Disputes in space – The next frontier?

This emerging sector presents new and potentially lucrative opportunities but businesses and state players are entering into largely unknown territory. Aside from sizeable business risks of a nascent industry relying on complex technology and challenging logistics, substantial legal risks exist. Potential issues such as satellite collisions, disputed ownership of resources and space debris causing damage to property – or even life – are just some complications that could give rise to disputes.

However, existing international space law is widely regarded as outdated, as it was established at a time when states were the only players on the field, without significantly developing to account for the emergence of private parties who are now actively participating in this industry.

Nevertheless, stakeholders in this sector remain undeterred and continue to invest. Reliable and enforceable dispute resolution mechanisms are essential to protect these investments and mitigate the risk of losses. Given the nature of the sector, legal claims could arise between contract counterparties; private third parties; states; or states and private parties. This article explores the existing legal framework, the nature of disputes that may arise in this sector and how they can be resolved.

Existing legal framework

There are five key UN treaties that set out the international law framework for activities in outer space, devised between 1967 and 1979 – over 40 years ago. The principal treaty is the 1967 Outer Space Treaty (OST), which has been ratified by 115 states.

The key principles set out in the OST are:

The OST places obligations on states and requires them to assume responsibility on behalf of their respective non-state players. Private parties are not directly bound by the obligations that arise out of the OST.

The other treaties largely build on the foundations of the OST, as well as expand on its aims and objectives. Of particular relevance in the context of dispute resolution is the 1972 Liability Convention (LC). As well as setting out further detail of the circumstances in which states are liable for objects launched into space, the LC provides that compensation claims can be brought between states through diplomatic channels (Article IX). If this fails, claims can be determined by reference to a Claims Commission (Article XIV), which decides the merits of the claim and determines the amount of compensation payable (Article XVII). The decision of the Claims Commission is final and binding only if the parties have agreed (Article XIX). Claims under the LC are restricted to claims for "damage" as defined in the LC, which includes loss of life, personal injury and damage to property, but does not expressly include other losses such as loss of profits.

For example, the introduction of a set of bespoke arbitration rules from the Permanent Court of Arbitration (PCA) in 2011 for space disputes was the first of its kind within the arbitration community. Since then, the Dubai International Financial Centre (DIFC) launched its Courts of Space in 2021 to cater to the rising demand for a specialist forum to resolve space-related disputes.

Despite these developments, a key hurdle private parties face is establishing the jurisdiction of these specialist forums. For example, in the absence of a pre-existing arbitration clause, submission to arbitration before the PCA is contingent on the agreement of the parties after a dispute has arisen. The same jurisdictional issue applies to the submission of disputes to the DIFC Courts of Space.

If two satellites were to collide in space, the route for seeking redress may present a significant issue and will depend upon the relationship (if any) between the parties involved.

Resolving disputes

For parties who have a contractual relationship, the contract should set out an agreed dispute resolution mechanism. Often, this will be international arbitration. The features of international arbitration mean that it is a popular dispute resolution method for commercial parties contracting in the space sector. In particular, the international nature of the field means that the neutrality of an independent arbitral tribunal is attractive, as is the ability to enforce an arbitral award around the world under the 1958 New York Convention. In addition, the privacy of arbitration can help to protect confidential and sensitive technical information central to the sector. If a dispute arises between parties that have agreed to arbitrate, they can be confident they can obtain a final and binding resolution.

The rapid and ongoing commercialisation of space gives rise to the risk of physical and economic damage caused by or to third parties. Damage could be caused by failed launches or re-entries, or by collisions in space, which increase in likelihood as space debris proliferates in the form of discarded rockets, non-operational satellites and other material. The third party could be a state, another commercial actor or even the public. For example, a family in the US recently sought compensation from NASA for damage to their house caused by falling space debris. In the absence of a contractually agreed dispute resolution method, or an international space law framework for private parties, each case will fall to be determined based on applicable conflict of laws principles, which could be complex for damage suffered in space.

The OST provides that the states parties will bear international responsibility for national activities in outer space, whether carried out by government or non-government entities. However, it contains no dispute resolution provisions other than a reference to consulting in advance if one state party considers that another state party's activity will cause harmful interference with other activities in space. The Liability Convention contains provisions on liability and a formal process for dispute resolution but this process is only binding if both states agree. In the end, the outcome of any dispute is likely to depend heavily on diplomatic channels.

As mentioned above, a private actor wanting to enforce the provisions of the OST or LC would need to do so through a state party. This could be difficult and will be subject to political factors. In any event, the result of the process would not necessarily be final and binding.

Rather than relying on state-to-state diplomacy, investors who suffer loss due to state actions typically look to the availability of investment treaties, which often contain state consent to arbitration. The extent to which protections given by investment treaties will extend to investment in the space sector remains to be seen. One complicating factor is likely to be the typical threshold requirement in investment treaties that the investment is made "in the territory of" the host state. This may require a more complex analysis for investments in the space sector than other industries, given the nature of the assets in question.