Agenda for nuclear diplomacy

Rakesh Sood*

Published in The Hindu, 27 June 2014**

On June 22, the Narendra Modi government announced that the International Atomic Energy Agency (IAEA) Additional Protocol had been ratified. It is a welcome step marking the new government’s foray into nuclear diplomacy. However, by itself, it will not pave the way to the successful conclusion of negotiations with Westinghouse or GE or, for that matter, even AREVA. For that, more initiatives need to be taken, particularly if progress on the nuclear issue is to be registered during the Prime Minister’s visit to Washington.

India signed the IAEA Additional Protocol on March 15, 2009, over five years ago. It was one of the boxes to be ticked for implementing the 2008 India-U.S. Civil Nuclear Cooperation Agreement. But it was not a difficult obligation to fulfil because the Additional Protocol is customised for nuclear weapon states and this aspect had been successfully worked out by the Indian negotiators. It was left pending ratification because there were other, more difficult and more critical issues that needed to be tackled first, for which the political will could not be mustered in the last years of the United Progressive Alliance (UPA)-II government.

Addressing proliferation

To understand the Additional Protocol, it is useful to look at its genesis. With the end of the Cold War, the prospects of a nuclear exchange between the two superpowers receded and the proliferation of nuclear weapons became the new threat that needed to be addressed at a global level. In 1993, the IAEA began to consider how it could play a role in this and began a deliberative two-year exercise, described as 93+2.

The IAEA was already implementing full-scope-safeguards in countries that were party to the Nuclear Non-Proliferation Treaty (NPT) as non-nuclear weapon states. This meant that all nuclear activity in these countries was monitored to ensure that it was intended only for peaceful purposes. For the five nuclear weapon states recognised by the NPT (the United States, Russia, the United Kingdom, France and China), full-scope-safeguards were not applicable as these countries had a nuclear weapon fuel cycle that could not be subjected to international accounting and inspection by the IAEA. These five countries, therefore, worked out an understanding with the IAEA and accordingly, “voluntarily” placed some of their civilian facilities under a much looser IAEA safeguards agreement, more as a political gesture to demonstrate their good faith and provide credibility to the IAEA, which would otherwise be accused of only policing the nuclear have-nots.

The 93+2 exercise led, in 1997, to the Model Additional Protocol. The logic behind it was different — while full-scope-safeguards provided assurance that all nuclear materials were fully accounted for in exclusively peaceful activities, the Additional Protocol was intended to reassure that there was no clandestine nuclear activity being undertaken. Its purpose was to strengthen and expand the existing safeguards regime applicable to the non-nuclear weapon states. Remote monitoring and analysis, environmental sampling to detect traces of radioactivity, and inspections without notice, were introduced. In addition, the scope of declaratory activities relating to the nuclear fuel cycle was expanded, thresholds to trigger inspections were lowered, and imports (and exports) of dual-use items came under scrutiny. The prime catalysts for this were nuclear developments in Iran, North Korea and Libya, most of them easily traceable to Dr. A.Q. Khan’s freewheeling nuclear Wal-Mart. Once again, the five nuclear weapon states excluded themselves from the Model Additional Protocol citing national security considerations, but volunteered to conclude an Additional Protocol based on what could be shared with the IAEA.

Recognising Indian ambition

During the 1990s, with the tightening of export control regimes and the expansion of control lists to cover dual-use items and technologies, India’s access to these sectors was severely restricted. Therefore, after the 1998 nuclear tests and the declaration that India now possessed a nuclear arsenal, it was important for the Vajpayee government to demonstrate India’s impeccable non-proliferation record and as a responsible nuclear-weapon-state, seek its place in legitimate civilian nuclear commercial and technology exchanges. In the dialogues undertaken with major powers after 1998, France and later on, the U.S., were receptive to this ambition.

Prime Minister Manmohan Singh took forward the nuclear diplomacy of the Vajpayee government. Looking beyond the Next Steps in Strategic Partnership (NSSP), which was being implemented in phases in 2004, the breakthrough came in July 2005 during Dr. Singh’s visit to Washington, when it was announced that “the U.S. would work to achieve full civil nuclear energy cooperation with India”, “seek agreement from Congress to adjust U.S. laws and policies,” and further, “work with friends and allies to adjust international regimes to enable full civil nuclear energy cooperation and trade with India.” In turn, India agreed to “take on the same responsibilities and practices and acquire the same benefits and advantages as other leading countries with advanced nuclear technology, such as the United States.” These responsibilities included “signing an Additional Protocol with IAEA for civilian facilities.”

Not being party to the NPT, India was not subject to full-scope-safeguards. However, nuclear reactors set up with international cooperation (e.g. Tarapur 1&2, Rajasthan 1&2, and more recently, Kudankulam 1&2) were subject to the IAEA’s facility-specific safeguards. As per the 2005 undertaking, it was tacitly understood that as a nuclear weapon state, India would keep some of its facilities out of safeguards for national security reasons and there would, therefore, be significant differences between the Model Additional Protocol (as adopted by states under full-scope-safeguards) and the customised Additional Protocol that would apply in the case of India. In fact, the Indian Additional Protocol does not contain most of the Model Additional Protocol’s provisions and basically requires that India provide information to the IAEA regarding its nuclear-related exports. So much so, that even though India only signed the Additional Protocol on March 15, 2009, President Bush had certified to the U.S. Congress in September 2008 that India and the IAEA were making substantial progress in negotiating the Additional Protocol, thus clearing the way for the India-U.S. Agreement to be signed on October 10, 2008.

Quantifying liability

Ratifying the Additional Protocol was the low-hanging fruit but significantly, the decision indicates that nuclear diplomacy will remain a priority for the Modi government. The focus should therefore now shift to resolving the ambiguities of the 2010 Nuclear Liability Law. Without this exercise, India can only import nuclear fuel for the existing power plants; it will not be able to undertake the much-needed expansion of the nuclear power sector. It is not only the foreign suppliers who would like clarity on this issue; Indian vendors are equally concerned about its ambiguities.

We know how national and international nuclear liability laws have evolved and why liability was channelled exclusively to the operator. In the 1950s, only the U.S. had a nuclear industry and the U.S. private sector needed this protection in order to establish itself at a global level. Today, the situation is different and there is a growing feeling that this exclusive channelling is no longer helpful. The Indian law of 2010, which brings in the concept of supplier liability, may not be consistent with existing practice, but it is certainly much more in consonance with the spirit of the times. The idea of some measure of supplier liability is an idea that can no longer be bypassed. However, what the Modi government needs to ensure is that supplier liability does not become “infinite” or “open-ended.” What is necessary is a genuine effort to address the concerns of the suppliers’ community so that their liability can be quantified in a manner that does not raise costs to prohibitive levels.

The NSG waiver has enabled India to import nuclear fuel from multiple sources and improve capacity utilisation in nuclear power plants, but the ambiguities of the Nuclear Liability Law created a roadblock that UPA-II could not overcome. Dialogue with the U.S. lost momentum as did the quest for India’s membership of the Nuclear Suppliers Group. Mr. Modi is well placed, both at home and abroad, to impart a new momentum to the diplomatic process, thereby ensuring India’s long-term energy security interests, giving a push to India-U.S. relations, and getting India to its rightful place at the nuclear high table.

*(Rakesh Sood, a former Ambassador, was the Prime Minister’s Special Envoy for Disarmament and Non-Proliferation from September 2013 to May 2014.)

**http://www.thehindu.com/opinion/lead/agenda-for-nuclear-diplomacy/article6152407.ece

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Nuclear Liability: A Key Component of the Public Policy Decision to Deploy Nuclear Energy in Southeast Asia

 

Mohit Abraham*

Published by the American Academy of Arts and Sciences and is available for download  https://www.amacad.org/content/publications/publication.aspx?d=1499

Prologue

This paper provides an analysis of nuclear liability, with a focus on the countries of Southeast Asia. The unfortunate events at Fukushima Daiichi in 2011 have raised serious issues for the world community and, in particular, nuclear energy aspirants with regard to the scope and adequacy of nuclear liability coverage in the event of a nuclear accident. For the public in countries that are still discussing the efficacy of deploying nuclear power, we believe that the nuclear liability regime needs to be robust enough to fairly compensate all parties if and when a nuclear accident occurs. This paper tackles this complex issue by focusing on the most significant issues, including:

1. The tension among nuclear suppliers, nuclear operators, and the host and neighboring states in sharing the cost of liability.

2. The continual debate regarding the sufficiency and availability of funds to meet potential compensation demands in case of an accident. This uncertainty, we believe, constitutes a hurdle for public acceptance of nuclear energy, especially in developing countries; we believe that the insurance caps need to be raised significantly.

3. Altering the balance in this area of nuclear liability law jurisprudence by identifying the nuclear supplier as the responsible party in case of an accident. If liability laws comparable to the Indian Civil Liability for Nuclear Damages Act are adopted in the future by additional countries, particularly those in Southeast Asia, this could be a game changer in assessing the economic viability of nuclear energy. (The principle of excluding supplier liability in favor of channeling all liability to the operator of a nuclear power plant has been the operative standard in existing statutes and conventions.)

4. Reliance by a growing number of nuclear aspirants on foreign technology and expertise, including safety oversight. We believe that this will create new challenges regarding legal jurisdiction as to who is responsible for compensation and the extent of liability that could be imposed on these foreign entities and individuals.

5. Unavailability of a universal framework regarding the liability conventions across all states. The principles laid down by the Paris and Vienna Conventions form the bedrock of current international nuclear liability law. However, there is a lack of harmonization between these two agreements. (Many states, including legal officials from the United States, have asserted that the Convention on Supplementary Compensation for Nuclear Damage [creating a viable risk pool based on proportional assessments imposed on nuclear plant operators in states that have ratified the CSC] could serve as an umbrella agreement. According to the IAEA, “The OECD- sponsored Paris Convention and Brussels Convention are popular in Western Europe while the IAEA- sponsored Vienna Convention is popular in Eastern Europe and elsewhere around the world. Some countries have signed a Joint Protocol to link those two treaties. The Convention on Supplementary Compensation for Nuclear Damage (CSC) was designed to become a global regime and is open to countries without nuclear power plants”[1].

This paper addresses the following key questions:

1. What impact have the unfortunate events at Fukushima had on the views of regional policy-makers and stakeholders regarding changes to nuclear liability and nuclear compensatory standards?

2. What is the standard that policy-makers and scholars, planning the deployment of new nuclear energy, should use as a guidepost as they consider nuclear liability legislation in their respective states? Obvious questions that arise include whether the principles laid down by the Paris and Vienna Conventions should be used to establish regional or country- specific standards, and whether regional agreement on standards should be preferred over country-specific standards. The current U.S. policy is clear on these questions: The United States prefers adoption by new countries of the CSC rather than implementation of region-based standards.

3. Will the vendors in Russia, Japan, China, and the Republic of Korea, as substantive future nuclear suppliers, be influential in setting the trend(s) in the nuclear liability regime?

4. What can countries considering deployment of nuclear energy learn from the recent experiences in India? Statements made by Russian officials seem to indicate that if the Russian government were to accept India’s new liability law, there would be an increase in tender price for its new VVER plants in India, increasing the burden on Indian consumers. Does this set a precedent, or are alternatives, based on variants of India’s nuclear liability law, preferable?

5. Should specific incentives to encourage passively safe designs be considered when the technical aspects of establishing a robust and sustainable liability regime are considered?

6. What roles should international bodies such as the International Atomic Energy Agency, the World Nuclear Association, and others play in encouraging a uniform and strict liability regime?

7. Can other substantive non-nuclear models (such as the International Oil Pollution Compensation Fund) that contain provisions for risk-sharing among private and public entities be useful in assessing the size of the financial risk pool to pay for compensation in the event of an accident?

Stephen M. Goldberg
former Senior Consultant to the American Academy’s Global Nuclear Future Initiative

Robert Rosner
Senior Advisor to the American Academy’s
Global Nuclear Future Initiative;
William E. Wrather Distinguished Service Professor in the Departments of Astronomy and Astrophysics and Physics, University of Chicago

 

[1] “Initiative for Global Liability,” World Nuclear News, August 30, 2013, http://www.world-nuclear-news.org/NP_Initiative_for_global_liability_3008131.html.

*Mohit Abraham is Partner at PXV Law Partners and Advocate-on-Record of the Supreme Court of India. He is on the Governing Board of the Nuclear Law Association of India and also chairs its working group on nuclear liability

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Nuclear technology transfer – Intellectual property issues

By, Vaibhav Saxena*

India’s nuclear power expansion programme banks heavily on imported technologies which have developed at high cost and risk over a long period. Not unreasonably therefore, the nuclear technology developers would expect compensation for transfer of their technologies. When the technology is transferred in whatever form (sale, JVs, localiastion or full ownership transfer) the technology provider will want to ensure that its competitive advantage, as the developer of the technology is protected. If current trends in the nuclear industry are any indication, host countries the world over are placing an increasing priority on both localisation and technology transfer.

Intellectual property (IP) has an international dimension, and technology providers want to make sure that the host country acknowledges and enforces the technology provider’s IP rights. They genuinely want to have confidence that the other party to the transaction will honour and respect their IP rights including the licences granted in respect of the technology. A patent is granted only to the inventor or the owner of the invention and the principle behind patent protection is that in return for disclosing his invention, the inventor is given limited exclusivity for it and thus provided an exclusive right to make, use and sell the invention within the jurisdiction of that patent.  Nuclear capabilities and activities have created a shrinking world necessitating wide-ranging international co-operation. As a backward step though the World Trade Organisation (WTO) – Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement gives freedom to each country to frame its patent and other IP related laws and confirms that the patent laws are ‘territorial’. Patent laws are therefore, national in scope and eventually IP rights may need to be enforced through the national courts.

According to sub-section (1) of section 20 of the Atomic Energy Act, 1962, no patents shall be granted for inventions which in the opinion of the Central Government are useful for or relate to the production, control, use or disposal of atomic energy or the prospecting, mining, extraction, production, physical and chemical treatment, fabrication, enrichment, canning or use of any prescribed substance or radioactive substance or the ensuring of safety in atomic energy operations. As a corollary to this, section 4 of the Patents Act, 1970 provides that “No patent shall be granted in respect of an invention relating to atomic energy falling within sub-section (1) of section 20 of the Atomic Energy Act, 1962”.

As a consequence,  inventions useful for or relating to the production, control, use or disposal of atomic energy or the prospecting, mining, extraction, production, physical and chemical treatment, fabrication, enrichment, canning or use of any prescribed substance or radioactive substance or the ensuring of safety in atomic energy operations can not be patented in India and in the absence of patent protection their inventors have to protect their rights through a confidentiality clause in the contract or a separate confidentiality agreement so that in case of breach, the supplier can have a right of recompense. Such remedy however, will be enforceable against the buyer and not against the government or the regulatory authority to whom information of proprietary nature is communicated by the buyer in compliance with the legal and regulatory requirements as in the absence of the privity of contract the government and regulatory authorities can not be held liable for the breach of confidentiality. Obviously intellectual property rights are available in rem while contracts normally bind the parties concerned. Yet it can be argued that the buyer may still be liable if it failed to inform the government or the regulatory authority of the proprietary nature of third party intellectual property related information submitted to them in compliance with the applicable local laws.

Though carefully drafted confidentiality agreements have a significant role in protecting intellectual property, such an agreement can, at best secure compensation for breach of contract between two parties and can hardly be a substitute for clearly delineated express laws which have binding force and are enforceable through deterrent penal provisions that can introduce order in the IP regime. Therefore, true international cooperation for protection of IP is absolutely essential which can only prosper in an atmosphere of mutual trust and equality by digging at currently prevalent fragmentary ‘territorial’ approach reflected in the WTO-TRIPS international IPR regime and the out-fashioned national laws like sub-section (1) of section 20 of the Atomic Energy Act, 1962 and Section 4 of the Patents Act, 1970. This is of great relevance in the context of highly-specialised technological endeavours such as the nuclear sector and deserves treatment of a forewarning that the host government might find it difficult to attract project participants and to achieve the desired levels of localisation and technology transfer to the extent to which the host country shows lack of respect for IP rights. New approaches to IP protection are therefore, the need of the hour.

* Advocate and a Member of the Nuclear Law Association, India and the International Nuclear Law Association. He  recently interned at the Nuclear and Treaty Law Section, Office of Legal Affairs, International Atomic Energy Agency (IAEA) at Vienna. Author is alone responsible for the contents of the write-up.
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Call for Papers: Third Annual Meeting of the Nuclear Law Association

“Nuclear Energy and Indian Society: Public Engagement, Risk Assessment and Legal Frameworks”

01 March 2014, India Habitat Centre, New Delhi

About

The Nuclear Law Association (NLA) is organising its 3rd Annual Meeting with the specific aim to deliberate on public engagement, consultation and acceptance of nuclear energy projects. The meeting further aims to seek a better understanding of the necessary legal framework for a safe nuclear energy program in India.

Call for Papers

Papers are invited from lawyers, academics, social scientists and the student community. A critical and comparative analysis of process, policy and law is encouraged. The papers must be submitted under any of the identified themes.

The following should be strictly adhered to and submitted in a single Word document:

  • An abstract of not more than 150 words.
  • The abstract should contain the research issues and a description of how the author proposes to address the issues. All in a paragraph format
  • A complete profile of the author. (2-3 lines)

 Dates

  • Abstract deadline: 1 January 2014
  • Selection notification: 15 January 2014

Publication Partner

A special issue of Journal of Risk Research, Taylor and Francis will publish the invited and selected papers.  A total of 5 papers will be selected for publication. Two out of these five papers will also be offered a presentation slot at the third annual meeting of NLA.

Themes

  • Public engagement, consultation and acceptance
  • Nuclear energy safety and public discourse
  • Case studies from India on public engagement (comparative studies can be included but must include an India component)
  • Land acquisition and EIA in India
  • Safety regulations and its enforcement
  • Nuclear regulatory institutions
  • Siting, consent and project execution
  • Nuclear liability and compensation

Contact

Abstract submission and queries related to paper

Dr R Rajesh Babu, Associate Professor, Indian Institute of Management, Kolkata

Email: rajeshbabu@iimcal.ac.in

For general enquires and participation

Els Reynaers Kini, Partner, M V Kini & Co, and, General Secretary, Nuclear Law Association
Email: secretary@nlain.org

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Don’t waver now on nuclear liability

Published in the Hindu, 20 September 2013*

Mohit Abraham & M.P. Ram Mohan**

 India’s Civil Liability for Nuclear Damages Act, 2010 (the Act), was a watershed moment in international nuclear liability jurisprudence because of the unique way in which it dealt with supplier liability. Up until this enactment, all liability in relation to a nuclear power plant was channelled exclusively to the operator. The only two situations in which a operator could claim a subsequent right of recourse against a supplier under international liability law as well as under domestic law of other countries were i) where the nuclear incident arose out of an act or omission by the supplier with an intent to cause damage (which is covered under Section 17(c) of the Act); and ii) a contractual right of recourse (which is covered under Section 17(a) of the Act).

The Act however, also introduced a novel concept of supplier liability in Section 17(b) by which the operator would have the ability to reclaim any compensation it may pay, from a supplier, if the product supplied has patent or latent defects or the service provided is substandard.

Section 17(b)

This expanded concept of supplier liability is vehemently resisted by major supplier countries including the United States, Russia and France, on the ground that these provisions are not consistent with international norms pertaining to nuclear liability. Parliament, however, deemed it fit to deviate from these international norms owing to India’s history with industrial accidents, particularly the Bhopal gas tragedy, and felt that this additional requirement contained in Section 17(b) was necessary in the Indian context.

Recent news reports (19 September 2013, The Hindu ) now indicate that the Attorney General has provided a legal opinion to the government opining that Section 17(a) provides for a right of recourse if such right is expressly provided for in a contract in writing and the operator is therefore free to choose not to incorporate such a provision in its contract with the supplier. It is understood that the opinion goes on to confirm that the operator can either incorporate a clause in the contract to cover the right of recourse under Section 17 or can waive such a right. It is also understood that the Attorney General gave this opinion from a strictly legal point of view and not policy.

An important point to note here is that a plain reading of Section 17 seems to suggest that Section 17(a), (b) and (c) are distinctive and separate. Merely because a contractual right of recourse in terms of Section 17(a) has been used or not used by an operator in his contract with a supplier, would have no bearing on Sections 17(b) and (c). This argument is strengthened, as it would be unthinkable for the government to waive a right of recourse in situations covered under Section 17(c) that deals with causing of nuclear damage with an intent to cause such damage. In other words, hypothetically, can the operator take a stand that it would waive its right of recourse against a supplier who causes nuclear damage intentionally? The answer would obviously be no. Therefore, if the exclusion cannot be made for sub-clause (c), exclusion for sub-clause (b) is also not possible and Section 17(a) cannot be the basis for reading such a right of waiver.

Another point to note is that in India, the nuclear operators, viz. the Nuclear Power Corporation of India Limited (NPCIL) and the Bhartiya Nabhikiya Vidyut Nigam Limited (BHAVINI), are wholly government owned. Therefore, the entire responsibility of setting up and running a nuclear power plant rests with these entities. Consequently, under nuclear liability laws, in the event of a nuclear accident, compensation that may be payable would have to be borne by these entities. Since these entities are government entities, the funding is also entirely by the government and, therefore, ultimately by the taxpayers of India. In this backdrop, can the Indian operator contractually agree with a supplier to waive its right of recourse under Section 17(b) of the Act to recover such compensation from a supplier who may have provided a component with “patent or latent defects”?

Unsustainable

A preliminary analysis suggests that it would be difficult to legally sustain such a blanket waiver. The law in relation to waiver of a statutory right is well settled. The Supreme Court of India has held that a statutory right in favour of a party can be waived by such party as long as no public interest or public policy is adversely affected (see for e.g. Krishna Bahadur v. Purna Theatres (2004)). If NPCIL were to waive its right to claim subsequent compensation against a supplier who has provided a product with a “patent or latent defect” or has provided “substandard service,” it would mean that the compensation is ultimately being footed by the taxpayer despite the fact that there is a law which enables NPCIL to seek such compensation from a negligent supplier. This would squarely be against public interest and appears to be legally unsustainable.

If Parliament, in its wisdom, has decided to introduce an expanded concept of supplier liability in the Act, it can also be argued that this forms part of the public policy of India — a consideration, which it is understood, is expressly excluded from the Attorney General’s legal opinion. Further, Section 23 of the Indian Contract Act, 1872 also provides that the consideration or objects of a contract would be unlawful if it would defeat the provisions of a law or is opposed to public policy. While a strong case can be made out that such waiver would defeat the provision of the Act, it can also be argued that it would be against the public policy of India. The Supreme Court in Rattan Chand Hira Chand v. Askar Nawaz Jung (1991) held that a contract which has a tendency to injure public interests or public welfare is one against public policy and what constitutes an injury to public interests or welfare would depend upon the times in which the issue arises. It is therefore important to remember that the ultimate interpretation of these provisions and contractual arrangements is going to be by an Indian court in the backdrop of a nuclear incident. In such a backdrop, it is more likely for an Indian court to adopt an interpretation that rejects an attempt at circumventing the provision of the Act by providing a waiver of a right of recourse, as this would be against public interest.

Parliament has framed a law that has an expansive concept of supplier liability and all entities, foreign or Indian, are subject to this law. If there were problems in the implementation of the law, then the right course would be for Parliament to amend such laws. The Act, as it stands, has various ambiguities in relation to the scope of supplier liability. These ambiguities are undoubtedly a hurdle for foreign suppliers and ought to be clarified or removed.

Some of these hurdles can be avoided by providing for contractual provisions by which the Indian operator provides timely feedback to the supplier in relation to the functioning of a particular component or perhaps even certifying after a period of time of usage of the component, that the component does not suffer from a “patent or latent defect”. This kind of an approach by the operator may be more helpful for the supplier community rather than an approach in which the Indian operator says it is giving a blanket waiver of its statutory right of recourse.

The Act does have its flaws but it has raised some key challenges to international liability principles that historically insulated the supplier from liability in practically all situations. It should be borne in mind that these provisions will be interpreted by an Indian court in the context of a nuclear incident. Any watering down of the law by the operator offering waivers of statutory provisions would only increase the ambiguities, and is in no one’s interests, including those of the foreign suppliers.

**(Mohit Abraham is a Partner with PXV Law Partners and M.P. Ram Mohan is Fellow, The Energy and Resources Institute (TERI). Both are on the governing board of the Nuclear Law Association of India. Views expressed are personal)

*http://www.thehindu.com/todays-paper/tp-opinion/dont-waver-now-on-nuclear-liability/article5148125.ece

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