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Cover Story | November 2013

Indian civil nuke liability is unique

India has taken a policy decision to invest in nuclear power and it is also under an obligation to remove certain ambiguities in the few clauses of Civil Nuclear Liability Act, says Mohit Abraham, Partner, PXV Law Partners.

What is your overall observation on Indian stand on civil nuclear liability issue?
My primary concern with the Indian law is that it is ambiguous. Consequently, we have the supplier community arguing that the limits on liability are unlimited, which is unacceptable while the NGO community argues that the limitation on liability on suppliers is too low and is unacceptable. Since India has taken a policy decision to invest in nuclear power, we are also under an obligation to remove these ambiguities. It is unfair on suppliers to expect them to invest in India with such an ambiguous law. If we wish to have situations in which suppliers are liable, these situations should be clearly spelt out and the extent of liability should be known with some degree of precision.

How it is different as compared to other countries?
International nuclear liability laws as well as domestic laws of other countries all channel liability exclusively to the operator of the nuclear power plant. The only two situations in which an operator can seek recourse from a supplier is i) when the nuclear incident arises out of an act or omission by the supplier with an intent to cause damage; or ii) a contractual right of recourse mutually agreed between the supplier and the operator.

The Indian nuclear liability law differs from these accepted and hitherto unchallenged principles on two fronts. First, Section 17 (b) provides for a situation in which the nuclear operator can claim a right of recourse against a supplier where the product supplied by the supplier has patent or latent defects or where the services provided by the supplier are substandard. Second, Section 46 of the act states that the act is in addition to and not in derogation of other laws. In other words, all other laws in India that may apply to any industrial accident would apply to a nuclear incident as well. Therefore, this provision has the possibility of opening up a supplier to general claims under tort laws as well as other criminal provisions that may apply to an industrial accident. Both these provisions are unique to India and have thrown up a whole new set of issues for the liability of suppliers who choose to conduct business in India.

Is it possible under set provisions to provide cover to local players?
The Indian law will apply equally to both foreign and local suppliers. Therefore, the concerns in relation to the law which are raised by foreign suppliers will also be the same concerns of domestic suppliers. Some news reports have indicated that post 2010 no Indian supplier has entered into any fresh contracts with NPCIL and this is a reflection of the concerns which the Indian law has raised.

Why international players largely not ready to comply with set Indian norms?
The main reason why international players are hesitant to subject themselves to the Indian law is because in all the previous decades of being involved the nuclear industry, these suppliers have never encountered such legal provisions. Further, the Indian laws also create ambiguities in relation to the extent of liability that the suppliers will actually face, and more particularly, whether there will be a limit on their liability or whether it could be unlimited. These issues are genuine concerns as the suppliers are then unable to plan their activities in a systematic manner. For e.g., they would not be able to determine the exact insurance that they must carry in order to protect their interests and this would also have a direct impact on the pricing of their product.

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