Sea Launch Breach of Contract Suit Filed by Boeing
On the day after a failed launch attempt, Boeing Co. and subsidiary Boeing Commercial Space Company filed a $355 million breach of contract suit against its overseas partners in connection with the troubled Sea Launch project.
Sea Launch utilizes a mobile sea platform, which can be maneuvered along the Pacific Ocean equator. The goal is to position the platform at the most geographically desirable launch point for the particular spacecraft’s flight plan, orbit, etc. This, the owners claim, results in higher payload capacity and reduced costs.
According to Boeing’s Complaint, Sea Launch has made 30 launches or attempted launches since 1999. The most recent occurred on January 31, 2013 (the day before the suit was filed).
The defendants to the suit include (1) Yuzhnoye (a Ukranian aerospace design company, wholly owned by the State of Ukraine), (2) Energia (a Russian manufacturer of spacecraft and space station components, of which the primary owner is the Russian Federation) and (3) two companies allegedly owned or controlled by Energia.
The suit, filed in federal court in Los Angeles, claims that Boeing, in 1995, agreed to enter into the joint venture with the international partners. Boeing claims that it financed the project, and that the defendants contractually agreed to repay it if the project failed.
Boeing alleges that “Sea Launch failed”, due to “weakness in the demand for commercial satellite launches, unexpected cost increases, operational losses, mounting debt, increased competition among commercial satellite launch providers, and a launch failure which led to a $53.2 million arbitration award against Sea Launch”. These events, it claims, led to a 2009 bankruptcy declaration by the venture.
The suit goes on to claim that Yuzhnoye and Ernegia failed to repay the $350 million they allegedly owe Boeing as a result of the failure.
The suit suggests that the defendants have never denied their obligation to repay the money, but have instead focused their efforts on evading payment, arbitration proceedings and the jurisdiction of the courts. Boeing claims that the defendants’ strategy is to “stall and evade, forcing Plaintiffs to chase them around the world to secure payment of debts clearly owed”.
If Boeing’s characterization is true, expect the defendants to focus their efforts on evading the suit. I would expect them to claim that, as quasi-governmental entities, they are immune from suit, though Boeing claims they signed away their immunity in the Sea Launch contracts. Or, they may claim that the United States’ court has no jurisdiction over them. They will likely evade, or attempt to fight, service of the suit on them. In other words, if Boeing is correct, the foreign companies’ defense will be more “you can’t get us” than “we don’t owe you”.