Attorneys at Aegis are skilled at drafting and negotiating various commercial contracts for our clients in the space industry, such as:
The following is a discussion of some of the issues that we see pop up in a lot of these contracts, which are particular to contracts in the commercial space industry.
For any activity that is licensed by the FAA at part 450 (including launch, reentry, and human spaceflight), the FAA requires that the launch service provider, all payload owners, and all related parties sign cross-waivers, in which they all agree not to sue each other (or the government) if something goes wrong during the licensed operations. As a result, all launch services agreements will include language eliminating the parties’ liability to each other for incidents occurring during launch, and they require the parties to sign cross-waivers as required by the regulations.
Furthermore, operating things in space comes with inherent risks and intense engineering challenges. Most companies in the industry have little experience with such operations, yet they have a lot riding on the outcome. As a result, service agreements relating to in-space operations will often include language similar to the cross-waivers required by the FAA, even when the regulations don’t require such cross-waivers. At the end of the day, all parties are incentivized to put their best efforts into making things work, and they can often rely on insurance if things go wrong.
Contracts relating to the commercial space industry will often involve the transfer of hardware and/or information that is controlled by the International Traffic in Arms Regulations (“ITAR”) or the Export Administration Regulations (“EAR”). As a result, contracts will often include provisions in which each party promises to abide by U.S. export control regulations. Each party should have written procedures in order to meet this burden.
Often a service contract will contemplate an activity regulated by the FCC or NOAA, and the contract will need to identify which party will be responsible for obtaining the necessary licenses. For example, in cases of hosted payload services, either the operator of the spacecraft or the operator of the payload might need to obtain an FCC license to communicate with the spacecraft/payload and a NOAA license to conduct remote sensing operations.
Many commercial contracts in between companies in the space industry involve the international shipment of hardware. For example, a payload operator in Europe might deliver a payload to the U.S. to be integrated into a spacecraft, which will then be launched into orbit. When contracts contemplate international shipments of hardware, the contracts should explicitly set which party is responsible for certain aspects of the delivery, such as international carriage, inland carriage, obtaining cargo Insurnace, and clearing customs in the country of export and the country of import.
The best way to identify these responsibilities is by using three-letter acronyms known as “Incoterms.” Every ten years International Chamber of Commerce publishes an update to its dictionary titled “Incoterms,” which sets out a dozen three-letter acronyms, such as FCA (“Free Carrier”), CIP (“Cost and Insurance Paid to”) and DDP (“Delivered Duty Paid”). Failure to identify the Incoterm can result in cargo arriving in port with neither party knowing whose responsibility it is to clear customs, and the cargo potentially being confiscated by authorities (a devastating result for a spacecraft en route to integration).
You didn’t build your business to read regulations. You should be focusing your efforts on what you do best. But if you don’t follow the rules to the letter, you can lose big.
We know the regulations that affect businesses in the space industry. We work closely with our clients to explain the rules, put systems in place, and ensure compliance.
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