Introduction
For hundreds of years, humanity has gazed on the stars with insatiable curiosity; a curiosity that led us from merely gazing at it to efficiently venturing past it, in pursuit of unraveling the mysteries of the unknown. As our technological capabilities grew, so did our presence in area, transitioning from a realm dominated by authorities companies to 1 bursting with alternatives for personal firms. The finance ministry on twenty first February, 2024 issued a notification allowing 74% overseas direct funding below computerized route for satellite tv for pc manufacturing, as much as 49% below computerized route for launch autos, and as much as 100% below computerized route for manufacturing of parts and programs. These measures are sure to unlock numerous alternatives for the budding non-public area sector and serving to India notice its formidable goal of contributing 10% to the worldwide area economic system by 2030.
This growth into area has not solely supplied new prospects for human achievement but in addition launched advanced authorized and logistical challenges. One notably intricate space is the overlap of area regulation with insolvency regulation which presents notably advanced points for insolvency professionals. As area property change into more and more helpful and widespread, insolvency practitioners would face distinctive difficulties when coping with the insolvency of firms within the area sector. This piece strives to discover the challenges insolvency professionals face when coping with space-related entities. It discusses conflicts and provides strategies for India to align its insurance policies with worldwide and financial commitments whereas supporting a rising area economic system.
Potential Challenges
Collision Legal responsibility
The privatization of the area sector has led to a major improve in area actions, together with the proliferation of satellites, business area missions, worldwide collaborations, and the buildup of area particles. This surge has heightened the chance of satellite tv for pc collisions and different space-related incidents, presenting new challenges for insolvency professionals coping with claims on this context.
A really troublesome challenge for an insolvency skilled appointed to a satellite tv for pc operator on this context is easy methods to take care of collision claims towards the debtor firm or alternatively easy methods to progress collision claims towards different entities in discharging the skilled’s investigatory and reporting obligations and overarching obligation to behave in the very best pursuits of collectors.
When a collision declare includes solely Indian entities, the decision course of is comparatively much less advanced, as it is going to proceed as per Indian regulation. Nonetheless, when a overseas entity is concerned, decision turns into considerably tougher attributable to intersection with the worldwide area regulation regime, which is essentially state-centric. In such circumstances, the relevant authorized regime is ruled not by the IBC alone, however by a set of worldwide treaties to which India is a signatory. These embrace the Outer House Treaty (1967), the Rescue Settlement (1968), the Legal responsibility Conference (1972), the Registration Conference (1976), the Moon Settlement (1979), and most not too long ago, the Artemis Accords (2023). Amongst these, the Outer House Treaty (“the Treaty”) and the Legal responsibility Conference (“the Conference”) majorly govern the problem of state accountability and cross-border legal responsibility for injury brought on in area.
Article VII of the Treaty offers that the launching state is internationally chargeable for any injury brought on by its area objects to a different state get together or its pure or juridical individuals, whether or not on Earth, in airspace, or in outer area. Article VIII additional establishes that the launching state retains jurisdiction and management over the area object. The Conference enhances this by establishing a fault-based legal responsibility for injury occurring in outer area (Articles III and IV (b)). Furthermore, Article V of the Conference stipulates joint and several other legal responsibility for injury brought on by area objects launched collectively by two or extra states.
The central concern for insolvency professionals arises from the truth that below Articles VIII and IX of The Conference, solely sovereign states, not non-public entities, can immediately pursue claims for compensation arising from space-related injury. A personal firm should first request its nationwide authorities to take up the declare diplomatically or, in restricted circumstances, route it via the UN Secretary-Common. However, if no state chooses to advance a person’s declare, that particular person has no recourse in worldwide regulation. Even the place authorities help is secured, the method, whether or not by way of diplomatic channels or the alternate Claims Fee mechanism (see Article XIV of The Conference), could be gradual, opaque, and unpredictable.
This procedural bottleneck creates actual hurdles. As an illustration, below Part 18, the interim decision skilled (IRP) is tasked with taking management of all property, together with actionable claims. Below Part 20, the IRP should protect asset worth and preserve the corporate operational. But, if a possible declare for space-related injury can solely be pursued not directly and with unsure timelines, the IRP’s potential to discharge these duties is considerably hampered.
Valuing the debtor’s property turns into speculative, restoration of dues is delayed, and the effectivity of the insolvency course of suffers. Although, India requires space-sector firms to hold third-party legal responsibility insurance coverage to guard the state from publicity, this doesn’t resolve the elemental disconnect: insolvency professionals lack direct enforcement avenues. Till the legal responsibility regime turns into extra accessible to non-public claimants, cross-border area disputes will proceed to pressure insolvency proceedings and the professionals navigating them.
One other important problem for the insolvency professionals is easy methods to deal or proceed with collision claims, if such collision is brought on by area particles. It poses a wrestle, as to precisely figuring out which orbital particles belongs to which state within the plenty of satellites and different particles. The lack to attribute particles to a selected state or entity prevents actionable claims from maturing into realizable property.
Firstly, a satellite tv for pc broken by untraceable particles might change into a virtually nugatory asset. Usually its e-book worth is likely to be offset by an insurance coverage payout or compensation declare, but when no get together could be recognized, there isn’t any recoupment. The trustee’s estimate of the property’s worth is due to this fact extremely unsure. This ambiguity can depress bidding in a sale or restructure, as purchasers issue within the threat of latent, uncompensated injury.
Secondly, even when the trustee makes an attempt to say a declare on behalf of collectors, the declare itself could also be categorised as unliquidated or contingent, thereby decreasing its admissibility and recoverability inside the decision course of. Furthermore, will probably be very troublesome to find out the extent of injury brought on by such collisions. This problem is especially problematic within the context of insolvency, the place time is of the essence. The insolvency course of is designed to be time-bound to make sure that the pursuits of each collectors and debtors are protected. Nonetheless, the challenges of tracing area particles and assigning legal responsibility can result in important delays, doubtlessly undermining all the course of and dealing towards the very best pursuits of each monetary collectors and the debtor.
Possession Rights
One rising frontier of business area exercise is area mining, which additionally presents important challenges for insolvency practitioners. A crucial query revolves round whether or not sources extracted from asteroids and celestial our bodies might be subjected to the insolvency decision course of if a agency engaged in area mining have been to change into bancrupt. For such sources to be subjected to the method, they must be categorised as ‘property’ of the agency.
Whereas the Insolvency and Chapter Code, 2016 doesn’t outline the time period “asset” below Sections 3, 5, or 79, Part 3(37) permits for reference to definitions in different enactments such because the Indian Contract Act, the Firms Act, and others. Nonetheless, even these statutes don’t outline “asset.” In Victory Iron Works Ltd. v. Jitendra Lohia & Anr., the Supreme Courtroom addressed this hole by turning to Part 102(2) of the Revenue Tax Act, 1961, which defines “asset” to incorporate “property or proper of any sort.” The Courtroom noticed that this broad definition, coupled with the extraordinary that means of “asset” as “property of any sort,” helps an expansive interpretation below the IBC. It held that any proprietary curiosity or bundle of rights held by a company debtor constitutes an “asset” for the needs of Sections 18(f) and 25(2)(a) of the Code. Making use of this reasoning to area mining, if a company debtor has extracted and possesses sources from celestial our bodies, such sources, being able to possession, management, and financial exploitation, would qualify as property. Accordingly, they’d be topic to the insolvency decision course of, and the decision skilled can be obligated to take custody and management of them as a part of the debtor’s property.
Now, this poses a really important drawback, as numerous worldwide treaties prohibit the identical and even the standing of area mining as a ‘authorized’ enterprise is in unsure waters globally.
On the coronary heart of this dilemma as soon as once more lies the Treaty, to which most spacefaring nations, together with India, are events. Article I of the Treaty declares that outer area shall be the “province of all mankind”, whereas Article II prohibits nationwide appropriation of celestial our bodies via claims of sovereignty, use, occupation, or every other means. On a plain studying of such provisions and aligning them with the rules of the Treaty, one might indicate that area mining is incompatible with worldwide regulation, because the extraction of sources might be seen as a type of appropriation. Nonetheless, regardless of being events to the Treaty, nations just like the USA and Luxembourg have enacted mining-specific laws allowing the identical by another interpretation of Articles II and VI of The Treaty. These nations assert that whereas Article II prohibits sovereign claims over celestial our bodies themselves, it doesn’t explicitly forbid the extraction of sources as soon as they’ve been faraway from the celestial physique. Below this interpretation, area mining is permissible so long as it doesn’t contain sovereign territorial claims. In different phrases, whereas celestial our bodies stay exterior nationwide possession, the sources extracted from them can legally be owned and exploited. This has led to the fast growth of area mining industries in these nations, far outpacing the remainder of the world. Therefore, as of right this moment, these nations have a burgeoning area mining ecosystem that’s far forward of every other on the planet.
Now, the query that arises is, ought to India observe the same path to enact a selected area mining laws, too? Nonetheless, this alternative tends to be in battle with India’s worldwide dedication. This is because of the truth that along with being a celebration to the Treaty, India can also be a signatory to the Moon Settlement, which denounces business exploitation of the Moon and different celestial our bodies until performed below a longtime worldwide regime, which is non-existent as of now. The longer term additionally appears bleak for any such regime as most spacefaring nations haven’t signed the Settlement and have as an alternative marched ahead with mining actions contradicting the Settlement’s rules.
Furthermore, S.7(2)(b) of the Draft House Actions Invoice, at present into consideration in India, envisages a regime during which licenses for area actions could also be granted if they’re ‘per the worldwide obligations of India.’ A license for area mining actions, post-enactment of this invoice, might not be possible as it could be opposite to India’s obligations below the Settlement.
Curiously, regardless of being a signatory to the Settlement, India has additionally signed the Artemis Accords, a multilateral framework led by america, exterior the common channels of the UN’s corpus juris spatialis, which facilitates future lunar exploration and explicitly envisions useful resource extraction from the Moon inside the subsequent decade. Such commercialization of the area by few state actors is inherently contradictory to the rules enshrined within the Settlement, which envisions it as a “widespread heritage of mankind”.
On this context, a fancy problem arises for insolvency practitioners. If they’re appointed in circumstances involving corporations engaged in area mining, they could confront unprecedented authorized uncertainty surrounding the therapy of such sources, particularly in cross-border insolvencies. There may be more likely to be a rise in advanced disputes involving the intersection of home insolvency regulation, non-public worldwide regulation, and the often-ambiguous rules of worldwide area regulation. India stands at a major crossroads, and the trail it chooses is not going to solely decide the permissibility of commercializing area but in addition form the authorized readability out there to insolvency professionals in coping with space-mined sources.
Complexity in Valuation
House property, equivalent to satellites, launch autos, or mental property associated to area expertise, are extremely advanced. Figuring out the worth of area property could be advanced attributable to their specialised nature and the shortage of a standardized valuation framework. House property depreciate otherwise in comparison with terrestrial property. For instance, a satellite tv for pc’s worth would possibly depend upon its remaining operational life and technological relevance. Conventional valuation strategies might not apply, resulting in difficulties in figuring out the precise value of property throughout insolvency proceedings. Aside from the problem in assessing the valuation of asset, will probably be troublesome to evaluate the extent of injury brought on to it attributable to outer area collisions. This could influence the decision course of and the distribution of recovered property amongst collectors.
Usually, valuation and compensation can be calculated on the premise of internationally accepted valuation requirements. It is crucial that the premise of valuation for financial and non-economic losses associated to area property be thought-about. Correct valuation helps in formulating possible restructuring plans, guaranteeing honest distribution amongst collectors.
Approach Ahead
To resolve the dilemma regarding the possession rights over area sources, India can both ratify the Settlement via a home laws and push for the envisioned worldwide regime to manage area mining. Such an act would seemingly stop the popularity of area sources as ‘property’ below IBC, 2016 for the needs of insolvency, thereby curbing the budding of area mining startups within the nation. Alternatively, it could withdraw from the Moon Settlement and align itself extra carefully with the Artemis Accords and the cohort of countries that regulate area mining via respective home legislations. India needn’t enact a separate laws for a similar; it could herald complete amendments to the Draft Invoice for a similar, offering a authorized framework for recognizing area sources as property below Indian insolvency regulation.
Close to collision legal responsibility, at first, we have to focus world efforts to construct expertise able to eradicating or retracting defunct satellites from earth’s geostationary orbit in order to mitigate pointless area junk that may doubtlessly injury lively satellites or different area property. As there’s a better chance of defunct area particles colliding with practical area property, creating such expertise can have a optimistic influence on variety of dispute arising out of such collisions. Furthermore, investing in applied sciences for monitoring area particles and assessing area property will assist insolvency practitioners handle dangers extra successfully. With the arrival of personal entities within the area sector, there arises a necessity for a novel worldwide framework that imposes legal responsibility on such entities for any damages their actions might trigger. The present framework below the Conference was conceived at a time when area actions have been the only area of state actors and therefore calls for an overhaul.
There may be additionally a have to develop asset valuation strategies which are primarily based on internationally accepted valuation requirements that are particular to area property. Such strategies should prioritize simplicity and uniformity, guaranteeing clear claims processing and minimizing room for inconsistency. Integrating well-established valuation norms will improve reliability, whereas the usage of impartial proof wherever attainable ought to underpin legal responsibility assessments, lending credibility and precision to the valuation course of total.
Conclusion
The intersection of area regulation and insolvency regulation presents distinctive challenges that require revolutionary options. Because the area sector continues to develop, it’s crucial that authorized frameworks preserve tempo with technological developments. By creating complete nationwide laws, harmonizing worldwide frameworks, and implementing standardized valuation strategies, we are able to make sure that insolvency proceedings within the area sector are performed pretty and effectively. The alternatives that India makes on this regard is not going to solely form the way forward for its area business but in addition contribute to the evolution of worldwide area regulation.
Anubhav Singh and Prinshul Agarwal are undergraduate regulation college students at Dr. Ram Manohar Lohiya Nationwide Legislation College, Lucknow.
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