A cap on the maximum liability of the suppliers and insurance pooling arrangements are some of the minimum requirements for the resolution of the controversies surrounding the ClNDA, 2010
The Indian Civil liability for Nuclear Damage Act (ClNDA), 2010, was passed amid much controversy from its very conception and since then it has been seen to be a hindrance in any further progress of the Indian nuclear power programme, and it needs to be resolved. The two major issues are Section 27(b) and Section 46 of the Act which deal with suppliers’ liability and action against operators under other acts in force.
Why it is taking so long to be resolved when the whole future of the Indian nuclear power programme is at stake is baffling, although recent Press reports seem to suggest the Government is working overtime to resolve the issue by indulging in intense bilateral discussions with the US, in view of the forthcoming visit to India by the US President. However, it would be foolish to believe that these talks alone would see foreign suppliers of nuclear equipment flocking to India.
Much more needs to be done that does not remove the need for a relook at the ClNDA since without such an exercise, Indian suppliers, too, are reluctant to engage in trade with the Indian nuclear power operators. It is also a fact that if Indian suppliers are again on board, there is, strictly speaking, no need to have any foreign reactors to achieve the nuclear power generation goals set as a target for future.
The understandings under which a workable solution to the ClNDA can be found are the following:
i) There is a need for a ClNDA.
ii) A Supplier’s liability (Section 17 (b)) is not present in any of the other nuclear liability regimes currently operating worldwide and the foreign suppliers had objected to this. There is nothing sacrosanct about suppliers and in principle there is no reason why they should be exempted from any liability. However, it is also a universal truth that no commercial entity would agree to be asked to commit itself to an unlimited liability for an unlimited time period. However, there may be no need to amend Section 17(b) of the ClNDA.
iii) Indian insurers alone may be unable to provide nuclear liability insurance coverage for the amount specified in the Act — Rs1,500 crore — on their own, for reasons beyond their control and reinsurance with foreign insurers — a common practice in international insurance business — may not be possible because of the reluctance of the Indian Government to allow the foreign insurers to inspect and rate the Indian Nuclear Power Plants (NPPs).
iv) Another concern is Section 46 of the Act which states: “The provisions of this Act shall be in addition to and not in derogation of any other law for the time being in force, and nothing contained herein shall exempt the operator from any proceeding which might, apart from this Act, be instituted against such operator.” Suppliers are apprehensive they may be liable for concurrent liability under this provision.
v) Many of the terms used in the Act and the accompanying rules have been left undefined causing concern about future interpretation of these terms.
Is there a way outIJ Yes.
a) Section 46 is specific in using the term “operator” against whom proceedings can be initiated under other laws. According to the Parliamentary Standing Committee which submitted a report on the Nuclear liability Bill to the Government, the inclusion of the “supplier” as well in the clause was suggested by a Committee member which was rejected by the Parliamentary Standing Committee and hence was not included in the Bill recommended and the Act passed by Parliament — the inference being that the legislature did not mean to include the “Suppliers” within the ambit of Section 46 — thereby exempting the “Suppliers” from any proceeding under any other Act in force. Therefore, there is no danger of concurrent liability as feared by suppliers since the courts will follow the intention of the legislature in interpreting an Act. Since there is no danger of a Supplier being designated as a “Polluter” as also the Supreme Court has indicted “Polluter Pays Principle”, all currently accepted definitions or usage of the term would exclude a nuclear supplier from being termed a polluter. Therefore, there will be no concurrent liability under Section 46.
b) The fears of the suppliers about potentially unlimited liability have already been clarified under the rules for implementing the ClNDA. It will be a maximum of Rs1,500 crore. (Section 24 of the Rules implementing ClNDA)
c) Insurance can be offered to both the operator and the suppliers for their maximum liability. If the insurers cannot offer liability insurance for this amount and no reinsurance facility is either available or possible with foreign insurers, then the Government of India can offer indemnification for the remaining amount charging the operator/supplier an annual premium till such time as becomes possible for the Indian insurers to offer full coverage. This practice is not unusual. It is followed in Japan.
d) As regards the large number of suppliers, there do exist mechanisms and formulae for prorating liability/premium among a large number of nuclear suppliers — which is way of pooling the liability/premium of the suppliers.
e) The terms used in the ClNDA and the Rules have to be properly defined.
f) If these are done, then a solution will be found for the nuclear liability issues, although some minor issues may need to be sorted out.
Therefore, one possible solution to the nuclear liability issue will consist of
I) A cap on the maximum liability of the suppliers — already part of the Civil liability for Nuclear Damage Rules (ClNDR), 2011 (Explanation 2, Section 24)
II) Insurance/liability pooling arrangements approved for the suppliers and the operator.
III) Insurance coverage to both suppliers group and operator for their maximum liability.
IV) Indian insurers to cover to the maximum extent possible as per their regulatory regime.
V) The remainder to be covered by the Government with an appropriate premium charged to the account of the suppliers group and operator.
VI) The terms used in the ClNDA and the ClNDR to be properly defined and elaborated.
These are the minimum requirements for the resolution of the controversies surrounding the ClNDA, 2010. Some more measures, not necessary, but desirable, would bring greater clarity and confidence to both the suppliers and operators and should take India on a path of sustained and planned growth of nuclear power leading to a better environment.
(The writer is consulting fellow, IDSA, New Delhi)