Hyperloop: Critical Considerations
This Article was first published in Premium: The Definitive Middle East Insurance Magazine in May 2017.
Being an innovative and nascent technology, the legal issues and regulatory framework applicable to the Hyperloop are, to some extent, speculative. This article considers some of the potential issues such as intellectual property, investment, the regulatory framework and liabilities.
We understand that the initial concept of the Hyperloop was included in a white paper issued by Elon Musk (Space X/Telsa) in August 2013, who described it as an ‘open-source platform’ available for others to refine. Since then a number of companies have been developing the idea including Hyperloop One, Hyperloop Transportation Technologies (HTT) and Transpod.
Since then a number of applications have been made to patent the technology and it may transpire to be similar to the rush back in the 1980’s to register the magnetic levitation (MagLev) technology behind the Japanese ultra high-speed trains. In fact, we understand HTT has an exclusive licence to use a passive technology from a third party, which they describe as the ‘next generation of MagLev technology’. Whether the IP necessary for the Hyperloop is licensed-in from third parties or developed and registered internally, investors will want assurances that the IP is adequately protected and can’t be exploited without the risk of IP infringement claims.
The cost of Hyperloop from Dubai to Abu Dhabi is estimated to be in the region of USD5 billion. Financial backing for the development of the technology has come in part from both Dubai and Abu Dhabi, although the UAE investment has been split into competing companies:
It was reported that DP World invested USD50 million into Hyperloop One in October 2016 and DP World’s Group chairman and CEO Sultan Ahmed Bin Sulayem was elected to their board; and
Sheikh Falah bin Zayed Al Nahyan signed a partnership agreement with HTT in January 2017 but it is unclear from the reports what level of investment was made. HTT did, however, state that it had enabled the company to surpass USD100 million in total investments around the world.
With the relatively low proposed fares and limited capacity of the pods, some argue that the Hyperloop would need some form of subsidy to run. Whether further investment for these projects will come from private companies or the Government is unclear but the appetite clearly seems to be there either way.
The Hyperloop works by way of a magnetically levitated pod being propelled through a near-vacum tube, which poses the immediate question whether it would fall under any of the existing road, rail or air regulations or would it need a new law/regulator altogether?
Our view is that the Hyperloop would fall within the remit of the Federal Transport Authority – Land & Maritime (FTA) at the federal level and the applicable Emirate regulators such as the Dubai Roads and Transport Authority (RTA) and Abu Dhabi’s Department for Municipality Affairs and Transport (DMAT). According to media reports, in November 2016, Hyperloop One signed a MOU with the RTA for the initial Dubai phase of the project and HTT signed an agreement with DMAT for a potential link between Abu Dhabi and Al Ain.
Although the current laws such as the Executive Regulations of Federal Law No. 9 of 2011 Concerning Land Transport (Land Transport Law) are tailored for more traditional forms of transport (e.g. vehicles, buses, trucks or trailers) there are general definitions which could be deemed wide enough to cover the Hyperloop. The exact laws that will apply will be dictated in part by whether the Hyperloop will be utilised to (i) carry cargo or passengers or both and (ii) transport over land or sea or both.
We believe that the Hyperloop developers would be required by the FTA (and RTA/DMAT as applicable) to follow a similar process to major rail projects in terms of the information required to be submitted e.g. under the Dubai Regulation 5 of 2009 (as amended) on the regulation of railways in the Emirate of Dubai (Railway Regulation). This includes providing conceptual master plans, urban master plans, feasibility studies, traffic impact studies, project studies etc.). We understand initial feasibility studies have already commenced in both Dubai and Abu Dhabi.
The UAE regulators will obviously also need to consider the unique nature of the Hyperloop technology and its interaction with the existing transportation infrastructure such as road, rail, tram, air etc. It is likely that some form of bespoke regulation will be required to deal with this, perhaps similar to the approach taken for regulation of the tram in Dubai.
If the UAE stage of the Hyperloop were successful, the next logical step would be to role it out across the GCC, which would obviously have its own unique regulatory challenges – especially if there are multiple operators in different jurisdictions.
With the speed of travel (up to 1,200 kmph) and the innovative nature of the technology, the potential liabilities for those designing, developing and operating the Hyperloop will be of paramount concern.
One practical option to mitigate these risks may be for the initial phase to be limited to cargo until the technology is stable enough for passenger travel.As with most other forms of transport, other options to mitigate the risks include (i) strict safety regulations (ii) insurance and (iii) contractual terms and conditions.
The FTA is likely to impose strict safety requirements on the operator and will need to work closely with the emergency services to plan how to cover any incidents, which may occur along the Hyperloop. It will certainly raise some interesting new issues such as the speed of emergency stops and what happens in the event of depressurisation.
Also, as required under the existing Land Transport Law, the operator will need to provide the FTA with a copy of the insurance policy covering the systems, cargo, passengers and third party liabilities etc. The insurance industry will no doubt have challenges when assessing the premium.
Finally, there will be the normal contractual arrangements, which will allocate liability and risk between the various parties involved. Any clauses attempting to limit personal injury or death would be subject to the normal UAE Civil Code provisions when it comes to the passengers.
Regardless of which company wins the race to protect the IP and secure the investment, the rollout of the Hyperloop system will certainly create challenges for the operators, regulators (at Emirate, federal and GCC level) and the insurance industry. The Hyperloop is, however, just another form of disruptive transportation technology that the regulators have to continuously monitor to assess whether the laws need updating. Drones and driverless cars are other good recent examples but are a topic in their own right. In the meantime, as lawyers we need to be able to advise how these new forms of technology fit within the matrix of existing laws.