Ambiguities in India’s nuclear liability law

The issues regarding India’s nuclear liability law continue to hold up the more than a decade-old plan to build six nuclear power reactors in Maharashtra’s Jaitapur, the world’s biggest nuclear power generation site under consideration at present.

What is the law governing nuclear liability in India?

• Compensation for nuclear disaster: Laws on civil nuclear liability ensure that compensation is available to the victims for nuclear damage caused by a nuclear incident or disaster and set out who will be liable for those damages.
• International nuclear liability regime: The international nuclear liability regime consists of multiple treaties and was strengthened after the 1986 Chornobyl nuclear accident.
• Convention on Supplementary Compensation (CSC): The umbrella Convention on Supplementary Compensation (CSC) was adopted in 1997 with the aim of establishing a minimum national compensation amount.
  • The amount can further be increased through public funds, (to be made available by the contracting parties), should the national amount be insufficient to compensate for the damage caused by a nuclear incident.
  • Even though India was a signatory to the CSC, Parliament ratified the convention only in 2016.
• Civil Liability for Nuclear Damage Act (CLNDA): To keep in line with the international convention, India enacted the Civil Liability for Nuclear Damage Act (CLNDA) in 2010, to put in place a speedy compensation mechanism for victims of a nuclear accident.
  • The CLNDA provides for strict and no-fault liability on the operator of the nuclear plant, where it will be held liable for damage regardless of any fault on its part.
  • It also specifies the amount the operator will have to shell out in case of damage caused by an accident at Rs 1,500 crore and requires the operator to cover liability through insurance or other financial security.
  • In case the damage claims exceed Rs 1,500 crore, the CLNDA expects the government to step in and has limited the government liability amount to the rupee equivalent of 300 million Special Drawing Rights (SDRs) or about Rs 2,100 to Rs 2,300 crore.
  • The Act also specifies the limitations on the amount and time when an action for compensation can be brought against the operator.

What does the CLNDA say on supplier liability?

• The international legal framework on civil nuclear liability, including the annexe of the CSC is based on the central principle of exclusive liability of the operator of a nuclear installation and no other person.
• Making suppliers responsible would hinder growth: In the initial stages of the nuclear industry’s development, it was agreed that excessive liability claims against suppliers of nuclear equipment would make their business unviable and hinder the growth of nuclear energy.
• Shifting responsibility to the operator: It became an accepted practice for national laws of countries to channel nuclear liability to the operators of the plant with only some exceptions.
• Section 10 of the annexe of the CSC lays down “only” two conditions under which the national law of a country may provide the operator with the “right of recourse”, where they can extract liability from the supplier —
  • if it is expressly agreed upon in the contract
  • if the nuclear incident “results from an act or omission done with intent to cause damage”

Who introduced the concept of supplier liability (for the first time)?

• However, India, going beyond these two conditions, for the first time introduced the concept of supplier liability over and above that of the operators in its civil nuclear liability law, the CLNDA.
• The architects of the law recognised that defective parts were partly responsible for historical incidents such as the Bhopal gas tragedy in 1984 and added the clause on supplier liability.

Why is the supplier liability clause an issue in nuclear deals?

• Foreign suppliers of nuclear equipment from countries as well as domestic suppliers have been wary of operationalising nuclear deals with India as it has the only law where suppliers can be asked to pay damages.
• Sticking point for suppliers: Concerns about potentially getting exposed to unlimited liability under the CLNDA and ambiguity over how much insurance to set aside in case of damage claims have been sticking points for suppliers.