Nuclear Suppliers’ Liability and the Attempt to Dilute Section 46

February 15, 2015

On February 8, nearly two weeks after Prime Minister Modi and President Obama announced that their two countries had achieved a “breakthrough” in their partnership on civil nuclear energy cooperation, the Ministry of External Affairs (“MEA”) finally broke its silence on the details of the deal reached by issuing responses to a list of Frequently Asked Questions. The MEA’s answer to one group of questions is particularly disturbing: that Section 46 of the Civil Liability for Nuclear Damage Act (the “CLND Act”) does not permit victims of a nuclear accident to bring tort law claims against suppliers.


Before going into the substantive implications of this, it is worth examining the language of Section 46 and the legal effect of the MEA’s pronouncement. Section 46 states: “The provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being in force and nothing contained herein shall exempt the operator from any proceeding, which might, apart from this Act, be instituted against the operator.” A plain reading interpretation of this section would suggest that the CLND Act does not exclude liability under other laws of general application, such as tort or criminal law. While Section 46 explicitly states that the Act does not exclude proceedings against nuclear operators, the generality of the first half of this clause would mean that actions could also be brought against nuclear suppliers under other laws. Indeed, it was this reading of Section 46 that was, until recently, adopted by both the Indian and US governments and was what caused American companies great concern over Section 46 and the possibility of unlimited supplier liability that it opens up.


Now the Government has made clear that the CLND Act will not be amended, but at the same time has issued its own interpretation of Section 46 that appears directly contradictory to its plain meaning interpretation. The MEA’s FAQs state that Section 46 does not allow suppliers to be sued under other laws relying on the fact that two amendments that proposed to include “suppliers” in the second part of the clause were negatived in the Rajya Sabha. The FAQs are so confusing that at one point they actually say “The CLND exclusively channels all liability for nuclear damage to the operator and Section 46 does not provide a basis for bringing claims for compensation for nuclear damage under other Acts.” Yet, allowing claims under other acts is exactly what Section 46 does! We have been told that the Government’s interpretation of Section 46 has been issued in the form of a legal memorandum from the Indian Attorney General to the United States. But such an opinion is not a legally binding or legitimate way of amending an existing law; nor does the Attorney General’s opinion bind judicial interpretation of this provision at a later date.  In any event, the Government’s actions reveal a disturbing approach of attempting to dilute an existing law without actually going through the arduous legislative process that an amendment would entail.


Second, and more importantly, why has the Government been so eager to assuage the concerns of suppliers, particularly foreign nuclear suppliers? Despite the widespread perception that the CLND Act is unnecessarily onerous on suppliers, this is not the case. The CLND Act is based on the principle of channeling liability to operators on a no-fault basis (subject to a cap on the amount of damages) with the purpose of facilitating speedy compensation for victims of a nuclear accident. Yet, while the CLND Act is primarily about no-fault liability, it would not be fair to the victims of a nuclear disaster to exclude all bases of fault liability given that no-fault liability is capped, and this is exactly what Section 46 does. In the event of a nuclear accident that is caused at least in part due to the fault of the supplier, Indian tort law would allow victims to have recourse against the supplier under tort law. Is this really so outrageous a proposition? General principles of equity and fairness demand that the victims of a nuclear accident should have the ability to bring claims against those who might have caused the accident. Supplier liability also makes sense from a policy point of view as it incentivizes suppliers to enhance safety standards given the enormous stakes involved in the event of a nuclear disaster.


Amidst all the aplomb in announcing a breakthrough in U.S.- India dealings on civil nuclear energy, the Modi Government appears to have forgotten for whom the CLND was intended for in the first place – the Indian people in the event of a nuclear accident. It has also conveniently forgotten that the BJP was a strong proponent of supplier liability when the CLND Bill was debated in Parliament in 2010. (For an example of this, see Finance Minister Arun Jaitley’s article from September 2013 against limiting supplier liability.) It is shocking that, despite the wounds of the Bhopal gas disaster being fresh in our memories and recent nuclear disasters such as Fukushima where damages and clean up costs are estimated to run to upwards of the US $ 100 billion, the Government has set aside all concern for the potential victims of industrial accidents in its eagerness to address the concerns of US suppliers.