On February 4, India submitted the instrument of ratification of the Convention on Supplementary Compensation for Nuclear Damage (CSC) to the International Atomic Energy Agency (IAEA).[1] India had signed the convention in 2010, but it needed to be ratified by Parliament as well, which has now happened.[2]
News reports suggest this ratification “clears the deck” for foreign companies and will help “win investment” in the nuclear sector. Some activists have lashed out at what they see as a dilution of India’s civil nuclear liability law.[3][4][5]
These views are mistaken: India’s stand on nuclear liability remains unchanged despite the ratification of the convention.
Firstly, India is not trying to “win investment” for its nuclear energy sector from companies such as Westinghouse and Areva. India is planning to build several new nuclear power plants, but all under the umbrella of the state-owned Nuclear Power Corporation (NPCIL). Any investment in the nuclear power sector is going to be made by NPCIL, and thus, by Indian taxpayers. Foreign firms such as Westinghouse, Areva, and GE Hitachi will be involved only as contractors and suppliers to NPCIL—not as investors. India is not looking at these companies for ‘investments’—their involvement in India will only be as vendors for NPCIL—and, as vendors, they cannot dictate terms to a customer.
Secondly, ratification of the (CSC) does not “clear the decks” in any significant way for foreign participation. Foreign participation in India’s nuclear programme has, so far, been held back by the Civil Liability for Nuclear Damage Act, 2010 (CLNDA).[6] The act was drafted keeping in mind the 1984 Bhopal gas tragedy, and has a provision that suppliers to nuclear power projects can be held liable for accidents if they or their employees are responsible for any nuclear incident. This provision has been opposed by foreign suppliers, particularly those from the United States. [7]
India’s ratification of the CSC has led some activists to allege that the government has diluted India’s stand on nuclear liability, but this is incorrect. Article 10 of the Annex of the convention specifically deals with supplier liability.[8] The text of the article reads:
National law may provide that the operator shall have a right of recourse only:
- if this is expressly provided for by a contract in writing; or
- if the nuclear incident results from an act or omission done with intent to cause damage, against the individual who has acted or omitted to act with such intent.
The right to recourse is still there if provided for in a contract. Meanwhile, section 17 of CLNDA provides that [9]:
The operator of the nuclear installation, after paying the compensation for nuclear damage in accordance with section 6, shall have a right of recourse where—
- such right is expressly provided for in a contract in writing;
- 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;
- the nuclear incident has resulted from the act of commission or omission of an individual done with the intent to cause nuclear damage.
The act explicitly gives the circumstances under which a supplier can be held liable for an incident. Jurist Soli Sorabjee has also expressed his legal opinion on the matter, saying that Indian law cannot be superseded in this case. Therefore, as long as NPCIL provides for the right to recourse in the contracts that it enters into with its suppliers, the suppliers can be held liable for any lapses on their part which lead to problems. NPCIL is fully owned by the Government of India and is bound to follow Indian law on this issue.
The act explicitly gives the circumstances under which a supplier can be held liable for an incident. Jurist Soli Sorabjee has also expressed his legal opinion on the matter, saying that Indian law cannot be superseded in this case.[10] Therefore, as long as NPCIL provides for the right to recourse in the contracts that it enters into with its suppliers, the suppliers can be held liable for any lapses on their part which lead to problems. NPCIL is fully owned by the Government of India and is bound to follow Indian law on this issue.
There are two ways in which the supplier’s liability issue can play out to match the demand of foreign firms:
- Indian liability law is changed to reflect their demand;
- the law is unchanged, but NPCIL does not ask for the right of recourse in its contracts.
Changing the liability law, in the backdrop of Bhopal and with the experience of Fukushima, will not be politically feasible, but is still possible. The second approach is to keep the law unchanged, but subvert its spirit. Here, it is worth pointing out that NPCIL or the Department of Atomic Energy are unlikely to remove the right of recourse from a contract on their own initiative. The decision will have to be made on the political side.
Again, any decision maker will need to consider the future probability of another government using dilution of nuclear liability as a political tool. Both the scenarios outlined above are of low probability, but they can potentially leave India vulnerable to severe consequences and, therefore, constant vigilance is needed on both these fronts.
India’s stand on nuclear liability today is exactly what it was before it submitted the ratification of the CSC. If foreign nuclear suppliers have apprehensions about India’s nuclear liability regime, their apprehensions remain.
For the Indian nuclear programme, this means that likes of GE, Areva, and Westinghouse are unlikely to participate in new power projects, for now. This is actually a good thing, as shown by Gateway House earlier: these firms are selling expensive technologies that cost up to three times that of the locally-developed alternatives, i.e., Indian-designed nuclear reactors.[11] For the same investment, India can create three times the capacity if it goes indigenous and truly “makes in India”.
Amit Bhandari is Fellow, Energy & Environment Studies, Gateway House. Kunal Kulkarni is a Senior Researcher at Gateway House.
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References
[1] Embassy of India to Austria and Montenegro, 4 February 2016, <http://indianembassy.at/gallery.php?album=419>
[2] Times of India, India signs CSC on nuclear damages ,27 October 2010, <http://timesofindia.indiatimes.com/india/India-signs-CSC-on-nuclear-damages/articleshow/6821174.cms>
[3] Livemint, India ratifies key international convention on nuclear accident compensation, 6 February 2016, <http://www.livemint.com/Politics/G0Pz7NFRwZlp1C4pDAbGDJ/India-ratifies-key-international-convention-on-nuclear-accid.html>
[4] Times of India, India ratifies nuclear liability convention, hopes to win foreign investment, 5 February 2016 <http://timesofindia.indiatimes.com/india/India-ratifies-nuclear-liability-convention-hopes-to-win-foreign-investment/articleshow/50860762.cms.>
[5] Scroll.in, The dilution of nuclear liability by the modi government that nobody is talking about, 9 February 2016 <http://scroll.in/article/803229/the-dilution-of-nuclear-liability-by-modi-government-that-nobody-is-talking-about>
[6] Economist, India’s nuclear diplomacy: Late Addition, 28 June 2014, <http://www.economist.com/news/asia/21605961-india-ratifies-last-nuclear-deal-iaea-late-addition>
[7] Livemint, GE’s Jeff Immelt bullish on india, but points to hurdles, 22 September 2015 <http://www.livemint.com/Companies/B7oJ9PyE6ZLWIvTz84PfxM/Jeffrey-Immelt-bullish-on-India-but-points-to-hurdles.html>
[8] International Atomic Energy Agency, Convention on Supplementary Compensation for Nuclear Damage,
<https://www.iaea.org/publications/documents/treaties/convention-supplementary-compensation-nuclear-damage>
[9] Ministry of Law and Justice, The Civil Liability for Nuclear Damage Act, 2010, 22 September 2010 <http://lawmin.nic.in/ld/regionallanguages/THE%20CIVIL%20LIABILITY%20OF%20NUCLEAR%20DAMAGE%20ACT,2010.%20(38%20OF2010).pdf>
[10] DiaNuke.org, Soli Sorabjee’s opinion on Liability Rules and CSC, 13 December 13 2011, <http://www.dianuke.org/soli-sorabjees-opinion-on-liability-rules-and-csc/.>
[11] Gateway House, Quiet burial for the nuclear deal, November 2015<http://www.gatewayhouse.in/quiet-burial-for-the-nuclear-deal/.>