Office of Commercial Space Transportation

1. Office of Commercial Space Transportation Plans to Modify Part 440 COMSTAC, Business/Legal WG Randy Repcheck May 14, 2013

2. Outline Background Customer Flow-Down Third Party Beneficiaries Cross Waiver With No Customer Part 440 Modifications

3. Background • A licensee must sign reciprocal waivers of claims with its contractors, its customers, and the U.S. government. • Each party waives and releases claims against the other parties to the waivers and agrees to assume financial responsibility for: • Property damage it sustains, and • For bodily injury or property damage sustained by its own employees. • Purpose is to reduce litigation expenses by requiring launch participants to assume responsibility for their own losses. • Crew and space flight participants must execute reciprocal waivers of claims with the federal government. Part 440 Modifications

4. Customer Flow-Down • Under current rules, each customer must sign a reciprocal waiver of claims with the licensee and the FAA. • Historically not a major problem: • FAA licensees usually had no more than one customer, usually a manufacturer or operator of a large satellite. • Only occasionally would other, smaller satellites be part of the manifest. • We are now seeing and expect to see more launches having multiple customers or “customers of customers.” Part 440 Modifications

5. Customer Flow-Down (cont.) • We are interested in COMSTAC’s views on customer flow-down: • Require licensee to sign cross-waivers only with customers that have directly contracted with the licensee. • A customer of a customer contracting with a licensee would sign cross-waiver only with the original customer, not all launch participants. • To work: • A “second-tier” customer would still have to agree to waive claims against all launch participants, and • The original customer would have to indemnify other launch participants if it failed to obtain such a waiver from the “second-tier” customers. Part 440 Modifications

6. Third Party Beneficiaries • In a 2011 Rulemaking:* • The FAA amended the cross-waiver appendices in part 440 to change the language to clarify that one customer could not indemnify on behalf of another customer. • By doing so, it became unclear that the customer was waiving any claims it had against all other customers. • Statute requires that customers waive claims against all the customers involved in the launch or reentry, including those signing a different set of cross-waivers. • Future rulemaking will clear this up. * Clarification of Reciprocal Waivers of Claims for Multiple-Customer Commercial Space Launch and Reentry Amendment, 76 FR 8629 (Feb. 15, 2011). Part 440 Modifications

7. Cross Waiver With No Customer • No cross-waiver template exists for permitted activity with no customer. So … • Every permit applicant has needed to modify the existing cross-waiver templates. • The FAA plans to add a new appendix to part 440 that is a sample reciprocal waiver of claims agreement for permitted activities with no customer. • In interim, will place a template on AST’s web site. Part 440 Modifications