Liability for nuclear accidents - how is it handled?

27 March 2011

Ever since the first commercial nuclear power reactors were built, there has been concern about the possible effects of a severe nuclear accident, coupled with the question of who would be liable for third-party consequences. This concern was based on the supposition that even with reactor designs licensable in the West, a cooling failure causing the core to melt would result in major consequences akin to those of the Chernobyl disaster. It was supposed that damage caused could be extensive, creating the need for compulsory third party insurance schemes for nuclear operators, and international conventions to deal with trans-boundary damage. On the other hand it was realized that nuclear power makes a valuable contribution to meeting the world’s energy demands and that in order for it to continue doing so, individual operator liability had to be curtailed, and beyond a certain level, risk had to be socialized. Nevertheless, experience over five decades has shown the fear of catastrophe to be exaggerated, and the local impact of a severe accident or terrorist attack is likely to be small—the Three Mile Island accident in 1979 being indicative.

Most conventions and laws regarding nuclear third party liability have at their heart half a dozen important principles. Strict liability means that the victim is relieved from proving fault. In the case of an accident the operator (power plant, enrichment/fuel facility, reprocessing facility) is liable whether or not any fault or negligence can be proven. This simplifies the litigation process, removing any obstacles, especially such as might exist with the burden of proof, given the complexity of nuclear science. In layman’s terms: strict liability means a claimant does not need to prove how an accident occurred. Exclusive liability of the operator means that in the case of an accident, all claims are to be brought against the nuclear operator. This legal channeling is regardless of the accident's cause. By inference, suppliers or builders of the plant are protected from public litigation in the case of an accident. This has recently become on issue in India as its latest legislation appears not to offer the plant suppliers such protection, but the aim is to simplify the process because claimants do not have to figure out who is responsible – under law conventions it will be the nuclear operator. There is also a principle of compensation without discrimination based on nationality, domicile or residence. Mandatory financial coverage means that the operator must maintain insurance cover, and it ensures that funds will be made available by the operator or its insurers to pay for damages. The minimum amount of protection required is set by national laws which in turn often depend on international treaty obligations. Over time the amount of this mandatory protection has increased, partially adjusting for inflation and partially allowing for an increased burden of responsibility to be passed on to nuclear operators. Exclusive jurisdiction means that only the courts of the country in which the accident occurs has jurisdiction over damages claims. This has two effects; firstly it prevents what is known as jurisdiction shopping, whereby claimants try and find courts and national legislation more friendly to their claims, thus offering nuclear operators a degree of certainty and protection. Secondly it locates the competent court close to the source of damage meaning that victims do not have to travel far in

order to lodge claims. This, combined with exclusive liability, ensures that relevant courts are accessible, even when the accident is transport-related and the relevant company based far away. Finally, limitation

of liability protects individual nuclear operators and thus is often somewhat controversial. By limiting the amount that operators would have to pay, the risks of an accident are effectively socialized. Beyond

a certain level of damage, responsibility is passed from the individual operator either on to the state or a mutual collective of nuclear operators, or indeed both. In essence this limitation recognizes the benefits of nuclear power and the tacit acceptance of the risks a state takes by permitting power plant construction and operation, as with other major infrastructure.

Governments have long recognized the risk that a nuclear accident might cause trans-boundary damage. This led to the development of international frameworks to ensure that access to justice was readily available for victims outside of the country in which an accident occurs, so far as the countries are party to the relevant conventions. The number of different international instruments and their arrangements often give rise to confusion. Many of the major instruments have been amended several times and not all countries party to the earlier version have ratified the latter. The result is a patchwork quilt of countries and conventions. A significant effort towards harmonization of these regimes and extending them to additional countries is an ongoing feature of nuclear power today.

Before 1997, the international liability regime was embodied primarily in two instruments. The first was the Organisation of Economic Cooperation and Development’s Paris Convention on Third Party Liability in the Field of Nuclear Energy of 1960, which entered

into force in 1968 and was bolstered by the Brussels Supplementary Convention. The second was the International Atomic Energy Agency’s Vienna Convention on Civil Liability for Nuclear Damage of 1963, which entered into force in 1977. The Paris/Brussels convention includes all Western European countries except Ireland, Austria, Luxembourg and Switzerland. Parties to the Vienna Convention are mainly outside of Western Europe, and include Argentina, Bulgaria, the Czech Republic, Egypt, Hungary, Mexico and Russia. They are each based on the concept of civil law and adhere to the principles outlined above.

Following the Chernobyl accident in 1986, the IAEA initiated work on all aspects of nuclear liability with a view to improving the basic conventions and establishing a comprehensive liability regime. The prime need was to bring together the geographical scope of the two. In 1988, as a result of joint efforts by the IAEA and OECD/NEA, the Joint Protocol Relating to the Application of the Vienna Convention and the Paris Convention was adopted. Parties to the Joint Protocol are treated as if they are parties to both conventions. If an accident takes place in

a country bound by the Paris convention which causes damages in a country bound by the Vienna convention, then victims in the latter are subject to compensation as per the Paris convention. The reverse is also true. Generally, no country can be a party to both conventions because the exact details are not consistent, leading to potential conflict in their simultaneous application. The Joint Protocol was also intended to obviate any possible conflicts of law in the case of international transport of nuclear material. It entered into force in 1992.

To give an idea of the sums of money involved, the amended IAEA Vienna Convention (1997) sets the possible limit of the operator's liability at not less than 300 million in International Monetary Fund special drawing rights (SDRs) (about EUR 360 million) and entered into force in 2003. It also broadens the definition of nuclear damage (to include the concept of environmental damage and preventive measures), extends the geographical scope of the Convention, and extends the period during which claims may be brought for loss of life and personal injury. It also provides for jurisdiction of coastal states over actions incurring nuclear damage during transport.

In 1997, IAEA parties adopted a Convention on Supplementary Compensation for Nuclear Damage (CSC). This defines additional amounts to be provided through contributions by party states collectively on the basis of installed nuclear capacity and a UN rate of assessment, basically at 300 SDRs per MWt (that is, about EUR 360 million total). The CSC—not yet fully in force—is an instrument to which all states may adhere regardless of whether they are parties to any existing nuclear liability conventions or have nuclear installations on their territories, though in the case where they are not party to either Paris or Vienna they must still implement national laws consistent with an annex to the CSC. In order to pass into force the CSC must be ratified by five countries with a minimum of 400 GWt

of installed nuclear capacity. Currently the only ratifying party with significant nuclear generating capacity is the USA (circa 300 GWt). Fourteen countries have signed it, now including India, but most have not yet ratified it.

Beyond the provision of the above-mentioned instruments there

is at least a tacit acceptance that the installation state will make available funds to cover anything in excess of these provisions, just

as they would in any major disaster, natural or otherwise. (The main industrial accidents have been at chemical plants). This has long been accepted in all developed countries. In the event of government payout to meet immediate claims, the operator's liability is in no way extinguished however, and taxpayers would expect to recover much or all of the sums involved.

Most countries with commercial nuclear programmes also have their own legislative regimes for nuclear liability. These national regimes implement the conventions’ principles, and impose financial security requirements, which vary from country to country. There are three categories of countries in this regard: those that are party to one or both of the international conventions and have their own legislation, those that are not parties to an international convention but have their own legislation (notably USA, Canada, Japan, and South Korea), and those that are not party to a convention and are without their own legislation (notably China).

Although the USA pioneered the concept of nuclear liability, it is not party to any international convention, except for the CSC (which has yet to come into force). Its national legislation, the Price Anderson Act, provides $10 billion in cover without cost to the public or government and without fault needing to be proven. It covers power reactors, research reactors, and all other nuclear facilities. It was renewed for

20 years in mid-2005, with strong bipartisan support, and requires individual operators to be responsible for two layers of insurance cover. In first layer, each nuclear site is required to purchase $300 million of liability cover, which is provided by two private insurance pools. This is financial liability, not legal liability, as in European liability conventions. The second layer is jointly provided by all US reactor operators. It is funded through retrospective payments, if required, of up to $112 million per reactor per accident, collected in annual instalments of $17.5 million (and adjusted with inflation). Combined, the total provision comes to over $10 billion, paid by the utilities. Beyond this cover and irrespective of fault, Congress, as insurer of last resort, must decide how compensation is provided in the event of a major accident.

The Nuclear Regulatory Commission (NRC) requires all licensees for nuclear power plants to show proof that they have the primary and secondary insurance coverage mandated by the Price-Anderson Act. Licensees obtain their primary insurance through American Nuclear Insurers. The average annual premium for a single-unit reactor site is $400,000. The premium for a second or third reactor at the same site is discounted to reflect a sharing of limits. The nuclear operators' mutual arrangement is Nuclear Electric Insurance Limited (NEIL) which is well-funded (with a $5 billion surplus) and cooperates closely with the American Nuclear Insurers pool. It was founded in 1980 and insures operators for any costs associated with property damage, decontamination and related nuclear risks.

In the UK, the Energy Act 1983 brought legislation into line with earlier revisions to the Paris/Brussels Conventions and set a new limit of liability for particular installations. In 1994 this limit was increased again to GBP 140 million for each major installation, so that the operator is liable for claims up to this amount and must insure accordingly. The majority of this insurance is provided by a pool of

UK insurers comprising eight insurance companies and 16 Lloyds syndicates, called Nuclear Risk Insurers. Beyond the GBP 140 million, the current Paris/Brussels system applies, with government contribution of SDR 300 million. The government is currently planning legislation which will require insurance above the GBP 140 million level, and towards the EUR 700 million level specified under the 2004 Paris/Brussels Protocol (when it enters into force). This is planned to be provided by government at commercial rates.

Author Info:

Steve Kidd is deputy director general of the World Nuclear Association, where he has worked since 1995 (when it was still the Uranium Institute). Any views expressed are not necessarily those of the World Nuclear Association and/or its members.

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