Contract Works Makes Local Lawyer a Pioneer in the Final Frontier

Sherman & Howard’s Skip Smith discusses some of the legal work involved in getting first private astronauts into orbit

Axiom Space announced Jan. 26 that it has chosen the first crew of private astronauts ever to travel to space. The Houston-based company will launch the explorers to the International Space Station aboard a SpaceX Crew Dragon vehicle sometime in 2022. The astronauts selected to fly the Axiom Mission 1 include Americans Michael López-Alegría, a former NASA astronaut and the mission commander; and Larry Connor, an entrepreneur and pilot; Canadian investor and philanthropist Mark Pathy; and Israeli investor and philanthropist Eytan Stibbe, a former fighter pilot.

Milton “Skip” Smith, a partner at Sherman & Howard spoke with Law Week Colorado reporter Hank Lacey about his representation of Stibbe and the pioneering work he did to craft the contracts necessary to facilitate the mission. 

Smith is a former U.S. Air Force JAG officer and holds LL.M and D.C.L. degrees in space law. While in the military, Smith was director of space law at USAF Space Command and chief of air and space law for the entire Air Force. Smith, a former chairman of the Colorado Space Business Roundtable and member of the board of directors of the International Institute of Space Law, has served as an adjunct professor of space law at the University of Colorado Law School, University of Denver Sturm College of Law and George Washington University Law School

The interview is edited for clarity and space limitations.

LAW WEEK: There isn’t an exact template for a contract like this. What are some of the considerations that you needed to consider when you were thinking about what the contract might look like?

SMITH: There’s international law that’s applicable to activities in outer space. The Outer Space Treaty, the Liability Convention, [and] some others, they form the backdrop of this. There are provisions that say nations have to authorize and supervise the space activities of their entities. So, we have to have government approval for this, and that also brings in U.S. law. 

The United States has the most broad, in-depth body of national space law in the world. There’s a lot in there on, for example, cross waivers of liability. If you’re launching something into space, or if you’re having a vehicle return to the earth, cross waivers that are governed by the Commercial Space Launch Act as well as Federal Aviation Administration regulations apply to the launch and reentry phases. 

NASA has a number of regulations that are applicable to the space station, and it also has provisions on cross waivers of liability. 

All of the countries that are members of the space station are part of the Intergovernmental Agreement. The IGA establishes, at a fair level of detail, the responsibilities of all of the various countries that participate [in the] space station are part of the IGA. 

And then there’s Memorandums of Understanding that provide details on the use of the ISS, because many countries have their own modules and, typically, their modules are like their territory. Their laws apply there. 

There are states that have cross waiver requirements for what they call spaceflight participants — Texas, Florida, Colorado, New Mexico. Lots of states have those and parts of this mission, like the training, occur in [those] states. There’s training that [will] occur in Texas and Florida, and the launch, and the return will be in Florida. So, there’s state law that can apply as well. 

So, it’s a conglomeration of law that’s applicable here. 

It’s not completely starting over because these contracts have to address some of the normal issues that are in contracts. What’s the price? What are the payment terms? Is their insurance required? What are force majeure events? What about dispute resolution? What about events of default and cure opportunities? Those types of issues that are in most complex contracts need to be addressed here as well. But then then you go to the next level, and it’s the stuff that hasn’t really been addressed before and needs to be addressed here. 

LAW WEEK: What is a cross waiver? Are we talking about a waiver of liability in case somebody gets hurt and so they can’t sue?

SMITH: Yes, exactly. Just like waivers here. You go skiing and you see in the skiers code of conduct or whatever it’s called, you’re not allowed to sue. In the space industry, we’ve had the Commercial Space Launch Act. It was initially done in 1984, it’s been amended a number of times, but it requires cross waivers of liability, initially for launches, and then once we started returning things from Earth orbit, it applies to reentry phases as well. 

Let’s say Lockheed Martin was launching a satellite on a launch vehicle supplied by SpaceX or Northrop Grumman, but a launch services provider. There would be an inter-party waiver of liability that would include the launch service provider, the customer that has the satellite on the top of the launch vehicle and the launch site as well. 

There will be those waivers of liability that will cover the launch phase. 

The Commercial Space Launch Act was aimed at encouraging the commercial space launch industry because, before that, it was always the government that launched satellites. If, every time you were launching a rocket, you literally had a “bet-the-company” type of situation for potential liability, you probably wouldn’t get into that. With these cross waivers, everybody’s waving claims against everybody else that’s participating and saying we’re not going to sue you, we’re not going to seek damages. 

The U.S. Government provides indemnification and the amount has gone up periodically. The launch service provider must procure insurance. And there’s insurance for third parties. So you have those things that come together to mitigate the potential damages to the companies that are participating in the launch. 

LAW WEEK: When you’re writing contracts for a private astronaut, what might be the important things to think about to protect someone going up on a high-speed rocket into space? 

SMITH: Well, most of the people that are doing this, or the people that will consider doing this, are very wealthy individuals, so they all have life insurance. 

There are issues you have to look into. Are there exclusions in the life insurance policy for dangerous activities? Sometimes there are, so you have to evaluate that or have your client get with his broker and evaluate those issues. 

LAW WEEK: Was this a situation where you have to anticipate, as much as you can, the types of problems that might arise and then write language that’s broad enough to cover all the bases without being too overly narrow?

SMITH: Yes. It’s just like any other contract. You have to identify the risks and then [ask] how we manage the risks. Sometimes you can manage risk with insurance. Often, it’s not insurable. 

For example, delays are kind of a fact of life in the space industry. So what happens if your client is 70 years old and he’s a private astronaut? What if there’s a delay that could be one year, two years? What happens? You have to address delays that will be more than just inconvenient. 

They could result in a private astronaut’s inability to participate. So you look for ways to manage that risk. 

For example, you might have a backup astronaut who’s standing by to take your place. And it’s not necessarily as easy as that may sound. They need training. They need a pressure suit. They have to literally be ready to take your place as short as maybe even a month before the launch and go. 

LAW WEEK: Obviously, the price tag for this flight is high. Do you see this as being more like the first computers, when they were really expensive and now they’re cheap, or is it always going to be pretty expensive for somebody to join a mission to the ISS?

SMITH: I hope the prices will come down so that many, many people can afford to experience space flight. That might not be the ISS. Virgin Galactic and Blue Origin are on the verge of having space tourists. It’s going to be suborbital. They’ll be weightless. They’ll see the blackness of space. They’ll see the curvature of the earth. They will be astronauts, but they’re only going to be in space for less than 10 minutes. So, it’s a far different experience, but the price is also less. 

The published prices there are in the $250,000 range. There are a lot more people who can afford that.

I hope that 10, 20 years from now, we have lots of people living and working in space, whether it’s on a space station, on the Moon, on Mars or on suborbital flights that might take passengers from New York City to Tokyo in 45 minutes.

LAW WEEK: What role do you think this mission has in encouraging more of a private role in future space exploration activities?

SMITH: We’re seeing more and more commercial space [activities]. It used to be that space activities were all conducted by the government, and now it’s the government that is, to some extent, enabling commercial activities in outer space. It’s logical that, as we progress, we may mature past the government being an enabler to the government being a bystander to some extent. A lot of activities in space may end up being commercial, whether it’s mining the moon and asteroids or having a space hotel in Earth orbit or lunar orbit. I hope we get to that point. I hope I see it in my lifetime. I think it will be opened up largely on a commercial basis and to lots of people to live and work in space and to vacation in space.

LAW WEEK: Are there downsides to the trend toward commercial launches and a commercial astronaut presence in space? For example, national security worries or any risk that scientific research could be downplayed?

SMITH: Honestly, I don’t see downsides. The more capabilities you have, the more you open it up to exploration and scientific investigation. NASA is not going to go away. 

Space is so prevalent in everybody’s life. I’ve got my cell phone here. It’s got GPS. 

We’ve got communication satellites. Then you have remote sensing of the Earth from space, so you can have visual images. The big data side of space is a whole other story, but a very important story. We’re getting so much data from space that you need artificial intelligence to understand and make use of it. Commercial space is really where it’s at, and it’s a very exciting time to be involved in the commercial space industry.

LAW WEEK: How important is this first private astronaut mission to building more international cooperation in space?

SMITH: I think it will be helpful. I think Axiom was very wise in its selection of who is going on this mission. I don’t know how they did their selection, but I don’t think it’s an accident that they came up with people from three different countries and people with different backgrounds. It’s cooperation. 

LAW WEEK: Do you see this as being a helpful step in encouraging American public support for the space program and for space exploration and for investment in the education and engineering and other assets to continue with space activities?

SMITH: It’s a historical event. It’s the first all-commercial flight to the space station. Even the training of these private astronauts will be covered by the media. All of these private astronauts, they’re going to be working up there. They’ll be communicating. People [will say], ‘hey, I can do that. I could do that. These aren’t just professional astronauts going up.’ You encourage people who want to dream big. 

LAWWEEK: Is your practice unique in the U.S. for having this space specialty? Is it growing? 

SMITH: It’s still pretty

 rare. It’s a very small field. But we have so much space [business] going on in Colorado. Lockheed Martin Space, ULA, Maxxar, Digital Globe, EchoStar, and small companies like Astroscale and York Space [Systems] — two companies that won awards this year from Space News. You’ve got companies like Blue Canyon Technology, which was recently acquired by Raytheon. There are opportunities for lawyers here to get involved in space law.

LAW WEEK: How important is it for companies that are building space infrastructure to integrate lawyers into the development of their projects?

SMITH: A lot of space companies have lawyers involved as they’re moving through their business development plan because you have to understand the regulations that you are going to be subject to before you finalize your plan. Most startup companies aren’t startups by billionaires. They need advice from the start on the legal and regulatory regime that they’re going to be playing in because there’s a lot of risks. 

LAW WEEK: Somebody had to write the first contract that enabled a motor vehicle to be sold to a buyer and the first contract that let a passenger onto an aircraft. This contract you’re writing could go down in history as the template for arranging transportation to space for a private citizen. How does being a legal pioneer make you feel?

SMITH: This is certainly one of the highlights of my legal career. I can tell you, I’m going to go to this launch.

— Hank Lacey

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