US nuclear suppliers sceptical of MEA assurances

"A memorandum from the Indian government doesn’t bind the Indian courts or supersede the statute," says a source

Updated - December 04, 2021 11:05 pm IST

Published - February 10, 2015 12:05 am IST - Washington

U.S. nuclear suppliers remain deeply sceptical of the assurances on interpretations of civil nuclear liability provided over the weekend by the Indian Ministry of External Affairs, both on Section 17 (b) and on Section 46 of the country’s liability law, according to persons close to the discussions in Washington.

One source, who spoke to The Hindu on condition of anonymity, said that although the nuclear suppliers have not been able to evaluate in their entirety the >FAQ-style notes supplied by the MEA on Sunday, it was clear that in the case of India’s Civil Liability for Nuclear Damage Act of 2010 (CLND) “a statutory requirement cannot be waived by contract”.

In its notes the MEA suggested it was a right but not a mandatory requirement that the strict, no-fault liability implied by Section 17 (b) for negligence on the part of the supplier be channelled from the operator, in this case India’s PSU Nuclear Power Corporation of India (NPCIL), to the supplier, the U.S. nuclear corporations.

Even if the contract between the two parties relied on Rule 24 or other instruments to limit the right to recourse of NPCIL, to channel liability back to the supplier in the event of a nuclear incident, “A memorandum from the Indian government doesn’t bind the Indian courts or supersede the statute,” the source said.

While the MEA noted that an insurance pool would be set up to finance compensation payouts by NPCIL to the tune of Rs. 1,500 crore and the Government of India would foot an additional bill of Rs. 1,110 crore, such arrangements appeared not to have quelled the discomfiture of U.S. suppliers regarding their own financial costs for insurance premiums.

One concern uppermost in the minds of nuclear suppliers here surrounds the suggestion that they may continue to be liable for at least 80 years, which includes 60 years for the life of the nuclear plants and a further 20 years under the statute limit.

“When the companies supply a part in Year One, why would they continue to pay an insurance premium for 80 years?” said a person familiar with the companies’ view on the matter, adding that there was a lack of clarity on the overall insurance costs and on the liability limits that the companies would face.

U.S. nuclear corporations also appeared not to have derived much reassurance from the MEA’s comments on Section 46, which may allow victims of a nuclear incident to sue the operator or the supplier for damages using tort law.

On this matter the MEA said, “That this section applies exclusively to the operator and does not extend to the supplier is confirmed by the Parliamentary debates at the time of the adoption of this Act,” citing in favour of its interpretation the fact that two amendments moved on the section in Parliament, by D. Raja and Sitaram Yechury respectively, which sought to include suppliers in this provision, were both negatived.

However the analysis of that remark here appeared to question whether Parliamentary debates were definitive on this subject, and even whether the legislative interpretation was clear.

A source explained to The Hindu that there were other debates in Parliament at the time, which suggested that MPs might not have understood all the ramifications Section 46 liability.

In particular the remarks of two parliamentarians were cited, including that of Lok Sabha member Bhartruhari Mahtab, who said, “The right of recourse against the supplier provided by the Bill is not compliant with international agreements the Government may wish to sign. As I had stated earlier, though the Bill allows the operators and suppliers to be liable under other laws, it is not clear which other laws will be applicable. Different interpretations by courts may constrict or unduly expand the scope of such a provision… In clauses 5 and 46, the Bill does not clearly define what type of law will be applicable. Differing interpretations by courts, as I had stated earlier, will lead to confusion.”

Also mentioned were the remarks of M.V. Mysura Reddy of the Rajya Sabha, who noted, “Coming to Clause 46 of the Bill, I would like to submit that this Clause is not clear. We don't know whether the Law of Torts is applicable. So, there is a need for explanation for this Clause. It would be better if the hon. Minister brings an official amendment to this clause. If it is brought, it would become clear and known to the people whether the Law of Torts is applicable.”

In remarks to The Hindu George Perkovich vice-president for studies and nuclear strategy and non-proliferation expert at the Carnegie Endowment for International Peace, said that at a broad level it may not matter how the Indian and U.S. governments felt about this bilateral venture, but rather the calculations of the U.S. nuclear companies and their bankers mattered more.

Dr. Perkovich questioned the reliability of legal interpretations of India’s liability law, especially once a nuclear incident occurred and pressure for compensation and justice would likely be enormous.

However, he noted, even if further progress in the civil nuclear sector stalls around the question of liability, India has achieved what it hoped for in terms of obtaining “moral recognition” of the U.S. for its nuclear ambitions.

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