Focus: India's new liability law

6 September 2010

A law passed by both houses of the parliament at the end of August limits the maximum liability of compensation claims from people or businesses affected by a nuclear accident in India.

India's Rajasthan 3&4
India's Rajasthan 3&4

Although The Civil Liability for Nuclear Damage Bill affirms that operators are exclusively liable to pay out (except in case of major disaster, war or terrorism, in which case the central government assumes responsibility), it does allow operators the right to seek recourse to suppliers in case of defects or 'sub-standard services'. The latter point appears to have proved particularly controversial, according to media reports, because it might leave an international contractor vulnerable to punitive lawsuits.

The law sets the maximum operator liability for any single nuclear incident at a reactor greater than 10MW in power at Rs 1500 Cr ($322 million), according to the text of the law. An incident at a spent fuel reprocessing plant is capped at Rs 300 Cr ($64 million). Incidents during transport, at other fuel cycle plants and at research reactors below 10MW are capped at Rs 100 Cr ($21 million). The maximum amount of liability for each incident is the Rupee equivalent of 300 million International Monetary Fund special drawing rights ($300 million). The legislation expects that operators will take out insurance to cover the risk.

After paying compensation, operators have the right of recourse to suppliers or other parties in three cases: when the right is written into a contract, when the damage is caused by a malicious individual, and "where the nuclear incident resulted as consequence of act of supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services."

In a prepared statement, the Federation of Indian Chambers of Commerce & Industry cautiously welcomed the bill. Although it praised the bipartisan approach to the bill, it said that it hopes a 'pragmatic approach' would be followed by the government in implementing the bill 'to ensure that the Indian manufacturing industry has a commercially viable option of participating' in the nuclear industry.

It also said that it also seeks the formulation of a public-private partnership model that would unbundle the risk of the participation of Indian industry small, medium and large [companies] to reach the goal of attaining 63000 MWe by 2032.

The legislation would also set up a system of compensation commissioners, or a commission, which would adjudicate claims and has the power to summon witnesses and suborn documents. Claims would expire if they were not made within 10 years in the case of property damage, or 20 years in case of injury, from the date of occurrence.

If a company is involved, the legislation targets those who were directly in charge of, and responsible to, the company for conduct of business. It also says that if senior executives can be proven to be complicit, can be found guilty as well.


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