My Lords, I thank the noble Lord for his amendment and his questions. The United Kingdom’s space sector contributes more than £11 billion a year to our economy, with an average annual growth rate of more than 7%. The sector directly employs more than 34,000 people. The Government are committed to the goal of raising the UK share of the projected £400 billion global space market to 10% by 2030, from approximately 6% currently. The proposed amendment to the Outer Space Act 1986 contained in the Bill is one of the measures designed to help us achieve this ambitious target.
The Outer Space Act 1986 is the legal basis for the regulation of activities in outer space carried out by organisations or individuals established in the United Kingdom, its Crown dependencies and certain Overseas Territories. The aim of the Outer Space Act and its licensing regime is to ensure compliance with the United Kingdom’s obligations under international treaties covering the use of outer space. One of these is the liability convention, under which the UK Government are ultimately liable for third-party costs for accidental damage arising from UK space activities. Section 10 of the Outer Space Act 1986 requires licensees to indemnify the Government against liabilities resulting from their space activities. This is an unlimited liability on licensees.
Since it is not possible to insure against unlimited liability, there is a requirement on licensees to obtain third-party liability insurance, usually to a minimum of €60 million for the duration of the licensed activity, with the UK Government a named beneficiary. If a claim were to exceed that amount, the Government could seek to recover the remainder under Section 10 of the Act.
As the noble Lord said, UK space operators have long argued that the unlimited liability placed on them is very difficult to manage in terms of financing. Furthermore, they say that licence conditions relating to insurance place them at a significant disadvantage. Given the global nature of the space industry, this could result in work being lost to countries outside the UK, in particular to countries where operators may not be subject to unlimited liability, such as the USA or France.
The UK Space Agency has reviewed the Act and identified areas where there is room for improvement. In particular, the treatment of contingent liabilities
under the Act is now out of date compared with other space-faring nations and other United Kingdom sectors that have comparable contingent liabilities. A public consultation was undertaken and the majority of respondents were positive about the benefits of capping the unlimited liability requirement to €60 million for the majority of missions. The Government therefore decided to undertake a two-part approach to address the industry’s concerns. In the first part, we reduced the insurance requirement from £100 million to €60 million. This was well received by the industry. Clause 13, which we are discussing today, is the second part. It amends the Outer Space Act to cap the unlimited liability. This will be managed through the Outer Space Act licensing regime, as the amendments to the Act provide for the Secretary of State to specify the maximum amount of a licensee’s liability under the indemnity in each licence.
Our initial intention is to set the cap at €60 million for the majority of missions. Clause 13 gives the Secretary of State the power to set or vary this liability limit on a licence-by-licence basis. This will provide the flexibility to ensure that UK space operators remain competitive internationally without the need to undertake further legislative reform. For example, companies are now developing ever-smaller satellites, such as CubeSats. These offer lower-cost, and possibly lower-risk, access to space, and potential growth opportunities for the UK. For non-standard, high-risk missions we would retain the flexibility to increase the liability cap.
The UK Space Agency is currently reviewing its approach to this emerging class of satellite and this amendment will allow the Government to react quickly if a lower liability cap is appropriate for a particular mission, thereby ensuring the UK industry remains competitive. An impact assessment has been completed and the benefit to business is estimated to be in the region of £13.5 million over 15 years. Clause 13 is designed to balance the risks to the Government arising from UK space activity against the need to enable UK industry to exploit the opportunities available to them.
The noble Lord asked how these liabilities would be represented in the national accounts. I think I shall have to write to him about that. The noble Lord also asked what criteria would be used to determine which missions will be within the cap. As I suggested in my answer, there will be a risk-based approach; we feel it is appropriate to retain the flexibility to set the amounts under the amendment on a case-by-case basis.
The noble Lord asked about the devolution position. We are not planning any change in that area. He kindly said that it was a probing amendment. I hope that that will satisfy him and I ask him to withdraw the amendment.