Drone Regulation: A Commercial Perspective

In recent years the commercial use of unmanned aircraft systems or drones has exploded due to their increasing capabilities. Though still regarded by some as gadgets useful for little more than basic surveillance or shooting videos, drones are now used in a variety of commercial applications: land surveyors can map areas more quickly and safely with mapping drones; insurance adjusters can inspect more damaged assets with drones; and farmers can use drones to monitor crops and collect soil data. As drone technology further improves, so will their capacity to transform daily life.

Yet notwithstanding their commercial potential, drones clearly present risks to public safety and personal privacy. Indeed, the popular perception of drones as flying cameras threatening both privacy advocates and manned aircraft has maligned them in the eyes of many members of the public. Such risks have prompted some policy makers to take a conservative regulatory approach by developing rules focusing largely (if not exclusively) on safety considerations.

On the other hand, other jurisdictions seeking to realise the commercial potential of the drone industry are taking steps to unlock it by coming up with regulations that could facilitate the development of new technologies. These policy makers recognise that as the drone market matures, more value will migrate to software that can enhance detect-and-avoid systems, enable autonomous flight, and assist with navigation in areas where no GPS signals are available. For drone companies, streamlined administrative procedures and specific rules governing commercial drone flights could act as a bedrock for testing new technologies or launching new services.

Hong Kong’s own laws regulating drones are mainly based on public safety considerations (perhaps understandable given the city’s high urban density and crowded population centres). However, the existing approval regime for commercial drone flights is cumbersome and may not adequately address commercial realities. Cognizant of this, the Hong Kong Government has in recent years studied regulations in other jurisdictions with an eye towards updating existing laws concerning drone usage. As a result of this review, in December 2017, the Civil Aviation Department (‘CAD‘) proposed a set of revisions designed to better supervise drone flights and reduce the administrative burden for commercial drone operators.

EXISTING DRONE LAWS

Currently all drone owners/operators are governed by the Air Navigation (Hong Kong) Order 1995 (Cap. 488C) (the ‘Order‘). Article 48 of the Order stipulates that no person shall “recklessly or negligently cause or permit an aircraft to endanger any person or property”. Beyond this general prohibition on causing harm to persons or property, commercial drone operators must refer to guidelines published by the CAD concerning the operation of drones weighing more than seven kilograms without fuel (the guidelines can be viewed at: http://www.cad.gov.hk/english/Unmanned_Aircraft_Systems.html).

These guidelines stipulate, inter alia, that such drones:

  • Shall be flown only during daylight hours and always within the operator’s Visual Line of Sight (”VLOS”);
  • Shall not be flown until the operator has secured permission from the land/property owner and conducted a safety assessment of the site (such safety assessment must be made available to the CAD upon request);
  • Shall “normally not be flown” within five km of any aerodrome (namely Hong Kong International Airport, Shun Tak Heliport, and Shek Kong Airfield);
  • Shall not be flown more than 300 feet above ground level;
  • Shall not be flown over or within 50 metres of any person, vessel, vehicle or structure not under the control of its operator (except that during take-off and landing the drone must not be flown over or within 30 metres of any person other than the drone operator and any other person in connection with its operation);
  • Shall not be flown if surface winds exceed 20 knots (the CAD suggests that the operator keep a hand-held anemometer to monitor surface wind speed);
  • Shall only be operated in an area under the operator’s full control, where take-off and landing is properly segregated from public access;
  • Shall not carry any hazardous materials, nor drop any objects onto the ground;
  • Shall not be flown until the operator is satisfied that, prior to the flight, the mechanism causing the drone to land in the event of failure or disruption is in working order.

Before any flight of a drone for commercial purposes or for remuneration, the operator must procure prior approval from the CAD. This involves a multi-step process:

1. If the operator has not done so already, he/she must first establish that the drone is airworthy by procuring a Certificate of Registration and Certificate of Airworthiness issued by the CAD (per Arts. 3, 7, and 100 of the Order). This involves filing two separate applications (see Form DCA 99 (Application for Registration of Aircraft) and Form DCA 46D (Application for Certificate of Airworthiness)) to the CAD whereby the operator must indicate the particulars of the drone, its operating history, and his/her personal details.

2. Once the drone has been registered and the operator has obtained a Certificate of Airworthiness, permission must be sought prior to any flight by submitting an application form (https://e-submission.cad.gov.hk/&common/cad/fcballon.nsf/uas?openform) and supporting documents to the CAD at least 28 working days before the date of such flight. One purpose of the application form is to prove that the drone is operated by a ‘qualified’ pilot (the CAD currently recognises the UK-based BNUC-S Certification for drone pilots). Supporting documents should include:

a. details of the intended flight path;

b. operations manual - this covers the procedures to be followed for all envisaged flight operations and is a key reference for the CAD. The CAD will refer to the operations manual in order to assess the viability and safety of a proposed flight before deciding whether to grant a permission, and will expect the drone flight to be carried out in accordance with the manual (see: http://www.cad.gov.hk/reports/UAS_operations_manual.pdf);

c. land/property owner’s written permission; and

d. copy of an adequate insurance policy.

3. Submission of an Application for Permit for use of aircraft for the provision of air service - Unmanned Aircraft Systems (‘UAS’).

4. Prior approval must be sought from the Office of the Communications Authority on the use of radio frequencies and ensure that no interference is caused to air traffic operations and air navigation equipment. 

Once all permissions have been secured, the drone operator should notify the CAD/Aerodrome Supervisor before flight and upon completion of the flight. Drone operators must also maintain records of each flight and make such records available to the CAD upon request.

Given the complexity of this registration/approval regime there is anecdotal evidence suggesting that some commercial drone operators, whose work is subject to the vagaries of weather and deadlines, simply choose to skip the application process and risk sanction. Furthermore, the requirement for commercial drone operators to submit details of proposed flights well before their intended flight date may not accommodate business realities. Videographers, for example, often receive a work request only one or two weeks in advance.

FORGING A DRONE STRATEGY FOR HONG KONG

As part of an ongoing effort to update existing laws, the CAD commissioned a consultancy study to examine how Hong Kong could better regulate drones. Last December the CAD reported the study’s key recommendations, which put forth a number of preliminary proposals:

1. Implementing an online registration system for drones and their operators;

2. Categorisation of drones into three different risk categories: low risk (drones weighing less than 250 grams), medium risk (drones weighing between 250 grams and seven kilograms), and high risk (drones weighing more than seven kilograms), with each risk category determinative of a drone’s registration requirements and flight parameters (this risk-based approach deviates from the current purpose-based rules under whereby pre-approval is required prior to all commercial drones flights, regardless of drone size);

3. Introducing a requirement for drone operators to undergo training and procure insurance (with particular requirements commensurate to the drone’s risk category).

The CAD’s revisions broadly follow drone rules in the USA, where the US Federal Aviation Administration (the “’FAA’”) has promulgated a drone registration and marking system. The FAA’s web-based registration system covers all drones regardless of their use and is a precondition for all drone operations. Owners of non-recreational drones must submit their name, address (including email address), drone manufacturer, model name, and serial number. The submitted information is kept on a database accessible to the public (though individual names and addresses are only visible to the FAA and law enforcement agencies). Moreover, compliance is encouraged by imposing fines of up to US$250,000 or imprisonment for up to three years for failing to register or properly mark a drone.

UNLOCKING COMMERCIAL POTENTIAL

Aside from its registration system, the FAA’s Small Unmanned Aircraft Regulations (Part 107) serve as a model for many jurisdictions seeking to govern commercial drone flights. These rules allow drone operators with a remote-pilot certificate (obtained by passing a test costing US$150) to fly drones for commercial purposes during daylight, within VLOS, in uncontrolled airspace, and without flying over people who are not involved in operating the drone. The FAA is now working on future rules governing flights over people (ie flights in crowded areas) and remote identification of drones. Further down the road the FAA intends to propose rules regarding night flying, operations over longer distances, and control of multiple drones by a single operator.

The FAA is well aware that such rules can drive the direction of the commercial drone industry. In fact drone companies can already go beyond the Part 107 rules by obtaining a special waiver from the FAA, on the condition that they can show that their proposed operation can be conducted safely and meet additional criteria. Such waivers impose additional safety requirements, for instance, obtaining a waiver for night flights requires mounting a light on the drone that is visible from three miles away, and providing night-flight training for the drone operator.

This waiver system effectively allows the FAA to gain regulatory expertise by giving them a means to test new regulations before they are formalised. Some parties have already taken advantage: in October 2017, the news organisation CNN successfully obtained a waiver regarding its commercial drone operating license allowing them to fly its drone over open-air crowds of people (regardless of population density) at altitudes of up to 150 feet.

Neither Hong Kong’s existing laws nor the CAD’s proposed revisions explicitly sanction or prohibit experimental drone flights. At this point then, it seems unclear how accommodating the CAD would be towards allowing drone testing of new commercial applications. As the CAD’s proposed revisions will be subject to public consultation (which is scheduled to conclude by mid-year), the CAD may be well-served by soliciting input from stakeholders outside the traditional aviation sector. The combined knowledge and experience of drone specialists, software companies, and end users could improve our understanding of potential drone uses and identify technological or infrastructure constraints.

PRIVACY CONCERNS

One regulatory area that has not been subjected to extensive re-examination is personal privacy. Indeed, many jurisdictions including Hong Kong still rely on existing privacy laws to deal with the potential threat of drones.

In Hong Kong, all drone operators must comply with the Personal Data (Privacy) Ordinance (Cap. 486), the provisions of which were not drafted in contemplation of remotely operated cameras. To address this gap, in March 2015 the Office of the Privacy Commissioner for Personal Data issued the Guidance on CCTV Surveillance and Use of Drones (see https://www.pcpd.org.hk/english/resources_centre/publications/files/GN_CCTV_Drones_e.pdf). This guide contains reminders that drone operators (ie those who operate camera equipped drones) are regulated by the Personal Data (Privacy) Ordinance (including the Data Protection Principles therein) and have a duty to respect personal privacy. The guide also offers guidelines on recording, handling recorded images, retention and encryption of image transmission. However the guide does not have the force of law, so the Government must necessarily rely on the Personal Data (Privacy) Ordinance or other existing laws when evaluating any public offenses involving drones.

Whether and how the current data privacy protection regime should evolve to counter the privacy challenges posed by drones will be an open question in the coming years. There should be little doubt, though, that devising new drone regulations that take into account potential technological and industrial developments could only benefit Hong Kong. A forward-looking drone policy that considers their commercial potential may help our local industry take flight.

Jurisdictions: 

Deacons, Senior Associate

Alex is a senior associate in the Corporate Commercial Practice Group.

He focuses on a variety of corporate and regulatory matters including corporate restructuring, mergers and acquisitions, joint ventures, business sales/asset transfers, anti-money laundering compliance, and general commercial transactions. Alex also has extensive experience advising on Hong Kong taxation matters for institutional and private clients.

Deacons, Partner

Machiuanna advises local and multinational companies in a variety of fields, including banks, insurance, private equity, other investment funds, government bodies and technology start-ups on a wide range of regulatory and commercial matters.

She has particular experience in cross-border M&As, private equity and venture capital investments, joint ventures, investment structure and advisory.