Developing space law: Luxembourg’s regulatory framework model

Thursday 14 September 2023

Bob Calmes
Partner, Arendt & Medernach, Luxembourg City

Blazej Gladysz-Lehmann
Counsel, Arendt & Medernach, Luxembourg City

In the field of international space law, where none of the United Nations’ space treaties create direct obligations for non-governmental entities, it is the responsibility of states to ensure that all national activities comply with the provisions of international law. Consequently, it is incumbent on states to transfer certain obligations arising from these treaties to private space operators through national legislation and accreditation regimes.

As a result, in the contemporary space law landscape, development takes place within various national legal systems and is strongly influenced by concepts, mechanisms and procedures derived from different areas of national law. Ensuring continuous oversight practically implies the implementation of administrative procedural provisions specific to each state. This approach is evident in the case of Luxembourg, which provides an interesting example of using a pre-existing national regulatory framework to supervise the space industry.

Luxembourg's space legal framework is one of the most recent among countries actively involved in space policy. It currently consists of two specific laws: the Law on the Exploitation and Use of Space Resources of 20 July 2017 (the ‘Space Resources Law’) and the General Law on Space Activities of 10 December 2020 (the ‘General Space Law’, together with the Space Resources Law, referred to as the ‘Space Laws’).

For the sake of completeness, prior to the implementation of the General Space Law, the activities of Luxembourg's satellite operators were governed solely by two articles included in a non-specific law relating to electronic media of 27 July 1991, as amended.

Despite its recent implementation, Luxembourg's space legal framework, particularly its administrative aspect, has its roots to much older provisions whose effectiveness has been proven by the success of Luxembourg's financial sector. Rather than creating an entirely separate legal framework for the space sector, the legislator chose to adapt pre-existing solutions to the regulatory regime applicable to credit institutions under the Law on the Financial Sector of 5 April 1993, as amended (the ‘Financial Sector Law’).

Consequently, the Luxembourg space legal framework now imposes on space operators engaged in space activities rules and licensing conditions similar to those applicable to Luxembourg credit institutions. What does this entail in practice?

One of the main advantages of using an existing regulatory framework is the use of well-defined terms and concepts from the Financial Sector Law, now applied in the context of the space legal framework. These concepts, which previously applied only to financial professionals, have been extended to an industrial sector, where technical and technological skills, industrial expertise, and the ability to use space data and resources for commercial purposes prevail.

Furthermore, in view of the high risks associated with space activities, the Space Laws require that space operators, similar to the Financial Sector Law's requirements, demonstrate sufficient financial stability covered by appropriate means tailored to the risks incurred. These risks can be covered by the operator's financial resources, an insurance policy, or a bank guarantee. However, the operator may not belong to the same group of companies as the insurer or guarantor. The Space Laws also require space operators to have sufficient financial own resources. In addition, to guarantee the operator's financial rigour, the Space Laws mandate that each operator's annual accounts be audited by an independent auditor.

The rules concerning management, change of control, or anti-money laundering in the financial sector also apply in the Luxembourg space legal context. Additionally, the Space Laws make approval conditional on the justification of a central administration and headquarters in the Grand Duchy, reflecting the financial sector’s requirement that the decision-making processes take place in and from Luxembourg.

Similarly, just as rules from the financial sector apply, the requirement of two-person management ensures that at least one competent person is responsible for managing space activities at all times. Furthermore, the professional integrity of these directors must be scrupulously scrutinised by the regulator, according to the criteria set forth initially in the Financial Sector Law.

The Space Laws oblige operators to disclose the identities of their directors, auditors, and shareholders, as required of credit institutions under the approval process of the Financial Sector Law. Additionally, the space sector regulator has the right to object to any changes that could jeopardise the operator's sound and prudent operation, or if the professional integrity of those involved is called into question.

Finally, the General Space Law provides for a comprehensive notification and approval mechanism in the event of the transfer of shares by space operators exceeding certain thresholds, mirroring the regime applicable to Luxembourg payment service providers.

Overall, the use of a regulatory oversight model derived from the financial sector is unprecedented among the world’s leading space legislations. This approach, particularly emphasised in Luxembourg, aims to strengthen the decision-making process and financial solvency of space operators.

However, the choice of adapting an existing supervisory model from the financial sector also results in certain limitations. Specific technical and operational requirements, which are essential in such a technology-intensive industry, are virtually absent from the Space Laws, and are only incidentally addressed in the provisions relating to good governance, financial and legal aspects of space operators.

Nevertheless, the Luxembourg legislator's decision to employ a pre-existing supervisory model from the financial sector seems reasonable. Leveraging existing concepts provides a strong foundation for future interpretations of the provisions, ensuring legal security. This approach is also justifiable, as it involves not merely copy-pasting but rather a selection of provisions suitable for a sector different from the financial industry.

In conclusion, Luxembourg's approach of adapting an existing surveillance model to govern space activities offers an innovative perspective in the world of space law. The integration of financial sector concepts ensures robust supervision, and although some subtleties specific to the space industry are not explicitly addressed, the framework serves as a solid basis for regulation and oversight. By embracing the challenges of this rapidly evolving sector, Luxembourg's legal framework sets an example worth examining for other countries seeking to establish a strong and effective space legal framework.