Status and Prospects for the Indian Nuclear Liability Law

1. Status and Prospects for the Indian Nuclear Liability Law Mohit Saraf Senior Partner Luthra & Luthra Law Offices The Seventh Meeting of the CII-USIBC Joint Task Force on Commercial Nuclear Corporation on December 7, 2009

2. 2 Background India needs to augment energy supply to fuel growth. For decades, India faced nuclear isolation and despite acute power shortage could not exploit nuclear energy to the fullest. Prime Minister Manmohan Singh elaborated the imperative need for India to have unhindered access to nuclear energy if we are to maintain and accelerate our rate of economic growth. India and USA write history by signing the 123 Agreement. Regulation needed to address all aspects of nuclear industry.

3. 3 Internationally Accepted Nuclear Liability Law The seven pillars of internationally accepted nuclear liability law: channelling of liability to the installation operator, no fault liability, liability limited in amount, liability limited in time, a single competent court to adjudicate claims, compulsory financial security, non-discriminatory treatment (based on nationality, domicile or residence).

4. 4 International Conventions Convention on Supplementary Compensation for Nuclear Damage (CSC): Envisages two tiers of compensation in case of a nuclear accident. The Installation State has to ensure the availability of at least 300 million SDRs. The second tier to be contributed to by contracting parties. No discrimination on the basis of nationality of the victim. The �operator� is absolutely liable for nuclear damage, up to a specified cap.

5. 5 International Conventions No liability shall be attached to a nuclear operator in case the nuclear incident is caused by an armed conflict, hostilities, civil war or insurrection or a grave natural disaster of an exceptional character. Limitation period of 10 years. Jurisdiction vested with courts where the nuclear incident occurs.

6. 6 International Conventions Vienna Conventions: Based on the same principles as CSC. Minimum liability limit of 300 million SDRs Limitation period generally of 10 years and 30 years in case of personal injury. Non-availability of international funds. Paris Conventions: Based on similar principles as CSC and Vienna Conventions. Membership open only to Organization for Economic Co-operation and Development (OECD) members or with the consent of all other parties. India may sign one or more of the international instruments depending on international relations, geographical scope or may solely enact a national law. CSC is preferable since US also a signatory.

7. 7 The Present Indian Law Indian legal response to the Bhopal Gas Tragedy Supreme Court enunciates �absolute liability� in the midst of claims of sabotage: �the enterprise is strictly and absolutely liable to compensate all those who are affected by the accident and such liability is not subject to any of the exceptions which operate vis-a-vis the tortious principle of strict liability�. Absolute liability allows no exceptions, including sabotage or Act of God.

8. 8 The Present Indian Law Bhopal Gas Tragedy claims were finally settled out of court for a payout of approximately USD 470 million, with the blessings of the Court. Attracted considerable public criticism for the perceived insufficiency of the compensation and tardy relief measures.

9. 9 The Present Indian Law  Liability attaches to the enterprise � an indeterminate term that can arguably include the parent company and perhaps even suppliers/ construction contractors/ operations and maintenance contractors. �The larger and more prosperous the enterprise, the greater must be the amount of compensation payable by it�. Existing limitation law unclear and may permit claims for harm resulting decades after the incident. Not in line with the �cap-and-channel� approach. Uncertainty under present Indian law not conducive for corporate participation.

10. 10 The Civil Liability For Nuclear Damage Bill Listed for introduction in Parliament in the ongoing session, but draft not available as yet. Media reports suggest that the Cabinet of Ministers has approved the Civil Nuclear Liability Bill. President Obama and Prime Minister Manmohan Singh have reiterated their intention �to realise the full potential of the India-US Agreement�. Indicated to be in broad compliance with the CSC. Liability channelled to the operator, which would be the NPCIL, and is capped at USD 537 million (according to some sources).

11. 11 The Civil Liability For Nuclear Damage Bill Mainstream media publications such as Outlook and The Hindu have attacked the CNL Bill and branded it pro-America / anti-Bhopal. Passage through Indian Parliament likely to be a stormy affair.

12. 12 Why is the Liability Bill attracting criticism? The Liability Bill is attacked primarily for: Limitation of liability- a deviation from the principle of reparation. A measure allegedly absolving US companies from all liability. Since ultimate responsibility to award just compensation is on the Government, it is perceived that tax payers� money would be used to compensate tax payers. Bhopal is an emotional issue. A nuclear liability legislation thought of as protection to avoid the inconvenience caused to UCC after the Bhopal disaster. Opposition from certain sectors is expected in a democratic process.

13. 13 Correcting the Balance Indian citizens would suffer since costs of unlimited liability would render nuclear power prohibitively expensive in terms of per-unit costs. Nuclear liability legislation is considered a must in practically all countries pursuing nuclear energy. Enactment of a law on civil nuclear liability would be in furtherance of India�s commitment to the US. Ratifying CSC would help augment available compensation funds.

14. 14 Correcting the Balance Need to build independent regulator with high technical competence � techno-economic clearance. Need to build broad based licensing regime so that companies with great track record may enter the sector. Reducing possible chance of accident is more important than not limiting liability.

15. 15 Beyond the Liability Bill: CSC India has repeatedly indicated its commitment to adhere to the CSC. No timeline has been offered. The CSC will enable US suppliers to contribute compensation funds, even for incident at non-US site. The CSC will mitigate risk of US litigation for all members of the nuclear business.

16. 16 Legislative Procedure Introduction of the Bill in either of the two Houses of the Parliament. Notice for leave to introduce a Bill is usually 1 month but may be reduced by the Speaker. A Bill goes through three readings in each House of the Parliament and after passage, assent of the President. The Second Reading is where the Bill is considered. The House may send the Bill to a Committee for its recommendation or to the public to elicit opinion.

17. 17 Legislative Procedure Time period for passing a Bill varies. It could be as short as a few days. However, the House may choose to debate over issues of public importance. President may at any time, except when both Houses of Parliament are in session, upon his/ her satisfaction, promulgate an ordinance. An ordinance would cease to operate at the expiry of 6 weeks from the reassembly of the Parliament or if it is disapproved by the Parliament prior to 6 weeks from its reassembly or if it is withdrawn by the President.

18. 18 Entry into the CSC The CSC requires the national law of a ratifying contracting state to be in compliance with the terms of the CSC. India would have to enact national law in compliance with the CSC, after which it may ratify the CSC. Ratifications of international conventions do not necessarily require Parliamentary legislation.

19. 19 Thank YouMohit Saraf Senior PartnerLuthra & Luthra Law Offices