“Reaching out to All?”: Draft EU Space Act (3) – Focus on SMEs / Industry

The draft European Union Space Act (EUSA) seeks to establish a harmonised regulatory framework for the internal market in space-based services. For commercial stakeholders, this harmonisation presents both an opportunity and a challenge.

Reducing legal fragmentation benefits all commercial stakeholders, but particularly smaller operators, who are often disproportionately impacted by the complexity and cost of navigating multiple, and sometimes inconsistent, national regulatory regimes. By establishing a coherent legal framework, the EUSA introduces greater certainty, seeking to reduce legal and administrative barriers to cross-border activities within the Union. This is a critical precondition for enabling efficient commercial operations, supporting the scalability of SME-led space ventures, and facilitating access to third-party financing.

On the other hand, the introduction of new compliance obligations, including demon-strable adherence to detailed safety, resilience, and sustainability requirements, raises serious concerns regarding increased administrative and financial burdens. These con-cerns are substantiated by the Impact Assessment conducted by the European Com-mission which acknowledges that the EUSA will result in not in-significant new burdens.

In summary:

EUSA Requirements – What is Generally Required from Space Operators?

• Space operators must be authorised and, in any case, registered in the Union Register of Space Objects (URSO), and are subject to ongoing supervision
• Space operators must provide evidence regarding compliance with EUSA's binding safety, resilience, and sustainability requirements before being allowed to offer services in the EU market, partially in form of detailed third-party assessments
• Covered space activities include operation of space objects, launch services, space-based data provision, in-space operations and services (ISOS), and collision avoidance (CA) services
• Safety requirements include mitigating space debris, registering with a CA services provider, complying with technical tracking and trackability requirements, and meeting obligations relating to collision avoidance as well as certain supply chain requirements
• Resilience requirements involve risk management, incident reporting, staff training, and supply chain responsibilities under the concept of security-by-design
• Sustainability requirements include calculating mission environmental footprint, submitting additional data during authorization, and sourcing data from suppliers via contract

EUSA’s Impact – What impact is expected for Commercial Stakeholders

• The EU Commission expects, as shown in their Impact Assessment, a not-unsignificant increase in costs for private companies due to new technical, operational, administrative, and enforcement requirements, with manufacturing costs, for example for industry / SMEs expected to rise by 3 % to 10 %
• Companies will likely be required to increase their IT budgets by about 10 % to handle additional risk management and documentation demands introduced by the EUSA
• The EU Commission estimates the authorization procedures to cost around EUR 100,000 per product line, although the precision and basis for all these estimates remain unclear and appear to be very approximate
• Positive impacts, according to the EU Commission, include reduced fragmentation leading to cost efficiencies, improved safety standards extending satellite lifespans in low Earth orbit from five to six years, and lowered cyber risks
• Indirect effects will impact the entire supply chain, arising from both, the explicit EUSA requirements obliging Primes to demand certain actions from suppliers, but also from broader economic value chain effects, such as new specifications and designs required by directly affected stakeholders from suppliers 

Lighten the Burden – Which Explicit Easements are Foreseen?

• A principle of proportionality is said to be incorporated into the resilience provisions, scaling specific obligations based on risk profile, mission nature, scale and complexity, and the size of the respective space operator
• For small-sized enterprises (however, not for mid-sized or mid-cap companies), “light regimes” are introduced to reduce the regulatory burden concerning resilience and sustainability, however, not in relation to safety obligations
• An additionally longer two-year transition period (until end of 2031) is foreseen for small-sized enterprises concerning the obligation to calculate the environmental footprint of a space activity
• Fees for technical assessments, carried out during for authorisation process, are asked to be adjusted proportionately to the size of the operator
• To help offset the costs associated with complying with EUSA’s provisions, particularly but not exclusively for SMEs, the EUSA provides for a variety, however, yet not detailed, supportive measures to facilitate compliance

Supporting Measures – Which Measures are Foreseen to support, faciliatet, help?

• The EUSA obliges the Commission to support capacity building, in particular through the development of information portals, guidance materials, vouchers for expert assistance, and general measures aimed at information access and exchange, to help space operators manage the regulatory burden
• Most notably, the draft EUSA offers co-funding opportunities in areas such as joint research and innovation, and even full funding for the development of so-called launcher neutralizers (e. g., flight termination systems) and participation in training programmes to help offset the costs of implementing the EUSA’s provision
• A Union Space Label Framework has been announced, to be introduced for operators who “go the extra mile” and meet higher requirements than those laid down in the EUSA
• Within the broader Space Package published on 25th July, the accompanying “Vision for the European Space Economy”, envisages expanded contracting opportunities for startups, SMEs, and scaleups, alongside established firms, as a strategic driver of innovation and competitiveness within the EU space sector.

SMEs and SMCs – Who Qualifies as Such?

• The EUSA addresses smaller operators by distinguishing between small and medium-sized enterprises (SMEs) on one hand and small mid-caps on the other hand , attributing easements by way of light regimes to small-size companies
• A small-sized enterprise, has fewer than 50 employees and an annual turnover or balance sheet total not exceeding EUR 10 million
• The broader overall SME category (mid-sized included) includes enterprises with fewer than 250 employees and an annual turnover not exceeding EUR 50 million and/or balance sheet total not exceeding EUR 43 million
• Small mid-caps (SMCs, the next category “above” SMEs) are defined as enterprises with fewer than 750 employees and an annual turnover not exceeding EUR 150 million or a balance sheet total not exceeding EUR 129 million
• Startups and scaleups are not explicitly recognized as standalone categories under the EUSA but can often be subsumed under the broader heading of SMEs

In more detail:

I. General Requirements of the EUSA

The draft EUSA establishes harmonized rules for the establishment and functioning of the internal market for space-based data and space services. Its overarching objective is to ensure a high and uniform standard of safety, resilience, and environmental sustainability, while eliminating legal fragmentation across the Union. This comes for a prize.

The draft EUSA requires space operators established within the Union to obtain “authorisation”, to be registered in the Union Register of Space Objects (URSO) and be subject to continuous supervision. In general, the EUSA also applies to third-country space operators to ensure a level playing field in the internal market, regardless of the operators’ geographical origin. According to the current wording of the EUSA, its provisions are to apply when third-country operators provide space services in relation to a Union operator or otherwise in the internal market. 

1. Space Activities covered by EUSA

The EUSA directly covers the following space activities:

• operation of space objects such as satellites, such as satellites, not including, however, for instances the construction of satellitesalone, nor the supply of components like sensors, software, or other parts, and not including ownership as such, without active participation in space operations
• launch services, including the operation and maintenance of launch sites and facilities involved in the launch process, which would likely include, for example, the operator of a fuelling station at a spaceport
• primary provision of space-based data, which refers to entities acting as intermediaries between the upstream and downstream segments of the value chain by transmitting space-based data from space operators to the various subsequent users. This includes, for example, providers of satellite-based electronic communications services and providers of space-based observation data who perform the initial processing of such data, to the extent that this initial processing is technically sufficient to enable its further use; the exact definition of the scope of this appears to be one of the more difficult questions of the EUSA terminiology
• in-space operations and services (ISOS), such as inspection, rendezvous, docking, repair, refuelling, and more, carried out by a servicer spacecraft
• collision avoidance (CA) services, such as providing space situational awareness (SSA) data to enable a space operator to perform collision avoidance manoeuvres

Not all definitions used to describe the covered activities are explicitly clear. As an example:

The precise role of primary providers of space-based data, as described in the EUSA, remains difficult to interpret, because of the complexity and apparent circular references in connection with other defined terms.

Although the EUSA does not state this explicitly, the EUSA seems to imply that an entity already operating space assets is not in addition the primary provider of space-based data in the meaning of the EUSA. Even if data is processed, for instance, on board a satellite, the satellite operator may according to the wording not be treated as a primary provider. As a result, the entity operating the ground segment receiving the data would likely fulfil that role. We are certain, that this cannot be the aim. This (and other definitions and mechanics) requires further clarification to be able to clearly identify the scope of addressees of certain obligations under the EUSA directly from its wording and not only from additional interpretation arguments.

2. Basic Requirements

To demonstrate compliance with the EUSA, space operators must meet a range of obligations, which are grouped into the fields of safety, resilience, and sustainability.

In the area of safety, operators must:

• implement measures to mitigate space debris
• register with a CA services provider

With respect to resilience:

• conduct risk assessment and management
• establish effective mechanisms for incident reporting
• implement appropriate staff training and recruitment measures
• apply security-by-design principles across the entire supply chain

With respect to sustainability:

• calculate the environmental footprint of a mission
• submit additional data with application for authorisation / registration
• require by contract data from suppliers

Once an authorisation has been issued in the Member State where the respective space operator is established, the provision of space-based data and space services shall not be subject to additional restrictions by other Member States, insofar as such restrictions relate to matters governed by the EUSA (Article 3(1)). 

However, this “freedom to operate” applies only to requirements within the scope of the EUSA and does not extend to other member state national laws outside its remit (e. g. liability and related security, national security matters, etc). Moreover, if a member state, for objective reasons, imposes more far-reaching requirements, then the stakeholder must also comply with those higher standards, and where necessary, obtain an additional authorisation in that member state.  

3. Indirect Effects

The EUSA’s impact extends beyond directly addressed space operators and, in practice, affects the entire supply chain.

Indirect effects arise in two ways.

• First, EUSA’s resilience and sustainability provisions require directly regulated operators to pass on corresponding obligations to their suppliers, which in turn may require these suppliers to ask their subs for the same.
• Second, the efforts of regulated operators to comply with EUSA will inevitably drive changes in technical specifications, product designs, and capabilities, which suppliers must also adopt to remain compatible with EUSA-compliant systems.

As a result, the EUSA requirements have the ability to and will effect the whole value-chain, including the regions in which space technology is becoming and important economy matter.

4. In-depth reviews of EUSA Requirements

General: “Reaching High”: A First Look at the EU Space Act – (and the Vision for the European Space Economy)
Third Country Operators: “Reaching Wide”: EU Space Act (2) – Perspective of Third-Country Space Operators

II. SMEs - Small and Medium-Sized Enterprises and Small Mid-Caps

To facilitate compliance with its provisions, the EUSA envisages certain (i) easements and (ii) supporting measures, in some cases specifically for smaller enterprises, to whom such measures are of particular relevance.

The easements encompass measures designed to alleviate the administrative and bureaucratic burdens introduced by the EUSA. These include:

• The principle of proportionality
• Light regimes, including simplified risk management and IOD/IOV missions
• Extended transition periods
• Scaled fees

The easements encompass measures designed to alleviate the new burdens introduced by the EUSA. These include:

• Provision of information
• Co-funding and funding

The availability of these easements and supporting measures often depends, among other factors, on the size of the respective operator. In most cases, eligible operators must qualify as small-sized enterprises.

The broader category of SMEs at a whole (which also includes medium-sized companies) is, at present, relevant primarily in the context of fees charged by qualified technical bodies and – currently – not beyond that.

1. Small-sized Enterprises

Small-sized enterprises, which are eligible for certain easements, are a subcategory of SMEs. To qualify as a small enterprise within the SME category, a business must remain within the following thresholds (Article 5, point 26):

• Staff headcount: fewer than 50 full time employees, including full-time, part-time, and seasonal workers, expressed as full-time equivalents.
• Financial ceilings: annual turnover and/or annual balance sheet total must not exceed EUR 10 million.

2. SMEs in general 

The next category, SMEs in general, also includes medium-sized enterprises. An enterprise qualifies as an SME if it employs fewer than 250 persons and has an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million. 

3. Small Mid-Caps

Finally, small mid-caps, which is the category above SMEs, are defined as enterprises employing fewer than 750 persons and having an annual turnover not exceeding EUR 150 million or an annual balance sheet total not exceeding EUR 129 million (Article 5, point 27, of the draft EUSA).

For clarification, the relevant definitions are summarized here (in each case, the requirements regarding the number of employees and at least either the turnover or the balance sheet total must be met).

It should be noted that the proposed amendments by the European Commission in the area of ESG reporting obligations, which raise the threshold to apply the full requirements only to large companies (Omnibus I and II), do not yet appear to be reflected in the EU Space Act so far.

Furthermore, in calculating the above-mentioned figures, partner enterprises and so called “linked” enterprises must also be taken into account. "Linked" enterprises are those that are connected through the direct or indirect control of the majority of voting rights or through the ability to exercise a dominant influence on an enterprise. In case of linked enterprises, 100 % of the linked enterprise’s employee / EUR figures, in line with thresholds in the wider ESG reporting discussion, must be included into the determination of the applicable stakeholder category.

Partner enterprises are enterprises that are neither fully autonomous nor linked to one another. When determining its eligibility under SME assessment, partner enterprises must add a proportion of the partner’s staff headcount and financial data to its own count.

III. General Easements and Specific Easements for SMEs

The Easements provided for in the draft EUSA include

• the principle of Proportionality, explicit only for certain resilience requirements
• certain so called light regimes
• longer transition periods for certain stakeholders in the area of sustainability; and
• the request to adapt fees for mandatory technical bodies.

1. Principle of Proportionality regarding Resilience

In the provisions on resilience (only), the draft EUSA introduces a principle of proportionality, whereby the specific requirements scale according to certain factors.

This principle applies to the provisions concerning risk management throughout the lifecycle of space missions (Article 76(1)). The level of risk (against which the necessary measures are assessed) is considered appropriate if the following factors have been taken into account (Article 76(3)(a-b)):

• the type and features of the space mission, such as its specific objectives, the orbit, the constellation size
• the impact upon other space activities
• the size of the respective entity, the degree of exposure to risk and the likelihood and severity of incidents, including their societal and economic impact.

One of the factors to be considered is the size of the operator. This means that smaller enterprises may face less demanding obligations. The principle of proportionality is justified by the EUSA authors by the assumption that smaller enterprises generally pose a lesser overall risk impact (Recital 75).

However, this principle is not explicitly applied to the provisions on safety, which instead appears to address proportionality only through the so-called light regimes. This distinction raises questions.

2. Light Regimes

Article 10 of the draft EUSA establishes three “light” regimes under which eligible space operators may follow adjusted authorisation conditions, particularly regarding compliance with the safety, resilience and sustainability requirements.

The light regime set out in Article 10(2) applies exclusively to space operators that are research and education institutions. By contrast, the regimes provided for in Article 10(3), concerning simplified risk management, and in Article 10(4), concerning In-Orbit Demonstration and Validation (IOD/IOV) space missions, shall also be available to operators qualifying as small-sized enterprises.

Notably, simplified risk management is also intended to be available to small enterprises established in third countries, specifically third-country space operators, launch operators, and launch site operators. 

a) Simplified Risk Management

Simplified risk management applies to small enterprises (or research or education institutions) (Article 5, point 28) and focuses specifically on critical assets and the main risks (Recital 51).

The provisions on simplified risk management are not yet final and comprehensive and will be further refined through delegated acts to be adopted by the European Commission. These delegated acts shall establish criteria for identifying critical assets and critical functions, to which simplified risk management applies (Article 78(3), point (a)(ii)), and to develop risk scenarios tailored to the risks faced by the entities implementing it (Article 78(3), point (b)).

Entities using simplified risk management must comply with a set of requirements laid down specifically (point 9 of Annex VII), but only in relation to critical assets and critical functions necessary to address the risks of:

• loss of control over assets equipped with propulsion; and
• loss of control over assets capable of emitting interference likely to adversely affect the security of other space operations.

According to point 9 of Annex VII, the requirements are:

• Risk management through the lifecycle of space missions: operators shall manage risks to the security of network and information systems and the security of the physical infrastructure and environment through comprehensive and proportionate measures based on an all-hazard approach (Article 76(1));
• Risk Assessment: As outlined in Article 78(2), entities must assess risks to critical assets and functions
• Assessment Elements: Entities must include specific elements detailed in point 1.4 of the regulation in their risk assessments
• Risk Scenarios: Entities must develop potential risk scenarios, particularly those referred to in point 1.4(f)
• Asset Inventories: Entities must establish and maintain up-to-date inventories of critical assets, in line with Article 80(4)
• Prevention and Protection: Measures must be implemented to prevent and mitigate risks, following Article 84(3)
• Cryptography and Encryption: Security principles must be applied for encryption, as required in Article 85(1)
• Backup Management: Entities must manage backups according to the procedures in Article 86(1) and (3)
• Incident Handling: They must also handle security incidents as specified in Article 91

This means, for example, that while regular operators are required to establish, review, and monitor internal mechanisms related to human resources policies in order to ensure that all personnel understand and commits to their respective security responsibilities according to their roles. Operators eligible for simplified risk management are exempt from this requirement.

The oversight of the simplified risk management will rest with the European Commission, acting through EUSPA. The respective national competent authorities are obliged to submit to EUSPA a list of the entities applying this simplified risk management approach.

The EUSPA, in turn, must report annually to the European Commission on the implementation of simplified risk management across the Union, and submit appropriate recommendations (Article 40(1)(h)). As part of this process, the Agency may also provide recommendations aimed at promoting supervisory convergence within the internal market. The main findings from these annual reports may be included in the agenda of meetings held by the EU Space Resilience Network, as established under Article 94(1).

Furthermore, to ensure that the regulatory framework remains aligned with scientific and technological progress, the European Commission is empowered to adopt delegated acts in accordance with Article 113. These acts may be used to amend the requirements set out in point 9 of Annex VII, based on the best available techniques.

b) IOD/IOV Space Missions

Under the draft EU Space Act, space operators that qualify as small-sized enterprises (or as research or education institutions) are exempt from the obligation to calculate the environmental footprint of their space activities, as required in Article 96(2), however, only where they conduct In-Orbit Demonstration and Validation (IOD/IOV) space missions (Article 10(4)).

This exemption effectively relieves these operators from complying with the broader sustainability requirements of the Act, all of which are linked to the environmental footprint assessment.

The term IOD/IOV is not explicitly defined within the draft EUSA itself (something that should be addressed in the future iterations of the EUSA). However, it appears to refer to space missions conducted under the Union’s dedicated programme of the same name. Within this programme, IOD/IOV experiments are defined as innovative technologies, products, concepts, architectures, and operational techniques requiring in-orbit demonstration and validation. Such experiments may encompass instruments, equipment, technologies, system tests, missions, payloads, and similar initiatives.

3. Longer Transition Periods

An additional benefit is granted to small-sized enterprises (as well as research and education institutions), with respect to sustainability (only), in the form of an extended transition period.

Such operators shall be exempt for two more years from the provisions of the EUSA relating to sustainability, and in particular, from calculating the environmental footprint of their mission and providing the datasets on which the calculation would have been based (Title IV, Chapter III, Articles 96 to 100) until 31 December 2031 (Article 96(8); see also Recital 138).

4. Adapted fees

The draft EUSA foresees the establishment of qualified technical bodies for space activities (Articles 34 to 39).

These bodies, for instance national Space Agencies, can be entrusted by Member States with assessing the technical files that space operators must submit with their applications, enabling the authorities to verify compliance with the requirements of the EUSA (Article 8(1)).

The EUSA encourages / requests qualified technical bodies to operate under fair and reasonable terms, particularly with regard to fees, and to take into account the interests of SMEs (point 1.14 of Annex IX). However, this obligation is formulated as a recommendation rather than a binding requirement.

IV. Supporting Measures

1. Providing Information

In order to facilitate the implementation of its requirements, the EUSA also foresees measures to support capacity building for space operators, competent authorities and qualified technical bodies.

Such measures encompass, for instance, the development of guidance materials, methodologies and best practices on

• the use of the Union Space Safety Label in the context of national procurement procedures (Article 109(1)(a)(i));
• requirements applying to novel areas or to areas under development, such as on-orbit servicing or orbital traffic rules (Article 109(1)(a)(ii)); as well as
• other matters covered by the EUSA, as appropriate (Article 109(1)(a)(iii)).

In support of implementing EUSA’s requirements, the European Commission, with the support of the EUSPA, is expected to set up and manage an information portal (Article 110). This portal, among others, shall provide compliance checklists to facilitate voluntary adherence to the Union Space Labelling Scheme and support any relevant single point of contact set up by the Member States (Article 110(2)).

The information portal shall be interoperable with helpdesk portals on rules, procedures and authorisation processes set up by individual Member States (Article 110(3)), which the EUSA anticipates will be implemented.

2. Co-Funding and Funding

The draft EUSA foresees (co-)funding of certain activities, deemed beneficial for facilitating compliance with the safety, resilience and sustainability requirements. From such funding opportunities, especially innovative SMEs could profit. 

The co-funding, however, is not limited to SMEs.

For example, the European Commission is expected to co-fund joint research and development projects to enable industry uptake of technological solutions in the fields of encryption technologies and protocols, on-board-safety systems, ISOS technologies and concepts, as well as any other matters covered by the EUSA (Article 109(2)). In the case of ISOS, the details are yet to be specified by additional delegated acts to be adopted by the European Commission in the future.

In other sectors, not only co-funding, but even primary funding is foreseen: The European Commission is expected to fund the development of standards for so-called “launcher neutralizers” (not otherwise defined, however, in our understanding being flight termination systems) and the provision of vouchers to support the participation of space operators in coaching programmes aimed at offsetting part of the costs incurred in the implementation of the requirement to calculate the ecological footprint of a space activity (Article 109(3)). 

According to the current wording of the EUSA draft, these co-funding and funding opportunities are offered irrespective of operator size.

Notably for SMEs and small mid-caps, but not exclusively, the European Commission is also asked to facilitate access to the “threat-led penetration testing” (TLPT) referred to in Article 88(3), first subparagraph, by mapping the availability of such testing services in the Union and by developing frameworks to ensure fast and affordable access (Article 109(4)).

V. Union Space Label Framework

For space operators that voluntarily intend to meet higher requirements on safety, resilience and environmental sustainability than those laid down in the EUSA, a Union Space Label shall be established by the European Commission (Article 111).

Labelling schemes are foreseen to be available for basically everything the EUSA covers (Article 111(2)(a-g):

• Limiting the risks associated to space debris
• Improving the safety and sustainability of space objects in orbit, the safety of aircraft in flight, or the safety of persons and property on ground when carrying out space activities
• Reducing the light pollution of spacecraft
• Reducing the radio pollution of spacecraft
• Safeguarding the resilience of space infrastructure, as regards critical assets and the resilience of the supply chain
• Enabling of in-space operations and services
• Reducing the environmental impacts of carrying out space activities

However, the precise criteria for these schemes will still need to be defined in future, additional implementing acts of the European Commission.

An application for the label is to be lodged with the EUSPA, which is expected to immediately inform the European Commission thereof (Article 112(1)). The European Commission will decide, by implementing acts, whether the label will be awarded (Article 112(3)).

The label is currently primarily intended for advertising purposes, but in the future, it is expected “…to be “used” in national procurement procedures” (cf. Article 109(1)(a)(i)). This appears to expect that European and national procurement processes will honour the label. The exact criteria and results are also missing here.

According to Recital 129, the EUSPA, through public consultations, is requested to evaluate any likely impact on the market, especially potential impacts on SMEs and small mid-caps, when it receives a request of the European Commission to develop a labelling scheme, with special consideration given to smaller enterprises.

VI. Indirect Effects

Where a space operator is not a small-sized enterprise, but its supplier is, the operator must, by contractual obligation, require that the supplier provide all necessary data for calculating the environmental footprint (Article 96(3)).

As a result, small-sized enterprises may factually fall within the scope of the draft European Union Space Act’s (EUSA) sustainability provisions, notwithstanding the exemptions explicitly granted to them if they would be the prime.

The same principle applies mutatis mutandis to the relevant supply chain provisions relating to safety (Article 74) and resilience (Article 92). In each of these cases, small-sized enterprises acting as suppliers to space operators may be required to fulfil obligations that would not apply if they were themselves the operators. Or in other words, the relevant Prime must require a company which is a supplier to provide certain info which the same company would not be required to provide, if that company would be the Prime.

This appears to create a Wertungswiderspruch, i. e. a contradiction in the regulatory framework, whereby small-sized enterprises incur burdens inconsistent with the exemptions intended to relieve them from such obligations. It remains unclear whether this outcome is intentional or the result of legislative oversight. 

VII. Conclusion and Assessment

The EUSA introduces strict and detailed regulation of space-related activities. As feared by some stakeholders, it sets out detailed requirements that will undoubtedly be an – at least – initial burden for the entire industry and value chain, particularly for SMEs. 

As countermeasure and in response to concerns raised not only by private stakeholders but also by institutions and member states, the draft EUSA incorporates the aforementioned provisions aimed at mitigating negative impacts for stakeholders. 

Whether these measures will be sufficient to offset the compliance pressure remains highly uncertain. The success of the EUSA will, irrespective of this, depend not only on the clarity and coherence of the legal framework, but also on its ability to enable innovation without imposing barriers to entry or growth and, above all, prevent bureaucratic burdens and long waiting periods. If the EUSA kills off innovation and development in relation to space, it may not be needed at all.

1. Initial Critic from Stakeholders

Detailed recommendation from stakeholders, beyond the (required) political  perspectives remains scarce so far. Besides the question of competence, the following – very condensed - critic points were specifically put forward:

• additional cost and new bureaucratic burdens limiting the agility of space stakeholders
• unclear scope for “dual-use” and “defence”
• lack of proportionality of the introduced requirements compared to the goals
• negative effects on innovation development
• complexity of authorisation and compliance mechanics
• lack of concrete ideas for fostering innovation
• no use of regulatory sandboxes for protection of Innovation
• lack of market facilitation (Anchor Customer)
• complex application for non-EU stakeholders without connection and adjustment for international partnerships, in particular regarding national security
• lack of (funding) support; and
• overly long transition periods.

2. Homework

In addition to the visible “micro-problems” of unclear definitions and some imprecise wording, the following issues should in our view be addressed in a next iteration of the draft EUSA:

a) Downgrading the level of detail: While the very details of certain technical requirements are missing, the EUSA often appears to prescribe specific solutions rather than setting broader objectives without much room for deviation. It is whether such an approach can work in an environment of expected rapid innovation with a transition period of more than four years, and it risks contradicting the very idea of innovation. In our opinion, requirements should focus on goals and outcomes rather than prescribing detailed solutions where possible. It appears to be central to discuss a much wider application of the “light regimes” or “regulatory sandbox schemes, as already proposed in a very recent view on the EUSA in a publication focussing strongly on the Durch perspective).

b) Binding Character / Policy Solutions: The EUSA foresees binding regulation regarding safety and resilience, and partly for sustainability. Given the many uncertainties in these areas, it should be considered whether certain requirements should initially remain non-binding for a longer period. Incentive and meaningful reward structures, combined with, indeed, “regulatory sandbox” regimes and a more specified label structure, could provide an effective framework for innovation and for addressing evolving technical solutions; at least as exemptions from certain requirements.

c) Scope of Addressees: Generally, all stakeholders are hit by the new requirements. However, SMEs will be disproportionately challenged in managing the complexity internally, even if funding were available. In line with the discussions in other regulatory fields (e.g. ESG and Supply Chain Regulation), the EUSA requirements should not begin with Mid-sized companies but rather with larger entities and should only include small and mid-sized companies in certain justified cases.    

d) (Innovation) Exemptions and Easements / Regulatory Sandbox: The area of exemptions and emergency easements should be reviewed and likely be broadened. Besides the obvious problem, that derogations and emergency exemptions appear to focus on third country stakeholders, a general derogation / exemption system for innovative technologies appears to be missing. As it was only recently proposed in a most recent contribution (see above) , the usage of “regulatory sandboxes”, could relax the burden for innovative technologies and its operators. For comparison, the EU AI regulation made use of this mechanic and even the cornerstones of a future German Space Law from 2024 under the former German Government envisaged exemptions in cases of innovation.

e) Review of EU and National Capabilities and Budget Effects: The EUSA places significant new responsibilities on the EUSPA and on the national authorities. It is difficult to assess whether these structures will be fully functional by 1 January 2030 on EU level and above all on the level of all member-states. We believe, that not all member states will be able to do that and would assume, because of the scale of the new responsibilities, the burden to manage and execute, not even talking about to facilitate and support, will be enormous. Functioning of the system, however, is the most important precondition for reaching the goals of the EUSA. “Downsizing” the requirements is one way to “help”.

f) Administrative Costs of EUSA / Burden on the regular Space Budgets: It must be ensured that the additional administrative costs created by the EUSA and in the member states, do not eat into existing or planned “real” space budgets on EU and national level. It appears very likely that exactly this will happen.

g) Procedures and timelines: The EUSA provides for a maximum timeline of a full 12 months for national authorities to decide on authorisation applications. This appears unnecessarily long, and exceeds maximum timelines foreseen in many national regimes. Moreover, this period only begins once all additional inquiries have been satisfied, which further extends delays. A timeline could instead begin at the point of application, with a shorter period applying where no inquiries are issued within an initial short window. In addition, authorisation should be deemed to have been granted after a certain (shortened) timeline has lapsed. Regulation regarding, for instance merger control or FDI regimes in certain countries could be an example. If operators are expected to adapt to new requirements, authorities should also be required to act within clear deadlines. This, however, circles back to the required capabilities.

h) Market Facilitation, Procurement / Anchor Customer: To regulate and to limit before there is a real and sustainably prospering market is forward-looking, but may be seen doubtful from the perspective of private stakeholders. If the aim is to further the EU capabilities, then the build-up of such capabilities should be the center of the Space Package. The EUSA itself does not provide meaningful market facilitation measures, aside from the prospect that an EU label may gain importance in procurement processes. However, additional measures appear necessary, to be detailed in the “Vision for a European Space Economy” and accompanying instruments. Such measures should include a much stronger focus on anchor customer measures and, if necessary, adjustments to procurement laws as part of an overall space package. A strong Space Package should focus on this.

i) Tiered Compliance: Further proposals to improve EUSA include the introduction of tiered compliance requirements proportionate to the size and risk profile of the operator, ensuring that smaller entities are not subject to the same level of regulatory complexity as larger operators and that the risk profile of a mission should be focussed on more Additionally, a review of the fees associated with Conformity Assessment (CA) services should be undertaken. Reduced fees or fee waivers for SMEs and startups could significantly alleviate financial burdens, enabling these enterprises to invest more in innovation and growth. Alternatively, the EU might consider establishing funding mechanisms to subsidize or cover CA service fees for smaller companies, thereby fostering a more inclusive and competitive space industry.

j) Funding for additional costs: More specific measures need to be detailed regarding funding support and co-support. This could also be vouchers, for instance, for support by external expertise. To this end, if the “Vision for a European Space Economy”, is intended to provide part of this support, it should be fleshed out in greater detail, and the EU Space Act should be embedded within this broader space package.

In sum, for the EUSA to achieve its ambition of fostering a sustainable, safe, and resilient but still internationally competitive space sector, the regulatory framework must be flexible and supportive of industry, SMEs, startups and innovation. Well-functioning and clear mechanics, practical timelines, tailored regulatory relief, voluntary sustainability pathways, and – yes – tailored financial incentives will be key to ensuring that vital contributions to innovation are not unduly encumbered but rather empowered to thrive within the evolving European space ecosystem. The Space Package as a whole should be developed into a balanced package regarding protection and facilitation.

This publication has been prepared in in cooperation with Attorney at Law Daniel Budke.