Space Law and Arbitration: Dispute resolution mechanisms for space-related disputes

This is the first article in Clyde & Co’s latest international arbitration series covering the topic of Space Law & Arbitration. In this piece, Special Counsel Darcy Beamer-Downie and Associate Leonor D’Albiousse discuss why arbitration is well suited to deal with space related disputes.

Since 1959,¹ Outer Space has been a place of international cooperation by virtue of various international legal agreements.² Space is often described as the “final frontier” and although there are no life forms in space (as far as we are aware) it was nevertheless agreed, via the auspices of the UN, that there ought to be rules regarding space activities. Consequently, rules governing space were put in place before the first space boot made its impression in the moon regolith. Consequently, outer space and celestial bodies are subject to a suite of successful public international law UN treaties,³ the most important being the 1967 Outer Space Treaty (“OST”) and the 1972 Liability Convention (“LC”) both of which are often referred to as the constitution of space. 

In this article, we will discuss why arbitration is well suited to deal with space related disputes arising between (i) private contracting parties and states, (ii) non-contracting parties (i.e. third parties), and (iii) State parties and (iv) States and private parties. This discussion will inevitably lead to the conclusion that in some respects, the existing international space law instruments are not fit for modern times, mainly as they relate to dispute resolution as between private parties. The fundamental reason being that only states and international governmental organisations are permitted to access the dispute resolution procedures in the treaties. Be that as it may, these defects are not fatal to the underlying structural integrity of the UN space law treaties and thus does not give rise to any justification to abandon them – they remain binding international law and thus govern our space activities. 

Before we discuss the issues of dispute resolution options in relation to space activities some context is required. The drafters of the OST deliberately set out some parameters to safeguard the future use of space by expressly stating that “exploration and use of outer space” [Art 1 OST] and the activities “shall be carried out for the benefit and in the interests of all countries, irrespective of their degree of economic or scientific development and shall be the province of all mankind.” In addition, Article 1 stipulates that “space… shall be free for exploration and use by all States without discrimination of any kind, on the basis of equality and in accordance with international law, and there shall be free access to all areas of celestial bodies …” and finally Article II of the OST states that there is no sovereignty in space, that is to say Space “…is not subject to national appropriation…” These are critically important international law principals that are designed to both permit access to space, for all, and to curb the worst excesses of those who may wish to exploit space to the exclusion of others. In contrast to the land grabs of the '"new world"  when Europeans discovered the Americas, it is important to remember space is not a lawless frontier, and states and private actors are not free to act as if it is. 

Old Space v. New Space

The existing international space law framework was developed in a time when access to space was exclusively via government space programs such as NASA and ROSCOSMOS. It was not foreseen that private actors would be in the position to access space entirely on their own. ‘Old Space’ can roughly be placed from around the 1950’s to early 2000’s and this was a time when private companies were working with national space programmes and private companies bought launch services on state-owned and operated rockets. 

But things have changed and are somewhat reversed, in that there are now private launch companies undertaking a variety of independent commercial space activities including providing launch services to both government and private actors. This is the New Space economy. 

The New Space economy is said to be worth about $546 billion in 2022, with about 75% of this revenue generated by the Satellite industry, for the space-for-earth economy, i.e., for goods or services produced in space for use on earth.⁵ In relation to the extraction of resources in space, there are eye watering numbers being bandied about in the thousands of quadrillions of dollars.⁵

Private contracting parties and States 

The commercial space industry operates in the same way as any other industry in that most of the work and employees are all earth based. There are however a few unique features of the space industry not least the fact that space activities are often collaborative between various multinational companies, either to produce the product or provide the services. The product (for example a satellite) is often subject to strict confidentiality and technology restrictions. The international nature of the space industry is thus well suited to arbitration as it provides far more flexibility than would court proceedings. Arbitration permits the parties to agree key things such as the characteristics of their neutral tribunal, the seat of the arbitration (for example to avoid a lengthy post award appeals process), agree the procedural timetable, including how sensitive documents will be dealt with. In addition, the parties may choose an arbitral institution to administer the arbitration, for example the ICC⁶ or the LCIA,⁷ which can expedite proceedings and have a tried and tested process in place.

In recognition of the suitability of arbitration to space related disputes, the Permanent Court of Arbitration (“PCA”) in 2011 published its Optional Rules for Arbitration of Disputes Relating to Outer Space Activities.⁸ The PCA rules are designed specifically to provide a voluntary and binding dispute resolution mechanism available to all those in the space sector. As far as we are aware, there has not been a great uptake of the PCA space rules and there have been no reported arbitrations in accordance with these rules. Another important consideration is that arbitration provides for an enforceable award pursuant to the New York Convention on the recognition and enforcement of international arbitral awards. 

Non-contracting parties, third party space losses (no contractual link) 

The commercial space industry, specifically in relation to the satellite market, has been slow to mitigate potential third-party losses from possible satellite collisions, with a lack of development of space situational awareness systems and uniform satellite debris removal. The UN Office for Outer Space Affairs maintains an index of objects launched into outer space, and they report that there are over 9,000 individual satellites in various orbits (inactive and active). With that number of satellites in orbit, incidents between parties that have no contractual relationship (third party incidents) which cause damage either in-orbit or on the surface of the earth will be increasingly inevitable. 

Satellites colliding with each other, space debris causing damage or even frequency interference between satellites can lead to serious economic harm and as it stands existing international space law is not equipped to deal with this effectively with no effective dispute resolution mechanism and thus no realistic remedy for a damaged third party – either against a private party or a state responsible. The reason for this is that the drafters of the OS and the LC did not anticipate that private actors would play such an active and independent role in space. 

Currently, the dispute resolution mechanisms available in respect of third-party space claims must be made through diplomatic channels [LC Art IX] thus requiring a willing state to act on behalf of the damaged third party to bring the claim. In short, a damaged third party that is not a state party or intergovernmental organisation is not afforded a direct cause of action against the responsible party.⁹ 

The LC does stipulate that a launching state “shall be absolutely liable to pay compensation for damage caused by its space object on the surface of the earth or to aircraft in flight.” [LC Art II]. Fault-based liability arises for proven damage caused by a space object of a launching state “elsewhere than on the surface of the earth” to a third-party space object, person(s) or property [LC Art III/IV].¹⁰ The fact that liability and damages is based on the condition of an establishing fault could prove to be a real challenge for a claimant. 

The LC stipulates that compensation for damage is to be based on “principles of justice and equity” and damages are to be assessed on the basis that a party is restored to the position as if the damage had not occurred [Art XII]. 

If a damaged party is unable to reach a settlement, they (or indeed the other party) can establish a claims commission [Art XIV]. The claims commission will then be tasked with deciding the merits of the claim and determining the quantum payable. This process is complex and burdensome, and it has not been used often, which demonstrates that it is no longer fit for purpose in the New Space economy. Private actors who may be damaged could in fact be denied a remedy entirely as according to the LC they must rely on the political will of a state in order to advance their claim. 

The lack of an effective third-party dispute resolution mechanism could be remedied if the damaged party were able to access a pre-agreed specific and independent dispute resolution process. As stated above, arbitration is well suited to provide that mechanism. There have been various suggestions as to how to remedy this situation. One proposal is for states, through their internal launch licensing process, to require applicants to adopt a pre-established arbitration protocol to deal with disputes. This suggestion would mean in practice that each state is free to adopt the protocol or not which could lead to inconsistencies of application and accessibility; damaged third parties would have no assurance of receiving uniform treatment. 

These issues are not new and in 1998 the International Law Association (“ILA”) adopted a convention on the settlement of disputes related to outer space activities.¹¹ The convention offers up three different and binding dispute resolution options: (i) a Space tribunal, (ii) the ICJ dealing with state-to-state disputes; and (ii) an arbitral tribunal. Arbitration is stipulated as the default mechanism if the disputing parties are unable to agree on any process. The convention has not been adopted and the general consensus is that it was ahead of its time. An agreed international convention would be more effective and likely to deliver consistent results. However, given the current geopolitical climate it is not likely that a consensus on a binding treaty could be reached. 

State to State disputes

Many intergovernmental organisations operating in the space sector such as the International Telecommunications Satellite Organisation Agreement, the European Telecommunications Satellite Organisation, and the International Mobile Satellite Organisation and others have already concluded that arbitration is their preferred dispute resolution mechanism and have included arbitration in their agreements. In some instances, the choice of arbitration is mandatory and sometimes it is in the parties’ discretion. 

Future Disputes

As previously mentioned, the international law position is that space is to be open and free for exploration and “use by all States and without discrimination of any kind, on the basis of equality and in accordance with international law.” It is conceivable therefore that states or even its nationals who consider that their access to space is being restricted, say for example in relation to access to space resources, may be inclined to take action to protect their rights of access granted pursuant to the OST. 

In addition, the New Space economy is seeing the rise of private investors in space enterprises and it is not unusual for states, who have their own space programmes, to partner with private investors. Consequently, in the event of a dispute, the parties can rely on the dispute resolution mechanism contained in their commercial contracts. In addition, private investors may be able to bring a binding arbitration claim against the offending state in accordance with any relevant investment treaties. Indeed, there have been several reported investors dispute arbitrations heard via PCA and ICSID. 

Conclusion

When the existing international space law was agreed, in the sixties and seventies, there were only a handful of nations who could realistically access space through their national space programmes. However, things have moved on since then and private actors are now regularly accessing space entirely independently. As mentioned in this article, there are many ways disputes can arise between the different players in the space sector and in general, arbitration is well placed to address these challenges. A third party who is damaged and has no contractual recourse is particularly poorly served by the existing regime. Given the increase in space activity, these actions are likely to arise more frequently and there is a pressing need to develop a binding and uniform mechanism to hear such disputes which the arbitration process would be well suited to address. 

This series will continue next week with a perspective on Space Law and arbitration in France and Luxembourg.

¹ See General Assembly of the United Nations set up an Ad Hoc Committee as its subsidiary body, with the aim to deal with space matters. Between 1959 and 1962, the Committee for Peaceful Uses of Outer Space (Ad Hoc Committee for Peaceful Uses, then COPUOS) released three important resolutions: Resolution 1472 (XIV) (12 December 1959) and Resolution 1721 (XVI) (20 December 1961), both concerning international cooperation in the peaceful uses of outer space; and Resolution 1962 (XVIII) (13 December 1963) concerning the legal principles governing the activities of states in the exploration and uses of outer space.

² Suite of United Nations Treaties: 1967 – Short name: “The Outer Space Treaty (OST), 1968 –short name: “the Rescue Agreement”, 1972 –short name: “The Liability Convention”, 1975 –short name: “The Registration Convention, 1979 – short name “The Moon Agreement”. 

³ 1967 – Short name: “The Outer Space Treaty (OST), 1968 –short name: “the Rescue Agreement”, 1972 –short name: “The Liability Convention”, 1975 –short name: “The Registration Convention, 1979 – short name “The Moon Agreement”. 

⁴ Space Foundation report. 

⁵ NASA estimates from the asteroid Psyche (about 280km wide) which they will start mapping in 2029. 

⁶ International Chamber of Commerce

⁷ London Court of International Arbitration

⁸ The PCA Outer Space rules are based on the 2010 UNCITRL Arbitration Rules. 

⁹ Please note that the ability to identify who caused the damage in orbit may be very difficult to ascertain. 

¹⁰ Note that there it is unclear if in fact the liability provision of the OST /LC apply to private actors and also whether they can rely on them. Unhelpfully, gaps in the OST/LC have highlighted gaps and confusion.

¹¹ ILA, task force headed up by Prof Karl-Heinz Bockstiegel called “The Final Draft of the Revised Convention on the Settlement of Disputes Related to Outer Space Activities. The convention anticipated that the court or tribunal will have wide powers to interpret international agreements and given the likely complex nature of some space disputes the tribunal can appoint an expert to assist the tribunal. This would be in addition to party appointed experts.