Some Indian political parties and sections of the news media have raised concerns about discussions between India and the United States on civil nuclear trade on the sidelines of United Nations General Assembly (UNGA) summit in New York this week. They contend that the prime minister is likely to compromise on a key provision of India’s Nuclear Liability Act (NLA), which allows for costs to be imposed on the supplier in the event of a nuclear disaster in India, in order to remove impediments to the participation of U.S. firms in civil nuclear trade with India.
Attorney General GE Vahanvati was criticised for having issued an opinion indicating that the Nuclear Power Corporation (NPCIL) had the right to waive the liability provision if provided for in a contract. Outraged opposition parties and some left-leaning media outlets argued that India was bypassing its own law to please the United States.
However, a closer inspection of the language of the NLA appears to give credence to the Attorney General’s interpretation and applicability of supplier liability. Clause 17 of the NLA reads:
The operator of the nuclear installation, after paying the compensation for nuclear
damage in accordance with section 6, shall have a right of recourse where-
(a) such right is expressly provided for in a contract in writing;
(b) the nuclear incident has resulted as a consequence of an act of supplier or his
employee, which includes supply of equipment or material with patent or latent defects
or sub-standard services;
(c) the nuclear incident has resulted from the act of commission or omission of
an individual done with the intent to cause nuclear damage. (The Civil Liability for Nuclear Damage Act, 2010)
We will leave matters relating to the legal interpretation of the language in the Act to the experts on the subject, but if our admittedly untrained legal interpretation is correct, clause 17(a) indeed allows for supplier-side liability if “expressly provided for” in a contract between the operator (in most cases, the Government of India) and the supplier.
If this is indeed true, then the question of ‘bypassing’ Indian law simply doesn’t arise. The law itself does not make supplier-side liability mandatory. Further, it raises uncomfortable questions about the seriousness with which opposition parties debated the bill in 2010. Indeed, what have opposition parties and critics been doing in the two years since the enactment of the NLA to warrant their newfound criticisms not being dismissed as mere political posturing and rhetoric?
To be clear, the NLA in its current state is incompatible with the IAEA Convention on Supplementary Compensation (CSC), which India undertook a commitment to accede to. Contingent on these incompatibilities, India has signed the CSC but not ratified it, as ratification would require a change in our liability laws. It is strange then that India appears so eager to be brought into the mainstream of the global framework for civil nuclear commerce and yet not want to be bound by its rules.
The issues pertaining to supplier-side liability are not US-specific. The truth is that no country is willing to do business with India given the costs imposed by the NLA on suppliers. Russian firms have refused to bring Kudankulam 3 and 4 under the ambit of the NLA. Areva, a French company, has also made it clear that it will not be able to move forward, given the language in the NLA. Canada has expressed reservations during negotiations. Even potential Indian suppliers appear to be uneasy with supplier-side liability with FICCI warning that the NLA “threatens to completely undo the government’s efforts to accelerate nuclear power generation…”
The Attorney General’s interpretation that the operator has the ability to contractually invoke or exclude supplier-side liability dates back to October 2012, when his legal opinion was provided during negotiations on Kudamkulam with the Russians. Political and media reaction was muted at the time but appears to have found new vigour with regard to the applicability of the same interpretation to the United States. The government now stands accused of “diluting” India’s liability laws to carry as a “gift” to the U.S. India’s left-leaning media houses would do well to recognize that the Cold War ended two decades ago. There is no benefit in India pretending to be more soviet than the Soviet Union in 2013.
Further, many in India are yet to fully appreciate the impact the NLA has had on the general mood towards India in the U.S. The civil nuclear deal was about more than just nuclear commerce. Presidents of the U.S. do not make phone calls to their Chinese counterparts asking them to drop their opposition to another country’s bid for an NSG waiver merely at the prospect of being able to sell few nuclear reactors. India would have most likely remained a nuclear pariah were it not for the efforts of the Bush administration.
Since obtaining an NSG waiver, India has squandered opportunities to move forward in addressing our long term energy needs by enacting self-defeating legislation. Debates on nuclear liability were emotive rather than pragmatic, drawing wrong lessons from the Bhopal tragedy. While the NLA automatically precluded the possibility of the participation of US companies in civil nuclear commerce with India, companies in Russia and France, which were initially underwritten by their governments, were able to enter into exploratory discussions with India. With Russia and France no longer willing to abide by the NLA, the prime minister arrives in the US attempting to salvage a relationship and an economy.
Realistically, neither the US nor India have each other on their list of top priorities at the moment. The Obama administration is faced with a precarious situation in Syria and is battling opposition on healthcare reform and budget disputes. Meanwhile, with India heading to polls in May 2014, the UPA is effectively in a holding pattern with very little political capital at its disposal for brave new ideas.
Under the circumstances, if a pre-early works agreement can indeed be concluded between NPCIL and Westinghouse, it might help arrest the doom and gloom and allow both sides to the opportunity to reevaluate positions sometime next year. This is about as much as we can hope for when Dr Singh and Mr Obama meet on Friday.
Photo: IAEA Image bank
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