Podcast for Hotel Mars Now Available

I had a fun chat with John Batchelor and David Livingstone about the Outer Space Treaty and related issues on their show Hotel Mars.  The podcast is now available on John Batchelor’s site here where I understand it will remain for a week or two.  Just to be clear, I’m sure that I said the Outer Space Treaty was flexible, rather than that it contained loopholes. “Loopholes” makes something sound like a bug, not a feature. Also, the podcast is available permanently on David Livingston’s The Space Show site here.

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This New Ocean

This isn’t space law, but it feels like space law.  Or, to put it more pedantically, this application to the National Oceanic and Atmospheric Administration from Lockheed Martin Corporation to extend its deep seabed mineral exploration licenses contains interesting parallels to the mining of celestial bodies.  The mining would take place outside of anyone’s sovereign territory.  As a review of Lockheed Martin’s application shows, it’s technically very difficult.  Also, there’s a treaty that Lockheed is waiting on the United States to ratify, somewhat like some space miners are waiting for Congress set up a regulatory structure for them before they will start mining.   There is an International Seabed Authority, much as some, including the signatories of the Moon Treaty, would have there be an international authority for extraterrestrial activity.  Unlike for space miners, Congress did pass a law, the 1980 Deep Seabed Hard Mineral Resources Act, to regulate and administer seabed mining.

NOAA’s Federal Register notice links to the application itself.  In its application, Lockheed Martin states that it:

requests an extension of the seabed exploration licenses for the two Lockheed Martin claims, USA-1 and USA-4. NOAA renewed these licenses in 2012 enabling us to continue our investigation into the viability of exploration and development of the USA-1 and USA-4 licensed areas. Since the most recent 5 year license extension was granted, the Corporation has made significant progress against Phase I of its Exploration Plan.1 However, during the same period, progress on the Exploration Plan has been delayed due to the prolonged, severely depressed state of the metals markets and continued delay in resolving the security of tenure issues given the lack of ratification of the U.N. Convention on the Law of the Sea.

It would be very interesting to know why Lockheed sees the lack of ratification of the UN Convention as an impediment to going forward, but I found no additional detail or explanation in the Lockheed application for this tantalizing tidbit.

A quick internet search unearthed this comprehensive review of the 1982 UNCLOS.  Writing in 2012, Steven Groves of the Heritage Foundation explains how U.S. companies can engage in seabed mining without joining UNCLOS.  For one thing, the United States has entered into a series of agreements with other nations to, among other things, resolve conflicting claims and to notify each other when approving applications for exploration. A number of nations

have made a commitment to the United States that they will not interfere with or infringe on the claims by the United States or its companies in the CCZ. None of the nations has denounced or withdrawn from the agreements or has otherwise indicated that it does not respect its international commitments to recognize U.S. claims in the CCZ.

As a legal matter the article notes, the countries who are part of  UNCLOS “cannot prevent the United States or any other nation from mining the seabed any more than they can prevent the U.S. from exercising the freedom of navigation and overflight, the freedom of fishing, or any other high seas freedom.”

Simply because most nations have ratified UNCLOS does not mean that those nations or any international organization, such as the Authority, may deny a right to the United States that it enjoys under international law. One set of nations cannot annul the rights of another set of nations by drafting a treaty that the second set of nations chooses not to join.

(From the perspective of Article II of the Outer Space Treaty, which bars national appropriation of celestial bodies, it is interesting to note that no nations claim sovereignty over the deep seabed yet those nations may recognize claims.)

Groves’ article sums up the state of affairs for security of tenure:

In sum, acting under the authority of DSHMRA, customary international law, and multilateral agreements with foreign countries and companies, the United States has successfully claimed and maintained security of tenure over vast tracts of the deep seabed. The U.S. has done so as an independent sovereign nation exercising its inherent rights.

Groves’ discussion highlights a number of areas of concern for U.S. companies, including environmental measures, inspections, data sharing, and, most significantly for a company with fiduciary obligations to its shareholders:

Under an UNCLOS regime, a U.S. company would have limited control over the area licensed to it for exploration. Once a U.S. company identifies an area of the seabed that it wants to explore, it must divide the area into two halves of equal estimated commercial value and share its data on the area with the Authority.[51] Thereafter, the Council reserves one half of the area for exploration by developing countries or the Enterprise, the Authority’s mining arm.[52] The remaining half would be licensed to the U.S. company for exploration. The size of the U.S. company’s half is effectively limited to only 75,000 square kilometers.[53] (By comparison, the USA-1 exploration area is almost 169,000 square kilometers.[54] Finally, a U.S. company would not have exclusive access to its half because the Authority has the right to enter into contracts with third parties to explore and mine the U.S. half for resources other than polymetallic nodules.

According to NOAA’s Federal Register notice, it seeks comments from the public by May 22, 2017, on Lockheed Martin’s request for an extension.  It will be interesting to follow this docket and see if anyone objects to the extension.  Might competitors file?  Might environmental groups?  Might those who think this a fine regulatory model for outer space be deterred by the thought that others get to comment on and thus delay their business plans?

Bonus points to anyone able to identify the source of this post’s title.

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The “Non-Interference” Provision of Article IX of the Outer Space Treaty and Property Rights

Sometimes when you start a new project or line of inquiry it’s helpful to knock out the deadwood first. Then you can work on the bits that will get you somewhere. I want to understand private property rights in outer space, and lots of people say the Outer Space Treaty forbids a private person’s rights in “real property,” namely, land. Article II of the Outer Space Treaty isn’t deadwood. It forbids national appropriation in outer space. Article IX, however, might be. I want to address it first because I have heard theories floated about how it may protect some property interests.

In law school we learned that property rights were a collection of rights, which one could separate and parcel out. My property professor called them a bundle of sticks. You could have a lifetime interest in a bit of land but no ability to sell it. That’s not the whole bundle, but it’s not nothing. You could lease someone’s land for a year, but then have to leave it. (That’s more of a twig.) Both the lease and the lifetime interest constitute limited property rights. My question then is: does Article IX afford some form of property right, not all of them, necessarily, but some?

It’s always nice, when practicing law, to read what the words say, since they are the best expression of what someone meant. When you’re writing a law or regulation, you’re supposed to say what you mean and mean what you say, so we’ll figure that applies to treaties, too. Given the Supreme Court’s propensity for treating treaties like contracts, this is likely a sound approach. So, what does Article IX say? Continue reading

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Ordering the Cosmos: Private Law and Celestial Property Rights

This month the Institute for Humane Studies and the Mercatus Center co-sponsored a fascinating seminar on the Law and Economics of Space Policy in Arlington, Virginia. Dr. Alexander Salter, a professor of economics at Rawls College of Business and a Comparative Economics Research Fellow at the Free Market Institute, Texas Tech University, presented his paper, Ordering the Cosmos: Private Law and Celestial Property Rights, on how a private legal system could protect property rights despite Article II of the Outer Space Treaty. (I have my own issues with whether Article II actually prohibits private property in Outer Space, but Salter’s ideas give me hope that it might not matter). He proposes a purely private legal system for space commerce to make up for any lack of government enforcement of private property rights.

The discipline of continuous dealings can be self-enforcing. Salter envisions self-enforcing property rights and rules for private parties to adjudicate their own disputes. He acknowledges the problems posed by game theory’s Prisoner’s Dilemma, where two individuals face the choice between respecting each other’s property rights or taking the other’s property. Respect results in them getting to keep their own property. But if one of them defected from the norms of civilized conduct that person could get double the property. Without a sovereign to enforce their respective property claims, the property-maximizing approach (if I am not abusing the lingo here) would be to go barbarian. As Salter notes, however, the scenario is limited in that it assumes a one-time interaction between the two parties, which is not realistic. In real life, there should be multiple interactions over a lifetime. If one of them were to defect, the lost trust would hinder future dealings. As Salter explains:

Social scientists call this the discipline of continuous dealings: since the gains from defection are gained only once, but the gains from cooperating extend into the indefinite future, rational individuals will be much more likely to cooperate when they repeatedly interact.

Adding additional players strengthens the tendency for cooperation because of the reputational effects of behaving badly. Space commerce, Salter posits, will select for patient players who can foresee the consequences of failing to cooperate. Large up front investments and long lead times before seeing positive cash flow do not reward the impatient.

History shows that self-enforcement can work. The international stage itself constitutes an example of the kind of cooperation Salter envisions. There is no king of the world, and “the world’s polities exist in a ‘state of nature.’” Yet international trade and commerce still manage to happen in a “sophisticated private and voluntary legal system.”  The historical roots for this system extend all the way back to the 9th and 10th centuries, when Europe’s trade began recovering from the collapse of the Roman Empire in the West. Merchants developed law enforced in private, merchant-developed courts. This medieval lex mercatoria “was a system of self-enforcing property rights according to legal rules that emerged out of dispute resolution among interested parties.” The merchant courts, Salter explains, developed their own rules of evidence, allowed for consulting experts, and provided quicker decisions than the national courts of the time. Because the courts had no formal enforcement power, enforcement relied on reputational effects. Failure to comply with a decision would brand a merchant  a defector and an unsafe trading partner.  (Even without the internet).

Private courts have not vanished, even with the court systems of the modern nation state. Salter explains that nowadays at least 90 percent of international commerce contracts provide for private arbitration in the event of a dispute.

The desirability of private law. To determine the desirability of private law, Salter first explores the difference between organizations, such as corporations or regulatory agencies, and emergent or spontaneous order (called a cosmos). A market is an example of an order. A market has a tendency toward efficiency as millions of individuals somehow cooperate even though they don’t know each other or even all the conditions of the market.  Prices—continually adjusting in response to changing conditions of supply and demand—provide the substitute for individual omniscience.

We also see orders in the creation of law. Where a regulatory agency’s rules are created by an organization, judicial decisions in a common law legal system exhibit the characteristics of an order. Under a common law system, whether public or private, and under lex mercatoria, “rules that do a good job of providing both stability and flexibility are likely to be discovered and maintained, while rules that do a poor job are likely to be discarded.” Innovation may take place at the margin as new circumstances extend the application of legal principles to new situations.

Both the market and legal systems are orders that generate information and align incentives. In a private legal system the reputational effects tend to keep the arbitrators impartial and disputants willing to abide by private arbitration. The lower costs of a private legal system tend to get passed on to consumers. The feedback mechanisms keep the order flexible, and the order itself stable enough for planning and investment purposes.

Do read the whole paper to best appreciate the discussion of benefits.

Pun acknowledgment:  Now that we know the other meaning of cosmos, we can doubly appreciate the orderly aspects of the paper’s title.

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