Sabotaging the Parliament and Nuclear Suppliers’ Liability

Sabotaging the Parliament and Nuclear Suppliers’ Liability

Vahanavati is not a government pleader appointed to fight a government case. He is supposed to give his legal opinion to the government on what the law is supposed to be, not what the government wants. He is the highest law officer in the country and supposed to advise the government on how to protect the rights of the people in the country. Instead, once again, he has soiled his high office with an opinion on nuclear suppliers liability, which is expressly designed to protect foreign suppliers; even if they supply faulty and substandard equipment. This, in a country that has seen Bhopal Gas Disaster, the largest industrial accident ever, with enormous loss of lives.

Image Courtesy:

The clause that Vahanavati has opined on is the much debated Clause 17 of “The Civil Liability for Nuclear Damage Act.” This clause was opposed by nuclear suppliers, particularly the US suppliers, who had argued that only the owners of nuclear plants should have liability and they should be exempted from all liabilities whatsoever – even if the accident resulting in damage is squarely to their account. This means that they would carry no risk even if they supply sub-standard or faulty equipments. After Fukushima and the magnitude of this nuclear disaster, to argue that all suppliers should be let off scot free in case of faulty design or faulty/substandard equipment, is to dice with with peoples’ lives.

From the beginning, the Manmohan Singh government tried to help the American nuclear lobby by diluting suppliers’ liability. One was a cap on the plant operator’s liability – of 300 million SDR’s (at that time about Rs. Rs. 1500 crore), which then also became a cap on the suppliers liability. The right to recourse – the right of the operator to recover the damages that he might have incurred in case of an accident – was hedged initially in various ways. Finally, the Standing Committee and subsequently the Parliament passed the Act that laid down the following:

17. The Operator of the Nuclear Installation after paying the compensation for nuclear damage in accordance with Section 6, shall have a right to recourse where –

a) Such right is expressly provided for in a contract in writing

b) The Nuclear Incident has resulted as a consequence of an act of suppliers or his employees, which includes supply of equipment or material or patent or latent defect

c) The Nuclear Incident has resulted from the act of commission or omission of an individual done with the intent to cause Nuclear damage

Various attempts had been made during the Standing Committee deliberations to link 17 a) above with 17 b). An “and” was introduced at one stage to make the 17 b) contingent on its being a part of the contract. If this had been accepted, the right to recourse of the operator under 17 b) could have been exercised only if it was there in the contract. The Parliament rejected all such measures and laid down unambiguously that the suppliers of liability for defective supplies would exist independent of the contract provisions.

What Vahanavati is now seeking to do – from newspaper reports – is to link 17 a) and 17 b) and arguing that without suppliers liability being expressly being provided in the contract, the supplier would have no liability; that 17 b) could be exercised only if it is included in the contract. This flies in the face of all interpretations of acts, and is a complete unique Vahanavati spin. Worse, he seems also to be implying that it is possible for a public sector undertaking – the Nuclear Power Corporation Ltd (NPCL) – to defy the provisions laid down in an Act of Parliament and enter into a contract with private parties that are explicitly in contradiction to such an Act. To give such blatantly wrong interpretation of law even after the Court has exposed his complicity in various other illegal acts of the government — in 2G and coalgate cases – needs indeed a very thick-skin.

Why is Manmohan Singh government so hell bent on acting illegally that would probably end up being challenged in a court of law any way? Has it not suffered enough ignominy in the 2G and the coalgate cases of violating various lawful provisions to satisfy the venality of local and global capital?

The issue here is Manmohan Singh’s desire to bring the Nuclear Deal that he has signed with the US to fruition, even if it costs the country dear. The Indian government had secretly promised to buy 10,000 MW of equipment in lieu of US support to lifting sanctions on India for nuclear fuel and dual use technology. Shivsankar Menon’s letter with this offer is on public record.

Two things have happened subsequent to the signing of India US nuclear Deal. The Bhopal Judgement that gave a slap on the wrist of those responsible for the Union Carbide Disaster, causing a huge outrage and bringing back memories of this horrific disaster. And the Fukushima accident brought out the risks of nuclear energy, particularly if the designs and operations are faulty.

After the Bhopal Judgement, the discussions on what should be the liability of the suppliers became a serious matter of debate in the country. It was the consensus among the people that those who supply thousands of cores worth of equipment, need to also accept some financial liability if their equipment is proven to be the cause of an accident. It is this consensus that the Parliament reflected when it incorporated suppliers liability. In the Liability Act.

The US nuclear suppliers have resisted such liability right from the beginning. In the US, laws have been passed which puts the entire liability of the accident only on the operators – the Price Anderson Nuclear Industries Indemnity Act. It was specifically designed to shield the nuclear equipment suppliers from liability. They have also used this as a model for all countries and even for international treaties on nuclear liability.

Critics of nuclear energy have argued that no other industry gets this protection. In effect, this is an implicit subsidy to the nuclear industry, which then needs to take no insurance for supplying defective equipment causing an accident. As nuclear accidents can have enormous consequences, this protects the nuclear equipment manufacturers from loss of business in case of an accident. If Bhopal-like accident had taken place in another country, Union Carbide’s liabilities could have bankrupted it, as has happened to a number of asbestos companies. It is this hidden subsidy – in most cases by the tax payers – that appears to make nuclear energy commercially more attractive than it really is.

Fukushima brings out this quite clearly, though here we are discussing the operator’s liability. The accident in Fukushima is comparable to Chernobyl. It is still continuing to discharge highly radioactive material into the atmosphere, groundwater and the sea. There have been core melt-downs in three of the reactors and their containment vessels have also cracked. The entire area inside the plant is highly radioactive making any maintenance and stabilisation work hazardous.

It is estimated that due to the large amount of radioactivity discharged, the loss to the people in Fukushima Prefecture is more than $ 100 billion US dollars.

The time required to dismantle the plant will be more than 20 years and to replace the radioactive soil there probably 40-50 years. Right now, the Japanese government is building an ice-wall – at a cost of about half a billion dollars – to reduce the radio active water from leaking out into the ground water and the sea.

The question is who is going to foot all the bill? The insurance of Tepco, the owner of the Fukushima plant, will barely cover $1 billion. Most of the $100 billion of the cost – of paying compensation to those affected, dismantling the plant, and rehabilitating the area — is going to be borne by the Japanese government, read the Japanese people.

If the suppliers are given total immunity from any damage that their faulty equipment may cost, why should they then take care of the safety of the plant? What prevents them from cutting corners and taking risk at the cost of the safety?

This is why the Clause 17 of the Nuclear Liability Act puts some liability on the supplier. If the operator has to pay out money, again with an upper limit of only Rs. 1,500 crore, then he can sue the supplier for at least this amount. Contrast this to the cost of an accident of Fukushima scale costing more than 300 times this amount. A reactor costs much more than Rs. 1,500 crore, forget the cost of a possible accident. The US suppliers’ unwillingness to even take an insurance cover for a fraction of their contract value – something all suppliers in all other industries routinely do – shows the lack of confidence they have in their own equipment and supplies.

The Manmohan Singh government is risking a possible Fukushima when it seeks to placate the US and remove suppliers’ liabilities. Possibly, he gave assurances to the US that the US suppliers will have no liability for their supplies. In trying to save his face for such assurances, he is playing with the lives of Indian people.

The US government and its companies must understand that it may take comfort now from the words of Vahanavati and Manmohan Singh. But as they are likely to find out, the law of the land cannot be overturned by dubious interpretations and executive actions. India is still not a banana republic, even if its government is behaving like one. The will of the people and the rule of law will finally prevail, all governmental efforts notwithstanding.