ICLE Comments to U.S. Departments of State and Commerce on the EU Space Act
I. Executive Summary
The purpose of this submission is to provide a law and economics assessment of the EU Space Act and its implications for U.S. competitiveness, innovation, and trade policy. As telecommunications experts with a particular interest in the next generation of satellite connectivity, we approach this issue with both technical and economic expertise. Our work focuses on the economic structure of regulation, and we are particularly attentive to the ways in which poorly integrated economic reasoning in regulatory decision-making can produce distortions that undermine both market efficiency and long-term innovation.
Our analysis concludes that the EU Space Act functions as a nontariff barrier (NTB) under World Trade Organization principles. In design and effect, it selectively targets U.S. large-constellation operators, imposing compliance burdens that are not proportionate to any demonstrated safety or sustainability benefits. The regulation’s structure and procedural mechanisms—most notably its size-based “giga-constellation” threshold, dual-track registration process, and extraterritorial inspection provisions—create discriminatory market-access barriers. These provisions are likely to harm both U.S. and EU economic welfare, slow the pace of innovation in the sector, and shift market share toward geopolitical competitors whose strategic objectives may run counter to transatlantic security interests.
In light of these findings, we recommend that the U.S. government treat the EU Space Act’s discriminatory provisions as nontariff barriers in trade negotiations with the European Union and, where appropriate, pursue remedies through the WTO Technical Barriers to Trade framework. At a minimum, U.S. policy should press for alignment of the EU Space Act with established international orbital safety standards, including those developed by the International Standards Organization, the Inter-Agency Space Debris Coordination Committee, NASA, and the Federal Communications Commission. Such alignment would reduce the risk of market fragmentation, provide regulatory certainty, and ensure that safety objectives are met without imposing unnecessary and discriminatory costs on foreign operators.
II. High Level Concerns with the EU Space Act
The EU Space Act’s central structural feature is the introduction of a “giga-constellation” category, defined as any satellite constellation comprising more than 1,000 operational satellites.[1] This size threshold is not grounded in an evidence-based assessment of orbital risk or debris mitigation; rather, it is seemingly tailored to capture only the largest U.S. operators, while exempting all foreseeable EU systems. For example, the EU’s own IRIS² program is projected to contain around 264 satellites,[2] well below the threshold, ensuring that its operators will be spared the most onerous requirements.
The Act also creates a dual-track registration process that imposes additional procedural and substantive burdens on non-EU operators. EU-based firms register through the competent authority of an individual member state, subject to harmonized but nationally administered requirements.[3] Non-EU operators, however, must undergo review by a Compliance Board housed within the European Union Agency for the Space Programme (EUSPA) before their registration can proceed to the European Commission for a final decision.[4] This is not a neutral administrative arrangement: EUSPA is itself slated to operate EU constellations that will directly compete with U.S. operators,[5] raising a significant conflict of interest.[6] The combination of heightened procedural burdens and review by a market participant creates both delay and the potential for discriminatory outcomes.
Curiously, the EU Space Act also authorizes the European Commission to request inspections of non-EU operators’ facilities located outside the Union as a condition of market access.[7] Such inspections could conflict directly with U.S. export control laws, including the International Traffic in Arms Regulations (ITAR), which restricts the sharing of certain technical data and access to controlled facilities.[8] Even if nominally voluntary, these inspection powers create the risk that denial of access would be used as grounds to withhold licensing, thereby coercing compliance in ways incompatible with U.S. law and security policy. Thus, in effect, these inspection provisions could operate as a poison pill—a built-in condition that makes lawful compliance by U.S. firms impossible under existing U.S. export control laws, thereby excluding them from the EU market.
In addition, the Act defers numerous substantive technical requirements to future Implementing Acts (IAs).[9] This legislative structure deprives non-EU operators of regulatory certainty, leaving critical compliance obligations—including debris-mitigation criteria, reflectivity standards, and operational procedures—undefined until potentially just months before the rules take effect. Such open-ended delegation allows for selective imposition of burdens that can be crafted to fit emerging EU industrial-policy goals, rather than neutral safety objectives.
III. The EU Space Act as a Nontariff Barrier
Critically, in both design and effect, the EU Space Act meets the definition of a nontariff barrier (NTB) under World Trade Organization principles and the Technical Barriers to Trade (TBT) Agreement.[10] The TBT Agreement recognizes that technical regulations can constitute trade barriers when they create unnecessary obstacles to international commerce, particularly if they deviate from relevant international standards without a clear scientific basis.[11] The EU Space Act’s size-based obligations, dual-track registration process, and extraterritorial inspection regime are not calibrated to achieve demonstrably superior safety outcomes. Instead, they disproportionately restrict market access for foreign — specifically U.S. — operators while insulating EU competitors. This combination of discriminatory scope, procedurally burdensome market-entry requirements, and absence of proportional justification is the hallmark of an NTB.
From a static economic perspective, the EU Space Act’s compliance structure will raise costs, distort allocation of resources, and limit consumer options within the EU. Additional compliance costs imposed on non-EU operators are likely to be passed on to customers in the form of higher prices or slower service rollout, thereby reducing output and leaving mutually beneficial transactions unrealized. By deterring or excluding the largest foreign providers, the Act diminishes the diversity of service offerings available to EU consumers and governments, constraining competition on quality, price, and coverage. Shielding less efficient EU operators from the full force of competition further misallocates capital, talent, and spectrum, allowing these resources to remain in less productive uses rather than being deployed where they would generate the greatest value. These effects replicate the inefficiencies observed in other regulated sectors where NTBs have been used to protect domestic incumbents.
The longer-term, dynamic harms are likely to be even more significant. In innovation-driven markets such as satellite constellations, regulatory design has an outsized influence on investment incentives and the rate of technological diffusion. By deferring critical technical requirements to IAs that may not be issued until 2028 or 2029, the EU Space Act injects substantial regulatory uncertainty into capital-intensive, multi-year constellation projects. Standard “real options” reasoning predicts that firms will delay or scale back irreversible investments until regulatory obligations are clear, slowing the introduction of new capacity and capabilities. Moreover, the EU Space Act’s departure from established global debris-mitigation and operational-safety standards undermines the benefits of international convergence on proven best practices. Rather than reinforcing interoperability and enabling the widespread adoption of technical improvements, the Act risks creating a parallel compliance regime that fragments markets, discourages interoperability, and limits the spillover of innovation across jurisdictions.
A. The Economic Structure of Regulatory Barriers
Economics identifies several mechanisms through which regulations can function as trade barriers. In particular, compliance costs function as fixed entry barriers that disproportionately affect firms seeking to enter a new market. Research by Baldwin and Krugman on strategic trade policy demonstrates how regulations requiring market-specific investments can deter entry by raising the minimum efficient scale needed to profitably serve that market.[12]
An examination of the EU Space Act’s chosen legal basis—Article 114 of the Treaty on the Functioning of the European Union (TFEU)—reveals that its primary objective is the “establishment and functioning of the internal market.”[13] The Act explicitly avoids using Article 189 TFEU, the legal basis for space policy, because that article prohibits the harmonization of national laws.[14] The stated rationale is to prevent “fragmentation of the internal market” and enhance the “competitiveness of the Union space industry.”[15] This legal framing is telling—it demonstrates that the principal driver of the legislation is industrial policy and market integration, not a response to an external safety imperative that requires a novel, EU-specific regime. The safety, resilience, and sustainability objectives, while laudable, are thus positioned as instruments to achieve the primary goal of constructing and protecting the EU’s internal market. This context is crucial for understanding the EU Space Act’s protectionist character under the TBT Agreement, which is centrally concerned with preventing legitimate policy objectives from being used as a pretext for distorting trade.[16] In contrast, the EU Space Act’s bespoke technical requirements force non-EU operators to make EU-specific investments in engineering, legal compliance, and administrative systems that provide no value in other markets.
Moreover, the regulation creates fragmentation costs. When different jurisdictions adopt incompatible technical standards, firms face higher costs to serve multiple markets and lose economies of scale from standardization. Mattoo and Subramanian’s work on regulatory barriers shows how divergent standards can be as trade-restrictive as traditional tariffs, particularly in technology-intensive sectors where interoperability is crucial.[17]
The EU Space Act’s deviation from established international standards exemplifies this problem. By requiring compliance with EU-specific debris mitigation rules, collision avoidance protocols, and reporting requirements that differ from those developed by international bodies like the IADC and ISO, the regulation forces operators to maintain parallel compliance systems. This fragmentation reduces the economic benefits of global standardization and creates ongoing operational complexity.
B. Market Structure Effects and Competitive Distortions
The discriminatory impact of the EU Space Act’s size-based thresholds becomes particularly clear when analyzed through the lens of market structure economics. The 1,000-satellite threshold for “giga-constellation” obligations creates selective burden that targets only the most capable competitors in the satellite communications market. In contrast, IADC, UN, and ISO standards do not contain specific, tiered requirements based on arbitrary satellite counts. Instead, risk is assessed based on operational parameters and orbital environment, not a numerical threshold.
Current market data shows that this threshold applies almost exclusively to U.S. operators. SpaceX’s Starlink system currently operates nearly 8,100 satellites,[18] while Amazon’s Project Kuiper plans a constellation of over 3,000 satellites.[19] Most EU-based satellite operators, by contrast, operate much smaller systems that fall below the threshold. This creates a regulatory structure that systematically advantages smaller, primarily European operators while imposing additional costs on their must larger—and possibly more efficient—competitors.
From an industrial organization perspective, this represents a classic case of using regulation to alter competitive dynamics. The economic literature on strategic trade policy shows how governments can use selective regulations to shift profits from foreign to domestic firms. For example, Brander and Spencer demonstrated that governments could raise their national incomes at other countries’ expense by supporting national firms in international competition.[20] The EU Space Act’s structure follows this pattern by imposing higher costs on the most successful foreign competitors while leaving domestic firms largely unaffected.
In short, the EU Space Act’s “giga-constellation” category is a unilateral EU invention with no basis in international technical standards. Its creation is prima facie evidence of a regulation designed to target specific operators, rather than to address a scientifically defined risk category recognized by the international community.
C. The Economics of Regulatory Uncertainty
A significant—and largely unacknowledged—economic harm from the EU Space Act stems from the regulatory uncertainty it creates. Modern finance theory, particularly real options analysis pioneered by Dixit and Pindyck, provides a framework for understanding how regulatory uncertainty affects investment decisions in capital-intensive industries.[21]
Real options theory shows that when firms face irreversible investments under uncertainty, they have strong incentives to delay commitment until uncertainty is resolved. This is particularly relevant for satellite constellations, which require massive upfront capital expenditures with long payback periods. The value of the “option to wait” increases with the level of uncertainty, meaning that high regulatory uncertainty can significantly reduce or eliminate the incentive to invest.
Privately-owned operators launch satellites because they anticipate that it would be profitable to do so. By increasing regulatory uncertainty, the EU Space Act increases the uncertainty of profit projections and reduces operators’ confidence in their reliability. Because of the well-known and widely accepted risk-return tradeoff, firms facing increased uncertainty in investment returns (i.e., risk) will demand higher expected returns.[22] To achieve higher returns operators may launch fewer satellites or increase prices to generate higher revenues. The result would be some combination of reduced service quality and higher prices for consumers.
The EU Space Act creates several layers of regulatory uncertainty for non-EU operators. Critical technical requirements are deferred to future IAs that may not be issued until 2028 or 2029. These include fundamental operational parameters like orbital lifetime limits, specific debris mitigation procedures, and detailed collision avoidance requirements. For firms planning multi-year constellation deployments, this uncertainty makes it nearly impossible to calculate expected compliance costs or assess the viability of serving the EU market.
Academic research on regulatory uncertainty supports this concern. Studies by Baker, Bloom, and Davis demonstrate that policy uncertainty significantly reduces private investment, particularly in sectors requiring long-term capital commitments.[23] Their findings show that uncertainty about future regulatory requirements can be as damaging to investment as actual regulatory burdens, because firms postpone irreversible decisions until the regulatory environment stabilizes. Earlier this year the OECD identified “reducing policy uncertainty” as a “key” factor to “reinvigorate investment.”[24]
D. Structural Conflict of Interest and Regulatory Capture
The competitive harms of the EU Space Act are compounded by a structural conflict of interest that creates a clear pathway for regulatory capture. The EU Space Act tasks EUSPA with significant regulatory and technical assessment functions, including the critical role of assessing third-country operators for registration. Simultaneously, Article 64 mandates that all operators subscribe to the collision avoidance (CA) service provided by the Union’s designated entity, the EU Space Surveillance and Tracking (EU-SST) partnership, which EUSPA oversees and integrates.
This arrangement places EUSPA in a dual role as both a regulator and a de facto market participant (or the overseer of a mandated participant). This lays the groundwork for regulatory capture, where the regulator has an inherent incentive to shape technical rules and registration requirements in a way that favors its own operational systems and disadvantages competitors.[25] For instance, EUSPA could advise the Commission to adopt IAs that define data formats or interoperability standards for collision avoidance that are native to the EU-SST system but are technically complex and costly for U.S. operators to adopt.
The CA service provisions of the EU Space Act raise several fundamental questions regarding competition and conflict of interest. First, the provision create a mandatory relationship between competitors and an EU-controlled entity, potentially allowing that entity to gather competitively sensitive information about foreign operators’ plans and capabilities. Second, it eliminates competition in collision avoidance services within the EU market, reducing innovation incentives and potentially leading to higher costs and lower service quality.
The combination of regulatory uncertainty and structural conflict of interest creates a powerful barrier. U.S. firms are not just facing unknown future rules; they are facing unknown future rules that will be developed with input from an entity that has an interest in disadvantaging them. From an investor’s perspective, this transforms the problem from one of managing technical uncertainty to one of managing strategic, political, and competitive risk. There is no guarantee that the range of possible outcomes for the implementing acts will be neutral longer neutral. In contrast, regulators will be under enormous pressure to favor EU systems. This amplified uncertainty dramatically increases the option value of waiting discussed above, creating a uniquely hostile investment environment that will strongly deter non-EU firms from committing the capital necessary to serve the EU market.
IV. Recommendations & Conclusion
By selectively excluding or burdening the largest U.S. satellite operators, the EU Space Act risks creating a vacuum in the European market that could be readily filled by Chinese providers. Such a shift would not only erode U.S. market share but also undermine transatlantic security interests by expanding the footprint of PRC-controlled infrastructure in critical space-based communications and observation systems. The Act also sets a troubling regulatory precedent: if the EU succeeds in deploying a discriminatory framework without facing trade or diplomatic pushback, other jurisdictions may adopt similar nontariff barriers, producing a fragmented global regulatory environment that increases compliance costs and further constrains market access for U.S. firms. Finally, these measures jeopardize existing and future U.S.–EU industrial cooperation. In this way, the EU Space Act not only harms U.S. competitiveness but also diminishes the economic gains Europe itself would otherwise realize from open transatlantic participation in the space economy.
To address these risks, the U.S. government should presumptively treat the discriminatory provisions of the EU Space Act as nontariff barriers in relevant trade negotiations. A core objective should be regulatory alignment: the United States should press for incorporation of established orbital safety standards—such as those developed by the International Standards Organization, the Inter-Agency Space Debris Coordination Committee, NASA, and the FCC—directly into the EUSA text to ensure consistency and predictability. At the same time, market-access safeguards are essential. Reciprocity in registration and inspection processes must be secured, and the EU Agency for the Space Programme should not be permitted to regulate direct competitors in ways that create conflicts of interest.
In parallel, U.S. agencies should monitor the potential spillover of this regulatory model to other jurisdictions, coordinating with allies and industry to develop responses that prevent the proliferation of similarly protectionist frameworks. The EU Space Act is not simply a space safety initiative; it is a clear example of a nontariff barrier with significant economic and strategic costs. For these reasons, the Departments of State and Commerce should treat it not only as a technical regulation, but as a combined trade and competitiveness challenge that warrants coordinated diplomatic, legal, and economic action.
[1] Proposal for a Regulation of the European Parliament and of the Council on the Safety, Resilience and Sustainability of Space Activities in the Union, 2025/0335 (COD) (Jun. 25, 2025) at Art. 5 [hereinafter “EU Space Act”].
Jean-Pierre Diris, IRIS2: Everything You Need to Know About This New European Constellation, Polytechnique Insights (Mar. 11, 2025), https://www.polytechnique-insights.com/en/columns/industry/iris2-everything-you-need-to-know-about-this-new-european-constellation.
[3] EU Space Act at Arts. 6,7, and 9.
[4] Id., at Art. 17.
[5] See IRIS²: The New EU Secure Satellite Constellation, Eur. Commission Defence Industry & Space, https://defence-industry-space.ec.europa.eu/eu-space/iris2-secure-connectivity_en (last visited Aug. 12, 2025).
[6] For an analogous regulatory structure and its attendant problems see, e.g., Julian Morris, Central Banks and Real-Time Payments: Lessons from Brazil’s Pix, Int’l Ctr. L. & Econ. (2022), https://laweconcenter.org/resources/central-banks-and-real-time-payments-lessons-from-brazils-pix (discussing how Brazil’s state-owned real-time-payment system both directly competes with private-sector financial companies and also directly regulates them, leading to a host of conflicts of interest).
[7] EU Space Act at Arts. 48(4) & 52.
[8] See, e.g., Parts 120(10), 121 Cat. IV(h)(3), 124.1, 127.1.
[9] See EU Space Act Ch. IV(5).
[10] Agreement on Technical Barriers to Trade, World Trade Org. (1995), https://www.wto.org/english/docs_e/legal_e/tbt_e.htm [hereinafter “TBT”].
[11] Id. at Art. 2.
[12] Paul R. Krugman, Import Protection as Export Promotion: International Competition in the Presence of Oligopoly and Economies of Scale, in Imperfect Competition and International Trade (Gene E. Grossman ed., 1992) (demonstrating that, in an oligopolistic market with economies of scale, “giving a domestic firm a privileged position in one market, a country gives it an advantage in scale over foreign rivals.”). Richard Baldwin & Paul Krugman, Market Access and International Competition: A Simulation Study of 16K Random Access Memories, in Empirical Research in Industrial Trade (Robert C. Feenstra ed., 1987) (demonstrating that a protected home market was a crucial advantage to domestic firms, “which would otherwise have been uncompetitive both at home and abroad.”)
[13] EU Space Act at 3.
[14] Id.
[15] Id. at 2, 5, 8, 16, 118.
[16] TBT Agreement, supra note 10 (“measures necessary to ensure the quality of its exports, or for the protection of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices” should “not [be] applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade.”).
[17] See, e.g., Aaditya Mattoo & Arvind Subramanian, Regulatory Autonomy and Multilateral Disciplines: The Dilemma and a Possible Resolution, 1 J. Int’l Econ. L. 303 (1998).
[18] Tereza Pultarova, Starlink Satellites: Facts, Tracking and Impact on Astronomy, Space.com (Aug. 1, 2025), https://www.space.com/spacex-starlink-satellites.html.
[19] Clara Easterday, Amazon Sets April 9 Launch Date for First Operational Kuiper Satellites, Broadband Breakfast (Apr. 3, 2025), https://broadbandbreakfast.com/amazon-sets-april-9-launch-date-for-first-operational-kuiper-satellites.
[20] James A. Brander & Barbara J. Spencer, Export Subsidies and International Market Share Rivalry, 18 J. Int’l. Econ. 83 (1985); James A. Brander & Barbara J. Spencer, International R&D Rivalry and Industrial Strategy, 50 R. Econ. Stud. 707 (1983).
[21] Avinash K. Dixit & Robert S. Pindyck, Expandability, Reversibility, and Optimal Capacity Choice (NBER Working Paper No. 6373, Jan. 1998), available at https://www.nber.org/system/files/working_papers/w6373/w6373.pdf.
[22] See, Edwin J. Elton & Martin J. Gruber, Modern Portfolio Theory and Investment Analysis (4th ed, 1991).
[23] Scott R. Baker, Nicholas Bloom, & Steven J. Davis, Measuring Economic Policy Uncertainty (NBER Working Paper No. 21633, Oct. 2015), available at https://www.policyuncertainty.com/media/BakerBloomDavis.pdf (“policy uncertainty raises stock price volatility and reduces investment and employment in policy-sensitive sectors like defense, healthcare, and infrastructure construction”).
[24] OECD Economic Outlook: Tackling Uncertainty, Reviving Growth, OECD (Jun. 2025), available at https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/06/oecd-economic-outlook-volume-2025-issue-1_1fd979a8/83363382-en.pdf.
[25] See, e.g., Richard A. Posner, The Concept of Regulatory Capture: A Short Inglorious History, in Preventing Regulatory Capture: Special Interest Influence and How to Limit It (Daniel Carpenter & David A. Moss eds., Jun. 2014).