Luxembourg, a rising star in the space industry
Over the past years, Luxembourg has positioned itself as a hub for the growing space industry. While this plan is not a novelty as several major satellite operators have already been present in the country since the 1980s, there are current advances resulting from the strategic decision of the government to actively further develop and extend the space economy. For that purpose, Luxembourg has set up an attractive legal framework for space activities (Section I), preliminary bases for international cooperation (Section II), a space-oriented education throughout the schooling cycle (Section III), and offers a number of financial tools to space entrepreneurs, either already based in Luxembourg or contemplating a move to the country (Section IV).
I. Legal framework: an international impulse
The major part of space law consisting of five multilateral treaties1 prepared under the auspices of the United Nations (UN) was elaborated in 1960s and 1970s. The five main treaties, welcomed by States with different levels of success, have constituted the global framework for regulation of space activities since then.
With a renewed interest for space, characterized namely by important technological transformations and increased involvement of private actors, many countries have started adopting their own national space legislation. Promoting this trend, the UN resolution 68/74 issued in 2013 provides a set of recommendations for establishing national legal frameworks compliant with the key principles of a peaceful use of space derived from the five treaties.
Luxembourg has reflected this development through its 2018 draft bill on space activities (“Space Activities Act”)2, which to date is still to be discussed by the Parliament. A need for a comprehensive national space law results from various motivations, namely:
- the presence of a well-developed satellite industry in Luxembourg that has only been governed so far (for its space aspects) by Article 20 of the 1991 Act on electronic media3, which lays down regulatory framework for audiovisual media and broadcasting, but also;
- Luxembourg’s adhesion to the Outer Space Treaty as well as the planned ratification of the Registration Convention4. The Outer Space Treaty is considered as a constitution for space, establishing main principles governing space such as limitation of its use to peaceful purposes and exclusion of any national sovereignty claims in space. Registration Convention, on the other hand, requires States to provide the United Nations with information about each object launched into space.
The Space Activities Act—in its current draft form—would regulate all space activities for which Luxembourg may be held liable, such as (i) activities carried out by Luxembourg persons, or (ii) carried out from a territory or installations (e.g. airplanes launching space objects) to which Luxembourg applies its jurisdiction. In practice, this should mostly concern satellite operators. In terms of "ratione materiae", the Space Activities Act aims to cover four main fields:
- Authorization of space activities (Title II of the Space Activities Act)
- Surveillance of such activities (Title III)
- Transfer of such activities (Title IV)
- Registration of Luxembourg space objects (Title VII)
Most key notions have been inspired by the above-mentioned UN resolution 68/74 and existing legislations of other countries (France and Belgium).
Interestingly, while the "lex generali" is under preparation, Luxembourg has already adopted its lex specialis governing space mining5. Introduction of this specific legislation on extraction of resources from celestial bodies did not remain unnoticed as the Grand Duchy is the second country worldwide, after the U.S., to elaborate such specific law.The main feature of the aforementioned Act is that it makes the ownership of spatial resources possible. As such, it provides legal certainty and guarantees a protection for investors, explorers and miners, which would extract space resources.
This issue of a global framework for space mining is being discussed at various international forums6. Regarding feasibility and economic viability of space mining7, the OECD’s report on space economy recognizes major developments turning exploration of space resources into a promising activity.
II. International cooperation
Luxembourg positions itself as a new player on the international space scene by setting up bases for international cooperation in the space sector with various countries through either a joint declaration, Memorandums of Cooperation or Memorandum of Understanding (MoU). In chronological order:
- With the United Arab Emirates through the MoU dated October 10, 2017 in order to launch bilateral cooperation on space activities focusing on the exploration and utilization of space resources8
- With Japan through a Memorandum of Cooperation dated November 19, 2017 to explore opportunities for exploration and commercial utilization of space resources9
- With China through the MoU dated January 16, 2018 setting up bases for potential cooperation in economic, legal, regulatory and technological aspects of the utilization of space resources. Alongside this MoU, Luxembourg signed a cooperation agreement with the National Space Science Center (NSSC) of the Chinese Academy of Sciences (CAS) establishing a Research Laboratory of Deep Space Exploration in Luxembourg10
- With the Czech Republic through the MoU dated October 10, 2018 targeting cooperation in the frame of space resources exploration and utilization11
- With Poland through the MoU dated October 12, 2018. The five-year MoU targets the exchange of information and expertise in the space technologies, policy, law and regulation12
- With the United States of America (U.S.) through the MoU on space co-operation dated May 10, 2019. Such a MoU mainly aims at promoting their respective space industries through new commercial and investment opportunities, as well as strengthening policy and scientific coordination13
- With Belgium through a joint declaration dated January 23, 2019 in order “to collaborate on the development of an international framework for the exploration and utilization of space resources”14
Year after year, Luxembourg continues to foster international relationships in the field of space industry, as demonstrated by the recent signature of a MoU with the State of New South Wales (Australia) on future space activities. The MoU dated February 3, 2020 foresees a framework for cooperation on space related activities such as:
- “Space science, technology and applications, including high-tech instrumentation, ground communications and services, smart payloads development, space and intra-space communications and commercialization of space data; and
- Space policy and law.”15
III. Educational perspectives
Luxembourg’s comprehensive space strategy is not restricted to business, but also targets education with the ambition of cultivating a new generation of space specialists. Different space-oriented educative projects will be led throughout the schooling cycle, from primary up to university. Notably, in addition to its existing Master’s degree in Space, Communication and Media Law, the University of Luxembourg has opened a new interdisciplinary Master’s in Space Studies. The program aims to develop both technological and business skills, which are needed to durably develop Luxembourg’s space capabilities.
IV. Financial support tools
Together with the legislative framework and educational component, Luxembourg supports development of the space industry with diverse financial tools, both national and European. Tax incentives or direct aids are available for companies at every stage of their business, whether they are a start-up or a well-established multinational company. Also, worth emphasizing are the recent16 advances made by Luxembourg as it has given more substance to its project of establishing a space industry venture fund.
4.1. Aid at national level
There are various direct financial subsidies for companies with innovative ideas for space. At a national level, the government offers a large choice of R&D grants for essentially any innovative project, depending on purpose, size of the applicant and other criteria. The national investment bank provides another vector of financing through loans targeting start-ups as well as companies seeking medium and long-term solutions.
Moreover, the Luxembourg National Research Fund (NRF) provides specific funding for space companies through a newly established Space Research Program. NRF’s investments are however only available for private-public-partnerships (PPP) between a company and a Luxembourg public research institution. Two PPP projects focused on space mining are currently in place.
4.2. Aid at European level
Europe offers attractive funding opportunities for the sector as space becomes an increasingly important field for European countries. EU Member States collaborate on space projects namely within the European Space Agency (ESA), but some major projects have been jointly promoted and financed with the European Commission (such as Galileo, the European navigation satellite-based system, or Copernicus, the European program collecting and providing satellite Earth observation data). Horizon 2020 is also one of the main EU funding programs for research and innovation open to space industry companies . One would also expect Horizon 2027 to cover the space industry. This is yet to be confirmed.
The European Space Agency specifically targets companies with space capabilities. Its funding plan is twofold:
- first, ESA provides a budget to implement a national space program (LuxIMPULSE) in order to develop new national competencies in the space sector;
- second, thanks to Luxembourg’s contributions to ESA’s programs, recognized Luxembourg players may benefit from an access to the space market, which has high specificities and level entrance barriers.
4.3. Tax incentives
At a later phase, when inventive ideas have taken shape and become profitable, tax incentives offered by the Luxembourg government become available. Tax investment credit (on corporate income tax) helps companies to lighten financial burden when investing in new equipment and technologies.
In that regard, the draft Space Activities Act introduces a motivating provision allowing companies to apply for tax investment credit on space objects launched into the space (Title VIII) – the current tax legislation grants tax investment credit only for fixed equipment physically located in Luxembourg. This is a logical move, considering recent evolutions in manufacturing and supply of space products such as growing market for small and especially nanosatellites (so-called CubeSats). These are indeed becoming increasingly affordable for a whole range of entities in terms of procuring and launching costs.
Last but not least, companies that have developed intellectual property rights may also benefit from the new Luxembourg IP box regime. Indeed, the legislation allows firms—subject to fulfilment of several conditions—to be exempt from taxes up to 80 percent of their net eligible adjusted and compensated income derived from eligible intellectual property such as registered patents or software. Exemption applies independently on the form of that income – be it embedded income, royalties or capital gains.
4.4. Recent advances: from orbital ventures to the five-year national action plan
Luxembourg has a growing space industry and research community, sustained by government policy keen to encourage high tech industry, specifically that of the space industry. In this sense, on January 16, 2020 during a meeting of a parliamentary committee, Luxembourg took another step forward with the confirmation by Etienne Schneider (former Deputy Prime Minister and Minister of the Economy) that the Government of Luxembourg, together with private and public sector17 partners have invested in Orbital Ventures, a new investment fund based in the country.
While the amount invested by the Government (via the Ministry of the Economy) remains undisclosed, Etienne Schneider indicated the fund had reached an initial closing with €70 million (c. US$78 million).
The fund aims now at providing equity funding for early stage space companies performing in space activities18, keeping in mind the business reality: delivering a return to investors. In this context, priority will be given to innovative companies with “dirsruptive techonologies, products and services (…) already generating revenues or set to do so in the near term”.
On the same day in January, the Government announced its five-year “national action plan” for space science and technology in Luxembourg. It should cover work in telecommunications (from optical space communications to secure government satellite systems) as well as the contribution to the development of a CubeSat—so-called “Juventus” that should fly with the European Space Agency’s Hera mission19 —recalling the country’s strong interest for the space resources industry.
This latest news sounds promising and encouraging for consecrating Luxembourg as a new hub for the space industry.
Echoing the Luxembourg space initiative and thriving presence of players in Luxembourg (for further insight on the space companies/sectors in Luxembourg, check out our new dedicated webpage20), Deloitte Luxembourg has been developing its own space center of excellence. The center regroups experts from various fields in order to offer a comprehensive assistance to the clients from the space industry and help them navigate the different incentives (financial or tax) that may be available to them.
1Outer Space Treaty (1967, in force from 1967); Rescue Agreement (1968, in force from 1968); Liability Convention (1972, in force from 1972); Registration Convention (1975, in force from 1976); Moon Agreement (1979, in force from 1984).
2 Draft Act n°7317 on Space Activities; submitted to the Parliament on 12 June 2018 (Projet de loi sur les activités spatiales).
3 Act of 27 July 1991 on Electronic Media (Loi du 27 juillet 1991 sur les médias électroniques).
4 Luxembourg ratified the Outer Space Treaty in 2005, and the Liability Convention in 1983. Draft Act n°7270 on Ratification of the Registration Convention has been submitted to the Parliament on 26 March 2016 (Projet de loi portant approbation de la Convention sur l'immatriculation des objets lancés dans l'espace extra-atmosphérique).
5Act of July 20, 2017 on Exploration and Use of Space Resources (Loi du 20 juillet 2017 sur l’exploration et l’utilisation des ressources de l’espace).
6UN Committee on the Peaceful Uses of Outer Space; The Hague Space Resources Governance Working Group.
7OECD (2019), The Space Economy in Figures: How Space Contributes to the Global Economy, OECD Publishing, Paris, [https://doi.org/10.1787/c5996201-en, Consulted on January 6, 2020].
8Luxembourg Ministry of Economy (2017), Luxembourg and the United Arab Emirates to cooperate on space activities with particular focus on the exploration and utilization of space resources [https://space-agency.public.lu/dam-assets/press-release/2017/2017-10-10-press-release-mou-space.pdf, Consulted on February 13, 2020].
9Mining Technology (2017), Luxembourg and Japan agree to explore space resources [www.mining-technology.com/news/luxembourg-japan-agree-explore-space-resources/, Consulted on February 13, 2020].
10Press release by the Ministry of the Economy (2018), The National Space Science Center of the Chinese Academy of Sciences to establish a Research Laboratory in Luxembourg [https://gouvernement.lu/en/actualites/toutes_actualites/communiques/2018/01-janvier/17-schneider-agreement-china-en.html, Consulted on February 13, 2020].
11Chronicle.lu (2018), Luxembourg and Czech Republic Cooperate in Space Resources [https://chronicle.lu/category/space/27148-luxembourg-and-czech-republic-cooperate-in-space-resources, Consulted on February 13, 2020].
12Luxembourg Ministry of Economy (2018), Luxembourg and the Republic of Poland agree to cooperate on space activities with particular focus on the exploration and utilization of space resources [https://space-agency.public.lu/dam-assets/press-release/2018/2018-10-05-Press-Release-MOU-Luxembourg-Poland-Space.pdf, Consulted on February 13, 2020].
13Luxembourg Space Agency (2019), United States and Luxembourg sign memorandum on space co-operation [https://space-agency.public.lu/en/news-media/news/2019/united-states-memorandum.html; Consulted on February 13, 2020].
14L., ROBBROECKX (2019), The Grand Duchy of Luxembourg and Belgium join forces to develop the exploration and utilisation of space resources (23.01.2019) [https://space-agency.public.lu/dam-assets/press-release/2019/2019-01-23-ENG-joint-press-release-BE-LU.pdf, Consulted on February 12, 2020].
15Luxembourg Space Agency (2020), New South Wales and Luxembourg sign MoU on future space activities [https://space-agency.public.lu/en/news-media/news/2020/new_south_wales_mou.html, Consulted on February 13, 2020].
16Luxembourg Space Agency (2020), Luxembourg Backs Space Technology Venture Capital Fund [https://space-agency.public.lu/en/news-media/news/2020/space_technology_venture_capital_fund.html, Consulted on February 12, 2020].
17E.g. financial firms (BCEE, BGL BNP Paribas, BIL, SNCI), European space companies (OHB, SES), an American venture fund (Promus Ventures) and the leading postal and telecommunication services operator in Luxembourg (POST Luxembourg).
18Emphasizing: not only in space resources.
19SpaceNews (2020), Luxembourg establishes space industry venture fund [https://spacenews.com/luxembourg-establishes-space-industry-venture-fund/, Consulted on February 12, 2020].
20Deloitte (2020), Luxembourg Space Initiative [https://www2.deloitte.com/lu/en/pages/technology/articles/luxembourg-space-initiatives.html, Consulted on February 12, 2020].