Written ministerial statement on laying the departmental minute for the new contingent liability arrangements for space activities in orbit
A Departmental Minute is being laid before Parliament today setting out updated contingent liability arrangements arising from new liability and insurance measures announced alongside the Space Strategy on 8 September.
The UK has a thriving space sector, which is increasingly providing critical services to support our daily lives and which underpin 18% of UK GDP.
Faced with great opportunities in the burgeoning space economy, the UK Space Strategy, backed by a record £7.8 billion until 2030, brings government’s space investment and activity under one plan to drive growth, strengthen security and back the technologies that underpin modern life.
The Strategy details how government will go further and faster to develop capability and deliver outcomes in our four priority subsectors, including In-Orbit Servicing, Assembly and Manufacturing.
Alongside the Strategy, the government has announced reforms to space regulations to reduce costs, reward responsible operators and make it easier for UK firms to invest in cutting-edge missions from satellite servicing to lunar exploration by:
- Adopting a world-first variable third-party liability limits approach for orbital operations to incentivise uptake of government priorities of security and space sustainability, reduce cost burdens on UK companies and stimulate increased commercial investment in the UK’s space sector.
- Waiving operator third-party liability for innovative and novel space missions launched before the end of 2030 (In-Orbit Servicing, Assembly & Manufacturing and lunar missions) to help support development of high potential technologies.
- Adoption of new world-first models for the provision of third-party liability insurance to support innovation in the City of London space insurance market.
- Abolishing decommissioning funds for operators of constellations in favour of a more proportionate approach to monitoring operators’ financial health.
I have therefore today (12 November) laid a Departmental Minute updating the previously notified contingent liability that arises from the changes announced on adopting variable liability limits for orbital operations, and waiving third-party liability and insurance requirements for innovative missions.
A potential contingent liability is created each time a space activity (not including launch activity under this notification, as this is covered by a separate notification) is conducted involving UK-licensed entities. The measures announced could create a maximum additional exposure of £50 million for any single claim compared with the current arrangements. In general, the risk of a claim arising is considered to be remote and to date, no claim has been made for damage caused by a UK-licensed space object.
The Treasury has approved the proposal in principle. If, during the period of fourteen Parliamentary sitting days beginning on the date on which this Minute was laid before Parliament, a member signifies an objection by giving notice of a Parliamentary Question or by otherwise raising the matter in Parliament, final approval to proceed with incurring the liability will be withheld pending an examination of the objection.
DEPARTMENTAL MINUTE FOR NOTIFICATION TO PARLIAMENT OF THE NEW CONTINGENT LIABILITY ARRANGEMENTS FOR SPACE ACTIVITIES IN ORBIT
It is normal practice, when a government department proposes to undertake a contingent liability in excess of £300,000 for which there is no specific statutory authority, for the Minister concerned to present a departmental Minute to Parliament giving particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until fourteen Parliamentary sitting days after the issue of the Minute, except in cases of special urgency.
This Departmental Minute sets out the government’s new approach to determining limits on a satellite operator’s third-party liability indemnification obligations in orbital operations licences. This is following feedback that the UK’s current approach is uncompetitive and to align with key objectives of the UK’s new space strategy by rewarding responsible operators, reducing operator costs, supporting the growth of new innovative mission types and helping grow the City of London’s insurance market.
Under the UN space treaties, the UK government holds ultimate liability for damage caused by its space objects, whether on the Earth’s surface or to aircraft in flight. In-orbit liability arises only where the UK is found to be at fault.
The Space Industry Act 2018 (which regulates spaceflight activities conducted from the UK) and the Outer Space Act 1986 (which regulates spaceflight activities conducted overseas by UK entities) translate these obligations into UK law. Under the Acts, UK-licensed operators are required to indemnify the UK government against any third-party liability (TPL) claims made either against the UK government, or additionally, under the Space Industry Act, directly against the operator (where damage occurs within the UK).
Currently, operators’ liability and TPL insurance requirement is capped at €60 million (£50 million equivalent), with a requirement to hold TPL insurance up to that level. This limit may be increased depending on the specific risk profile of the mission. This approach and the resulting contingent liability that arises has been agreed previously with HMT and notified to Parliament.
In cases where a claim is greater than the operator’s limit of liability, the UK government is required to indemnify any additional claim. This ensures that the government meets its obligations under international law.
New insurance and liability measures have been announced alongside the publication of the UK’s new Space Strategy on 8 September, which has been backed by a record £7.8 billion until 2030 and will play a key role in the delivery of the Modern Industrial Strategy to deliver reindustrialisation and good growth in every postcode. The measures that affect the UK’s contingent liability arrangements are:
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Adopting a world-first variable liability limits approach for orbital operations to incentivise the uptake of government priorities of security and space sustainability, with a default limit of £50 million to be applied in licences unless operators provide evidence to satisfy requirements for a reduction of the limit to either £20 million (if one of the criteria is met) or £0 (if both criteria are met);
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Waiving operator third-party liability for innovative and novel space missions launched before the end of 2030 (In-Orbit Servicing, Assembly & Manufacturing and lunar missions) to help support development of high potential technologies.
The introduction of variable liability limits will apply to orbital operations licence applications received after 1 December 2026. A next iteration of the approach will be considered for implementation in late 2027 or early 2028.
The waiver for ISAM and lunar missions will be included in licences issued after 1 December for such missions launched before the end of 2030.
It is not possible to quantify with certainty the potential impacts on contingent liability from space activities in orbit, due to the constantly changing risk profile of the space environment. In general, the risk of a claim arising is considered to be remote and to date, no claim has been made for damage caused by a UK-licensed space object.
The maximum additional exposure under these measures is £50 million for any single claim compared with the current arrangements, in cases where operators achieve a £0 limit of liability under the variable liability limit approach, or have their liability waived based on the ISAM or lunar mission waiver.
Based on a methodology developed with the Government Actuary’s Department using assumptions around the cadence of future satellite operations licences issued, there is an expected cost to government of approximately £700,000 per year for these measures and an extra £900,000 per year for an application for a large constellation (based on the variable liability limit approach alone). However, due to the remote probability of these events occurring the cost would be expected to be £0 in nearly every year.
As currently, if the liability is called, provision for any payment will be sought through the normal Supply procedure.
The Treasury has approved the proposal in principle. If, during the period of fourteen Parliamentary sitting days beginning on the date on which this Minute was laid before Parliament, a member signifies an objection by giving notice of a Parliamentary Question or by otherwise raising the matter in Parliament, final approval to proceed with incurring the liability will be withheld pending an examination of the objection.