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Mohit on Rule 24

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Mohit’s views on the Rule 24 has been quoted in the latest issue of the Nuclear Intelligence Weekly  (Vol. V, No. 47, November 21, 2011) [www.energyintel.com].

The article is as below

INDIA

Liability Act Goes Into Force, Rules Issued

The Indian government on Nov. 11 put into effect the Civil Liability for Nuclear Damage Act of 2010 and issued rules for its implementation. The rules do not and could not bring India into line with international practice by sheltering suppliers from liability in case of an accident, but they do (apparently unsuccessfully) attempt to address nuclear vendors’ concerns by limiting supplier liability.

Sources at all major foreign nuclear vendors, as well as some domestic Indian nuclear suppliers, have in the past told NIW they have serious concerns about signing contracts under India’s new nuclear liability regime. Several of these sources also said in October that no set of rules could adequately address their concerns, because no rule could fundamentally reverse the intention of a law — in this case, by protecting suppliers from liability (NIW Oct.3’11).

Despite Prime Minister Manmohan Singh’s ambiguous public statement on the new rules, a fundamental change to the law may be in the works: Singh has pledged Indian ratification of the Convention on Supplementary Nuclear Compensation (CSC) by the end of 2011. The CSC and the Indian liability act are in conflict, since the former obliges signatories to shelter suppliers and the latter does not. So ratification of the CSC would likely result in additional pressure for India to change its law to bring it into compliance with its international obligations under the CSC.

Industry sources and vendor spokespeople told NIW last week that their companies’ legal teams were still reviewing the rules, and so it was too early to comment on them. G. Balachandran, a researcher who’s been following the liability issue at the Institute for Defence Analyses in New Delhi told NIW that the rules were “a brave attempt to reconcile the needs of both suppliers and the provisions of the Liability Act. However, I am not yet sure if it will satisfy either the suppliers or the Indian legislature that passed the Act.”

The rules will now go before India’s Parliament for 30 days. The winter session begins Nov. 22 and ends Dec. 21. It looks set to include debates on the creation of a more independent nuclear industry regulator (replacing the Atomic Energy Regulatory Board), and ratification of the CSC (NIW Sep.12’11).

The Fine Print

The rules issued Nov. 11 attempt to limit suppliers’ liability, but apparently fail to do so effectively. They still seem to leave the way open, in case of a nuclear accident, for lawsuits against negligent suppliers through the structure set up by the nuclear liability act. They also appear to leave the way open for direct lawsuits by victims against suppliers.

The Civil Liability for Nuclear Damage Act of 2010 included a clause giving the operator the “right of recourse” to sue suppliers to recoup the cost of payments to victims after a nuclear acci- dent. The act’s Section 17 says that the operator has this right of recourse in three instances: if “(a) such a right is expressly pro- vided for in a contract in writing; (b) the nuclear incident has resulted from the willful act or gross negligence on the part of the supplier … ; [or] (c) the nuclear incident has resulted from the act … done with the intent to cause nuclear damage.”

In the set of rules issued this month, Rule 24 deals with this right of recourse, and its sub-rule 1 specifies 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 operator’s liability under sub-section (2) of Section 6 of the Act or the value of the contract itself, whichever is less.” In cases covered by Section 17 (a), this apparently limits supplier liability to either 500 crore rupees (about $250 million) or the value of the contract — which could theoretically be $1 for a screw or some other small part — whichever is less.

Sub-rule 2 in the rules issued this month also adds — in cases covered by Section 17 (a) — a time limit on the operator’s right of recourse, saying that “The provision for right of recourse referred to in sub-rule (1) 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.” The rules define the product liability period as “the period for which the supplier has undertaken liability for patent or latent defects or sub-standard services under a contract.”

However, Mohit Abraham, a partner at PXV Law and co- chairman of the Delhi-based Nuclear Law Association’s nuclear liability working group told NIW in an email that these new limitations imposed by the rules seem to apply only to Section 17(a), leaving Nuclear Power Co. of India Ltd. (NPCIL) the right of recourse to go after suppliers under 17(b), an accident caused by supplier negligence, or the much less likely 17(c), an accident caused by supplier sabotage.

“The present Rule 24 appears to confine itself to Section 17(a) alone … Therefore, the confinement of the liability to a specific time period, i.e. the duration of the initial license issued under the Atomic Energy (Radiation Protection) Rules (about 3 years) or the product liability period, would work only when the right of recourse is expressly provided for in a contract in writing,” Abraham wrote.

So, despite the rules, it seems suppliers would still face liability through the architecture of the liability act itself. And the rules themselves (particularly Rule 24) do not on the face of it appear to eliminate the principle of the right of recourse on the part of the operator. In addition, the Act’s Section 46 says, “The provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being in force,” Abraham notes. This appears to leave the possibility open of direct lawsuits against suppliers by victims of nuclear acci- dents through traditional (non-nuclear) Indian tort law.

Sam Tranum, Kolkata stranum@energyintel.com 

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2 Comments

  1. Ram Mohan says:

    In respect to Rule 24 in light of Section 17 of the Act, what if nothing is specified in the contract?

    • PXV says:

      If nothing is specified in the contract regarding a right of recourse, section 17(b) and (c) would still apply and the operator can still claim a right of recourse if the circumstances enumerated in sub-clause (b) and (c) of Section 17 are made out. This is because each of Section 17(a), (b) and (c) are distinct from each other- Mohit

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