This week, the UK has taken a step forward in strengthening the legal framework for commercial spaceflight by putting in place law which limits liability for spaceflight operators.
Until now, operators have faced unlimited liability, which the industry and parliament have argued creates a barrier to investment in the UK space sector compared to other states which either cap liability or offer state guarantees.
The Space Industry (Indemnities) Act (2025 Act), which received Royal Assent on 18 December 2025, amends the Space Industry Act 2018 (2018 Act) by providing certainty to spaceflight operators that they will not face unlimited liability to the state when operating from the UK: All spaceflight operator licences must now include a limit on the amount of the operator’s liability to the Government under section 36 of the 2018 Act.
As Richard Quigley MP put it, this new Act is “a simple, but crucial, fix: it will ensure that all spaceflight licences set a clear limit on operator liability, bringing us in line with international standards.” https://hansard.parliament.uk/Commons/2025-03-07/debates/AEBE3C88-D046-431B-9224-BA17F4D4A5BF/details?
UK Liability under the Outer Space Treaty 1967
Under Article VII of the 1967 Treaty, a state is liable for objects it launches into outer space or objects launched from its territory:
Each State Party to the Treaty that launches or procures the launching of an object into outer space, including the moon and other celestial bodies, and each State Party from whose territory or facility an object is launched, is internationally liable for damage to another State Party to the Treaty or to its natural or juridical persons by such object or its component parts on the Earth, in air or in outer space, including the moon and other celestial bodies.
The effect of Article VII is that each space object has at least one, and often more than one, launching state. As a launching state, the UK is liable for any damage that the space object may cause on Earth or in space.
The Space Industry Act 2018
The 2018 Act created the high-level legal framework to enable commercial spaceflight and associated activities to be carried out from the UK. It sits alongside the Outer Space Act 1986 which regulates some of the overseas space activities carried out by UK entities.
Allocation of Liability under the Space Industry Act 2018
The UK passes on its liability under the 1967 Treaty to operators under section 36 of the 2018 Act. Section 36 requires that a person carrying out spaceflight activities must indemnify the government, and several named public bodies (including the Health and Safety Executive), against any claims brought against the state “in respect of damage or loss arising out of or in connection with those [spaceflight] activities”.
Limitation of Indemnity in Operator Licences
However, this indemnity can be limited. Section 12(2) of the 2018 Act stipulates that an operator licence “may” specify a limit on the amount of the licensee’s liability under section 36, but it is not mandatory for a licence to do so. Section 12(2):
An operator licence may specify a limit on the amount of the licensee’s liability under section 36 in respect of the activities authorised by the licence.
Stakeholders argued that this exposure has an adverse effect on the UK’s spaceflight industry and, in response to the Government’s 2020 consultation on liabilities, insurance and charging, suggested that this be remedied through regulations.
In its 2021 report, Unlocking Commercial Spaceflight for the UK, the government responded that it was not possible to remedy this through regulations, as there are no regulation-making powers to amend section 12(2), stating, “If another suitable piece of primary legislation is brought forward, the Government may seek to amend the wording in section 12(2) from “may” to “must”.”
In practice, it is government policy that all operator licences issued under the 2018 Act contain a cap on the section 36(1) indemnity:
- The (now defunct) horizontal launch licence granted to Virgin Orbit, LLC in December 2022 capped this indemnity at US$ 250 million.
- In January 2025, the UK Civil Aviation Authority (CAA) granted the first vertical launch licence for a rocket from the UK. This was granted to Rocket Factory Augsburg AG for the launch of RFA One from SaxaVord Spaceport in the Shetland Islands. The first test flight is now expected to take place in 2026.
- In July 2025, the CAA granted the first vertical launch licence to a UK based company. This was granted to Scottish company Skyrora Limited for the launch of Skylark L from SaxaVord. Skyrora is exploring launching from other spaceports so may need to amend this licence.
The Space Industry (Indemnities) Act 2025
The effect of the 2025 Act is that the operator licence “must” (instead of “may”) specify a limit on the amount of the licensee’s liability under section 36(1), it also makes a consequential amendment to section 36(3)(a).
Section 12(2) of the 2018 Act, as amended by the 2025 Act, now reads:
An operator licence must specify a limit on the amount of the licensee’s liability under section 36 in respect of the activities authorised by the licence.
This brings legislative certainty that spaceflight operators will not face unlimited liability to the state when operating from the UK. In practice, the CAA will continue to include indemnity caps in licences that it grants under the 2018 Act.
When the bill was considered in committee on 18 June 2025, the Minister for Aviation, Maritime and Security, Mike Kane MP, said that the bill was “consistent with government policy”. and would improve the Space Industry Act by “meeting a key request from industry to provide legislative certainty that spaceflight operators will not face unlimited liability when operating from the UK”.
It is hoped that the Act will unlock further investment in the space economy, a view which was shared by members of both Houses during the passage of the Bill through parliament. Speaking in the House of Lords during the Bill’s second reading on 5 September 2025, Lord Ranger of Northwood stated that, “without it, the risks created by indemnity and insurance requirements threaten to become a handbrake on growth.” Lord Hendy of Richmond Hill made the point that it will avoid investors diverting to what would otherwise be favourable jurisdictions:
If government did not limit a spaceflight operator’s liability, spaceflight companies and investors would look instead to more favourable regulatory regimes in other countries, where Governments share the risks involved by limiting an operator’s liability or by offering a state guarantee, such as in the US or France.
Baroness Mobarik also pointed out how a seemingly simple change to the law can have a big impact:
This seemingly small adjustment is fundamental because, without legal certainty over liability, insurers are reluctant and investors hold back. By guaranteeing a clear liability framework, we send a strong signal that the UK is open for business in the space sector.
The 2025 Act was published on 18 December 2025 and will come into force on 18 February 2026. It remedies a long-standing unresolved issue and brings some balance and certainty for investors and commercial operators in the UK. It is a welcome step toward strengthening the UK’s commercial space offering and improving the UK’s competitiveness as a launch location.