Satellites and sandboxes: why controlled testing environments could be key to regulating tomorrow's space technologies

Regulatory sandboxes can be a valuable tool in modern regulation. Depending on how sandboxes are structured, they can create structured spaces where regulators, industry, and other stakeholders can work together to develop policy in complex and fast-moving sectors. This approach can be particularly helpful where traditional regulatory frameworks struggle to keep pace with technological change, and where innovation, safety, and commercial interests all need to be balanced carefully.

Good examples of this challenge can be found in the space sector, which involves cutting-edge technology at the intersection of international and national space law, technical safety requirements, and significant commercial opportunities. Getting the regulatory framework right for activities like this requires careful regulatory design, and sandboxes present a unique regulatory opportunity here if established and managed successfully - with areas like Rendezvous and Proximity Operations presenting particularly suitable use cases for this approach, as demonstrated by the UK’s recent sandbox for these kinds of activities.

The business case for effective sandbox design and management

Emerging areas face regulatory challenges that traditional policy-making can struggle with. For example, space missions have long development timelines and early design choices need to take into account regulatory requirements. If the requirements are unclear or new requirements are imposed later, this can have significant consequences, leading to additional costs, delays, and potentially contributing to the loss of business opportunities or even challenging an entire business case. This problem is particularly acute in space, where technical complexity meets international obligations and commercial pressures.

Good regulatory sandboxes can give companies competitive advantages: lower compliance costs, faster market entry, and more predictable regulatory treatment. In space, where countries compete for commercial activities, regulatory clarity becomes important for attracting investment and building market leadership. Effective sandbox approaches go beyond simply relaxing rules - they create systematic ways for everyone to work together on solutions.

Depending on the setup of the regulatory sandbox, national regulators and supervising authorities can also benefit, as they will be able to discuss regulatory issues, contribute to the development of best practices and lessons learned and exchange experiences and insights with other regulators.

Key success factors for sandboxes

Successful sandboxes in complex sectors need careful design that handles technical complexity whilst staying focused on practical outcomes. Collaborative engagement can bring together regulators, industry and government stakeholders, insurers, and technical experts in, for example, dedicated workshops and mock application exercises to explore gaps in the existing framework and to propose practical recommendations. This multi-stakeholder approach can be essential in sectors like space, where you need to balance technical expertise, commercial realities, and regulatory requirements.

A sandbox can establish productive stakeholder collaboration by bringing together government, regulators, insurers, and industry for a structured exchange of ideas in a neutral or 'safe' forum. As a result, collaborative sandbox environments can help bridge knowledge gaps and reduce uncertainty, for example, supporting more predictable licensing timelines and better commercial outcomes. This collaborative approach can work because in emerging sectors, no single player has all the answers.

Practical recommendations for sandbox success

To be effective, sandboxes in complex emerging sectors should:

• Have clear objectives, systematic methods, and sustained commitment from everyone involved;
• Be designed to handle technical complexity whilst staying focused on practical, implementable outcomes;
• Combine collaborative problem-solving with structured ways to turn operational challenges into actionable recommendations; and
• Create systematic frameworks for identifying challenges whilst providing clear paths to implementation.

An example of a regulatory sandbox that has published practical recommendations for running a successful sandbox is the European Blockchain Sandbox (EBS). The EBS is an initiative of the European Commission that established a pan-European framework for regulatory dialogue with the goal to increase legal certainty for innovative blockchain technology solutions and facilitate the development of best practices. In 2024, the EBS published its first best practices report with an emphasis on, among others, the organisation of the sandbox and the different tasks required for its set-up with a focus on lessons learned regarding the organisation and the application & selection process. The full first best practices report of the EBS can be found: here.

A recent sandbox example from the space sector

Recently, the sandbox model has been used to inform future regulation in the UK space sector for Rendezvous and Proximity Operations (RPO). These operations involve spacecraft getting close to other objects in space for servicing, debris removal, or assembly work. The UK government has recognised that RPO missions involve distinctive technical and legal challenges, such as varying levels of spacecraft cooperation, indefinite mission scopes, cross-border involvement, and dynamic risk profiles, that necessitate closer scrutiny and potential regulatory adaptation. Therefore, the government has turned to the regulatory sandbox model as a tool to tackle the unique challenges of these space activities. 

The first stage of the RPO sandbox project has been completed and an industry-led report has been published, which considers analyses based on stakeholder workshops and an iterative simulation of the space licensing process for a hypothetical RPO mission, available: here. The aim is to provide the Department for Science, Innovation and Technology, the UK Space Agency and the Civil Aviation Authority with a list of actionable recommendations to improve the UK’s licensing regime for RPO missions.

As the project unfolds and evolves, the design and management of the sandbox environment will be key in the effectiveness of the outcomes.