In 1988, when Mikhail Gorbachev visited India, the two countries signed an agreement to build a nuclear power plant in India. Ten years later, India decided that the Russian reactors were to be built at Kudankulam, Tamil Nadu. Since Sri Lanka was close, and a possible nuclear accident might have had some trans-boundary effects, it was felt desirable to offer protection to victims through a third party liability regime.
In 1999, then, the Department of Atomic Energy sponsored a project, ‘A critical and comprehensive study of the nature and extent of State responsibility arising out of nuclear incidents/accidents within national boundaries and beyond’. Both this report — submitted in 2001 — and that of an inter-ministerial multidisciplinary Committee on Civil Liability for Nuclear Damage, recommended “a national legislation on nuclear liability after examining the various international conventions on the subject, including the Convention on Supplementary Compensation for Nuclear Damage, 1997”, G Balachandran, consulting fellow at the Institute for Defence Studies and Analyses, recorded in paper written in 2015.
The idea of being part of the CSC was thus born — long before the India-US nuclear deal was signed. And on February 4, 2016, 15 years after that first recommendation, India ratified the CSC — and the instrument of ratification was submitted to the International Atomic Energy Agency (IAEA) by Rajiva Misra, the Indian ambassador in Vienna. The Convention comes into force 90 days later — on May 4, 2016.
The ratification of the Convention by India, more than five years after it signed it on October 27, 2010, indicates that the NDA government is on the same path as the previous UPA regime. While signing a Convention reflects an “intention” to abide by it, ratification is a commitment to its “implementation”.
This is significant — since Finance Minister Arun Jaitley, then Leader of Opposition in Rajya Sabha, had, during a heated debate on the Civil Liability for Nuclear Damages Bill in August 2010, had said: “We did not want any direct or indirect reference (in the Bill) to any international convention such as the CSC so that India could keep its options open.”
The question of “suppliers’ liability” discussed during the debate on the nuclear liability law was situated also in the context of the outrage over the verdict on the Bhopal gas tragedy, which was seen to have let the guilty off with too little, too late.
On the other hand, the 2010 Act was perceived by the international community as being not in conformity with international liability regimes such as the Paris Convention, the Vienna Convention and, most importantly (because the US is part of it), the CSC.
During President Barack Obama’s visit in December 2010, India assured the US that the CSC would be ratified within the following year — but that didn’t happen. Through 2011, the UPA battled the fallout of alleged corruption scandals and the Anna Hazare-led campaign — and the will to ratify the CSC, sapped by political opposition and accusations of a sellout to foreign companies, dwindled.
During these years, owing to the suppliers’ liability clause in the nuclear liability law, no supplier, either foreign or domestic, was willing to sign contracts in the nuclear sector. The purported safeguards, while targeted at foreign suppliers, also hit domestic suppliers such as L&T adversely, and over the years, India’s civil nuclear programme stagnated.
The breakthrough came days before Obama’s second visit in January 2015, when Indian officials — following a series of meetings and conversations — were able to convince their American counterparts that the Indian law was broadly in conformity with the CSC.
This was followed by New Delhi’s intent to have a nuclear insurance pool to take care of the liability of operators and suppliers. This insurance pool of Rs 1,500 crore was launched in June 2015, with some Indian insurance companies and a British insurance partner.
Beyond Rs 1,500 crore, the liability will be borne by the Indian government up to Rs 2,610 crore, and beyond that, India will be able to access international funds under the CSC. The ratification this month helps India access this pool — which, though, is quite small now as only the US, Japan and UAE are the rich countries currently part of the Convention.
Critics say that India, by ratifying the Convention, has conformed to the CSC, which does not recognise suppliers’ liability.
For India, the issue was settled last year when it said — after Obama’s visit, in a series of FAQs on the MEA’s website — that while the liability is with the operator, it will be based on the commercial contract between the operator and the supplier (where the right to recourse and the suppliers’ liability can be mentioned). In fact, the CSC annex in Article 10 (a) says that the right to recourse can be exercised if it is mentioned in the contract.
The other criticism is that the US or Japan can now approach the IAEA and say that India’s nuclear liability law is not in conformity with the CSC. This may lead to arbitration, or take the issue to the International Court of Justice — or the IAEA may adjudicate it.
But India, while submitting its instrument of ratification on February 4, has found a way out. The document says the Indian government “does not consider itself bound by the dispute settlement procedures”. The dispute settlement procedures in the CSC refer to arbitration, or ICJ, or IAEA.
Now, the key question in case of a nuclear disaster — which is rare — is compensation for victims. In such a situation, the state has to step in, apart from the insurance pools set up for the damage to life and property.
As for the accountability of the suppliers, it will be incumbent upon the operator to settle it with them.
With the ratification of the CSC, the doors of India’s nuclear commerce with the world appear to have been finally opened.