[Feature: Questioning Japan's Space Strategy] Space Business and Corporate Legal Affairs

2019/03/05

Even as a humanities student, I wanted to study space. I was drawn to the words "Space Law" that I found in a university guide, and enrolled in the Keio University Faculty of Policy Management. During my student days, I sought guidance from Professor Setsuko Aoki, and since graduation, I have been involved in corporate legal affairs for about 10 years at a company engaged in space business. In this article, I would like to introduce the rapidly changing space business and the laws and legal issues surrounding it.

What kind of image do you have when you hear the term "space business"? Is it space travel? While space travel seems likely to become a reality in a few years, space-based businesses are surprisingly close to us even today. For example, satellite broadcasting. As the name suggests, this is broadcasting using satellites in space, and some people may be familiar with BS broadcasting or SKY PerfecTV! services. Furthermore, it is now possible to use the internet even on airplanes, which is realized through communication services via satellite. Recently, there are also venture companies that create artificial shooting stars, and companies are emerging that seek to use space as a place to provide entertainment.

Telecommunications in Japan was once conducted as a state-owned business, but like the privatization of other businesses such as railways, it was liberalized in the 1980s, making new entry possible. Our company, SKY Perfect JSAT, also entered the telecommunications business following that liberalization, and currently provides satellite communication services by owning 17 satellites. Satellite communication services are less susceptible to ground disasters compared to communication services using ground lines, enabling stable service provision. By taking advantage of these merits, we are contributing to the realization of a safe and secure society.

The market size of the global space business is said to be approximately 30 trillion yen, and the average annual growth rate from 2009 to 2016 is said to be approximately 5%. New businesses are being born as the market size expands, but the majority of space businesses currently being conducted are realized by using satellites for communication, taking images of the Earth, or identifying locations. Therefore, I would like to look at an overview of the procurement, launch, and operation of satellites, which are commonly required for these businesses.

First is the procurement of satellites. There are several companies in the world called satellite manufacturers, and satellites are purchased from these manufacturers. Japanese manufacturers include Mitsubishi Electric and others. Next, it is necessary to procure a rocket to place the satellite in the desired location in space. There are several operators in the world that manufacture rockets and provide satellite launch services. In Japan, there is Mitsubishi Heavy Industries, which provides services using the H-IIA rocket (there are also several Japanese venture companies trying to enter the launch service business).

Once the satellite is delivered by the satellite manufacturer and successfully placed in the desired space using a rocket service, satellite operation begins. Simply put, satellite operation consists of (1) checking the health of the satellite and (2) maintaining the satellite in the correct position. Our satellites are placed in space approximately 36,000 km above the ground (the altitude at which airplanes fly is approximately 10 km, and the distance from the Earth to the Moon is approximately 380,000 km). Once a satellite is launched, it is difficult with current technology to go into space and repair broken parts, so it is important to constantly check the health of the satellite and take necessary measures in advance to prevent it from breaking. Also, although space is said to be zero gravity, satellites move from their original positions due to the gradual influence of the gravity of the sun and the moon. If a satellite is not in a fixed location, it causes inconvenience for communication, so it is necessary to keep the satellite in the correct position by gradually spraying fuel with small engines mounted on the satellite called "thrusters."

Diverse space businesses are being born depending on how these procured and operated satellites are applied.

If you want to start a space business, what kind of rules must you follow? In Japan, it is necessary to comply with the Space Activities Act (official name: Act on Launching of Artificial Satellites and Management of Artificial Satellites), which came into effect in November 2018. This law makes the launch and management (operation) of satellites subject to a permit system, and also determines who bears what responsibility if damage is caused to a third party in connection with the launch or management of a satellite.

Why did the launch and management of satellites have to be subject to a permit system? One of the reasons is the existence of International Space Law. International Space Law refers to treaties created by various countries regarding the development and use of space, namely the "Outer Space Treaty," the "Rescue Agreement," the "Space Liability Convention," the "Registration Convention," and the "Moon Agreement." Let's briefly look at the main principles of these treaties within the scope related to the background of Japan's enactment of the Space Activities Act.

1. Freedom of Space Activities: Article 1 of the Outer Space Treaty stipulates that outer space is a field of activity open to all mankind and can be freely explored and used. However, activities that violate international law are not permitted.

2. Authorization and Continuing Supervision by the State: As mentioned above, space activities can be conducted freely, but at the same time, they require the authorization and continuing supervision of the relevant state parties to the treaty. To fulfill this treaty obligation, each country has enacted domestic laws regarding space activities. Japan has been conducting space activities since before the Space Activities Act was enacted, but because the active subjects were centered on the state and because authorization and supervision were conducted for space activities performed by private companies based on other laws such as the Radio Act, no special law had been enacted. However, the background is that the number of new companies entering the space business increased, and rules specialized for space activities were established.

3. Launching State Liability: As can be imagined from rocket launches, space activities involve danger. If a launch fails and a rocket falls into a residential area, the damage would be enormous. Naturally, multiple measures are taken to prevent such damage, but a relief rule is necessary in the unlikely event of such a situation. This is what is called "launching state liability."

Regarding damage caused to a third party by space activities, the country falling into the category of "launching state" bears responsibility under international law. In the treaty, a "launching state" is defined as (1) a state which launches, (2) a state which procures the launching, and (3) a state from whose facility or territory a launch is conducted. Furthermore, regarding space activities, even if the activity is conducted by a private enterprise, the state to which that enterprise belongs is held responsible.

For example, if the Japanese government launches a Japanese satellite with a Russian rocket from a Russian launch site in Kazakhstan, Russia becomes the state that launches from its facility, Kazakhstan becomes the state from whose territory the launch is conducted, and Japan becomes the state that procures the launch, making all three countries—Russia, Kazakhstan, and Japan—launching states. These launching states are held jointly and severally liable.

A recent keyword in the space business industry is "New Space." This often refers to space business conducted by new players, such as venture companies and entries from different industries, compared to conventional government-led space activities. As a company, in addition to our conventional satellite communication business, we are planning to develop businesses that utilize data such as images taken from space. Since there are many articles circulating about New Space, I would like to introduce new initiatives being undertaken by conventional satellite communication operators like us.

Recently, the buying and selling of used goods and the sharing economy have been active, but in fact, similar things are happening in space. In terms of buying and selling used goods, it involves purchasing a satellite that has been operated in space for a certain period from another company at a low price. Also, while international space projects like the International Space Station have been conducted for a long time, joint ventures among private companies are also becoming popular. In other words, a satellite is launched not by one company, but as a joint project of multiple companies. This can reduce the procurement costs for each company. While these have great merits from the perspective of project budgets, issues of international space law, particularly launching state liability, arise.

The overview of launching state liability is as mentioned earlier, but the definitions of "launching state" are all related to the launch. So, if a satellite already in space is bought or sold and an accident occurs later causing damage, which country bears responsibility? Normally, one would think that the company that bought the satellite and caused the accident (the country to which that company belongs) would be responsible, but under current international space law, it leads to the strange conclusion that the original owner (the country to which that person belongs) bears responsibility. This is because the person who bought the satellite in space was not involved in the launch at all and does not fit the definition of a "launching state."

International space law consists of rules created about 60 years ago, and changing them is extremely difficult because there are too many interested countries. As seen in launching state liability, some international rules regarding the use and development of space have not caught up with current business. Therefore, in contracts for space business, it is necessary to consider the contents of the contract with the consequences of international space law in mind, in terms of risk sharing between the parties.

The space business will continue to change more and more. When private companies conduct business, they must consider the balance between profit and risk in any field. To realize new space business, analyzing risks and considering countermeasures based on the special nature of international space law and outer space—this is the true pleasure of space business and the corporate legal professionals involved in it. I hope to continue contributing to the development of space business in Japan and the world by utilizing the knowledge of international space law that I was able to study by entering Keio University.