The tax haven lead­ing the race to pri­va­tise space

Lux­em­bourg has shown how far a tiny coun­try can go by serv­ing the needs of global cap­i­tal­ism. Now it has set its sights on outer space

The Guardian - - JOURNAL - By Atossa Araxia Abra­hamian

On a driz­zly af­ter­noon in April, Prince Guil­laume, the hered­i­tary grand duke of Lux­em­bourg, and his wife, Princess Stéphanie, sailed through the front doors of an of­fice build­ing in the out­skirts of Seat­tle and into the head­quar­ters of an as­ter­oid­min­ing startup called Plan­e­tary Re­sources, which plans to “ex­pand the econ­omy into space”.

The com­pany’s en­gi­neers greeted the roy­als with hors d’oeu­vres, craft beer and bot­tles upon bot­tles of Columbia Val­ley ries­lings and syrahs. In the cor­ner of the lounge stood a vin­tage As­teroids ar­cade game; on the wall hung an Amer­i­can flag along­side the grand duchy’s own red, white and blue stripes. Be­tween the two flags was a pro­to­type of a space­craft de­signed to roam the galaxy, prospect­ing as­teroids for pre­cious nat­u­ral re­sources that would some­day – at least in the­ory – make the share­hold­ers of Plan­e­tary Re­sources very wealthy earth­lings in­deed.

The na­tion of Lux­em­bourg is one of Plan­e­tary Re­sources’ main boost­ers. The coun­try’s pledge of €25m (£22.5m) – which in­cludes both di­rect fund­ing and state sup­port for re­search and devel­op­ment – is just one el­e­ment of its wildly am­bi­tious cam­paign to be­come a ter­res­trial hub for the busi­ness of min­ing min­er­als, met­als and other re­sources on ce­les­tial bod­ies. The tiny coun­try en­riched it­self sig­nif­i­cantly over the past cen­tury by greas­ing the wheels of global fi­nance; now, as com­pa­nies such as Plan­e­tary Re­sources pre­pare for a cos­mic land grab, Lux­em­bourg wants to use its tiny ter­res­trial perch to help send cap­i­tal­ism into space.

Space ex­plo­ration has his­tor­i­cally been an arena for grand, na­tion­al­is­tic op­er­a­tions that were too costly, dan­ger­ous and com­plex for civil­ians to take up without state back­ing. But now, pri­vate com­pa­nies want in, rais­ing ques­tions that, un­til re­cently, have seemed like mere thought ex­per­i­ments or hy­po­thet­i­cals: who can lay claim to an as­ter­oid and all of its ex­trac­tive wealth? Should space ben­e­fit “all of hu­mankind”, as the in­ter­na­tional treaties signed in the 60s in­tended, or is that ide­al­ism out­dated? How do you mea­sure those ben­e­fits? Does trickle-down the­ory ap­ply in zero-grav­ity con­di­tions?

Space is be­com­ing a test­ing ground for these thorny eth­i­cal and le­gal ques­tions, and Lux­em­bourg – a tiny coun­try that has sus­tained it­self off of reg­u­la­tory in­tri­ca­cies and tax loop­holes for decades – is po­si­tion­ing it­self to help find the an­swers. While ma­jor na­tions such as China and In­dia plough in­creas­ing sums of money into de­vel­op­ing space pro­grammes to ri­val Nasa, Lux­em­bourg is mak­ing a dif­fer­ent bet: that it can be­come home to a multi­na­tional cast of en­trepreneurs who want to go into space not for just the sake of sci­en­tific progress or to strengthen their na­tion’s geopo­lit­i­cal hand, but also to make money.

It al­ready has a keen clien­tele. Space en­trepreneurs speak of a new “gold rush” and com­pare their mis­sion to that of the fron­tiers­men, or the early in­dus­tri­al­ists. While planet Earth’s lim­ited stock of nat­u­ral re­sources is rapidly be­ing de­pleted, as­ter­oid min­ers see a so­lu­tion in the vast quan­ti­ties of un­tapped water, min­er­als and met­als in outer space. And the fledg­ling “NewS­pace” in­dus­try – an um­brella term for com­mer­cial space­flight, as­ter­oid min­ing and other pri­vate ven­tures – has found ea­ger sup­port­ers in the in­vestor class. In April, Gold­man Sachs sent a note to clients claim­ing that as­ter­oid min­ing “could be more re­al­is­tic than per­ceived”, thanks to the fall­ing cost of launch­ing rock­ets and the vast quan­ti­ties of plat­inum sit­ting on space rocks, just wait­ing to be ex­ploited.

“[Min­ing as­teroids] is not a new idea, but what’s new is state sup­port of the idea,” says Chris Voorhees, the chief en­gi­neer of Plan­e­tary Re­sources. “Ev­ery­one thought it was in­evitable but they weren’t sure when it would oc­cur.” Now, he says, Lux­em­bourg is “mak­ing it hap­pen”.

The grand duchy – which has all the square footage of an as­ter­oid and, with a pop­u­la­tion of half a mil­lion, not all that many more in­hab­i­tants – has ear­marked €200m to fund NewS­pace com­pa­nies that join its new space sec­tor; to date, six have taken it up on the offer. It has sent of­fi­cials to Ja­pan, China and the UAE to talk about space ex­plo­ration part­ner­ships, and ap­pointed space in­dus­try veter­ans, in­clud­ing the ex-head of the Euro­pean Space Agency, to ad­vise them. In May, it took out a glossy sup­ple­ment in Sci­en­tific Amer­i­can mag­a­zine to sig­nal it is com­mit­ted not just to help­ing busi­nesses, but to ad­vanc­ing re­search as well.

And in July, the par­lia­ment passed its law – the first of its kind in Europe, and the most far-reach­ing in the world – as­sert­ing that if a Lux­em­bour­gish com­pany launches a space­craft that ob­tains water, sil­ver, gold or any other valu­able sub­stance on a ce­les­tial body, the ex­tracted ma­te­ri­als will be con­sid­ered the com­pany’s le­git­i­mate pri­vate prop­erty by a le­git­i­mate sov­er­eign na­tion.

The pres­ence of roy­alty at Plan­e­tary Re­sources HQ ahead of the pass­ing of the law was a canny part of the coun­try’s space in­cur­sion. The young cou­ple was there to daz­zle, charm and lend grav­i­tas to the op­er­a­tion – Euro­pean aris­toc­racy doesn’t show up in sub­ur­ban of­fice parks any old day – but the mis­sion’s greater aim was to im­press upon Sil­i­con Val­ley ex­ec­u­tives, the press and space sci­en­tists around the world that min­ing as­teroids was no longer science fic­tion. To that end, the roy­als were ac­com­pa­nied by about 40 of their sub­jects, all of whom had a role to play in this emerg­ing in­dus­try.

Eti­enne Sch­nei­der, Lux­em­bourg’s con­ge­nial deputy prime min­is­ter, led the del­e­ga­tion. With his easy man­ner, ex­cel­lent English and pen­chant for fancy cars, he cuts a Macro­nian fig­ure: a prod­uct of Euro­pean so­cial­ist po­lit­i­cal par­ties, sure, and a so­cial lib­eral to his core – Sch­nei­der is mar­ried to a man – but one who will will­ingly play hand­maiden to global cap­i­tal­ist in­ter­ests should the right op­por­tu­nity arise. He an­nounced re­cently that he would be run­ning for prime min­is­ter in 2018.

With Sch­nei­der came a del­e­ga­tion of sci­en­tists, trade at­taches, bankers, lawyers and lo­cal jour­nal­ists who switched be­tween Ger­man, English, French and the lo­cal lan­guage, a con­so­nant-heavy mix of Flem­ish and Ger­man with the oc­ca­sional for­eign word thrown in to sup­ple­ment: “meet­ing”, “frame­work”, “brunch”. (“We don’t have all the words,” a mem­ber of the del­e­ga­tion told me sheep­ishly.) In French, the lan­guage is known as Lux­em­bour­geois, which pretty much says it all; the duchy’s 500,000 cit­i­zens, who have a GDP per capita of $104,000 (£78,800), are the wealth­i­est in the world af­ter Qatar’s, ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund.

The Plan­e­tary Re­sources team took their bene­fac­tors on a tour of the labs where its hard­ware is built. The com­pany isn’t min­ing as­teroids yet, but to ben­e­fit from Lux­em­bourg’s con­ces­sions, it opened an of­fice in the grand duchy this year. Up close, its Arkyd 6 space­craft – which is ready for launch – looks just like satel­lites look in the movies, only smaller. It had mul­ti­ple flaps and ap­pendages, in­clud­ing an in­frared sen­sor, a star tracker to ori­ent the craft in space and a GPS unit, which works only in the earth’s or­bit.

Once the tour was com­plete, cock­tail hour be­gan. Sch­nei­der, who owns a vine­yard, bounced from one con­ver­sa­tion to an­other, brim­ming with en­thu­si­asm. To end the visit, Chris Lewicki, the CEO of the com­pany, gave a toast prais­ing Lux­em­bourg’s con­tri­bu­tions “to an abun­dant fu­ture for all of hu­man­ity”. As a parting gift, he pre­sented her royal high­ness with a neck­lace. In­stead of jewels, it was stud­ded with tiny frag­ments of as­teroids.

It is rea­son­able to won­der what, ex­actly, a mar­ginal Euro­pean monar­chy, egged on by a vi­va­cious gay so­cial­ist, was do­ing telling Amer­i­can en­trepreneurs on the cut­ting edge of in­no­va­tion that their ham­let-sized state could pro­pel hu­man­ity – and cap­i­tal­ism – into deep space. The grand duchy has no na­tional space agency, no launch­ing sites, and only mod­est re­search ca­pa­bil­i­ties. It opened its first and only univer­sity in 2003 and its mil­i­tary con­sists of 1,008 troops. Lux­em­bourg does not fit the im­age of a space­far­ing na­tion; in fact, some have ques­tioned whether it should even be a na­tion at all.

Yet Lux­em­bourg’s very essence – as a speck in the heart of Europe – al­lows, even re­quires, it to par­take in such am­bi­tious ven­tures. Its na­tional motto is “We want to re­main what we are” and, over the cen­turies, this in­de­pen­dent spirit has en­dured oc­cu­pa­tions by the dukes of Bur­gundy, the kings of Spain and France, the em­per­ors of Aus­tria and the king of the Nether­lands. To­day, the state, which only gained full in­de­pen­dence in 1867, oc­cu­pies a cu­ri­ous po­si­tion: a coun­try with an out­sized eco­nomic in­flu­ence that ev­ery­one has heard of, but that no one can quite lo­cate on a map.

Ac­cord­ing to Gabriel Zuc­man, as­sis­tant pro­fes­sor of eco­nomics at UC Berkeley, the coun­try is hard to miss in the fi­nan­cial world. “Lux­em­bourg has pri­vate banks like Switzer­land, it has a big mu­tual fund in­dus­try like Ire­land’s, it’s used for cor­po­rate tax avoid­ance like Ber­muda or the Nether­lands, and it also hosts one of the two in­ter­na­tional cen­tral de­pos­i­to­ries for se­cu­ri­ties, so it’s ac­tive in euro bonds,” he says. “It’s the tax haven of tax havens, pre­sent at all stages of the fi­nan­cial in­dus­try.” Tony Nor­field, a for­mer banker in the City of Lon­don who now writes on global fi­nance, has de­scribed Lux­em­bourg as “a paragon of par­a­sitism”.

The story of how a mar­ginal and rel­a­tively pow­er­less coun­try has sur­vived world wars, eco­nomic crises and cat­a­clysmic tech­no­log­i­cal ad­vances to be­come a bank­ing and fi­nance pow­er­house tells us a lot about how far a small coun­try can go if it de­votes it­self to an­tic­i­pat­ing and ac­com­mo­dat­ing the needs of global cap­i­tal. It’s a con­tentious busi­ness: for ev­ery happy share­holder prais­ing Lux­em­bourg’s busi­ness-friendly rules and money-sav­ing loop­holes, there’s a critic con­demn­ing Lux­em­bourg’s will­ing­ness to ex­pe­dite the reg­u­la­tory “race to the bot­tom”.

Then again, there aren’t many op­tions for a coun­try like Lux­em­bourg be­sides ex­ploit­ing its most valu­able re­source: its na­tional sovereignty. And Lux­em­bourg has done this more and bet­ter than any other coun­try in the world. By craft­ing in­no­va­tive rules, laws and reg­u­la­tions that only it could (or would) put on offer, Lux­em­bourg has at­tracted banks, telecom­mu­ni­ca­tions com­pa­nies and con­sult­ing firms be­fore any of these in­dus­tries came to dom­i­nate the global econ­omy. Now, by court­ing as­ter­oid min­ers be­fore any­one else takes them se­ri­ously, it may very well end up do­ing the same thing for the com­mer­cial­i­sa­tion of space.

Lux­em­bourg’s first sig­nif­i­cant at­tempts at lib­er­al­i­sa­tion be­gan in the late 1920s and early 1930s. As ra­dio grew pop­u­lar, the grand duchy de­cided not to create a pub­licly funded ra­dio ser­vice like its neigh­bours. In­stead, it handed its air­waves to a pri­vate, com­mer­cial broad­cast­ing com­pany. That com­pany – now known as RTL – be­came the first ad-sup­ported com­mer­cial sta­tion to broad­cast mu­sic, cul­ture and en­ter­tain­ment pro­grammes across Europe in mul­ti­ple lan­guages. “By hand­ing the rights to a public good to a pri­vate com­pany, the state com­mer­cialised, for the first time, its sov­er­eign rights in a me­dia con­text,” notes a 2000 book on Lux­em­bourg’s eco­nomic his­tory. The ti­tle of the book, pub­lished by a Lux­em­bour­gish bank, is, tellingly, The Fruits of Na­tional Sovereignty.

Then, just three months be­fore the stock mar­ket col­lapsed in 1929, Lux­em­bourg’s par­lia­ment passed leg­is­la­tion ex­empt­ing hold­ing com­pa­nies – that is, par­ent firms that ex­ist solely to own parts of or con­trol other com­pa­nies – from pay­ing cor­po­ra­tion taxes. In the first five years af­ter the law’s pass­ing, 700 hold­ing com­pa­nies were es­tab­lished; in 1960, there were 1,200, and by the turn of the cen­tury, some 15,000 “let­ter­box” firms – one for ev­ery 18 cit­i­zens – were in­cor­po­rated in Lux­em­bourg. (In 2006, the Euro­pean com­mis­sion found that this ex­emp­tion vi­o­lated EU rules, so Lux­em­bourg promptly cre­ated a new des­ig­na­tion, the “fam­ily es­tate man­age­ment com­pany”, that com­plied with the coun­try’s EU treaty obli­ga­tions while of­fer­ing many of the same money-sav­ing ad­van­tages.)

Through­out the first half of 20th cen­tury, Lux­em­bourg’s main in­dus­try was steel, but by 1980, that busi­ness all but col­lapsed. Even be­fore its iron ore mines shut down, though, the grand duchy came to rep­re­sent a dis­creet but pow­er­ful reg­u­la­tory free­dom. A home­grown eco­nomic model be­gan to take shape: over the next decades, it would make a name for it­self by pass­ing leg­is­la­tion “de­signed to tempt the world’s hot money,” notes the Tax Jus­tice Net­work, an anti-tax-eva­sion ad­vo­cacy group.

The coun­try’s pol­i­cy­mak­ers also re­al­ized that less could re­ally be more. Ac­cord­ing to Ge­orges Sch­mit, a life­long civil ser­vant who has played a big role in shap­ing the coun­try’s econ­omy since he joined the min­istry of the econ­omy in 1981, a key com­po­nent of Lux­em­bourg’s early suc­cess was the fact that it did not have its own cen­tral bank. The coun­try had been in a mon­e­tary union with Belgium since 1921, and didn’t im­pose re­serve re­quire­ments on fi­nan­cial firms. This meant banks could lend or spend the money that they would have had to keep on de­posit in other ju­ris­dic­tions. In Sch­mit’s words, Lux­em­bourg’s biggest draw “wasn’t our do­ing; it was the lack of our do­ing any­thing”.

Over the years, the gov­ern­ment man­aged to coax over for­eign fi­nan­cial in­sti­tu­tions, from com­plex se­cu­ri­ti­sa­tion ve­hi­cles to Is­lamic banks. And on the con­sumer level, the state’s low taxes drew Europe’s tax-averse petty bour­geoisie. Start­ing in the 1960s, “Bel­gian den­tists” and “Ger­man butch­ers” – the pre­vail­ing stereo­types cited in the in­ter­na­tional fi­nan­cial press – be­gan tak­ing daytrips to the grand duchy to de­posit money

It is easy to won­der what a mar­ginal monar­chy was do­ing telling US en­trepreneurs that its ham­let-sized state could pro­pel cap­i­tal­ism into space

to avoid tax at home. The Lux­em­bour­gish state even low­ered fuel costs to at­tract the daytrip­pers, and in 1981, in­tro­duced le­gally bind­ing bank se­crecy com­pa­ra­ble to Switzer­land’s.

In the next cen­tury, the den­tists would give way to Qatari princes, Chi­nese princelings and other global mem­bers of the global su­per-rich – or at the very least, their in­vest­ments. “When a coun­try is small, the rest of the world is big,” says Sch­mit. “Since in­de­pen­dence we needed to find larger eco­nomic spa­ces, be they re­gional or con­ti­nen­tal.” By serv­ing as a hub for in­vestors, com­pa­nies and mar­kets dur­ing decades of rapid dereg­u­la­tion and glob­al­i­sa­tion, Lux­em­bourg turned it­self into an in­dis­pens­able cog in the ma­chin­ery of in­ter­na­tional fi­nance.

In 2009, Sch­mit em­barked for Cal­i­for­nia to con­tinue his life’s work: find­ing new ways for his coun­try to at­tract money, this time as the gen­eral con­sul and trade en­voy in Sil­i­con Val­ley.

Since he had joined the min­istry of the econ­omy to de­vise new in­no­va­tion strate­gies al­most three decades ear­lier, his coun­try seemed to have de­fied all odds and made virtues of its ap­par­ent weak­nesses. Its small size had not pre­vented it from be­com­ing the largest cen­tre for in­vest­ment funds in the world af­ter the US. Its tiny pop­u­la­tion had not de­terred multi­na­tion­als and EU in­sti­tu­tions such as the court of jus­tice from bas­ing their head­quar­ters there. It had par­layed its sta­tus as a neu­tral coun­try and found­ing mem­ber of many Euro­pean or­gan­i­sa­tions into send­ing three of its politi­cians – more than any other coun­try – to pre­side over the Euro­pean com­mis­sion. And by mar­ket­ing its easy ac­cess to Europe, an ed­u­cated work­force, bank se­crecy (which it voted to end in 2014 un­der pres­sure from other coun­tries and the OECD) and myr­iad reg­u­la­tory ad­van­tages, the coun­try built an out­sized fi­nan­cial sec­tor.

Cru­cially, Lux­em­bourg never seemed to let an op­por­tu­nity pass it by. Fol­low­ing its sup­port for com­mer­cial ra­dio 50 years prior, the coun­try was the first in Europe to pri­va­tise satel­lite tele­vi­sion. In 1985, the grand duchy granted a com­pany called So­ciété Européenne des Satel­lites (SES) the right to broad­cast TV di­rectly to view­ers’ homes from a satel­lite po­si­tioned in space. “The big in­no­va­tion is that this was a pri­vati­sa­tion of space,” says Sch­mit, who served for 17 years on the SES board. “All the other op­er­a­tors were owned by govern­ments through in­ter­na­tional agree­ments. This was the first com­mer­cial com­pany that set out to use space for broad­cast­ing.” When SES grew prof­itable, Lux­em­bourg’s bet paid off: the tiny coun­try be­came home to a tele­coms gi­ant, and, as an early in­vestor, re­ceived a piece of the pie.

In the early 2000s, Lux­em­bourg pounced at the chance to court re­tail­ers such as Ama­zon and Ap­ple with tax in­cen­tives. There were the perks the state was happy to pub­li­cise – the low­est VAT in Europe, for in­stance – and there were case-by­case deals with large com­pa­nies that it kept rather qui­eter. The com­pa­nies flocked in, but in the af­ter­math of the fi­nan­cial cri­sis, with aware­ness of wealth in­equal­ity grow­ing and aus­ter­ity mea­sures bruis­ing or­di­nary Euro­peans across the con­ti­nent, Lux­em­bourg could only keep these ar­range­ments un­der wraps for so long.

In late 2014, the grand duchy went from rel­a­tive ob­scu­rity to com­plete in­famy when the de­tails of these “tax rul­ings” – ver­sions of which were also car­ried out by Belgium, Ire­land and the Nether­lands – were dis­closed by the In­ter­na­tional Con­sor­tium of In­ves­tiga­tive Jour­nal­ists. Known as the “Lux leaks”, the mas­sive trove of leaked data re­vealed that, from 2002 to 2010, the coun­try’s tax agency ap­proved a se­ries of con­fi­den­tial deals that al­lowed AIG, Ikea, Deutsche Bank and more than 300 other large firms to save bil­lions of dol­lars they might have other­wise owed to other coun­tries.

The rul­ings weren’t nec­es­sar­ily il­le­gal, and they weren’t unique to Lux­em­bourg, but they did cause a scan­dal, pro­vok­ing damn­ing re­ports in the me­dia, protests around Europe and prom­ises for tighter reg­u­la­tion from within the EU. In­ves­ti­ga­tions on both sides of the At­lantic on re­lated mat­ters fol­lowed, and law­suits re­vealed in­for­ma­tion on more com­pa­nies still. (One mem­o­rable de­tail: Ama­zon’s 28-step tax-re­struc­tur­ing ar­range­ment in Lux­em­bourg was named Project Gold­crest af­ter the coun­try’s na­tional bird.)

Around this time, Zuc­man, a re­cent Paris School of Eco­nomics PhD who stud­ied with Thomas Piketty, be­gan look­ing into Lux­em­bourg’s role in in­ter­na­tional tax avoid­ance and eva­sion. His fo­cus was not on the multi­na­tion­als, but on Lux­em­bourg’s thriv­ing fund in­dus­try, which through niche reg­u­la­tions and loop­holes al­lowed in­vestors to avoid cer­tain taxes, too. Lux­em­bourg was a well-known fi­nan­cial cen­tre, but the statis­tics Zuc­man dug up while re­search­ing his book, The Hid­den Wealth of Na­tions, took him aback: in 2015, na­tional data showed $3.5tn worth of shares in Lux­em­bour­gish mu­tual funds were domi­ciled in the grand duchy, while data from other coun­tries ac­counted for only two of those tril­lions. The miss­ing $1.5tn sug­gested to him that the money – which, he notes, was prob­a­bly ac­cu­mu­lat­ing in­ter­est by the day – had no iden­ti­fi­able owner. That meant the coun­tries to whom tax was owed on these un­godly sums were un­aware of their ex­is­tence.

Glob­ally, Zuc­man cal­cu­lated al­most $8tn in fi­nan­cial wealth – which does not include real es­tate, lux­ury goods, gold or other com­modi­ties – has been stolen from coun­tries and tax­pay­ers in this fash­ion thanks to “se­crecy ju­ris­dic­tions” such as Lux­em­bourg, the Vir­gin Is­lands or Panama work­ing “in sym­bio­sis”. In his book, Zuc­man de­scribed Lux­em­bourg as an “eco­nomic colony of the in­ter­na­tional fi­nan­cial in­dus­try” and chal­lenged its right to its great­est as­set: its sovereignty.

“Imag­ine an ocean plat­form where the in­hab­i­tants would meet dur­ing the day to pro­duce and trade, free of any law or any tax, be­fore be­ing tele­ported in the evening back home to their fam­i­lies on the main­land,” he wrote, re­fer­ring to the coun­try’s un­usual de­mo­graph­ics: 47% of Lux­em­bourg’s 500,000 res­i­dents are for­eign, and 44% of the work­force com­mutes in across na­tion-state lines each day for work. “No one would dream of con­sid­er­ing such a place, where 100% of its pro­duc­tion is sent abroad, as a na­tion.

“The trade of sovereignty knows no lim­its,” Zuc­man con­tin­ues. “Ev­ery­thing is bought; ev­ery­thing is ne­go­tiable. Lux­em­bourg is not the only coun­try that has sold its sovereignty, far from it … but it is the one that has gone the fur­thest.”

Scru­tiny of Lux­em­bourg’s tax prac­tices – from the press, the public and the EU – spread at an awk­ward time. At the end of 2013, the coun­try elected a new prime min­is­ter, Xavier Bet­tel, whose coali­tion gov­ern­ment of democrats, so­cial­ists and greens wanted to dis­tance them­selves from the eco­nomic poli­cies of for­mer prime min­is­ter Jean-Claude Juncker and play by the EU’s rules. “Hon­estly, I am fed up with be­ing ac­cused of be­ing a de­fender of a tax haven and a hot­bed of sin,” Bet­tel said in a speech to the Lux­em­bourg Bankers’ As­so­ci­a­tion shortly af­ter tak­ing of­fice. “We need to work on our im­age … we have much changed in the last years, now it is time to make sure that every­body knows.”

Eti­enne Sch­nei­der, then econ­omy min­is­ter, was part of this ef­fort, too. But in­stead of be­ing ap­plauded for break­ing with the past, from the mo­ment they took power the politi­cians were con­stantly re­minded of their coun­try’s in­dis­cre­tions. The new gov­ern­ment needed to square the Lux­em­bour­gish model of eco­nomic devel­op­ment with new po­lit­i­cal re­al­i­ties. It had to keep look­ing ahead. Most of all, it wanted to change the con­ver­sa­tion.

A cu­ri­ous pos­si­bil­ity had emerged the pre­vi­ous sum­mer, when Ge­orges Sch­mit vis­ited Nasa’s Ames re­search cen­tre in Palo Alto and found him­self in con­ver­sa­tion with Pete Wor­den, a for­mer di­rec­tor of the cen­tre. Over cof­fee, Wor­den told Sch­mit about the emerg­ing NewS­pace sec­tor and about his dream of find­ing life on other stars and plan­ets.

Sch­mit sensed Wor­den would hit it off with Sch­nei­der, so he in­tro­duced them. At first, as­ter­oid min­ing struck Sch­nei­der as crazy. “I lis­tened to him and won­dered what this guy might have smoked this morn­ing,” he re­called. But the more he lis­tened, the more it made sense. Wor­den per­suaded Sch­nei­der that “it’s not if it will hap­pen, it’s when it’ll hap­pen. And the coun­tries who’ll be the pi­o­neers will be the ones that’ll get the most out of it later on.”

From 2014 to 2016, a se­ries of meet­ings be­tween the Amer­i­cans and the Lux­em­bour­geois took place. If they re­sem­bled April’s trade mis­sion, they will have in­volved te­dious tours of tech­nol­ogy com­pa­nies, self-ag­gran­dis­ing speeches about how space would bring about Earth’s “third in­dus­trial rev­o­lu­tion”, and many hours stuck in traf­fic – but also gen­uine won­der at what might hap­pen if hu­mankind made space their own.

Sch­nei­der hung his hopes – and his po­lit­i­cal fu­ture – on the stars. Here was a chance to change the con­ver­sa­tion away from taxes and to­wards space; to es­tab­lish an in­dus­try for Lux­em­bourg’s fu­ture; to con­trib­ute to science and hu­man knowl­edge, even. Be­sides, in such try­ing times, who didn’t like talk­ing about the won­ders of ex­plor­ing the great un­known? NewS­pace com­pa­nies were cer­tainly ea­ger to work with Lux­em­bourg. They were thirsty for funds and at­ten­tion, and felt in­vis­i­ble in the US. Lux­em­bourg was a place where they could get meet­ings with high-level politi­cians in min­utes; where ev­ery­one spoke great English; where the bu­reau­cracy was min­i­mal, and the prom­ise of low taxes re­mained. As one NewS­pace ex­ec­u­tive told me this year: “We just want to work with a gov­ern­ment who won’t get in the way.”

The only catch was the am­bi­gu­ity of space law: com­pa­nies wanted as­sur­ances that the fruits of their ex­trater­res­trial labour would be recog­nised here on Earth. This is not a given. Un­like on Earth, where a coun­try can grant a com­pany a min­ing con­ces­sion, or a per­son can sell the right to ex­ploit their land, no one has an ob­vi­ous le­gal claim to what’s out­side our at­mos­phere. In fact, the Outer Space Treaty, signed by 107 coun­tries at the UN in 1967, ex­plic­itly pro­hibits coun­tries from claim­ing sovereignty over ce­les­tial bod­ies. The ques­tion now is: if no­body owns or gov­erns the great un­known, who is to say who gets to own a lit­tle piece of it?

Since the emer­gence of the NewS­pace sec­tor, in­di­vid­ual coun­tries have at­tempted to lend some clar­ity to ea­ger en­trepreneurs, rea­son­ing that the prospect of pri­vate prop­erty in space will en­cour­age hard work and in­no­va­tion. The Amer­i­can Space Act, passed in 2015, is the first “find­ers, keep­ers” law that recog­nises own­er­ship of space re­sources, but it only does so for com­pa­nies owned by US cit­i­zens.

In Oc­to­ber 2015, Lux­em­bourg com­mis­sioned a study on whether it could fill that le­gal void. The report, com­pleted in 2016, noted that “while le­gal un­cer­tainty re­mains, un­der the cur­rent le­gal and reg­u­la­tory frame­work, space min­ing ac­tiv­i­ties are (at least) not pro­hib­ited” and con­cluded that Lux­em­bourg should pass leg­is­la­tion that gives min­ers the right to keep the ex­trater­res­trial bounty they ex­tract.

Such a law was drafted shortly af­ter the study’s com­ple­tion, and on 1 Au­gust 2017, it went into ef­fect. Lux­em­bourg’s bill does not dis­crim­i­nate by na­tion­al­ity, or even by the lo­ca­tion of a com­pany’s head­quar­ters. In fact, the law in­di­cates the coun­try’s will­ing­ness to serve as a sort of flag of con­ve­nience for space­crafts, al­low­ing them to play by one coun­try’s fu­tur­is­tic rules in the ab­sence of uni­ver­sal, bind­ing agree­ments. Rick Tum­lin­son, of Deep Space In­dus­tries, an­other space ex­plo­ration com­pany in which Lux­em­bourg has in­vested, told me that there was value in Lux­em­bourg’s law be­cause it saw no cit­i­zens and no bor­ders: just one blue planet from high above.

Six weeks af­ter the trade mis­sion in Cal­i­for­nia, I dis­em­barked from a tiny plane on the run­way of Lux­em­bourg City’s air­port in a melee of grey suits and black carry-on roller bags. I walked past large wealth-man­age­ment and eq­uity-fund ad­ver­tise­ments into the car park, where I caught the bus into the city cen­tre, pass­ing dozens of huge new build­ing projects, a tram­line un­der con­struc­tion and two enor­mous yel­low tow­ers that, in the af­ter­noon light, re­sem­bled twin gold bars reach­ing for the sky.

Within an hour, I was sit­ting at a table out­side a dive bar op­po­site the old city’s bath­house with Lars Sch­mitz, 29, and Gabrielle Taille­fert, 21, two mem­bers of a lo­cal the­atre and art col­lec­tive called Rich­tung22 (Direc­tion22). Over the past few years, the group has staged a se­ries of per­for­mances lam­poon­ing their coun­try’s mer­ce­nary modus operandi. In­stead of writ­ing their own scripts from scratch, the col­lec­tive makes dra­matic col­lages al­most en­tirely out of pri­mary doc­u­ments: laws, press re­leases, speeches, tran­scripts from par­lia­ment, pro­mo­tional videos and so on.

One of Rich­tung22’s early works satirised Lux­em­bourg’s na­tion brand­ing com­mit­tee, which was set up in March 2013 to pro­mote the coun­try abroad. The play, which was fi­nanced in part by the cul­ture min­istry, was en­ti­tled Lëtze­buerg, du han­ner­häl­tegt Stéck Schäiss (Lux­em­bourg, Vi­cious Pile of Shit). Since then, Sch­mitz says, state funds for Rich­tung22’s work have dried up.

In his spare time, Sch­mitz, who is slight with cropped blonde hair, works on an­tifas­cist and anti-cap­i­tal­ist or­gan­is­ing. He has the droll res­ig­na­tion of a left­wing ac­tivist op­er­at­ing in a coun­try whose pol­i­tics are so ab­stract and so global that grass­roots re­sis­tance must nec­es­sar­ily come in the form of farce. Rich­tung22’s lat­est play sav­ages the coun­try’s ef­forts to at­tract the NewS­pace in­dus­try. Its ti­tle is Lux­em­bourg’s Pri­vate Space Ex­plorev­o­lu­tion­ary Su­per­fancy As­ter­oid Tailor­ing. Sch­mitz sees space min­ing as a high-tech spin on an age-old scam: sell­ing sovereignty. “The coun­try’s busi­ness model is hid­den,” he said. “It’s mak­ing laws that com­pa­nies want, and tak­ing a risk on those com­pa­nies. But the gov­ern­ment uses it to say ‘This is how modern we are! This is some­thing new!”

Zuc­man shares Sch­mitz’s view. “Adapt­ing this strat­egy to the busi­ness of space con­quest is what be­ing an off­shore fi­nan­cial cen­tre means,” he says. “It’s not di­ver­si­fi­ca­tion. It’s just ex­tend­ing the logic of be­ing a tax haven to new area.”

On stage, the en­tire space en­ter­prise is por­trayed as a cyn­i­cal, money-grub­bing de­ba­cle dic­tated by pri­vate-sec­tor in­ter­ests. “We feel bad that our coun­try does this to the world, and no one else here talks about this stuff,” Sch­mitz told me. He ran off a dozen or so Lux­em­bour­gish trans­gres­sions, in­clud­ing but not lim­ited to aid­ing and abet­ting tax eva­sion and weasel­ing its way out of EU bank­ing reg­u­la­tions. In such a small coun­try, it’s hard to be so out­spo­ken against the na­tional in­ter­est. “Peo­ple think we’re traitors,” he said.

Was there any­thing good about his coun­try, I asked. “It’s beau­ti­ful,” Sch­mitz con­ceded. He was right. The city rests on two lev­els; the smaller “low” city’s quaint lit­tle streets and side­walk cafes skim the river, while the “high” city cen­tre is home to a lively main drag with pricey bou­tiques, fancy choco­late shops and chains such as H&M. Cafes advertise cré­mant – a lo­cal bub­bly wine – and lo­cal dishes that bor­row their rich­ness from the French and their stodgi­ness from the Ger­mans.

The next day, I went to meet Marc Baum, an MP from the demo­cratic so­cial­ist party déi Lénk (the Left). He handed me a pol­icy pa­per his party pub­lished crit­i­cis­ing Sch­nei­der’s space-min­ing pro­posal: they be­lieve his law is in­con­sis­tent with Lux­em­bourg’s outer-space treaty obli­ga­tions, that it cre­ates op­por­tu­ni­ties for bil­lion­aires to fur­ther en­rich them­selves and could be harm­ful to the en­vi­ron­ment. Even worse, it en­shrines the no­tion of “com­pe­ti­tion in­stead of co­op­er­a­tion” be­tween states. “It’s in­fi­nite cap­i­tal­ism!” Baum ex­claimed.

Baum, as it hap­pened, is an ac­tor, too. When we met, he was pre­par­ing to per­form Eugène Ionesco’s Rhinoceros, an ab­sur­dist play about a town whose pro­tag­o­nists speak ex­clu­sively in cliches and end up turn­ing into rhi­nos on ac­count of their un­ques­tion­ing con­form­ity. Over the course of the drama, the towns­peo­ple jus­tify their de­ci­sion to “go rhino” by declar­ing that “hu­man­ism is dead, those who fol­low it are just old sen­ti­men­tal­ists”. The play’s sole hero, Berenger, re­sists suc­cumb­ing to “rhinoceri­tis”, but fails to save any­one else: he ends up be­ing the only per­son in the whole town who does not grow a horn. The anal­ogy be­tween that and Baum’s own predica­ment seems a lit­tle on the nose. He was one of just two politi­cians who voted against the space law in July.

In June, about a month be­fore his sig­na­ture leg­is­la­tion was passed by the par­lia­ment, Sch­nei­der and some of his as­so­ci­ates flew to New York for yet an­other sales pitch – this time, for the ben­e­fit of ven­ture cap­i­tal­ists on the east coast.

His speech fo­cused on the fi­nan­cial as­pects of Lux­em­bourg’s space race, and the coun­try’s in­ten­tion to get in on the ground floor of com­mer­cial space ex­plo­ration. “Un­der the US Space Act, your cap­i­tal has to be ma­jor­ity US cap­i­tal,” he said, re­fer­ring to US will­ing­ness to recog­nise prop­erty rights in space for its cit­i­zens. “We don’t re­ally care where the money comes from in our coun­try, as long as the money is clean.”

On Sch­nei­der’s telling, Lux­em­bourg could do for the spac­ere­source trade what it had done for the eu­rodol­lar mar­ket, in­ter­na­tional hold­ing com­pa­nies and multi­na­tion­als: pro­vide a safe, re­li­able base where they could op­er­ate in tan­dem with a keen and co­op­er­a­tive – or, by his de­trac­tors’ as­sess­ment, pli­able and syco­phan­tic – state. Sch­nei­der an­nounced that af­ter pass­ing its law, Lux­em­bourg would create its own space agency. This would not be a copy of Nasa, but would in­stead “fo­cus only on com­mer­cial space re­sources”. He told the au­di­ence that Lux­em­bourg would so­licit pri­vate fund­ing to cap­i­talise NewS­pace com­pa­nies, and seek the ad­vice of ven­ture cap­i­tal­ists to de­cide what com­pa­nies to in­vest in. If as­ter­oid min­ing does, in fact, take off, Lux­em­bourg will be what Sch­nei­der’s friends in Sil­i­con Val­ley might call an “early adopter”.

It’s a gam­ble, for sure. But it’s dif­fi­cult to imag­ine where Lux­em­bourg would be had it not de­ployed this in­ge­nious devel­op­ment strat­egy con­tin­u­ously over the past cen­tury. The global econ­omy of­fers few al­ter­na­tives than to serve it, and re­wards its en­ablers richly. Per­haps a mer­ce­nary spirit is what it takes to suc­ceed as a small coun­try in the world – and that “we want to re­main what we are” is just Lux­em­bour­geois for the old French say­ing: plus ça change.•

Lux­em­bourg was a place where NewS­pace com­pa­nies could get meet­ings with high-level politi­cians, and the prom­ise of low taxes

Il­lus­tra­tion by Ben the Il­lus­tra­tor

Lux­em­bourg City and the Alzette river val­ley Rex/ Shutterstock

Di­dier Baverel/ WireI­mage

Princess Stéphanie and Prince Guil­laume of Lux­em­bourg

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.