Applicable Law in Investor-State Space Arbitration

What is the applicable law in Investor-State space arbitration? Investor-State tribunals routinely determine the procedural and substantive laws applicable to an arbitration by reference to applicable law clauses in the relevant instrument of consent or, in the absence of an express choice of law, by reference to governing law provisions in the applicable arbitral regime. 

For instance, Article 42 of the ICSID Convention provides that “[t]he Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.” (emphasis added)

Similarly, Article 35 of the PCA Optional Rules for Arbitration of Disputes Relating to Outer Space Activities provides that “[i]n resolving the dispute, the arbitral tribunal shall apply the law or rules of law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall apply the national and/or international law and rules of law it determines to be appropriate.” (emphasis added)

In investor-State space arbitration, as in investor-State arbitration more generally, the primary substantive law applicable to the merits of the dispute is international law (usually the applicable treaty), but other legal regimes may apply to discrete issues in dispute. In investor-State space disputes, international space law is an added normative source that tribunals may consider in interpreting an applicable treaty, but this integration is of course not without challenges. In this blog post, we identify the major sources of public international law that might be relevant to an investor-State space arbitration.

Further, we trace key legal developments in national law regimes on outer space activities. With the increasing private participation in commercial space activities, countries have regulated private actors by formulating national space laws concerning licensing and resource exploration and use. These laws form part of the basis on which investors rely to invest in host States in the space sector.

Finally, as with any other economic industry, investors in the space sector are free to enter into agreements with States and other private persons that can affect the applicable law to an investor-State space arbitration.

Public International Law

Article 38 of the Statute of the International Court of Justice identifies the sources of law that the ICJ must apply in determining disputes in accordance with international law, including: (a) international conventions; and (b) international custom. Notably, whilst international conventions are binding on States party to them, subject to discrete exceptions, customary international law is applicable to all States. In the context of outer space activities, there are several international law instruments that are relevant to consider in an applicable law inquiry.

International space treaties

International space treaties form the bulwark of the international law on outer space. Formulated in the backdrop of the Cold War with outer space being a preserve of governments, these treaties did not envisage the possibility of private commerce in outer space. For instance, in the context of commercial outer space activities, these treaties are silent as to the permissibility of ownership of natural materials in the course of exploration and use of celestial bodies. However, certain principles arising out of the treaties are instructive:

• Outer Space Treaty (1967): The Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (the “OST”) forms the bedrock of international space law. It provides that: (a) the exploration and use of outer space shall be carried out for the benefit and in the interests of all countries and shall be the province of all mankind; (b) outer space is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means; (c) States shall be responsible for national space activities whether carried out by governmental or non-governmental entities; (d) States shall be liable for damage caused by their space objects; and (e) States shall avoid harmful contamination of space and celestial bodies.
• Liability Convention (1972): The Convention on International Liability for Damage Caused by Space Objects establishes the standards of liability for damage caused by space objects and provides for a claims commission to resolve disputes.
• Other treaties: The Rescue Agreement (1968), the Registration Convention (1975) and the Moon Agreement (1979) form the rest of the international space treaties covering rescue of astronauts, registration of space objects and application of the OST to the Moon and other celestial bodies respectively.

Customary international law

Considering the limited scope and outdated nature of the outer space treaties, parties may seek to use international custom as an effective source of law for outer space in the following ways:

• Adaptation of existing CIL principles: there are several principles of customary international law (“CIL”) that are relevant to outer space. For instance, the CIL in other areas of international law such as salvage principles in international maritime law might be applied to international space law.
• Instant custom: it has been argued that given that only a miniscule number of countries engage in outer space activities, the twin CIL requirements of state practice and opinio juris can be satisfied “instantly” in the case of international space law. Under this view, instant rules of CIL in space law might emerge from unilateral acts of States or from international agreements, including United Nations General Assembly resolutions such as the Declaration of Legal Principles (1963), the Remote Sensing Principles (1986), the Nuclear Power Sources Principles (1992) and the Benefits Declaration (1996).

Bilateral and plurilateral agreements

There are plurilateral agreements between countries that impact the use and exploration of outer space including:

• The International Telecommunication Union Constitution, Convention and Radio Regulations governing the allocation of global radio spectrum and satellite orbits; and
• The Artemis Accords which set out the Principles for Cooperation in the Civil Exploration and Use of the Moon, Mars, Comets, and Asteroids for Peaceful Purposes. Originally signed by Australia, Canada, Italy, Japan, Luxembourg, the UAE, the UK, and the US, the Artemis Accords emphasize that space resource extraction and utilization should be conducted in a manner that complies with the OST.

Soft law instruments

Lastly, there are soft law instruments under international law such as Guidelines and Reports of the United Nations Committee on the Peaceful Uses of Outer Space (the “UNCOPUOS”). For instance, the UNCOPOUS formulated Guidelines for the Long-term Sustainability of Outer Space Activities in 2018 requiring States to, among other things, adopt, revise, and amend, as necessary, national regulatory frameworks for outer space activities to enhance sustainability and safety.

National Law

Several states have passed laws to regulate the exploration and extraction of space resources. These laws cover key issues such as licensing regimes, the right to prospect, explore and mine space resources and resulting property rights of such space resources. Some recent national laws on space resources are set out below:

• United States: The United States (the “US”) passed the Commercial Space Launch Competitiveness Act in 2015 (the “CSLCA 2015”) which grants American companies, ownership of the space resources that they extract. This is arguably in contravention of the OST’s non-appropriation principle. In Section 403 of the CSLCA 2015, the US contends that it does not assert sovereignty or exclusive rights or jurisdiction over, or ownership of, any celestial body.
• Luxembourg: To become a European hub for space resource exploration, Luxembourg adopted its Law on the Exploration and Use of Space Resources in 2017. Like the CSLCA 2015, it grants Luxembourg companies ownership of space resources that they extract.
• UAE: In 2019, the UAE passed its Federal Law No. 12 of 2019 on the Regulation of the Space Sector. Notably, one of the avowed goals of UAE’s space law is stimulating investment and encouraging private sector participation in the space sector activities.
• Japan: Japan passed its Law Concerning the Promotion of Business Activities Related to the Exploration and Development of Space Resources 2021 setting out a licensing regime for granting Japanese companies to prospect, extract and use space resources.

The extent to which these laws comply with the OST’s non-appropriation principle is unclear. It has been contended that the laws do not make any territorial claims or assert sovereignty over any celestial body. However, considering the absence of an express prohibition of use of space resources under the OST, national laws such as the CSLCA 2015 may inform both the ongoing interpretation of the OST and the content of customary international law.

Private Contracts

In line with the principle of party autonomy, parties to an investment or other agreement are free to choose the law governing the obligations contained in that agreement. In doing so, the parties must consider the implications of their choice. However, the choice of law in the parties’ agreement would be the clearest exposition of their intention in this regard, in particular if the parties also expressly designate that their choice of law would prevail in the context of an investor-State dispute.

So What is the Applicable Law to Investor-State Space Arbitration?

Considering the various sources of law that might be applicable in an investor-State space case, it will be important for tribunals to approach choice of law issues in a careful and consistent manner. This entails considering which legal norms are applicable to particular issues in a given dispute, as well as a search for harmonization a method for resolving any potential conflicts in legal norms. 

In performing this exercise, a recognized hierarchy of legal norms in international space law, based on the existing hierarchy of legal norms in general international law, is likely to emerge. The weighing of sources of law and their contents will need to be done on the particular facts of each case.

The first blog post of this series on investment protection of space assets is accessible here. The last blog post of this series examines the suitability of existing arbitral rules and courts specializing in dispute resolution in respect of commercial space activities including the PCA Optional Rules for Arbitration of Disputes relating to Outer Space Activities and the DIFC Courts of Space. It also considers whether a specialized institution will be ideal for investor-State arbitration in the space sector. It will be accessible here. 

For those interested in investor-State space arbitration, the Space Arbitration Association held a panel discussion on “Can Space Arbitration Protect Space Investments?” on Friday, 2 September 2022. You can view the panel discussion online here.

You might also like