Proceedings of the Workshop - United Nations Office for Outer ...

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136 THE ROLE OF INTERNATIONAL ORGANIZATIONS IN PRIVATIZATIONAND COMMERCIAL USE OF OUTER SPACEAfter this short description of the restructuringprocess of the intergovernmental satellite organizations,it can be said that the new companies stemming from theinternational organizations will not be in a position toaccept the rights and obligations of the SpaceConventions, and it is doubtful whether the remainingintergovernmental organizations with no furtheroperational activity in space would accept any liabilityderiving from acceptance thereof. In the case ofInmarsat Ltd., established under English law, the UnitedKingdom is a Party to the Space Conventions mentionedabove and this is also the case of France and EutelsatS.A. which will be established under French law.Concluding remarksThe intergovernmental satellite organizations have beencreated on the same model and have worked for anumber of years according to the same principles;because of their purposes and of the markets on whichthey operate, they have been faced with the challenge ofadapting their mission and structure to a newenvironment. It is likely that this unprecedented changein intergovernmental organizations will result, even ifthere are many similarities in the restructuring modelswhich have been adopted, in entities with very differentdestinies in the future.Commentary PaperRestructuring of InmarsatMr. David SagarLegal ConsultantInmarsatReasons For Restructuring1 Inmarsat’s restructuring was completed on 15 April1999, when the Inmarsat system was transferred toprivate sector UK-based holding and operatingcompanies (“the Companies”). However, theintergovernmental organization (“IGO”) continuesunder an amended Convention in order to oversee andenforce the continued performance of the GlobalMaritime Distress and Safety System (GMDSS)services and certain other obligations by the Companiesunder a Public Services Agreement.2 Inmarsat was the first of the international satelliteorganizations (ISOs) to privatize but Intelsat andEutelsat are also engaged in similar processes. Thisreport explains why Inmarsat’s Member States felt itnecessary to embark on this privatization and sets outthe main features of the new structure as well asmentioning some of the special corporate, commercialand legal problems which had to be overcome.3 On the initiative of the International MaritimeOrganization (IMO), Governments set up Inmarsat in1979 to utilize space technology for worldwidemaritime communications, especially for safety of lifeat sea. The 1980’s were years of steady growth forInmarsat, with few commercial pressures. Its serviceswere extended to aeronautical and land mobilecommunications, and today there are over 150,000users of the system worldwide.4 From around 1990, however, a combination offactors urged change upon Inmarsat's co-operative andinter-governmental structure, namely:increasing privatization of the telecommunicationsindustry in many countries;the advent of competing satellite systems such asIridium and Globalstar, affecting the risks associatedwith further investment in Inmarsat;a demand by regulators including the EuropeanCommission for wider access to space segment capacityand a demand for removal of privileges and immunities,to create a level playing-field with the competitors;an urgent need for a more normal corporate structure,with limited liability of investors and a small, fiduciaryBoard able take decisions quickly, and raise capitalfrom the financial markets for new systems;
THE ROLE OF INTERNATIONAL ORGANIZATIONS IN PRIVATIZATION 137AND COMMERCIAL USE OF OUTER SPACEthe desire of many of Inmarsat’s owners to maximise thevalue of their investment in the Organization whichcould mainly come about through public trading of theirshares; the owners also wanted to be able to invest on avoluntary basis at levels of their own choosing, insteadof on a mandatory basis in proportion to theirinvestment shares.5 The challenge was how to restructure whileretaining governmental interests. Inmarsat’s Partiesinsisted on guarantees that the Organization’s publicservice obligations would be maintained. In 1996, theEleventh Inmarsat Assembly decided that five BasicPrinciples should underlie any new structure, namely:continued provision of services for the Global MaritimeDistress and Safety System (GMDSS) set up by theInternational Maritime Organization (IMO);non-discriminatory access to services;service to all geographical areas where there is a need,including rural and remote areas;peaceful purposes;fair competition.6 Other Essential Elements of the restructuringincluded continued governmental oversight of the basicprinciples, broad ownership of the corporate entity, andparticipation by developing countries and smallinvestors.7 Over 9 years from 1990, the restructuring processunderwent various phases ranging from proposals tomodify the financial and governance structure to therealization that full scale privatization was necessary forInmarsat's long-term financial viability. It was necessaryto reconcile widely differing policies of its Members,many of which wanted to retain the IGO structure, whileothers would only accept a privatized entity competingequally with other satellite system operators.8 The reluctance of many of Inmarsat’s largeshareholders to invest further in the existing structure ledto the loss of a major satellite handheld communicationsmarket opportunity, known as Inmarsat-P in 1994. Asa result, a separate and independent company, ICOGlobal Communications (ICO), was formed to providesuch services. In 1996, an opportunity for investmentin a global Inmarsat satellite navigation service wasalso declined.The New Structure9 The long restructuring process culminated in thedecisions of the Inmarsat Assembly at its Twelfth andThirteenth Sessions in 1998 which led to theprivatization on 15 April 1999. Wide-rangingamendments to the Inmarsat Convention and OperatingAgreement were adopted to transform the Organization,with the following main features:(i) The Inmarsat assets and business, and its staff,were transferred on 15 April 1999 to a multi-corporatestructure, consisting of a holding Company (InmarsatHoldings Limited) and an operating Company (InmarsatLimited) incorporated under English law, and based inLondon at the same headquarters.(ii) The former Inmarsat Signatories receivedordinary shares in the holding Company in a cash-freeexchange for their previous investment shares. Theyalso have limited liability.(iii) The Companies' objects are to continue toprovide global, regional and domestic satellite services,especially maritime, aeronautical and land mobilecommercial services, and distress and safety andnavigation services.(iv) The Companies have no privileges andimmunities, and have the same status under nationalregulation and in IGOs such as the ITU and the WorldTrade Organization, as any private competitor.(v) There are some special features in the structureof the Companies intended to reflect the varyinginterests of the current membership and the globalscope of Inmarsat’s operations. The fiduciary Boardof Directors of the holding Company will have up to 15members, including shareholder directors, independent
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ST/SPACE/2Office for Outer Space Af
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IntroductionThe Workshop on Space L
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CONCLUSIONS AND PROPOSALS OF THEWOR
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8obstacles that impede ratification
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SESSION ONEExisting United Nations
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EXISTING UNITED NATIONS TREATIES: S
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48low earth orbit. This commercial
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POSSIBLE INTERNATIONAL REGULATORY F
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SESSION EIGHTMaintaining the Space
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MAINTAINING THE SPACE ENVIRONMENT 1
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220Session 3: Wednesday. 21 July. 1
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223Annex IITHIRD UNITED NATIONS CON
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