Informed consent GARA –Statute of repose for suits brought for damages caused more than 18 years after delivery of aircraft –Aircraft production tripled National Childhood Vaccine Injury Act –No-fault compensation program 8

9. Federal Aviation Administration October 13, 2011 Options at Federal Level Preemption: displacing state tort law through one of three options: –Extinguish liability: immunity from claims –Caps: limit the amount of damages –Statute of repose: requires right to be acted upon by a certain date 9

10. Federal Aviation Administration October 13, 2011 Scope of Protection Operators of space transportation vehicles –and habitats? –citizenship? –FAA authorization? Manufacturers or suppliers of components, parts, services or vehicles For actions brought by anyone for death or serious injury of space flight participants

11. Federal Aviation Administration October 13, 2011 Discussion Questions Thoughts Remarks