Space arbitration: Dispute resolution in extraterrestrial realms

 Thanks to modern technologies such as reusable rockets and the consequent reduction in launch costs, today it is the private sector that is driving the global space industry which is predicted to be worth as much as USD1.8 trillion by 2035. As the commercial space industry continues to mature, the growth in commercial space activity will inevitably lead to a rise in space-related disputes.

Taking constellation projects as an example, these typically consist of hundreds (or even thousands) of satellites and often require new manufacturing capabilities and the delivery of complex systems and networks. Owing to the dynamic and complex nature of a space systems project and constantly evolving technologies, the space manufacturing industry comprises a large number of system and platform manufacturers and sub-system or component suppliers across the globe, a combination of which would come together to form an industrial consortium on a given project.

As is commonly the case with large-scale projects, it is important to ensure that key terms and conditions appliable to parties within the consortium, throughout its multiple layers, are workable and consistent. These projects are also likely to be influenced by a patchwork of considerations such as insurance, procurement, export control, regulatory and licensing, and data laws and cybersecurity regulations.

In addition to manufacturing and product delivery, space systems providers increasingly offer integrated solutions such as data processing and distribution. These contracts need to be tailored individually to cater for the specific scope of activities and services both on the ground and in space; they will also need careful drafting to regulate distinct and potentially novel risks and liabilities, all of which may be fertile ground for legal disputes.

We expect that arbitration will feature heavily in the resolution of such disputes, especially those that arise from a contractual relationship. The complex, cross-border nature of space systems contracts lends itself well to international arbitration, which counts neutrality, party autonomy, procedural flexibility, and confidentiality among some of its key advantages. In particular, parties may agree that arbitrator(s) should have specific qualities such as technical expertise, language skills, or legal qualifications to adjudicate their dispute. Crucially, compared to court judgments, arbitral awards can be enforced more easily around the world pursuant to the 1958 New York Convention, which has been ratified by more than 170 countries. For all these reasons, the parties to a space systems contract will likely be more receptive to agreeing to arbitrate their disputes than resorting to litigation in the courts of one of the parties.

Notably, the existing international space law does not provide for an effective dispute resolution mechanism to enable a third party to pursue claims directly against a private party and/or a state. Therefore, third party claims with no contractual nexus will remain difficult, in the absence of an international legal system governing private and commercial activity in space. It remains to be seen whether states will come together to put in place bilateral and multilateral space treaties to ensure greater protection for their own private space-faring nationals.

A complete version of this article was published in the Journal of the Law Society of Scotland on 9 July 2024, available here.

If you have any questions on this topic, please feel free to contact the authors below or your usual DLA Piper contact.