To Arbitrate or not to Arbitrate? Role of Investor State Arbitration in Space

Introduction

Recent years have seen a rise in and diversification of space operations, increasing the number of items launched into space. This has increased the density of outer space and resulted in an increasing quantity of space debris. While technology advancements provide optimism for orbital cleaning, such attempts face regulatory and financial challenges. One solution is to draft a new treaty. This, of course, is subject to the inherent limitations of international collaboration and States’ unwillingness to engage in additional enforcement responsibilities. These challenges highlight the need of determining whether an existing legal framework addresses this problem. The purpose of this article is to examine the possibilities for Investor-State Dispute Settlement (“ISDS”) to help minimize the accumulation of space debris.

Expansion of the space industry and accumulation of space debris

In recent years, space has seen an increase in diversification, commercialization, and democratization. commercial operators, who have long been involved in satellite operations, are now expanding their scope to include surveillance, commercial spacelines, and 5G satellite internet services. Satellite downsizing has increased the accessibility of satellite launch and operation while also increasing the proliferation of objects in space (see here and here).

This increased usage of space (particularly low Earth orbit) is projected to further “clutter” with things ranging from complete defunct satellites to very minute fragments of dead satellites or rockets. In addition, their increasing presence in space raises the likelihood of collisions, which further fragments space objects, leading to the collection of space debris circling the Earth. In the worst-case situation, collisions might trigger chain reactions (like the Kessler syndrome), rendering particular orbits useless. The dangers associated with space debris are expensive, as satellite operators increasingly integrate satellite security, replacement, and debris tracking into their financial calculations.

The issues with eliminating space debris

Given the potentially catastrophic repercussions of space debris and the associated costs to space actors, it’s natural that more attempts are being made to find a solution. There are various technical endeavors aimed at eliminating space debris such as the employment of special spacecrafts to deorbit superfluous satellites and rocket stages.(see here). Meanwhile, space operators are tracking fragments of space debris and repositioning their satellites to prevent expensive accidents.

The 1967 Outer Space Treaty and its implementing Agreements, particularly the Liability Convention, place the responsibility for objects in orbit squarely on the nation’s shoulders that launched them. In other words, launching States may theoretically be held accountable for damage caused by items launched into space and hence should have an interest in preventing the formation of debris from any objects launched from their territory. However, this view ignores the fact that States have a solid interest in avoiding burdening commercial space operators with additional restrictions that would raise their costs and force them to relocate. Thus, rather than preventing the generation of debris, States prefer to depend on contractual indemnities placed on private operators to minimize their exposure to any responsibility that may emerge from it.

Investor-State arbitration: Is there a place for it?

National compliance with space debris mitigation is claimed to be poor because, although governments are liable for rocket debris created by launches from their territory, there is no effective international mechanism to hold private enterprises accountable. A solution must include incentives, which is where ISDS may come into play.

ISDS and outer space reflections are not new. In 2011, the Permanent Court of Arbitration presented its Optional Rules for Arbitration of Disputes Relating to Outer Space Activities, which are based on the UNCITRAL Rules; there has been a call for the establishment of an International Centre for the Settlement of Outer State Disputes; and others have examined the possibility of resolving space disputes within the existing framework of Investor-State arbitration and concluded that this is a viable option – a conclusion that is reinforced by space ISDS disputes (see here, here and here).

Indeed, it is probable that ISDS tribunals will have jurisdiction over most disputes emerging from outer space activities. To establish jurisdiction, there must be an investment according to the relevant treaty and a foreign investor investing in the host State’s territory. Most investment treaties describe investments as “any kind of asset,” which often includes satellites. Even under a more restrictive interpretation of the ICSID Convention, which requires additional characteristics such as economic contribution, risk, duration, or even contribution to the development of the host State, space operations are likely to qualify, as they are typically long-term, high-value projects that are constantly exposed to the high level of risk inherent to outer space ventures.

Concerning the investment in the host State’s territory, it has been acknowledged that it extends beyond a physical connection to the territory, and satellite activities always have a natural relationship to at least one State. Any device launched into outer space must be registered with the appropriate State’s national registration, and satellite operators often secure permits from or enter into concession agreements with the State whose frequency band or orbital location they are utilizing. Consequently, operators of satellites in orbit may claim to have invested in the State’s territory whose frequency band or orbital slot they are using or on whose national registration the satellite is registered.

However, how does this relate to space debris mitigation? Most bilateral and multilateral investment protection treaties require host states to provide covered foreign investors and their assets with Full Protection and Security (“FPS”). In the context of outer space, this might be seen as a responsibility on host states to defend investors’ satellites from damage. However, the FPS responsibility is not absolute but rather a means obligation to do due diligence to safeguard an investment against damage. In other words, host states may be required to conduct due diligence to safeguard covered investors’ satellites from damage caused by space debris.

Certain academics believe that, given the impossibility for States to avoid harm to satellites caused by debris even with due diligence, international investment law appears incapable of adequately compensating for the gaps in the liability regime under international space law in the context of space debris. Is this, however, still true in the present era? Today’s rapidly increasing capabilities for tracking specific pieces of space debris enable operators to move a satellite out of harm’s way, and even the possibility of operators being required to have a plan in place for disposing of space debris before any launches, could result in liability under international investment treaties.

Conclusion

Space activities are inherently perilous and fraught with the risk of failure, which is why determining the scope of a due diligence duty to be utilized in outer space is unavoidably complicated and not always practicable. However, securing the long-term viability of outer space is one of the most severe concerns confronting humanity today and hence needs to be explored in all possible directions. In the absence of a proven technological solution to the space debris problem or a binding international treaty establishing rules for avoiding the creation of debris, it appears that the ISDS regime could serve as a tool that, through the threat of liability, encourages States to contribute to space debris mitigation.

Ahan Gadkari is a penultimate year BA LLB Candidate at Jindal Global Law School. He also serves as the Managing Editor at IJLSA.