A New Space for Investment Protection: Possibilities under international law for addressing political risks related to investment in the satellite industry

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A New Space for Investment Protection

Possibilities under international law for addressing political risks related to investment in the satellite industry

Master’s thesis: LL.M. International and European Law: International Trade and Investment Law

Hidde Kleijn (10550550) Kleijn.hidde@gmail.com

6 January 2020

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Abstract

Private companies have invested in outer space activities since the 1980s, notably in the satellite industry. Due to technological developments, investment in outer space activities has seen a drastic surge in recent years, and includes new terrains such as space mining and space tourism. This trend will likely continue over the next years.

Conducting activities in outer space is not without risk. Outer space is a barely regulated ‘no-man’s-land’ in which states, too, have significant interests. States are also the primary actors that may authorize activities in outer space that could also affect investments of foreign, private actors. Against this background, (political) actions or inactions of states may increasingly expose these investments to risks.

This thesis builds on the debate recently initiated in a special issue of the Journal on World

Investment and Trade, on the possibility of applying international investment agreements to

outer space activities. It tries to identify the political risks that outer space investors, specifically satellite operators, may face, and whether international investment law (and international space law) is equipped to adequately address these risks.

Since it is only to a limited extent so, it was then assessed if and how rights of investors could be better safeguarded in the future. This would ideally be done in a comprehensive way, regulating activity in outer space in general and thus also addressing other important issues that need to be regulated. The reality, however, is that such a system seems nowhere near.

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1. Introduction

Space travel has evolved drastically since the days of Sputnik 1 and Apollo 11. It is no longer the exclusive domain for states showing off their technological and military capabilities, but now also presents a wide array of opportunities for private businesses. Satellites have been sent into orbit and operated by private entities for decades already, providing services such as satellite television or remote imaging to consumers, businesses and governments alike.

Especially in recent years, space is increasingly opening up to innovative ‘start-up’ companies providing an increasingly wide range of services that seemed unfathomable some decades ago. Reusable rockets that will make launch activities cheaper and more efficient have been or are being developed and technological progress may soon enable us to travel to Mars. Space mining may, over the next years, become feasible, and those with enough money will be able to book a holiday to outer space within a matter of just a few years.1

Indeed, investment in space ‘start-ups’ has seen a continuous growth over the last decade – and at an especially increased rate over the last five years.2 This ambitious, newly emerging private industry has even been given its own flashy name: ‘NewSpace’.3_{The goals set by these} NewSpace companies reflect their high ambitions. For example, SpaceX intends to send cargo to Mars by 2022 and people by 2024, with the goal of eventually setting up a “thriving city and

eventually a self-sustaining civilization”4_{, while California-based ‘start-up’ Orion Span is} aiming at opening the first orbiting hotel in 2022.5

In other words: the sky is no longer the limit; possibilities, or certainly ambitions, seem endless. In light of these developments, one starts to wonder if and how all of this is regulated. Thus, with regard to issues such as the increasingly prevalent phenomenon (or problem) of space debris and the commercialization of outer space, there has been debate for quite some time already.6

1_{Jean-Marie Bockel (General Rapporteur), The Future of the Space Industry. General Report, NATO}

Parliamentary Assembly, Economic and Security Committee, 173 ESC 18 E fin, 2018 (available online at:

https://www.nato-pa.int/document/2018-future-space-industry-bockel-report-173-esc-18-e-fin, last accessed 3 January 2020), pp. 2-3.

2_{Caleb Henry, ‘Space startup investments continued to rise in 2018’, Spacenews, 4 Febuary 2019 (available}

online at https://spacenews.com/space-startup-investments-continued-to-rise-in-2018/)

3_{Baumann/El Bajjati/Pellander, JWIT 2018, p. 932; Malanczuk, JWIT 2018, p. 952.} 4_{SpaceX website:}_{https://www.spacex.com/mars.}

5_{Mike Wall, ‘’Luxury space hotel‘ to launch in 2021, Space.com, 5 April 2018 (available online at} https://www.space.com/40207-space-hotel-launch-2021-aurora-station.html).

6_{See for example Baker 1989; Jasentliyana, Journal of Space Law 1998; Wassenberg in: Lafferranderie and}

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In a recent special in the Journal of World Investment & Trade,7_{several authors have opened} up a new discussion on the legal protection of outer space investments under international investment law. In the special, possibilities to apply international investment law to outer space investments have been discussed, and different ways have been identified for investors to seek protection under international investment agreements (IIAs). For example, according to some authors, the ‘jurisdictional nexus’ that space law establishes between a space object, such as a satellite, and its state of registry, enables such space assets to typically fall within the scope of protection of bilateral investment treaties (BITs) or other IIAs. Accordingly, investors who own such assets can invoke protection under these treaties with regard to these assets, according to the authors.8

One question that remains (largely) unresolved, however, is whether such instruments are capable of addressing the specific risks that investors who own assets in outer space may face, and whether instruments falling under different regimes of international law, most notable international space law, are (more) suited to address these risks. More fundamentally, the question what these risks are deserves further consideration. In addition, it seems questionable whether some of the methods identified as possibly enabling the applicability of IIAs to outer space assets, can actually be maintained without resorting to an ‘interpretation’ that goes beyond ordinary methods of treaty interpretation.

With this thesis, I would therefore like to join in on the discussion initiated by the JWIT special. I will discuss to what extent international investment agreements (IIAs), such as BITs, can indeed be applied to outer space investments, and to what extent this gives investors adequate protection against the specific political risks associated with investing in outer space. I will also discuss the possibilities private investors may have under instruments of international space law. After, that I will discuss if and how investment protection in outer space could (or should) be shaped in the future. To keep this exercise manageable, the focus lies primarily on the

applicability of the regime to outer space investments, rather than on how the substantive norms

may be applied.

I will do this by zooming in on a specific outer space activity that has already been an important domain for private actors for decades: satellite operations. This industry is and has for decades already been a source of opportunities not just for states, but also commercial entities and is

7_{JWIT, vol. 19 (2018), issue 5-6.}

8_{Hobe et al., JWIT 2018. Similarly: Baumann/El Bajjati/Pellander, JWIT 2018; more sceptical: Malanczuk,} JWIT 2018.

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thus the most developed sector of the industry.9_{The fact that this branch is already established} enables us to not just philosophize about, for example, potential political risks, but actually gather some concrete data to identify such risks.

At the same time, the satellite industry shows important similarities with more futuristic space activities, such as space mining and the establishment of permanent settlements, in that the most important and valuable assets are located in outer space, outside of the territory and exclusive jurisdiction and control of any state, and in that the international coordination of such activities will be required.

Thus, the identification of political risks facing the satellite industry, and the subsequent analysis of the possibilities to address them, primarily serves to help us think about the future, when private activity in outer space will have increased both in magnitude, leading to increased competition for orbital slots and frequency slots, and possibilities, encompassing a wider array of (more competitive) activities, such as the harvesting of natural resources. Such developments will inevitably lead to situations where privately owned space objects suffer damage (whether intentional or not) as a result of acts attributable to states, raising the question if and how this asset is legally protected. It is especially in light of these developments, and thus with an eye to the future (role of international investment law), that I am writing this thesis.

The central question in this thesis is then:

To what extent does international law protect private investments in the satellite industry against the political risks associated with such investments, and how could the legal protection of such investments be shaped in the future?

Here, “investments in the satellite industry” are understood as those activities where the investor actually owns and operates a satellite in outer space, and thus leave aside (investments in) launch activities or other activities that do not involve the operation of an asset in outer space. ‘Protection under international law’ is understood as having available an international instrument imposing norms on states that apply to activities in space, and under which investors may (perhaps indirectly) enforce substantive rights through dispute resolution mechanisms.10

9_{Jean-Marie Bockel (General Rapporteur), The Future of the Space Induystry. General Report, NATO}

https://www.nato-pa.int/document/2018-future-space-industry-bockel-report-173-esc-18-e-fin, last accessed 3 January 2020), p. 5.

10_{Such an instrument may of course be an international investment agreement, but could also be part of the}

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To answer this question, I will first identify the political risks that investors in satellite operations may face, being the type of risks that IIAs seek to protect against (chapter 2). I will then discuss if, and to what extent, these risks can be addressed by international (investment) law (chapter 3). The primary focus will be the protection provided by IIAs, being the instruments specifically designed to secure investors’ rights. Since, however, it is immaterial to investors whether they are protected under a regime called ‘investment law’ or under a regime called ‘space law’, and since the possibilities under investment law, as well as the need for further regulation, can only be understood if we know the possibilities offered by space law, I will also address these possibilities.

I will then briefly discuss if and how the protection of investors’ rights could (and should) be shaped in the future (chapter 4), before ending with the conclusion (chapter 5).

2. Political risk and the satellite industry

Since international investment agreements seek to protect investors not against all risks, but specifically political risks,11_{the question whether outer space investments can be effectively} protected under IIAs essentially boils down to the question whether such agreements are capable of addressing these risks. In other words: what are these risks, where do they stem from and (when) can investment agreements be applied to (the source of) these risks?

It is thus necessary to identify the political risks satellite operators may face, which I will attempt to do in this chapter. To identify these risks, an understanding of how the satellite industry works is required (2.1). It is also necessary to get a basic understanding of the legal status of (objects in) outer space (2.2) and how satellite activities are internationally coordinated (2.3). Then, the concept of political risk, and the risks posed to satellite operators, will be addressed (2.4).

2.1. The satellite industry

The space industry first opened up to private entities when they entered the satellite communications industry during the 1980s, after telecommunications markets had been privatized.12 The sector has been growing ever since.

investment law can only be understood by also looking at the (potential) role of space law. Therefore, I have not included a specific reference to international investment law in the research question.

11_{Dolzer/Schreuer 2012, p. 21}

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The satellite industry may be subdivided into four segments: satellite services, satellite manufacturing, the launch industry and ground equipment.13_{Here, we are concerned with} satellite services, which is the branch providing services through the actual operation of satellites. From here onwards, I will refer to the ‘satellite services industry’ as simply the ‘satellite industry’.

The satellite industry has seen a rapid growth over the last years, generating a revenue of $ 126.5B in 2018 for services including commercial communications (27%), remote sensing (29%), research and development (13%), government communications (10%) and navigation (7%). Significant further growth in the future is expected.14 According to the Satellite Industry Association, the number of operational satellites increased by 67%, from 1,261 to 2,100, between 2014 and 2018.15 Within several years, that number may increase to 7,000, according to NATO,16 but SpaceX wants to go even further and intends to launch a constellation of around 12,000 satellites, with apparent plans for an additional 30,000, to provide global internet access, itself.17 The rapid increase of the number of satellites can be ascribed mostly to the increased deployment of small and very small satellites (with a mass under 1,200 kg) in low earth orbit (LEO).18

Meanwhile, 558 active satellites were in geostationary equatorial orbit (GEO) as of December 31st_{, 2018; up 110 from 448 in 2014.}

It is important to note that while outer space may be inconceivably large, this does not mean that there is infinite useful space for satellites to orbit the earth. In order for a satellite (and any other space object) to be able to operate, communication with ground stations by transmitting data is essential. This happens through radio frequencies sent back and forth between the satellite’s transponders and ground stations. If such frequencies overlap,19_{they may cause}

13_{See Satellite Industry Association, 2019 State of the Satellite Industry Report, Bryce, 2019, p. 3; Baumann/El}

Bajjati/Pellander, JWIT 2018, p. 934.

14_{Baumann/El Bajjati/Pellander, JWIT 2018, p. 938.}

15_{All statistics mentioned here provided by the Satellite Industry Association, 2019 State of the Satellite} Industry Report, Bryce, 2019.

16_{Jean-Marie Bockel (General Rapporteur), The Future of the Space Induystry. General Report, NATO}

17_{Caleb Henry, ‘SpaceX submits paperwork for 30,000 more Starlink satellites’, SpaceNews, 15 October 2019}

(available online at https://spacenews.com/spacex-submits-paperwork-for-30000-more-starlink-satellites/, last accessed 13 November 2019).

18_{A precise definition of ‘low earth orbit’ does not exist, but the term generally refers to orbits between around}

100 and several thousand kilometres in altitude: Von der Dunk in: Von der Dunk and Tronchetti 2015, p. 460, fn. 13.

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disturbance and interfere with one another, which could potentially make communication between satellites and ground stations impossible.20_{This, in turn, could have serious} consequences. Since the frequency spectrum is not endless, it is considered a limited natural resource.21

The same applies to orbital slots: in order to prevent collisions or interference of radio signals22 the orbits of satellites have to be coordinated and thus are considered a limited natural resource.23

This is especially applicable to satellites in geostationary orbits. A geostationary orbit is an orbit at approximately 35,900 kilometres altitude. Here, a satellite will take exactly one day to complete a single circuit around the earth, the same time the earth takes to complete one full rotation. As a consequence, the satellite stays in the same position relative to the earth’s surface and thus appear to remain ‘still’. Given the fact that satellites in geostationary orbit have unobstructed access to roughly forty percent of the surface of the earth, this allows for cost-effective communication and distribution of broadcast signals, and creates advantages for various types of remote sensing, such as weather forecasting.24

Since satellites in geostationary orbit must travel along the earth’s equator, there is little room for deviation, and a certain margin for satellites to drift has to be taken into consideration, one estimate puts the theoretical ‘capacity’ of the geostationary orbit at 1,800 satellites. However, it is immediately added that “this theoretical maximum grossly overestimates the possible

number of useful positions”, as not all positions are equally useful. For example, only a small

portion of the orbital arc can be used for direct transatlantic communication.25 Thus, (especially) the geostationary orbit be acknowledged as a finite resource that requires international coordination.26

In addition, there is the problem of space debris – man-made objects “that are no longer

functional or have fragmented into smaller parts and pieces, but remain in orbit”.27 Satellites and other space objects sent into orbit often stay there for years and years after becoming

20_{Roberts, Berkeley Technology Law Journal 2000, p. 1102; Masson-Zwaan & Hofmann 2019, p. 133.} 21_{Masson-Zwaan & Hofmann 2019, p. 140.}

22_{two satellites could transmit signals at the same frequency without causing disturbance if they are far enough}

apart, but not if they are close enough for these signals to interfere.

23_{Masson-Zwaan & Hofmann 2019, p. 140}

24_{Roberts, Berkeley Technology Law Journal 2000, pp. 1099-1100.} 25_{Roberts, Berkeley Technology Law Journal 2000, pp. 1101-1102.} 26_{Lyall in: Lafferranderie and Crowther 1997, p. 255.}

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defunct (and before re-entry into the earth’s atmosphere) and thereby become space debris. The more defunct space objects orbit the earth, the larger the risk of collisions. If a collision takes place (at speeds of between 10 and 15 km per second28), space objects shatter into many smaller pieces of debris. While these pieces may be significantly smaller, the speeds at which they travel still enables them to cause serious damage to, or completely destroy, other space objects. It is important to keep the amount of debris at manageable levels, as space may otherwise become too congested and dangerous to pursue any activities.29

2.2. Legal status of (objects in) outer space

To get a better understanding of the (political) risks involved, an understanding of the legal status of outer space and the objects in it is necessary. This requires a brief analysis of some of the fundamental principles of international space law.

International space law consists primarily of five treaties drafted in the early days of space exploration, the most important of which for present purposes is the 1967 the Outer Space Treaty (OST).30

As the cornerstone of international space law, the OST formulates some important principles and articulates broad, general norms on topics that the later treaties seek to concretize. It also contains the basic principles on the status of (objects in) outer space that will be discussed here.

Art. I OST provides that the “exploration and use of outer space, including the Moon and other

celestial bodies, shall be carried out for the benefit and in the interests of all countries, irrespective of their degree of economic or scientific development, and shall be the province of all mankind.” It further provides that all states are free to explore and use outer space and that

there shall be freedom of scientific investigation.

28_{According to NASA. See NASA’s website on orbital debris:}_{https://orbitaldebris.jsc.nasa.gov/faq/}_(last

accessed: 11 November 2019), sub 7.

29_{Viikari in: Von der Dunk and Tronchetti 2015, p. 720-722; Jean-Marie Bockel (General Rapporteur), The} Future of the Space Induystry. General Report, NATO Parliamentary Assembly, Economic and Security

Committee, 173 ESC 18 E fin, 2018 (available online at: https://www.nato-pa.int/document/2018-future-space-industry-bockel-report-173-esc-18-e-fin, last accessed 3 January 2020), p. 12.

30_{Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including}

the Moon and Other Celestial Bodies of 1967. The other four are the 1968 Agreement on the Rescue of Astronauts, the Return of Astronauts and the Return of Objects Launched into Outer Space; the Convention on International Liability for Damage Caused by Space Objects of 1972; the 1975 Convention on Registration of Objects Launched into Outer Space and the 1979 Agreement Governing the Activities of States on the Moon and Other Celestial Bodies.

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Art. II lays down “one of the most fundamental tenets of international space law”.31_{It states:} “Outer space, including the Moon and other celestial bodies, is not subject to national

appropriation by claim of sovereignty, by means of use or occupation, or by any other means.”

In contrast to airspace, states are thus banned from laying territorial claims on any part of outer space.32 This principle was an established one before the adoption of the OST and is considered to be a rule of customary international law.33

Art. VI articulates another important principle of international space law. It states: “State

Parties to the Treaty shall bear international responsibility for national activities in outer space, (…), whether such activities are carried on by governmental agencies or by non-governmental entities, and for assuring that national activities are carried out in conformity with the provisions set forth in the present Treaty. The activities of non-governmental entities in outer space, (…), shall require authorization and continuing supervision by the appropriate State Party to the Treaty. (…)” Pursuant to this provisions, private activities in outer space are

permitted, but legally attributed to the home state.34 Therefore, states generally do not allow the launching of objects into space by private actors unless a permit is obtained.35

Art VII OST concerns liability and provides that each launching state is “internationally liable

for damage to another State Party to the Treaty or to its natural or juridical persons by such object or its component parts on the Earth, in air space or in outer space, including the Moon and other celestial bodies.” This also entails liability for acts by private entities.36

Art. VIII relates to jurisdiction that states may exercise over space objects. It stipulates: “A

State Party to the Treaty on whose registry an object launched into outer space is carried, shall retain jurisdiction and control over such object, and over any personnel thereof, while in outer space or on a celestial body. (…).” The obligation to register space objects is found in the

Registration Convention.37

31_{Freeland/Jakhu in: Hobe et al. 2009-2015, vol. 1, Art. II OST, p. 63, par. 82.} 32_{Freeland/Jakhu in: Hobe et al. 2009-2015, vol. 1, Art. II OST, p. 45, par. 1-3.}

33_{Freeland/Jakhu in: Hobe et al. 2009-2015, vol. 1, Art. II OST, p. 46, par. 5, (referencing Judge Lachs’}

dissenting opinion to ICJ, North Sea Continental Shelf, judgment of 20 February 1969, ICJ Reports 1969, p. 3.), p. 53, par. 33 and p. 55, par. 45-46.

34_{Malanczuk in: Lafferranderie and Crowther 1997, p. 31.}

35_{In the Netherlands, for example, this is laid down in Art. 3(1) Wet Ruimtevaartactiviteiten (Space Activities}

Act).

36_{Art. VII imposes liability on states launching or procuring the launch of a space object, or from whose}

territory or facility a space object is launched.

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In short, outer space is ‘no-man’s-land’: no state may claim exclusive jurisdiction over (parts of) space.38_{Yet it is also open to everyone, including private parties. Private activities are} attributed to the “appropriate state”, who is required to supervise private activities and is liable for damage caused. In short, space is a completely different arena than earth, where the territory is not a no-man’s-land shared by all, but is divided into different areas under the exclusive control and jurisdiction of different entities: states. Logically, this will affect the type of risks related to investing in this area.

2.3. Coordination of space activities

As mentioned before, satellites are required to communicate with the earth through radio frequencies. Since frequency bands and orbital slots are limited natural resources, and since no state has exclusive rights to (parts of) space, international coordination is required. This role is fulfilled by the International Telecommunications Union (ITU), one of the oldest international organisations that still exists.39

Originally founded as the International Telegraph Union to stimulate cross-border standardization and cooperation for telegraph communication, the organisation is now responsible for a wide variety of issues relating to information and communication technologies. Among these is the coordination of the use of radio frequencies and orbital slots. Without the ITU, arguably space activities would have been negligible.40

The ITU system acknowledges that radio frequencies and associated orbital slots are limited natural resources.41 Accordingly, as a principle, all radio stations “must be established and

operated in such a manner as not to cause harmful interference to the radio services or communications of other Member States (…)” and states are placed under an obligation to

require individuals or companies operating telecommunication installations to comply with this principle.42

In order to prevent harmful interference (“Interference which endangers the functioning of a

radionavigation service or of other safety services or seriously degrades, obstructs, or repeatedly interrupts a radiocommunication service operating in accordance with Radio

38_{But states do retain jurisdiction over space objects registered by it like they retain jurisdiction over ships}

roaming the high seas

39_{Lyall in: Lafferranderie and Crowther 1997, p. 253.}

40_{Lyall in: Lafferranderie and Crowther 1997, p. 253; Von der Dunk in: Von der Dunk and Tronchetti 2015, p.}

492.

41_{Art. 44(2) ITU Constitution.} 42_{Art. 45 ITU Constitution.}

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Regulations”43_{), the ITU has developed a system of allocating, allotting and assigning} frequencies. This system can be summarized as follows.44

First, the ITU (through its member states taking part in world radiotelecommunication conferences) allocates a certain frequency band to a specific radiocommunication service, such as to services relating to Global Navigation Satellite Systems (GNSS) or remote sensing. Next, frequency bands or channels are allotted to specific administrations in specific countries or areas. This administration is the (national) government agency responsible for discharging the duties under the ITU framework. This national administration can then assign a frequency or channel to a specific radio station, i.e. a specific satellite operator.

Art. 12(172) of the ITU Convention provides that the Radiocommunication Bureau shall keep a registry of frequency assignments and associated orbital characteristics in a Master International Frequency Register (MIFR). If an assignment is recorded in the MIFR, this creates a right to international recognition,45 which means that other administrations have to make sure that harmful interference with the relevant frequency assignment is avoided.46

Accordingly, combatting harmful intervention under the ITU system is primarily a matter of prevention through properly planning the use of frequencies. But if harmful intervention does occur, the Radio Regulations provide procedures for resolving this problem. Essentially, this involves administrations of the countries involved consulting with one another and, in the majority of cases, settling the problem through cooperation. If that does not work, the Radiocommunication Bureau can request the relevant administration to take action or, ultimately, the Radio Regulations Board can formulate recommendations, such as the cancellation of assignments.

In addition to this procedure, Art. 56(2) of the ITU Constitution provides that member states may – if no other form of dispute resolution is agreed – resort to arbitration. The arbitration procedure is laid down briefly in Art. 41 of the Convention.

The ITU is the only form of international coordination of space activities.

43_{Art. 1.169 Radio Regulations.}

44_{The following derives from Masson-Zwaan & Hofmann 2019, pp. 141-145.} 45_{Art. 8.3 Radio Regulations.}

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2.4. Political risk

The previous sections provided an overview of the satellite industry, the environment it operates in and the consequential need for international cooperation. In this section, I will try to identify some of the political risks that may arise under these circumstances. After all, IIAs seek to protect not against all risks, but against political risks specifically.

Thus, it is first necessary to identify the meaning of that term (2.4.1). Then, some of the ‘traditional’ political risks that typical (space and non-space) foreign investors face will be discussed (2.4.2). After that, the additional political risks faced by (foreign) satellite operators will be discussed (2.4.3).

First, however, I would like to stress that the assessment of risks in this paragraph is of a qualitative, rather than a quantitative, nature. Not only would the latter be impossible, it would also likely lead to the conclusion, based on historic data, that these risks are, as of yet, rather small. Since, as shown, the magnitude of outer space activities – and thus the chance of risks materialising – will likely significantly increase over the next few years, however, that does not mean that this is a pointless exercise. Again, this thesis is mainly written with the purpose of thinking about investment protection in outer space in the future.

2.4.1. Definition

A precise definition of the term ‘political risks’ – which investment agreements seek to protect against – does not exist.47_{According to Dolzer and Schreuer, it refers to “the risk inherent in}

a future intervention of the host state in the legal design of the project” and the central risk

“lies in a change of position of the host government that would alter the balance of burdens,

risks and benefits which the two sides laid down when they negotiated the deal and which formed the basis of the investor’s business plan and the legitimate expectations embodied in this plan.”48_{Put differently, political risks regard “the host state’s exercise of its political}

power”49_{or “negative interferences with the investment by the government or from political}

developments in the host state affecting the foreign investment.”50

Political risks are often distinguished from commercial risks, which are the “possible negative

effects derived from ordinary commercial activities” such as sales falling below expectations,

47_{Baumann/El Bejjati/Pellander, JWIT 2018, p. 934.} 48_{Dolzer/Schreuer 2012, p. 21.}

49_{Bazrafkan/Herwig 2017.} 50_{Malanczuk, JWIT 2018, p. 954.}

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management being inefficient or certain technology turning out more costly or less effective than planned.51_{Political risks, then, stem from “negative events that derive from political}

actions, such as the expropriation of an enterprise by the government, the establishment of price controls by a regulatory authority, or riots that damage investment assets.”52 International investment law, in other words, “aims at protecting investors from abusive state

power.”53

These risks typically exist because of the unequal relationship between a state and foreign investors within that state. The state, after all, has the monopoly to violence and the exclusive right to change legislation or take administrative actions within its territory. In these powers lies a risk of abuse. This risk of abuse creates the need for and is the raison d’être of IIAs.

2.4.2. Traditional political risks

Thus, the most common types of measures that may lead to disputes, i.e. political risks materialising, are states changing or cancelling contractual or licensed rights, states seizing or cancelling property rights and states changing legislation or regulations.54,55

Undoubtedly, investors in the satellite industry are faced with these ‘traditional’ risks as well.56 Such investors also have a physical presence in (a) state(s) and own assets that can be localized within (a) state(s), such as ground stations or permits.57 Thus, for example, a state that has assigned a certain frequency to a (foreign) satellite operator may revoke the license or contract in question. Indeed, the political risks of a regulatory nature facing the satellite industry “primarily concern licensing under national space law, licensing under national

telecommunications and media laws, and frequency assignments for space and ground systems.”58

Investment arbitrations relating to such measures are, in fact, already taking place. For example, CC/Devas v. India59_{and Deutsche Telekom/India}60_{concern India’s termination,}

51_{Salacuse 2015, p. 36.} 52_{Salacuse 2015, p. 36.}

53_{Hobe et al., JWIT 2018, p. 1043.} 54_{Salacuse 2015, p. 393.}

55_{That does, of course, not mean that these examples are the only measures – ‘political risks’ – that international}

investment agreements protect against.

56_{I will restrict myself to those that specifically relate to the space operations rather than risks that apply}

irrespective of the type of business, such as the risk of revoking certain tax exemptions.

57_{While a permit is generally not a physical object, it can still be localized by looking at its issuer.} 58_{Baumann/El Bajjati/Pellander, JWIT 2018, p. 938.}

59_{CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited and Telcom Devas Mauritius} Limited v. Republic of India, PCA Case no. 2013-09, Award on Jurisdiction and Merits of 25 July 2016. 60_{Deutsche Telekom v. Republic of India, PCA Case No. 2014-10, Interim Award of 13 December 2017.}

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allegedly out of “essential security interests”, of an agreement pursuant to which the investor leased transponder capacity on a government-owned satellite from the government.61_Both cases are in the damages phase after a violation was found.

Eutelsat/Mexico62_{is another pending case, concerning a requirement to reserve a certain portion} of the satellites’ capacity for governmental use that, according to the investors, is much more severe than the requirements imposed on other satellite operators.63_{No details on this case have} been made public yet.

Thus, like any other foreign investor, investors active in the satellite industry face typical political risks concerning changes in regulations, the revocation of contractual rights, etc.

2.4.3. Political risks in outer space

But while satellite operators will face similar political risks as other investors, there is also a peculiarity in their investments that may introduce additional risks: the likely most valuable part of their assets is not located within the territory of any state, but in outer space.

That does not only mean that there is not one clearly identifiable state that may pose a risk to that asset – as the investment has no physical presence within any state’s sphere of control – but also that there is no state to protect that asset from other actors, such as other states or private entities. Instead, investments float freely in an emptiness which is (physically or ‘digitally’) accessible by anyone with sufficient resources. The number of states whose (political) actions may cause damage to a satellite investment is thus almost unlimited.

Thus, while in ‘normal’ investment scenarios, political risks exist because of the unequal relationship between the (powerful) host state and the foreign investor, in space, it is the lack of any state that has exclusive power (and thus offers protection) that creates (different) risks. Some of these risks will be discussed below. This is far from an attempt at being exhaustive, but rather serves to show what type of risks satellite operators may face.

61_{It has to be noted, that the investors in those cases were not the owners of the satellites but instead the}

(investors in) the lessee of broadcasting capacity of these satellites.

62_{Eutelsat SA v United Mexican States, ICSID Case No ARB(AF)/17/2.}

63_{Zoe Williams, ‘Mexico Faces new Investor-State Arbitration Brought by French Satellite Company’,} IAReporter 17 August 2017 (available at https://www.iareporter.com/articles/mexico-faces-new-investor-state-arbitration-brought-by-french-satellite-company/, last accessed 5 November 2011).

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This section will then end with some concluding remarks, where I will also address the question whether this difference entails that the risks concerned here should not be considered ‘political’ risks (and thus not the domain for international investment law).

Sabotage

Space technology is by definition dual use technology that can be used for both non-military as well as military purposes.64_{Accordingly, even commercially owned satellites could be used} for military purposes and pose a threat to states’ military interests. But even where space technology is not used for military purposes, its use may in many ways contravene the (geo)political interests of states. Privately owned satellites can, for example, be used to expose scandals for which states are responsible – such as China’s treatment of its Uyghur and Buddhist minorities65 – and thereby cause backlash,66 or seriously harm the credibility of a state’s foreign policy (or certain positions held by it) by uncovering certain claims as downright false – such as Russian claims that it possessed satellite imagery that would rule out its involvement in the downing of flight MH17.67 In addition, satellites can be used to transmit non-censored radio broadcasts into otherwise censored areas, such as broadcasts targeted at minority groups into China.68

64_{Baumann/El Bajjati/Pellander, JWIT 2018, p. 935; Malanczuk, JWIT 2018, p. 974.}

65_{See Bahram K. Sintash/the Uyghur Human Rights Project, Demolishing Faith: The Destruction and} Desecration of Uyghur Mosques and Shrines, October 2019, p. 49 (available at:

https://docs.uhrp.org/pdf/UHRP_report_Demolishing_Faith.pdf, last accessed 3 January 2020), p. 49; Fred Hiatt, ‘Column: In China, every day is Kristallnacht’, The Washington Post, 3 November 2019 (available at:

https://www.washingtonpost.com/opinions/2019/11/03/china-every-day-is-kristallnacht/?arc404=true, last accessed 5 November 2019); Chris Buckley, ‘China is Detaining Muslims in Vast Numbers. The Goal: ‘Transformation.’’, The New York Times, 8 September 2018 (available at:

https://www.nytimes.com/2018/09/08/world/asia/china-uighur-muslim-detention-camp.html, last accessed 5 November 2019); Holmes Chan, ‘China has destroyed large areas of one of Tibet’s biggest Buddhist sites, satellite images reveal’, Hong Kong Free Press 20 October 2019 (available at:

https://www.hongkongfp.com/2019/10/20/china-destroyed-large-areas-one-tibets-biggest-buddhist-sites-satellite-images-reveal/, last accessed 5 November 2019).

66_{The Economist 24 October 2019, To suppress news of Xinjiang’s gulag, China threatens Uighurs abroad, 24}

October 2019 (available at: https://www.economist.com/china/2019/10/24/to-suppress-news-of-xinjiangs-gulag-china-threatens-uighurs-abroad, last accessed 5 November 2019); 66_{Stephanie Nebehay, ‘Exclusive: West,}

Japan rebuke China at U.N. for detention of Uighurs’, Reuters 10 July 2019 (available at:

https://www.reuters.com/article/us-china-xinjiang-rights-exclusive/exclusive-west-japan-rebuke-china-at-un-for-detention-of-uighurs-idUSKCN1U51E1, last accessed 5 November 2019).

67_{Bellingcat, ‘Comparison of Digital Globe 17 July Satellite Imagery with Russian Ministry of Defense 17 July}

Satellite Imagery’ (available at:

https://www.bellingcat.com/wp-content/uploads/2015/06/17_july_satellite_imagery_comparison1.pdf, last accessed 5 November 2019).

68_{The Economist 24 October 2019, To suppress news of Xinjiang’s gulag, China threatens Uighurs abroad}

(available at: https://www.economist.com/china/2019/10/24/to-suppress-news-of-xinjiangs-gulag-china-threatens-uighurs-abroad, last accessed 5 November 2019).

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Accordingly, it does not seem too incredible that under certain circumstances, states may try to disable a satellite to prevent it from causing (further) harm to its interests.69

One way of achieving this would be by intentionally shooting it down. While this seems James Bond-esque, a recent test conducted by India has confirmed once more that this is actually very possible. In the test, India shot down one of its own satellites using an anti-satellite (ASAT) missile, becoming the fourth state, after the US, Russia and China, to acquire the ability to do so.70

Admittedly, however, it does not seem likely that states would easily resort to such drastic means of taking out a privately owned satellite. This would be extremely difficult to do secretly, as missiles are not exactly stealthy weapons and early warning systems will likely be able to detect the launch (and thus the launcher).71_{Accordingly, it would be relatively easy to attribute} such an act to the state in question. With the culprit identified, significant backlash from the international community could be expected.

Therefore, cyberattacks seem a much more viable option. Since all spacecraft necessarily use radio signals to communicate with ground stations, they are by definition vulnerable to cyberattacks.72_{According to cybersecurity experts, the protection of satellite systems is often} poor, making them relatively easy targets, too.73

Cyberattacks target the data sent to the satellite and require a point of intrusion, such as ground stations, distinguishing them from jamming or spoofing (which will be discussed in the next paragraph).74

69_{Hobe et al., JWIT 2018, p. 1049-1050.}

70_{Michael-Ross Fiorentino, ‘NASA chief calls India’s shooting down of satellite a ‘threat to the future of}

human space flight’’, Euronews, 2 April 2019 (available at: https://www.euronews.com/2019/04/02/nasa-chief-calls-india-s-shooting-down-of-satellite-a-threat-to-the-future-of-human-space, last accessed 5 November 2019).

71_{The US, for example, has a network of satellites orbiting the earth that continuously supervise the earth’s}

surface. See for example Lockheed Martin, SBIRS factsheet, 2017 (available at:

https://www.lockheedmartin.com/content/dam/lockheed-martin/space/photo/sbirs/SBIRS_Fact_Sheet_(Final).pdf, last accessed 5 November 2019).

72_{Masson-Zwaan & Hofman 2019, p. 76.}

73_{Gregory Falco, ‘Our satellites are prime targets for a cyberattack. And things could get worse’, The}

Washington Post, 7 May 2019 (available online at https://www.washingtonpost.com/opinions/our-satellites-are-prime-targets-for-a-cyberattack-and-things-could-get-worse/2019/05/07/31c85438-7041-11e9-8be0-ca575670e

91c_story.html?utm_term=.82f52f821ef2 last accessed: 3 January 2020).

74_{Todd Harrison, Kaitlyn Johnso, Thomas G. Roberts, Space Threat Assessment 2018, Center for Strategic &}

International Studies, 2018 (available online at:

https://aerospace.csis.org/wp-content/uploads/2018/04/Harrison_SpaceThreatAssessment_FULL_WEB.pdf, last accessed 3 Januari 2019), p. 4-5.

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Cyberattacks attributed to states are becoming an increasingly prevalent phenomenon,75 sometimes going as far as sabotaging other states’ nuclear facilities.76_{Cyberattacks have the} major advantage that it is difficult to identify them and attribute them to a certain state.77_And even if an attack can be attributed to a state, the ambiguity of international law on this subject will still enable it to deny any wrongdoing.78

In fact, cyberattacks directed at (commercial) satellites seem to already have happened. According to cybersecurity company Symantec, for example, Chinese hackers have lately been targeting actors in the communications, geospatial imaging, and defence sectors in the United States and Southeast Asia, likely with the motive of espionage, but possibly even disruption.79 While the attack was not directly ascribed to the Chinese government,80_{it is safe to say that the} possibility that it had an involvement cannot be ruled out. Meanwhile, Russian hackers are said to have been able to destroy an American-German (governmental) satellite by pointing its instruments at the sun already in 1998.81

Interference with frequency bands and orbital slots

But political risks relating to outer space investment are not likely to be restricted to deliberate acts of sabotage. It seems (probably more) likely that other harmful acts, not specifically aimed at intentional destruction, will pose a more serious threat to private investments in space. These risks are (at least in part) a consequence of the increased congestion of outer space and will thus likely increase in quantitative terms as activities in space increase.

75_{Jean-Marie Bockel (General Rapporteur), The Future of the Space Industry. General Report, NATO}

76_{Brust, ABA J 2012; Huib Modderkolk and Kim Zetter, ‘AIVD speelde cruciale rol bij sabotage}

kernprogramma Iran’, De Volkskrant 2 september 2019 (available at: https://www.volkskrant.nl/nieuws-

achtergrond/aivd-speelde-cruciale-rol-bij-sabotage-kernprogramma-iran~ba24df9f/?referer=https%3A%2F%2Fwww.google.com%2F, last accessed 5 November 2019).

77_{Rotondo, Cycon 2016, pp. 3-4.}

78_{Masson-Zwaan & Hofmann 2019, p. 76.}

79_{Symantec 19 June 2018, Thrip: Espionage Group Hits Satellite, Telecoms, and Defense Companies (available}

online at https://www.symantec.com/blogs/threat-intelligence/thrip-hits-satellite-telecoms-defense-targets last accessed: 3 January 2020).

80_{Joseph Menn, ‘China-based campaign breached satellite, defense companies: Symantec’, Reuters, 19 June}

2018 (available online at https://www.reuters.com/article/us-china-usa-cyber/china-based-campaign-breached-satellite-defense-companies-symantec-idUSKBN1JF2X0).

81_{The Economist 18 July 2019, Attacking satellites is increasingly attractive—and dangerous (available online}

at https://www.economist.com/briefing/2019/07/18/attacking-satellites-is-increasingly-attractive-and-dangerous

last accessed: 3 january 2020); Adam Ali.Zare Hudaib, ‘Satellite Network Hacking & Security Analysis’, IJCSS vol. 10 (2016), issue 1.

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As described above,82_{the frequency spectrum and orbital slots are limited natural resources.} For instance, a significant portion of the geostationary orbit already seems to be ‘full’, with a theoretical (and practically likely far lower) capacity of 1,800 satellites and already over 550 spots taken. With space increasingly congested, coordinating the large number of (planned) satellites will become increasingly challenging.83

Thus, states may sooner or later find themselves in situations where, for example, ITU rules seriously restrict their possibilities to launch, or authorise the launch of, satellites into certain orbits. If such a situation arises, the state will be confronted with a dilemma: either not launch the satellite into the desired orbit (or at all), or simply disregard ITU rules and accept the possibility of harmful interference taking place (in which case the state or its national will have to make sure that its satellite is equipped with the more powerful transmitter). This fits in the trend signalled in domestic telecommunications markets, where investor-state disputes relating to the use of spectrum, which has been found to be rather valuable, have become significantly more common.84

Interference with radio frequencies can also be a goal in itself, for a variety of reasons. This is called jamming (generating noise in the same frequency band within the same field of view of the antenna of the receiver to obscure the real signal sent to the satellite) or spoofing (sending a signal to the satellite that attempts to be identified by the satellite as the authentic signal and thereby inserting false or corrupted data).85_{For example, in 1997, an Indonesian satellite} intentionally jammed the signals of a satellite owned by a Hong Kong-based commercial operator, apparently over a dispute relating to an orbital slot.86_{China, meanwhile, is known to} intentionally jam broadcasts from the likes of Radio Free Asia87_{and even the BBC.}88_Although it is not entirely clear whether the source of jamming in these instances was another satellite or a station on the ground, there are rumours that China owns a satellite that can be used

82_{See para. 2.1.}

83_{Baumann/El Bajjati/Pellander, JWIT 2018, p. 940-941.} 84_{Holland, Dispute Resolution International 2018, p. 144.}

85_{Todd Harrison, Kaitlyn Johnso, Thomas G. Roberts, Space Threat Assessment 2018, Center for Strategic &}

International Studies, 2018 (available online at:

https://aerospace.csis.org/wp-content/uploads/2018/04/Harrison_SpaceThreatAssessment_FULL_WEB.pdf, last accessed 3 Januari 2019), p. 4.

86_{Adam Ali.Zare Hudaib, ‘Satellite Network Hacking & Security Analysis’, IJCSS vol. 10, issue 1, 2016.} 87_{The Economist 24 October 2019, To suppress news of Xinjiang’s gulag, China threatens Uighurs abroad, 24}

October 2019 (available at: https://www.economist.com/china/2019/10/24/to-suppress-news-of-xinjiangs-gulag-china-threatens-uighurs-abroad, last accessed 5 November 2019).

88_{Adi Robertson, ‘BBC World Service radio being jammed in China’, The Verge 25 February 2013 (available}

at: https://www.theverge.com/2013/2/25/4027450/bbc-world-service-radio-being-jammed-in-china, last accessed 5 November 2019).

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specifically to jam broadcasts from other satellites by playing Chinese music on the same frequency as the signal that is to be jammed, only with a much stronger transmitter.89

Harmful interference does not necessarily have to be the consequence of a state’s (deliberate) actions. Of course, it can also occur when private actors, without being granted the right to use a certain frequency, simply start using that frequency.90 Under normal circumstances, the state that has control over such an actor can be expected to take the appropriate measures to bring an end to the situation, as is required under ITU law.91 But there is also the risk that that state is unwilling to take action, for example because the situation is beneficial for a significant company from that country and it does not expect that not intervening will cause it too much trouble.

Harmful interference is, in short, “more than a mere hypothetical possibility. Satellite operators

deal with the harmful interference problems regularly.”92_{And it may have serious} consequences.

If the interference itself is permanent, or long enough to prevent a required ‘collission avoidance manoeuvre’ – a manoeuvre sometimes necessary to avoid collisions with other space objects or space debris93, 94 – from being executed, this may render the satellite unusable and uncontrollable. Temporary interference can also lead to lead to a loss of customers who are unsatisfied with the loss of service. For example, in 2007, a TV satellite’s signal in Israel and Lebanon was interrupted by an unidentified actor, so much so that thousands of customers cancelled their TV contracts, resulting in significant losses for the company involved.95

Dangerous activities

Another risk that investors could face lies in states conducting or authorising activities that are inherently dangerous. A good example would be India’s previously mentioned ASAT missile

89_{See for example}_{http://www.satdirectory.com/firedrake.html}_.

90_{Or simply because the possibility was unforeseen when assigning, allotting or allocating a frequency band} 91_{See para 2.3.}

92_{Jakhu and Sing, ZLW 2009, p. 84.}

93_{ESA recently had to perform such a manoeuvre for the first time, see ESA 3 September 2019, ESA spacecraft} dodges large constellation (available at:

https://www.esa.int/Safety_Security/ESA_spacecraft_dodges_large_constellation, last accessed 5 November 2019).

94_{While the necessity to conduct such manoeuvres is not yet a common occurrence, again, with the continued}

increase of activity in outer space, especially large constellations of satellites, this will become more and more common and thus pose an increasingly larger risk.

95_{Hobe et al., JWIT 2018, p. 1055; Jakhu and Sing, ZLW 2009, p. 84. It was not established who was}

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test. According to NASA, as a result of that test, at least 400 pieces of space debris have been identified, posing a threat to the ISS and other objects in low earth orbit.96

While there is no good enough data yet to draw conclusions on the debris cloud caused by India’s test,97_{the severity of the possible effects of such activities – and collisions in space in} general – is shown by China’s 2007 ASAT test and the collision that took place between a satellite belonging to the Iridium network and a defunct Russian satellite in 2009. Together, these two incidents doubled the total number of tracked space debris.98 As stated before, if the amount of space debris becomes too large, space may become too congested and dangerous to pursue any activities.99

Perhaps the authorisation of the launch into orbit of large constellations of small satellites could, under certain circumstances, be considered similarly (intolerably100) risky. One disadvantage of such small satellites is that they are often not equipped with propulsion systems, meaning that they are not manoeuvrable.101 This essentially turns them into large constellations of uncontrollable, radio transmitting space debris.

Thus, after a 2010 study – not yet accounting for the introduction of large constellations – had already found that the occurrence of space debris may reduce the expected lifetime of a satellite by as much as 13%, a 2017 study found that the introduction of large constellations of satellites may significantly amplify these effects. For example, a satellite that would have an expected lifetime of 20 years in a debris-free environment, has an expected lifetime of 12 years in an environment with debris and just 8 years when the environment also includes large satellite

96_{Michael-Ross Fiorentino, ‘NASA chief calls India’s shooting down of satellite a ‘threat to the future of}

human space flight’’, Euronews 2 April 2019 (available at: https://www.euronews.com/2019/04/02/nasa-chief-calls-india-s-shooting-down-of-satellite-a-threat-to-the-future-of-human-space, last accessed 5 November 2019).

97_{Mark Harris, ‘Why satellite mega-constellations are a threat to the future of space’, MIT Technology Review,}

29 March 2019, available online ( https://www.technologyreview.com/s/613239/why-satellite-mega-constellations-are-a-massive-threat-to-safety-in-space/, last accessed 11 Nov. 19).

98_{Peterson et al., ‘Space Traffic Management in the Age of New Space’, The Aerospace Corporation, April}

2018 (accessible online at https://aerospace.org/sites/default/files/2018-05/SpaceTrafficMgmt_0.pdf, last accessed 11 November 2019), p. 2.

99_{Viikari in: Von der Dunk and Tronchetti 2015, p. 720-722; Jean-Marie Bockel (General Rapporteur), The} Future of the Space Induystry. General Report, NATO Parliamentary Assembly, Economic and Security

Committee, 173 ESC 18 E fin, 2018 (available online at: https://www.nato-pa.int/document/2018-future-space-industry-bockel-report-173-esc-18-e-fin, last accessed 3 January 2020), p. 12.

100_{Of course, space activities are inherently risky. The point here is not to delineate what is and what is not}

intolerably risky, but to argue that there is a spectrum of ‘riskiness’ where there is a certain point above which activities cause too much danger.

101_{Igor Levchenko, Shuyan Xu and Kateryna Bazaka, ‘Small thrusters for small satellites: trends and}

challenges’, The Space Review, 14 January 2019 (available online at

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constellations.102_{Unsurprisingly, a NASA study has found that it is essential to de-orbit 99%} satellites forming part of such constellations at the end of their lifetime to sufficiently reduce the risk of collisions.103

The authorisation by a state to bring a large constellation of satellites into a certain orbit, especially without requiring the operator to take measures to remove the satellites from orbit at the end of their lifetime, could then pose significant risks to the satellites of other operators. This risk could be especially magnified by the lack of international standards. Here, a risk lies in a ‘regulatory race to the bottom’ ensuing, where states lower the standards set by their national legislations to make it more attractive for satellite operators to establish themselves in their jurisdiction.104 This, in turn, may lead to states authorising constellations in numbers and at altitudes that pose a significant risk to other assets in similar orbits.

2.4.4. Concluding remarks

Typically, the political risks that investment law concerns itself with stem from the exclusive power that a state has over foreign investors investing in its territory and the associated risk of abuse of that power. Investors investing in space activities, such as satellite operations, face similar risks in their dealings with a state, for example regarding the necessary permits. That state may, for example, arbitrarily revoke frequency assignments. The fact that these risks also apply to satellite operators has, however, little to do with the fact that they own an asset in outer space: where such risks apply, it is precisely because the investor also owns assets (such as ground stations, contracts or permits) that can be localized within the territory of the host state and over which that state has sovereign powers.

In addition, a new type of risk is posed to these investors’ assets in space, due to the lack of any state having exclusive control over (the area surrounding) these investments. The source of these risks is thus different than that of ‘traditional’ political risks. They stem from any number of states, or even private actors from any number of states,105 rather than just one clearly identifiable ‘host state’.

102_{Airlor et al., ‘Effects of large constellations on lifetime of satellites in low earth orbits’, Journal of Space} Safety Engineering, vol. 4 (2017), pp. 117-123.

103_{Liou et al., ‘Project Review: NASA ODPO’s Large Constellation Study’ Orbital Debris Quarterly News, vol.}

22, (2018), issue 3, pp. 4-7 (available online at https://www.orbitaldebris.jsc.nasa.gov/quarterly-news/pdfs/odqnv22i3.pdf, last accessed: 3 January 2020).

104_{Compare Malanczuk, JWIT 2018, pp. 966-968.}

105_{But risks arising from foreign (private) nationals can be attributed to the relevant state, pursuant to the}

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It should be noted that some of such risks, like those stemming from, for example, cyberattacks and missiles, do not necessarily apply only to assets in space – assets on earth could similarly be targeted. But their detachment from any sovereign state’s territory, and the often politically highly relevant roles they fulfil, may make them more likely targets than, say, a factory on earth. In addition, this type of risk does not apply differently to domestic and foreign investors, whereas international investment law is merely concerned with the protection of foreign investors.106

These risks thus have certain characteristics that differ from ‘traditional’ political risks. But that is not to say that they cannot or should not be considered ‘political risks’ within the meaning ascribed to that term in international investment law. These, too, are risks arising from a “state’s exercise of its political power”107_{or “abusive state power”,} 108_.

Put simply, due to the nature of outer space, states exercising their (political) powers (or refusing to do so) in their own territory – deciding to assign a frequency, to launch an ASAT missile, to grant a permit for a constellation, to (not) intervene in cases of harmful interference, etc. – may produce effects in outer space that are detrimental to others who do not have any relationship with the state in question, such as especially private investors from other states.109 This is in part because the coordination of activities in outer space is – save for the coordination of frequency usage – not done at the international level (for example by a dedicated authority), but largely left to states under the OST.

There is no reason why investors should not, ideally, be protected against these risks. While it should be acknowledged that IIAs were not created with such risks in mind nor designed to address them, it is thus still worth considering if, how and when they may be used to address these risks, and how better protection could be achieved in the future. This will be done in the next two chapters.

3. Protection of satellite investments against political risk under

international law

Having identified the range of political risks satellite operators may face in the previous chapter, I will address the possibilities to address these risks in this chapter. To get an

106_{A distinction that seems unjustified for the second category of political risks.} 107_{Bazrafkan and Herwig 2017.}

108_{Hobe et al., JWIT 2018, p. 1043.}

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understanding of the full range of possibilities, and since the difference is immaterial to investors, I will touch upon the possibilities under instruments of both international space law (3.2) and investment law (3.3). First, I will discuss the opinions of several authors on the application of IIAs to outer space investments (3.1).

3.1. Opinions in literature

In their article in the JWIT special, Hobe and others have specifically addressed the protection of satellite activities under international investment law. They distinguish four phases of operating a satellite: the manufacturing phase, the launch phase, the operating phase and the out-of-service phase.110 I will restrict myself to discussing their views on the operating phase.111

According to these authors, satellite assets will generally fall within the broad definitions of an ‘investment’ contained in most IIAs. This applies to the satellite itself, to contracts regarding its operation as well as to licences, permits and frequency usage rights.112 They signal, however, that the fact that the satellite itself is situated in outer space, without a physical connection to the territory of any host state, may pose a problem with regards to meeting the requirement generally found in IIAs that investments must be made ‘within the territory of the host state’.113

However, the “jurisdictional nexus” between the satellite as a space object and the state of registration offers a way around this problem, according to Hobe and others. In interpreting the ‘territory’ requirement, they argue, “a certain degree of flexibility is appropriate since not all

investment activities are physically located in the host State”.114 Referring to, inter alia,

Abaclat and others v. Argentina, they argue that the type and nature of the investment should

be taken into account, and that it therefore “seems reasonable to interpret ‘in the territory’ in

the sense that the host State must exercise exclusive jurisdiction over the satellite. Even if territorial sovereignty and exclusive jurisdiction have to be distinguished, such an interpretation would correspond to the rationale of international investment law, which aims at protecting investors from abusive state power.”115 Since Art. VIII OST confers exclusive jurisdiction to the state of registration, this state – when not the home state of the investor –

110_{Hobe et al., JWIT 2018, p. 1032.}

111_{being the phase where the central asset of the investment is actually in outer space, which is the scope of this}

thesis.

112_{Hobe et al., JWIT 2018, p. 1036.} 113_{Hobe et al., JWIT 2018, p. 1042.} 114_{Hobe et al., JWIT 2018, p. 1042.} 115_{Hobe et al., JWIT 2018, p. 1043.}

A New Space for Investment Protection: Possibilities under international law for addressing political risks related to investment in the satellite industry