Data and communications derived from satellite infrastructure are fundamentally important to many sectors, and demand is growing as telecommunications businesses, insurers, financial centres, manufacturers, data companies, infrastructure providers, investors and others are increasingly reliant on space-based infrastructure and services.
As organisations enter the sector, the focus often falls on technological innovation and commercial opportunity. Less attention is sometimes given to a fundamental contractual question: how should parties allocate the consequences of risks that sit outside their control? In the space sector, events such as launch failures, solar storms, sanctions and regulatory intervention are well understood industry risks. Whether they give rise to contractual relief will often depend on how clauses dealing with risk outside the parties control (force majeure) and other risk-allocation measures have been drafted.
Why Force Majeure Matters in the Space Sector
Space projects present a complex combination of risks. As with other large, complex, international projects, they typically involve substantial upfront investment, long development timelines, international supply chains and a heavy reliance on regulatory approvals. A disruption affecting one part of the project can have consequences across multiple contractual relationships.
To add another layer of complexity, space contracts may also be more exposed to risks that originate both on Earth and beyond. These could include:
- Space weather events affecting satellite operations;
- Debris collision risk
- Launch failures resulting in the loss of infrastructure;
- Geopolitical developments affecting access to technology, facilities or financing;
- Export control restrictions;
- Government action affecting licences, spectrum rights or operational approvals.
Whilst the above events may appear exceptional to someone new to the sector, the space industry has long recognised these commercial risks. The key issue is therefore not whether they can occur, but who bears the commercial consequences when they do.
When Space Risk Becomes Contract Risk
Solar storms and space weather may sound like a scientific concern rather than a legal one. However, significant solar activity can affect satellite systems, communications networks and navigation services. Where businesses rely on those services, a prolonged outage may raise questions about whether contractual obligations are suspended or whether liability remains. Whether a solar storm qualifies as a force majeure event will depend on the contractual wording, and parties may wish to address such risks expressly rather than relying on generic references to events beyond reasonable control.
Launch failures present similar challenges. A failed launch may result in the loss of a satellite, the destruction of payloads, and substantial delays to downstream projects. But a launch failure does not automatically determine liability. Responsibility will generally depend on how risk has been allocated through contractual provisions and insurance arrangements.
Geopolitical events can affect access to launch sites, transportation routes, supply chains, technology transfers, and international collaborations. Parties may seek to rely on force majeure, but under English law this will typically depend on whether the event actually prevents performance, or merely makes it more difficult or expensive.
Regulatory intervention may be equally disruptive. The suspension or revocation of licences, restrictions on technology exports, national security measures, or changes to regulatory requirements can have an immediate effect on project delivery. Contracts should therefore address whether such events give rise to suspension, termination, or force majeure rights. Not all regulatory disruption will be best addressed through force majeure provisions. In some circumstances, bespoke change-in-law or regulatory change mechanisms may offer greater certainty as to how additional costs, delays and compliance obligations will be managed.
The English Law Position
One of the most important points for businesses entering the space sector is that force majeure is not a standalone doctrine under English law. A party can generally rely on force majeure only where the contract contains an express force majeure clause.
The precise drafting of a force majeure clause can also be critical, particularly where relief depends on performance being ‘prevented’, ‘delayed’ or merely ‘hindered’.
Where no force majeure clause exists, a party may attempt to rely on the doctrine of frustration. However, frustration applies only in limited circumstances where performance becomes impossible, unlawful or radically different from that which was originally contemplated. Increased cost or inconvenience will not normally be sufficient.
For this reason, businesses participating in space projects should be wary of assuming that English law will provide relief in the absence of carefully drafted contractual provisions.
Sanctions: The Fastest-Growing Contractual Risk in the current Geopolitical Climate?
Many space projects involve international financing, cross-border supply chains, advanced technologies and multinational partnerships. A sanctions designation affecting a supplier, customer, lender or corporate group can quickly disrupt performance.
Sanctions may affect:
- Technology transfers;
- Component procurement;
- Financing arrangements;
- Payment mechanisms;
- Joint ventures and strategic collaborations.
Whether sanctions trigger force majeure relief will depend on the contractual wording and the extent to which they prevent performance. Depending on the circumstances, sanctions may also raise issues of contractual illegality. Businesses should therefore consider bespoke sanctions provisions addressing compliance obligations, suspension rights, termination rights and risk allocation.
Key Takeaways for Businesses Entering the Space Economy
As space-related projects become more commercially significant, force majeure clauses are increasingly acting as strategic risk allocation tools, rather than standard boilerplate provisions.
Parties should consider whether their contracts need to expressly address:
- Space weather and solar storm events
- Launch failures and delays
- Government intervention
- Economic sanctions
- Export controls
- Supply chain disruption
- Notice requirements
- Mitigation obligations
- Suspension rights
- Termination rights after prolonged disruption
Force majeure rarely operates in isolation. In many space projects, insurance forms an equally important part of the risk allocation framework. A force majeure event affecting one party can quickly have consequences across the wider project ecosystem. In projects involving launch providers, manufacturers, operators and customers, businesses should consider whether risk is appropriately allocated across the wider supply chain.
Parties should also consider how force majeure provisions interact with limitation of liability clauses and regulatory obligations. A clause that appears adequate in a conventional commercial contract may not provide the certainty required for a complex space project involving multiple stakeholders and jurisdictions.
Risk Allocation Matters More Than Risk Prediction
Solar storms, launch failures, sanctions and government intervention may all be beyond the parties’ control. Under English law, however, their contractual consequences are usually determined not by the event itself, but by the way risk has been allocated in the contract.
For businesses operating in, or entering the space sector, force majeure provisions are a central part of the commercial framework that determines who bears the risk when a project encounters turbulence, whether that turbulence originates on Earth or in space.
This article was written by John Catchpole, Partner in the Real Estate team, Neve McLennan, Trainee Solicitor in the Commercial Dispute Resolution team, and Tim Lane, Senior Associate in the Corporate team.