April 25, 2022

Space Companies Should Ensure Their Access to International Arbitration

Holland & Knight Transportation Blog
Laura Yvonne Zielinski | Juan Pablo Moyano | Josafat Paredes | Carlos Vejar
Transportation Blog

Outer space, long dominated by governments of larger nations, has recently witnessed a surprising increase in private capital, along with a great range of new space activities ranging from telecommunications and Earth observation to space tourism and resource exploration. Traditionally a non-litigious industry, space contracts are often drafted to avoid disputes, thereby giving preference to collaborative techniques, such as cross-waivers of liability or mandatory insurance, over potential dispute resolution mechanisms. However, with the entry of a great number of new players into the space market and the increasing congestion of, at least, the lower orbits of Earth, it is likely that this peaceful collaboration will soon give way to a rising number of disputes. Space companies should be prepared for this occurrence.

In theory, any space-related claims, whether contractual or tort-related, can be brought before domestic courts. However, in addition to potential issues for foreign companies with regard to the language of the proceedings and possible bias, space claims before domestic courts are likely to face significant obstacles related to determining a competent court, the applicable law, applicable standard of proof and possibly sovereign immunity arguments by a government defendant. Moreover, domestic judges might not be familiar with the space industry and, therefore, fail to grasp the details of the scientific and technological context. Finally, domestic courts are not always able to guarantee the confidentiality necessary for an industry operating dual-use technology. This is where international arbitration comes into play.

As a private dispute resolution mechanism, international arbitration provides the parties to a dispute with a significant degree of autonomy over their proceedings. Thus, in international arbitration, the parties to a dispute are able to select their arbitrators and, therefore, have the possibility to choose individuals with experience and the necessary know-how to understand the dispute in question. In addition, parties can choose the place of arbitration and language of their proceedings, and they can influence the procedural calendar. They can also agree on enhanced confidentiality or, for example, on a mechanism directed at simplifying any technical details for the decision-maker. Industry-specific arbitration rules, such as the Optional Rules for the Settlement of Outer Space Disputes of the Permanent Court of Arbitration, already contain provisions directed at the space industry that cater to the above-mentioned industry characteristics and requirements. Finally, any award rendered by an international arbitral tribunal is final, binding and enforceable internationally through an international treaty called the 1958 New York Convention.1

Being a private dispute resolution mechanism, arbitration is based on consent, and such consent can be expressed by including a clause providing for arbitration in a contract. While many space contracts already do contain arbitration clauses, those that do not should be reviewed and, perhaps, amended. Holland & Knight's International Arbitration and Litigation Team can help you with any questions related to the drafting of arbitration clauses and assist you with the prevention and management of disputes.

Notes

1 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted on June 10, 1958.

Related Insights