India's Civil Liability for Nuclear Damage Bill

India's Civil Liability for Nuclear Damage Bill

A radioactive Bill fraught with big risks

The Civil Liability for Nuclear Damage Bill seeks to burden the Indian taxpayer and encumber the rights of victims of any potential radioactive release from a foreign-built plant.

BRAHMA CHELLANEY

The Hindu, March 13, 2010

The government has finally released the text of its controversial nuclear-accident liability Bill. The text not only confirms the concerns expressed earlier over key elements of the proposed law, but also raises additional issues of worry.

What stands out in the Civil Liability for Nuclear Damage Bill is the extent to which it goes to aid the business interests of the foreign reactor builders. In the process, the Bill seeks to financially burden the Indian taxpayer and encumber the rights of victims of any potential radioactive release from a foreign-built plant.

A special Indian law limiting liability in amount and in time has been sought by Washington for its nuclear-exporting firms, with the largest two, Westinghouse and General Electric (GE), set to win multibillion-dollar contracts to build several commercial nuclear power reactors. To forestall lawsuits filed against American suppliers in U.S. courts by victims of a nuclear catastrophe, Washington has also pressed for exclusive jurisdiction for Indian courts so that there will be no repeat of what happened after the Bhopal gas disaster. The Bill seeks to help out the U.S. firms on these counts, going at times even beyond what American law provides.

Under the Bill, the foreign reactor builder — however culpable it is for a nuclear accident — will be completely immune from any victim-initiated civil suit or criminal proceedings in an Indian court or in a court in its home country. The Bill actually turns the legal liability of a foreign reactor supplier for an accident into mere financial compensation — that too, pegged at a pittance and routed through the Indian state operator of the plant. Foreign suppliers will have no direct accident-related liability.

The foreign builders will bask under legal immunity because the Bill channels all legal liability to the Central Government. Clause 7 states the “Central Government shall be liable for nuclear damage in respect of a nuclear incident” when such liability exceeds the Rs.500-crore liability limit of the operator or where the accident occurs “in a nuclear installation owned by it [the Indian government].” The Union government will own all foreign-built reactors.

Indeed, the Bill creates a specious distinction between the operator and the government when both are fused in the Indian context. After all, it is the Indian state which will run all foreign-built plants through its operator, the Nuclear Power Corporation of India Limited (NPCIL). Yet, throughout the Bill, the pretence of a U.S.-style separation between the operator and the government is maintained.

Under Clause 6, the maximum liability of the operator and the government combined has been set at “the rupee equivalent of 300 million special drawing rights (SDRs),” or Rs.2,087 crore ($458 million) — 23 times lower than the private-sector funds available under the equivalent U.S. law, the controversial Price-Anderson Act (labelled “Half-Price Anderson” by critics). Of this, the total liability of the operator has been limited to Rs.500 crore ($109 million). The Central government will be liable for damages in excess of Rs.500 crore but only up to Rs.2,087 crore.

In actual fact, all liability falls on the Indian taxpayer, whether it is the operator's slice or the Central government's portion. The state operator, the NPCIL, through a construction contract, can make the foreign builder legally responsible to pay compensation for an accident. But the amount payable by a foreign builder can only be up to the state operator's own liability ceiling, which is a trifling Rs.500 crore ($109 million).

So, even if the accident were triggered by wilful negligence on the part of the foreign supplier and the consequences were catastrophic, all claims would have to be filed against the Indian state — with the NPCIL required to disburse the first Rs. 500 crore and the Central government the second portion up to Rs. 2,087 crore. The NPCIL could, in turn, try to recover its Rs. 500 crore from the foreign supplier. But for the Indian taxpayer, this is a lose-lose proposition.

That raises a fundamental question: What will it do to nuclear safety to grant foreign suppliers legal immunity upfront and to shift the liability to the Indian taxpayer?

Another key issue relates to the rights of victims. The Bill ensures that victims of a disaster involving a foreign-built reactor will not be able to sue the builder in its home country. Worse still, the Bill blocks the victims from suing the foreign supplier even in Indian courts.

Only the “operator shall have a right of recourse,” according to Clause 17. The state operator can sue the foreign supplier where “such right is expressly provided for in a contract in writing” and “the nuclear incident has resulted from the wilful act or gross negligence on the part of the supplier of the material, equipment or services, or of his employee.” But such a right of recourse can only be to meet the operator's own small liability of Rs. 500 crore.

In fact, the Bill seriously shackles Indian courts. All nuclear-damage claims will be dealt with by a Claims Commissioner or a Nuclear Damage Claims Commission, and any award made “shall be final” and cannot be appealed in any court. “No civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which the Claims Commissioner or the Commission, as the case may be, is empowered to adjudicate under this Act and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act,” according to Clause 35.

By contrast, the Price-Anderson Act permits economic (but not legal) channelling of liability, thereby allowing lawsuits and criminal proceedings against the reactor builder or any other party in U.S. courts. That is a key reason why the U.S. has not joined the Vienna or Paris convention — the two main international liability instruments. But the U.S. has become party to another convention it helped draft under the auspices of the IAEA — the Convention on Supplementary Compensation (CSC), which is still not in force. The CSC, as the name suggests, is about compensation through an international fund, to be paid “supplementary” to the liability limit.

The Bill also limits liability in time, with Clause 18 stating: “The right to claim compensation for any nuclear damage caused by a nuclear incident shall extinguish if such claim is not made within a period of 10 years from the date of incident…” That provision was retained despite the Environment Ministry's note of caution — revealed by this newspaper — that the 10-year time limit was untenable because damage to human health from a serious radioactive release “involves changes in DNAs, resulting in mutagenic and teratogenic changes, which take a long time to manifest.”

And although the Finance Ministry, in its comments on the Bill, had warned the proposed law would “expose the government to substantial liabilities for the failings of the private sector,” the Bill essentially seeks to give foreign reactor builders a free ride at the Indian taxpayer's expense.

The Indian Bill, in effect, amounts to a huge hidden subsidy by protecting foreign reactor builders from the weight of the financial consequences of accidents. If the Bill is passed, the costs of doing business in India for foreign suppliers will be low but the assured profits will be high. To cover the maximum potential compensation payable for an accident, a foreign builder will need to take insurance for a mere Rs. 500 crore. What is more, the foreign builders are being freed from the task of producing electricity at marketable rates. The NPCIL will run the foreign-built reactors, with the state subsidising the high-priced electricity generated.

India is under no international obligation to pass such a law. In fact, efforts to create common international standards on liability and compensation since the Chernobyl disaster have made exceedingly slow progress. Yet the Bill's accompanying “Statement of Objects and Reasons” creates the deceptive impression that the proposed law aims to bring India in line internationally. If anything, the Bill seeks to set a wrong international precedent by its mollycoddling of foreign suppliers.

To be sure, technological improvements in reactor-safety systems have significantly lowered the risks of a major nuclear accident. Yet nuclear technology remains intrinsically dangerous, and a single catastrophe anywhere in the world will impose colossal, long-term costs nationally and have a chilling effect on the global appeal of nuclear power. Given the nuclear safety and security issues that have been highlighted by recent incidents in India, accident liability is a matter demanding serious consideration.

The Bill seeks to set a new principle in international law: Profits are private, liabilities are all public. The government must answer the central question: In seeking to invite U.S. reactor builders, should a poor country rush to pass a special law that skews the business terms in their favour, gratuitously burdens the Indian taxpayer and ignores the lessons of the Bhopal gas disaster?


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