From orbit to courtroom: the legal black hole of space debris liability

Authors

Nick Storrs

Partner

London

The liability gap

International law

The current liability system reveals a fundamental gap that leaves ordinary citizens vulnerable when space debris falls from the sky. Space liability law rests on two foundational Cold War-era treaties: the 1967 Outer Space Treaty (OST) and the 1972 Convention on International Liability for Damage caused by Space Objects (Space Liability Convention). As we explained in our previous article, these instruments – designed for an era of state-dominated space exploration - are increasingly inadequate for today's commercial space economy.

Article VI of the OST mandates that States are internationally responsible for all national space activities “whether […] carried on by governmental agencies or by non-governmental entities". Article VII states that any State that launches or procures the launch of an object (or from whose territory or facility an object is launched) “is internationally liable for damage” caused by that object to another nation or its persons. Notably, the liability is couched in State-to-State terms – the treaty speaks of liability to other States' parties or their citizens, reflecting the interstate focus of 1960s international law, when private companies did not play a significant role in space exploration.

The Liability Convention elaborates on Article VII of the OST by establishing a comprehensive two-tier liability framework. For damage on Earth or to aircraft, launching States face absolute liability – meaning they must compensate victims regardless of fault, such as when falling rocket debris damages property (Article II). In contrast, space-based incidents like satellite collisions give rise to fault-based liability, where the victim State must prove fault, recognising that orbital mechanics can make accidents genuinely unavoidable (Article III).

The Convention establishes a State-centric claims process. When space damage occurs, only governments (not private parties) can bring international claims through diplomatic channels (Article IX). If negotiations fail, States may convene a three-member Claims Commission for arbitration (Articles XIV-XV), though its decisions remain merely advisory unless both parties previously agreed to binding arbitration. Victims can still pursue domestic lawsuits if jurisdiction exists, and States need not exhaust local remedies before filing international claims (Article XI). This creates a dual-track approach: international State-to-State procedures operate alongside preserved domestic options.

This international law mechanism has rarely been used. The 1978 Cosmos 954 incident provides the Liability Convention's sole precedent. When the Soviet nuclear-powered satellite scattered radioactive debris across Canada, Canada filed a formal claim and eventually settled with the USSR before a Claims Commission decision was issued. No other case has triggered the Convention's formal machinery.

Consider the Florida incident again. While NASA would have faced liability under the Liability Convention had the debris caused damage in another country, it bears no such obligation to its own citizens – the Convention expressly excludes a State's liability to its own nationals in such cases. This creates a curious legal asymmetry where foreign victims may have stronger international legal protections than domestic ones, highlighting a gap in the current liability framework that domestic tort law must fill.

Domestic remedies

When debris lands domestically, national tort law may provide a liability regime for supporting redress. This is precisely what the Florida homeowners took advantage of. They filed a claim against NASA under the US Federal Tort Claims Act. In that case, NASA (an American organisation) acknowledged ownership of the debris. For cross-border incidents, however, the situation becomes more complex.

Under English law, courts will ordinarily have jurisdiction where damage arises in the jurisdiction – so if a satellite falls through a house in London, English courts could theoretically hear the case. However, unlike a car accident, which is domestically located, space activity involves international businesses, potentially located anywhere in the world, launching objects that can fall anywhere on Earth. If the debris object was launched by a foreign business via a foreign State, the homeowner would need to bring international proceedings in England. Litigating multi-jurisdictional proceedings is expensive and impractical for the ordinary person.

Insurance is another tool for dealing with space debris risk domestically. Both the US and UK require space operators to maintain insurance up to specified amounts to indemnify the government in case of debris damage. Insurance therefore serves as the de facto compensation mechanism when international law or diplomacy prove inadequate. But this, again, does not assist an ordinary person who still needs to establish entitlement to compensation before any payment is made (out of the insurance money or otherwise).

This means, domestic remedies and international law do not easily and satisfactorily provide a redress scheme for space liability events.

New developments: EU Space Act

The European Commission's draft EU Space Act, released in June 2025, seeks to create unified space regulations across the fragmented landscape of EU Member State laws. The Act mandates debris mitigation and collision avoidance measures – essentially 'baking in' industry-wide safety standards to prevent incidents before they trigger liability issues. The Act also standardises financial responsibility requirements, likely requiring operators to maintain insurance coverage for third-party damages, thereby shifting accountability from governments to private actors. Perhaps most significantly, the Regulation extends its reach beyond EU borders, applying to any non-EU company providing services into the European market – meaning a US satellite operator serving European customers could find itself subject to EU safety standards and potential sanctions.

The Act brings some welcome developments. EU operators facing blame for debris damage will be able point to compliance with harmonised EU standards as evidence in their defence. Arguably more importantly, the Act's emphasis on cooperation and information-sharing could prevent disputes from escalating by providing clearer tracking data and incident attribution. However, the Act does not establish any framework or mechanism for claiming compensation and the liability gap remains. See here for more on the EU Space Act.

The need for a new liability framework

If a falling satellite were to cause significant property damage or injury in a country tomorrow, the affected parties would have to navigate difficult and unfamiliar legal territory to get compensation. This could include their own government’s diplomatic efforts, insurance claims, or expensive international proceedings in domestic courts. Given the prospect of growth in space debris claims, evidenced by the number of incidents in recent years, a new approach is needed.

International agreement on a new treaty mechanism

One solution could be a new international treaty, convention or agreement creating an arbitral mechanism for claims for damage caused by space debris, creating a binding arbitration scheme. Arbitration is well suited for space disputes for a number of reasons:

Neutral forum: arbitration offers no 'home court' advantage – parties can choose neutral arbitrators and venues. This is crucial when disputants span continents and distrust each other's legal systems.
Specialised expertise: the Permanent Court of Arbitration (PCA) has Optional Rules for Arbitration of Disputes Relating to Outer Space Activities (Space Rules) and maintains a dedicated panel of space law and technical experts. Parties can handpick arbitrators who understand orbital mechanics alongside international law, and tailor procedures to handle sensitive technical data through confidential expert reviews.
Confidentiality: private proceedings protect trade secrets and national security concerns which is vital in an industry where orbital data and satellite designs are closely guarded. This prevents media circuses and stock market volatility as a result of courtroom drama.
Global enforceability: arbitral awards are enforceable in over 170 countries under the New York Convention. The winning party can collect against the loser's assets worldwide instead of chasing court judgments across borders.
Speed and finality: no lengthy appeals process means disputes end faster. While large arbitrations may take years, they avoid the multi-level appeals that can double litigation timeframes.
Industry acceptance: space contracts already embrace arbitration. From launch services to satellite manufacturing – the industry knows how it works.

Contractual infrastructure through voluntary industry schemes

An alternative might be an industry scheme; a voluntary code agreed by industry participants giving access to an enforceable redress scheme. However, for it to be effective, all participants would need to agree and it would need the support of national agencies. In the current competitive environment, there is perhaps limited incentive to agree such a scheme with the suite of legal tools needed to ensure proper accountability.

Time to get real

The reality is that our Cold War-era liability regime can't handle today's commercial space economy. The Florida, Kenya, Canada, and Poland incidents of the past two years demonstrate that space debris damage is not theoretical – it is a serious problem and one which can affect ordinary people anywhere in the world.

The current system's flaw is that it treats space debris liability like a traditional interstate diplomatic matter when, in reality, it's an international business activity that can affect anyone, anywhere. Arbitration could offer a solution to the inadequacies of the current system – providing private companies and individuals with direct recourse to compensation. As space becomes increasingly crowded and commercialised, we need dispute resolution mechanisms that match the pace and complexity of modern space innovation.