Civil liability for nuclear damage
This EOE article is adapted from an information paper published by the World Nuclear Association (WNA). WNA information papers are frequently updated, so for greater detail or more up to date numbers, please see the latest version on WNA website (link at end of article).
International Framework
Before 1997, the international liability regime was embodied primarily in two instruments:
- the International Atomic Energy Agency (IAEA)'s Vienna Convention (among the parties to the Vienna Convention are: Argentina, Bulgaria, Czech Republic, Hungary, Lithuania, Mexico, Poland, Romania, Russia, Slovakia, Ukraine) on Civil Liability for Nuclear Damage of 1963 (entered into force in 1977); and
- the Organisation for Economic Co-operation and Development (OECD)'s Paris Convention on Third Party Liability in the Field of Nuclear Energy of 1960, which entered into force in 1968 and was bolstered by the Brussels Supplementary Convention in 1963. Parties to both the Paris and Brussels conventions are: Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Slovenia, Spain, Sweden, UK. Parties to the Paris convention only: Greece, Portugal, Turkey.
These Conventions were linked by the Joint Protocol adopted in 1988. They are based on the concept of civil law and share the following main principles:
- Liability is channelled exclusively to the operators of the nuclear installations;
- Liability of the operator is absolute, i.e., the operator is held liable irrespective of fault, except for "acts of armed conflict, hostilities, civil war or insurrection";
- Liability of the operator is limited in amount. Under the Vienna Convention, the upper ceiling is not fixed; but it may be limited by legislation in each State. The Paris Convention set a maximum liability of 15 million Special Drawing Rights (SDRs, about EUR 18 million), but this was increased under the Brussels Supplementary Convention up to a total of 300 million SDRs (about EUR 360 million), including contributions by the installation State up to SDR 175 million (EUR 210M) and other Parties to the Convention collectively on the basis of their installed nuclear capacity for the balance;
- Liability is limited in time. Generally, compensation rights are extinguished under both Conventions if an action is not brought within ten years;
- The operator must maintain insurance or other financial security for an amount corresponding to his liability or the limit set by the Installation State, beyond this level the Installation State can provide public funds but can also have recourse to the operator;
- Jurisdiction over actions lies exclusively with the courts of the Contracting Party in whose territory the nuclear incident occurred;
- Non-discrimination of victims on the grounds of nationality, domicile or residence.
Following the Chernobyl disaster in 1986, the IAEA initiated work on all aspects of nuclear liability in an effort to improve the basic Conventions and establish a comprehensive liability regime. In 1988, as a result of joint efforts by the IAEA and OECD's Nuclear Energy Agency (NEA), the Joint Protocol Relating to the Application of the Vienna Convention and the Paris Convention was adopted. This broadened the coverage of the two Conventions, combining them into one expanded liability regime. It was also intended to obviate any possible conflicts of law in the case of international transport of nuclear material. It entered into force in 1992.
In 1997, governments took a significant step forward in improving the liability regime for nuclear damage when delegates from over 80 States adopted a Protocol to Amend the Vienna Convention. The amended IAEA Vienna Convention sets the possible limit of the operator's liability at not less than 300 million SDRs (about EUR 360 million). It entered into force in 2003, but with few members.
Also in 1997, IAEA parties adopted a Convention on Supplementary Compensation for Nuclear Damage (CSC). This defines additional amounts to be provided through contributions by States Parties collectively on the basis of installed nuclear capacity and a UN rate of assessment, basically at 300 SDRs per MW thermal (i.e., about EUR 360 million total).
The CSC—not yet ratified—is an instrument to which all States may adhere regardless of whether they are parties to any existing nuclear liability conventions or have nuclear installations on their territories.
The Protocol amending the Vienna Convention—ratified in 2003—broadens the definition of nuclear damage (now also addressing the concept of environmental damage and preventive measures), extends the geographical scope of the Convention, and extends the period during which claims may be brought for loss of life and personal injury. It also provides for jurisdiction of coastal states over actions incurring nuclear damage during transport.
In 2004, contracting parties to the OECD Paris and Brussels Conventions signed Amending Protocols which brought the Paris Convention more into line with the IAEA Conventions amended or adopted in 1997. The principal objective of the amendments was to provide more compensation to more people for a wider scope of nuclear damage. They also shifted more of the onus for insurance on to industry. Consequently, new limits of liability were set as follows: Operators (insured) €700 million; Installation State (public funds) €500 million; Collective state contribution (Brussels) €300 million; a total liability of €1500 M. The definition of "nuclear damage" is broadened to include environmental damage and economic costs, and the scope of application is widened. These Protocols are expected to be ratified by the contracting parties once they have consulted with industry stakeholders and then drafted the necessary amending legislation. They are not yet in force, and the old limits still apply (c €210 million, €360 million).
Beyond such provisions, there is at least a tacit acceptance that the installation state will make available funds to cover anything in excess of these provisions, just as is the case with any major disaster—natural or other (the main ones have been chemical plants). This has long been accepted in all developed countries. However, in the event of government payout to meet immediate claims, the operator's liability is in no way extinguished, and taxpayers would expect to recover much or all of the sums involved.
However, states with a majority of the world's 440 nuclear power reactors are not yet party to any international nuclear liability convention.
US Framework
The USA takes a somewhat different approach, and is not party to any international nuclear liability convention. Here, the Price-Anderson Act—the world's first comprehensive nuclear liability law—has, since 1957, been central to addressing the question of liability for nuclear accidents in the US. It now provides US$10 billion in coverage without cost to the public or government and without fault needing to be proven. It covers nuclear power reactors, nuclear research reactors, and all other nuclear facilities.
It was renewed for 20 years in mid-2005, with strong bipartisan support, and requires individual operators to be responsible for two layers of insurance cover. The first layer is where each nuclear site is required to purchase US$300 million cover from private insurers. The second layer is jointly provided by all US reactor operators. It is funded through retrospective payments if required of up to US$96 million per reactor collected in annual installments of US$15 million (adjusted for inflation). Combined, the total provision comes to over US$10 billion paid for by the utilities. The U.S. Department of Energy (DOE) also provides US$10 billion for its nuclear activities. Beyond this cover and irrespective of fault, U.S. Congress, as insurer of last resort, must decide how compensation is provided in the event of a major accident.
More than US$200 million has been paid in claims and costs of litigation since the Price-Anderson Act came into effect, all of funded by insurance pools. Of this amount, some US$71 million was related to litigation following the 1979 accident at the Three Mile Island nuclear facility.
The Price-Anderson Act is a controversial policy. Opponents argue that the Act represents a massive taxpayer subsidy of the nuclear industry that substantially reduces the cost of doing business. Some opponents claim that without the cap on liability damages, the industry could not survive.Opponents note that the legislation was initially intended to provide investor confidence in what was viewed as a new and risky industry. But this is now a mature industry that should be fully accountable for nuclear accidents and should purchase risk insurance on the private market. However, over 40 years later, this mature industry still enjoys a subsidy that distorts the cost of nuclear power and potentially leaves taxpayers on the hook for damages from a severe nuclear accident.
Other countries
In the UK, the Energy Act of 1983 brought legislation into line with earlier revisions to the Paris/Brussels Conventions and set a new limit of liability for particular nuclear installations. In 1994, this limit was increased again to £140 million for each major installation, so that the operator is liable for claims up to this amount and must insure accordingly. The majority of this insurance is provided by a pool of UK insurers comprising 8 insurance companies and 16 Lloyds syndicates. Beyond £140 million, the current Paris/Brussels system applies, with government contribution to SDR 300 million (c. €360 million).
In mainland Europe, individual countries have legislation in line with the international conventions and, where set, cap levels vary. Germany has unlimited operator liability and requires €2.5 billion security which must be provided by the operator for each plant. This security is partly covered by insurance, up to €256 million. Switzerland (which has signed but not yet ratified the international conventions) requires operators to insure up to €700 million.
In Finland, a 2005 Act requires operators to take at least &eur;700 million insurance cover, and operator liability is unlimited beyond the &eur;1.5 billion provided under the Brussels Convention. "Nuclear damage" is as defined in the revised Paris Convention, and includes that from terrorism.
In Canada, the Nuclear Liability Act of 1976 is also in line with the international conventions and establishes the licensee's absolute and exclusive liability for third-party damage. Suppliers of goods and services are given an absolute discharge of liability. At present a limit of CA$75 million per nuclear power plant is set on the insurance cover required for individual licensees, but this is under review. Cover is provided by a pool of insurers, and claimants need not establish fault on anyone's part, but must show injury. Beyond the cap level, any further funds would be provided by the government.
Japan is not party to any international liability convention, but its domestic law generally conforms to them. Plant operator liability is exclusive and absolute, and power plant operators must provide financial security of 60 billion yen (US$540 million). Beyond that, the situation is unclear, though liability is unlimited. In relation to the 1999 Tokai-mura fuel plant criticality accident, insurance covered 1 billion yen and the parent company (Sumitomo) paid the balance of 13.5 billion yen.
Russia is not party to any international liability convention, nor does it have any domestic laws on nuclear liability. The country signed but has not ratified the Vienna Convention. It has some "interim" bilateral agreements to cover entities working under safety assistance programs, but the legislative deficit is a deterrent to Western contractors in particular.
Ukraine adopted a domestic liability law in 1995 that it has since revised in order to harmonize with the Vienna Convention, which it joined in 1996. It is also party to the Joint Protocol and has signed the Convention on Supplementary Compensation for Nuclear Damage (CSC). Operator liability is capped at 150 million SDRs (c. €180 million). Special provisions apply to work on the Chernobyl shelter so as to extend coverage outside the Vienna Convention countries.
China is not party to any international liability convention and has only a 1986 interim domestic law on nuclear liability, which corresponds with international conventions except that the liability limit is only about US$36 million.
Further Reading
- WNA paper onCivil liability for nuclear damage
- IAEA, Worldatom web site.
- Taylor, Jerry and Navin Nayak, 2003. No Corporate Welfare for Nuclear Power, The Cato institute, June 21, 2003.
- Warren, G.C., 2000. Nuclear Risks. British Nuclear Insurers (now: Nuclear Risk Insurers).
