HOT POTATO

BRAHMA CHELLANEY, STRATEGIC AFFAIRS EXPERT

Revisions in N-liability bill a must

DUE TO EXTRAORDINARY MOLLYCODDLING, THERE ARE NO RISKS FOR FIRMS ENTERING INDIAN MARKET, ONLY PROFITS TO RAKE IN

The Economic Times, April 6, 2010 http://u.nu/35v48

After
the national furore, the government has begun to redraft its nuclear-accident
liability Bill. It was left with little choice: Unlike the 123 agreement or the
latest reprocessing accord with the US, the proposed new law on
liability has to go before Parliament for scrutiny and approval.

The
Bill it circulated to members of Parliament last month attempted to fashion a new principle in
international law: Profits are private, accident-related liabilities are all
public. The Bill gave foreign reactor suppliers a free ride at the Indian
taxpayer’s expense.

Limits on
liability traditionally have been designed in the world to limit the financial
risks of private firms engaged in the business of nuclear-generated
electricity. But in India
the state intends to own and operate all nuclear power plants. That is the
reason why the Atomic Energy Act, which shuts out the private sector from
nuclear power generation, is not being amended.

But foreign
reactor suppliers cannot complain because they are in an exceptionally happy
situation. The Indian government has earmarked separate nuclear parks for each
of the two American reactor-exporting firms as well as for the sole French and
Russian companies. It is acquiring land for them. It also is freeing them from
the task of generating electricity at marketable rates. The government will run
the reactors through the state operator, subsidizing the high-priced
electricity generated. To top it all, foreign suppliers will have no direct accident liability.

So, given this
extraordinary mollycoddling, there are no risks for foreign firms in entering
the Indian market, only profits to rake in.

Against
this background, the liability Bill must contain seven essential revisions.

■One, there
is no need for a limit on liability as the Indian state, in any case, will be
the sole owner and operator. There is no maximum cap on liability in the US, Germany,
Finland, Japan, South Korea
and Switzerland.
The proposed Indian law must mesh with the doctrine of absolute liability and
“polluter pays” principle set by the Supreme Court in response to the Bhopal gas disaster.

■Two, the
minimum cap should reflect the international trend of providing enough to deal
with the long-term public health problems likely to be caused by a nuclear
accident. For example, Japan’s minimum liability is 120 billion yen ($1.33 billion).

■Three, the revised Bill
should not relieve foreign companies of direct liability for any accident. Nor
should victims be stripped of their right to sue a culpable foreign firm
in an Indian court, or through a foreign court.

India ought to follow the example set by US law, which
permits “economic channelling,” but not “legal channelling,” of liability,
thereby allowing civil suits against any party in
courts. That is the main reason why the US
has not joined the Vienna or Paris convention — the two main international
liability instruments. But the U.S.
has become party to the Convention on Supplementary Compensation (CSC), which
is still not in force. The CSC, as the name
suggests, is about compensation, to be paid
“supplementary” to the liability limit. The CSC permits either “economic channelling”
or “legal channelling” of liability.

Why
shouldn’t India emulate the US example and
permit economic (but not legal) channelling of liability to the operator? That
will leave suppliers (foreign or Indian) legally liable for an accident, but
allow for speedy disbursement of compensation to victims following an accident.

■Four, the
Indian taxpayer ought to be the insurer of last resort, not of first resort. In
the existing Bill, all liability falls on the Indian taxpayer, whether it is
the state operator’s slice or the Central Government’s share. By contrast, America’s Price-Anderson
system is without cost to the American taxpayer. It ensures that there is at
least $10.5 billion in private-sector funds available to cover a nuclear
accident. As the US
has no cap on liability, the US Congress serves as the insurer of last resort.
If a catastrophic accident were to occur, Congress could raise its contribution
not by burdening the taxpayer but by imposing additional taxes and other levies
on the nuclear industry.

■Five, the
new Bill must do away with the specious distinction between the operator and
the government when, in the Indian context, both are fused. Throughout the
existing Bill, the pretence of a US-style separation between the operator and
the government in maintained.

■Six, the
powers of Indian courts must not be curtailed.
Under the existing Bill, all nuclear-damage claims will be dealt with by a
Claims Commissioner or a Nuclear Damage Claims Commission, and any award made
“shall be final” and cannot be appealed in any court. Indeed, it declares that
“no civil court shall have jurisdiction to entertain any suit or proceedings” or
grant any “injunction.”

■Seven, while
limiting liability in time, the Bill must set a
more reasonable timeline, given that damage to health from exposure to severe
radiation can be transmitted to future generations. The 10-year time limit set
in Clause 18 of the existing Bill is simply untenable.

Brahma Chellaney is professor of strategic
studies at the Centre for Policy Research.

Reprocessing-related arrangements and procedures agreed between the United States and India

KEY FEATURES:

►The actual implementation of the agreement is years away, even though U.S.-origin spent fuel has been accumulating in India for nearly 40 years at the U.S.-built Tarapur nuclear power station near Mumbai. India will not be able to reprocess that spent fuel until it has built at least one new dedicated reprocessing facility — a process that will take a number of years. Article 1(3) specifies that the U.S. consent relates to “two new national reprocessing facilities established by the Government of India.” Only in those new facilities, approved by the IAEA, can India reprocess the discharged fuel under international inspection. Any additional reprocessing facility can be added only with prior U.S. agreement.

►The United States has retained the right to unilaterally suspend the grant of reprocessing consent to India. This is an extension of its right, incorporated in the 123 bilateral agreement, to unilaterally suspend or terminate fuel supply or all civil nuclear cooperation with India. In fact, that is exactly what the United States did in the mid-1970s under its previous 123 agreement with India dating back to 1963. As a result of that action, the twin-reactor Tarapur plant was left high and dry.  In the newest 123 agreement, the U.S. has retained the legal right to unilaterally terminate cooperation but has provided political assurances to India that such a right will be exercised only in extraordinary circumstances. A similar approach is mirrored in the reprocessing accord.  

Under Article 7 of the reprocessing accord, the reprocessing consent can be suspended on grounds of “national security” or a “serious threat to the physical protection of the facility or of the nuclear material at the facility,” and if the party determines “that suspension is an unavoidable measure.” So the U.S. right to suspend reprocessing consent in unfettered. Still, the agreement’s Article 7 and the accompanying Agreed Minute record political assurances to India that such a right shall be exercised only in special circumstances and after careful thought. But such assurances can hold little value when the legal right to suspend reprocessing consent is explicitly recorded in the text.

It is noteworthy that the U.S. has retained the right to suspend all cooperation with India, including the withdrawal of reprocessing consent, if India were to carry out a nuclear test. The assurances that have been recorded relate only to "peaceful" nuclear activities and fuel choices by India. For example, the Agreed Minute states that the reference to “serious national security concerns” as a basis for suspension of reprocessing consent shall not mean or be the basis for "addressing differences between the parties on the nature of peaceful nuclear activities," or "addressing differences with regard to fuel cycle choices," or "the purpose of securing commercial advantage," or "the purpose of delaying, hampering or hindering peaceful nuclear activities of the other party." The United States thus can continue to hold India to a no-test obligation.

►Another feature of the agreement is that it amplifies India’s reprocessing obligations with the IAEA, including to provide facility-design information in advance and to allow unhindered international monitoring and verification (Article 2). But in addition, the accompanying Agreed Minute obligates India to permit U.S. “consultations visits” to each dedicated reprocessing facility. Every “visiting team of not more than 10 persons” will be permitted on-site access “at a time and duration mutually agreed by the parties.”

►The agreement relates only to U.S. reprocessing consent, not to transfer of reprocessing technology and equipment. Unlike America’s arrangements with Japan and Euratom, the arrangements with India (as reflected in the 123 bilateral agreement and the domestic Hyde Act) exclude transfer of enrichment and reprocessing technology even under international safeguards. 

►The agreement does not provide for an international arbitral tribunal to resolve any differences or disputes — a provision found in the U.S.-Japan arrangements. It only provides for bilateral consultations — a mechanism where the cards will be stacked in favor of the supplier state and against the recipient state. Any compensation payable to India for a unilateral U.S. suspension of reprocessing consent will depend entirely on American willingness to do so. The agreement states that, "In case the suspension extends beyond a period of six months, both parties shall enter into consultations on compensation for the adverse impact on the Indian economy due to disruption in electricity generation and loss on account of disruption of contractual obligations." So, the agreement is to "consult" over compensation, not to actually compensate India. If the U.S. eventually agrees to pay any compensation, the amount will be determined by it.  

FULL OFFICIAL TEXT: "Arrangements and Procedures Agreed Between the Government of the United States and the Government of India, Pursuant to Article 6(iii) of Their Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy" (text released on March 29, 2010)

The Government of the United States of America and the Government of India (hereinafter “the Parties”), pursuant to the Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy, with Agreed Minute, signed at Washington, on October 10, 2008 (“the Agreement for Cooperation”), which entered into force on December 6, 2008.

CONSIDERING the commitment to full civil nuclear cooperation between the two countries in the peaceful uses of nuclear energy as noted in Article 6 of the Agreement for Cooperation;

NOTING that cooperation under the Agreement for Cooperation is between two States possessing advanced nuclear technology, both Parties having the same benefits and advantages, both committed to preventing WMD proliferation;

DESIRING to implement the provisions of Article 6(iii) of the Agreement for Cooperation concerning arrangements and procedures for the reprocessing or other alteration in form or content of nuclear material transferred pursuant to the Agreement for Cooperation and nuclear material and by-product material used in or produced through the use of nuclear material, non-nuclear material, or equipment so transferred;

NOTING that the “Agreement between the Government of India and the International Atomic Energy Agency for the Application of Safeguards to Civilian Nuclear Facilities” (INFCIRC/754)(“India-Specific Safeguards Agreement”), which provides for safeguards on reprocessing plants, entered into force on May 11, 2009;

Have agreed on the following arrangements and procedures under which such reprocessing or other alteration in form or content may take place in India at two new national reprocessing facilities dedicated to reprocessing safeguarded nuclear material under International Atomic Energy Agency (“IAEA”) safeguards, including future expansion, modifications, renovations or additions thereto;

ARTICLE 1 – NOTIFICATION AND EFFECTIVENESS OF RIGHT TO REPROCESS

1. The Government of India shall notify the Government of the United States of America in writing that it has established a facility (“the Facility”). The notification shall contain:

a. the name of the owner or operator of the Facility;

b. the name, type and location of the Facility and its planned capacity;

c. confirmation that pursuant to Paragraph 14(a) of the India-Specific Safeguards Agreement, as referenced in Article 10(2) of the Agreement for Cooperation, India has notified the Facility to the IAEA for application of IAEA safeguards and that relevant safeguards arrangements have been agreed pursuant to the India-Specific Safeguards Agreement with the IAEA;

d. such information as is available to the Government of India on the IAEA safeguards approach that is not classified as “Safeguards Confidential”; and

e. a confirmation that physical protection measures as required by Article 8 of the Agreement for Cooperation will be applied at the Facility.

Both Parties confirm that the provisions of this Article or any subsequent Article of these Arrangements and Procedures shall not be used to secure any proprietary or commercially sensitive information about the Facility.

2. The Government of the United States of America shall provide an acknowledgement to the Government of India no later than thirty days after receipt of the notification. This acknowledgement shall be limited to a statement that the notification has been received.

3. It is understood that the phrase “the Facility” throughout these Arrangements and Procedures is intended to refer to two new national reprocessing facilities established by the Government of India to reprocess U.S.-obligated nuclear material and any other safeguarded nuclear material and dedicated to the reprocessing and, as required, other alteration in form or content of safeguarded nuclear material under IAEA safeguards, as well as any additional new national facilities established and agreed to in accordance with paragraph 4 of this Article.

4. The Government of the United States of America and the Government of India understand the need for sufficient indigenous Indian capacity to reprocess or otherwise alter in form or content, under IAEA safeguards, U.S.-obligated nuclear material subject to the Agreement for Cooperation. Based on this understanding, the Parties agree to pursue the steps necessary, consistent with their national laws, to permit reprocessing or alteration in form or content of nuclear material subject to the Agreement for Cooperation at one or more new additional national facilities in India, (beyond the two facilities provided for in these Arrangements and Procedures) established by the Government of India and dedicated to the reprocessing and, as required, other alteration in form or content of safeguarded nuclear material under IAEA safeguards. These Arrangements and Procedures shall apply to such facilities upon successful completion of these steps, unless otherwise agreed by the Parties.

ARTICLE 2 – IAEA SAFEGUARDS

1. Consistent with the provisions of the Agreement for Cooperation, the Government of India shall offer the Facility for the application of IAEA safeguards as per the provisions of the India-Specific Safeguards Agreement. For the timely detection of withdrawal of safeguarded nuclear material from civilian use, safeguards measures shall include, as specified by the India-Specific Safeguards Agreement, nuclear material accountancy, design review, verification, progress in construction, appropriate containment and surveillance systems, process monitoring and other measures as may be agreed with the IAEA.

2. The Government of India shall ensure that the following minimum requirements, consistent with paragraph 37 of the India-Specific Safeguards Agreement, for the implementation of IAEA safeguards at the Facility are fulfilled:

a. Facility Design

i. Early Provision of Design Information.

The operator of the Facility shall co-operate with the IAEA by providing design information at the earliest possible time as provided in Paragraph 40 of the India-Specific Safeguards Agreement.

ii. Effective Design Review.

India and the operator of the Facility, as appropriate, shall cooperate with the IAEA in allowing “design information verification” (DIV) activities.

iii. Incorporation of Design Features that Facilitate Safeguards.

As may be required by the IAEA, facility design and operational characteristics shall enable effective and efficient implementation of safeguards while precluding design features that would prevent the effective application of safeguards. Examples include, but are not limited to: installation of vessel calibration systems; effective methods of solution mixing and sampling; and installation of independent instruments as dictated by authentication concerns.

b. Safeguards System Design and Installation

i. Cooperation with the IAEA.

The Facility operator and the Safeguards Implementing Agency of the Government of India (hereinafter referred to as the Indian SIA) shall accommodate the installation and operation of IAEA instrumentation in the Facility, including data collection, authentication systems and tamper-indicating devices.

ii. System of Accounting and Control Capable of Providing Accurate, Timely Data.

The operator of the Facility and the Indian SIA shall maintain a comprehensive and accurate nuclear materials accountancy system that conforms to IAEA standards as per the provisions of the India-Specific Safeguards Agreement, so that reliable and timely declarations can be made to the IAEA. A system of inventory records and reports shall be maintained for each material balance area. An effective system for measurement control shall be utilized.

iii. In-Process Material Measurement.

The Facility operator and the Indian SIA shall cooperate with the IAEA to enable the IAEA to provide at the Facility measurement capabilities that the IAEA considers as necessary to cover all major in-process nuclear material inventories during plant operation.

iv. Process Monitoring Data.

If desired by the IAEA, the Facility operator shall provide to the IAEA access to safeguards relevant operator data, such as authenticated process control data as per the provisions of the India-Specific Safeguards Agreement and India’s Additional Protocol when in force.

v. On-site Laboratory.

The Facility design shall incorporate an on-site laboratory, if IAEA so requests, to perform destructive analysis of process samples required by the IAEA safeguards approach at the Facility, and the IAEA shall be permitted to set up and operate that laboratory.

vi. Containment and Surveillance Systems.

The Facility design shall take into account the use of containment and surveillance systems in accordance with the IAEA’s practices and procedures, as required for the effective implementation of safeguards, and the IAEA shall be permitted to maintain such systems at the Facility.

c. Safeguards Implementation

i. Verification of Accountancy of Records.

The IAEA shall be permitted to carry out regular verification of nuclear material accountancy records and reports.

ii. Remote Data Transmissions.

The IAEA, if it considers it efficient for the purpose of safeguards implementation, may use remote transmission, in accordance with the provisions of India’s Additional Protocol when in force, of authenticated data to enable more frequent data analysis.

iii. Data Authentication.

The Parties recognize the importance of reliable instrumentation for the purpose of timely and accurate safeguards related data, and of data authentication for safeguards implementation. The Facility operator shall cooperate with the IAEA to apply adequate authentication methods to data and samples collected for safeguards purposes.

iv. Access and Transparency.

The Facility operator and the Indian SIA shall provide sufficient access to IAEA Inspectors to install and maintain safeguards equipment, and to inspect the complete process activity of the operator (including sample-taking) to the extent required for safeguards implementation and maintain a complete understanding of plant operation.

v. Annual Cleanout Inventory.

Nuclear material shall be removed from process lines annually in order to make it available, to the extent practicable, for accurate physical inventory verification.

vi. Anomaly Resolution.

The operator of the Facility and the Indian SIA shall cooperate with IAEA inspectors to resolve anomalies, if any, including material accounting anomalies, in a timely fashion.

ARTICLE 3 – CONSULTATION

The Parties undertake to consult at the request of either Party regarding the implementation of these Arrangements and Procedures.

ARTICLE 4 – PHYSICAL PROTECTION AND STORAGE AT THE FACILITY

1. In implementing physical protection at the Facility, and to the spent fuel and separated special fissionable material at the Facility, the Government of India shall apply measures in accordance with (i) levels of physical protection at least equivalent to the recommendations published in the IAEA document INFCIRC/225 Rev. 4 entitled “The Physical Protection of Nuclear Material and Nuclear Facilities,” and in any subsequent revisions of the document agreed to by the Parties, and (ii) the provisions of the 1980 Convention on the Physical Protection of Nuclear Material and any amendments to the Convention that enter into force for both Parties.

2. The Parties agree to exchange information on the approach to implementation of the requirements of this Article. The Parties shall also hold consultations visits at the Facility with respect to U.S.-obligated nuclear material in accordance with paragraph I of the Agreed Minute.

3. Any information provided by the Government of India pursuant to this Article that is classified shall be protected in accordance with Article 8 of these Arrangements and Procedures.

ARTICLE 5 – ENVIRONMENTAL PROTECTION

The Government of India shall follow best practices, as established in its national regulations, for minimizing the impact on the environment which may arise from the operation of the Facility.

ARTICLE 6 – MANAGEMENT OF SAFEGUARDED SEPARATED PLUTONIUM

India is committed to the management of separated safeguarded plutonium in ways that are consistent with its national decisions on the civil nuclear fuel cycle. The management of separated safeguarded plutonium subject to these Arrangements and Procedures by the Government of India shall take into account the need to avoid contributing to the risks of nuclear proliferation; the need to protect the environment, workers and the public; the potential of the material for further energy generation; and the importance of balancing supply and demand, including demand for reasonable working stocks for civil nuclear operations.

ARTICLE 7 – SUSPENSION OF ARRANGEMENTS AND PROCEDURES

1. The Parties note the significance of the full and continued implementation of these Arrangements and Procedures concluded pursuant to Article 6(iii) of the Agreement for Cooperation for implementing full civil nuclear cooperation as envisioned in the Joint Statement of the Parties of July 18, 2005. The Parties recognize that these Arrangements and Procedures should facilitate and ensure the development of further cooperation in the field of peaceful uses of nuclear energy on a stable, reliable and predictable basis. The Parties have also agreed to take into account the effects of suspension of these Arrangements and Procedures on other aspects of cooperation under the Agreement for Cooperation.

2. The Government of India may undertake a temporary pause of limited duration in

operations at the Facility if in its view such an action is required on account of

specific circumstances regarding the Facility that may have an impact on the

safe and secure operation of the Facility, the continued application of IAEA

safeguards or physical protection measures, or the safety of personnel working in it or to the population in surrounding areas. The Government of India has the right to resume operations at the Facility when it decides that the specific circumstances that led to the temporary pause in operations no longer exist.

3. The Parties agree that the sole grounds for seeking suspension, under Article 14(9) of the Agreement for Cooperation, are exceptional circumstances limited to:

i) Either Party’s determination that continuance of reprocessing of U.S.-obligated nuclear material at the Facility would result in a serious threat to that Party’s national security, consistent with the Agreed Minute to these Arrangements and Procedures, or serious threat to the physical protection of the Facility or of the nuclear material at the Facility, and

ii) Either Party’s determination that suspension is an unavoidable measure.

4. Recognizing the critical importance of a decision to seek suspension, such a decision shall only be taken at the highest level of Government. As provided in Article 14(9) of the Agreement for Cooperation, the Party seeking suspension shall take into account the effects of such suspension on other aspects of cooperation under the Agreement for Cooperation. The Party seeking suspension shall also consider the effects of such suspension in light of the commitments and objectives, including full civil nuclear cooperation, contained in the U.S.-India Joint Statement of July 18, 2005.

5. The two Parties recognize that any suspension of these Arrangements and Procedures would have profound implications for the Agreement for Cooperation and for their relations. As such the two Parties shall exercise due restraint and caution before seeking suspension of these Arrangements and Procedures and shall use the provisions for consultations provided in Article 13 of the Agreement for Cooperation and in this Article. Such consultations shall also give special consideration to the importance for India of uninterrupted operation of nuclear reactors that provide nuclear energy for peaceful purposes and potential loss to the Indian economy and impact on energy security caused by a suspension of these Arrangements and Procedures. Both Parties shall take into account any negative consequences of such suspension on cooperation under the Agreement for Cooperation, including on-going contracts and projects initiated under the Agreement of Cooperation.

6. Subsequent to the above consultations, if either Party determines that exceptional circumstances do exist and that these Arrangements and Procedures should be suspended pursuant to Article 14(9) of the Agreement for Cooperation, that Party shall notify the other Party in writing providing reasons for the suspension. The Parties confirm that, as of the time of entry into force of these Arrangements and Procedures, there exists no objective evidence of any of the concerns specified in paragraph 3 of this Article.

7. Any decision to invoke the provisions of Article 14(9) of the Agreement for Cooperation shall be applied to the relevant reprocessing facility related to the exceptional circumstances to the minimum extent and for the minimum period of time necessary to deal with the exceptional circumstances and for not longer than a three month period unless extended by the Party seeking suspension for specific reasons conveyed in writing to the other Party. Both Parties shall review at the highest levels of Government, within three months from the commencement of the suspension, measures taken by the Parties aimed at reaching mutually acceptable resolution of outstanding issues, and steps taken to promote the earliest possible revocation of suspension, taking into account the effects of continuation of suspension on other aspects of cooperation under the Agreement for Cooperation. In case the suspension extends beyond a period of six months, both Parties shall enter into consultations on compensation for the adverse impact on the Indian economy due to disruption in electricity generation and loss on account of disruption of contractual obligations. The suspending Party shall notify the other Party in writing of a decision to end the suspension.

8. In the event of suspension of these Arrangements and Procedures the rights and obligations of the Parties under Article 14 of the Agreement for Cooperation shall remain unaffected.

ARTICLE 8 – CONFIDENTIALITY

1. If the Government of India, in carrying out its obligations under Articles 1(1)(e) and 4 of these Arrangements and Procedures, provides to the Government of the United States of America classified information concerning the physical protection of the Facility or nuclear material at the Facility, the Government of the United States of America shall protect that classified information against unauthorized disclosure in accordance with the terms set forth below and in accordance with the laws and regulations of the Government of the United States of America.

2. For purposes of these Arrangements and Procedures, “classified information” shall mean information provided by the Government of India pursuant to Articles 1(1)(e) and 4: (i) concerning the physical protection of the Facility or nuclear material at the Facility, the unauthorized disclosure of which could jeopardize the physical protection of the Facility or the material; (ii) which requires protection against unauthorized disclosure in the security interest of the Government of India; and (iii) which bears a security classification assigned by the Government of India. Classified information provided by the Government of India to the Government of the United States of America under these Arrangements and Procedures shall be marked by the Government of India in English as RESTRICTED, CONFIDENTIAL or SECRET.

3. Equivalent classifications are as follows:

INDIA UNITED STATES OF AMERICA

SECRET SECRET

CONFIDENTIAL CONFIDENTIAL

RESTRICTED CONFIDENTIAL (modified handling authorized)

4. To the extent consistent with its applicable national law and regulations, the Government of the United States of America shall seek to ensure that all classified information that is provided to the Government of the United States of America by the Government of India under these Arrangements and Procedures will not be publicly disclosed, and shall seek to accord appropriate protections to such classified information, with a view to providing the same level of protection as is accorded to such classified information by the Government of India. The Parties shall consult regarding the appropriate protection of such classified information.

ARTICLE 9 – INTERPRETATION

1. These Arrangements and Procedures are not intended to and shall not be interpreted to affect the terms of the Agreement for Cooperation, and in the case of any conflict between these Arrangements and Procedures and the Agreement for Cooperation, the terms of the Agreement for Cooperation shall prevail.

2. Terms used in these Arrangements and Procedures shall have the same meaning as given in the Agreement for Cooperation unless otherwise specified.

ARTICLE 10 – ENTRY INTO FORCE

These Arrangements and Procedures shall enter into force on the date on which the Parties exchange diplomatic notes informing each other that they have completed all applicable requirements for entry into force.

IN WITNESS WHEREOF, the undersigned, being duly authorized by their respective Governments, have signed these Arrangements and Procedures.

Done at __________________this ________day of ____________ 20__, in duplicate.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA:

FOR THE GOVERNMENT OF INDIA:

Agreed Minute

During the negotiations of the Arrangements and Procedures agreed between the Government of the United States of America and the Government of India pursuant to Article 6(iii) of their Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy (“the Arrangements and Procedures”) signed today, the following understandings, which shall be an integral part of the Arrangements and Procedures, were reached.

I. PHYSICAL PROTECTION AND STORAGE AT THE FACILITY

i) A consultations visit under Article 4.2 shall be held within six months of the initial commencement of operations at the Facility and thereafter once in every subsequent five year period. In special cases, consultations visits can also be undertaken by mutual agreement between the Parties.

ii) The purpose of the consultations visits is to provide an opportunity for both Parties to exchange views on the implementation of physical protection measures as specified in Article 4.1 as well as exchange of information on international best practices with respect to physical protection.

iii) During the consultations visits the following activities shall be permitted:

a. Initial meeting between the visiting team of not more than ten persons and the designated authorities of the Facility;

b. Observe the protected area perimeter and its access control points;

c. Visit to the central alarm station;

d. A pre-exit meeting between the visiting team and the designated authorities of the Facility to prepare and finalize a confidential joint report on the visit to the Facility.

iv) The consultations visits shall be:

a. undertaken to the Facility at a time and duration mutually agreed by the Parties taking into account paragraph (i) above;

b. Addressed in accordance with Article 12.3 of the Agreement for Cooperation.

c. Conducted in a manner consistent with the national laws and safety and security regulations in force and without causing hindrance to smooth operations at the Facility. Access within the Facility shall be restricted as appropriate by the designated authorities of the Facility in order to protect sensitive locations and equipment at the Facility as well as sensitive information. The use of equipment by the visiting team shall not be permitted.

II. Article 7: SUSPENSION OF ARRANGEMENTS AND PROCEDURES

The Parties, taking into account their relations of strategic partnership and the objectives and purposes of the Agreement for Cooperation, agree that with respect to implementation of Article 7:

i) the reference to “serious national security concerns” shall not mean or be the basis for:

a. addressing differences between the Parties on the nature of peaceful nuclear activities of either Party or activities covered by Article 2.4 of the Agreement for Cooperation;

b. addressing differences with regard to fuel cycle choices;

c. the purpose of securing commercial advantage; or

d. the purpose of delaying, hampering or hindering peaceful nuclear activities of the other Party.

ii) Suspension of the Arrangements and Procedures means suspension of reprocessing of U.S.-obligated nuclear material at the Facility.

iii) Suspension of operation of the Facility or part thereof by the Facility operator shall be in accordance with operating procedures so as not to jeopardize the safety, early resumption of operation of the Facility, and its continued operation in the future. Operations at the Facility with regard to non-U.S.-obligated nuclear material shall not be affected by suspension under Article 7. With respect to U.S.-obligated nuclear material, the principle of proportionality as included in the Agreed Minute of the Agreement for Cooperation shall apply.

FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA

FOR THE GOVERNMENT OF INDIA 

Kill the nuclear liability Bill

Low accident liability and legal immunity mean reactor builders will have perverse incentives for malpractices

Brahma Chellaney Mint March 11, 2010

The Civil Liability for Nuclear Damage Bill is an unparalleled piece of legislation: It aims to make foreign builders of nuclear reactors in India immune from legal action, however culpable they may be for a catastrophic accident. And it caps their liability at a ridiculously low Rs500 crore ($109 million) despite the billions of dollars in profit they are set to make. Yet, the government set the parliamentary process for the Bill’s consideration in motion under unusual circumstances—it circulated it to members on 8 March when Parliament was in turmoil over the women’s reservation issue.

Two issues stand out about the liability Bill. For one, it is an anti-market measure: It constitutes a generous Indian state subsidy to foreign firms. By seeking to shield foreign reactor builders from the weight of the financial consequences of severe accidents, the Bill shifts the main burden for accident liability from the foreign supplier to the Indian taxpayer.

Illustration: Jayachandran / Mint

For another, it weakens nuclear safety. After all, to grant foreign reactor builders legal immunity upfront and to turn their legal liability for an accident into mere compensation pegged at a pittance is hardly a way to advance nuclear safety.

Broadly, the anti-market features of the government’s proposed import of nuclear power reactors are manifold. First, the Bill seeks to help foreign firms cut their costs of doing business in India by requiring them to take accident liability insurance for a mere $109 million. The actual liability, according to the Bill, will be of the state operator, which will run foreign-built plants. The state operator, in turn, with make the foreign builder liable up to $109 million through the construction contract. Second, the government is merrily procuring land for foreign reactor builders. It has designated nuclear parks for foreign-origin reactors, reserving separate sites exclusively for US, French and Russian firms.

Three, reactor deals will be signed government-to-government without open bidding and transparency, just the way India has entered into contracts for US arms worth billions of dollars in recent years. Four, foreign firms are being freed from the task of producing electricity at marketable rates. The government will run the reactors through the state operator, subsidizing the high-priced electricity generated. And five, foreign suppliers will bask under legal immunity.

The liability Bill essentially is intended to help out the two US reactor exporting firms, Westinghouse and General Electric (GE) which, unlike their state-owned French and Russian competitors, are in the private sector. With India committed to importing at least 10,000MW of nuclear power generating capacity from the US, Washington has been zealously prodding New Delhi to enact the liability law. But in bending backwards to create a friendly business environment for US firms, the government is making the Indian taxpayer assume the principal financial burden in the event of a major accident.

Actually, the Bill symbolizes the latest in a string of conditions thrust on India under the much-trumpeted nuclear deal, which was approved by the US Congress in 2008 but whose nuclear energy benefits are unlikely to start flowing until nearly a decade from now, as the average global lead time for reactor construction has stretched to eight years. Under the deal, India got no legally binding fuel supply guarantee to avert a Tarapur-style cut-off, and no right to withdraw from its obligations under any circumstance, though the US has reserved the right for itself to suspend or terminate the arrangements if it holds India not to be in compliance with stipulated terms.

India is still negotiating with the US to secure the right to reprocess foreign-origin spent fuel under international inspection. The state department has notified the US Congress in writing, though, that “the proposed arrangements and procedures with India will provide for withdrawal of reprocessing consent” by the US.

Prime Minister Manmohan Singh had repeatedly promised to bring the nuclear deal to Parliament and “abide” by its decision. For example, he stated on 30 June 2008: “I have said it before, I will repeat it again, that you allow us to complete the process. Once the process is over, I will bring it before Parliament and abide by the House”.

Yet, no sooner had the process ended, than the government signed the 123 Agreement with the US, sidelining Parliament. Having given no role to Parliament on the main deal, the government now wants the two Houses to pass a special law to provide foreign companies with accident liability protection. In fact, as has been publicly revealed, the Bill was approved by the cabinet after the Prime Minister’s Office rode roughshod over objections raised by the finance and environment ministries to its provisions.

The Bill’s stated objectives and reasons seek to create the meretricious impression that it is designed to bring India in compliance with international nuclear liability instruments. The plain truth is that India is under no obligation to enact liability legislation. If India wants, it can follow the example of Russia, which has refused to pass legislation to waive or cap accident liability for its foreign suppliers. Or it can follow the lead of Germany, which has limitless liability and demands €2.5 billion ($3.4 billion) security from each plant’s operator.

Indeed, efforts to harmonize international rules on liability and compensation have been frustrated by the failure to bring all relevant international instruments into force. As the powerful World Nuclear Association—the lobbying arm of 180 nuclear firms, including GE, Westinghouse and Areva—admits, “States with a majority of the world’s 440 nuclear power reactors are not yet party to any international nuclear liability convention, relying on their own arrangements.”

Take the case of the US: It has its own domestic liability law, the controversial Price-Anderson Act, but it is not party to the main international instruments—the Vienna Convention of the International Atomic Energy Agency (IAEA) or the Paris Convention of the Organisation for Economic Cooperation and Development (OECD).

In 1988, to bridge the geographical scope of the Vienna and Paris conventions, a joint protocol was adopted. Then in 1997, another protocol amended the Vienna Convention to set the limit of the operator’s liability at not less than 300 million special drawing rights, or SDRs ($458 million).

The US has now become party to IAEA’s 1997 Convention on Supplementary Compensation for Nuclear Damage, or CSC, which recognizes the potential trans-boundary consequences of Chernobyl-type nuclear disasters, and thus seeks a common approach on compensation. Compensation is distinct from liability. CSC, as the name suggests, is about compensation, to be paid “supplementary” to the liability limit. To join CSC, a state must be party to the Vienna or Paris conventions, or certify that its national law complies with the CSC annex on liability. The supplementary compensation under CSC is to be provided through contributions by state-parties on the basis of their installed nuclear capacity and a United Nations rate of assessment.

The Indian government has misleadingly juxtaposed its liability Bill with CSC, which has not even entered into force.

In theory, the Bill seeks to emulate the Price-Anderson Act, the US system of indemnification for legal liability. But in reality, it picks the worst elements from both worlds—the US system and IAEA’s Vienna Convention.

The Vienna Convention has no upper ceiling on liability, only a minimum one (300 million SDRs, also reflected in CSC). But the minimum is so low that few countries have pegged liability to that level. For example, Japan’s operator liability now is 120 billion yen ($1.33 billion), while liability in Finland is unlimited, with each plant licensee required to take at least €700 million ($950 million) in insurance coverage.

The Price-Anderson system, for its part, provides for more than $10.5 billion in liability payouts for each disaster through a complex formula that includes insurance coverage carried by the reactor that suffered the accident, retrospective premiums from each of the operating reactors in the US, and a possible 5% surcharge. The US government assumes liability for any accident only above the $10.5 billion figure, which is inflation-adjusted every five years and thus variable.

The Indian Bill, by contrast, pegs maximum liability, as its clauses 6 and 7 state, at “the rupee equivalent of 300 million SDRs”, or Rs2,087 crore ($458 million)—that is, 23 times lower than the private-sector fund available under the Price-Anderson system. Of this, the total possible liability of the foreign supplier has been limited to a trifling Rs500 crore. The Union government will be liable for damages in excess of Rs500 crore but up to Rs2,087 crore.

The Price-Anderson Act—effectively a subsidy measure—has been severely criticized by independent groups in the US, where it has been mockingly called “Half-Price Anderson”. The legislation the Indian government is seeking to push through can be labelled “Free-Ride Anderson”. Under it, the reactor builder is free to rake in unlimited profits without a real liability on product safety.

What is worse is that while the Price-Anderson Act permits economic (but not legal) channelling of liability, thereby allowing lawsuits against any party, the Indian Bill grants foreign suppliers immunity from legal action by introducing legal channelling of all liability to the Indian government. It not only turns the “polluter pays” principle on its head, but also forecloses the possibility of victims suing the foreign reactor builder for additional damages even in Indian courts.

With the improvement in reactor safety systems, chances of a nuclear accident are admittedly low. But the consequences of a single nuclear accident would be colossal, with a serious radioactive release likely to cause lasting public health problems, including genetic damage passing on to future generations. Though it did not kill anyone, the 1979 partial core meltdown at the Three Mile Island nuclear plant in the US led to 14 years of clean-up costing at least $1 billion. Little surprise that Washington has been pressing New Delhi hard on the liability issue.

More fundamentally, creating an artificial market with open-handed subsidies, land acquisition for foreign firms, abysmally underrated accident liability, and electricity supply at state-supported rates is no way to meet energy needs, or to reduce carbon emissions, or to help India’s poor. The Bill should be seen for what it is—an anti-market measure designed to promote unfair business practices and cartelization by rigging commercial terms in favour of select foreign suppliers.

Indeed, the Bill sends out a jarring message: Indian lives are cheap. It is a message at odds with India’s pride in being the world’s largest democracy.

Brahma Chellaney is professor of strategic studies at the Centre for Policy Research in New Delhi. Comment at theirview@livemint.com

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