Why space junk matters

On 4 May 2022, a heavy piece of unidentified metal crashed through the ceiling of a young Gympie family’s home – narrowly missing the bouncer in which their baby daughter had been lying moments earlier. Less than six months later, four pieces of space junk – which the United Nations says originated from SpaceX’s Crew Dragon Resilience – were discovered in paddocks in and around the Snowy Mountains region.

Fortunately, no one was harmed and minimal property damage occurred as a result of these incidents. However, debris in low-earth orbit has increased by 50% in the last five years and some estimate that there is up to a 10% chance of a person being hit by space junk this decade. There are millions of pieces of space junk orbiting Earth at such high speeds that even a fingernail-sized fleck of paint can cause substantial damage to satellites and other objects in orbit.

It seems only a matter of time before space debris causes substantial damage to property on Earth or in space, resulting in significant economic loss. So, what are the legal consequences if (or when) this happens?

Who bears the risk?

In Australia, the legal framework applicable to damage caused by space debris depends on where the debris originates and where the damage occurs.

Space debris which is the property of foreign nationals

Under the United Nations 1967 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (Outer Space Treaty) and 1972 Convention on International Liability for Damage Caused by Space Objects (Liability Convention), if a space object (or part of an object) which, under international law, is the responsibility of another country damages Australian property, the Commonwealth has a discretion to present a claim for compensation on behalf of the property owner to the nation registered as being responsible for that object. This assumes that the space object – and the nation responsible for it – can be identified, which can be difficult in the case of parts of a whole object disintegrating.

The Commonwealth is also obliged to return the object, but only on request. If there is any doubt as to the identity of the object in question, a responsible party may choose not to request return in an attempt to avoid liability.

Space debris which is the property of Australian nationals

Part 4 of the Space (Launches and Returns) Act 2018 (Ex) (the Act) establishes rules and procedures to determine the liability of operators when damage to persons or property occurs. In broad terms, the party responsible for the space object (generally the licensee or permit holder under the Act) is required to pay compensation for damage up to the insurance amount specified under the Act and associated rules, and the Commonwealth will pay any excess compensation up to $3 billion.

However, the responsible party’s liability will not be limited in this way if:

• they did not hold appropriate authorization;
• the damage resulted from a breach of their license/permit conditions; or
• the damage resulted from their intentional conduct or gross negligence, or that of a related party (ie a person with an interest in the space object or the responsible party, including engineers, suppliers and manufacturers).

The Federal Court and Federal Circuit Court have jurisdiction to hear and determine actions for compensation, which must be brought within one year after the damage occurred (or one year after the applicant became aware of the damage – or would have become aware if they had exercised due diligence).

Practical implications

Absolute vs. fault-based liability

Liability also depends on where damage occurs:

• if damage occurs on Earth or in the atmosphere, the responsible party will be subject to absolute liability – which means there is no available defense and they must pay compensation unless the damage is caused by the gross negligence or intentional conduct of a third party; or
• if damage occurs in outer space, the responsible party will be subject to fault-based liability – which means they will not be liable to pay compensation unless they or a related party is at fault for the damage. Although fault liability traditionally equates to negligence, there is no international consensus in relation to how parties determine fault – which means any such claim is likely to result in a protracted dispute.

In all cases, if multiple parties are at fault for the damage, each party will be subject to joint and several liabilities, and liability will be proportionately shared between the parties according to their contribution.

Insurance requirements

For every launch and return, a permit holder is responsible for obtaining two forms of compulsory insurance:

• insurance which protects against any liability to third parties that arise under the Act; and
• insurance which covers the Commonwealth for any liability it may incur under international law.

A permit holder’s obligation to do so can be satisfied by entering into either a single or separate policy, but the minimum insurance must be at least equal to the lesser of:

• the amount set by the rules (currently $100 million for launches authorized by an Australian launch permit or high power rocket permit. This can be lowered by the Rules, but it cannot exceed $100 million. For example, overseas payload permits have a $0 insurance requirement ); OR
• the amount calculated by reference to their maximum probable loss (determined by reference to the maximum probable loss methodology, taking into account the value of third-party casualty losses, third-party property losses, losses arising from environmental damage and loss of economic use – the Australian Space Agency makes available a calculator tool upon request to assist with this assessment).

Alternatively, a permit holder can meet their insurance requirements by demonstrating an ability to take direct financial responsibility for paying a claim equal to their required insured amount. The process for doing so is similar to that of securing a loan, because they must provide evidence of their available net assets or other financial means of covering any liability they may incur.

It is also worth noting that every launch involves multiple parties with complex contractual and insurance arrangements governing liability as between themselves.

Debris mitigation strategy requirements

A permit holder must consider the space environment and prepare a debris mitigation strategy for authorization which involves objects going to space. The strategy must:

• outline how the permit holder will manage the risk of debris generated during the lifetime of their space activity;
• be based on an internationally recognized guideline or standard for debris mitigation;
• identify the guidelines or standards being used;
• describe any mitigation measures planned for orbital debris arising from the proposed launch; and
• include an orbital debris assessment, which is a statistical assessment of the probability of collision over the life of the space object and ground impact should a space object survive re-entry.

Future trends

The risks associated with space debris are attracting increasing attention from innovators, defense, commercial and space industry participants, and regulators.

In September 2022, the United States Federal Communications Commission adopted new rules to address these risks. These changes require satellite post-mission disposal to be carried out by deorbiting satellites in or passing through low-Earth orbit as soon as practicable but no later than five years after mission completion. Previous guidelines were set at 25 years.

This goes far beyond Australia’s current requirements, which only dictate the preparation of a debris mitigation strategy, rather than setting any specific rules for removal of spent space objects from orbit. Australian space industry participants should be prepared for increasing regulation in this topical area.

How can HWL Ebsworth help?

Our dedicated space law and insurance teams can assist in managing your risks in relation to your space-related activities.

This article was written by Luke Dale, Partner, Nikki Macor Heath, Special Counsel and Jock Young, Solicitor.

This article has been updated as at 13 February 2023 to clarify the insurance requirements.