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CIVIL LIABILITY FOR NUCLEAR DAMAGE: DEBATE

Any nuclear accident has potential consequences beyond the boundaries of the country where it occurs, and national laws on liability in the case of a nuclear accident are supplemented by a number of international conventions. Liability is limited by both international conventions and by national legislation, so that beyond the limit (normally covered by insurance) the state can accept responsibility as insurer of last resort, as in all other aspects of industrial society.

There are three major international agreements which form the international framework of nuclear liability: (a) The Paris Convention of 1960 (b) The Vienna Convention of 1963S, and (c) The Convention on Supplementary Compensation for Nuclear Damage of 1997.

These Conventions are based on the civil law concept and share the following main principles:

  1. Liability is channeled exclusively to the operators of the nuclear installations;
  2. Liability of the operator is absolute, i.e. the operator is held liable irrespective of fault;
  3. Liability is limited in amount. Under the Vienna Convention, it may be limited to not less than US$ 5 million (value in gold on 29 April 1963), but an upper ceiling is not fixed. The Paris Convention sets a maximum liability of 15 million SDR provided that the Installation State may provide for a greater or lesser amount but not below 5 million SDRs taking into account the availability of insurance coverage. The Brussels Supplementary Convention established additional funding beyond the amount available under the Paris Convention up to a total of 300 million SDRs, consisting of contributions by the installation State and contracting parties;
  4. Liability is limited in time. Compensation rights are extinguished under both Conventions if an action is not brought within ten years from the date of the nuclear incident. Longer periods are permissible if, under the law of the installation State, the liability of the operator is covered by financial security. National law may establish a shorter time limit, but not less than two years (the Paris Convention) or three years(the Vienna Convention) from the date the claimant knew or ought to have known of the damage and the operator liable;
  5. The operator must maintain insurance of other financial security for an amount corresponding to his liability; if such security is insufficient, the installation State is obliged to make up the difference up to the limit of the operator´s liability;
  6. Jurisdiction over actions lies exclusively with the courts of the Contracting Party in whose territory the nuclear incident occurred;
  7. Non-discrimination of victims on the grounds of nationality, domicile or residence.

The Civil Liability for Nuclear Damage Act, 2010

In most countries nuclear plant operators are liable for any damage caused in the event of an accident, against which they take out liability insurance. India had been a notable exception, with reactor suppliers potentially liable for damages in the event of an accident. The 2010 legislation makes Indian operators primarily liable for any nuclear accident, but still keeps open the possibility of recourse to suppliers.

The Civil Liability for Nuclear Damage Act, 2010 seeks to create a mechanism for compensating victims of nuclear damage arising from a nuclear incident.

Key Features:

  • It fixes liability for nuclear damage and specifies procedures for compensating victims.
  • The Bill fixes no-fault liability on operators and gives them a right of recourse against certain persons. It caps the liability of the operator at Rs 500 crore.  For damage exceeding this amount, and up to 300 million SDR, the central government will be liable.
  • All operators (except the central government) need to take insurance or provide financial security to cover their liability.
  • For facilities owned by the government, the entire liability up to 300 million SDR will be borne by the government.
  • The Bill specifies who can claim compensation and the authorities who will assess and award compensation for nuclear damage.

In case of Russia, India had explicitly absolved the Russian supplier of any liability whatsoever in case of a nuclear incident at any site hosting a Russian reactor. Not only that even if the 2008 agreement was terminated the assurance of no liability was promised in case of the four additional reactors at Kudankulam. However, recent reports indicate that India would like Russia to accept the application of the Indian CLNDA in case of Kudankulam 3 and 4, which is one of the reasons why no contract has been signed by NPCIL for further reactors at Kudankulam.

The India-US "AGREEMENT FOR COOPERA TION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF INDIA CONCERNING PEACEFUL USES OF NUCLEAR ENERGY" which was signed on October 10, 2008 does not have any explicit reference to civil nuclear liability. However, through exchanges of bilateral assurances and Joint statements by the respective heads of governments, India committed itself to a set of principles in civil nuclear liability.

 Key issues and analysis

Under Section 17(b), liability for a nuclear accident can be channelled from the operator, which is the Nuclear Power Corporation of India, to suppliers of nuclear material, specifically if the accident is due to an act of the supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services.

Section 46 permits victims of a nuclear incident to sue the operator or the supplier for damages applying tort law, even though such proceedings would be beyond the scope of CLNDA and its liability cap, and thus exposing suppliers to unlimited liability. Both clauses are likely to raise suppliers' cost of insurance cover, possibly beyond what is feasible commercially and within the confines of competitive energy pricing.

Regardless of the extent of damage, the total liability would be limited to SDR 300 million. This amount may not be sufficient to provide adequate compensation in case of a major incident. More than five lakh people were affected after the chemical leakage in Bhopal in the Union Carbide incident (not a nuclear incident). For that incident, the Supreme Court required Union Carbide to provide compensation of 470  million dollars and asked the government to meet any further liability. Many other countries which are major producers of nuclear energy do not have a cap on the overall liability for nuclear damage.

The liability of the operator has been capped at Rs. 500 crore (USD 109 million at current exchange rates). This means that if the nuclear damage exceeds this amount, the central government is liable to compensate victims subject to a cap of 300 million SDR. Several countries which are major producers of nuclear power have a higher limit on the liability of the operator.

The Bill permits the operator to take recourse against the supplier. This may be an impediment if India wants to join international agreements on civil liability for nuclear damage.

Claims for compensation can be filed within ten years of the date of notification of a nuclear incident. This may be inadequate in cases where the effects of radiation are discovered after a substantial period of time.

India ratified Convention on Supplementary Compensation for Nuclear Damage (CSC)

The objective of the 1997 Convention on Supplementary Compensation for Nuclear Damage (CSC) is to establish a worldwide liability regime and to increase the amount of compensation available to the victims of nuclear accidents.

India ratified the Convention on Supplementary Compensation for Nuclear Damages (CSC) in February 2016.

CSC Annex does not restrict in any manner the contents of the contract between the operator and the supplier including the basis for recourse agreed by the operator and supplier.

Once the ratification is done, it will strengthen the Indian government's stand on the interpretations and enable the NPCIL to open preliminary techno-economic discussions with U.S. suppliers, while offering similar assurances to other foreign suppliers.

Simultaneously, the NPCIL should bring its contract language into conformity with these explanations, which is presently not the case, so that domestic suppliers stand reassured. The explanations should help smoothen the process.

How CSC provisions prefer US?

The United States, in particular, has always preferred the CSC over other conventions addressing nuclear liability, such as the Paris Convention of 1960 or the Vienna Convention of 1963. This is because CSC has a grandfather clause in its annexure 2 that provides an exemption for American domestic laws to supersede in case of an accident on its soil. As a result, in the US, criminal liability lawsuits can be initiated against nuclear corporations. The same CSC, however, requires its other signatories to enact domestic laws as per its annexure and strictly limit it to civil liability.

Therefore, in view of the above, in so far as the reference to the supplier in Section 17(b) is concerned, it would be in conformity with and not in contradiction of Article 10(a) of the CSC Annex. Its operationalization will be through contract conditions agreed to by the operator and the supplier.

 

Indian Nuclear Insurance Pool

The Indian Nuclear Insurance Pool, was launched by the state-owned General Insurance Corporation-Reinsurer (GIC-Re) and other Indian insurance companies in June 2015 to offer an insurance product for NPCIL for covering the operator's liability under the provisions of the Civil Liability for Nuclear Damage (CLND) Act 2010. NPCIL will subsequently launch a separate product to specifically cover the risks of the suppliers under this Act.

India decided to have a nuclear insurance pool to take care of the liability of operators and suppliers. This insurance pool of Rs. 1,500 crore was launched in June 2015, with some Indian insurance companies and a British insurance partner.

Beyond Rs. 1,500 crore, the liability will be borne by the Indian government up to Rs. 2,610 crore, and beyond that, India will be able to access international funds under the CSC. The ratification helps India access this pool - which, though, is quite small now as only the US, Japan and UAE are the rich countries currently part of the Convention.

Conclusion

India is planning to build several new nuclear power plants, but all under the umbrella of the state-owned Nuclear Power Corporation (NPCIL). Any investment in the nuclear power sector is going to be made by NPCIL, and thus, by Indian taxpayers.

Foreign firms such as Westinghouse, Areva, and GE Hitachi will be involved only as contractors and suppliers to NPCIL-not as investors. India is not looking at these companies for 'investments'-their involvement in India will only be as vendors for NPCIL-and, as vendors, they cannot dictate terms to a customer.

The act explicitly gives the circumstances under which a supplier can be held liable for an incident. Indian law cannot be superseded in this case. Therefore, as long as NPCIL provides for the right to recourse in the contracts that it enters into with its suppliers, the suppliers can be held liable for any lapses on their part which lead to problems. NPCIL is fully owned by the Government of India and is bound to follow Indian law on this issue. India's current domestic nuclear liability laws still allow electric companies to obtain reimbursement against suppliers of nuclear power plants in the event of an accident.

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