Satellite operating contract

For this new space law article on Space Legal Issues, let us have a look at the satellite operating contract. With the commercial exploitation of space, the contractual aspects relating to the construction, launching or even the exploitation of a space object take on their full significance. More generally, aspects of private law become predominant, even if they are, of course, part of a framework of public, national and international law, stemming from national space legislation, community instruments and international treaties.

Space contracts are not completely new contracts: they borrow pre-existing molds. However, contractual practice is innovating in order to respond to new needs generated by new techniques: innovation is reflected here in the very fine adaptation to the subject of the contract. Let’s have a look at the satellite operating contract.

Satellite operation takes the form of contracts which make it possible to obtain the capacity available on the satellite: data for telecommunications satellite operating contracts, images for the operating contracts of remote sensing satellites, and location data for operating contracts for navigation satellites.

Operation of telecommunications satellites

Concerning telecommunications and the satellite operating contract, the market for the operation of telecommunications satellites has undergone profound changes, with, in particular, the privatisation of international satellite telecommunications organizations (Intelsat, Inmarsat, Eutelsat) in the late 1990s, with the entry into the capital of these ex-international organizations of investment funds, motivated by the high financial profitability of the latter, with the introduction of these operators on the stock market, and , in general, with a very strong consolidation of the sector following mergers and acquisitions making it possible to rationalise the fleets of satellites.

These contracts allow the satellite operator, owner of the latter, to market the capacity available on the satellite. In these contracts, the operator makes available to its customers, telecommunications service providers, repeaters on board the satellite for a number of years. They provide, for example, that “In agreement with the terms and conditions of this Agreement, X shall lease to Y and Y accepts such lease of (number) transponders, each of 2.7 MHz capacity on the determined satellite with technical performance and other specifications defined in Exhibit A (…). The Leased Capacity shall be made available by X to Y on a 24-hour, seven-day-per-week basis for the Lease Period which shall be twelve (12) years (…)”. Repeaters or transponders designate a set of elements receiving a signal from an Earth station (uplink), transferring it on a different frequency and amplifying it, for retransmission to another land station (downlink).

In the contract, called capacity rental contract, the satellite operator provides capacity on a satellite as well as certain services allowing good use of the satellite by the customer against payment of a price at certain periods. There are different types of capacity allocation contracts: it is the priority of the services chosen by the customer that distinguishes them. The two pivotal concepts of these contracts are preemption and restoration of rights. Concerning preemption, the owner of the satellite can grant to the organization which leases capacity, a repeater or transponder without right of recovery (non-preemptible) or with right of recovery (preemptible). In the first case, the transmission capacity cannot be allocated to another service and the entity renting the capacity benefits from preferential rights, while in the second case, the satellite capacity can be taken over by the managing body and reassigned to a priority service if necessary.

To this notion of preemption is added that of restoration: the capacity user can rent a protected transponder (restorable or protected) or an unprotected transponder (non-restorable or unprotected). In the first case, if a repeater or the satellite breaks down, the operator must re-establish the transmission by using a reserve transponder or a preemptible transponder. Continuity of service is guaranteed. In the second case, the operator is not obliged to restore capacity in the event of a repeater or satellite failure. The user is therefore subject to the vagaries of the operation of the transponder. The concept of preemption is coupled with that of restoration, because in order to be able to restore a protected service, the operator may be obliged to resort to the mechanism of preemption, therefore the exclusion of a co-contracting party. This palette of contracts, and above all protection very variable which they confer to the user of the space capacity, are reflected of course on the tariffs proposed by the operator of the satellite. A service with no right to take-back and protected, that is to say maximum protection, costs much more than a service with a right to take-back, unprotected. This involves contractually managing the scarcity of repeaters. However, given the restructuring of the satellite operating market, the existence of satellite fleets and therefore of a sufficient supply, most of the transponders offered by operators are now non-preemptible transponders.

In terms of qualification, the contract without right of recovery is very close to a lease contract, because the owner of the satellite makes the signatory enjoy the use of something, a repeater, for a while against a certain price. However, the qualification of a service contract is also possible since the operator provides access to satellite capacity thanks to a certain number of services intended to ensure the control, positioning and proper functioning of the satellite and the ground stations. In addition, “the satellite operator may at any time compel his client to end the use of the transponder for reasons related to the proper functioning of the satellite”, thus depriving the customer of the free and peaceful enjoyment of the thing rented, characterising the lease contract.

The contract may, for example, provide that, in the event of interference, “the satellite operator may request each of the Earth stations to switch off their connections and no longer point their antennas towards the satellite. This instruction must be carried out immediately”. Likewise, the operator has police powers in order to make the different users coexist, which allow the operator to intervene to ensure the maintenance and protection of satellite performance and even to suspend access by the tenant who does not comply with the procedures. The contract may thus provide that “if the maintenance and the protection of the overall performance of the satellite requires lessor to interrupt lessee’s use of the transponder, lessor shall do so only to the extent necessary and for the shortest possible time” or that “lessor shall have the right to suspend lessee’s access to the transponders and the satellite in the event that lessee breaches any of the operations procedures during such time as any breach continues”.

The contract with right of recovery, which allows the eviction of a contracting partner, who will be replaced by a privileged contracting partner, is in turn close to a precarious occupation agreement. Indeed, the operating contract is a “contract by which the parties express their will to recognize the occupier only a precarious right of enjoyment, for a modest financial consideration”.

The rental contracts have known certain evolutions concerning their tariff structure. For example, in terms of price, some contracts now include a most favoured broadcaster clause, by which the operator guarantees his customer that he benefits from the best market conditions at the time of conclusion of the contract and that, if he came to apply better ones to a future client, he would pass them on to his initial clients. The trend is for satellite operators to adapt their offer, thanks to the widening of their service offer, and to more flexible contractual terms granted to their customers.

Satellite operating contract: remote sensing satellites

Concerning the remote sensing satellite operating contract, the agreement between CNES and Spot Image, which held a full and exclusive license to use and broadcast the data collected by Spot reception stations managed by CNES and by reception stations foreign companies, specified that Spot Image ensured “the promotion and direct reception of Spot data, the negotiation of agreements with the managers of foreign stations of reception and the management of relations with these stations”. Spot Image had therefore concluded agreements for the reception of Spot data with foreign stations. Spot Image had also signed license agreements in many countries to set up the distribution network, and granted licenses to service companies adding value to Spot images so that they could market them. The marketing of Spot images therefore involved the conclusion of reception agreements, contracts for the sale of data (photographs or magnetic tapes), concession contracts allowing sub-licensees to sell this data, service contracts for data processing and the development of products and derivative works. These contracts reflected the provisions of the framework agreement concluded between CNES and Spot Image.

Airbus Defence and Space has integrated Spot Image resources, having exclusive access to data from several satellites and providing raw images as value-added products from optical satellites and radar. Airbus Defence and Space provides standard products subject to basic processing (choice of preprocessing level; color or black and white images) or cartographic backgrounds usable with a geographic information system or mapping software. Any order and/or supply of products is governed by the General Conditions for the supply of satellite imagery products, for the order products referenced in the catalog or not (in this case, the satellite must be the subject of a specific programming). All use of satellite products is governed by Airbus Defence and Space Licenses. The licenses are standard (they designate the use of the product for the internal needs of the end user) or multi-licenses (they then concern the sharing of the product between several end users for a common project), for images or for the products of elevation which designates the mosaics produced from images or even 3D products.

Operation of navigation satellites

The exploitation of the system results from the U.S. Global Positioning System Policy of 1996, then from the U.S. Space-Based Positioning, Navigation and Timing Policy, of December 15, 2004. The American system is coordinated by the Department of Defense, which set up a free system, which allowed the United States of America to avoid setting up a complex system of payment for user fees (in contrast, the United States of America developed associated services, which generate tax revenue). In the United States of America, the operation of the satellite navigation system is public, and sovereign functions are exercised to the maximum. There was a deadlock on a possible public-private partnership because the Americans feared that a private operator, therefore subject to profitability constraints, would sell the encryption keys to untrusted States.

In Europe, Galileo is a civilian program placed under civilian control, but at the same time, can receive military use. It involves ESA and the European Union, which first concluded study contracts (feasibility studies, overall system architecture, market studies, interoperability, legal and economic aspects) and technical contracts, before the award of several contracts in 2010 for support services (integration and validation of the Galileo system), awarded to Thales Alenia Space, for the construction of satellites, assigned to OHB System AG, and for launch services, contract awarded with Arianespace. In 2011, the contract relating to the terrestrial control segment (network for monitoring and controlling satellites and Earth stations) was awarded to Thales Alenia Space, and the contract relating to the terrestrial mission segment (maintenance of navigation and their accuracy) was at Airbus Defence and Space.

The contracts were signed between the selected companies and the European Space Agency, acting on behalf of the European Commission. The Galileo safety monitoring center is located in France, for its main establishment, and in the United Kingdom for the secondary, emergency site. Considered a “point of vital importance” by a decree of March 22, 2013 from the Ministry of Higher Education and Research, it is operated by the European Agency for Satellite Navigation Systems (GSA), located in Prague. The Galileo project is therefore the responsibility of the European Union, the architecture of the system at the European Space Agency, and the operation at the European Agency of satellite navigation systems. This is what can be said concerning the satellite operating contract.