Private Parties in Space Law

There needs to be room for private parties in international space law. On 24 March 2022, the Space Arbitration Association (‘SAA’) hosted a discussion on whether there is room for private parties in international space law. The panel was moderated by Laura Yvonne Zielinski, Founder of the SAA, and featured Daniela María Rojas Garcia (Legal Counsel, Colombian Civil Aviation Authority), Dr. Grace Nacimiento (Partner, Graf von Westphalen), Rada Popova (Legal Counsel, Isar Aerospace) and Rachael O’Grady (Partner, Mayer Brown). It was the third of a 2022 series of conferences organized by the recently founded SAA, which has set as its mission to provide a forum of discussion between the space and the arbitration communities.

An Overview of Existing International Space Law and its Characteristics

The conference kicked off with the first speaker, Daniela María Rojas Garcia, who provided a summary of existing international space law and its characteristics. Firstly, there is the Outer Space Treaty, which establishes the principles applicable to space activities. Secondly, there is the Rescue Agreement, which establishes that astronauts are regarded as envoys of mankind in outer space. Thirdly, there is the Liability Convention, which establishes fault-based liability for damage caused in outer space, and absolute liability for damage caused on the surface of the Earth, resulting from a State’s own space activities or those carried out by private entities under their jurisdiction. Fourthly, there is the Registration Convention, which promotes the registration of all objects launched into space. Finally, there is the Moon Agreement, which addresses commercial exploitation of outer space for the first time. It establishes that space activities are to be developed in a way that guarantees the peaceful nature of outer space and celestial bodies, considering them the common heritage of mankind. It is the least ratified amongst the space treaties, but Daniela María Rojas Garcia noted that the existence of this treaty itself shows the importance of the development of sustainable legal rules for the space sector. 

This treaty framework is supplemented by general international law, and States have developed “soft law” principles, including on issues related to the use of artificial satellites for international broadcasting. One key feature of all these regulations is that it continues to focus entirely on States. This is the reason why States continue to be held responsible and liable, and why they need to authorize and continuously supervise private parties’ space activities. However, due to private ventures into outer space, Daniela María Rojas Garcia highlighted the need for regulation tailored specifically to private parties. She believes that the current framework is flexible enough to enable States to develop harmonic domestic laws to promote space activities and noted that international bodies have already aimed at creating soft law, including on financing, insurance, regional and bilateral relations, private liability, and dispute resolution mechanisms for both public and private parties. The aim should be that States implement international commitments into domestic law in the most harmonized manner possible.

Finally, Daniela María Rojas Garcia noted that to address concerns related to outer space, it is essential that the public and private sectors work jointly. For example, in the context of space debris, the United Nations Committee on the Peaceful Uses of Outer Space (UNCOPUOS) has evaluated the possibility for private parties to perform clean-up activities in space under an agreement for the provision of services, but it has also looked into who is responsible for performing these activities, how often the services need to be performed, and what exactly would trigger the obligation of States to ensure the provision of such services. 

Laura Yvonne Zielinski then asked the panelist several questions. Firstly, on the space industry in Latin America, Daniela María Rojas Garcia highlighted that due to economic and territorial disparity space activities have been relatively modest to date. To address this, space activities should be more focused on private parties, and noted that the injection of private capital through foreign investment will facilitate the creation of more space projects in the region. Secondly, on whether States will continue to play an important role in space activities, she answered that States will continue to have the responsibility to ensure that the exploration and exploitation of outer space benefits all mankind. However, private actors have achieved such financial autonomy that space activities can be performed directly by them, especially since States themselves are not experts in technological advancements. Hence, there will likely be an increase of private parties developing space activities, with States continuing to supervise them. 

The Need for Developing Domestic Space Laws

Dr. Grace Nacimiento continued the discussion by highlighting the necessity for States to develop their own domestic legal framework applicable to space activities. She started by pointing out the various business models that are being developed by the private space industry, which create the need for a legal framework that provides legal certainty to private parties. The driver behind this development is technology: technologies to access and explore space, and to build space-based business models. The business models include: space tourism; space traffic management (the development of software-based solutions to monitor and track space traffic); wildfire detection by satellite-based technologies; access to outer space itself; space exploration (planned expeditions to other planets to extract resources, such as minerals or water); space debris removal; satellite communication networks; and Earth observation and satellite imaging.

In order to adequately regulate this wide variety of space activities in which private parties are now engaging, Dr. Grace Nacimiento noted that, on the one hand, it is important that international law is transposed into domestic law. While most space treaties are addressed to States, in the area of spectrum management, which has its legal basis in the International Telecommunications Union, this step of transposition is crucial. On the other hand, however, there is also a pressing need for legal regulation outside these international treaties through the independent development of domestic space laws, to provide a reliable framework within which private parties can develop their business. This applies to approval processes, insurance requirements, liability limitations, space debris measures, national security requirements, environmental protection, penalties for non-compliance with provisions in domestic legislation, as well as dispute resolution mechanisms. The main risk that exists when it comes to national legislation is the risk of fragmentation if each State develops its own domestic law based on its own individual circumstances. Dr. Grace Nacimiento thus emphasized the importance of finding ways at the international level to harmonize national space legislations. 

Laura Yvonne Zielinski then followed up with several questions. Firstly, on examples of when the fragmentation of domestic laws has caused her clients problems in practice, she referred to the authorization of satellite communication networks, where almost every European State has a different procedure, with different requirements and guarantees, which makes it very burdensome for an operator to establish its network. Secondly, on whether there are any examples of domestic law contradicting international space law, Dr. Grace Nacimiento referred to Luxembourg’s national law on the Exploration and Use of Space Resources, which states that space resources are capable of being owned by private parties, despite the rule contained in the Outer Space Treaty, that outer space is not subject to national appropriation. Finally, on the state of German space law, she highlighted that there exists no German Space Act to this date, which might be seen as both an advantage and a problem from a private entity’s perspective: on the one hand, for example, binding space debris mitigation rules could be financially or technically burdensome, but on the other hand, the absence of specific rules may also present considerable risks for private parties, especially in terms of liability.

Investment Protection of Outer Space Activities

Rada Popova then talked about the possibility of protecting space investments through bilateral investment treaties (BITs). She highlighted that, generally, space activities are very large-scale, long-term activities which require significant financial resources and, as a result, create a lot of risk. There currently exists, however, no satisfactory solution with regard to dispute settlement in international space law, which is still based on diplomatic protection, i.e., States as the main actors to engage in dispute settlement. A possible solution to this could be the application of investment treaties, which allow private parties to fight themselves for the protection of their rights against interference by States instead of having to rely on the diplomatic protection of their home State.

Rada Popova then proceeded to set out the requirements that would need to be met for investment protection to be applicable to investments made in space projects. Firstly, there must be an “investment” under the BIT and possibly under the Convention establishing the International Centre for Settlement of Investment Disputes (the ICSID Convention). Although there exists no universal definition of the term investment, the US Model BIT from 2012 defines it as every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment. Investments in space activities clearly satisfy this requirement because they are costly undertakings, usually involving the acquisition of fixed infrastructure. They will also, in most cases, satisfy the three criteria of contribution, duration and risk in the ICSID Convention: they are inherently long-term activities, involve significant risks both on the ground, such as related to licensing requirements, and in orbit, such as resulting from the danger caused by space debris, and normally benefit the States both economically and for reasons of prestige.

Secondly, there must be a “host state”, which Rada Popova highlighted to be the more problematic requirement since space activities are inherently multinational. Since it will often be impossible to identify a single host State for the entire space project, she suggested determining the host State for each phase of a project. On the one hand, in the pre-launch and launch phase, there will be a close territorial connection to the State in which the infrastructure of the company is based and from where the space object is launched. On the other hand, in the on-orbit phase, one way to establish the necessary connection may be through Article VIII of the Outer Space Treaty, which establishes that the State of registry has and maintains exclusive jurisdiction over the registered space object. 

Finally, Rada Popova summarized the main risks from an investment law perspective during each one of the phases of a space project. Firstly, in the pre-launch phase, the main risks stem from regulatory uncertainty, which may result in frustrated costs for the investor. Secondly, during the launch phase, the main risk concerns the physical security of the space object itself. Finally, in the on-orbit phase, the risks may stem from collisions, etc. To sum up, she opined that the investment law regime has huge potential for allowing investments to be much better protected, and their risks being more controlled than they currently are. 

Laura Yvonne Zielinski then asked Rada about how the fact that satellites often have a dual use function, meaning that even though they are made for commercial purposes, they can also be used for military activities, fits into the regime of investment protection. In response to this, Rada Popova highlighted that dual use technology involves national security concerns, which may thus serve as a reason for a host State to put some limitations or barriers on commercial investments.

The Possibility of a Development of a Future “ICSOD”: an International Convention for the Settlement of Outer Space Disputes

Finally, Rachael O’Grady addressed how private parties might be able to resolve their space-related disputes. She recalled that there are various legal orders that may apply to space activities: on the one hand, the international legal framework, and, on the other hand, the various domestic legal orders. This distinction is important because the way in which space-related disputes are resolved will depend on which of these legal orders is applicable. 

Rachael O’Grady then set out four categories of space-related disputes. Firstly, there are purely State-to-State disputes, which can for example be resolved by diplomacy, the International Court of Justice, the Claims Commission foreseen by the Liability Convention. Secondly, there are disputes between two private parties (or between a private party and a State acting in a commercial capacity), usually in relation to a commercial venture, which can be resolved by domestic courts, arbitral institutions, or other mechanisms such as the Dubai Space Courts. Thirdly, there are those disputes between private parties and a State (acting in a sovereign capacity) to which an investment treaty can be applied, for which again there are adequate mechanisms in place to resolve such disputes. However, the fourth category are those disputes between private parties and a State which do not fall within the parameters of an international investment treaty. For such disputes, currently no adequate dispute resolution mechanism exists.

Not only are the substantive rules missing to resolve such disputes, but there is also a serious procedural gap, since there is actually no forum at all before which private parties in such scenarios could bring claims directly against potentially liable States. This, Rachael O’Grady noted, mirrors the situation that existed in the 1960s with respect to foreign investment disputes more generally, before the ICSID Convention had come into force. Private parties had to rely on their own governments to take on and pursue claims on their behalf through diplomacy. She opined that a similar facility should now be created with respect to space disputes. This was something Karl Heinz Böckstiegel had already thought about 25 years ago when he led a task force to produce a Convention on the Settlement of Disputes related to Outer Space Activities, to which States at the time however did not sign up to. She thought however that the time has now come for an “ICSOD”: an International Convention on the Settlement of Outer Space Disputes.

Laura Yvonne Zielinski then asked Rachael several questions. Firstly, on why the Convention by Böckstiegel did not have more success and why States should sign up to it now, she replied that it was because (1) it was before its time, when outer space was not yet as congested as it is now, and (2) some of its aspects were problematic, for example, the lack of any kind of a right to appeal. She emphasized that we have a very limited window to act now, because of the increasing congestion of the lower Earth orbits, and drew on the analogy with ICSID which was created preemptively with only 50 BITs in force. In her view, if there were some kind of forum like this, then just like ICSID clauses were included in BITs, similar clauses would also be included in the new generation of space treaties. Secondly, on whether customary international law can be created by private parties in space since they are supervised by States, she noted that customary international law will likely develop primarily through the creation of soft law, but that future jurisprudence concerning space disputes will also be shaping its form. 

There Needs to be Room for Private Parties in International Space Law

At the end, Laura Yvonne Zielinski asked the panelists a question that had been asked by members of the public throughout the event, concerning whether “Flag States of convenience” are creating conflicts and if and how they should be prevented. Rada Popova firstly noted that the International Law Commission has produced a model law, the so-called Sofia Model Law, which could help to harmonize national laws and also serve new space-faring countries that are aiming at creating their own national space legislation. In response, Dr. Grace Nacimiento pointed out that in Germany the reaction to the Sofia Model Law has been rather reluctant, there being critics that argue that Germany needs to take into account its specific national circumstances. But in the long run it would still be beneficial to have an orientation towards such a model, in the sense that it would provide private parties with reliable guidance on how to build their businesses not only in one specific jurisdiction, but also when thinking about extending to other jurisdictions.

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