The absence of a clearly delineated regional or international framework to govern
issues of liability and compensation is a serious concern. Since the complications
inherent in international negotiations will continue, countries that wish to pursue
a civilian nuclear power program must not focus only on their own nuclear plans,
but must also consider the interests of the region.
Presently, no legal or treaty obligation on ASEAN or South Asian countries relates
to transboundary liability and compensation. The situation is akin to the pre-Chernobyl
liability framework in Europe, and because of the proximity of these countries,
is not advisable or desirable. Particular focus needs to be given to liability thresholds
as well as to transboundary impacts.
Another option for ASEAN and South Asian countries is to consider legislation on
the basis of reciprocity. An example of such reciprocity is the U.S. Price-Anderson
Act and its Canadian counterpart, the Nuclear Liability Act.64 Each provides for reciprocity of legal
remedies for liability and compensation in accident cases involving transboundary
However, such a mechanism is not even under consideration by any of the South Asian
or ASEAN countries. To the contrary, the existing laws in India, Bangladesh, Indonesia,
and Malaysia are silent on the transboundary impact of nuclear accidents.
South Asia and the ASEAN region are thus ideally placed to adopt a liability framework
similar to the Paris Convention. Any talk of nuclear expansion in this region ought
to be accompanied by meaningful debate on adopting such a framework. This framework
need not be confined to issues of liability alone but can also include other critical
aspects: for instance, siting and regional mapping of risk zones and possible risk
scenarios. Further, the unique circumstance of having foreign operators operating
almost all aspects of nuclear power plants within another country can also be factored
into these arrangements.
The Fukushima incident has offered the world another chance to strengthen the legal
regimes governing nuclear liability, and countries in South Asia and the ASEAN region,
where nuclear energy is in its early stages, have an opportunity to learn from previous
experiences and to work on a harmonized regional liability regime. A stable and
certain liability framework is imperative if all stakeholders are to accept nuclear
energy as a sustainable method of power generation.
Availability of Compensation and Liability Limits
Under extant international and domestic laws, the best available limit of compensation
can be found in the U.S. Price-Anderson Act—an accessible fund of approximately
$12 billion. While methods of determining the total economic costs of a nuclear
accident may be debated and questioned, what remains clear is that nuclear liability
limits and available funds are unlikely to meet the actual economic costs that a
nuclear accident brings about. It must however be pointed out that typically in
cases where the financial security is inadequate to pay for the claims, public funds
in the installation state are commonly used as the next source of funding. As seen
in the cases of Chernobyl and now Fukushima, a large portion of the cost of an accident
is more often than not borne by the affected countries and their taxpayers. This
poses a serious challenge to the acceptability of nuclear power as a viable option,
especially for developing countries (e.g., in the South Asia region or ASEAN), as
the compensation mechanisms may be inadequate and could result in a lack of support
among local communities for nuclear energy in these countries. This argument in
fact gained significant momentum in India and resulted in the Indian law evolving
a concept of supplier liability that is discussed elsewhere in this paper. This
argument has also been raised in the context of Fukushima.
However, any such argument also needs to be examined from a realistic perspective.
Presently, no insurance pool would be in a position to provide insurance in the
range of hundreds of billions of dollars. Consequently, no commercial entity can
be expected to open itself to the possibility of being completely bankrupted in
the event of a nuclear accident. Such an approach would effectively discourage nuclear
energy activities. This is clearly a challenging paradox. How can the nuclear industry
meaningfully contribute to the economic costs of a nuclear accident while at the
same time continue to be economically viable?
In considering the possible ways of addressing this paradox, it is important to
keep in mind the evolution of international principles of liability. Rather than
discarding these principles as unworkable or impractical, the approach for reforms
in this regard should be to build on the existing platforms provided by the international
conventions, particularly the CSC.
At the moment, the structure of creating a fund, as in the case of the Price-Anderson
Act or the CSC, appears to provide a starting point to address this challenge. However,
rather than confining contributions to such a fund within a jurisdiction (as with
the Price-Anderson Act), the nuclear industry can consider creation of such a fund
at an international or a regional level. Contributors to the fund should include
not only nuclear operators, but also suppliers. Additionally, states can also contribute
to such a fund. Considering the relative rarity of nuclear accidents yet the large-scale
consequences of such an event, it would be in the interest of all stakeholders,
particularly of the nuclear industry, to create such a fund. Rather than being solely
operator-driven (as in the case of Price-Anderson) or solely state-driven (as in
the case of the CSC), a combined operator- and state-driven approach along with
contributions from the supplier community would result in a much more robust fund,
which could provide meaningful compensation in the event of a nuclear accident.
The concept of the nuclear supplier community contributing in the event of a nuclear
accident is not new. Section 934 of the U.S. Energy Independence and Security Act,
with how the United States will meet its obligations under the CSC, and in particular
its obligation to contribute to the international supplementary fund in the event
of certain nuclear incidents. The section authorizes the secretary of energy to
issue regulations establishing a retrospective risk-pooling program by which nuclear
suppliers will reimburse the U.S. government for its contribution to the international
supplementary fund in accordance with a predetermined formula. A similar concept
can also be evolved at an international level, involving contributions into a fund
by states, nuclear operators, and major suppliers. The working of such a provision
can be in a manner that would make the contribution by nuclear suppliers reasonable
without making the business itself economically unviable.
Another example of the implementation of a fund that involves active participation
between states and industry is the International Oil Pollution Compensation Funds
The IOPC Funds provide financial compensation for oil pollution damage that occurs
in member states resulting from persistent spills of oil from tankers.68 Notably, the funds are
financed by contributions paid by entities that receive certain types of oil by
sea transport. These contributions are based on the amount of oil received in the
relevant calendar year, and they cover expected claims together with the costs of
administering the funds. These contributions are payable by the individual contributors
to the fund. A state is not responsible for the payment of contributions levied
on contributors in that state unless it has voluntarily agreed to do so.69 Thus, the IOPC Funds
are administered by states under the framework of international agreements, but
whose main contributories are members of the oil industry.
Addressing the gap between the actual losses incurred by a nuclear accident and
the limits of liability provided under different legal instruments will require
a fundamental relook at international and regional frameworks for nuclear liability
laws. A model that involves the creation and administration of a fund with both
states and the nuclear industry (including the supplier community) being contributories
is one worth considering, as it would increase the pool of accessible funds and
create a meaningful compensation structure. It also addresses the argument against
the present model, which completely insulates the supplier in the event of a nuclear
incident. The structures adopted by the oil industry, as well as those contemplated
in the CSC and the Energy Independence and Security Act, 2007, can be a good starting
point in providing an effective amount of funds for compensation claims in the event
of nuclear incidents, and they provide an existing structure that can be further
built on. It will also go a long way in addressing the concern that nuclear suppliers
are not playing a role in contributing to funds for compensation of nuclear accidents.
1985, c. N-28.
“Transboundary Nuclear Liability Regime.”
67 The framework
for the regime was the 1969 International Convention on Civil Liability for Oil
Pollution Damage and the 1971 International Convention on the Establishment of an
International Fund for Compensation for Oil Pollution (1971 Fund Convention). To
increase the scope and compensation under these conventions, the 1992 Civil Liability
Convention and the 1992 Fund Convention were adopted. Following the Erika and Prestige
incidents, a third instrument, the Protocol to the 1992 Fund Convention (Supplementary
Fund Protocol), was adopted in 2003, providing additional compensation over and
above that available under the 1992 Fund Convention.
68 See Funds
69 See The
International Regime for Compensation for Oil Pollution Damage (August 2013), http://www.iopcfunds.org/fileadmin/IOPC_Upload/Downloads/English/explanatorynote_e.pdf.