Talks for Space Assets Protocol Narrow Options for Creditors
BERLIN -- The U.S. and Germany differed with other countries over the length of time to delay remedies for creditors of satellite projects when public services are involved. The differences were aired at a diplomatic conference for adoption of a space assets protocol to the Convention on International Interests in Mobile Equipment according to documents, speakers and interviews. An official from a country with a strong satellite industry said a definition of public services is needed. Executives attending the conference were from Astrium, BHO Legal, EADS, Eutelsat, Intelsat, Munich Re, SES and Thales Alenia Space.
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The length of a delay was the principal remaining deadlock for limitations on remedies. The U.S. and Germany said a three-month exclusionary period should be used instead of six months, a proposal said. Germany and the U.S. are the only two countries that support the shorter time period, said a developing country satellite expert who is very active in ITU.
A three-month delay would likely be too short for developing countries, the developing country expert said. Satellite communications are vital when such services aren’t available from terrestrial facilities, he said. Most of the services are provided through leased transponders, he said. There needs to be a balance between creditors’ rights and protecting public services, he said. Another developed country official told us most would have backup arrangements for vital services.
All governments have the power through their regulatory and licensing authorities to impose appropriate conditions on public services, said the official from a country with a strong space industry. The draft protocol text for limitations on remedies involving public service may be an artificial constraint, he said. Provision of telephony is regarded as a public service in most jurisdictions, he said. Another difficult area is draft language setting priorities for the timing of the registration of a space asset and its public service notice, he said.
Creating opportunities for secured finance while subjecting them to a six-month delay in enforcing their interest is effectively the same as not having the protocol, said an official from an advanced space-faring nation. Without the protocol, some operators are unable to continue providing services, he said.
A definition of public services is needed, said the official with industry on his delegation. It likely means emergency services, such as navigation, but it’s unclear what else, he said. Any rules must be understood from the beginning of financial undertakings, the official told the conference. Variable rules won’t work, he said.
Canada, France, India and others supported a six-month delay in the remedies that were spelled out for creditors, the developing countries expert said. The transfer of a single satellite could mean the complete loss of telecom services in remote areas, and the loss of other services to millions of households, a developed country official said. It’s not clear the technical and regulatory requirements could be adjusted, and an alternate service provider found within the short time period, she said.
Satellite financiers and launchers must be able to determine the level of risk before commitments are made, said the official from an advanced space-faring nation. Waiting until a service provider is involved in a project to know the time limits of potential recourse doesn’t work, the official said, referring to the possibility that the notification of public service could occur after the satellite is launched. The only way it could work is for the licensing country to declare the time period in which a creditor could move to enforce its interests, the official said.
A general rule with a three-month limit was proposed late Monday. Countries could alternatively claim up to six months at the time of ratification. The developing country expert wanted a general rule with a six-month limit, and the three-month limit as the exception at ratification. France needed more time to consult about the compromise. Other countries supported the compromise for a three-month general rule.
One question is which country’s jurisdiction is used to determine the applicable rules, said the official from an advanced space-faring nation. One possible approach could be to use the initial licensing country as the basis for interpretation, if that country is a ratifying party, the official said. Satellite credit financing must be determined in advance, the official said, and creditors need to know the rules in advance. Some deals may otherwise move to more favorable markets, he said.