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May 1, 2010

In Parliament: The civil nuclear liability bill

Last month, the government withdrew its plan of introducing the Civil Liability for Nuclear Damage Bill, 2010 in the Lok Sabha. Several opposition parties had given notice that they would oppose the motion to introduce the bill. However, various media reports indicate that the bill would be introduced after some modifications. We highlight its main features and the principles used internationally to address the issues of liability arising from nuclear damage. This article is based on the version of the bill that was circulated to MPs prior to the proposed introduction.

Liability regimes in some other countries
The United States. The United States was one of the first countries in the world to enact legislation for liability caused by nuclear damage. When the United States started encouraging nuclear power in the 1950s, it felt that private players would be deterred by the uncertainty of the possible liability due to any nuclear accident. The insurance markets were also not in a position to estimate the potential damage. The US Congress then enacted the Price-Anderson Act, which has subsequently been extended and is updated periodically. Currently, this act provides for a pool of funds totalling over $10 billion, with lines of funding from each nuclear facility operator. Individual operators are also required to take out an insurance of $300 million. Any civil liability arising out of a nuclear incident will first be met by the operator (up to $300 million), and then from the common pool (up to $10 billion). If the liability exceeds $10 billion, the federal government will be liable; there is no limit to the liability on the federal government.

Europe. The regulatory regime differs across Europe. For example, the United Kingdom caps operator liability at £140 million, France requires a security of €91 million  per nuclear plant, and Germany has unlimited liability with the operator required to provide security of €2.5 billion for each plant.

Principles to address issue of liability
The International Atomic Energy Agency (IAEA) has set forth four basic principles of liability law common to most international agreements.

First, the operator of the facility should be exclusively liable. This prevents lengthy legal processes to identify the liable party. This also reduces insurance costs for other parties such as suppliers and constructors. Second, no-fault liability should be imposed. Liability arises from the act of engaging in hazardous activity, irrespective of fault. Third, exclusive jurisdiction in the state in which the incident occurs. This prevents the potential difficulty of resolving differing judgments in different states. Fourth, liability is limited in amount and in time. In the worst possible circumstances, the financial liabilities may be so large as to make it impossible for operators to find the necessary insurance or financial security to meet the risks. This requires a limit on the amount. As bodily injury to persons may take some time to manifest, there should be reasonable time for victims to file for compensation. At the same time, operators and insurance companies will find it difficult to maintain large reserves for a long time against potential liabilities.

International Conventions
There are four major international conventions. Three of these—Paris (1960), Vienna (1963) and the Joint Protocol (1988)—address the issue of cross-border damage. The Paris convention (by OECD countries in western Europe) set minimum levels for liability limits, and required signatory countries to provide for damage to all other signatory countries up to that limit. The IAEA drafted the Vienna Convention in 1963 on similar lines. In 1988, a Joint Protocol was formulated—signatories of this Joint Protocol and the Paris Convention were required to extend liability cover to signatories of the Vienna Convention; a similar reciprocal arrangement applied to signatories of the Joint Protocol and the Vienna Convention.

The Convention of Supplementary Compensation (CSC) was formulated in 1997. This Convention provided for an international pool of funds. Depending on the nuclear plants and generating capacity of a country, it had to provide for a contribution to the pool. Every country has to set aside 300 million special drawing rights (SDRs) per incident; if the liability due to an accident exceeded this amount, the pooled contribution could be utilised. This convention has not yet come into force. (A SDR is monetary unit of the IMF’s reserve assets, and a weighted sum of contributions of four major currencies, reevaluated and adjusted every five years.)

India is not a signatory to any of these conventions. Currently, all nuclear power plants in India are operated by the central government or its public sector undertakings. The Civil Liability for Nuclear Damages Bill, 2010 provides for a regime of limiting liabilities in case of nuclear incidents.

The Proposed Bill
The bill has four main features. First, it specifies that the liability will be only on the operator of a nuclear liability. The operator can take recourse against the supplier if there is a written agreement to that effect.

Second, the bill limits the total civil liability on account of a nuclear incident at SDR 300 million (around Rs 20 billion at current conversion rates). The liability of the operator is capped at Rs 5 billion, with any further liability (up to SDR 300 million) being borne by the Union government. (Note: In the print & digital community edition, the conversion of SDR 300 million is incorrectly given as Rs 2 billion. It should be Rs 20 billion. Sorry.)

Third, it permits the Union government to set up a claims commissioner, who will invite applications for claiming damages, and will determine compensation amounts. The government may also establish a nuclear damage claims commission if it believes that the amount of damage may exceed Rs 5 billion.

Fourth, it specifies that claims may be made for personal injury or damage to property. Claims can be made by the person sustaining injury or legal representatives. Claims may be made within three years of knowledge of damage. However, the right to make a claim is exhausted after a period of 10 years from the date of the notification of the nuclear incident.

Current status
There were three main concerns raised by various political parties and other commentators. First, whether the liability cap is sufficiently high, and how the risk was to be shared by the operator and the government. Third, whether suppliers of fuel and equipment should also be held liable.

The bill was not introduced in the first part of the Budget session. If it is introduced, it will likely be referred to the standing committee. There are two contending interests. Victims of nuclear accidents need to be provided adequate compensation in a timely manner. Operators of nuclear power facilities should also be able to provide for insurance and financial security needed to meet any claims. Our lawmakers need to find the appropriate balance between these interests.


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