Right of Recourse: Interpretation under Civil Liability for Damage Liability Rules, 2011

Mohit Abraham*

The much awaited The Civil Liability for Nuclear Damage Rules, 2011 (The “Rules”) are now in place to implement the provisions of the Civil Liability for Nuclear Damage Act, 2010 (The “Act”). Interestingly, the Act and the Rule has come into force (notified) on the same day i.e., 11 November 2011. Undoubtedly, there has been an intense lobbying from various supplier countries to dilute some of the critical and unique provisions of the Indian Liability Act. An analysis of the Rules provides an insight in both placating supplier countries and also the attempt in retaining stringent provisions in the Act.

Right of Recourse under Rule 24 is one such Rule that needs a broader debate. The following note explains Rule 24 and its possible interpretation. This note limits itself to interpretation of Rule 24 read with S 17 (a), (b), (c) of the Act.

  1. Rule 24 sub-rule 1 of the Rules provides that a contract referred to in clause (a) of Section 17 of the Act, shall include a provision for right of recourse for not less than the extent of the operators liability provided under Section 6(2) of the Act or the value of the contract itself, whichever is less.
  2. Further, sub-rule 2 of Rule 24 provides that the provision for a right of recourse referred to in sub-rule 1 of Rule 24 shall be for the duration of initial license issued under the Atomic Energy (Radiation Protection) Rules 2004, or the product liability period whichever is longer. Therefore, sub-rule 2 also refers to only the right of recourse provided under Section 17(a) and not section 17(b) and 17(c). The Rules then go on to explain what is “product liability period” and “supplier”.
  3. A key issue of interpretation arises here. Section 17 of the Civil Liability Act states that the operators shall have a right of recourse where; a) such right is expressly provided for in a contract in writing; b) the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services; c) the nuclear incident has resulted from the act of commission or omission of an individual done with the intent to cause nuclear damage.

The present Rule 24 appears to confine itself to the provision of Section 17(a) alone. Sub sections 17 (b) and (c) do not appear to be covered at all. This interpretation of course proceeds on the basis that sub-sections 17(a), (b) and (c) are distinctive, i.e. the right of recourse applies where the situations referred to in 17(a) or (b) or (c) are fulfilled.

Therefore, the confinement of the liability to a specific time period, i.e the duration of initial license issued under the Atomic Energy (Radiation Protection) Rules (about 5 years) or the product liability period, would work only when the right of recourse is expressly provided for in a contract in writing, i.e Rule 17(a).

This may work out in practice as follows: Assume a contract is entered into between the operator and the supplier in which the warranty provided by the supplier for a product is for 5 years. Accordingly, in terms of Rule 24, the right of recourse by the operator against the supplier would apply for 5 years. During the course of 5 years, any damage caused owing to material defect of the particular product would attract the right of recourse clause. After 5 years, the supplier is no longer liable and no right of recourse would apply.

However, after a period of 5 years, in terms of Section 17(b), if the operator could show that a nuclear incident has resulted as a consequence of an act of a supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services (as opposed to normal wear and tear), the right of recourse would be of no avail, and the supplier could be made liable.

Therefore, it could be strongly argued that if a nuclear incident results directly as a consequences of an act of a supplier or his employee, this limitation on liability provided in the Rules would not apply.

It if was the intention of the Central Government to limit the time period of liability to all situations, the existing Rules do not appear to do so. They only apply to situations where the right of recourse is provided for in a contract in writing.

Separately, Section 46 of the Act states that the Act shall be in addition to, and not in derogation of any other law. Therefore, technically, an individual affected by a nuclear incident would be within his rights to move an action in tort against a supplier notwithstanding any contract between the supplier and the operator since there is no contract privity between such individual and supplier.

The Rules do seem to raise some questions which are bound to attract more debate and seems in all probability a case for future litigation.

*Mohit Abraham is a Member of Governing Board of the Nuclear Law Association (NLA) and Chairs the Working Group on Nuclear Liability at NLA. He is a Partner with PXV Law Partners.

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