Mission critical: Resolving construction disputes in the space sector through arbitration

NASA’s recent announcement of plans to build a nuclear reactor on the Moon by 2030 marks a turning point in the evolution of the space sector. This milestone signifies more than scientific progress – it underscores the emergence of space as a serious commercial frontier. Once dominated by state-led exploration, the industry is increasingly characterised by rapid commercialisation, multinational collaboration, and the construction of complex infrastructure projects both on Earth and beyond.

Construction in the space sector is uniquely complex. Projects often involve stakeholders across the globe, nascent technologies, a nexus of domestic and international laws and regulations, as well as high-value contracts. With this complexity comes an increased risk of disputes, ranging from procurement delays to in-orbit damage. Legal practitioners are increasingly called upon to work alongside key players, such as engineers, contractors and space agencies, to navigate these challenges.

This article explores the types of construction disputes commonly arising in the space sector and the role of arbitration in their effective resolution.

Dispute Hotspots in Space-related Construction Projects

Arbitration as the Forum of Choice

Even the best-drafted construction contracts are not free from all risks. If or when disputes occur, the choice of forum for resolving disputes is critical. This is particularly the case in a sector that is characterised by the use of first-of-a-kind proprietary technologies, and multinational stakeholders. Arbitration can offer a confidential forum that is neutral and adaptable and provides binding and enforceable outcomes. While it is typically used by parties with a pre-existing contractual relationship, disputes can also be referred to arbitration by agreement after they have arisen.

A natural fit for public-private contract disputes

Space activities were once the exclusive domain of states and state agencies, with disputes resolved through diplomacy or international treaties. But with the growing involvement of commercial actors in space, there is an increasing need for binding, reliable dispute resolution mechanisms.

Given the national importance of space-related infrastructure projects, contracts often still involve states or state-owned entities on one side, and private contractors on the other. Arbitration is well-suited to these relationships, offering a forum that accommodates both public and private interests.

Different mechanisms and institutions have evolved to respond to this shift. Notably, the Permanent Court of Arbitration (PCA) developed Optional Rules for Arbitration of Disputes Relating to Outer Space Activities. Though not yet tested, these rules provide a framework for disputes involving both public and private entities.

As public-private partnerships in space continue to grow, particularly in areas like lunar construction and satellite constellations, these rules – and similar instruments that might follow – are likely to become increasingly relevant. They offer procedural guidance for disputes involving state actors, international organisations, and commercial entities, and may help bridge the gap between diplomatic and commercial dispute resolution. 

Reflecting this broader industry trend, states, intergovernmental organisations, as well as international private companies increasingly favour arbitration as their default dispute resolution mechanism. The European Space Agency, for example, routinely includes arbitration clauses in its standard contracts. These clauses should specify the seat of arbitration, governing law, and procedural rules, providing clarity and consistency across projects.

Neutrality and enforceability

Construction disputes in the space sector typically involve numerous parties and it is not uncommon for contractors, launch providers, and satellite operators all to be from different jurisdictions. In this regard, selecting a neutral seat of arbitration that is free from any perceived biases of national courts, together with a reputable arbitral institution, can help to ensure fairness between the parties. Arbitral awards are also enforceable in over 170 countries under the New York Convention, providing a level of certainty and reliability that domestic judgments can often lack.

For example, disputes between satellite manufacturers and launch providers may involve evidence encompassing trade secrets, proprietary designs, or national security-sensitive data. Unlike court proceedings, which are typically public, arbitration offers a private dispute resolution process. This protects sensitive commercial information and intellectual property that is critical in a sector where innovation is a competitive advantage.

Confidentiality is, of course, subject to the usual limitations. It may be affected when arbitration-related matters are brought before the court – typically through enforcement proceedings, challenges to the award, or appeals – in which case the resulting judgments are usually published. Courts do, however, have discretion to protect sensitive information, including through anonymisation or limited disclosure, where justified. In exercising this discretion, courts may consider factors such as the sensitivity of the subject matter, the public interest, and broader public policy considerations; and in the space sector, where disputes may involve novel technologies or defence-related issues, courts may be particularly receptive to confidentiality concerns.

Confidentiality also helps preserve commercial relationships which, in an industry with relatively limited players, tend to be formed on a long-term and collaborative basis.

Procedural flexibility

Such flexibility is invaluable in a sector where time-sensitive launches and international collaboration are the norm.

In addition, the procedural and party-driven flexibility of arbitration means that, compared to litigation, parties can more easily combine arbitration with alternative dispute resolution methods, such as mediation or expert determination, which could be particularly valuable in the context of construction disputes in the space sector where parties will be keen to preserve commercial relationships and the issues in dispute can be highly specialised and technical.

Future-proofing dispute resolution

Arbitration’s adaptability makes it ideal in a sector where innovation often outpaces regulation. For example, parties may agree to arbitrate disputes arising from lunar construction, asteroid mining, or satellite servicing – activities that are not yet fully regulated under international law.  In the absence of an established body of laws, regulations and legal precedents, arbitral tribunals will pave the way in decision-making. They are likely to do so by interpreting the parties' contractual arrangements in light of the provisions of the governing law, alongside general principles of international law, commercial practice and, potentially, public policy. The novelty of these subject matters also means tribunals are likely to rely heavily on subject-matter experts to provide evidence on technical standards, industry-specific protocols, and emerging norms.