Autonomous Anonymous
Resistance is futile! Autonomous mobility will soon be among us. Engineers create, and lawyers regulate. I forecast loss and liability allocations from a law and economics standpoint.
Lay of the legal land.
First, to aviation.
In a land not so faraway, and a time not so long ago, aviation was the new frontier. To increase investments into the nascent aviation sector, the Warsaw Convention was introduced in 1929 to limit the liability of airlines for personal injury and property damage. This meant that:
Liability limit: An airline’s liability for (i) passenger death, bodily harm or delay, (ii) baggage loss, damage or delay, and (iii) cargo loss, damage or delay, was limited unless then airline engaged in wilful misconduct
Shifting burden of proof: People claiming against the airline would not have to prove that the airline was negligent. Instead, the airline hade to show that it was not negligent.
Why is this significant? Lets take a step back.
Without the Warsaw Convention, claimants claiming death, bodily harm or baggage loss would have to use the law of tort or contract against the airline. Claims in either tort or contract would place the burden on the claimant to prove either that the airline was negligent (a claim under tort) or that the airline’s breach of contract caused the loss. Lets call this “Normal Fault Based Rules”.
The Warsaw Convention shifted the burden of proof to the defendant airline (instead of the claimant). Lets call this “presumptive liability” (we will refer to this term later). This makes sense because the airline is the best party to bear the burden of providing evidence that it had complied with all safety regulations and policies. A passenger / claimant would usually be a layman in the aviation space, and would likely find it difficult (or expensive) to prove that the airline had been negligent. In exchange for shifting the burden of proof, the Warsaw Convention therefore implements limits on the amount that can be claimed, therefore achieving the goal of advancing the development of the aviation sector.
Then came the Montreal Convention of 1999 that created a strict liability for airlines for damage up to a maximum threshold amount, while maintaining the “presumptive liability” regime of the Warsaw Convention for claims above that threshold. Strict liability means that liability is not fault based. The airline is automatically liable for any loss suffered under the threshold.
Now, to space.
Commercial space operations are already unmanned, with varying levels of remote piloting and autonomous control. The damage arising from space operations can be of inter-planetary proportions involving space assets of other governments (not consumers or corporates).
A legal solve to this, has been the requirement by the FAA for operators / licensees to provide a financial backstop for the maximum probable loss (“MPL”), either in proven financial reserves, escrow funds or insurance. This is required because the Space Liability Convention 1972 makes any losses arising from a space object the responsibility of the state that launched such space object (broadly based on a strict liablity regime, with nuances - see https://cjil.uchicago.edu/print-archive/closing-liability-loophole-liability-convention-and-future-conflict-space#heading-3 for a thoughtful discussion). This means that the US government is responsible for any losses arising from space objects launched from the US, and therefore any losses exceeding MPL would have to be shouldered by the US government.
What does this mean for autonomous mobility?
If history is anything to go by, governments love transportation. Transportation helps move goods and people around quicker, and is a no brainer improver of the economy. Apart from increasing overall utility for society, it also promotes economic inclusion and access to vital services like healthcare.
The problem with transportation, is that airplanes require pilots, ships require captains and vehicles require drivers and riders. At the same time, the world faces declining populations and inflationary pressures which put pressure on wages and salary, so hiring humans to navigate is now very expensive.
It will not be long before governments encourage the adoption of autonomous mobility. The first applications will be risk managed and deployed:
In sparsely populated areas, or industrial sites or ports, or operating in more dense areas but only on fixed routes
Servicing students or the elderly who may not be able to drive themselves
Where severe weather conditions do not occur frequently, and where the terrain is uniform and flat (although see below on Jeju as a test site, selected due to its climate of heavy rain and snow)
https://www.govtech.com/fs/the-cities-where-autonomous-vehicles-would-be-most-practical.html
https://www.channelnewsasia.com/cna-insider/autonomous-vehicles-driverless-trials-safety-south-korea-singapore-3187291
Bearing these factors in mind, do you see a pattern?
Work with me.
With autonomous mobility, who is best placed to figure out whose fault it was? Manufacturer? Software provider? Traffic control software? Communications provider?
If figuring out whose fault it was is more difficult than human controlled mobility, or if regulators and judges are unable or unlikely to be able to grapple with the technicalities, what tends to happen?
Strict liability at the worst
Shifting the burden of proof to the operator / manufacturer at the best
My opinion is that manufacturers and operators of autonomous vehicles have to be prepared that Normal Fault Based Rules may not apply. All it takes is for a significant human casualty incident to cause regulators to get nervous.
What does this mean?
If you are an investor investing in autonomous mobility, be prepared that any calculations for liability reserves may have to be increased, or mitigated with insurance (which also has a cost).
If you are a manufacturer or operator, be prepared for investors to ask you tough questions on liability reserves.
If you are a player in traffic control or communications for autonomous mobility, be prepared that your customers (the operator or manufacturer) may require assurances or may pass on the risk of loss to you.
This article was inspired by my early-ish education in Law and Economics. My work with investors, financiers and businesses has shown me that economics and finance majors tend to run the show when considering investments in emerging technologies. This leaves a gap where it pertains to getting a sense of where regulation and policy could lead and is where my expertise comes in.
This is why I always recommend studying a situation across different disciplines. When standards are set, people crowd in to follow, often missing important factors of consideration that could have educated their valuation methodology. This is where the opportunity lies to make supernormal profits!