In the media ecstasy over Obama’s victory, expectedly Bush’s exit was unmourned and unsung. I came across only few passing references to Bush as the friendliest US President for India, in making the nuclear deal happen. As India activates its near dormant civil nuclear sector, there are many hurdles to be overcome. Updating its legal regime is a priority, particularly in addressing nuclear third party liability laws, which are critical for leveraging the deal advantageously.
In structuring the legal framework, the approach has to be holistic as well as specific, so that the objectives are achieved and risks minimised. Given the transborder nature of the industry, the high risks and costs require application of special legal norms to the entire chain of activity ranging from nuclear transport, material processing and storage hazards, the radiation factor, facility operations, waste disposal and treatment. The liability system needs to be established at all points, so that the players responsible are identifiable and brought to book.
Historically, nuclear damage issues have been addressed under the general law of torts, till the industry realised that it was necessary to lay down certain ground rules for protection of the public and stakeholders.
Accordingly, international Conventions were established to create binding instruments in order to avoid conflicts of law and jurisdiction and multiplicity of proceedings, and provide for strict liability zeroing on a single entity, i.e., the operator.
Strict liability is no different from the Rule of Absolute Liability laid down by the Indian Supreme Court, in the Shriram Gas leak case, wherein the victim does not have to prove negligence in order to receive compensation. Damages envisaged were conservatively defined to cover loss of life, personal injury, loss or damage to property, excluding damage to installation, with caps on the compensation amount.
The Chernobyl disaster of 1986 was the trigger for a relook at the prevailing legal structure and the need for a truly unified international liability regime. The earlier Conventions, Vienna (VC) and Paris (PC), the latter bolstered by the Brussels Supplementary Convention (BSC) which originated in the sixties, were structured essentially to serve national considerations, as nuclear energy was assuming an important role in national energy resources, and a civil Hiroshima situation could not be risked.
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Also the investors i.e. suppliers, operators, lenders et al needed protection from claims which were unparalleled in financial magnitude, requiring insurance providers to collaborate globally. These Conventions were independent of each other, and there being no recognition or mutuality.
Chernobyl, whose radioactive effects flowed from Ukraine to Bangladesh, compelled the international global nuclear community to radically revamp the liability regime. PC and VC undertook massive reform initiatives, broadened existing definitions of “nuclear incident” and “nuclear damage” to provide for environmental costs and reinstatement, economic losses etc. and executed a Joint Protocol.
The US took the initiative to establish the Convention of Supplementary Conventions (CSC). CSC’s approach was to grandfather VC and PC, but its most important contribution is the introduction of a three tier compensation policy, with the operator at the first, Installation State at the second tier, and an international contributory fund as a standby — the third tier, in case the other tiers limits stood exhausted .
Half of the fund is earmarked for transboundary victims, not necessarily from member states; this has been severely criticised as discriminatory.
India is working on a Civil Nuclear Liability Law which is believed to be modelled on the lines on CSC. India has the advantage of starting on a clean slate and the first step should be to purge all reliance on torts, Air and Water Pollution Acts and convert the 100 per dent government guarantee to a limited cover, on the CSC two tier model.
Liability exclusions should not just cover armed conflicts etc., but also natural disasters of the tsunami magnitude, and acts of terrorism. Combine single point liability with that of joint and several as applicable, so that no defaulting party should escape paying up for his defaults using the operators’ shield ie. the insurance cover.
The statute should not be overburdened with content or schedules, but have wide enabling provisions in order that efforts at amendments should not stagnate, and finally though dealing with civil liability, some breaches should be treated as penal and dealt with preferably by specialised courts.
Kumkum Sen is a Partner in Rajinder Narain & Co. and can be reached at kumkumsen@rnclegal.com