Part I of this series explained what helium-3 is, its potential uses, its commercial interest. It then discussed some of insurance issues. Part II turned to another fundamental issue for the development of a commercial lunar helium-3 industry: financing. This blogs with another legal issue of helium-3: liability.
Lunar mining operations will involve expensive equipment, complex transportation systems, and potentially multiple companies operating under different national jurisdictions. What happens when equipment is damaged, a shipment is lost, or an accident occurs during the return to Earth?
The existing space liability regime provides relatively few clear answers to the complex realities of commercial lunar operations.
For companies contemplating lunar helium-3 operations, liability therefore needs to be considered at two levels: the international obligations of States and the contractual, insurance, and domestic-law arrangements governing the private operators involved.
The 1972 Liability Convention establishes a framework for liability between States, but its State-to-State architecture was developed in an era dominated by governmental space missions, rather than today’s emerging multi-party commercial activities. It does not deal directly with company-to-company relationships.
- Damage Caused by One Lunar Operator to Another
Consider a situation in which one company’s robotic excavator accidentally damages another company’s lunar processing facility. Who would ultimately pay for the damage?
There are two distinct legal questions: the potential international liability of a State and the financial responsibility of the private operators themselves.
At the international level, the Liability Convention could potentially apply if the damage involves qualifying space objects. Article III establishes a fault-based standard for certain damage occurring away from the Earth’s surface. The Convention establishes two different liability regimes. Under Article II, a launching State is absolutely liable, regardless of fault, for damage caused by its space object on the surface of the Earth or to aircraft in flight. Obviously this is not the case in our example. By contrast, Article III establishes a fault-based liability regime for damage occurring elsewhere than on the surface of the Earth, including on the Moon, which is our example. More specifically, Article III addresses damage caused by one launching State’s space object to another launching State’s space object, or to persons or property on board it. In these circumstances, liability arises only if the damage is attributable to the fault of the launching State or of persons for whom it is responsible.
Whether the Convention would cover damage to a particular lunar mining installation or processing facility is not necessarily clear. The characterization of the equipment as a “space object” may be significant. Also, what happens, for instance, if the damage is caused by equipment manufactured entirely on the Moon using lunar materials? Whether such equipment would qualify as a “space object” under the Liability Convention is not clearly resolved by the treaty.
Moreover, the Liability Convention operates between States. It does not create a direct cause of action allowing one private company to sue another under the Convention. A claim under its provisions must be presented by a State through the Convention’s procedures.
For the companies themselves, the more immediate questions would likely be governed by contracts, applicable domestic law, and insurance. For example, two mining companies operating near one another on the lunar surface should consider entering into agreements addressing operational boundaries, interference, allocation of liability, indemnification, cross-waivers, and required insurance.
Thus, particularly for commercial lunar operations, the international liability regime provides only part of the legal framework and the practical question of who ultimately bears the financial loss will depend heavily on the contractual and insurance arrangements established by the operators.
- Allocating Liability in Multi-Party Lunar Missions
A helium-3 mission could involve numerous commercial participants: for example, one company extracting the resource, another providing spacecraft, a third operating cryogenic storage facilities, and another managing transportation back to Earth.
The involvement of multiple parties makes it especially important to allocate risks contractually before an accident occurs. The objective is not merely to determine who caused the damage after the event, but to establish in advance who will bear particular losses.
Consider the example of a cryogenic storage facility operated by Company A that malfunctions and damages mining equipment belonging to Company B. The malfunction may have been caused partly by a defective component supplied by Company C. Without clear contractual allocation of these risks, determining who ultimately pays could become extremely complicated.
Carefully drafted agreements governing multi-party lunar operations should therefore address indemnification, limitations of liability, cross-waivers, insurance requirements, and circumstances in which more than one participant contributes to a loss.
The space sector already has experience with this type of risk allocation. Under the U.S. commercial launch and reentry regime, for example, 51 U.S.C. § 50914 requires reciprocal waivers of claims among specified participants in licensed activities. The underlying concept is that participants assume responsibility for certain losses of their own rather than pursuing claims against other covered participants.
This regime of course does not automatically apply to every lunar activity, but its basic approach could provide a useful model for allocating risks in commercial lunar operations.
The parties can determine in advance which risks each participant will bear and ensure that their insurance arrangements correspond to that allocation.
For complex lunar missions involving multiple operators, such agreements will be particularly important in reducing uncertainty and avoiding disputes after an accident.
- Loss of Helium-3 During Transportation to Earth
A separate legal issue arises if helium-3 is lost or destroyed during transportation from the Moon to Earth. Who bears the economic loss: the mining company, the transportation provider, the purchaser, or the insurer?
The answer will depend primarily on how the parties allocate the risk of loss in their contracts. For example, the risk could remain with the mining company until the helium-3 is handed over to the transportation provider. Alternatively, the risk could pass to the purchaser when the resource is loaded for transport. The seller could also agree to retain the risk until delivery at a designated location on Earth.
Importantly, the transfer of ownership and the transfer of risk of loss do not necessarily occur at the same time and the parties should therefore address both issues expressly.
The allocation of risk must also be coordinated with insurance obligations. The party that assumes a particular risk should ensure that appropriate insurance coverage is available and that the contractual provisions are consistent with the scope of that coverage.
Terrestrial commerce already offers contractual mechanisms for allocating transportation risks, including Incoterms. However, Incoterms were not developed for a cislunar supply chain involving lunar extraction, spacecraft transfers, orbital operations, and atmospheric reentry. Although parties could draw upon these established commercial concepts, they would need to adapt or supplement them to address the distinctive risks associated with transporting resources from the Moon to Earth.
The central contractual question is therefore when the risk passes from one party to another and who bears the economic consequences if the helium-3 is lost or destroyed.
- The Intersection of Space Law and Domestic Liability Law
The transportation of helium-3 back to Earth also raises questions about the relationship between international space law and ordinary domestic liability law.
At what point does space law cease to apply and Earth-based law take over?
There is no clear dividing line. Space law and domestic liability law can apply simultaneously.
Consider an accident during atmospheric reentry. If a returning spacecraft causes damage on the surface of the Earth, Article II of the Liability Convention provides that the launching State is absolutely liable for damage caused by its space object. However, this does not mean that domestic law ceases to apply. Depending on the circumstances, there may also be claims involving negligence, property damage, personal injury, or other domestic causes of action.
The same principle applies to activities taking place on the Moon. Domestic law does not necessarily stop applying simply because an activity occurs on the lunar surface.
For example, Article VIII of the Outer Space Treaty provides that the State of registry retains jurisdiction and control over a registered space object and its personnel while in outer space or on a celestial body.
Domestic laws may also apply to companies and activities on the basis of other jurisdictional connections.
Once helium-3 reaches Earth and is transported, stored, or processed, ordinary domestic liability and regulatory regimes become even more prominent.
Contractual arrangements may also influence the allocation of liability. NASA cross-waivers, for example, provide mechanisms for allocating certain risks among participating entities. However, these are contractual risk-allocation mechanisms, not rules establishing a general dividing line between space law and domestic law.
Accordingly, it would be misleading to think of space law as ending at a particular point and domestic law as beginning thereafter. The two legal systems can overlap, including on the Moon. Which rules apply will depend on where the activity occurs, who is involved, what caused the damage, and the relevant jurisdictional connections.
- The Limits of Contractual Risk Allocation
Because international space law does not provide comprehensive answers to every liability issue arising from commercial lunar operations, contracts will be essential.
Companies have considerable freedom to allocate risks among themselves. They may agree on indemnification, limitations of liability, cross-waivers, insurance requirements, and which party bears particular financial losses.
However, contractual freedom has limits: private agreements cannot eliminate applicable statutory obligations, licensing requirements, or regulatory responsibilities.
The U.S. commercial launch regime provides an example. Under 51 U.S.C. § 50914, certain reciprocal waivers of claims are required as part of the licensing framework. Within the scope of those statutory requirements, a cross-waiver is not merely an optional provision that parties are free to negotiate away.
Similar considerations may arise in lunar operations if there will be a framework to license them.
Companies can allocate financial risks among themselves, but their agreements cannot eliminate obligations imposed by governments through applicable licensing, safety requirements, or domestic legislation implementing international obligations.
Article VI of the Outer Space Treaty is particularly relevant. It provides that States bear international responsibility for national activities in outer space, including those conducted by non-governmental entities. Such activities require authorization and continuing supervision by the appropriate State.
Private contracts cannot relieve States of that international responsibility.
The essential distinction is therefore between allocating financial risk among private parties and determining the legal obligations imposed by applicable law. Companies may decide contractually who bears particular losses, but they cannot determine by contract what the law requires of them or from their country.
For multi-party lunar operations, contractual and insurance arrangements must therefore be developed with applicable regulatory requirements in mind, therefor knowledge of international space law is necessary.
Conclusion
The development of commercial helium-3 mining on the Moon will present liability questions that existing international space law addresses only partially.
The Liability Convention establishes important rules concerning State liability, but it does not provide a comprehensive system for allocating financial responsibility among private companies participating in complex lunar operations.
Domestic law, contractual arrangements, and insurance will therefore play a crucial role.
For prospective lunar operators, the priority should be to address these issues before operations begin; establishing clear responsibilities, allocating risks, coordinating insurance coverage, and ensuring compliance with applicable governmental requirements.
Ultimately, the success of commercial lunar helium-3 mining will depend not only on the technology needed to extract and transport the resource, but also on the legal and financial arrangements that make these operations commercially viable.
