Legal Basis

Since liability in international law does not depend on the existence of a breach, it is strictly a treaty-based regime. This means that one can only be held liable for damage if the grounds and conditions for such liability are set out in a specific international treaty. Examples of such dedicated treaties, which exist in different spheres of high-risk hazardous activities, include the 1960 Paris Convention on Nuclear Third Party Liability in the Field of Nuclear Energy, the 1963 Convention on the Liability of Operators of Nuclear Ships, the 1969 International Convention on Civil Liability for Oil Pollution Damage, the 1996 International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, and the 2001 International Convention on Civil Liability for Bunker Oil Pollution Damage. Each treaty governing international liability in a particular area contains specific provisions on the subjects bearing liability, the types of recoverable damage, the territory within which the accident may occur, limitations of liability, etc.

The first reference to international liability in the context of space activities can be found in the Declaration of Legal Principles Governing the Activities of States in the Exploration and Use of Outer Space, which was adopted in 1963 by a resolution of the United Nations General Assembly and included, as its Principle 8, liability for damage caused by an object launched into outer space or its component parts (General Assembly Resolution 1962, 1963). Then, the liability regime related to space activities was developed and enshrined in two legally binding instruments: 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 (Outer Space Treaty), and the 1972 Convention on International Liability for Damage Caused by Space Objects (Liability Convention).

According to Article VII of the Outer Space Treaty, which can be named as one of the two legal pillars of the treaty-based liability regime related to commercial space activities, each state that launches or procures the launching of an object into outer space, and each state from whose territory or facility an object is launched, is internationally liable for damage to another state or to its natural or juridical persons by such an object or its component parts on the Earth, in air space, or in outer space.

As the other legal pillar and lex specialis to the Outer Space Treaty, the Liability Convention elaborates on the liability regime; in particular, it provides for two types of liability: absolute and fault-based. Absolute liability is established in Article II, which specifies that a launching state is absolutely liable to pay compensation for damage caused by its space object on the surface of the Earth or to aircraft in flight. Under Article III of the Liability Convention, in the event of damage being caused elsewhere than on the surface of the Earth to a space object of one launching state or to persons or property on board such a space object by a space object of another launching state, the latter is liable only if the damage is due to its fault or the fault of persons for whom it is responsible.

Since Article II of the Liability Convention, which does not require proof of the fault of the conduct that causes damage in order to claim compensation and refers to this type of liability as absolute, reads similarly to Article VII of the Outer Space Treaty, the latter is also generally considered an example of absolute liability. This means that damage caused as a result of fault-free conduct is subject to compensation in accordance with both Article VII of the Outer Space Treaty and Article II of the Liability Convention.

Similar to other areas of human activity where liability regimes apply, the liability provisions applicable to commercial space activities establish certain conditions under which compensation for damage may be obtained as a result of an incident. First, according to both the Outer Space Treaty and the Liability Convention, the damage to be compensated must be caused by a space object. Second, compensation can be claimed from the state that is the “launching state” for the space object that caused the damage. In case of incidents falling under Article III of the Liability Convention where one space object causes damage to another space object or to persons or property on board such another space object, it is required that the launching states for such space objects be different. Third, in the same case of Article III of the Liability Convention, compensation is only payable for damage caused due to fault.

Space Objects as a Cause of Damage

Only damage caused by a space object is subject to compensation under the liability regime of international space law, while damage caused otherwise in the course of space activities is not compensable under international liability rules. In this regard, the notion of a space object is of key importance.

Though all five United Nations treaties on outer space use the term “space object,” none of them gives a precise definition of what a space object is. The Liability Convention, in its Article 1(d), specifies that this term includes component parts of a space object as well as its launch vehicle and parts thereof, but without defining the term itself. The latter is believed to have been done deliberately in order to define space objects in the broadest and most flexible way, taking into account the unsettled issue of definition and delimitation of outer space as well as technical and technological development. At the same time, when the draft Liability Convention was being developed, various options for defining a space object were discussed, including, for example, that a space object should mean “space ships, satellites, orbital laboratories, containers and any other devices designed for movement in outer space and sustained there otherwise than by the reaction of air, as well as the means of launching of such objects” (Travaux Préparatoires to the Liability Convention, 1964, Annex 2, p. 3).

Although not included in the United Nations space treaties, the definition of the term “space object” can be found in some national space legislations. They can be divided into three main groups, depending on which approach is used to define the term. The first group assumes the broadest meaning of a space object, which comprises all objects launched into outer space, including those of natural origin. With this approach, the bonsai tree, orchids, lilies, and other plants of Tokyo artist Azuma Makoto could be considered a space object if, after they were photographed in the stratosphere in 2014, they reached outer space (Jones, 2014). The second group narrows the definition by specifying that the object launched into space must be human-made. With this approach, the Tesla Roadster that was launched toward Mars on top of the SpaceX Falcon Heavy rocket in 2018 is considered a space object (Malkin, 2018). The third group links the definition of a space object to its capability to function in outer space. As far as the doctrinal view of the term “space object” is concerned, the widely held approach is that a space object means any artificial object “that is at least attempted to be physically brought into outer space” (von der Dunk, 2015, p. 87). This view corresponds to the second group of the national space legislations.

In the context of commercial space activities, the most obvious examples of space objects can be telecommunications, remote sensing and other types of satellites, spacecraft for on-orbit servicing and life-extension missions, manned spaceships and passenger capsules for space tourism, space mining rovers, and rockets to launch such objects into outer space. Сomponent parts of a space object, which are also included in the term “space object,” are generally understood as any items without which a space object would be deemed incomplete. This would include all elements normally regarded as making up a space object, such as a rocket’s boosters and upper stages, a spacecraft’s propulsion systems and fuel tanks, a satellite’s transponders, antennas, and solar panels, and a rover’s wheels and landing legs.

The Notion and the Legal Status of Space Debris

Though international space law does not contain a universally accepted legal definition of space debris, a general understanding has been reached to describe space debris as “all man-made objects, including their fragments and parts, whether their owners can be identified or not, in Earth orbit or re-entering the dense layers of the atmosphere that are non-functional with no reasonable expectation of their being able to assume or resume their intended functions or any other functions for which they are or can be authorized” (Scientific and Technical Subcommittee of the United Nations Committee on the Peaceful Uses of Outer Space, 1999, p. 2). Similar definitions may be found in Space Debris Mitigation Guidelines of the United Nations Committee on the Peaceful Uses of Outer Space, Space Debris Mitigation Guidelines of the Inter-Agency Space Debris Coordination Committee, Standard 24113 of the International Organization for Standardization, and European Code of Conduct for Space Debris Mitigation. These instruments are nonbinding guidelines and technical standards which have been developed by international governmental and nongovernmental organizations. The need for such instruments can be explained by the fact that international space law does not contain specific obligations regarding space debris. This is, however, without prejudice to the applicable rules of general international law and international space law which govern all aspects of space activities, including the associated creation of space debris.

The existing practice of private space actors reflects the acceptance of recommendations in order to limit the generation of space debris and minimize 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 in order to re-enter or move them to disposal orbits. Another way of mitigating space debris is to predict and help prevent collisions between space objects. Nonbinding instruments may be voluntarily implemented (General Assembly Resolution 68/74, 2013) and are referenced in some national space legislation and technical standards as mandatory requirements for authorizations for space activities (UNOOSA, 2019, February 25).

Space debris varies in size and can reach tens of square meters, such as inactive satellites, spent rocket stages, and other discarded hardware, or be tiny fragments measured in centimeters and millimeters, such as pieces of shielding and paint that have come off spacecraft or bits of satellites that exploded or collided. What is common to all types of space debris from a practical point of view is that it obstructs the exploration and use of outer space by all space actors.

In a legal sense, space debris is considered a space object and its component parts. [This is because] International space law does not link the legal status of a space object to the operability of such an object and does not provide for any conditions under which a space object that is in outer space, re-enters the Earth’s atmosphere, or reaches the Earth’s surface, ceases to be a space object and becomes what is known as space debris.

Since the nonfunctional condition of a space object does not affect the applicability of rules of international space law, space debris remains subject to the same regulation that applies to space objects in general. This means that, in accordance with Article VII of the Outer Space Treaty and the Liability Convention, states bear international liability for damage caused by space debris, including debris created by private actors.

The Status of the Launching State

Article VII of the Outer Space Treaty imputes liability on states that launch or procure launchings of space objects and states from whose territory or facility space objects are launched. For such states, Article I of the Liability Convention introduces the term “launching states” which is of crucial importance in international space law (General Assembly Resolution 59/115, 2004). Even if the space object that causes damage has been manufactured, launched, and commercially operated by a private company, in order to claim compensation, it is first necessary to determine the launching state in relation to such a space object.

The provisions of the Outer Space Treaty and the Liability Convention are formulated in such a manner that several states can be qualified as launching states for a single space object. It is necessary in order for each space object to always find a launching state and ensure that the damage caused by such an object would be compensated. For example, if a satellite operator registered and operating in one state procures the launching of its spacecraft by a private launcher with facilities located in the territory of another state, then both states have the status of the launching state with respect to the same spacecraft. For such cases, Article V of the Liability Convention provides that all launching states shall be jointly and severally liable for damage caused.

States may conclude bilateral and multilateral international treaties on the distribution of financial obligations for which they are jointly and severally liable. Such treaties regulate the issues of liability between their parties without prejudice to the Liability Convention. That is, other state parties to the Liability Convention are guided by its provisions when determining and seeking compensation from launching states, while the latter, in turn, can subsequently settle financial obligations in accordance with their arrangements. For instance, the 1994 Lease Agreement for the Baikonur Complex (Baikonur Lease Agreement, 1994) contains provisions on allocation of liability between Russia and Kazakhstan.

Other complex issues of international liability can also be resolved through agreements between states involved in space activities. This is relevant, for example, in the context of active space debris removal. In accordance with Article VII of the Outer Space Treaty and Article III of the Liability Convention, the launching state of the space object being removed may be held liable for any damage such an object causes during its removal, while the launching state of the removing spacecraft which is engaged in active removal will not be held liable for damage caused by space debris of a third state being removed. Both Article VII of the Outer Space Treaty and Article III of the Liability Convention provide for international liability of a launching state for damage caused by its space object, not by a space object of a third state. An agreement between two launching states—the one who bears international liability for damage caused by its nonfunctional space object and the other who renders a space debris removal service—can settle the liability issue internally.

Article I of the Liability Convention clarifies that a launch includes an attempted launch, although this may result in failure. Launch failures often lead to the formation of space debris. For instance, if a satellite does not reach outer space due to a technical malfunction and causes damage in the air or on the ground, either by itself or its disintegrated fragments, the launching state is obligated to compensate for such damage in accordance with the applicable rules of international space law. More importantly, the launching state cannot relinquish or otherwise lose this status for any reason, including the loss of functionality of its space object. It will continue to bear international liability for such an object, even if in practice it turns out to be space debris.

However, if damage is caused by space debris, it may be difficult or even impossible to determine the launching state, since practical problems may arise in identifying space debris. The ability to do this depends on the distance between the tracking devices and space debris and is affected by the characteristics of space debris, such as size, type of blanketing material, and albedo. More so, as disintegration of space debris occurs in outer space, it can be difficult to trace a fragment back to its original space object. If space debris cannot be identified and cannot, therefore, be associated with a specific launching state, the application of the international liability regime is practically excluded.

Fault as the Basis for Liability

Under Article III of the Liability Convention, in the event of damage being caused elsewhere than on the surface of the Earth to a space object of one launching state or to persons or property on board such a space object by a space object of another launching state, the latter shall be liable only if the damage is due to its fault or the fault of persons for whom it is responsible. This fault-based liability regime is another specific feature of international liability for commercial space activities, and certain complexities with the notion of fault in the liability regime of international space law should be taken into account.

The first is the uncertainty of the legal content of this notion. Neither the United Nations treaties on outer space nor general international law contain a definition of fault. No examples of state practice exist that could be helpful in this regard. There are, however, several doctrinal views on the meaning of fault, and perhaps the most widespread is that fault means “intent or negligence to cause damage in respect of someone else active in space” (von der Dunk, 1991, p. 366). Hence, potentially the fault can be established if the operator of a space object did not take all possible measures that would have avoided the accident. Such an example is the omission of the operator of a remote sensing satellite that did not correct its orbit when receiving notice of a possible collision with space debris, which led to their collapse and the formation of new pieces of debris, thereby causing damage to another operational satellite.

However, loss of functionality can affect the assessment of fault. For example, if the operator of a telecommunications satellite that has lost its communication function and the ability to maneuver learns of a possible collision with an operating satellite in orbit but, despite attempts to establish communication, fails to correct the orbit of its nonfunctional satellite, which eventually collides with another satellite and causes damage, it is unlikely that the fault of the telecommunications satellite operator can be established.

In the implementation of Article III of the Liability Convention, which provides for liability for damage being caused due to fault, nonbinding guidelines and technical standards aimed at mitigating space debris may also be relevant. They may serve as an indication of an expected level of due regard, although due to the recommendatory character of such instruments, they cannot be considered an established universal norm of due regard. Still, depending on whether a commercial space operator who caused damage applied nonbinding guidelines and technical standards, one can speculate about the qualification of its conduct as containing a certain degree of fault.

Another problem related to fault concerns the difficulties in presenting evidence for legal proceedings by the litigants seeking to establish the facts and bearing the burden of proving these facts. At the same time, it is obvious that the operator who caused damage, but not the claimant, has all the evidence in respect of those actions that it did or did not take, and that may affect the establishment of fault. Such evidence may include technical data from Earth stations, telemetry and tracking analysis, collision probability assessment, commands transmitted to the spacecraft, etc.

According to Article III of the Liability Convention, the launching state is liable for damage caused not only by its fault, but also by the fault of persons for whom it is responsible. However, the Liability Convention does not specify who these persons are. To understand for which persons a state is responsible in the context of space activities, one can refer to Article VI of the Outer Space Treaty, which provides that states bear international responsibility for national activities in outer space, whether such activities are carried on by governmental agencies or by nongovernmental entities.

Although liability and responsibility are different legal regimes, Article VI of the Outer Space Treaty may contribute to the understanding of the last sentence of Article III of the Liability Convention, and persons for whom a state is responsible in the context of Article III of the Liability Convention should be considered to include all persons falling within the scope of Article VI of the Outer Space Treaty (Smith & Kerrest, 2013, pp. 134–135). According to the most widespread view, the concept of national activities in outer space, for which a state is responsible under Article VI of the Outer Space Treaty, covers all activities carried out by nationals of such a state or from its territory. Therefore, the inclusion of the fault of the persons for whom a state is responsible in Article III of the Liability Convention can be seen as further emphasizing that a state is also liable for damage caused due to the fault of commercial private operators of space objects for which such a state is the launching state.

Relationship Between the Liability Provisions of the Outer Space Treaty and the Liability Convention

Not all states that are parties to the Outer Space Treaty participate in the Liability Convention, and vice versa (UNOOSA, 2020, January 1). Therefore, the conditions of liability for commercial space activities may vary for operators from different states. Although the Outer Space Treaty and the Liability Convention establish the same basic principles of international liability, including that both instruments apply to damage caused by a space object and impose liability on the launching state, these treaties have some differences with respect to the liability regimes.

If liability arising regardless of fault is considered, the provisions of the Outer Space Treaty and the Liability Convention, which names this type of liability absolute, have different areas of application. Article VII of the Outer Space Treaty provides for such liability for damage caused “on the Earth, in air space or in outer space, including the Moon and other celestial bodies,” while Article II of the Liability Convention provides for absolute liability of states only for damage inflicted “on the surface of the Earth or to aircraft in flight” and does not provide the same for incidents occurring in outer space.

In contrast to the Outer Space Treaty, the Liability Convention does not establish absolute liability for any damage caused in air space, yet only for damage caused to aircraft in flight. The ordinary meaning of the word “aircraft” can be described as “a vehicle (such as an airplane or balloon) for traveling through the air” (Merriam-Webster, n.d.). The term “aircraft” is defined by the 1944 Convention on International Civil Aviation but cannot be directly used as legally binding for the purposes of another international treaty, the Liability Convention. In any case, presumably not all objects that may be damaged in air space can be covered by the notion of an “aircraft in flight.” This means that the Liability Convention applies in fewer cases of incidents in air space compared to the Outer Space Treaty.

In comparison with the Outer Space Treaty, the Liability Convention can also be applied in fewer cases of on-orbit accidents. Article VII of the Outer Space Treaty establishes liability for damage caused to another state or to its natural or juridical persons. Article III of the Liability Convention not only provides for fault-based liability for damage in outer space but also narrows such cases to those where damage is caused to another space object. In case damage is inflicted to an asset that does not qualify as a space object, such a case would not fall within the scope of the Liability Convention without, however, precluding the victim from having recourse to the Outer Space Treaty.

In contrast to the Outer Space Treaty, exoneration from absolute liability in accordance with Article VI of the Liability Convention may be granted to the extent that the damage has resulted either wholly or partially from gross negligence or from an act or omission done with intent to cause damage on the part of a claimant state or of natural or juridical persons it represents. This can be illustrated by an example where a private on-orbit servicing operator violates the technical regulations agreed upon with the owner of the satellite being served, which leads to the accidental de-orbiting of the satellite and the fall of its fragments to the Earth station of the service operator, thus causing damage to it. Despite the fact that the damage is caused by the satellite, its launching state would not be held liable, since the damage is the result of the servicing operator’s fault. However, the same Article VI of the Liability Convention also establishes that no exoneration is granted in cases where the damage has resulted from activities that are not in conformity with international law.

According to its Article VII, the Liability Convention does not apply to damage caused by a space object to foreign nationals participating in the operation of such a space object or located in the immediate vicinity of the planned launching or recovery area at the invitation of that launching state. There are no similar provisions in the Outer Space Treaty, which Article VII can be applicable to cases where damage is caused to natural or juridical persons of another state regardless of their invitation by the launching state.

For states that are parties to both the Outer Space Treaty and the Liability Convention, the provisions of these two treaties apply simultaneously. The Liability Convention is undoubtedly the lex specialis to the Outer Space Treaty and, in this regard, it is essential to correctly apply the lex specialis derogat legi generali principle. This general principle of law should be resorted to in cases where a special rule and a general rule have the same factual circumstances of application, yet offer different legal regulation, that is, when there is a conflict between special and general rules (International Law Commission, 2006b). Therefore, the relations of states that have acceded to the Liability Convention and are parties to the Outer Space Treaty continue to be governed by Article VII of the latter insofar as such relations are not governed by the Liability Convention.

This relationship between the Outer Space Treaty and the Liability Convention is important for the settlement of accidents related to commercial space activities, since Article VII of the Outer Space Treaty applies in cases where the Liability Convention “is inapplicable or does not provide the optimum remedy for the victim” (Smith & Kerrest, 2013, p. 135). In some cases, the Liability Convention cannot be applied, and therefore the victim cannot be compensated for damage. Inapplicability of the Liability Convention does not, however, preclude such a victim from seeking compensation under Article VII of the Outer Space Treaty. The following example may serve as an illustration.

A start-up space company aimed to deploy an innovative satellite service around the globe through a new low Earth orbit constellation. Though performed by the same launcher, the first couple of launches were successful, but the subsequent ones failed as the satellites were not working normally and could not be used for providing services. The inability to fully deploy the satellite constellation and start providing services led to the bankruptcy of the space start-up, and the partially deployed constellation was purchased by a new owner, an experienced commercial company from another state. Before replenishing the constellation, the new owner decided to remove from orbit nonfunctional satellites and contracted a commercial space debris removal service provider. The removing spacecraft was launched by the same state that was the launching state for all satellites in the constellation. Due to the fault of the space debris removal service provider, a functional satellite was removed from orbit by mistake instead of a nonfunctional satellite intended for disposal. This caused damage to the new owner of the constellation as it was deprived of an operational satellite. Since a spacecraft designed to remove space debris and a satellite that was accidentally removed have the same launching state, compensation for such damage cannot be claimed under the Liability Convention.

The latter applies only to in-orbit cases where a space object of one launching state causes damage to a space object of another launching state. Although the new owner of the satellite is a company from another state where it is registered and under whose license it operates, this case is not subject to the Liability Convention on formal grounds. The state of registration of the new owner merely does not have the status of a launching state in respect of the damaged satellite, whereas both the damaged satellite and the spacecraft that caused damage had the same launching state, which prevents the application of the Liability Convention in this particular case. Still, a claim will be possible in accordance with Article VII of the Outer Space Treaty—it does not require that the space objects involved in the incident have different launching states. Its scope is broader and it applies to all cases of damage caused by a space object of one state to another state or its natural or juridical persons.

These examples illustrate situations where no conflict between Article VII of the Outer Space Treaty and the Liability Convention exists. Otherwise, when the same aspect is settled both in the Outer Space Treaty and the Liability Convention, and the launching states which are involved in the incident are parties to both instruments, the victim cannot choose the application of Article VII of the Outer Space Treaty instead of the Liability Convention just because the former is more advantageous. Such a choice of convenience circumventing the Liability Convention would not be in line with the general principle of law lex specialis derogat legi generali.

The Notion and the Scope of Compensable Damage

Before claiming compensation, a commercial space company should determine exactly what damage is recoverable under the liability regime of space law. In this regard, the following aspects need to be considered.

Article VII of the Outer Space Treaty, while establishing the rule of international liability of a launching state for damage caused to another state or to its natural or juridical persons, does not define what the term “damage” means. At the same time, Article III of the treaty states that the exploration and use of outer space must be carried on in accordance with international law. The applicability of international law to outer space and space activities has been unanimously confirmed since the beginning of the space age—first, in 1961, in Resolution 1721 (XVI) of the United Nations General Assembly, then in the 1963 Declaration of Legal Principles. This means that the rules of general international law should be used to resolve issues that are not regulated by space law. Thus, it is possible to apply general international law in order to determine what damage is compensable under the liability regime of the Outer Space Treaty and how compensation shall be calculated.

In international law, respective principles and rules are mainly contained in the customary law of state responsibility, which is codified in the International Law Commission (ILC) Articles on Responsibility of States for Internationally Wrongful Acts (ILC, 2001). The importance and usefulness of these articles continues to be recognized by the General Assembly of the United Nations (General Assembly Resolution 74/180, 2019). As noted by the latter, a growing number of decisions of international courts, tribunals, and other bodies refer to the Articles on Responsibility of States (General Assembly Resolution 71/133, 2016). However, it is unclear whether one can apply the responsibility principles to damage claimed in accordance with the liability regime of the Outer Space Treaty despite the provisions of its Article III. This is because responsibility and liability are two separate legal regimes, and different doctrinal views exist on the possibility or exclusion of overlaps between them.

One of the most general principles concerning compensation for damage, which can be derived from the responsibility regime, is that the recoverable damage must not be too remote or consequential in regard to an act causing it (ILC, 2001, pp. 92–93) and must be financially assessible (ILC, 2001, Art. 36). If a judicial body dealing with the case establishes that the principles contained in the responsibility regime apply to the compensation for damage which is governed by Article VII of the Outer Space Treaty, the litigant seeking such compensation must prove that the damage satisfies the above criteria.

With regard to the type of damage that is recoverable under the responsibility regime, depending on the classification used, several types of damage can be distinguished. These are material and nonmaterial (moral) damage and direct or indirect (consequential) damage. In addition, such types as loss of profits and environmental damage are usually singled out as deserving special attention (ILC, 2001, pp. 101, 104). All these types of damage are recoverable under the rules of state responsibility. Therefore, it is possible to assume that Article VII of the Outer Space Treaty, which is read in the light of its Article III, provides the legal basis for compensation for all mentioned types of damage.

The Liability Convention addresses the liability regime in more detail and, in particular, defines damage in its Article I (a) as “loss of life, personal injury or other impairment of health; or loss of or damage to property of states or of persons, natural or juridical, or property of international intergovernmental organizations.” As for the calculation of compensation for damage, Article XII of the Liability Convention also refers to international law and the principles of justice and equity, specifying that compensation must provide such reparation in respect of the damage as will restore the person, natural or juridical, state, or international organization on whose behalf the claim is presented to the condition which would have existed if the damage had not occurred. Thus, general principles and rules of international law should be applied to the determination of compensation under the Liability Convention. As in the case of Article VII of the Outer Space Treaty, one can only assume whether this means that the rules and principles derived from the responsibility regime can be applied.

However, even if the applicability of such principles and rules to damage claimed under the Liability Convention is established, this does not mean that the Liability Convention covers all types of damage recoverable according to the responsibility regime. This is because the Liability Convention, unlike the Outer Space Treaty, contains a sufficiently precise and exhaustive definition of damage. Nonetheless, in the absence of state practice and because of different national approaches to determining what damage is and how it can be classified, the question of what types of damage are compensable under the Liability Convention can be answered in different ways. For example, there is no consensus on whether the latter provides compensation for indirect damage, environmental damage, and loss of profits. However, there is no doubt that under the Liability Convention, a private space company is entitled to compensation for direct material damage, such as the loss of a satellite. Since damage under the Liability Convention covers “loss of life, personal injury or other impairment of health,” which may include psychological health, it can be concluded that nonmaterial damage is also compensable thereunder.

Taking into account the difference between the types of damage recoverable under the Outer Space Treaty and the Liability Convention, a private company suffering damage should choose the right legal basis for its claim and thoroughly determine the scope of damage that may be claimed thereunder.

Claims for Compensation

One of the most important issues in the context of international liability for commercial space activities is the procedure for submitting compensation claims. Private actors should understand what mechanisms they can use under the liability regime of international space law and what practical steps they need to take. Otherwise, the right to compensation remains ink on paper.

First of all, it should be known that since states are subjects of international space law and bear rights and obligations in the context of international liability, it is states that can put forward claims under the Outer Space Treaty and the Liability Convention. Therefore, in order to initiate a compensation procedure, an injured company must approach a state to present the claim. When determining which state it is, one should first keep in mind the state of nationality. If damage is claimed to be compensated in accordance with the Liability Convention, other states that could potentially file such a claim include the state in whose territory the damage was suffered or, if neither the latter nor the state of nationality present a claim, the state of the victim’s permanent residence.

It should be noted that under international space law, a state is not obliged to present claims for damage caused to the private space sector, yet it has such a right. How this right is implemented in practice, including cases where the state makes such claims and under what conditions, may be established by national legislation. In the absence of a national legal obligation on the part of a state to make claims for the benefit of its private actors, a state may act at its discretion, taking into account many factors that may encourage or deter a state from making claims against another state. These factors include the political environment and possible consequences, the costs of international legal proceedings, as well as the lack of any practice in applying the liability regime of international space law and, consequently, the need to be among the first to interpret its provisions and be adjudicated, thus creating state practice. Nor does international space law contain any binding provisions as to whether compensation collected from another state should be transferred by the claimant state to the injured private actor, and if so, to what extent. All these aspects should be examined by the affected company in advance to avoid unintended consequences.

An injured company should also determine a state authority that is competent to deal with claims for compensation for damage caused in the course of space activities or, at least, to interact with the private space sector. Such a body may be the licensing authority that performs authorization and continuing supervision of the activities of nongovernmental entities in outer space. Interaction with government authorities is regulated by national legislation, which may differ from state to state, being more or less complicated and time-consuming, which is especially important for small understaffed companies lacking experience.

Finally, if a state initiates a compensation claim for damage caused to a private company, this procedure still has disadvantages for the injured party, which may affect the outcome of the case. Since a private company cannot be a party to international legal proceedings that directly concern it, its success depends largely on how well the relationship between the injured party and the state goes. In this regard, private companies should at least understand the procedure established by the liability regime of international space law for making claims and applicable rules of general international law.

The only article on liability of the Outer Space Treaty, Article VII, predictably does not contain any procedural guidelines on how to conduct compensation cases related to damage caused by space objects. Rather, it has a general provision set out in its Article III on the applicability of international law, including the Charter of the United Nations (UN Charter, 1945), to activities in the exploration and use of outer space. The UN Charter calls on states to settle their international disputes by peaceful means, which can be done under any procedure agreed upon by the parties to the dispute.

Unlike the Outer Space Treaty, the Liability Convention describes in detail the procedure related to compensation for damage. Its Article X establishes a 1-year period for presenting claims, which begins on the date of the occurrence of damage unless the claimant state is unable to identify the launching state due to practical issues or is unaware of the occurrence of damage. Article IX stipulates that a claim shall be presented through diplomatic channels to the launching state of the space object that caused damage. If a claim is not settled through diplomatic channels within 1 year, Article XIV provides that, at the request of either party, the parties must establish a Claims Commission. By mutual agreement, states can also refer the dispute to an international judicial body that will solve the case.

Compensation for damage caused to a private space company in accordance with the liability regime of international space law is not the only option. A private company can itself take a legal action against the natural or juridical person who caused the damage. If the damage is caused by a state, specific aspects related to the state’s immunity should also be taken into account. The right to pursue a claim in the courts, administrative tribunals, or agencies of a launching state is expressly provided for in Article XI of the Liability Convention. However, in the absence of a contractual relationship, it will be difficult to determine the legal basis for such a claim and other elements of the legal proceeding. Neither international law nor national legislations contain comprehensive universal binding rules governing the settlement of such disputes. Unless the participants of the incident agree on an appropriate dispute resolution mechanism, it is unclear what judicial body a compensational claim can be referred to and what law must be applied. The answers to these questions should be sought in the domain of private international law, including conflict of laws rules.

Insurance as a Means to Protect Commercial Space Actors

Since private space actors may face certain difficulties with regard to the process of interstate dispute settlements under the Outer Space Treaty and the Liability Convention, as well as with regard to other possible mechanisms of claiming compensation, insurance plays an important role in planning and pursuing commercial space activities. National legislation on space insurance varies from state to state, making different kinds of insurance available and establishing cases when it is voluntary or mandatory for the private space sector. In case of an accident, the mechanisms of insurance can protect interests of both private actors and states.

As a rule, commercial companies can insure their space objects against damage and loss, this being known as property insurance. The risk of nonreceipt of profits from space objects can also be insured, which is an insurance of entrepreneurial risk. Both types of insurance are quite widespread, although they are generally voluntary. Hence, a private space actor has discretion to estimate whether insurance is economically advantageous in the event of damage.

The major advantage of insurance for the private space sector is greater confidence in receiving compensation for damage and greater predictability of the amount and timing of payment. That is, a company is entitled to the expected compensation when an insurance event occurs without having to assume the risk of uncertainty arising when initiating an interstate procedure in accordance with international space law or a private litigation process. Compared to an interstate or private settlement, payment of the amount owed to the injured party by an insurance company will be prompter and more convenient provided that all steps related to the occurrence of an insured event are taken in a timely manner. In addition, the notion of an insured event under an insurance contract may cover a wider range of cases and types of compensable damage than the cases for which compensation is provided by the liability regime of international space law.

States that have the status of launching states for objects launched into outer space and operated by commercial private companies and bear international liability for associated damage are also interested in introducing insurance mechanisms. For this reason, national legislation frequently contains provisions on mandatory liability insurance for space objects’ launches. Most often, in this case, both the launch and the first year in orbit are insured. This is due to the fact that incidents tend to occur during launch, in-orbit deployment and testing, or in the beginning of a space object’s operation. Mandatory insurance allows states to at least partially minimize and allocate financial risk in case another state files a compensational claim for damage caused by a space object of a private actor.