Dispute resolution in extra-terrestrial realms (part 2)

Growth in commercial and economic activity often precedes an increase in disputes, and the space industry is likely to be no exception. Let’s consider the risks and challenges facing stakeholders in a significant commercial space economy and discuss the role of international arbitration in resolving outer space disputes.

Read part 1 here. 

Interstellar arbitration: no one size fits all

Contractual disputes

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 on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’), which has been ratified by more than 170 countries.[1] 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.

There is a growing list of leading arbitral institutions (such as the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) and the Singapore International Arbitration Centre (SIAC), among many others) that seem well placed to administer space-related disputes.

• Although not space sector specialists, these are some of the world’s most trusted and popular arbitral institutions. Not only do they offer a selection of model arbitration clauses, but their arbitration rules also provide for a comprehensive, tried-and-tested procedural framework for the conduct of arbitration proceedings.
• Leading arbitral institutions regularly review and update their institutional rules to take account of the evolving needs and profiles of users of international arbitration. Many now have at their disposal procedural tools such as expedited procedures, joinder of parties and consolidation of related arbitrations, which are well suited to resolving multi-party, multi-contract disputes arising from large-scale space projects.
• Furthermore, many of these established arbitral institutions are known for having a proven track record in managing complex disputes in highly technical and specialised subject areas. Indeed, two recent high-profile space-related disputes concerning satellites and orbital slots have been resolved through ICC arbitration proceedings.[2]

Based in The Hague, alongside the International Court of Justice, the Permanent Court of Arbitration (PCA) has developed specialised arbitration rules for the space industry. In 2011 the PCA introduced its Optional Rules for Arbitration of Disputes Relating to Outer Space Activities (the ‘PCA Space Rules’). These contain several interesting features, including an agreed waiver of immunity due to the prevalence of state and state-owned entities in space contacts. There has been rather limited uptake of the PCA Space Rules, even though the PCA itself has administered a few space-related disputes under the UNCITRAL Arbitration Rules 2021.[3]

Third-party claims with no contractual nexus

As discussed above, with the increasing number of satellites in orbit, the risks of satellites colliding with each other and of harmful interference with radio frequencies between satellites will inevitably rise – as will the number of disputes between parties who, despite having no contractual relationship, cause or suffer damage in orbit or on the ground.

As things stand, existing international space law does not appear to provide an effective dispute resolution mechanism to enable a third party to pursue claims directly against a private party and/or a state. This is largely because the main pillars of international space law, in particular the 1972 Liability Convention (the ‘LC’), apply to states only and did not envisage that the private sector would play such an active role in space as it does today.

By way of an overview, under the LC:

• Any third-party claims must be made through diplomatic channels, either by the state of nationality on behalf of the injured third party or by the state where the damage occurred.[5]
• The launching state “shall be absolutely liable to pay compensation for damage caused by its space object on the surface of the earth or to an aircraft in flight”.[6] Notably, under Article VI, the launching state may be exonerated from absolute liability if it establishes that there is, on the part of the claimant state, “gross negligence or an act or omission done with intent to cause damage …”.
• Compensation is based on “principles of justice and equity” and damages are assessed on the basis that a party is restored to the position as if the damage had not occurred.[7]
• Where the parties cannot reach a settlement, a claims commission may be set up to determine the merits of the claim and compensation payable.[8] The claims commission will be tasked with deciding the merits of the claim and determining the quantum of damages payable. 

Clearly, the above presents major difficulty for a non-state private entity looking to pursue claims against another private entity (or against the latter’s state of nationality) where there is no contractual nexus: first, an injured private entity has no recourse under the LC and must convince a willing state to bring a claim for compensation on its behalf. Negotiating through diplomatic channels can be slow and uncertain and may leave the claimant without a meaningful remedy for long periods of time. Even if a claim does get off the ground, the odds are stacked against the claimant who not only needs to establish fault and liability against the launching state but must also convince a claims commission to assess and award compensation in its favour.

Beyond arbitration

Despite its overall size and significant potential for growth, the space industry remains a relatively small ecosystem in which the key stakeholders tend to have their distinct areas of expertise and market focus. It is important that disputing parties should attempt to find an amicable resolution to their disputes in the first instance and consider mediation (or other forms of ADR) before resorting to formal legal proceedings.

In recent years some jurisdictions have taken steps to develop specialised infrastructure, with a view to attracting disputes from the space sector. In 2021 the Dubai International Financial Centre (DIFC) Courts and the Dubai Future Foundation launched its Courts of Space as part of the Courts of the Future initiative. The initiative was designed to build a new judicial system to encourage the international space community to opt for the jurisdiction of the DIFC Courts to resolve their space-related disputes.

Conclusion

Humans have made staggering achievements in outer space over the past 50 years. While it is impossible to predict what humankind might accomplish in the next half a century, it is clear that much of the future progress will be made by the private sector, which is already playing a pivotal role in harnessing the opportunities and possibilities in outer space today.

As the commercial space industry continues to mature, the growth in commercial space activity will inevitably lead to a rise in space-related disputes. Arbitration will feature heavily in the resolution of such disputes, especially those that arise from a contractual relationship. In the absence of an international legal system governing private and commercial activity in space, third-party claims with no contractual nexus will remain difficult within the existing framework of international space law. It remains to be seen whether we will see states come together to sign bilateral and multilateral space treaties to ensure greater protection for their own private space-faring nationals.

Written by Naomi Pryde and Jue Jun Lu, DLA Piper.

Space Comm Scotland

DLA Piper are delighted to be hosting a Space Law Symposium as part of Space Comm Scotland (11 and 12 September) created specifically to address the space law questions that keep lawyers awake at night. It’s free to attend and there will be a mixture of key note addresses, panels and fireside chats. Please direct any questions you might have to the authors and they look forward to seeing you there. 

[1] See the list of contracting states to the New York Convention, available here.

[2] See Devas Multimedia Private Ltd v Antrix Corporation Ltd (ICC Case No 18051/CYK) and Eutelsat Communications v SES.

[3] Including, for example, CC/Devas (Mauritius) Ltd, Devas Employees Mauritius Private Ltd and Telecom Devas Mauritius Ltd v Republic of India (PCA Case No 2013-09) and Deutsche Telekom AG v The Republic of India (PCA Case No 2014-10).

[4] Convention of International on Liability for Damage caused by Space Objects, 1972.

[5] See Article VIII, the LC.

[6] See Article II, the LC.

[7] See Article XII, the LC.

[8] See Article XIV, the LC.