Resolving disputes in outer space: the role of international arbitration

For a long time, space was seen as a belonging to States. It was a projection of expansionist ambitions on Earth, and the Russian Federation and the US were the main competitors in that race. Private individuals could only hope to be part of that distant and fascinating world. They watched images of moon landings and science-fiction movies inspired by the narrative of astronauts.

Now, space is much less distant: private individuals’ and private companies’ role in the exploration, commercialization, and exploitation of space has increased. Mainly because of the incremental use of satellites for communicating, for broadcasting, and more.

Outer space: Market composition, developments, and perspectives

The global space economy’s value reached USD 424 billion in 2020, having expanded up to 70% since 2010. It could reach USD1 trillion in annual revenue by 2040.

The EU has a leading role both in the diplomatic and commercial use of space.

To provide some numbers: the space industry’s turnover in the EU exceeds EUR 8.246 billion, of which 64% relates to commercial activity, and 36% to institutional activity.

These statistics will almost certainly increase in the near future. There are numerous measures and investments approved at European level for companies operating in space. For example, Reg. (UE) 2021/696, establishing the Union Space Programme and the European Union Agency for Space Programme, provides, in Article 6, for “actions in support of an innovative and competitive Union space sector” amongst which, in particular, as letter (d) states, the support of “the emergence of a business-friendly space ecosystem through cooperation amongst undertakings in the form of a network of space hubs.”

That is also the direction taken by the Cassini Space Entrepreneurship Initiative (Cassini Initiative), signed by Commissioner Breton  on January 25, 2022, together with the European Investment Fund. The Cassini Initiative, based on the belief that investments are essential to boost the European space private market, will support entrepreneurship in space related business by deploying a EUR 1 billion investment capacity.

This short article aims at providing an overview on the numerous actors playing a role in outer space: States (including China, Russia, the US), international organizations such as the EU (with Italy and France as leading States), and private entities.

The impact of the increasing number of players involved is twofold: not only it promotes technological development, but it also creates more risks.

The effects of the new players in the outer space market

In a context in which more users populate the outer space market two main observations can be made: first, there is a lack of adequate regulation of private activities in the outer space (a); second, overcrowded orbits have been registered (b). Both aspects affect – and may give rise to - litigation.

• Lack of regulation of private activities in outer space

All international treaties regulating to outer space were enacted during (or right after) the Cold War. They aimed at regulating the geopolitical expansion of the US and the Soviet Union in space.

The Outer Space Treaty (1967), the Rescue Agreement (1968), the Liability Convention (1972), and the Moon Agreement (1984), refer mainly to States. The applicability of these multilateral treaties to private entities – despite it would be possible to a certain extent– is not sufficient to regulate their activities in space.

After the Moon Agreement, no other international treaty has been entered into. This legislative standstill might be linked to the quick development of new technologies and trends in space law. The legislative process at international level is simply too slow and complex to keep up the pace with the rapid and ever-changing challenges of this industry.

Right now the regulation of activities of private individuals in space is basically grounded only on international treaties and on private regulation entered into by and between Space operators with the aim of governing their commercial relationships.

This causes uncertainty and it does not set any limit to the activities of private entities in the outer space.

• Overcrowded orbits

We might think of the outer space as a limitless place. Yet, it is not. It can get crowded.

Technically speaking, satellites can only be placed in orbits. Orbits, in turn, are not infinite. And – as incredible as it may sound – we are running out of space.

The presence of these numerous and various private entities operating in space is increasing the number of satellites sent into orbit. The estimated number of satellites is more than 30,000 (data updated to 2022). This increases the risks of collision, and claims for damages, potentially for millions of dollars.

A collision will not only damage the satellite, but it could also stop the broadcasting of TV programs or shut down internet connections. It could cause thousands of claims on Earth.

Collisions are not so infrequent because of debris. Debris usually comes from satellites that have reached the end of their life. Debris can collide with other entities, damaging them and interrupting services.

One example is the Elon Musk-China case. At the end of 2021, one of the 1,900 SpaceX satellites in space came dangerously close to hitting a Chinese base. China filed a note to the US describing the circumstances of the risked collision and threatening legal action.

PCA Optional Rules for Arbitration of Disputes Relating to Outer Space Activities

The Optional Rules for Arbitration of Disputes Relating to Outer Space Activities (the Rules), drafted by the Permanent Court of Arbitration and effective as of 6 December, 2011, are a tentative step to deal with these issues, which are not regulated by any other dispute resolution set of rules.

The Rules are based on the 2010 UNCITRAL Rules, with some tweaks to “reflect the particular characteristics of disputes having an outer space component involving the use of outer space by States, international organizations and private entities.”

As provided for in Article 1 of the Rules, their scope of application is quite broad: it solely depends on the parties’ intentions, and it is not connected to any specific definition of “outer space.”

The Rules seem to be innovative since they:

1. provide for a modern dispute resolution process to address all kind of disputes in outer space, recognizing the peculiarities of this industry;
2. apply to all the players of the space market, including private entities. This is quite a unique feature before the Permanent Court of Arbitration, which usually deals with disputes between States;
3. represent an upgrade in international space law. While the final and binding nature of the arbitral award is widely recognized in international arbitration, it is (or, better, was) not so in international space law. The Liability Convention is the only convention on space law providing for a dispute resolution mechanism (only between States): yet, the relevant decision is never binding on the parties involved, unless the binding nature has been agreed upon by and between the parties. The dispute resolution process set forth in the Liability Convention, approved by States to protect their sovereignty and freedom in the exploration of space, is not adequate to address claims from new players (such as private entities) against each other or against States. Article 34(2) of the Rules provide that “All awards shall be made in writing and shall be final and binding on the parties.”

The Rules are tailored on the peculiarities of this particular niche industry, characterized by a high degree of rapid technological development and the need for confidentiality.

In particular, Arts. 10, 27 and 29 of the Rules address the complexity of the technological issues that might arise.

Article 10(4) of the Rules provides for a mechanism to assist the parties in the choice of arbitrator in the area of technology and law, by mandating the Permanent Court of Arbitration – specifically, its Secretary-General – to arrange a list of arbitrators with expertise in space-related matters.

Article 27(4) of the Rules adds a tool in favor of the Tribunal, so that it “may request the parties jointly or separately to provide a non-technical document summarizing and explaining the background to any scientific, technical or other specialized information which the arbitral tribunal considers to be necessary to understand fully the matters in dispute.”

Lastly, Article 29 regulates expert appointments. The choice of experts is aided (according to paragraph 7) by a list of people with expertise in the scientific or technical matters at stake.

Disputes in the field of space exploration, exploitation and commercialization require, apart from a deep knowledge of the technical and scientific matters at stake, a high degree of confidentiality to protect the secrets and interests of the States and companies involved. Leakage and publication of sensitive information on technology developments or projects can result in an enormous economic loss for the entity affected.

That’s why privilege and confidentiality have gained even greater protection in this field of law compared to that in standard commercial arbitration proceedings.

Article 17(8) provides that the Arbitral Tribunal may appoint (upon request of one of the parties or on its own motion) a “confidentiality adviser as an expert.” The expert can report to the Arbitral Tribunal designated confidential information (preventing the party from sharing entire confidential documents with the Arbitral Tribunal) without disclosing the confidential information to the other party.

Past, present, and future of the Rules

Because of their structure and scope of application (both ratione materiae and ratione personae) and personal), the Rules appear to be fit for different kinds of disputes:

• space treaty arbitration, amongst States;
• investment arbitration, among States and private entities (i.e. investors);
• commercial arbitration, among private entities and States acting jure privatorum.

Until now, this multilateral convention has not been used much in the dispute resolution of outer space matters.  

Yet, this should not discourage as to the application of the Rules in the future.

It is likely that States will continue to choose the dispute resolution mechanism provided for in the Liability Convention. This will ensure they’re not bound by any decision rendered against them, unlike what would happen if they decided to start referring to the Rules instead.

In spite of the above, a different scenario can be predicted for private entities.

In 2011, when the Rules were adopted, no one could ever have imagined that private entities would operate in space like they are now.

Space tourism is growing. Private companies like Space X and Virgin Galactic are sending thousands of satellites into orbit. Private entities and States are entering into increasing number of procurement contracts for the construction of satellites. This will certainly result into disputes in the near future.

It is therefore plausible that the Rules will become much more relevant. This for two main reasons:

1. First, because of their specific features (they are drafted to address the specific needs of the space market, apply also to private individuals, and recognize the binding nature of the awards issued under the Rules)
2. Second, because of the nature of outer space. Outer space has been defined – and still is, with some practical exceptions – “a province of mankind” (Outer Space Treaty, Article 1) Outer space is a place without sovereignty, making it difficult for practitioners to identify the jurisdiction and applicable law if disputes arise in outer space between companies from different states.

Litigation before national State courts is complex and slow. So arbitral proceedings under the Rules seem to be the preferred option to resolve disputes in relation to activities concerning the outer space.

Acknowledgments

The research I relied upon for this article was originally conducted for my private international law thesis on the jurisdiction and applicable law to the liability of private companies in Space. I had the privilege of being followed and mentored during the process by Professor Pietro Franzina.