Pipelines to payloads: risk management lessons for the space economy

The energy sector has spent decades learning how to manage complex disputes that touch on sovereign power, geopolitics, regulation and private capital. Those same dynamics are at play in the rapidly expanding commercial space economy. Like energy investors, today’s private space financiers and operators are investing in complex, capital-intensive infrastructure that crosses national borders. It is prudent for these companies to consider how best to protect their costly investments in the event of a future dispute. There are five key lessons that the space industry can learn from international energy disputes over the years.

Lessons from an industry with a similar risk profile

Space and energy share a common risk profile: They involve long-term investments with high upfront costs repaid over years or decades; enduring state leverage (including through state-owned enterprises); exposure to political and geopolitical risk; intense regulatory oversight; national security sensitivities and reputational “social license” pressures. These hallmarks of the energy field increasingly characterize private ventures in the space economy. 

Despite these shared features, the legal frameworks governing the two sectors diverge sharply. Energy disputes typically arise because a host state acts within its own territory against a foreign investor’s assets, a paradigm for which international investment law was designed. Space investments, by contrast, involve assets operating in areas beyond any state’s sovereignty, creating jurisdictional and enforcement challenges that existing legal frameworks were not built to address. Whereas the energy sector benefits from an established, worldwide treaty framework protecting cross-border investments (including customized instruments such as the Energy Charter Treaty, established in the 1990s to protect and promote international energy cooperation), international space law offers no comparable system to protect private investments in space. 

The Outer Space Treaty (1967) and the Liability Convention (1972) establish obligations between states, but neither creates direct rights or remedies for private actors. The Outer Space Treaty encourages States to enter consultations in case of “potentially harmful interference,” and the Liability Convention provides a negotiation and claims commission procedure for inter-state disputes. This framework is poorly suited to assist space companies who may need timely relief from unfair, discriminatory, or even expropriatory state measures. Much less does it assist companies whose costly investments may be affected or even destroyed by state action undertaken in outer space. While space companies benefit from the global network of bilateral investment treaties (“BITs”) that generally protect foreign investments on Earth such as those that cross national borders, and where the companies have structured their investments to obtain coverage, such protections have limits. BITs do not always apply, and no existing treaty regime directly protects commercial investments affected by the actions of another foreign company or state in outer space.

Lesson 1: Structure for investment protection

In the energy sector, savvy investors engage in corporate nationality planning to ensure investment treaty coverage in the event of a future dispute with the state where the investment is located. These treaties afford rights to foreign investors within the territory of the host state, such as fair and equitable treatment, protection against illegal expropriation, full protection and security, free transfer of funds, umbrella clauses to protect contract commitments and access to neutral arbitration to pursue the enforcement of their rights. 

Space companies should adopt the same discipline when investing in foreign jurisdictions, by analyzing the availability of favorable BITs for the structure of their investments, paying attention to the particular requirements of the treaty. For example, some treaties require “substantial business activities” or a “principal place of business” in a state to obtain coverage, while others require very little presence in the state at all. 

Recent disputes underscore the stakes. For example, a major dispute arose after a state-owned satellite operator in India terminated an agreement to provide a foreign-owned private satellite communications company with satellite capacity for a communications and multimedia services project across India, citing national policy and spectrum allocation priorities. The cancellation triggered parallel contract and investment‑treaty claims by foreign investors. International arbitration tribunals found the state-owned satellite operator liable for breach of contract and India liable under applicable investment treaties, and awarded significant damages. Amid enforcement efforts, however, Indian courts found that the underlying agreement was “tainted by fraud,” and ordered the liquidation of the private company, giving rise to further disputes by investors against India. The dispute illustrates how state measures can disrupt commercial expectations, and why investors value treaty-based access to neutral fora outside the influence of the state counterparty.

Lesson 2: Allocate the risk of legal volatility

Energy projects operate over a long timeframe, often decades. They regularly encounter shifts in tax regimes, permits, price controls, emergency powers and other forms of state interference, which is precisely why international laws and treaties have evolved to safeguard investors against these risks. Space investments are beginning to encounter similar challenges, including the revocation or reallocation of spectrum, mandatory allocation of capacity for governmental use, payment delays, shifting technical milestones and demands that exceed design life or contract scope. 

Seen through this lens, the lesson for space investors is clear: Anticipate and allocate sovereign, legal and regulatory risk ex ante. Risk allocation provisions in contracts with sovereigns should be treated as core terms that are drafted carefully, not relegated to boilerplate afterthoughts. These include force majeure and hardship, government/regulatory approval and spectrum management provisions, national security and public-interest carve-outs, stabilization clauses, termination for convenience and compensation formulas, limitations of liability and liquidated damages, step-in and cure rights, representations and warranties, dispute resolution and express waivers of sovereign immunity for arbitration and enforcement. 

In the dispute described above, the state-owned operator and India relied on contractual defenses (including force majeure and public policy), and subsequently raised jurisdictional and sovereign immunity based objections to resist payment of unfavorable arbitral awards. The energy sector frequently uses stabilization (or “freezing”) clauses in contracts to freeze aspects of the regulatory regime at the time of investment or otherwise providing mechanisms to restore the investor’s economic position from changes to that regime. These clauses can be adopted to protect against sudden changes in national space laws or licensing requirements. Private actors operating in the space economy should assume that only well-drafted contracts and enforceable remedies will reliably protect their position against states. 

Lesson 3: Choose forum and enforceability deliberately

To minimize political interference and ensure swift cross-border enforcement, international disputes should be resolved in neutral arbitration fora that enforce the 1958 New York Convention or 1965 ICSID Convention for post-award recognition and enforcement proceedings. Contracts should default to arbitration clauses calling for resolution under the rules of established institutions, with careful attention to seat, sovereign immunity waivers and routes for award enforcement. 

Arbitration also allows space companies to ensure that disputes can be heard by those with aerospace/telecom expertise (with the option to refer even more technical issues to expert determination). The PCA Optional Rules for Arbitration of Disputes Relating to Outer Space Activities (PCA Space Rules), adopted in 2011, provide a voluntary and binding dispute resolution mechanism for disputes having “an outer space component involving the use of outer space by States, international organizations and private entities.” The PCA Space Rules are modeled on the 1992 PCA Environmental Rules and the 2010 UNCITRAL Arbitration Rules, but introduce targeted modifications that standard UNCITRAL Rules do not contemplate, including provisions accommodating arbitrations involving States, international organizations and private entities; availability of heightened confidentiality mechanisms that are well suited to the sensitivities of conducting space activities; and provisions facilitating the appointment of arbitrators and experts with technical aerospaceor telecommunications expertise.

Space companies also benefit from the bells and whistles that come with the updated dispute resolution rules promulgated by most of the leading institutions. Interim and emergency relief mechanisms, explicitly permitted by many of these rules, can help preserve mission continuity, protect classified information and halt irreparable harm to an investment. Joinder and consolidation language can help companies avoid fragmented proceedings when using multiple contracts across stakeholders. 

Lesson 4: Mind the public international law gap

International space law was written for states, not for the private companies that now do most of the work in orbit. That leaves commercial space investors and operators exposed in three ways.

First, the standards for what constitutes responsible behavior in space continue to evolve. For example, interference, such as cyber-attacks or signal jamming, is a growing concern for private actors (as illustrated by the 2022 cyber-attack on a commercial satellite operator’s broadband network at the outset of the Russia-Ukraine conflict). While such interference is addressed in part by the International Telecommunications Union’s regulatory framework, which seeks to prevent harmful interference through spectrum coordination and state-to-state cooperation, the ITU regime does not establish rules governing liability, attribution or compensation for commercial harm.

Likewise, the Tallinn Manual on the International Law Applicable to Cyber Operations offers a framework for analyzing state responsibility in the cyber domain but does not specifically address space-based cyber operations. Given the prevalence of dual-use systems and the increasingly blurred lines between military and commercial assets, these risks to private actors are expanding. Space debris similarly poses a growing risk in the space economy, raising complex questions of attribution and liability in complex multi-party scenarios.

Second, though states are internationally responsible for their “national activities” in outer space, the definition of “authorization and continuing supervision” varies widely across jurisdictions. This creates uneven regulatory baselines in projects spanning multiple jurisdictions, which makes it difficult to determine which state bears responsibility when harm is caused by non‑state actors acting on behalf of, or under the authorization, supervision, or control of, a state (assuming attribution to the state itself can be proven). 

Third, as mentioned, private actors currently lack standing under the two main international space treaties and must rely on diplomatic protection, at the discretion of their home governments. This leaves private actors legally under-protected in an environment where State conduct can cause immediate operational and financial harm to their assets. Efforts such as the Artemis Accords (2020) represent a significant multilateral attempt to establish norms for civil space exploration and resource utilization among signatory states — but they too stop short of creating enforceable private rights. Until a genuine private-rights regime emerges, investors in the space economy should consider “borrowing” protections via treaty-based structuring and by drafting internationalized contracts that create enforceable private remedies in arbitration.  

Lesson 5: Learn from how the energy sector handles its deals and disputes

Commercial disputes in the space economy increasingly mirror the energy sector’s toughest challenges, from supply chain shortages and tightening export controls to force majeure and hardship claims, breakdowns in joint ventures, pricing adjustments and M&A-related warranty disputes. Space contracting is not starting from scratch, but the energy sector handles these tools with more care — spelling out in detail which disruptions count as force majeure or a change in the law, setting clear triggers for when a contract can be reopened because circumstances have shifted and treating anti-bribery and sanctions compliance as serious standalone promises rather than boilerplate. Just as importantly, the energy sector has built a working culture around its contracts such that what happens on a project is written down as it happens, formal notices are sent on time and the agreed steps for raising and escalating problems are actually followed. Energy parties also treat the possibility of disputes more pragmatically, carefully thinking upfront about arbitral seats, institution and enforceability and raising claims early. We think that selectively borrowing from both the drafting practices and the day-to-day discipline of the energy sector would significantly reduce exposure to the regulatory and supply chain shocks now emerging across the space sector.

The space sector should take these five lessons to heart. While the energy industry shares a common profile in the sense of risky, capital-intensive and global investments that involve duration and sovereign risk, the space industry takes this a step further by pursuing (literal) new frontiers in technology and outer space. It is precisely because the space sector lacks the mature legal infrastructure that the energy sector has built over decades that these lessons carry such urgency. In an industry defined by long investment horizons and complex operational risk, disputes are not merely hypothetical. By protecting themselves legally, investors in the space industry can better safeguard their interests in the event of a future dispute or loss.

Elizabeth Silbert is the co-head of King & Spalding’s International Disputes Practice Group. With particular knowledge of the energy, tech and pharma industries, Elizabeth represents clients in high-profile disputes involving major projects and long-term foreign investments.

Carson W. Bennett is a senior associate in King & Spalding’s International Disputes practice. He represents clients in high-stakes international commercial disputes, investment treaty arbitrations and global award enforcement actions. 

Viva Dadwal is a senior associate in King & Spalding’s New York office and a member of the International Arbitration practice. Her practice involves commercial and investment treaty arbitrations, as well as enforcement proceedings before U.S. courts. 

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