Context: The issues regarding India’s nuclear liability law has stalled work on Maharashtra’s Jaitapur, the world’s biggest nuclear power generation site under consideration.
What is the law governing nuclear liability in India?
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.
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 the damage caused by a nuclear incident.
India was a signatory to the CSC (convention ratified in 2016).
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.
1. 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.
2. It also specifies the amount the operator will have to shell out in case of damage caused by an accident at ₹1,500 crore and requires the operator to cover liability through insurance or other financial security.
3. In case the damage claims exceed ₹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 ₹2,100 to ₹2,300 crore.
4. The Act also specifies the limitations on the amount and time when action for compensation can be brought against the operator.
India currently has 22 nuclear reactors with over a dozen more projects planned. All the existing reactors are operated by the state-owned Nuclear Power Corporation of India Limited (NPCIL).
What does the CLNDA say on supplier liability?
The international legal framework on civil nuclear liability calls for exclusive liability of the operator of a nuclear installation and no other person. Similarly, suppliers of nuclear equipments called liability to be unviable and hinder the growth of nuclear energy. Other arguments were to provide single point liability and remove complexity of legal hurdles.
Section 10 of the annex 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 — one, if it is expressly agreed upon in the contract or two, if the nuclear incident “results from an act or omission done with intent to cause damage”.
However, India, going beyond these two conditions, for the first time introduced the concept of supplier liability over and above that of the operator’s in its civil nuclear liability law, the CLNDA.
CLNDA has a Section 17(b) which states that the operator of the nuclear plant, after paying their share of compensation for damage in accordance with the Act, shall have the right of recourse where 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”.
Why is the supplier liability clause an issue in nuclear deals?
Suppliers have taken issue with two specific provisions in the law, Section 17(b) and Section 46.
The latter clause goes against the Act’s central purpose of serving as a special mechanism enforcing the channelling of liability to the operator to ensure prompt compensation for victims.
Section 46 provides that nothing would prevent proceedings to be brought against the operator. It allows criminal liability to be pursued where applicable. Issue: definition on the types of ‘nuclear damage’ being notified by the Central Government is not clear. Section 46 potentially allows civil liability claims to be brought against the operator and suppliers through other civil laws such as the law of tort. While liability for operators is capped by the CLNDA, this exposes suppliers to unlimited amounts of liability.