Sea Launch Ordered to Pay HNS $52 Million

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PARIS — An arbitration panel has ordered Sea Launch Co. to pay Hughes Network Systems (HNS) about $52 million in a dispute over whether HNS had a right to terminate a launch contract and demand a full refund of its prelaunch payments, according to an April 22 Boeing Co. submission to the U.S. Securities and Exchange Commission (SEC).

“The terms of the payment of the award are still being discussed,” Chicago-based Boeing said, without naming HNS.

Germantown, Md.-based HNS in mid-2007 asked the American Arbitration Association to force Sea Launch to refund $44.4 million in advance payments made to Sea Launch to prepare to place HNS’s Spaceway 3 Ka-band broadband satellite into orbit.

Sea Launch, whose January 2007 on-pad launch failure forced all its customers to seek alternatives or suffer delays, argued that HNS canceled its contract before it was allowed to under the terms of the deal.

In an August 2007 SEC filing, HNS said Sea Launch’s position represented a “breach of contract and a violation of the California statute prohibiting unlawful and unfair business practices.” Sea Launch is based in Long Beach, Calif.

Before its January 2007 failure, Sea Launch had manifested Spaceway 3 for a May 2007 launch. HNS subsequently negotiated a separate contract with the Arianespace launch consortium of Evry, France, which placed Spaceway 3 into orbit Aug. 14 of that year.

Sea Launch returned to flight in January 2008.

Sea Launch officials had said before the Arianespace launch that they learned of HNS’s decision to switch vendors only from press reports, and that HNS had delayed sending a formal contract-termination notice to Sea Launch.

Most commercial satellite-launch contracts permit customers to terminate the deals and receive a refund of advance payments only after a specified amount of time has passed, or is expected to pass, after their scheduled launch date.

It is unclear whether the Sea Launch-HNS contract for Spaceway 3 included such a specific date. Sea Launch officials could not immediately be reached for comment April 23.