Whether the new Nuclear Liability Rules are in line with the Nuclear Damage Act? Expert views

Bar & Bench News Network Dec 19, 2011

 The Government has recently notified the Civil Liability for Nuclear Damage Rules 2011 (the Rules) to implement the Civil Liability for Nuclear Damage Act, 2010.

In August last year, the Indian government had approved the Civil Liability for Nuclear Damages Act (the Act) with the aim to provide immediate compensation to victims of any nuclear disaster that takes place within the country.

Under the Act, the operator of nuclear facilities, will pay out the maximum permissible compensation of Rs. 1500 crore (nearly  $300 million) and then seek damages from suppliers if their equipment was found to be defective.  Therefore, the Act allowed operators of nuclear facilities to have a ‘right of recourse’ against equipment and nuclear material suppliers if “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.”

Section 17 of the 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; or c) the nuclear incident has resulted from the act of commission or omission of an individual done with the intent to cause nuclear damage.

This provision was added after much pressure from various activists and after the opposition had heated debates on the floor of the House. The result of this clause so far had been that foreign suppliers, have been unwilling to supply to India because of this additional liability which cannot be accurately foreseen. There has been lot of pressure from the foreign suppliers to restrict the liability.

Under the newly notified Rules, Rule 24 is being debated the most as being framed to guard the interest of foreign suppliers and to accommodate their interests. According to experts, Rule 24 is not in consonance with the Act. It dilutes the stringent liability provision provided in the Act by restricting the liability of the supplier.

Rule 24 provides for the amount of recourse the suppliers might be exposed to and the length of time of time the suppliers are subjected to the risk.

Rule 24 (1) 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. Rule 24 (2) 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.

Karuna Raina, Nuclear Campaigner Greenpeace in a press release said, “the newly notified Rules go against the intent of parliament which passed one of the strongest supplier liability clauses that exist today. While the Act provides for stringent supplier liability provisions, the Rules dilute this provision by limiting the extent of liability and the period of cover. In limiting supplier liability and almost indemnifying suppliers, the Rules impose the ultimate financial burden of a nuclear accident on the Indian government and the taxpayer.”

Greenpeace took the opinion of eminent jurist and former Attorney General of India, Soli Sorabjee on the notified Rules relating to supplier liability. Mr. Sorabjee in his opinion, said that the notified Rules (1) relating to supplier liability is inconsistent with the Civil Liability for Nuclear Damages Act 2010, and hence invalid. He has opined that Rule 24 is unduly restrictive as it limits the amount which can be claimed by exercise of the right of recourse to the extent of the operator’s liability or the value of the contract – whichever is less and also imposes limits on the time period for which an operator can be held liable. The detailed opinion is provided below.

Informed by Sobrajee’s opinion, Greenpeace calls for the Rules notified by the Department of Atomic Energy to be revoked as certain clauses are repugnant to the Liability Act.

Bar & Bench spoke to young mind Mohit Abraham Partner at PXV Law and Co-Chair of the Working Group on Nuclear Liability at the Nuclear Law Association of India on this issue. Nuclear Law Association (NLA) is a forum for the legal community to discuss issues relating to peaceful use of nuclear energy in India. Mohit has a different view from that of Mr. Sorabjee’s, which is provided in detail below.

Mohit Abraham said, “I would argue that Rule 24 would have absolutely no application in cases falling under Section 17(b) and (c), i.e. where the nuclear incident has resulted as a consequence of an act of a supplier or his employee which includes supply of equipment with patent or latent defects or sub-standard services or if it done by an individual with the intent to cause damage. It is intended to apply only to cases under Section 17(a). This is because Rule 24 (1) deals only with “a contract referred to in clause (a) of Section 17” while Rule 24(2) speaks about “the provision for a right of recourse referred to in sub-rule 1 of Rule 24” – which is again a clear reference to Section 17(a) alone. There is no reference, direct on indirect, to sub-clauses (b) and (c) of Section 17 in Rule 24. Therefore, it would not be accurate to state that the supplier’s liability has entirely been limited by virtue of Rule 24. In the event the circumstances under Section 17(b) or (c) are made out, the operator would clearly have a right of recourse against the supplier.

Further, Section 46 of the Act clearly states that the Act shall be in addition to, and not in derogation, of any other law for the time being in force. Therefore, even if a right of recourse is not pursued by the operator, i.e. NPCIL, any other affected individual or entity can seek tortious remedies against any supplier whose actions, equipment or material may be responsible for a nuclear incident”

Mohit added, “This interpretation is in consonance with the first rule of statutory interpretation – the literal rule of interpretation. Further, the Act deals with compensation in cases of a nuclear incident. It is therefore a beneficial legislation whose intent is to promote the common good. It is also a well-settled principle of statutory interpretation that in cases of such beneficial legislations a liberal interpretation in favour of the intended beneficiaries (in this case the people affected by a nuclear incident, through the operator) should be resorted to. Basically, the courts would lean towards an interpretation, which would advance the beneficent purpose underlying the enactment in preference to a construction which tends to defeat that purpose.

In light of this, there is a high possibility that the interpretation of Rule 24 which I have suggested, may be adopted by the courts. Whether this was the intention of the Rules framers or not is a separate issue which can only be clarified by the Central Government”.

The DLA Piper conference this year on Indian Nuclear Rules highlighted an additional issue regarding the Act.  On October 27, 2010, India signed the Convention on Supplementary Compensation for Nuclear Damage (CSC), though it has not ratified it yet.  The ratification instruments of the CSC can be accepted from a state which is a party to either the Vienna Convention on Nuclear Liability or the Paris Convention on Third Party Liability (which India is not), “or a State which declares that its national law complies with the provisions of the Annex to the Convention”, and is also a contracting state to the 1994 Convention on Nuclear Safety (which India is).

The question the conference raised was, whether the Act and the Rules, would be found to be compatible with the CSC and its annex. More specifically, Section 17(b) of the Act may be deemed to be at odds with the CSC, which only recognizes the two other grounds set out in Sections 17(a) and (c) as a right of recourse. It is possible that the International Atomic Energy Agency will be requested to express its opinion on the matter.

The Government however, in the backdrop of Prime Minister’s visit to Moscow and the controversy surrounding the Koodankluam plant has been taking a stand that the Act and the Rules are “balanced” and fair to both foreign suppliers and nuclear plant operators.

Bar & Bench had earlier spoken to nuclear experts on the nuclear liability and safeguards in the light of the nuclear tragedy that had hit Japan this year.

Soli Sorabjee Opinion can be assessed at  http://www.scribd.com/doc/76040394/Soli-Sorabjee-Opinion

Sorabjee Picture Courtesy: The Hindu