Essays in the Regulation of Drones and Counter-Drone Systems by Andrew Victor Shelley A thesis submitted to the Victoria University of Wellington in fulfilment of the requirements for the degree of Doctor of Philosophy in Economics. Victoria University of Wellington 2020 i Abstract Rapid growth in the use of drones potentially delivers significant economic benefits, but it has also given rise to considerable public concern about safety risks, infringement of privacy, and other unwelcome surveillance and observation. Drones are able to be operated remotely from the pilot, mak- ing it difficult to identify the operator and attribute liability for harm caused. This in turn means that existing regulatory frameworks might not induce an efficient level of drone-related harm. The first substantive chapter of this thesis considers measures to ad- dress concerns about privacy and surveillance. I propose the adoption of a package of measures including: tort law reform, the promulgation of a \Code of Practice for Drone Operations" under New Zealand's Privacy Act 1993, a remotely-readable identifier to identify approved operators, provi- sion for aerial trespass by unmanned aircraft, provision for the destruction of unmanned aircraft committing trespass, and the clarification of what constitutes a privacy violation by broadcast or closed-circuit television and video systems. Fundamental to those proposals are the concepts of drone registration and the legalisation of the right to self-defence against drones. Registration requires that a drone is registered with the regulatory authorities, with a registered drone being traceable back to the owner of the drone. Registered drones may also be required to carry a remotely-readable identifier. Leg- alisation of self-defence allows bystanders to take defensive actions against drones, with the potential for a drone to be destroyed. Both of these mech- anisms provide a means by which the operator of a drone faces some cost if they are causing harm, and thus may induce more efficient actions by the drone operator. This thesis establishes a theoretical framework for self-defence, regis- tration, and registration in conjunction with self-defence. Conditions are established under which each will be the preferred form of regulation. It is also established that the status quo, with neither registration nor self- defence, is likely to be optimal when harm from drone activity is relatively low. The conditions established around when self-defence is efficient also provide the conditions for the regulation of counter-drone systems. I identify the legal impediments to the implementation of drone-detection systems and counter-drone systems in New Zealand, and propose a regulatory frame- work to allow the adoption of those systems. ii Acknowledgments I wish to express my gratitude to my supervisor Emeritus Professor Lew Evans for his support and advice, commencing from when I first approached him with the idea of writing a Masters' thesis on the regulation of un- manned aircraft. His questioning led me to expand the scope of my thesis from purely safety-related matters to consider a much wider breadth of harm potentially caused by drones, including privacy violations and the effects of surveillance, and then further increase the depth of my thesis so that a PhD was more appropriate. I also wish to thank my secondary supervisor, Dr Paul Calcott, who be- came part of my supervisory team when I changed from a writing a Masters' thesis to writing a PhD thesis. Paul introduced me to the wonderful world of LaTeX and python, as well as providing guidance to my model build- ing to help achieve a more structured result. He both encouraged me to simplify my model building and suggested new lines of enquiry. I approached the oral defence not really knowing what to expect; Pro- fessor Evans and Dr Calcott assured me that I had nothing to be concerned about, but at some level I half expected the process to be something like a cross-examination in the High Court. As it turned out, my oral defence was an enjoyable affair, and one that I would happily repeat again. Thank you to Professor Nicholas Agar who chaired the committee: the tone you set made it easy to relax and focus on the task at hand. Thank you also to the examination committee - Professor Robert Hahn, Professor Basil Sharp, and Dr Vladimir Petkov - both for making the examination process enjoyable and for your helpful comments for future publications. I would also like to thank Air Commodore Steve Moore (retired) for his initial topic suggestion. I was talking to Steve in the officer’s mess at RNZAF Base Ohakea soon after he had taken up the position of Deputy Director General Aviation at the Civil Aviation Authority. When I asked him what questions would be of most interest to him in his new role, he suggested that the regulation of unmanned aircraft, particularly the insti- iii iv tutional arrangements for regulating safety. This thesis is probably not quite what he had in mind, but his suggestion provided the basis for this entire endeavour. Thanks also go to Nicola McCloy for her assistance in editing several of the papers produced as part of this thesis, and the helpful comments she offered as part of that process. I must also thank the various anonymous peer reviewers of those papers: even when I disagreed with their com- ments, they always helped me refine and strengthen my arguments, and on occasion to discard lines of argument that lacked robustness. Finally, I would like to thank Heather Andrews for introducing me to the world of aviation and aviation regulation. That began a journey of writing manuals of operating procedures (expositions) for scenic flight operators and Adventure Aviation operators, and ultimately to writing expositions for drone operators, teaching drone operators, and working with the emerging realm of drone regulation. Without that introduction I would never have embarked on writing this thesis. Contents Contents v 1 Introduction 1 1.1 Potential for Harm . .2 1.2 Attribution of Liability . .3 1.3 Research Questions . .4 1.4 The Utility of Law and Economics Predictions . .5 1.5 Thesis Structure . .8 References . 11 2 Proposals to Address Privacy Violations and Surveillance by Unmanned Aerial Systems 15 2.1 Introduction . 15 2.2 Civil Aviation Regulation . 18 2.2.1 Part 101 Rules . 19 2.2.2 Certificated Operators . 19 2.3 Trespass . 20 2.3.1 Intent . 20 2.3.2 Rights to Airspace . 21 2.3.3 Remedies . 22 2.3.4 Summary . 25 2.4 Privacy . 25 2.4.1 Privacy Torts . 26 2.4.2 Privacy Act 1993 . 30 2.4.3 Uncertainty over Privacy Violation . 34 2.4.4 Crimes Act 1961 and Summary Offences Act 1981 . 35 2.4.5 Law Commission Privacy Project . 35 2.4.6 Summary . 36 2.5 International Experience . 37 2.6 Reform Proposals . 39 v vi CONTENTS 2.6.1 Tort Reform . 40 2.6.2 Code of Practice for Drone Operation . 40 2.6.3 Encoded Radio Frequency Identification . 41 2.6.4 Strengthening the Privacy Act 1993 . 43 2.6.5 Self-Help . 43 2.6.6 Criminal Sanction . 47 2.7 Conclusion . 48 References . 50 3 A Model of Self-Defence against Drones 59 3.1 Introduction . 59 3.2 Literature Review . 61 3.2.1 Externalities and Negligence . 61 3.2.2 Ex Ante Regulation . 64 3.2.3 Malicious and Reckless Action . 66 3.2.4 The Need for Self-Defence . 67 3.2.5 Counter-UAS Technology . 69 3.2.6 Legal Issues . 72 3.3 Model . 73 3.3.1 General Setup . 74 3.3.2 Simultaneous Interaction . 75 3.3.3 Drone Operator as Leader . 87 3.3.4 Bystander as Leader . 90 3.4 Numeric Example . 94 3.4.1 Parameter Values . 95 3.4.2 Simultaneous Interaction . 97 3.4.3 Drone Operator as Leader . 104 3.4.4 Bystander as Leader . 105 3.5 Discussion . 106 3.5.1 Theoretical Analysis . 106 3.5.2 Numeric Analysis . 107 3.5.3 Registration . 109 3.5.4 Policy Implications . 109 3.6 Conclusion . 110 3.A Mathematical Appendix: Simultaneous Model . 113 3.A.1 Derivation ofs ^ ..................... 113 3.A.2 Derivation ofq ^ ..................... 113 3.A.3q ^m ands ^H ........................ 114 CONTENTS vii 3.A.4 Lemma 6 . 115 3.A.5 Lemma 7 . 117 3.B Mathematical Appendix: Drone Operator as Leader . 120 3.B.1 Equilibrium . 120 3.B.2 Proof of Lemma 12 . 122 3.B.3 Proof of Lemma 13 . 123 3.C Mathematical Appendix: Bystander as Leader . 124 3.C.1 General Form of the Equilibrium . 124 3.C.2 Equilibrium s ...................... 125 3.C.3 Proof of Lemma 17 . 126 3.C.4 Proof of Lemma 18 . 127 3.D Numerical Analysis for Leader-Follower Models . 128 3.D.1 Drone Operator as Leader . 128 3.D.2 Bystander as Leader . 131 3.E Data . 135 References . 139 4 Registration of Drones 147 4.1 Introduction . 147 4.2 Aviation Regulation . 151 4.2.1 Licensing and Registration within the Civil Aviation Regulatory System . 151 4.2.2 Regulation of Drones . 155 4.3 Remote Identification Technologies . 163 4.3.1 Primary Surveillance Radar . 163 4.3.2 Secondary Surveillance and ADS-B . 164 4.3.3 DJI's Aeroscope . 165 4.4 Model: Registration of Drones . 166 4.4.1 General Setup . 167 4.4.2 Activity . 168 4.4.3 Conditions to Fly . 169 4.4.4 Activity and Utility with No Identifier . 171 4.4.5 Activity and Utility with an Identifier . 172 4.4.6 Operator's Choice . 173 4.4.7 Welfare .