Comment

Background
Both the Civil Liability for Nuclear Damage Act, 2010, and the associated Civil Liability for Nuclear Damage Rules, 2011, have been gazetted. The provisions of the Act came into force on November 11, 2011, but the rules can still be contested in Parliament within 30 days of their introduction.

During the final discussions on the India-US Nuclear Deal, the prime minister wanted to assure the governments of the US, France and Russia, as well as their nuclear corporate lobbies, that India shall provide a liability-free regime for them to do nuclear commerce with India. It was for this reason that the PM agreed in 2008 itself to their demand that India shall take steps to adhere to the Convention on Supplementary Compensation, which will make it mandatory for India to enact a national nuclear liability law that will channel liability for damages from a nuclear accident completely to the operator, namely, the Nuclear Power Corporation of India Limited. This is the backdrop in which the government prepared and introduced the Civil Liability for Nuclear Damage Bill in Parliament in mid-2010.

Nuclear Liability Act
Accordingly, the Bill that the government introduced in Parliament capped the liability on the Indian operator at a very low level, and did not include any provision for channeling even part of the damage liability to the suppliers. After some of us gave extensive testimonies to the parliamentary committee examining the Bill and after the opposition had heated debates on the floor of the House, a final Act was passed with a slightly higher operator liability of Rs1,500 crore for nuclear power reactors and, more importantly, included clauses 17(b) and 46 that could enable the seeking of damage compensation from the suppliers.

To claim recourse under 17(b), the operator has to prove that the incident occurred because the supplied equipment or material had ‘patent or latent defects or the services provided were sub-standard.’ But, under Section 46, a victim of a nuclear accident could bring a liability claim against the operator in courts under Tort Law and include the supplier also as co-defendant. In this case, the plaintiffs have to merely prove that the product or service caused the harm, but do not have to prove exactly how the product or service was deficient or that the supplier was negligent. The damages to be awarded in such cases are not specifically capped under law, and these will be decided by the court, based on circumstances.

Attempt to Dilute the Act
Soon after the Nuclear Liability Act was passed, the western governments and the nuclear business lobbies made it clear that India has failed to deliver the kind of liability regime the PM promised. To partially assuage these feelings, the PM hastened to have India sign the CSC as promised to the US government in September 2008 and, in his recent meeting with President Barack Obama in Bali, confirmed that India will soon ratify the CSC as well. But, even after ratification of the CSC, India’s eventual entry into the CSC will be held up because our National Liability Law does not conform to the mandatory stipulations in the CSC Annex, since it contains Clauses 17(b) and 46.

Having failed to enact a Liability Act that could please the foreign governments and their corporate lobbies, the PM and the government are under great pressure to amend the Act. However, the government knows it is it impossible to approach the Parliament for an amendment of the Liability Act in the prevailing atmosphere of scams and mismanagement by the government and its low credibility. Under the circumstances, as a last resort, the government is attempting to dilute Parliament’s legislative intent in enacting this Act, by cleverly manipulating the rules under this Act. At first glance, the rules appear to be consistent with the Act, in that the Clauses 17(b) and 46, which were offensive to foreign governments and suppliers, have not been directly tampered with in any way. But the government’s sleight of hand can be seen if one carefully analyses the contents of Chapter V of the rules, which explains the operator’s Right of Recourse under Clause 17(a) of the Act.

Amount of Supplier’s Liability
First, Rule 24(1) states: ‘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 Section 6(2) of the Act, or the value of the contract itself, whichever is less.’ Further, it is clarified, under Explanation-2, that an operator’s claim under this rule shall in no case exceed the actual amount of compensation paid by him up to the date of filing such claim.

The above rule bounds the amount of compensation which the operator can seek from the supplier through right of recourse under Clause 17(a) of the Act. Since the maximum liability of the operator is Rs1,500 crore as per the Act, Rule 24(1) states that the right of recourse from the supplier in no case can be more than that amount, whatever be the contract value. But, if the contract value is lower than that, the right of recourse from the supplier will be capped at the contract value. In any case, certainly Rule 24(1) appears to preclude the operator from seeking any ‘consequential damages’ from the supplier, under Section 17(a) of the Act, to compensate for the larger damage the supplies could have caused to the public and the environment.

In comparing norms across various high risk industries, I find that the amount of compensation due under the right for recourse, where a contract exists, cannot exceed the operator’s own liability or the value of the contract, whichever is less. To this extent, one cannot fault Rule 24(1) as stated in Chapter V of the Rules. This, unfortunately, is the consequence of Parliament limiting the operator’s liability for nuclear reactor accidents at Rs1,500 crore in Section 6(2) of the Liability Act, against the repeated pleas at that time to substantially increase that cap. In my view, the only option now left is to argue for higher compensation, including consequential damages, under Section 46, relying on Tort Laws.