Placing the Indian civil nuclear liability regime in context: the extent of supplier’s liability

Abstract

Few legislative provisions have created as much controversy as Section 17 of the (Indian) Civil Liability for Nuclear Damage Act, 2010. This provision effectually creates supplier liability by providing a right of recourse for the operator of nuclear establishment. The paper explores the contours of this heated debate. The answer as to why India, in its Civil Liability for Nuclear Damage Act, 2010, has moved away from the standard international template of legal channelling of liability lies in the historical rationale for exclusive operator liability and the context in which India’s liability law was drafted. The verdict in Bhopal Gas Tragedy case and the shabby manner of dealing with the disaster necessitated a victim-centric approach. While it is necessary to balance the double insurance economic argument against tortious liability principles, the cap provisions and lack of incentives in the overall legal framework for supplier to take preventive actions tilts the balance in latter’s favour. The Act, however, is intended not only to respond to past events but also to govern future situations of nuclear incidents. Thus, a holistic and thorough discussion of related provisions of the Act assumes paramount significance. The enforcement of this legislation was subsequently followed by promulgation of Rules which have, in turn, further complicated the issue. In this paper, the author starts by outlining the basic principles underlining the international civil nuclear liability framework, with specific focus on channelling of liability and right of recourse, vis-a-vis the supplier. Having explained the broader international framework, the author then analyses the 2010 Indian Act and subsequent 2011 Rules, explaining the complications created through the same. Moreover, the author also delves into exploring how the Indian legislative framework will operate in practice. The author concludes that the Indian enactments have not been given a thorough consideration. The task shall be upon both, the Legislature and the Judiciary, to clarify this area of law that has significant implications on the industry as well as on the common public.

Keywords:

• nuclear law
• operator-supplier liability
• Indian legislation

Notes

1. These include the US Price-Anderson Act (1957), the (German)Act on the Peaceful Utilization of Atomic Energy and the Protection against its Hazards (Atomic Energy Act) of 1959, (Switzerland) Law on Exploitation of Nuclear Energy for Peaceful Purposes and Protection from Irradiation (1959), (Japan) Act on Compensation for Nuclear Damage (1961).

2. Both the Conventions have been amended by few Protocols. The Paris Convention on Third Party Liability in the Field of Nuclear Energy, 1960 has been supplemented by Brussels Supplementary Convention, 1963 to provide for higher coverage in case of nuclear damage. There had hardly been any change in the two treaty regimes till the year 1988, when, following the Chernobyl incident, a Joint Protocol was adopted linking the territorial scope of the two treaties. Moreover, the Protocol to Amend the 1963 Vienna Convention on Civil Liability for Nuclear Damage was adopted in 1997. The latest modification has been the adoption of Convention on Supplementary Compensation in the year 1998.

3. CSC has not come into force since it has not received adequate number of ratifications yet. At present, four states have signed and ratified the Convention- Argentina, US, Morocco and Romania. The number of signatories currently are 14 (including India). The Convention shall enter into force on the ninetieth day after ratification by at least five states who had a minimum of 40,000 units of installed nuclear capacity.

4. The Expose Des Motifs of the Paris Convention uses the words “absolute liability” since the nuclear operator cannot escape liability using the classical defenses such as acts of God, intervening acts of third persons, etc. However, the term “absolute liability” was explained in M.C. Mehta v. Union of India AIR 1996 SC 2715 to admit of absolutely no exceptions whatsoever. M.C. Mehta is a landmark case that originated in the aftermath of the Shriram Food and Fertilizers oleum gas leak incident. The Court formulated a new basis of liability, termed ‘absolute liability’ that sought to impose liability on hazardous industries without admitting of any exceptions whatsoever.

5. Article X of Vienna Convention (1993 and 1997 versions): ‘The operator shall have a right of recourse only a. if this is expressly provided for by a contract in writing; or b. if the nuclear incident results from an act or omission done with intent to cause damage, against the individual who has acted or omitted to act with such intent.’ Article 6(f) of the Paris Convention has an identical effect: ‘The operator shall have a right of recourse only: 1. if the damage caused by a nuclear incident results from an act or omission done with intent to cause damage, against the individual acting or omitting to act with such intent; 2. if and to the extent that it is so provided expressly by contract.’

6. Borre, T.V, and M.G. Faure. 2008. Compensating Nuclear Damage: A Comparative Economic Analysis of the U.S and International Liability Schemes, William & Mary Environmental Law and Policy Review 33: 223.  The issue of social costs of nuclear liability scheme is far from being a theoretical discussion. The Energy Commission in Europe presented “An Energy Policy for Europe” in 2007 which stated that nuclear energy is likely to form a part of Energy Policy in several Member states. In the US as well, there is a renewed interest in nuclear energy given the further renewal of the Price-Anderson Act for 20 years in 2005 as well as The Energy Independence and Security Act of 2007.

7. Two notable authors, Dr Tom Vanden Borre and Michael Fuaree argue that while the US influenced the international compensation regime for protecting the interests of American suppliers abroad, domestically the US has adopted a very different system wherein the suppliers are also exposed to legal liability. In US, the mechanism is that of “economic channeling of liability”, as opposed to legal channeling. This has been discussed in detail in later part of the paper.

8. These figures have been revised from time to time by consistent renewal of the Price Anderson Act, the latest one being in 2005 for a period of more 20 years. Initially, there were two tiers of compensation- the operator being economically liable to the extent of 60 million $ and government providing a further amount of 500 million $. Later on, by amendments the government tier gradually disappeared. Now, the position is that the operator is to take a compulsory insurance of 300 million $. Claims exceeding that figure are satisfied by a pool created by all licensed operators in the form of ‘retrospective premium’ after the incident occurs. In light of the total number of operators in the US, this pool figure is estimated to be more than 10 billion $. The operator has to give the proof of his ability to pay such contributions in form of bonds, letter of credit, etc.

9. Energy Independence and Security Act of 2007, Pub. L. No. 110-140, § 934(a)(2)(B), 121 Stat. 1492, 1742 (2007). The Act is concerned with aspects other than nuclear energy as well. However, for the purpose of this paper, the discussion of the Act is limited to those provisions that deal with nuclear law. The Act is significant for the reason that it provides a mechanism for USA’s compliance with CSC, which is the first international instruments signed by it.

10. S. 934, Energy Independence and Security Act, 2007. The CSC has not yet come into force. Once it is in force, US will be required to provide an additional fund for compensation to third parties.

11. The Atomic Energy Act of 1962 provides for ‘development, control and use’ of atomic energy in India. The Act empowers the Central Government to grant licenses for use of nuclear power.

12. Section 4(4). However, section 5 provides exceptions to operator liability in events of armed conflict, grave natural disasters, etc.

13. Section 55(2) of the Hungarian Act on Atomic Energy 1996 provides: ‘In the case of nuclear damage, the licensee has the right of recourse if: a) this right has been expressly provided for in a written contract; b) the nuclear damage is the result of a wilful destructive action or negligence, against a natural person acting or omitting to act with such intention.’

14. Article 4(1) of the South Korean Act on Compensation for Nuclear Damage 1969 (as amended in 2001) provides : ‘Where nuclear damage is caused by the wilful act or gross negligence of a third party, a nuclear operator who has provided compensation for nuclear damage in accordance with Article 3 shall have a right of recourse against such third party, provided however, that where the nuclear damage occurs due to the supply of material or services (including labour) for the operation of a nuclear reactor (hereinafter referred to as “supply of material”), the nuclear operator shall have a right of recourse only insofar as there has been a wilful act or gross negligence by the supplier of the materials concerned or by his employees.’

15. Refer Unstarred Question No. 2932 on The Nuclear Liability Act, in the Loksabha (Upper House of Indian Parliament) on 29-08-2012 available at https://dae.nic.in/writereaddata/lsus2932.pdf. However, the discussion in Loksabha shows that the channelling issue was given only a superficial analysis during the Question-Answer sessions, as the government firmly believed that there is no conflict between the channelling principle in CSC and that provided for in the Act.

16. [1991] INSC 252.

17. Cr. Case  No. 8460 / 1996 (decided on June 7, 2010) , http://www.countercurrents.org/UCIL.pdf.

18. Section 20.

19. L Chandra Kumar v. Union of India (1997) 3 SCC 261.

20. Civil Appeal No. 3067 of 2004 before the Supreme Court of India. Judgment delivered on 11th May, 2010.

21. Writ Petition No. 210 of 2012 , http://www.supremecourtofindia.nic.in/outtoday/wc21012.pdf.

22. Hari v.Deputy Commissioner of Police AIR 1956 SC 559.

23. Balawwa v. Hasanabi (2000) 9 SCC 272.

24. The Latin Maxim “lex specialis derogat legi generali” incorporates this principle. The principle has been applied in India. Most recently, it was reiterated by the Supreme Court in The Official Liquidator, UP and Uttarakhand v Bank of Allahabad in Civil Appeal No. 2511 of 2013in the context of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 overriding the (general law) Companies Act, 1956.

25. Article 21 of the Indian Constitution states that “no person shall be deprived of his life or personal liberty except according to the procedure established by law.” This article has been interpreted very broadly by the Supreme Court as also including right to clean and healthy environment in several cases. (Refer A.P. Pollution Control Board II v. Prof. M.V. Nayudu (2001) 2 SCC 62 in the context of Andhra Pradesh government granting an exemption to a polluting industry to set up plants near reservoirs.; Vellore Citizens’ Welfare Forum v. Union of India (1996) 5 SCC 647, wherein relied was granted to victims of water pollution caused by tannaries).