The Rise of Satellite Arbitrations

Introduction

Demand in telecommunications services continues to grow in terms of both network capacity and higher speed networks. This growing demand is being addressed not only through additional fibre and wireless deployments but also by satellite internet providers. Satellite internet is provided through communication satellites. Whereas traditionally it had been reserved to geostationary satellites, more recently, companies such as Starlink and OneWeb have been launching new satellite internet constellations in the low Earth orbit (LEO) that enable low-latency internet from space. With this development anticipated to expand, the satellite industry can be expected to become an increasingly important player in the global telecommunications industry.

Overview of the satellite industry and risks of disputes

Current satellite activities and future outlook

Broadly, artificial satellites are objects launched into space to orbit the Earth in order to collect information or enable communications. According to the 2023 ‘State of the Satellite Industry Report’ released by the Satellite Industry Association in June 2023, the global satellite industry generated revenues of US$281 billion in 2022: US$113 billion corresponded to satellite services (telecommunications and remote sensing), US$145 billion to ground equipment, US$15.8 billion to satellite manufacturing and US$7 billion to the launch sector.^[2] The Space Economy Report for 2022 (published by Euroconsult in January 2023) adds that in the upstream global space market, 32 per cent of the revenues have been generated in the satellite communications sector and 27 per cent in the Earth observation sector. In the downstream market, 60 per cent was generated in the satellite navigation sector, 38 per cent in the satellite communications sector and only 2 per cent in the Earth observation sector.^[3] However, according to Chad Anderson, it is the Earth observation sector that has the greatest potential as Earth observation data is being incorporated increasingly in day-to-day applications.^[4] According to the 2023 ‘State of the Satellite Industry Report’, 2,325 satellites were launched in 2022.^[5] The Q2 2022 Space Report, published by the Space Foundation, states that almost 90 per cent of today’s active space objects are commercial: of a total of 186 launches, 161 were commercially procured.^[6] This number is likely to increase further in the coming years with the launches of thousands of new satellites by companies such as Starlink, OneWeb and Kuiper, which plan to provide satellite internet through large satellite constellations in LEO.^[7] In February 2023, the United States’ Federal Communications Commission approved Amazon’s plan to deploy and operate 3,236 broadband satellites in LEO.^[8] SpaceX’s application to launch up to a quarter of its proposed 30,000 satellites for its second-generation Starlink constellation had already been approved in December 2022.^[9]

Likely rise of satellite disputes

Until recently, the space industry had been characterised by the presence of only a few large market participants that were conscious of their interdependence and corresponding need to collaborate. This is why the space industry has traditionally preferred mechanisms such as cross-waivers of liability and insurance over formal dispute resolution mechanisms.^[10] However, the recent multiplication of activities and the entry of a large number of new actors into the satellite market is likely to change this dynamic, and brings about the risk of an increasing number of disputes.^[11] Those disputes will mainly arise out of the contractual relationships between the different public and private actors of the satellite industry. However, disputes are also likely to arise out of the growing congestion of the LEOs. The launch of thousands of new satellites in a short amount of time is likely to significantly increase both the risk of physical collisions between operational satellites (or with entire or parts of defunct satellites called ‘space debris’). Additionally, the increase in active satellites is causing a growing risk of harmful frequency interference between them, as well as potential disputes about the rights to use certain frequency bands and (or) orbital positions. Finally, even in the absence of actual collisions, the costly avoidance measures and manoeuvres that the increasing space congestion will require, are likely to also result in disputes between satellite operators.

Law applicable to satellite activities

International space law

International space treaties and UN General Assembly Resolutions

Satellite activities, like all space activities, are governed mainly by four inter­national space treaties developed in the context of the United Nations Committee on the Peaceful Uses of Outer Space: the 1967 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (the Outer Space Treaty);^[12] the 1968 Agreement on the Rescue of Astronauts, the Return of Astronauts and the Return of Objects Launched into Outer Space (the Rescue Agreement);^[13] the 1972 Convention on International Liability for Damage Caused by Space Objects (the Liability Convention);^[14] and the 1976 Convention on Registration of Objects Launched into Outer Space (the Registration Convention).^[15] A fifth treaty, the 1979 Agreement Governing the Activities of States on the Moon and Other Celestial Bodies (the Moon Agreement), has failed to gain sufficient support and can be safely ignored for the purposes of this chapter.

The Outer Space Treaty, sometimes referred to as the Magna Carta of international space law,^[16] is the most comprehensive of the five treaties and sets out the main principles governing activities in outer space. According to Article I of the Treaty, the exploration and use of outer space ‘shall be carried out for the benefit and in the interest of all countries . . . and shall be the province of all mankind’. Article II clarifies that ‘outer space, including the moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use of occupation, or by any other means’. Article III further states that the exploration of outer space shall be carried out ‘in accordance with international law, including the Charter of the United Nations, in the interest of maintaining international peace and security and promoting inter­national cooperation and understanding’. In turn, Article IV bans the placement of weapons of mass destruction in orbit or on celestial bodies, and Article XI promotes international cooperation in space exploration.

Articles V to VIII of the Outer Space Treaty contain principles that were further developed in the subsequent agreements mentioned above. Article V sets out the principle of providing assistance to any astronaut in need, a principle further expanded on in the Rescue Agreement. Article VI provides that state parties to the Outer Space Treaty ‘shall bear international responsibility for national activities in outer space . . . whether such activities are carried on by governmental agencies or by non-governmental entities, for assuring that national activities are carried out in conformity with the provisions [of the Outer Space Treaty]’, and that the activities of non-government entities in outer space ‘shall require authorization and continuing supervision by the appropriate State Party to the Treaty’. Article VIII stipulates that a ‘State Party to the Treaty on whose registry an object launched into outer space is carried shall retain jurisdiction and control over such object, and over any personnel thereof, while in outer space or on a celestial body’. To ensure compliance with this obligation of supervision, the Registration Convention provides for the registration of space objects.^[17] Finally, Article VII states:

Each State Party to the Treaty that launches or procures the launching of an object into outer space . . . and each State Party from whose territory or facility an object is launched, is internationally liable for damage to another State Party to the Treaty or to its natural or juridical persons by such object or its component parts on the Earth [or in space].

This principle is further developed in the Liability Convention.

In addition to these treaties, several Resolutions of the United Nations General Assembly, although in theory non-binding, have been followed to varying degrees. Notably, a 1961 Resolution recommends that states register their space objects with the United Nations as part of an international registry.^[18] Other Resolutions include:

• 1982 Principles Governing the Use by States of Artificial Earth Satellites for International Direct Television Broadcasting;^[19]
• 1986 UN Resolution on ‘Principles relating to remote sensing of the Earth from outer space’,^[20] which constitutes the main legal document applicable to Earth observation activities;
• 1992 Principles Relevant to the Use of Nuclear Power Sources in Outer Space;^[21]
• 1996 Declaration on International Cooperation in the Exploration and Use of Outer Space for the Benefit and in the Interest of All States, Taking into Particular Account the Needs of Developing Countries;^[22]
• the ‘Launching State’ Resolution of 2004;^[23]
• the ‘Recommendations on enhancing the practice of States and international intergovernmental organizations in registering space objects’ of 2007;^[24] and
• the ‘Recommendations on national legislation relevant to the peaceful exploration and use of outer space’ of 2013.^[25]

Soft law and guidelines on space debris mitigation

International space law dates back to the Cold War era, when the exploration of outer space was very costly and limited to a few state actors. It therefore fails to specifically address several recent issues, such as the accumulation of both active satellites and space debris in the LEOs that is already presenting serious risks, and will only continue to grow with the current multiplication of space activities and the planned large satellite constellations to be launched in the coming years.

In view of the political impossibility to agree on a new binding treaty able to address this new issue, in 2002, the Inter-Agency Debris Coordination Committee (IADC), comprising the major national space agencies, published the IADC Space Debris Mitigation Guidelines^[26] that served as a basis for the 2007 United Nations Space Debris Mitigation Guidelines.^[27] Although these instruments remain non-binding, they serve as an indication of best practices for satellite operators conscious of mitigating their creation of additional space debris and have been incorporated into domestic law by some countries.

The existing practice of private space actors reflects the acceptance of recommendations to limit the generation of space debris and minimise the negative impact on current and future space missions. Manufacturers try to reduce debris from launch vehicles and launched spacecraft by carefully designing them to prevent malfunctions and explosions and by ensuring that a reserved amount of fuel is available when a spacecraft’s mission is over to enter or move them to disposal orbits.^[28]

In addition, efforts are currently being undertaken (e.g., by the European Union) to agree on rules of space traffic management to decrease the risk of physical collisions in outer space, and new space companies, such as Leo Labs^[29] and Vyoma,^[30] are tracking space objects in efforts to improve global space situational awareness.^[31]

Frequency allocation and coordination

Not only is the risk of physical collisions between active satellites or satellites and space debris becoming a growing issue, but the increase of active satellites in space is also presenting a challenge for frequency allocation and coordination.

It is the International Telecommunication Union (ITU), a specialist agency of the United Nations headquartered in Geneva, Switzerland, that offers the main international legal framework for addressing the technical and operational aspects of satellite communications.^[32] The ITU is managing all radio frequencies and also the use of the Earth’s geostationary orbit. It ensures that the available radio frequency spectrum and associated satellite orbits are used equitably, efficiently and economically, and is tasked with preventing frequency interference between satellites.^[33] The applicable sources of law are the ITU Constitution^[34] and Convention,^[35] and the ITU Radio Regulations,^[36] all of which are inter-government treaties and binding as international law.

In practice, before a new satellite or system can be launched and used, it must be coordinated with neighbouring satellite networks. The result of this coordination process is set out in coordination agreements. Compliance with these agreements is crucial as harmful interference can prevent satellites from operating normally and thus create significant financial damage for its operators.

Domestic space law

Under Article VI of the Outer Space Treaty, states are internationally responsible for any private activities in outer space that qualify as their ‘national activities’, and are obliged to authorise and continuously supervise such activities. As a consequence, states have a strong incentive to regulate their domestic space activities to ensure compliance with international space law, while at the same time offering private parties incentives and the legal security they need to pursue space activities.

National space laws address issues such as approval processes for space launches, insurance requirements, liability limitations, space debris mitigation, national security requirements and environmental protection but the different domestic approaches can vary significantly from one state to another. In 2012, to increase harmonisation and reduce the fragmentation of domestic space law, the International Law Association proposed the Sofia Guidelines for a Model Law on National Space Legislation.^[37] One year later, the United Nations’ General Assembly adopted Resolution A/RES/68/74 with ‘Recommendations on national legislation relevant to the peaceful exploration and use of outer space’.^[38] In addition, the United Nations Office for Outer Space Affairs keeps an online database of states with national space legislation^[39] and, at the end of 2022, it launched a new platform, Accessing Space Treaty Resources Online (ASTRO), which serves as a database of national space laws, policies and regulations of state members of the Committee on the Peaceful Uses of Outer Space.^[40]

Finally, as space technology and hardware are considered dual-use technology (meaning that even commercial satellites can, for example, be used for military purposes if necessary), states want to protect their technological advances. As a consequence, satellite technology and hardware is often subject to export controls that need to be considered in any transaction regarding satellites.

Satellite disputes and arbitration

Commercial contractual disputes

As discussed above, the satellite industry comprises very different aspects, ranging from upstream activities, such as the manufacturing and launch of satellites, to midstream activities, such as the production, sale and distribution of satellite data, and downstream activities in the form of satellite applications for use on Earth or satellite broadcasting. Many of these activities involve contracts between various actors often based in different jurisdictions. The subject matter of these contracts is often highly technical and any satellite agreement can be subject to specific insurance requirements, heightened confidentiality and often export controls as a result of the dual-use nature of satellite technology. All these aspects can and are likely to result in a growing number of contractual commercial disputes to the extent that the satellite industry is expanding in both scope and complexity.

As Professor Karl-Heinz Boeckstiegel had already said in 1993:

With the growing direct participation of private enterprises in space activities, disputes are bound to occur also in this context. In relative perspective, dispute settlement plays a greater role for private enterprises than for state institutions, because private enterprises do not have available diplomatic and political means and because private enterprises rely much more on calculating the exposure to costs and risk on the fulfillment of contractual obligations and, if necessary, on the enforcement for the other to fulfill the contract or pay damages.^[41]

In the past, several of these contractual space disputes have been resolved through international commercial arbitration and it is likely that this trend will continue, as, for example, the European Space Agency (ESA) provides for arbitration in Clause 35(2) of its General Clauses and Conditions for ESA Contracts^[42] and arbitration clauses also seem to be routinely included in commercial space contracts by SpaceX, Avanti, Boeing, Airbus and Arianespace.^[43] In fact, a study undertaken by Vivasat Dadwal and Madeleine McDonald confirmed that international arbitration is used by both state and non-state actors in the resolution of publicly known space-related disputes, especially in the satellite industry.^[44]

In the past, satellite disputes that gave rise to international arbitrations have arisen, for example, out of the late delivery of satellites, the placing of a satellite into a wrong orbit, defective satellites already in orbit, the lease of satellite capacity, the right to orbital positions and frequency bands, export control and the cancellation of space contracts.^[45]

Although international arbitration in general is well suited to adapt to the specific needs of the satellite industry, in 2011, the Permanent Court of Arbitration published its specifically tailored Optional Rules for Arbitration of Disputes Relating to Outer Space Activities (the PCA Outer Space Rules).^[46] These Rules are based on the well-known Arbitration Rules of the United Nations Commission for International Trade Law, but contain various adaptations to better suit the requirements of the space industry. For example, under Articles 10(4) and 29(7), the Secretary-General of the PCA maintains lists of arbitrators and experts with specialist knowledge of the subject matter at issue. Article 17(6) allows the parties to a dispute to apply to have certain information classified as confidential and Article 17(8) provides for the possibility of appointing a ‘confidentiality adviser’ to report to the tribunal on specific issues without disclosing the confidential information on which his or her report is based. Finally, according to Article 27(4), the tribunal may request the parties to provide a non-technical document summarising and explaining the background to any scientific, technical or other specialist information that the arbitral tribunal considers to be necessary.^[47] At the time of writing, the PCA Outer Space Rules have not yet been used in practice. However, ‘[a]s the size and sophistication of the market develops, it seems likely that users will gravitate toward the [PCA Outer Space Rules], which were prepared with their specific needs in mind’.^[48]

Disputes about space collisions or collision avoidance manoeuvres

As mentioned above, disputes in the satellite industry are likely to arise not only out of contracts but might also result from space collisions or costly collision avoidance manoeuvres. A first example of such a scenario was the 2009 collision between the active commercial satellite Iridium 33 and the defunct military satellite Kosmos 2251.^[49] Although no formal dispute resolution proceedings are known to have taken place following this particular collision, an increase in collisions can be expected to lead satellite operators to explore available forums to recover the damage they are likely to suffer.

The Liability Convention, the treaty setting out the rules of liability for damage caused by space objects, contains a dispute settlement mechanism that can be qualified as quasi-arbitration: the Claims Commission.^[50] Although similar to arbitration, the Claims Commission presents two main drawbacks: its decisions are only recommendatory unless all parties to a dispute agree to render them binding and, equally importantly for private satellite operators, the Liability Convention, being an international treaty, applies only to states and, therefore, is not available to them other than through diplomatic protection.

It follows that in the absence of a contractual link between the parties involved in a collision and the corresponding lack of prior consent to arbitration – unless they can agree to refer their dispute to arbitration once it has arisen – the parties then have to turn to domestic courts. However, in domestic court litigation, satellite operators are likely to face well-known obstacles such as language barriers, bias, sovereign immunity, uncertainty about the competent court and the applicable law, and a lack of expert knowledge of the satellite industry among domestic judges.

To address this lack of efficient dispute resolution provisions available to private space actors, in 1998, the International Law Association published its Final Draft of the Revised Convention on the Settlement of Disputes related to Space Activities,^[51] establishing arbitration as the default dispute resolution mechanism. This proposal failed to gain sufficient political support, however, and has never entered into force. More recently and to circumvent the necessity of agreeing on a new international treaty, it has been suggested that states amend their domestic laws to condition launching licences for space objects on the mandatory consent to arbitration for any dispute involving the object in question.^[52]

Until such efforts progress further, it is unlikely that there will be many international arbitration cases regarding satellite collision cases; however, litigation on these issues should be expected.

Investment disputes

Satellites are expensive assets and the manufacturing, launching and operating of a satellite require significant economic resources. As a consequence, companies involved in the satellite industry have a strong incentive to make sure their satellites benefit from international investment protection.

Because of the high financial resources required to put a satellite in orbit and operate it, the corresponding risk, and the arguable economic and reputational contribution to the host state of the satellite, satellite activities are likely to comply with the required characteristics for an ‘investment’ under both the majority of bilateral investment treaties and Article 25 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.^[53] It follows that, as long as they are accepted to be investments ‘made in the territory of the host state’, as routinely required under bilateral investment treaties, satellite-related investments could be protected by international investment protection treaties.^[54]

In the investor-state proceedings in the satellite sector to date, the territorial requirement has not prevented tribunals from accepting jurisdiction. This might be explained by the fact that those scenarios have addressed alleged regulatory interference with contractual rights for which the link with the host state was undisputed. On the merits, past investment treaty cases have dealt with alleged conventional treaty breaches of expropriation and the violation of the fair and equitable treatment standard.

In practice, the cases Devas v. India and Deutsche Telekom v. India arose out of India’s revocation of leased S-band frequency spectrum,^[55] and Eutelsat v. Mexico concerned a provision contained in the concession contracts for the use of Mexican geostationary orbital positions allowing for the free reservation of satellite capacity for the Mexican government.^[56]

Disputes about frequency interferences

As mentioned above, any newly launched satellites need to be coordinated with neighbouring satellites – a process the results of which are set out in ‘coordination agreements’. It has also been mentioned above that the violation of a coordination agreement can cause harmful interference, resulting in significant financial damage to satellite operators.

When a case of harmful interference occurs, the parties can bring it to the attention of the ITU, and following an investigation, the ITU Radio Regulations Board can formulate recommendations. Its powers are limited, however, by its inability to review the confidential provisions of the coordination agreement at issue, its inability to award damages and, among other drawbacks such as the length and the public nature of its proceedings, the non-binding nature of its decisions. As a consequence, to recover damages for the breach of a coordination agreement, parties need to resort to alternative dispute settlement mechanisms.

As with collision cases, recourse to domestic courts is likely to face obstacles such as language barriers, bias, arguments regarding the competent court and the applicable law, and the decision makers’ lack of industry knowledge.^[57] Unlike in the case of a physical collision between satellites, however, the parties to a dispute arising out of the violation of a coordination agreement are connected exactly through this agreement. Unfortunately, coordination agreements are commonly drafted by technical experts and, therefore, rarely contain arbitration clauses.^[58] This could change in the future and, as with collision cases, in the meantime, the parties have the possibility to refer a dispute to arbitration once it has already arisen.

The dispute in 2012 between Eutelsat SA and SES SA arose because of non-compliance with a coordination agreement and was resolved through international arbitration administered by the Court of Arbitration of the International Chamber of Commerce.^[59] It is not public knowledge whether the coordination agreement contained an arbitration clause or whether the parties agreed to refer their dispute to arbitration after the event.^[60] Either way, this arbitration serves as an example that future disputes arising out of coordination agreements are likely to end up before arbitral tribunals.

Conclusion

The satellite industry is growing quickly and with this growth comes an increasing risk of satellite disputes – ranging from commercial contractual disputes to investment disputes, and disputes about satellite collisions or harmful frequency interference. The resolution of these disputes will benefit both from decision makers and counsel who are familiar not only with the commercial and technical characteristics of the satellite industry but who are also well acquainted with international and domestic space law and the specific legal rules applicable to satellite activities. It is international arbitration that can best guarantee access to both while being able to cater to the international and confidential nature of the satellite industry. It is not surprising, therefore, that many satellite disputes – both contractual and investment disputes – have already been resolved through arbitration. We should expect the number of satellite arbitrations to grow in the years to come.

Footnotes