Nuclear damage act
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The article is written by Vishruti Chauhan, from Symbiosis Law School, Hyderabad. The present article focuses on various aspects of nuclear liability insurance with a broad aspect of issues and challenges being faced in the field and various regulations that play an important role in its structure.   

Introduction

Nuclear power has emerged as one of the alternatives to produce energy and has changed the dynamics of power in the world. The use of nuclear power to generate energy has changed the future of many countries. But with great power comes great responsibility. Nuclear power has changed the conventional sources of producing energy but has driven its own set of threats. The harmful radiations that are emitted by nuclear radiations can lead to major harm even if one mistake is committed and such harm has the capability to destroy generations. The Chernobyl incident and the Bhopal gas tragedy are sufficient examples to prove the disruption nuclear energy brings with itself. The major risks that are involved in this process resulted in creating rules and policies for the events where a mishap could happen and the question of liability can arise. There have been various regulations made on the national and international levels to prevent disputes concerning liabilities due to such mishaps. However, there are some ambiguities that are not at par with the present scenario and still need to be addressed. The present article has focussed on various aspects of nuclear liability insurance- its benefits, regulations, principles and various issues and challenges that it faces.    

Importance of having nuclear liability insurance

Nuclear power is a source of a huge amount of energy and has enabled the countries to accelerate their growth both in the economic and defence sector. However, the risks that it involves cannot be ignored and thus it becomes important to have an existent authority which can be made liable for any damage that may occur due to nuclear reactions. This is because any damage that is done by such reactions is huge in nature and can affect millions of people in one go. It was felt after World War II, when the nuclear field was open to private enterprises, they were reluctant to invest in such a field as there were no proper laws to define the circumstances of compensation and liability if any accident happened. Moreover, it has been witnessed that in such cases the victims suffer a lot due to the radioactive nature of such spaces and thus it becomes crucial to address such issues and make someone liable so that the victims have somewhere to seek compensation from in case of any mishap. Furthermore, it was felt that for such a huge risk at hand no individual insurer would be able to take all the risk alone, and thus the insurance was made out to be operator based. The insurance in such a case became important so that liability claims could be covered by the victims of such a commercial nuclear power plant that caused the damage.        

Benefits of nuclear liability insurance

The foremost benefit of nuclear liability insurance is: 

  1. The victim who has suffered any harm from any nuclear disaster won’t have the difficulty in deciding as to whom to sue or make liable for the harm done. The victim can directly sue the operator or insurer for the damage done and can claim for compensation.
  2. It also benefits the insurer as the insurer will be channelling the amount of money separately for such purpose and thus if in future any such accident occurs there won’t be a burden on the insurer to arrange for a large sum of money at that moment. 

  

Important provisions of the Nuclear Damage Act, 2010

  • Section 1 (4) describes the scope of the said Act as being limited to nuclear installations which are either owned or controlled by the Central Government. It can be done so in two ways, either through government control directly or indirectly by any authority or corporation under the control of the government.   
  • Section 2 (g) describes what all circumstances can come under the ambit of ‘nuclear damage.’ Loss of life or damage or loss to property, the economic loss suffered due to such damage, or costs of preventive measures or reinstatement of an impaired environment will also be considered under this parameter.      
  • Section 2 (j) explains the state of nuclear installations and describes it as any facility that stores, produces, or processes nuclear material. It also means any nuclear reactor except the one which is equipped for use as a source of power.   
  • Section 2 (m) puts forth the definition for an operator and it plays an important part in the whole Act. It defines an operator as the ‘Central Government’ or any other authority or corporation under the government. A government company can also be termed as an operator if a license has been granted to the same under the Atomic Energy Act, 1962
  • Section 4 deals with the liability of the operator in case of nuclear damage. There are certain situations given in which the operator will be liable for nuclear damages. Such situations being, if the nuclear incident happened in a nuclear installation. If the damage has been done, the material being used or produced in that nuclear installation occurring before or after the responsibility has been shifted to another operator. Sub-clause 2 of the said section states that in case of more than one operator involved, the liability will be joint and several. Furthermore, in a case where one operator holds several nuclear installations, such an operator is liable to the extent that is described under Section 6 (2) describing a limit of liability on a monetary basis.  

The said section also deals with the no-fault liability principle. There are four circumstances given to define the liability of the operator-

  1. When the nuclear damage caused is by storage of material in transit, in such case the liability is on the person who is responsible for such transit to take place, and thus he will be assumed to be the operator. 
  2. If any nuclear damage is caused during the transportation of such nuclear material then the consignor or the sender of such material will be liable for the same.  
  3. In the case of a written assignment between the sender and receiver of the nuclear material, the person deemed to be made liable in the agreement between the two parties will be the operator.
  4. The operator will be liable for the damages other than the nuclear damages if they are caused by nuclear incidents along with other occurrences and are not separable from the nuclear damages.            
  • Under Section 5 exceptions are dealt with where the operator is not liable for nuclear damages. In case of grave natural disaster, civil war, acts of terrorism, armed conflict, or insurrection, the operator will not be liable for any damage caused. Further, if the damage is caused due to the means of transport being used, the nuclear installation itself, or is caused to any property which is connected to any such installation, the operator will not be held liable. In a case where damage is caused to any person by his own negligence, then as well the operator will not be liable to that person.      
  • Section 6 is crucial to understand as it states the monetary limit of liability by the operator. The section states that the maximum amount of liability for any nuclear incident is Rs. 300 million SDR which has to be borne by the Central Government. In the case where any nuclear incident happens having thermal power 10 MW or above, the operator will be liable to pay Rs. 1500 crores. Similarly, in the case of fuel reprocessing units, the monetary value is Rs. 300 crores and for research reactors Rs. 100 Crores. Such liability does not include the cost of proceedings.           
  • Under Section 7 it is provided that in case the liability amount exceeds Rs. 1500 Crores as specified under Section 6 (2) which is to be paid by the operator, the Central Government will be liable to pay for such amount except in cases of damage by natural disaster or other situations mentioned under Section 5 (1). Thus, the government is liable for an amount that is more than Rs. 1500 Crores but less than Rs. 300 million SDR.    
  • Section 14 mentions about who can apply for compensation in case of nuclear damage-
  1. Personal injury to a person- the person suffered can claim.
  2. Damage to property- owner of such property can claim.
  3. Legal Representative of the deceased.
  4. An agent authorized by the owner or legal representative. 
  • Section 17 deals with the ‘Right to Recourse’. It states that the operator has the right to recourse even after paying the compensation amount if it is expressly written in the contract, or the nuclear incident has happened due to the negligence of the employee or supplier, or someone has deliberately committed the act or omitted from doing such act to cause the damage.  
  • Section 18 provides for a bar on the period of claiming compensation, which is ten years in case of a damage to the property, and twenty years if there has been a personal injury to a person.     
  • Section 39 to 42 provides penalties for offences done under the Act. For instance, if any person fails to comply with section 8, he/she shall be punishable with imprisonment of a term which may extend maximum to five years or with fine or both.

  

Global nuclear liability insurance schemes

The present section explores various global schemes of nuclear liability insurance under different countries and how the regulations work in these countries. 

United Kingdom

The nuclear liability insurance in the UK is regulated by the Nuclear Installations Act, 1969, which has regulated the laws in such a way that there is a strict liability on the operator in case of nuclear damages. The Act states that even in a case where the nuclear material causing damage was discharged by a third party, if the operator had the knowledge of the presence of such element on the property, then he would be liable for the same and not the third party. Furthermore, the Act also provides strict liability of the operator will only operate if the nuclear damage is done during the term period of the operator, has occurred at a nuclear site and involves nuclear material only. Moreover, to ensure that the liability is paid off, the operator has to make insurance of such money or can do so in another way. The maximum amount of compensation payable is 1.2 billion Euros. The Act also extends the liability of the operator in case of damage to the environment.         

United States of America

The Price-Anderson Act, 1957 is the first regulation or legislation which came up with laws to regulate nuclear incidents and several aspects of nuclear liability. The liability under this law protects any damage to life or even bodily injury or sickness and any damage or loss to property. It includes loss of foreseeable expenses from such loss of property as well. The cap on the amount of liability in the USA is $13 billion. In a situation where the liability exceeds the maximum cap, the district courts are given the power to determine the compensation to be given by the operator. The concept of a two-tier insurance pool is applied in the USA, and if in compensation, both the pools are exhausted, then the Congress has to provide for the additional disaster relief. The American nuclear insurers are the one and only nuclear pool in the USA where the operator pays $1 million for liability insurance annually.     

United Arab Emirates

The UAE ratified and passed a law known as the Nuclear liability law in 2012, which concerns itself with nuclear damages and civil liability. The Act has imposed strict as well as an absolute liability on the operator in case of nuclear damage. The amount of liability that is fixed is 450 million SRD and if the amount exceeds, the State has to pay for the remaining compensation. Article 8 of the said law also provides that if due to any reason the operator is not able to cover the insurance, the State can pay for the entire insurance within the liability limits. The Act covers damage done to life and property as well as the loss of income from the enjoyment of the environment or economic loss from impairment of the environment. 

Japan

Japan has two regulations concerning nuclear liability, ‘The law on Compensation for Nuclear Damage’ and ‘The law on Contract for liability Insurance for Nuclear Damage’. The operators are made strictly and absolutely liable for any damage concerned with life and property. There are exceptions as well provided to operators from the liability in cases where damage is done by a natural disaster and where the liability is unlimited. The Fukushima Daiichi Accident in 2011 caused the country to be more protective about nuclear liability, and the insurance pool in japan for the same is nearly $62 billion.       

India

The Nuclear Damage Act of 2010 is the law which regulates the nuclear insurance liability in the country. It provides a strict liability on the operators and also includes the no-fault liability regime as has already been discussed in this article.  

Working of nuclear liability insurance 

  • Insuring a nuclear power plant

For ensuring that a nuclear power plant can be insured, the country should be a party to one of the Conventions concerning nuclear insurance liability and should also have a domestic law for the same. There should be adequate technical acceptability for installing such work and should have the domestic market to ensure the capital for the same. Furthermore, there should be pertinent laws to cover the damage compensation cost, and the government should take the factor of other damages which might be consequent to such incidents.       

  • The general structure of reactor insurance

The high potential perils of nuclear fission and fusion have to be kept in mind while installing the nuclear reactor, and it is determined as the most important aspect to create a reactor. In most of the cases, it is either the government or another person concerned with the reactor to be the operator. For insurance, either the government could pool the fund for it or the third parties could. There are two forms in which it can take place, by National Insurance Pool, where a group of insurance companies pool for such funds, and Mutual Insurance Associations, which are associations which deal with physical damages and injury in a nuclear incident and which are set up by the nuclear industry itself.    

  • Mandatory financial coverage

Mandatory financial coverage is one of the main principles of nuclear liability insurance, and it gives the provision that an operator has to maintain insurance to cover for the damages that might happen due to any nuclear incident. There is no set rule for such an amount, and it is decided by the national laws of the respective countries. Such an amount is insured and is collected by the government or any private sector, as per the laws of the respective country so that there are sufficient funds available after the damage has been done to compensate the victims and there is no situation which might arise where the operator does not have any money to compensate them.      

Important international convention and treaties 

  • Paris Convention on Nuclear Third Party liability 

This convention was founded by OECD’s members in the year 1960, with an aim to regulate the compensatory regime for the victims of the nuclear disaster. The Convention recognises strict liability in case of nuclear damage with certain exceptions pertaining to situations of armed conflict or civil war or acts of terrorism or natural disaster. Furthermore, the Convention provided that the operator will not be liable in cases where the damage was done due to the negligence of the supplier during the installation of the reactor. However, this does not apply after the reactor has been installed. The Convention also makes an exception from liability of the operator in cases where the damage is done due to negligence of the third party. The right to recourse was provided to the operator in this convention.   

  • Brussels Supplementary Convention on Third Party liability in Field of Nuclear Energy

Brussels Convention was made with an objective to provide compensation that is supplementary to the compensation provided in the Paris Convention. The Convention provided for the increase in the funds for the compensation that was being provided by the Paris Convention. It extended the scope of liability to be paid from the installation of a country’s public fund and by the operator, which has to be covered by the insurance or any other financial sources.  

  • Vienna Convention on Civil Liability for Nuclear Damage

The Convention was established in 1963 and it is open to any State. The Convention was based on the same principles as that of the Paris Convention. In this convention, the concept of ‘absolute liability’ was explored and it was provided that a minimum amount of funds should be allocated by the member parties to combat any nuclear damage that may happen by any nuclear incident.    

  • Joint Protocol Relating to the Application of the Vienna Convention and the Paris Convention

The joint protocol that established the connecting link between the two conventions bridged the gap between nations and pulled out the same platform for the countries which could be brought under the ambit of both the conventions. This joint protocol made sure that even if the victim of one state party to one convention was suffering and the incident party was in another convention, it would be easier for the victim state to claim compensation in the same manner.  

  • Protocol to Amend the Vienna Convention on Civil Liability for Nuclear Damage 

The amendment increased the amount of compensation and even the non-contracting party was made to be able to claim compensation by mode of the protocol provided.  

  • Convention of Supplementary Compensation for Nuclear Damage

The Chernobyl incident in 1986 created an urgency to think and make nuclear liability more emphasised and structured. On the International level. This Convention happened in 1997 and increased the amount of fund to 300 million SDR with the provision that if any state is not a party to Paris Convention or Vienna Convention, it can be a party to the Convention of Supplementary Compensation.  

  • 2004 Brussels and Paris protocol

The 2004 protocol included different types of damages to the victims, such as economic loss due to the environmental damage or damage to crops and animals. The Convention broadened the scope of claiming compensation and held that it can be claimed for other wider losses as well, which might not be directly related, such as loss of income or future loss due to loss of property. 

Nuclear liability principles

  • Strict liability

In such cases of nuclear damage, there is a strict liability on the operator and it does not matter whether the operator was involved or not, but if the damage was caused by a nuclear material on such a nuclear reactor or plant or land, the operator is strictly liable for the damage of the same. 

  • Exclusive liability

Such a principle brings a proper and unique channel for the victims to approach the operator directly and even if there is a third party involved who was responsible for the damage that was done, the victim will claim compensation from the operator only. This comes as a great advantage to the victims as they can claim for the compensation directly from the operator rather than being trapped in a situation where they have to fight for it.     

  • Limitation of liability in time

It is crucial to limit the certain time period for the claim of compensation as an indefinite period can be a hurdle and difficult for the operators. Thus, within every nation with such laws, a certain period is given to claim for the compensation so that the operators, or third parties in some cases, are not sheltered from the risk of being exposed to the liability for an uncertain amount of period.  

  • Amount of liability

The amount of liability is fixed and the situation is made so that the operators are not open to the risk of being exploited unnecessarily. Furthermore, such a cap brings a striking balance to the strict liability that is faced by the operator.  

  • Insurance

Insurance has been one of the most important aspects of nuclear liability. It is crucial that the operator has insurance so that in case of any nuclear damage, he doesn’t have the say that he cannot compensate the victims due to unavailability of the funds. Thus, insurance is crucial for the whole process and it can be taken either by the government or private institutions.  

  • Jurisdiction

It is well settled that if the parties are contracting parties to the Convention, the jurisdiction lies to the country where the nuclear incident has happened. Thus, the courts of other states involved will not be competent to hear any plea regarding such an incident. This has been done with a purpose so that the victims are provided with the most favourable claimed compensation as nuclear disaster can cause damage which may exploit generations.   

  • Applicable law

The last principle states that the law of the country should be applied to everyone irrespective of the country, one is from. The jurisdiction lies with the country where the incident has happened and so the laws of such country apply to the incident.  

Issues and challenges 

There are various issues and challenges accompanying the current regimes of nuclear insurance liability-

  1. Absence of a uniform International Treaty– It is very crucial at this stage, where almost every country is in a race to equip itself with nuclear power plants, to have an international regime which states uniform laws for all the countries so that there are no issues while contracting with a foreign country on the same basis. In spite of having three different major conventions and more between various countries, there is a need for a proper framework to provide for structured laws and regulations to regulate nuclear insurance liability laws.  
  2. Transboundary impact of nuclear incidents– There is no law in many countries considering the transborder nuclear accidents that can cause transborder nuclear damage. Incidents like Chernobyl and Fukushima Disaster held the world captive and reminded of the damage that can be caused due to such nuclear instalments. Thus, it becomes very crucial to examine the aspects where if a nuclear incident causes damage in the transboundary territory who will be liable for the same. This becomes a very important question in respect of a ship carrying a nuclear material and an accident being caused in another region. 
  3. Cost of liability– This is one of the most challenging aspects of nuclear insurance liability as it needs a balance between the victim’s compensation rights and the operator’s risks of being bankrupt in case of an accident. The damage done by nuclear accidents are the worst in nature and can stay for generations, thus it is very important to provide an adequate amount of compensation to the victim’s which may seem to be very low in many countries considering the amount of damage that is done by such accidents. Furthermore, a balance has to be made in the criterion that the operator is not penalised for the whole accident and ends up bankrupt. Thus, creating a balance between the two is a huge challenge in this aspect. 
  4. All parties not being made liable– As easy it is to consider it one of the benefits and easy option for the victim to penalise one person in case of an accident, it is more of a problem for the operator. As only one person being made liable in every aspect, all other parties and maybe those who are actually responsible for the accident done are not penalised. This puts the whole burden on one person which in turn is one of the causes for a limited amount of compensation.  
  5. Limitation period– It is sensible to put a limitation period for claiming compensation for nuclear damage. However, there are cases where the effect of the damage could not be known before thirty to forty years, and thus it becomes a problem in those countries where the limitation period is kept less in law.         

Exclusive liability of the operator for a nuclear installation

The Paris Convention held the operator as strictly liable for the nuclear damage done and exclusively liable in the case when the installation of the nuclear reactor is completed and not before that. Thus, as soon as the installation of the nuclear reactor is done, the exclusive liability of the operator begins and he is held exclusively liable for any damage caused afterwards. This concept of exclusive liability does not penalise the supplier or any other person for the damage done and only makes the operator liable and the operator is the only one who is responsible for giving compensation to the victims. This serves as a benefit for the victims as they do not have to pursue and look for different parties for claiming compensation. This is beneficial for the insurance companies as well as there are not different pools of insurance turning over for the same accident. However, it may be practically unjustified to make one person liable for the act which might not even have been done by him. Thus, this principle keeps the suppliers out of the chain for liability. Furthermore, if there is a burden on only one person to pay for compensation then it may either result in a very low compensatory amount or bankruptcy of the operator. 

Critical analysis

Nuclear power is something which has made its space in every country’s defence or energy power sector. In one way or the other, every country wants to establish itself within the availability of nuclear arms or power plants. It is a new type of war that has engulfed the whole world. Considering the situations in both World Wars and the Cold War, it is evident that no country wants to put up a war in future considering the nuclear elements present with every country. Considering the biggest nuclear accidents that have happened such as the Bhopal gas tragedy and the Chernobyl disaster, it is also evident that it is crucial to make the use of nuclear elements with more care and safety guards, both preventive and compensatory. Many countries have instituted a strict liability policy on operator and insurance policy schemes so that there is money to compensate the victims in case of an accident. 

There are many ambiguities in this structure. There have been conventions and the countries have developed domestic laws with respect to the same, but there is no consensus on various subjects such as liability of a supplier in this whole scenario. Furthermore, there should be a proper scheme for compensation amount as it may seem arbitrary and less for some countries where the damage could be huge in respect of indirect expense of the radioactive nature of the reactors.    

Recommendations

  1. The State should work together with the operator in terms of compensation to the victims, as there might be a possibility that in such disastrous nuclear accidents, the operator alone may not be able to compensate the whole regime. 
  2. Various countries have not taken into consideration the effect on the environment that might be caused due to such nuclear accidents. Thus, States should be made liable for the same. 
  3. There is a need for a uniform international regime to put up a structured basis for the nuclear insurance liability so that there is no clash or conflict between parties. Furthermore, creating such regimes will also help in the collection of funds on a greater level and will be useful to accidents in future.  
  4. The liability should not be borne by the operator alone and the supplier should also be made a party to it, otherwise, it is possible that a country may supply nuclear material which it knows may not work out later and cause harm to people. In such cases, the supplier will be saved from its liability. 
  5. The matter of jurisdiction is a bit confusing for a situation where the accident occurs in the sea or coastal side of a third nation which has nothing to do with the nuclear agreement on the material. Thus, it is important to make a Neutral Tribunal for such issues.  

Conclusion

Nuclear power has become an engaging part of every country’s economy. However, considering the amount of damage that it does and looking back at examples such as Chernobyl and Bhopal gas tragedy, it is crucial to make amendments in the financial and compensatory aspect of the convention as well as the domestic acts in certain countries, especially South Asian countries. The role of the State Government and the third parties have to be more clear in the aspect of financial funds to be provided after the damage has been done. It has to be taken care of that the present damage and any other future damage is taken into consideration while assessing for compensation. Furthermore, there should be a consensus about the liability factor, which is to be borne only by the operator or supplier as well.      

References


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