An economic analysis of the legal liabilities of GNSS

GNSS (Global Navigation Satellite System) technology is widely used presently and many private as well as national actors are entering the market. While national actors-such as the United States in the case of GPS-are generally exempted from both tort and contractual liability, private actors, such as Galileo in the EU and QZSS in Japan, are generally not immune from liability. In order to enhance private GNSS businesses, there is an international debate as to whether it is necessary to set up a new treaty on the liability of GNSS managers. This paper provides a basic economic analysis of the legal liabilities of the various parties. While the international debate focuses on the strict liability of GNSS managers and the exclusive channeling of liability, this paper argues against these ideas. It is well known in the literature that strict liability schemes are desirable in unilateral care cases, while negligence liability schemes are desirable in bilateral care cases. Since most of the cases in which GNSSs raise liability issues involve bilateral care in the sense that GNSS receiver makers and consumers, as well as GNSS managers, need to engage in precautionary behavior, it is socially optimal to adopt negligence-based liability schemes in general. Strict liability schemes would cause insufficient precaution on the part of GNSS receiver makers and consumers and would result in increasing the number of GNSS-caused accidents. In contrast, negligence liability schemes would provoke effective precautionary behavior on the part of GNSS receiver makers and consumers as well as GNSS managers and would thus deter GNSS-caused accidents efficiently.