Space Activities Bill, 2017: Miles to Go for the Investment Regime?
The field of private space investment has been witnessing increasing global investor interest. Traditionally, the long gestation periods for returns on space investments coupled with the regulatory vacuum and the near monopoly enjoyed by the Indian government through ISRO on launches has been an entry barrier for private investment. However, with the expansion of private enterprises like Space X, Virgin Galactic and Rocket Lab in the last decade, it is clear that the private sector is ready to invest vast sums in this field and venture into space research, exploration and space tourism. Even in India, several space technology start-ups are keen to raise funding to develop satellites, rockets and related systems spanning a range of industries, which can be used to power space missions.[1] Presently, 100% foreign direct investment is permitted in the satellite establishment and operation under the government route, subject to sectoral guidelines.[2]
Recognizing the need for regulation amidst increasing commercialization, in 2017, the Department of Space released a Draft Space Activities Bill (“Draft Bill”) which seeks to become India’s national space legislation.[3] With the recent launch of India’s lunar mission Chandrayaan-2 by ISRO, the legal vacuum in Indian space law has gained attention, and a legislation providing a robust framework for private sector participation in space activities is expected to be tabled in the Parliament soon.[4] However, I argue that although a national space legislation is an urgent concern, whether the Draft Bill in its current form will actually provide a stable, predictable and transparent framework for investors is doubtful for several reasons.
An overarching national space legislation is strongly desirable for a space faring nation, especially one with launch capabilities. The Explanatory Note to the Draft Bill states treaty obligations on outer space activities to be its motivation.[5] Notably, Article VI of the Outer Space Treaty, 1967 mandates state responsibility for national activities in outer space for both activities by governmental agencies and private parties. It also requires states to ‘authorize’ and ‘continuously supervise’ the activities of private entities in outer space. While these requirements can technically be fulfilled by an internal mechanism of licenses, permits, and maintenance and furnishing of reports – as is the current practice in India, the policies governing these requirements remain opaque, and codifying various treaty requirements into hard law domestically will provide clarity as to the appropriate authority as well as streamline the process in the long run.
Another factor to consider is that India has also suffered adverse arbitral awards in cases like Devas v. India[6] and Khaitan Holdings Mauritius Limited v. India,[7] where the government has been accused of arbitrarily terminating foreign contracts and licenses, and deviating from its policies. They reflect that bureaucratic decisions made by different organs of the government are often made without consideration of principles of international investment law and treaty obligations under bilateral investment treaties, and are thus vulnerable to claims of breach of fair and equitable treatment standards, arbitrariness and even expropriation. In these forums, India’s reliance on the argument that its national authorities are positioned to determine what constitutes essential security interests in any circumstance and thus adopt measures such as termination and revocation of licenses to safeguard those interests has not fared well in investor-state dispute forums. Therefore, a comprehensive regulatory framework which will provide a transparent and stable regime is acutely needed in India’s financial interest.
However, the main concern of the Draft Bill is that it does not seek to actually create a space activity regulatory national mechanism itself, but vest the Central Government with discretionary powers to frame policies per its suggestions. Its chief contribution is to define certain terms, propose a licensing system for commercial space activities, and create offences for leakage of information,[8] corporate criminal liability,[9] and contravention of ‘any direction given by the Central Government’ which is punishable with a hefty fine ranging from Rs. 1 crore to 50 crores,[10] among other offences. The Central Government is tasked with putting in place a space activity regulatory mechanism, granting/transfering/suspending/terminating licenses, monitoring and investigation, and framing policies for all of these activities.[11] Significantly, it provides that the government may suspend, revoke or vary a licence if it is satisfied that “it is required in the interests of public health, sovereignty and integrity of India, security of State, defence of India, friendly relation with foreign States, public order, decency or morality or to comply with any international obligations of India”[12] This is essentially a self-judging clause under which the state can reserve the right to derogate from international obligations in circumstances it deems fit, which an investor will have agreed to. It is likely based on India’s experience in Devas, where it failed to establish it acted under a self-judging clause in the interest of national security. Therefore, whether the Draft Bill dismantles government monopoly over space capabilities is dubious, due to the widespread discretionary powers. The Draft Bill’s silence on the issues of space mining and tourism, and the scope and role of ISRO and Antrix (the commercial arm of ISRO) vis-a-vis any ‘national mechanism’ being set up also indicates that it is not comprehensive enough as an overarching national space legislation.
Second, the Draft Bill also defines terms such as ‘person’ widely to potentially include non-residents who can apply for licenses for commercial space activities in India. Therefore, it includes situations of foreign private parties procuring and using launch facilities in India, where India would normally incur liability as the launching state under the space treaties.[13] Similarly, ‘space activity’ is broad enough to cover the entire supply chain process right from procurement to launch, including companies engaging in supply of materials or in assembling components or providing tech support. A wide number of enterprises may require a license to operate, but the Draft does not propose specific regulations for the different operators, and also empowers Central Government to affix the quantum of liability on the licensee.[14] A tiered and capped liability structure across the entire supply chain would assist in proportional fixation of liability.
Another discomfiting provision is Section 25, which deems any intellectual property right developed onboard a space object in outer space as the property of the Central Government.[15] Although the Draft Bill claims to encourage enhanced participation of the private sector, such a measure which appropriates private property – arguably assuming ownership and state sovereignty in outer space, will deter private investment and participation. Admittedly, the United States has a similar law where the title to inventions made in outer space rests with the government. However, NASA’s broad waiver policy allows retention of only a “nonexclusive, royalty free license for government use and the right to step-in if the contractor does not develop”. Therefore, a licensing mechanism or adequate compensation provision would be far more conducive to inventions in outer space.
Therefore, while the Draft Bill’s attempt to fill the legal vacuum is a welcome measure in the regulatory regime relating to commercialization of space activities, it warrants further deliberation on several aspects such as the qualifying criterion for grant of clearances and licenses and contractual relationships between the state and non-state players before it can be implemented to provide stability, predictability and transparency in the investment climate.
[1] Sachin Ravikumar and Ismail Shakil, ‘India’s space startups ignite investor interest’ (Livemint, 23 Jun 2019) <https://www.livemint.com/news/india/india-s-space-startups-ignite-investor-interest-1561269988291.html> accessed 21 September 2019
[2] Regulation 16, Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2017
[3] Draft Space Activities Bill 2017 <https://www.prsindia.org/sites/default/files/bill_files/Draft%20Space%20Activities%20Bill%202017.pdf> accessed 21 September 2019 [“Draft Bill”]
[4] Ajay Lele, ‘Space Activities Bill: India’s great galactic leap’ (Financial Express, 2 Jul 2019) <https://www.financialexpress.com/lifestyle/science/space-activities-bill-indias-great-galactic-leap/1625980/> accessed 21 September 2019
[5] Point II, Explanatory Note on Draft Space Activities Bill 2017
[6] CC/Devas (Mauritius) Ltd, Devas Employees Mauritius Private Limited, and Telcom Devas Mauritius Limited v. Republic of India (PCA Case No 2013-09)
[7] See Khaitan Holdings Mauritius Limited v India (Notice of Arbitration dated 30 Sept 2013); Union of India v KHML, CS (OS) 46/2019 IAs 1235/2019 & 1238/2019 dated 29 Jan 2019
[8] Draft Bill, s 18
[9] Draft Bill, s 23
[10] Draft Bill, s 20
[11] Draft Bill, s 3
[12] Draft Bill, s 10(1)
[13] See Outer Space Treaty, art 7 for international liability of launching states
[14] Draft Bill, s 12
[15] Draft Bill, s 25