What if space junk trashes your business

What if space junk trashes your business

The proliferation of space activities in the 21st century is creating an unprecedented amount of human-made space debris, better known as space junk. In just the last few months, SpaceX debris has landed on Australian farms and Chinese Government satellite space junk came down on villages in Côte d'Ivoire and India. What rights are available to those affected by the falling objects? While we are yet to see any major destruction caused by space debris, it is no longer just the stuff of science fiction.

Potential forums in which to bring a claim

The increasing occurrence of these incidents mean we need to start asking novel questions, such as whether a company can seek compensation if falling space debris hits a factory or port, or knocks production in a gas field off-line for months at a time. And importantly, if so, from whom can compensation be sought.

Broadly, there are four potential options for resolving these types of cross-border disputes.

Litigation

One option is traditional litigation. This presents a host of issues from the outset however, including finding a court with jurisdiction over both parties, reliance on the domestic laws of compensation, and in the case of government space junk, issues of state immunity from liability in the relevant jurisdiction (see our article, Recognition, Enforcement and Recovery of Investment Treaty Awards: Part II).

International Arbitration

Another possibility is international commercial arbitration. However, as commercial arbitration requires the express consent of those involved to refer their dispute to arbitration, it is only available where both parties agree. In reality, it is highly unlikely that the victim of falling space junk will have an arbitration agreement with the spacecraft’s owner or operator, or that both parties would agree to submit the dispute to arbitration after it has arisen.

International space law

International space law is also not a promising avenue for recourse, in particular as it does not govern private actors (see for example the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies 610 UNTS 205 and the Convention on International Liability for Damage Caused by Space Objects 961 UNTS 187).

Instead, international space law is state-based: only states can enforce and seek compensation under these agreements. While the current international system does allow a state to bring a claim against another state on behalf of a company or natural person, it was held in Mavrommatis Palestine Concessions (Judgment) [1924] PCIJ (ser A) No 2, 12 that when the state does so it “is in reality asserting its own rights”. The current international system of space law has, in the main, not been designed to provide a company or person with direct recourse against a state for damages.

Investor-state dispute settlement (ISDS)

ISDS has the potential to provide commercial actors with an avenue for compensation by requiring states to protect foreign investors and their investments. ISDS offers recourse against a state for violations of internationally accepted legal protections offered to foreign investors in an effort to promote inbound foreign investment. If investment treaties are violated, a qualifying foreign investor may be able to bring an ISDS claim against the host state. The question is whether the constellation of bilateral investment treaties (BITs) and free trade agreements (FTAs) can provide a framework for resolving space-based disputes. For example, in the event that a company’s port or gas field is knocked offline, could it utilise ISDS to pursue its own claim for potentially millions of dollars of damage and lost revenue?

Bringing an ISDS claim

Under the current ISDS regime, a claim for damage caused by space junk might work as follows.

The first step would be to identify the relevant state against which to bring a claim. There would be three potential options: (i) the state in which the foreign investment is located; (ii) the state that launched the equipment that became space junk, or to which the space junk is registered; or (iii) the state that hosted the launch of that equipment. Of the options, the most feasible may be the state which hosted the launch (the launching state). This is consistent with the position under current international space law instruments, which provide that a launching state is responsible for the resultant space junk.

The next step would be to locate an applicable investment treaty. This is important because investment treaties, whether BITs or FTAs, only impose obligations on a state which is a party to the treaty and only provide protection to ‘investments’ made in that state by ’investors’ of another state which is also a party. For example, if a spacecraft was launched from Australia and a Canadian company’s gas field in Australia was damaged by debris from the spacecraft, the Canadian investor might try to bring a claim under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), to which both Australia and Canada are parties.

Attention would then turn to the protection available under the CPTPP and assessing whether any such protection had been breached. The protection most likely to be relevant to a space-junk claim is “full protection and security”, which bestows an obligation on the host state not to harm an investment through its action or inaction. It is found in most investment treaties and has been given broad operation, requiring at its most basic that a host state must take steps to protect an investor’s investment from physical damage (Rumeli v Kazakhstan (Award) (ICSID Case No ARB/05/16, 29 July 2008) [668]), and extending to damage caused to an investment by a third party (Eastern Sugar v Czech Republic (SCC Case No 088/2004, 27 March 2007) [203]).

Claimants bringing this type of claim may seek to argue that the standard of protection required from a host state should be informed by reference to a number of international instruments, for example, the UN Office for Outer Space Affairs’ Space Debris Mitigation Guidelines (2010). This instrument provides that states should regulate for the controlled re-entry of space junk to ensure that debris does not put lives and property at risk. It may therefore be possible to base an argument for breach of full protection and security on the premise that a launching state did not take sufficient steps to regulate the re-entry of space junk or the actions of launch facilities in its territory, and thereby failed to protect an investment from the conduct of private actors.

Trickier questions arise in the more likely event that the investment is in a state other than the launching state. Under existing treaties, it is difficult to imagine how an investor from state A could have a claim in ISDS against state B over harm caused to its investment in state C. The ISDS regime is not designed to address this problem, and so the question becomes whether it is possible to fill this lacunae.

Possible alternatives

States could negotiate a multilateral arbitration treaty (MAT) providing for arbitration of disputes involving space debris or space activities more broadly. One permutation of a MAT might be to mirror investor-state arbitration, making arbitration against launching states available to parties injured by space debris. It is unlikely though that this option would be palatable for states in the absence of a clear, countervailing benefit. While space junk is an important issue, the reason for the expansion of ISDS was that states see direct economic benefits in offering protections to foreign investors – namely, benefits in the form of increased foreign investment.

Conclusion

In the heavens, as on earth, disputes will inevitably arise. Presently, the regulation of space activities remains a grey zone, which, according to the Australian House of Representatives Standing Committee on Industry, Innovation, Science and Resources, is “not keeping pace with the reality that space is now accessible to more nations and, increasingly, private entities”.

We continue to test and expand the limits of what we do in space; the question remains whether the same appetite exists to test and expand the limits of our dispute regimes to enable private entities to seek compensation for damage caused by falling space debris.