Space and Insolvency: India’s New Legal Frontier
Space research is getting close to a new limit. A new estimate says that the space business will be worth $1.8 trillion by 2035.[1] This is because satellite and rocket-based technology is becoming more common everywhere. At the moment, technologies that use space are very important for many things, from predicting the weather to making smart devices like trackers more common. Additionally, space technologies are helping a lot of different groups, such as those involved in retail, consumer items and lifestyle, food and drinks, supply lines and transportation, and emergency relief. It looks like these areas will gain from progress in space technology.
Sebastian Backup, a member of the World Economic Forum’s Executive Committee, said that space advances are making things better for more people than they were in the past. India is becoming a more important space economy, which has made people more aware of the need for financial risk coverage for business space flights in the country.[2] To get more private companies involved in the space economy, the Indian government is working hard to do so. The exponential rise in the number of satellites in orbit and the buildup of space junk make it more likely that two satellites will collide. Space missions have big financial effects, which makes safe flights and space insurance even more important.
There is a big need for more public and private investment in new projects in space. This can be achieved through partnerships between different governments and ongoing technological progress. As a result of this reorganization, companies that already work with resources and technology will move their focus to new investments and activities in space. Some of the effects this trend is likely to have are ongoing innovation within companies, a rise in new businesses, and companies being more willing to take risks. These events may lead to more reorganization and bankruptcy procedures.
The article seeks to is to look at how efforts in space are connected with the processes of reorganization and bankruptcy. This article talks about some problems that bankruptcy lawyers might face if they are hired to help a business that works in space. Additionally, it looks at the possible reworking options that are expected to come up as investment in space operations around the world speeds up.
Financial Instability in the Commercial Space Sector
It is becoming increasingly essential to investigate the intersection of bankruptcy and space regulations, particularly in India, where space technology is rapidly becoming a business. The Indian Space Research Organization (ISRO) has been the most significant participant in India’s space sector, which has been primarily regulated by the government throughout its history. IN-Space, the Indian National Space Promotion and Authorization Centre has recently been established with the objective of ensuring that enterprises in India have equitable access to public space assets. Furthermore, it will provide assistance, guidance, and support to private companies engaged in the space sector by establishing policies that are beneficial and fostering an environment that is conducive to regulation.
Simultaneously, it is crucial to acknowledge that private companies are actively engaged in the business sector. This is primarily due to the typical spending habits of individuals, which prioritize high-risk and high-return investments. Consequently, numerous commercial enterprises endeavor to maintain elevated leverage levels, which increases the likelihood of default. This implies that these organizations may encounter financial difficulties and a fiscal precipice, particularly in light of the recent economic downturn. The global restructuring and bankruptcy system will be significantly impacted by outer space operations due to the increasing number of commercial space actors and activities, as well as the increasing levels of financial instability and the bankruptcy of high-risk enterprises.
Recent Bankruptcy Cases in the Satellite Industry
The first commercial communications satellite was successfully launched by Intelsat in 1965. Other satellite operators that have filed for bankruptcy include One Web (a satellite start-up that specializes in deploying large constellations of small satellites capable of providing high-speed broadband to remote regions, including the Arctic), and Speed cast International (which operates large geostationary satellites after transitioning from Chapter 11).[3]
Additionally, Mastan Space Systems, one of the five businesses that NASA contracted as part of the Commercial Lunar Payload Services Program (CLPS), has started the bankruptcy process. Even though financial deals were put in place, the company’s finances didn’t get better, and in the end, it had to file for bankruptcy. The company had assets worth between 10 and 50 million USD, which were almost equal to its debts. An auction was held to sell the company’s assets, and Astrobotic won with a bid of USD 4.5 million for “representing the majority” of Mastan’s assets. The federal bankruptcy court in Delaware approved the sale. Once the Chapter 11 reorganization is over, NASA will be able to see if the company can meet the CLPS contract responsibilities. One Web, a company that runs a broadband satellite system and just finished a restructuring process, is a good example of how to do a restructuring in the space business well. The government of the United Kingdom wants to make the country a leader in space technology once its reform efforts are over. Especially noteworthy, new businesses like Masten have done amazing things. However, outside forces, such as the COVID-19 outbreak, forced them to file for bankruptcy. To be able to handle future tough situations well, it is important to have a strong financial cushion to protect against possible risks. The government and the new business could both gain from getting enough help from government agencies and using the public-private partnership approach.[4]
Challenges faced by practitioners in the field of bankruptcy
As satellites and other tools for space travel have become more common, there is more “clutter” in space, which makes it more likely that two things will collide. When working with satellite operators as insolvency practitioners, it can be hard because they have to deal with collision claims against the debtor company or other entities, as well as their duty to investigate and report, as well as to look out for the best interests of creditors. At this point, there are five international space laws from the United Nations that set up a complete system for governing legal rights and duties in space. Each country is responsible for the acts of its government agencies and non-government organizations in outer space, according to the Outer Space Treaty and the Liability Convention.[5] This treaty lays out broad rules for the responsibility in the event of an accident. Non-governmental organizations that work in space need to get permission from member states first and be watched over all the time. Each country that starts or plans the launch of an object into space, as well as the country from which the object is launched, is responsible to the rest of the world for any harm done to another Outer Space Treaty state or its legal or natural entities.[6] In Article VII of the Outer Space Treaty, it says how much people are responsible for.
The Liability Convention breaks this responsibility down into two groups: damage caused on Earth’s surface or to an airplane, and damage caused to an object in space. The Hague Convention doesn’t have a clear definition of “fault,” which makes it hard to figure out how much and what kind of responsibility someone has. In the international system set up by UN treaties, a private company must officially ask and get the permission of its own national government to start legal proceedings on its behalf through diplomatic means in order to get justice. Even if acceptance is confirmed, using diplomatic routes or the alternative “Claims Commission” framework set up by the Liability Convention would make reaching a settlement take a lot longer. International arbitration has been seen as a possible way for people to settle their disagreements. However, it is important for lawyers to be aware of the practical and theoretical problems that come with this method. Problems like high costs, delays, and confusion during the bankruptcy process can make it harder to restructure an organization that needs to work quickly, simply, and with as little capital as possible while still getting the best returns for debtors. In this situation, the UNCITRAL Model Law on Cross-Border Insolvency can help make the process clearer and encourage cooperation between states when there is a business debtor and one or more third parties in different places. Within sections 25 and 26 of the Model Law, it says that judges must work together with their peers in other countries as much as possible to carry out a properly authorized insolvency process. In this case, courts are also expected to look into and seek appropriate ways of communicating.[7]
There are clear rules about who owns things that are sent into space in the Outer Space Treaty. This includes satellites. However, the current international system isn’t clear about who owns things that are found in space. The ongoing research and growth of mining operations in space pose a big problem for people who work in bankruptcy, both in the public and private sectors. If a practitioner was put in charge of an organization that was involved in these kinds of activities, they would need to find out who owned any resources that came from space and whether the organization’s creditors had any claims that were in conflict with those resources. It’s important to note that the Outer Space Treaty only talks about ownership rights for materials found in space.
Article II of the treaty clarifies that no country can take over outer space, which includes the moon and other celestial bodies, through claims of authority, use, occupation, or any other means. Private organizations are not directly denied ownership rights, though. One restriction is that people cannot obtain things in space through “national appropriation,” and this restriction only affects states. Someone could argue that mining things that come from space don’t really belong in “outer space” on their own. The Moon Agreement talks about who owns the resources that come from space. It says that the moon cannot be taken over by any country with a claim to sovereignty (as explained in the Outer Space Treaty). Article XI of the deal also lays out a detailed plan for the countries that have signed it to create a global system that controls how moon natural resources are used. This system has a way to make sure that the gains from these resources are shared fairly. However, only 18 countries have ratified the above-mentioned agreement, and four more have signed it but not yet ratified it. Because of this, the idea of “common ownership” when it comes to goods taken from space has not yet become a worldwide standard. It’s important to note that some places have already put in place laws that are meant to create a clear framework for private business rights. After the Commercial Space Launch Competitiveness Act 2015 (US) was signed into law in the US, it officially allows private American companies to take part in finding and using space resources from other celestial bodies. This position was reaffirmed by an Executive Order issued by the Trump Administration in April 2020. It clearly rejected the Moon Agreement’s ownership system and said that space and its resources should be seen as a “global commons.” In the future, dealing with space mining assets is likely to become a lot more complicated for people who work in debt. This is likely to get even more complicated as more complicated issues happen across borders and different parts of bankruptcy law, private domestic law, and international law interact with each other.[8]
Restructuring possibilities in the field of space law should make it easier for private companies that want to take advantage of new opportunities to move their money around. This is especially important for resource companies that want to look into the untapped mining potential in space, as well as for tech companies that want to make new digital and communication advances that can be made possible by satellites and other infrastructure that is put in space and works with it.
Legal Reforms to Propel India’s Leadership in the Evolving Space Sector
India is well-positioned to lead this developing and evolving industry since space marketing is reshaping the global economy. Even if India’s space sector attracts private investment and grows, its regulations need to be reformed to address the particular insolvency issues it faces.
- There should be clear legislation or a distinct component for space bankruptcy issues are needed.
- It is recommended that bankruptcy attorneys, judges, and authorities be trained to manage space-related bankruptcies. Expert groups and dedicated training programs may help solve this issue.
- Foreign gatherings solely focused on bankruptcy and space law should be encouraged. Acceptance of the UNCITRAL Model Law on Cross-Border Insolvency, with India-specific amendments.
- Increasing communication between regulatory agencies including the Insolvency and Bankruptcy Board of India (IBBI), ISRO, and IN-Space to streamline space application insolvencies.
- To strengthen space regulation, private enterprises, investors, and legal professionals are needed. This helps you comprehend their concerns and integrate their vital perspectives.
- Also, support academic research and policy studies on bankruptcy law and space law to inform future legislative milestones.
Conclusion
India has the potential to become a world leader in the space business while also making sure that its law system is strong enough to handle the challenges that will come up in the future. In addition to being required by law, setting up a bankruptcy system that works especially for the space industry is also very important from a business point of view. Adopting this step should make the law clearer for private groups, encourage investment in the sector, and protect India’s interests in the commercial space market, which is becoming more and more competitive.
It is crucial to recognize that the financial challenges that emerging space enterprises may encounter may be substantial. Nevertheless, these challenges can be effectively resolved, particularly by initiating reform initiatives that prioritize the new company’s objectives and vision. The industry’s performance may be contingent upon the extent to which public-private partnerships in various countries can assist businesses that are experiencing difficulties.
Before the future of the space business and the participation of private entities can be determined, financial risks must be mitigated and existential concerns must be resolved. If the UNCITRAL Model Law and the Cape Town Convention’s Space Assets Protocol, which are current international instruments, are appropriately incorporated into national laws, they could establish a robust set of regulations for individuals who operate in space. The industry must immediately improve its readiness for future disasters, despite the fact that there are some valuable lessons to be learned from the bankruptcy of OneWeb and Masten. In this manner, the sector will be able to more effectively address new challenges, such as ensuring that debtors in various countries receive an equitable share of recovered resources, while still adhering to the primary objectives outlined in the Outer Space Treaty.
This article is a part of the Showcase Pieces Series.
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[1] Jason Rainbow, “Making the Case for Multi-Orbit Broadband” (SpaceNews, June 4, 2024) https://spacenews.com/making-case-multi-orbit-broadband/
[2] “Space Economy Set to Triple to $1.8 Trillion by 2035, New Research Reveals” (World Economic Forum) https://www.weforum.org/press/2024/04/space-economy-set-to-triple-to-1-8-trillion-by-2035-new-research-reveals/
[3] Kevin Wilcox, “This Week in NASA History — Intelsat I: The ‘Early Bird’ of Satellites | APPEL Knowledge Services” (October 20, 2023) https://appel.nasa.gov/2010/02/25/ao_1-7_sf_history-html/
[4] “Outer Space: The New Frontier for Restructuring and Insolvency” (Global Law Firm | Norton Rose Fulbright) https://www.nortonrosefulbright.com/en/knowledge/publications/b34b1f80/outer-space-the-new-frontier-for-restructuring-and-insolvency
[5] “Convention on International Liability for Damage Caused by Space Objects” (1972) https://www.faa.gov/about/office_org/headquarters_offices/ast/media/Conv_International_Liab_Damage.pdf
[6] UNITED NATIONS TREATIES AND PRINCIPLES ON OUTER SPACE (2002) https://www.unoosa.org/pdf/publications/STSPACE11E.pdf
[7] “UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation” (UNITED NATIONS 2014).
[8] “Private Space Companies and Insolvency: Unravelling the Legal Quagmire – Centre for Aviation and Space Laws” (December 1, 2022) https://nujs.edu/casl/private-space-companies-and-insolvency-unravelling-the-legal-quagmire/
Students, School of Law, NMIMS Hyderabad
