Investment Protection of Space Assets

The first major international space treaty, the 1966 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (the “Outer Space Treaty”) recognizes that “the exploration and use of outer space… shall be the province of all mankind” (Article I). In the decades following the Outer Space Treaty, international investment arbitration has emerged as a powerful tool to check State conduct towards foreign investors in industries such as infrastructure, energy, financial services, and technology.

More than half a century later, the increasing involvement of private commercial parties in outer space activities is testing the boundaries of investment arbitration and international space law. Today, private actors are investing significant financial and technical resources in the space sector, including telecommunications satellite services, space tourism, and resource exploration and mining. 

Although the traditional methods of inter-State dispute settlement remain cumbersome, foreign investors in the space sector may be able to seek investment protections under bilateral investment treaties (“BITs”) and other international investment protection agreements. The application of investment protections in their current form to space assets raises issues of first impression, but arbitral practice has shown that investment arbitration may be used by countries to incentivise and regulate investor behaviour and may find application in commercial space activities. 

With this in mind, we will explore various themes on the challenges and opportunities for investment arbitration in the space sector over three blog posts. In the first blog post of this series, we look at the application of the investment protection regime in relation to space assets and recent investment treaty practice in the space sector.

Are Space Assets “Investments”?

To exercise jurisdiction over a claim, an investor-State tribunal must determine whether there is a protected “investment” made by a foreign “investor”. Most investment treaties contain an “asset-based definition” of “investment” which includes a non-exhaustive list of protected assets. These often include movable and immovable property, shares and financial instruments, intellectual property rights, claims to money, licenses, and concessions, among other types of assets. Tribunals have also sometimes held that investments need to satisfy certain other characteristics such as duration, assumption of risk, commitment of capital, and contribution to the economic development of the host State.

Given the highly complex nature of commercial space activities, significant contribution of capital and risk is typically involved. Further, commercial space activities such as satellite telecommunications are often long-term projects requiring investment over a considerable period. Commercial space activity also often furthers the host State’s own objectives and goals of economic development. Key types of space assets that might qualify as “investments” include satellites and other equipment, contractual rights and licences, and participation in licensed entities operating in the host State.

Territoriality of Space-Based Assets

Investment treaties often require investors to demonstrate that there is an “investment” in the “territory of the host State.” The analysis for tangible assets is usually straightforward with territoriality being determined by the situs of that asset. In investor-State space arbitrations, however, with physical assets such as mining equipment or satellites operating in outer space, challenges with satisfying that territoriality requirement are not unexpected. 

An added layer of complexity is the international space law regime. Notwithstanding that outer space “is not subject to national appropriation by claim of sovereignty” (Article II, Outer Space Treaty), States retain “jurisdiction and control” over any object launched into outer space on their registry (Article VIII, Outer Space Treaty). If outer space is not subject to sovereignty and territoriality claims, respondent States may take the position that the space activities are outside of the territory of the host State (even if such activities are within the host States’ control). Whilst the interpretation of the treaty text is likely to turn on the wording of the specific treaty, investors may in turn attempt to advance the argument that “territory” for the purposes of BITs would include any physical space within the host State’s jurisdiction or control. How a tribunal would receive such an argument remains to be seen. 

Investors may seek to rely on intangible assets (such as licences and contractual rights for commercial space activities obtained under the host States’ licensing regimes) as qualifying investments. In doing so, the mandate of the 1974 Convention on Registration of Objects Launched into Outer Space (the “Registration Convention”) requiring member States to set up registries of space objects might offer some guidance.

An added challenge for investor-State space arbitration is that whilst the Registration Convention requires the “launching State” to register a space object launched from its territory, most space projects involve multiple jurisdictions – for instance, in the telecommunications sector, a satellite may be launched, controlled, and provide services to three different countries. Given this feature of modern space investment, the assessment of territoriality would appear to require a case-specific assessment to determine the degree of territorial nexus with the relevant State. 

Investor-State Cases in the Space Sector

Notwithstanding the scant number of investment arbitrations in the space sector, there are important lessons that emerge from recent practice. Perhaps unsurprisingly, the publicly available decisions thus far concern claims by satellite companies operating in the telecommunications industry.

The Devas-Antrix saga which began in 2011 and yielded multiple arbitration and litigation proceedings across jurisdictions, gave rise to one of the first investor-State space cases. The shareholders of Devas Multimedia Private Limited (“Devas”) brought claims against India under the India-Germany BIT (Deutsche Telekom AG v. The Republic of India, PCA Case No. 2014-10) and the India-Mauritius BIT (CC/Devas (Mauritius) Ltd., and others v. The Republic of India, PCA Case No. 2013-09) for the alleged expropriation of their investments and breach of other treaty standards.

The underlying contractual breach alleged in both cases arose from the same contract: Devas entered into an agreement for the lease of space segment capacity on two Indian satellites with a state-owned company, Antrix Corporation Ltd. (“Antrix”) in 2005. Following the decision of India’s Cabinet Committee on Security to reserve the S-band capacity for defence and other strategic use, Antrix terminated the lease agreement. This termination gave rise to an ICC international commercial arbitration and multiple BIT arbitrations. Notably, the ICC award which required Antrix to pay Devas over US$500 million in damages was recently set aside by the Delhi High Court on grounds of patent illegality and violation of Indian public policy.

The BIT cases from the Devas-Antrix saga addressed the following issues of note:

• Indirect investments: Both tribunals interpreted the unqualified definition in the BITs to include indirect investments. Resultingly, the Claimants’ “shares in, stock and debentures of” and “any other form of participation” in Devas and their indirect partial ownership of Devas’ business assets were “investments”.
• Essential Security Interest (“ESI”): Even though both arbitrations arose from the same set of facts, the tribunals reached opposite conclusions on India’s ESI defence. The CC/Devas tribunal accepted India’s ESI defence holding the termination of the lease agreement to be “absolutely necessary” and “unavoidable” as India was in “genuine need” of the spectrum. The Deutsche Telekom tribunal, by contrast, concluded that there was no connection between India’s ESI and Antrix’s decision to cancel the lease agreement. 

The most recent investor-State decision in the space sector stems from an ICSID arbitration between the French satellite operator Eutelsat (formerly an intergovernmental organisation) and Mexico (Eutelsat S.A. v. United Mexican States, ICSID Case No. ARB/AF/17/2). The Eutelsat arbitration, filed under the France-Mexico BIT, concerned claims arising out of alleged discriminatory regulations requiring spectrum allocation for government use. Whilst foreign licensees were required to allocate 8MHz of their capacity for government use, Eutelsat’s Mexican subsidiary was required to allocate 362MHz, which put it at a disadvantage according to Eutelsat. The Eutelsat award is not public. In 2021, however, it was reported that the tribunal had dismissed Eutelsat’s claim for breach of the BIT’s fair and equitable treatment standard.

It has been  argued that international investment arbitration can be used to incentivize commercial space activities, and even be used to address space collisions and space debris. Whilst this remains an open question, foreign investors in the space sector may still consider turning to investment treaties to protect their investments.

In the next blog post, we will examine applicable law issues in space arbitration proceedings. Given the overlap between public international law instruments such as the Outer Space Treaty, soft law instruments including UN General Assembly resolutions, national legal regimes, and private contracts, choice of law and applicable law issues in these disputes are not always straightforward.

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.

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Outer Space Needs Sector-Specific Dispute Resolution

On 10 February 2022, the Space Arbitration Association (‘SAA’) hosted a discussion, surrounding the need for an institution specialized in space disputes. It concluded that outer space needs sector-specific dispute resolution. The panel was moderated by Laura Yvonne Zielinski, Founder of the SAA, and featured Alexis Mourre (Past President, ICC Court), Gunjan Sharma (Partner, Volterra Fietta), Evgeniya Goriatcheva (Senior Legal Counsel, Permanent Court of Arbitration), and Amna Al Owais (Chief Registrar, DIFC Courts). It was the second of a 2022 conference series organized by the recently founded SAA, which has set as its mission to provide a forum for discussion between the space and the arbitration communities.

Special Characteristics of Space Contracts and Disputes

The conference kicked off with the first speaker, Alexis Mourre, who introduced the audience to some of the special characteristics inherent in space contracts and space disputes. He started by setting out the circumstances that can give rise to space disputes in the first place. They can range from accidents in the final stages of testing and commissioning of a satellite or total launch failures, to the incorrect positioning of a satellite, the interruption of transmissions or the loss of power, once a satellite is already in orbit. The disputes that arise could therefore be based on a wide range of contracts, including procurement, launch, and/or insurance contracts.

Alexis Mourre noted that whatever the cause of the problem, space contracts and disputes tend to share common characteristics. The first one is the allocation of risk, a result of the technologically intensive nature of conducting operations in outer space. This often results in practice in clauses excluding or limiting liability. For example, in procurement contracts, this typically takes the form of penalty clauses, which in the case of delayed delivery operate as a cap on a manufacturer’s liability. He emphasized that one key consideration for space contracts must be the choice of the legal regime as this determines whether clauses that exclude liability can, for example, be set aside in cases of gross negligence, and whether a limitation of liability can be increased on an equitable basis when certain conditions are met.

Another very common feature of procurement contracts that Alexis Mourre pointed out are provisions of cooperation between the manufacturer and the seller, as well as the purchaser’s access to information. Typically, procurement contracts allow for the presence of representatives of the purchaser in the manufacturing plant; the organization of joint meetings; regular reporting requirements; and joint decision-making on key issues. These considerations are critical from a purchaser’s perspective since in case of an accident, clauses excluding or limiting the liability of the manufacturer may apply, and the manufacturer would typically rely on an internal investigation, the records of which may not be shared with the purchaser. Any level of control during the manufacturing process is thus key for the purchaser. Further, in Alexis Mourre’s experience, the choice of dispute resolution can also be very important. Arbitration usually only permits disclosure of a narrow category of documents, whereas American court litigation may permit access to court discovery, resulting in much broader access to information. Overall, Alexis Mourre still considered that arbitration was more suited to space disputes than litigation for the main reason that it allows the parties to a dispute to select arbitrators with the necessary technical knowledge of space activities. In his view both, the ICC and arbitration under the Optional Rules for Space Disputes of the Permanent Court of Arbitration (“PCA”), are an excellent choice for institutional space arbitration.

Laura Yvonne Zielinski then asked the panelist several related questions. First, why arbitration is particularly well suited to space disputes, Alexis Mourre provided three reasons: (1) in arbitration, once a matter is decided, that decision is final and can be enforced relying on the New York Convention; (2) in arbitration, the parties will have the advantage of being able to choose specialized arbitrators with experience in the field; and (3) in arbitration, the parties will have greater control over, and thus greater proximity to, the process as a whole. Second, whether mainstream arbitral institutions are well placed to administer space arbitration proceedings. Alexis Mourre replied that in his view what is important is to have space experts as decision-makers and the administering institution should have the necessary experience and resources to appoint such arbitrators if required. Third, whether mediation might have a place in resolving space disputes. Alexis Mourre noted that this would in principle be very desirable since many litigated issues are technical in nature – if only to see whether positions on such issues can be reconciled, or to go to arbitration in a more balanced and informed way. Nonetheless, in his view it is crucial for the mediator to have knowledge of the industry, and the importance of drafting a clear mediation clause cannot be underestimated.

Special Considerations When Pleading Space Evidence to Arbitral Tribunals

Gunjan Sharma continued the discussion by setting out considerations for pleading evidence in space related disputes to arbitral tribunals. In his opinion, there have only been three space arbitrations in excess of USD 100 million: Eutelsat v Mexico; Devas/Deutsche Telekom v India; and Al Jazeera v Egypt. He highlighted that, when pleading such cases to arbitral tribunals, there exist two unique aspects. First, an important source of law in space disputes is public international law, such as the Outer Space Treaty and related instruments, and international investment law. The second unique aspect is the recurring technical evidence, which relates to two aspects of space operations: (1) getting the satellite into outer space, and (2) after the launch, the scientific basis on which that satellite can be used for commercial purposes. Currently satellites are used for two main purposes: Earth imaging and telecommunications. The science, such as the usability of orbital spectrum, the orbital slot, or the terrestrial components of the system, are mere ingredients determining how much money can be pulled out of the system and, relatedly, how much damage one can claim in a dispute. As a result, scientific evidence really becomes the core of space disputes.

Since “lawyers make bad engineers”, Gunjan Sharma therefore recommended to take a five-step approach to pleading space-related scientific evidence before arbitral tribunals: (1) Advise client(s) to prepare for a dispute as early as possible: a lawyer should have plans and procedures in place, such as those concerning evidence collection and making sure that documents are at all times retained; (2) Find the right, neutral expert: a lawyer should know someone who can refer him/her to the right experts for the case (from the International Telecommunications Union, regulators, companies, etc.). An arbitral institution’s list is a good start but the best method is to rely on referrals; (3) Make comprehensive submissions on every aspect of the case (including public international law); (4) Find the right way to cross-examine the other side’s expert: a lawyer should start early to frustrate the other expert’s credibility before the hearing, given the unique challenge of the engineer’s expertise and the tribunal’s likely non-comprehension of the issues; (5) Close well: a lawyer should close in an accurate, concise, and commonsensical way, since tribunal members are not space experts after all.

In response to the question formulated by Laura Yvonne Zielinski on what the best strategy was to explain space law to the arbitral panel, Gunjan Sharma noted that it is necessary to link it to what the tribunal knows, such as public international law. Moreover, on the so-called “name and shame” method to litigation (which involves telling the world who did the damage and hope they stop), he observed that he does not recommend it, since: (1) often there is a lack of evidence to prove the allegations; and (2) if you are wrong, this could possibly result in a defamation suit.

An Introduction to a Mechanism of Space Arbitration: The PCA’s Optional Rules for Arbitration of Disputes Relating to Outer Space Activities

Evgeniya Goriatcheva then proceeded to introduce one of the available specialized instruments for dispute resolution in the space sector: the Permanent Court of Arbitration’s Outer Space Rules (the “Rules”). She highlighted that the Rules were adopted in 2011, the idea having first surfaced in 2009 as a result of: (1) the growing potential for disputes from the commercialization of space, involving a variety of actors; (2) the existence of gaps in existing dispute resolution mechanisms, especially for private actors; and (3) the lack of appetite by States to ratify a treaty, which became clear after the failure of the International Law Association’s 1998 Draft Convention for the Resolution of Space Disputes. The Permanent Court of Arbitration thus envisaged that a way to move forward was to make available a different set of arbitration rules, the use of which would depend on the consent of the parties to any given dispute. Evgeniya Goriatcheva noted that this involved collaboration with an expert group of 13 leading experts in aerospace law, who considered that the instrument would have to be international, accessible to both public and private actors, and should be able to deal with very high demand. They also thought that arbitration was the right mechanism to go for, since: (1) arbitration is available to all parties that are active in the space sector: (2) arbitration is a voluntary mechanism: (3) arbitration results in final and binding decisions: (4) arbitration allows parties to choose their own decision-makers: and (5) arbitration ensures confidentiality of sensitive information.

Evgeniya Goriatcheva set out key aspects of the content of the PCA’s Outer Space Rules, noting that they are based on the 2010 UNCITRAL Rules, with some departures to address the peculiarities of space disputes. First, she noted that the Rules alert the parties that by agreeing on an arbitration under the Rules, parties waive their immunity from jurisdiction (but not from execution). Second, to address some of the technical and scientific complexities, the Secretary General of the PCA has been empowered to create a list of arbitrators and experts proposed by Member States, the use of which is optional. Moreover, whenever the tribunal thinks its own knowledge is insufficient, it can appoint a technical expert, and/or request the parties to provide non-technical explanations. Third, she observed that the Rules also suggests several mechanisms for the protection of confidential information. Evgeniya Goriatcheva then addressed the PCA’s role under the Rules themselves, noting for example that the International Bureau of the PCA would be administering the cases, and that the Secretary General of the PCA is the appointing authority, which gives him the responsibility of, upon request, appointing, replacing, and deciding challenges against, arbitrators.

In reply to Laura Yvonne Zielinski’s question of whether the PCA’s Rules are available to all or just to States, Evgeniya Goriatcheva emphasized that all kind of actors have access to the rules: the dispute can be between private parties, between private parties and a State, or even between two States. Moreover, she noted that the feedback they had received on the Rules was overall very positive, and that they receive regular inquiries, with some actors having already included the Rules in their contracts, although there has been no dispute under the Rules yet. Finally, on whether it would be desirable to establish an international space tribunal, Evgeniya Goriatcheva responded that it could provide a more effective remedy for private parties against States than the PCA, which requires parties’ consent. But the problem here is one of political will, or rather the current lack thereof.

An Introduction to a New Mechanism of Space Litigation: The DIFC Courts

Finally, Amna Al Owais introduced viewers to the DIFC Courts, in particular the Dubai Space Courts’ Initiative. She first provided an introduction to the Courts, highlighting that they form part of the Dubai International Financial Centre and were created with the underlying rationale of creating confidence in the domestic legal system, thus inviting companies to come to the United Arab Emirates. The Courts are international in nature working in English and following the common law approach, although based in a civil law country. They handle civil and commercial cases, and since 2011, they are a “forum of choice” and are thus open to any party, and can apply any (common) law the parties have chosen in their contracts. The Courts are moreover based on four primary pillars: (1) judicial excellence; (2) service excellence; (3) connectivity; and (4) innovation. Amna Al Owais emphasized that the DIFC Courts are one of the most connected courts in the world, with all common law jurisdictions honoring their judgments, and the added benefit of being able to enforce all the treaties the United Arab Emirates (“UAE”) have entered into internationally.

Amna Al Owais then turned to the Courts of Space Initiative, which officially commenced in 2021, and forms part of the broader Courts of the Future Initiative the Centre had started in 2017. She set out the three-step strategy that the Centre pursues to become the new and best forum of choice for future space disputes: (1), they are attracting thought leaders in space from various career paths, such as lawyers; representatives of space agencies; and observers from the UN Space Office; (2), they are thinking about what types of disputes could occur in the future, moving away from more traditional ones, such as satellite collisions. Amna Al Owais highlighted that they created a special disputes’ guide, the first edition of which sets out the types of procedures that one must follow in filing a case with the DIFC Courts, and the second edition of which will look at what is likely to happen in outer space and the disputes this will likely give rise to (such as, those arising from future Moon and Mars explorations); (3), they are providing a training series for registry staff and judges on the subject matter of outer space, including on the existing international space treaties.

When asked by Laura Yvonne Zielinski  why Dubai is the right place for space dispute resolution, Amna Al Owais responded that: (1) Dubai has recently focused a lot on outer space activities, with successes such as the first UAE astronaut and the first Mars mission, and the Courts are thus supporting the UAE indirectly, providing the certainty commercial parties need; and (2) the Dubai Courts operate in a unique manner, the primary objective being to provide for dispute settlement before going to trial. She concluded that its connectivity approach means that it can provide the best of two worlds, being a civil law country but operating in common law.

Concluding Remarks

At the end, Laura Yvonne Zielinski asked the panelists some of the questions that had been asked by members of the public throughout the event. The first question addressed the law that would be applicable to disputes arising out of space collisions. In response, Gunjan Sharma pointed out that, in principle, it would be the Liability Convention, which provides that the launching State is liable for damage caused to another State or its nationals, if at fault. The second question asked what made the PCA Rules so different from other arbitration rules. Evgeniya Goriatcheva responded that, to start with, the whole point of the Rules was to provide for consistency and predictability and hence they were never meant to be too different from existing arbitration rules. However, they were tweaked to respond to the heavy State involvement and very technical aspects of space disputes.

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The New Space Race:
Risks and Opportunities

On 31 March 2022, as part of Paris Arbitration Week 2022, Debevoise hosted a webinar entitled “The New Space Race: Risks and Opportunities.” Catherine Amirfar, Co-Chair of Debevoise’s International Dispute Resolution and Public International Law Groups, moderated the discussion.

The panelists were David Bertolotti, Director of Institutional & International Affairs at Eutelsat; Julien Cantegreil, Founder & CEO of SpaceAble; Chris Kunstadter, Global Head of Space at AXA XL; and Lynn Zoenen, Principal and Managing Director at Alpine Space Ventures. The panel discussed the 21^st century “new space race,” driven by private commercial development, and how the international legal landscape is adapting to this paradigm shift.

A recording of the session is available here, and key takeaways from the discussion are highlighted below. 

Key Role of National Legislation

Activities in space are regulated by both national and international laws. This legal framework is still evolving, however, with gaps at the international level leading to overlapping standards, or an absence of regulation altogether, at the national level. The foundational international instruments of space law were concluded in a bygone era of space exploration dominated by a small number of State actors. These foundational treaties primarily govern the activity of States, speaking little to the obligations of private entities in space. As private space activity has boomed since the beginning of the 21^st century, national laws have proliferated to regulate commercial space actors. The panel focused on the example of France’s national space law.

Quasi-Regulating Function of Insurance

Aside from national law obligations and industry-led norm generation, space insurance providers may incentivize behavior through their underwriting policies. The panel illustrated this through the example of insurers offering more attractive policy options and lower premiums to space operators utilizing propulsion mechanisms – technology that allows objects in orbit to better avoid collision – on their spacecraft. Insurers thereby encourage more space actors to mitigate risk and make space safer. Moreover, the existence of insurance promotes greater investment, further spurring technological progress. 

Technological Advancements

Private space activity is a rapidly growing field with enormous investment potential: at the same time that space-based activity has become more economically viable for private actors, technological developments are creating increasingly compelling business opportunities. For example, the panel highlighted increasing interest among venture capital and private equity institutions in start ups developing lightweight and reusable materials for launch systems and satellites, and those focused on increasing Internet connectivity outside of urban areas or enhancing Earth observation from space.

Process and Norm Creation

In the absence of binding and cohesive legal rules that take into account the growth of private-actor activity, practical questions are therefore often left to industry-specific norms, in a “bottom-up” process of norm creation. The panel discussed the example of industry players developing and testing new technologies and capabilities, and then creating their own guidelines for deploying those technologies and capabilities, which, as adopted across the industry, become industry standards. Those standards in turn often influence regulation at the national level. Over time as many national laws adopt the same standards, they may be formalized at the international level, as customary international law.

Risk Management

Counterbalancing the opportunities for increased investment in space are the growing risks of overcrowding, collision, and debris creation. These risks are compounded by increased military activity in space, including the targeting of space objects with signals jamming or cyberattacks. The panelists agreed that to effectively manage the most serious risks of space commercialization, binding, enforceable laws – developed through the cooperation of governments and commercial actors to ensure they are in touch with industry realities and avoid overregulation – are necessary.

Likely Increase in Space-Related Disputes

Recent years have seen an uptick in space-related disputes. The panel mentioned the examples of disputes between satellite manufacturers and operators and insurance disputes. As space continues to become more crowded, it can be expected that attribution of liability in cases of collision will be a central issue. Development of technology to precisely identify and chronicle the location and velocity of debris and other objects in orbit will become integral to the resolution of such disputes.

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Outer Space Needs Arbitration

On 13 January 2022, the Space Arbitration Association hosted its first event, a discussion surrounding the question of whether outer space needs arbitration. The panel was moderated by Laura Yvonne Zielinski, Founder of the Space Arbitration Association, and featured Prof. Frans von der Dunk (Nebraska College of Law), Prof. Steven Freeland (Western Sydney University and Bond University, Australia), Dr. Jan Frohloff (Independent Arbitration Practitioner), and Stefanie Haeseker (OHB SE). It was the first of a 2022 conference series of eight conferences organized by the recently founded the Space Arbitration Association, which has set as its mission to provide a forum for discussion between the space and the arbitration communities.

Wherever Humans go, the Lawyer Goes

Prof. Frans von der Dunk started his presentation by setting out the evolution of international space law, which has developed along with space activities. The launch of the first artificial Earth satellite Sputnik, in 1957, gave rise to discussions within the United Nations and, in 1691, to a General Assembly Resolution on Space laying down the first legal principles (United Nations General Assembly, Resolution 1721 (XVI), International co-operation in the peaceful uses of outer space, 20 December 1961).

In 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 “Outer Space Treaty”) was opened for signatures, providing the first legal framework for space activities (United Nations, General Assembly, Resolution 2222 (XXI), Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies, 19 December 1966). Elaborated at a time when a handful of States were the only actors of the space industry, the Treaty revolves around a State liability regime. By holding States responsible for the actions of their private actors, the Outer Space Treaty encouraged the development of national space laws, with the aim for States to define the scope of private space activities and to regulate them (e.g. a licensing regime for space activities). As of today, at least 29 countries have adopted national space laws.

For a long time, diplomacy has been favored to resolve disputes arising from space activities. In 1972, the Convention on International Liability for Damage Caused by Space Objects (the “Liability Convention”) was concluded (United Nations, General Assembly, Resolution 2777 (XXVI), Convention on International Liability for Damage Caused by Space Objects, 29 November 1971). It holds States liable for damage caused by their space objects and contains a dispute resolution procedure consisting of diplomatic negotiations followed by the establishment of a Claims Commission, a quasi-arbitral tribunal. This mechanism is however only available to States and not to private parties, and the award rendered by the Claims Commission remains a mere recommendation unless all States involved in the dispute agree that it will be binding.

In 1978, following the scattering of radioactive debris over northern Canada by the defunct Soviet satellite Kosmos 954, Canada issued a claim against the Soviet Union, based among others on the Liability Convention. Although the dispute was finally resolved diplomatically, this remains the only time the Liability Convention has been invoked so far.

Prof. Frans von der Dunk then mentioned a major paradigm shift in space activities since the 1980s. First, space activities were no longer carried out by only two superpowers, but by many countries around the world. Even more importantly, space activities became more “practicalized”, developing into highly marketable applications (e.g. satellite navigation, phone communication, etc.), which led many private actors to become involved in this area.

Hence, adjusting the available dispute resolution options to make them accessible to non-state actors became and remains essential. The challenge will be to preserve a balance between ensuring that private actors respect international rules and guaranteeing that the legitimate interests of those private actors are not crushed by State interests.

In 2011, the Permanent Court of Arbitration (the “PCA”) published its Optional Rules for Arbitration of Disputes Relating to Outer Space Activities (the “PCA Outer Space Rules”), allowing private sector entities, along with States, to defend their interest in a dispute (Permanent Court of Arbitration, Optional Rules for Arbitration of Disputes Relating to Outer Space Activities, effective 6 December 2011). These Rules offer a flexible arbitration procedure, a specialized panel of arbitrators and scientific experts, and lead to a binding legal settlement enforceable internationally.

However, they have yet to be used. Indeed, States continue to rely heavily on diplomacy to solve their disputes. For States, the reasons are linked to the national security issues surrounding space activities. From the private sector perspective, the small number of actors on this market encourages each of them not to antagonize future partners by launching a dispute thus preferring collaboration over formal dispute resolution proceedings. 

Of great interest for space arbitration practitioners, Prof. Frans von der Dunk, however, thinks this trend will be reversed as more and more private actors emerge. In his view, the PCA Outer Space Rules present the best method for private parties to assert their interests.

The Specificities of Space Disputes

Dr. Jan Frohloff first clarified the term ‘space dispute’. In his view, the term ‘space dispute’ might refer to a dispute concerning space law (e.g. a dispute regarding a satellite collision). But it might also refer to any dispute involving the space industry. There are contractual and investment disputes between players in the space industry, covering the whole cycle of manufacturing, launching, and operating spacecraft.

With regard to disputes concerning space law and actual activities in outer space, Dr. Jan Frohloff emphasized the need for the space industry to operate under more specific substantive rules for space activities. Once these rules are established, disputes concerning outer space activities will largely benefit from arbitration. One example for that is space traffic management: the industry would greatly benefit from a legal framework governing liabilities in case of satellite collisions. Due to the current lack of multilateral agreements, bilateral agreements are being favored by private actors. A recent example can be found in the agreement signed between SpaceX and NASA, whereby SpaceX agreed to move its satellites, should they come close to a NASA spacecraft (NASA, SpaceX, 15 January 2021, Non-reimbursable Space Act Agreement between the National Aeronautics and Space Administration and Space Exploration Technologies Corp for flight safety coordination with NASA assets).

On the subject of dispute resolution of space industry disputes, Dr. Jan Frohloff observed that arbitration is already playing an important role. In his view this is due to the numerous advantages of arbitration such as: (1) Arbitration provides a neutral forum. The space industry can be subject to political influence (e.g. some space objects might be dual-use goods constituting strategic military assets). Arbitration can be a way for the parties to neutralize such political influence; (2)  Arbitration offers expertise. Since space law disputes can involve technical issues, the possibility offered by arbitration to the parties in dispute to choose arbitrators with a relevant background is thus a great advantage; and (3) Arbitration ensures confidentiality. Depending on the seat and the rules of the arbitration, confidentiality can extend to any document produced by the parties.

In this context, he mentioned that one should keep in mind that space contracts give rise to disputes with some unique features: (1) Typical space industry disputes are based on a contract but can involve legal issues beyond contract law, such as export control regulations. For example, in ABS v. KT and KTSAT, the arbitral tribunal had to decide whether title to a geostationary satellite had passed from the seller of the satellite (KT) to the buyer (ABS). (ABS Holdings, Ltd and ABS Global, Ltd v. KT Corporation and KTSAT Corporation, ICC Case No. 19958/AGF/RD/MK) In this case, two years after the transaction had closed, Korea’s Ministry of Science issued an order that declared the Purchase Agreement “null and void” and in violation of the mandatory law because KT had allegedly failed to obtain an export permit; and (2) Operating in space is hard and contracts in this industry generally focus on the allocation of liability between the different parties to the contract. These contracts, therefore, present a challenge in defining and interpreting the terms that transfer liability from one party to another (e.g., the “launch” of a vehicle), as well as insurance issues.

Finally, Dr. Jan Frohloff observed that while most of the disputes involving the space industry are contract-based, there is certainly room for investment arbitration, as long as an investment is made in a host state on planet Earth. An example is the Antrix v. Devas dispute, which gave rise to one commercial arbitration before an ICC tribunal, and two investment arbitrations under the India-Mauritius BIT and the India-Germany BIT (CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited and Telecom Devas Mauritius Limited v. India, PCA Case No. 2013-09, and Deutsche Telekom v. India, PCA Case No. 2014-10).

Alternative Dispute Resolution Mechanisms for Space Transactions

Next, Prof. Steven Freeland stressed that space law has been developed both at the international and commercial levels. At both levels, actors have been focusing heavily on preventing the disputes before they arise through multiple instruments such as: (1) The promotion of peaceful settlement of disputes, as in the Liability Convention and the Agreement Governing the Activities of States on the Moon and Other Celestial Bodies (United Nations General Assembly, Resolution 36/48 (XVI), Agreement Governing the Activities of States on the Moon and Other Celestial Bodies, 5 December 1979); (2) The use of non-appropriation clauses to prevent any territorial claim; (3) The use of cross-waiver of liability in many commercial contracts, whereby parties waive their rights to sue each other under a contract.

In his view, however, this is likely to change. He stated several reasons that will lead to an increasing number of disputes, and to the need to develop dispute resolution mechanisms. First, the growth of space activities has led to an increasing amount of space debris that will cause accidents. Second, the multiplication of non-governmental actors, which do not have access to current dispute resolution mechanisms at the treaty level, will encourage the development of alternative dispute resolution mechanisms.

Prof. Steven Freeland explained that future space disputes will be more numerous and more diverse, and may involve States and commercial actors. Consequently, space law should not rely on a unique dispute resolution mechanism, but rather on a variety of them. Options include the International Court of Justice and arbitration institutions including the Permanent Court of Arbitration, the International Court of Arbitration of the International Chamber of Commerce, and specialized courts such as the Dubai Space Court.

Finally, Prof. Steven Freeland pointed out that although arbitration has a role to play, especially when the disputing parties are large companies, it can remain expensive and consuming in terms of time and internal resources. This is why other mechanisms, like expert determination, may better fit the needs of smaller companies.

Arbitration in Space: the Space Industry’s Perspective

Stefanie Haeseker, senior legal counsel at OHB SE, a space and technology group based in Germany developing and producing space systems and products for the aerospace industry, and operating satellite data, started her presentation with an introduction to OHB’s activities and clients.

She mentioned that OHB’s key customers include the European Space Agency, the German Aerospace Center, as well as the German Federal Ministry of Defense, and stressed that because of this client base and the fact that companies like OHB are conducting business in a very narrow market, where many customers are public actors, OHB operates in a highly political environment. In her view, it is for this reason that arbitration has not played an important role yet.

Acknowledging that there is a critical need for confidentiality in the space industry, she considered that this is already being addressed in current space contracts through the introduction of original dispute resolution mechanisms. As an example, Stefanie Haeseker referred to the publicly available general clauses and conditions for ESA contracts which require parties to refer disputes to a “dispute resolution board”, composed of two senior representatives from each party and ESA’s industrial ombudsman. It is only if the dispute resolution fails at this level and no other arbitration is foreseen in the contract with ESA, that a dispute shall be settled in accordance with the arbitration rules of the ICC.

In conclusion, she stated that arbitration is already contemplated in contracts but has not played a role yet. This might change, according to Stefanie Haeseker, since the increase of actors and activities in this industry will result in more disputes. In addition to the need for comprehensive national and international space rules, the space industry would also benefit from international arbitration.

The Challenge of Space Debris

In response to questions asked by the audience, the discussion then turned to the challenge of space debris. The panelists recalled that the Liability Convention covers the liabilities that may be incurred in case of collisions of space debris with active satellites. In such a scenario, the Liability Convention provides that a launching State shall be liable for damages caused by its space object to a third State’s space object, based on the “fault” of the launching State. In this regard, Prof. Steven Freeland highlighted that we still do not clearly know what is meant by “fault”. While the Space Debris Mitigation Guidelines could give some directions in this regard, further guidance is needed as the Liability Convention is likely to play an increasingly important role in the future.

Moreover, since the Liability Convention only applies between States, it does not provide any remedy for private victims (e.g., private satellite operators) who will have to resort to national tort laws. Finally, Prof. Frans von der Dunk pointed out that the traditional challenge of identifying the guilty party may become especially hard in the case of debris (e.g. when the debris that caused the collision comes from a previous collision, years before).

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What is Space Arbitration?

The Space Industry

Until recently, only a few States were able to access outer space. Since then, however, driven by technological advances, in particular by reusable orbital-class rockets and the resulting reduction in launching costs, more and more private companies have been able to enter the ‘space race’, and we can witness today the emergence of a significant commercial space economy.

According to the Space Report of 2021 published by the Space Foundation, the global space economy following an uninterrupted growth period of five years, amounted to USD 447 billion in 2020, a 4.4% increase from 2019. In turn, according to the Satellite Industry Report of 2021 published by the Satellite Industry Association, 74% of these global revenues were generated by the satellite industry. The satellite industry comprises a ground equipment sector, satellite services such as television, radio, broadband internet, fixed and mobile communications and Earth observation, satellite manufacturing, and launching services. The remaining 26% of the space economy includes public space budgets and commercial human spaceflight.

Space Disputes

With an increase in activities, often comes an increase in disputes and the space economy is unlikely to be the exception. On the contrary, we can already identify a number of possible areas of disputes ranging from common commercial issues to investment disputes, harmful frequency interference and even physical collisions.

Past commercial disputes in the space sector have arisen for example out of manufacturing defects, the late delivery of satellites, their insertion into a wrong orbit or the cancelation of contracts. (See Jan Frohloff, “Arbitration in Space Disputes”, Arbitration International, Oxford University Press, 2019, Volume 35, Issue 3, pp. 309-329, paras. 2.1.1-2.1.6.) Given the dual applicability of some space technology (meaning that it can be used for both commercial and military purposes), disputes have in the past also arisen in relation to export control regulations. (See Jan Frohloff, “Arbitration in Space Disputes”, Arbitration International, Oxford University Press, 2019, Volume 35, Issue 3, pp. 309-329, para. 2.1.4) It can be expected that with the increase of space activities and the corresponding multiplication of contracts and commercial relations, we will see a growing number of similar disputes in the years to come.

Space activities, at least when they require the launch of hardware into space, are generally long and costly investments and therefore allegedly benefit from international investment protections. (See Stephan Hobe, Rada Popova, Hussaien El Bajjati, Julian Scheu, “The Protection of Satellite Telecommunications Activities Under Bilateral Investment Treaties”, Journal of World Investment & Trade, Volume 19, 2018, pp. 1024-1058; Laura Yvonne Zielinski, “Space Arbitration: Could Investor-State Dispute Settlement Mitigate the Creation of Space Debris?”, EJIL:Talk!, 19 March 2021; Hasin warns that extending the investment protection system to outer space could fuel a regulatory race to the bottom. Gershon Hasin, “Confronting Space Debris Through the Regime Evolution Approach”, International Law Studies, Volume 97, 2021, p. 1097) This could give rise to investment disputes related to outer space. Past space-related investment cases include Devas v India (PCA Case No. 2013-09), Deutsche Telekom v India (PCA Case No. 2014-10), and Eutelsat v Mexico (ICSID Case No. ARB(AF)/17/2).

Finally, the launching of ever more objects into space is slowly causing the congestion of at least the lower orbits, and is therefore significantly increasing the risk of harmful interference between different satellite systems, and even the risk of physical collisions or at least the need for costly collision avoidance maneuvers.

Space Arbitration

What does all of this have to do with international arbitration? Where there are disputes, there is a need for a dispute resolution mechanism. In theory, any space-related dispute could be resolved by national courts. However, domestic litigation might not always be the best option. In fact, space disputes are often international in that they involve parties from different jurisdictions. They are also confidential as they often deal with dual-use technology, and finally, they are very technical and therefore require experts who are familiar with the space industry and its specificities. National courts and domestic judges are not always equipped to cater to these requirements. This is where international arbitration comes into play: the flexibility inherent in arbitration, which allows the parties to a dispute to choose their decision-maker and to adapt the procedural rules to the dispute at hand to provide for enhanced confidentiality for example, offers a dispute resolution mechanism that can adapt to the space industry and its needs.

Is arbitration available to solve space disputes? Commercial space disputes can always be resolved through arbitration as long as the parties agree to include arbitration clauses into their contracts, which often seems to be the case, or they agree to refer their dispute to arbitration once it has arisen. The European Space Agency for example provides for arbitration in Clause 35(2) of its General Clauses and Conditions for ESA contracts (ESA/REG/002, revised on 5 July 2019), and commercial space companies also seem to have adopted the use of arbitration. (See Rachael O’Grady, “Dispute Resolution in the Commercial Space Age: Are All Space-Farers Adequately Catered For?”, ICC Dispute Resolution Bulletin, Issue 3, 2021, p. 55, citing “Avanti Wins Arbitration Award Against SpaceX, SpaceNews, 20 April 2011; C. Sanderson, ‘Boeing faces claim over cancelled merger”, Global Arbitration Review, 28 April 2020; European Commission Press Release: “Mergers: Commission approves acquisition of Arianespace by ASL, subject to conditions”, 20 July 2016; Viva Dadwal, Madeleine Mcdonald, “Arbitration of Space-Related Disputes: Case Trends and Analysis”, presented at the 71st International Astronautical Congress in October 2020; Jan Frohloff, “Arbitration in Space Disputes”, Arbitration International, Oxford University Press, 2019, Volume 35, Issue 3) Interestingly, disputes relating to harmful frequency interference are also often contractual as frequencies are coordinated between different satellite systems and the results of this procedure are set out in so-called coordination agreements. (See Elina Morozova, Yaroslav Vasyanin, “Mechanisms for Resolving Disputes Related to Violations of Coordination Agreements”, presented at the 70th International Astronautical Congress in 2019) In turn, space investments, as long as they benefit from the substantive protections offered in bilateral investment treaties, also benefit from their procedural protections and therefore usually have access to investment arbitration tribunals.

However, it is disputes over physical collisions and collision avoidance maneuvers that are less likely to be able to be resolved through arbitration. Collisions can happen between parties that have no prior contractual link and therefore did not have the opportunity to agree to arbitration in advance. This means that unless they can agree to refer their dispute to arbitration once it has arisen, private parties involved in a space collision would need to resort to domestic litigation or ask their host States for diplomatic protection under the dispute resolution mechanism of the 1972 Convention on International Liability for Damage Caused by Space Objects.

So What is Space Arbitration?

In conclusion, the space industry is growing, and with it, the risk of disputes. Space disputes, because of their unique nature, will require a dispute resolution mechanism that can be adapted to suit their specific requirements. We believe that international arbitration serves this goal and will become, or rather remain, the dispute resolution mechanism of choice for the space industry. The resulting international arbitration proceedings dealing with disputes related to the space economy are what we understand as Space Arbitration. We hope you will visit us regularly as reader or contributor to learn and teach about spaces disputes and their resolution through international arbitration.

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