By Charles Bjork
Among the most intriguing and eagerly anticipated presentations at the 2018 Annual Course of the International Association of Law Libraries was a lecture by Professor Lorenzo Gradoni, a Senior Research Fellow at the Max Planck Institute for Procedural Law, on Luxembourg’s recently enacted Space Resources Act and whether or not it is in conflict with international law governing the use of outer space. Sadly, Professor Gradoni had to cancel at the last minute, and there was not enough time to locate a replacement speaker. Paul Mousel, a founding partner of the law firm Arendt & Medernach, who spoke about the practice of law in Luxembourg, was kind enough to provide the conference delegates with some background information that helped to explain how Luxembourg improbably became a pioneer in the field of space law. Time constraints precluded Mr. Mousel from discussing the new Space Resources Act in detail. Since the topic is of interest to me, I decided to do some research on my own. What follows is a summary of the context provided by Mr. Mousel, along with my own findings about the origins of Luxembourg’s Space Resources Act and whether it is compatible or in conflict with the multilateral treaties that govern the use outer space.
Although few people today think of Luxembourg as an industrial powerhouse, it was one of Europe’s largest steel producers from the middle of the 19th century until the last quarter of the twentieth century. The energy crisis of the 1970s accelerated the decline of Luxembourg’s steel industry. As it became apparent that most steel production eventually would shift to lower-cost jurisdictions, Luxembourg began looking for ways to diversify its economy. Banking and financial services offered one path. The emerging field of satellite-based communications and broadcasting offered another. The Cold War between the United States and the Soviet Union provided the impetus for the development of artificial satellites. As with other technologies originally developed for military purposes, it wasn’t long before civilian applications began to emerge.
To better understand how Luxembourg managed to establish itself as a center for the satellite communications industry, some background information on satellite operations will be helpful. Most communications satellites operate in a geostationary orbit, directly above the Earth’s equator, following in the direction of the Earth’s rotation. From the ground, a satellite in such an orbit appears to be motionless, occupying a fixed position in the sky. A ground-based antenna can communicate with the satellite simply by pointing to that fixed position without having to rotate back and forth to track the satellite’s movement. There are two main limitations on the use of geostationary orbits by communications satellites. First, only a finite number of satellites can safely operate within the relatively narrow band above the Earth’s equator. Second, the number of radio frequencies that can be used to communicate with satellites operating within a geostationary orbit also is limited. These frequencies must be allocated for use on an exclusive basis in order to prevent one satellite operator’s transmissions from interfering with another operator’s transmissions.
The entity responsible for allocating the limited number of orbital positions and radio frequencies available for satellite broadcasting is the International Telecommunications Union (ITU), a specialized agency of the United Nations. For each of its member states, the ITU set aside a fixed number of geostationary orbital positions, as well as a fixed number of uplink and downlink frequencies for communicating with satellites operating in geostationary orbit. National telecommunications regulators, such as the Federal Communications Commission in the U.S., may assign these orbital positions and frequencies to public or private entities operating within their respective jurisdictions. If there are no entities capable of using the orbital positions and frequencies allocated to a particular ITU member state, those positions and frequencies remain available for the use of entities based outside the jurisdiction on a “first come, first served” basis, subject to the oversight of the ITU.
Just as its steel industry was contracting, Luxembourg suddenly found itself in possession of two potentially lucrative assets: geostationary orbital positions for satellites to occupy and radio frequencies for communicating with the satellites occupying those orbital positions. As Mr. Mousel explained, Luxembourg’s location on the border between France and Germany makes it ideally situated to transmit satellite broadcasts to most of Europe’s largest television markets. The only thing Luxembourg needed to take advantage of this opportunity was a domestic satellite operator. If no domestic satellite operator emerged, Luxembourg risked losing its ITU-allocated orbital positions and radio frequencies to foreign entities willing to claim them.
At that time, in the early to mid 1980s, the only satellite operators in Europe were state-owned broadcasters. Lacking the resources and technical expertise to develop a state-owned champion of its own, the government of Luxembourg decided to offer seed money to subsidize the establishment of a privately-owned satellite company. It was approached by Clay T. Whitehead, an American who had worked in the Nixon administration as the first director of the Office of Telecommunications Policy, and who later helped Hughes Aircraft to launch its satellite subsidiary. In exchange for the seed money, the assignment of the requisite orbital positions and radio frequencies, and the right to broadcast television directly into viewers’ homes, Whitehead agreed to base his new company in the Grand Duchy and allow its government to take a minority stake in the business. Thus was born Société Européenne des Satellites (SES), Europe’s first privately-owned satellite operator.
Luxembourg’s gamble on SES soon paid off. In 1988, just three years after it was founded, SES launched its first satellite, the Astra 1A, into geostationary orbit, which enabled it to enlist as clients many of the key players in Europe’s emerging satellite television industry, including the German broadcaster RTL and Rupert Murdoch’s Sky TV. Thirty years later, SES operates more than 50 geostationary satellites and is among the world’s leading providers of satellite-based video and data connectivity services. The government of Luxembourg has retained its minority stake in the company.
With the enactment of its Space Resources Act in 2017, Luxembourg hopes to build on its success in the field of satellite communications and establish itself as a center for what many observers anticipate will be the next chapter in the commercial development of outer space: mining. Long before scientists confirmed that the Moon, certain types of asteroids, and other celestial bodies contain rich deposits of precious metals and minerals, Hollywood screenwriters had envisioned a future in which humans would turn to space to replenish the Earth’s depleted resources. As private enterprises continue to play a larger role in space exploration, it is only a matter of time before the commercial extraction of resources from outer space moves from the realm of science fiction to reality.
The most valuable space commodity – at least during the initial stages of commercial development – may not be platinum or other precious metals, but ice. In addition to being melted to provide drinking water for astronauts, ice can be broken down into its component parts, hydrogen and oxygen. The former can be converted into fuel, while the latter is essential for human respiration. If ice mined in space can provide a reliable source of drinkable water, breathable air, and fuel, it would no longer be necessary to transport those essential resources from the Earth, making space exploration and long-term human habitation in space more viable and less costly than they are now. Moreover, if communications satellites can be refueled in mid-orbit with fuel derived from hydrogen locked in space ice, it would dramatically extend their useful lifespans and significantly reduce the amount of hazardous space debris.
Even as technological advances bring space mining closer to reality, investors in companies seeking to extract resources from outer space will be reluctant to move forward without legal clarity on the ownership of such resources. It was the United States, not Luxembourg, that took the first step in creating a legal framework for the recognition of property rights in space resources. On November 25, 2015, Congress enacted the Space Resource Exploration and Utilization Act (SREUA) as part of the larger Space Launch Competitiveness Act. The SREUA defines a “space resource” as any abiotic resource, including water and minerals, in situ in outer space. It also defines an “asteroid resource” as a space resource found on or within a single asteroid.
Section 51303 of the SREUA states that any U.S. citizen engaged in the commercial recovery of an asteroid resource or a space resource is entitled “to possess, own, transport, use, and sell the asteroid resource or space resource obtained in accordance with applicable law, including the international obligations of the United States.” The term “U.S. citizen” is defined to include 1) an individual who is a citizen of the U.S.; 2) a business entity organized under the laws of the U.S., or the laws of any U.S. state; or 3) a business entity organized under the laws of a foreign jurisdiction, provided that a controlling interest in the business is held by an individual or entity described in 1) or 2) above. In other words, the SREUA’s recognition of property rights in resources extracted from outer space applies only to individual American citizens, American-based business entities, and the foreign subsidiaries thereof.
Luxembourg became the second country, and the first in Europe, to establish a legal framework for the ownership of resources extracted from outer space with the passage of its Space Resources Act, which entered into force on August 1, 2017. Like its American counterpart, the Luxembourg statute explicitly recognizes a property interest in resources extracted from outer space. However, there are two critical difference that set Luxembourg’s Space Resources Act apart. First, the Luxembourg statute establishes an accreditation and licensing regime for entities seeking to engage in space mining. Only entities that have applied for and received a license for their space mining activities may assert an ownership interest in the resources extracted. Second, the Luxembourg statute does not include a nationality clause. Any corporation, limited partnership or limited liability company established under Luxembourg law, or any European company with a registered office in Luxembourg, may submit an application for accreditation and licensing. It doesn’t matter who owns or controls the entity submitting the application. As long as the entity is established under Luxembourg law, or is a European company with a registered office in Luxembourg, it may submit an application.
Luxembourg has a long history of enacting tax loopholes and less burdensome regulatory regimes to entice multinational enterprises to establish foreign subsidiaries within its borders. Critics refer to these foreign subsidiaries, created solely for the purpose of tax and regulatory arbitrage, as “letterbox companies.” The Space Resources Act is meant to lure start-ups, not established multinationals. It draws its inspiration from the seed money the Grand Duchy provided to launch SES, Europe’s first privately-owned satellite operator. In fact, even before the Space Resources Act entered into force, the government of Luxembourg established a €200 million Space Fund for making strategic investments in fledgling companies that aspire to be space mining pioneers. To date, the Space Fund has invested in half a dozen mostly American start-ups, including Seattle-based Planetary Resources and San Jose-based Deep Space Industries. Once they establish subsidiaries in Luxembourg, these start-ups will be able to apply for space mining licenses under the Space Resources Act.
Are Luxembourg’s Space Resources Act and its American counterpart compatible with the multilateral conventions that govern outer space? No treaty provision directly addresses the private ownership of space resources. The most relevant provision is article II of the Outer Space Treaty, which states that “[o]uter space, including the Moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means.” Some scholars have interpreted this provision to preclude the private ownership of resources extracted from outer space. The more widely accepted view is that article II only prohibits nation states from asserting their sovereignty over celestial bodies and does not prevent private parties from claiming ownership of extracted resources. Supporters of space mining often make an analogy to deep seabed mining, which is permitted under the Law of the Sea Convention, or to fishing boats operating in international waters, which claim ownership of the fish they catch without asserting a property interest in the ocean.
The ownership of extracted resources is by no means the only legal issue that must be resolved for space mining to become a reality. Private enterprises will be reluctant to begin prospecting in space unless they are reasonably certain that they will have an exclusive right to extract the resources that they discover. How will companies assert their right to extract resources from a particular celestial body? Will there be a space mining registry? If so, who will administer it? Will companies need to establish a physical presence on a celestial body before they can assert a mining claim? How will the scope and duration of such claims be determined if nation states cannot assert sovereignty over celestial bodies? How will companies prevent competitors from interfering with their mining claims? Neither the Luxembourg Space Resources Act nor its American counterpart address any of these thorny questions, and it is highly unlikely that such matters can be satisfactorily resolved through domestic legislation.
Recognizing the need for international cooperation, the Hague Institute for Global Justice, an independent think tank, established the Hague Working Group on Space Resources in 2014. The Working Group consists of a geographically diverse collection of stakeholders, including government agencies, non-governmental organizations, academic institutions, and industry representatives. Its goal is to identify the building blocks for developing an international framework to govern the use of space resources. This framework will provide a basis for negotiating a new international legal agreement on space resources or, if that is not feasible, for the development of soft law instruments that will serve the same purpose. The Working Group completed its initial round of meetings on December 18, 2017, and issued this progress report. The second round of meetings began in January. The most recent meeting was held at the end of November. Appropriately enough, it took place in Luxembourg.
Suggestions for further reading:
Atossa Araxia Abrahamian, How a Tax Haven Is Leading the Race to Privatize Space, The Guardian (July 15, 2017), https://www.theguardian.com/news/2017/sep/15/luxembourg-tax-haven-privatise-space.
Chelsey Davis & Mark J. Sundahl, The Hague Working Group on Space Resources: Creating the Legal Building Blocks for a New Industry, 30 Air & Space L 7 (2017).
Rachel Mitchell, Note, Into the Final Frontier: The Expanse of Space Commercialization, 83 Mo. L. Rev. 429 (2018).
Jinyuan Su, Legality of Unilateral Exploitation of Space Resources Under International Law, 66 Int’l & Comp. L. Q. 991 (2017).
Space Resources Luxembourg (official government website).
Loi du 20 juillet 2017 sur l’exploration et l’utilisation des ressources de l’espace, 674 Journal Officiel du Grand-Duché de Luxembourg, July 28, 2017, p. 1.
U.S. Space Resource Exploration and Utilization Act, 51 U.S.C. §§51301 et seq.
U.S. Space Launch Competitiveness Act, P.L. 114-90, 129 Stat. 704.