The Manmohan Singh government may be courting trouble at home by pushing a controversial new law to limit the financial exposure of nuclear companies in the event of a nuclear accident. But the Civil Liability for Nuclear Damage Bill also has a sting in its tail for the United States, which has made the passage of a liability law immunising its suppliers from lawsuits a precondition for any American nuclear sales to India. For even as the legislation will free foreign companies from any responsibility towards the victims of a nuclear accident, it contains a loophole that could well see Westinghouse and G.E. being hauled up before an Indian court in the event of a disaster involving equipment made, supplied or serviced by them

Though the Department of Atomic Energy first mooted a liability law way back in 2000, well before the Indo-U.S. nuclear agreement of 2005, the current urgency surrounding the bill is related to the anxiety of American reactor suppliers which want legal protection from a Bhopal type situation — where the victims of India's worst industrial accident filed multi-million dollar claims against Union Carbide Corporation in India and the U.S.

The Liability Bill is designed to insulate suppliers from the risk of law suits by channeling legal liability for an accident entirely to the nuclear power plant operator and granting Indian courts sole jurisdiction over accident-related cases.

But section 17(b) of the bill also grants the operator of an Indian NPP the “right of recourse” against companies like GE and Westinghouse if an accident results “from the willful act or gross negligence on the part of the supplier of the material, equipment or services, or of his employee.” Such a right is not envisaged by the model law contained in the IAEA's Convention on Supplementary Compensation and is likely to irritate Washington because this means a nuclear operator can sue a supplier for recovery of any compensation paid in the event of an accident if it believes the accident resulted from gross negligence on the part of the latter.

Of course, with compensation for accidents capped by the bill at Rs. 500 crore, or $100 million, the right of recourse against suppliers offers only limited comfort, especially in a situation where the potential damage caused by any negligence on their part is likely to be of a much higher magnitude.