NLA representation at ‘Nuclear Energy – India 2012’

Falcon Media, Mumbai organised a nuclear energy event titled “Nuclear Energy – India 2012” on 25 April 2012. Nuclear Law Association, India (NLA) was represented by Mr Dipankar Bandyopadhyay, a member of NLA’s Governing Board and a Partner at VERUS, a full service pan India law firm. Mr Bandyopadhyay talked about legal framework on nuclear liability in India in the session titled “Indigenous Manufacturing & Fuel Sourcing Issues for India’s Nu-Clear Energy

The other speakers on the panel were Mr. Sudhinder Thakur, Distinguished Scientist & Fellow, Nuclear Power Corporation of India Ltd (NPCIL) and Dr Satish Patil, Secretary General, TBIA.

Dipankar began his talk by broadly explaining the legal principles behind damages for a civil nuclear incident and that the primary responsibility for payment of such damages rests with the ‘operator’ (currently,the only operator is NPCIL) of a nuclear power plant (NPP).Only in certain limited circumstances the operator’s liability has been statutorily excluded.  As part of his opening remarks, Dipankar also dealt with the concepts around statutory cap on damages, operator’s maximum liability for a nuclear incident and Government of India’s residuary obligation to compensate victims where the statutorily capped amounts prove to be inadequate.  As the audience contained many representatives of suppliers, he then went on to deal with the concerns of the suppliers with respect to ‘operator’s right of recourse’ under Section 17of the Civil Liability for Nuclear Damage Act, 2010 (Act), and specifically with respect to Section 17(b) providing for operator’s recourse in the event a supplier is has provided “equipment or material with patent or latent defects or sub-standard devices. The provisions of the Act, Dipankar explained, is not conclusive as far as liability of an operator is concerned as the Act recognises that actions for recovery damages under tort law can well continue despite NPCIL paying out damages as stipulated in the Act. It was pointed out by members of the audience that such a broad recourse provision was inconsistent with the prevailing international practice. The international practice in this regard is to fasten liability on a supplier if such liability is expressly provided for in the commercial contract between the operator and the supplier or if the nuclear incident results from an act or omission done with the intent to cause damage.

A member from the audience pointed out that the Indian law in this regard appeared to be stricter in respect to recourse under Section 17(b) for latent or patent defects and this is not a widely recognised internationally accepted norm. Following this, Dipankar brought up the divergence of views regarding interpretation of Section 17. Section 17 contains three sub-sections all of which are separated by semicolons and it is not very clear whether three requirements in the sub sections are to be read as conjunctive or, as separate requirements giving rise to recourse to the supplier on the occurrence of any of the three situations.

Dipankar on Section 17: “It is not very clear whether three requirements in the sub sections are to be read as conjunctive or, as separate requirements giving rise to recourse to the supplier on the occurrence of any of the three situations”

Mr. Thakur intervened at this point of time to explain that in his view, all the three requirements of Section 17 were to be fulfilled simultaneously for the operator to claim recourse to its supplier. He mentioned that a standalone occurrence of the situation envisaged under Section 17(b) is quite hypothetical in light of the fact that the engineering and commissioning of a NPP is closely monitored and co-ordinated by the operator and, absent a foul pay of some sort, it was unlikely that a patent or latent defect would exist after thorough inspection by not only NPCIL but also the Atomic Energy Regulatory Board (AERB). Dipankar pointed out that India being a signatory to Convention of Supplementary Compensation (CSC), the domestic law should be interpreted consistentwith India’s treaty obligations and, from that perspective, an interpretation providing separate recourse on each of the cases mentioned in Section 17 of the Act did not appear consistent with the principles of recourse adopted in CSC.

Thakur’s views on Section 17: “All the three requirements of Section 17 were to be fulfilled simultaneously for the operator to claim recourse to its supplier”

The discussion then turned on to the recently introduced Civil Liability for Nuclear Damages Rules, 2011. Dipankar mentioned that the Rules had introducedlimitationon the time period within which the operator is required to exercise the right of recourse and the maximum extent of liability of the supplier. The Rulesrequire that recourse can be claimed until the longer of the initial license period (usually 5 years) approved by the AERB and the product liability period.  Questionswere raised on whether the limitation on time period would cover nuclear incidents occurring at different phases of commissioning of a NPP in light of the definition of ‘initial license period’ or, the way product liability period works under contract documents of NPCIL.It was pointed out that the Government bodies would be continuously evaluating as to how the limitation on time period were panning out in practice and,if the time limit proved unworkable, necessary changes in the regulation might even be considered .  As regards the limitation on the monetary amount of supplier’s liability, Dipankar pointed out that the liability of the supplier could not be less than the lesser of the operator’s liability (Rs.1,500 crore) and the value of the contract. In this context, Dipankar raised a question to Mr.Thakur about the indemnity clause which had been historically present in the General Conditions of Contract (GCC) of NPCIL applicable to domestic suppliers.  Such a clause completely exonerated the domestic suppliers in respect of third party life and property damage claims arising out of nuclear event at NPCIL’s site although foreign suppliers did not enjoy benefit of such an indemnity. Mr. Thakur confirmed that recent GCC no longer carried such an indemnity clause and, to that extent, parity of treatment had been brought between the foreign suppliers and the domestic suppliers. The session closed with final remarks from the Chair that the Government was duty bound to promote nuclear power in such manner that it did not conflict with life of common citizens and all steps towards that were being taken by the relevant agencies.

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