Dividing up the spoils
by Sam Dinkin
|There are interesting law and economics questions about who should get the spoils when a ship goes bad.|
Under Article VIII of the Outer Space Treaty, countries retain authority and control over their nationals’ spacecraft. Once there are private parties rocketing around the cosmos, expect that to change. There are likely to be spaceships flying flags of convenience even if they don’t flutter much. When spaceship operators go bad and start smuggling contraband, stealing each other’s ships, not paying landing fees, and other mundane crimes, the ships will have to be seized. Expect nations to waive their sovereignty in criminal and civil cases for civilian ships so that the US Marshals or other enforcers can keep space safe for commerce.
There are interesting law and economics questions about who should get the spoils when a ship goes bad. Banks will argue that the only way for expensive spaceships to get built is for banks to be at the head of the line for any recovery. Lois McMaster Bujold tackles this question when Miles Vorkosigan’s privateers seize a spaceship after defeating it in battle. Unfortunately, there is little equity left for them after the bank gets its share.
If banks take too much of the pie, there is little incentive for anyone else to help the banks out. Partly for this reason, admiralty law puts repairs, salvage costs, and crew salaries ahead of what the banks get. It would be hard to get a crew to lift a finger after the ship was seized otherwise. With no one to operate the ship, law enforcement and banks would be in trouble.
Banks also need to be deterred from lending to pirates. Perhaps the banks should only get their principal or 80% of the principal. Perhaps they should get no more than 80% of the auction price if that is lower. That would still leave enough fiscal security for the banks so that they would be protected mostly, but not so completely that they succumb to moral hazard.
The courts would argue that court costs should certainly be paid first. During the great sea wars of the Napoleonic era, the admiralty court in Malta was criticized for taking court costs off the top and leaving sailors little. This is how bankruptcy law works too. This court take should be limited. Perhaps only the first 10% of the sale should go first to the court so that the court costs don’t go too high. If it becomes too big a revenue source, seizures will be overly enforced and both questionable and legitimate commerce will be hampered. If enforcement operations are financed out of seizures, that can be an amplifying feedback loop leading to everything being seized and tyranny. One way to prevent such an outcome is to have two or more competing courts, sort of like how the Department of Justice and Federal Trade Commission take turns prosecuting anti-trust cases. If there were four or five courts competent to hear such cases, perhaps they should have to bid for which will hear the case. Competition would keep the court prices from getting out of hand.
Law enforcement officials would argue that punishment and deterrence is what is critical. It might want to seize and keep 100% of a smuggling spaceship owned by a husband and wife jointly even if the husband is the smuggler and the wife has no control over the ship. This is parallel to a 1997 US Supreme Court case where a couple’s car is seized. We need space pirate ship owners (and rental truck owners) to feel at least some of the pain when they give a loan or a rental to someone who commits a crime. They might then go the extra kilometer to monitor and deter crime from occurring on their vehicle. If rental trucks were seized for speeding, technology would quickly evolve so that it would become very hard to speed in a truck. If car companies were sued for the shrapnel potential if their car is exploded, cars would become less useful as grenades over time.
|The legal uncertainty of having no seizure law is worse for commerce than a suboptimal law.|
Punishing non-perpetrators for something would have civil libertarians up in arms. The Israeli policy of knocking down houses of the families of bombers may be effective in getting families to inform authorities of potential bombing plots, but that has to be weighed against the likelihood of creating additional animosity amongst owners, neighbors and observers for a perceived injustice. If there are ultimately more bombings as a result, the policy is a failure. Even if such a policy were perfectly effective, at some point the means are not justified by the ends.
All of these competing interests should start haggling and pro-commercialization governments should provide a forum. The legal uncertainty of having no seizure law is worse for commerce than a suboptimal law. Let’s put one together well in advance of the first seizure. The competing interests will shape a law that reflects the strength of their arguments and the size of the budgets that they commit to lobbying. What ultimately results will enable commerce even if it does not optimize the tradeoff between deterrence and investment.
For the space admiralty court, I recommend that it not award enough of the proceeds of a seizure to a government to allow it to completely recover its costs for the seizure, or it may become tyrannical and grow without bound seizing everything in sight. I recommend that it not provide unlimited court and lawyer costs. I recommend that it not let those in control off too lightly and not let the owners off too lightly either. Expert witness economists like me, of course, should be paid in full off the top.