Progress in Nuclear Energy xxx (2017) 1e8
Contents lists available at ScienceDirect
Progress in Nuclear Energy
journal homepage: www.elsevier.com/locate/pnucene
The Civil Liability for Nuclear Damage Act of India: An engineering
perspective regarding Supplier's liability
R.B. Grover
Homi Bhabha National Institute, Mumbai, 400094, India
a r t i c l e i n f o
a b s t r a c t
Article history:
Received 23 January 2017
Received in revised form
11 April 2017
Accepted 12 April 2017
Available online xxx
Civil liability for nuclear damage regime established in India follows global practice in this area and has a
unique provision that enables an Operator to exercise a right of recourse against a Supplier. Rules
promulgated under the Act provide ‘explanation’ about the Supplier which has been formulated based on
practices in nuclear industry. The paper analyses the ‘explanation’ and concludes that India's legislation
designates the plant system designer as the Supplier. Any examination of the Indian law without
studying the ‘explanation’ leads to erroneous conclusions. To protect his interest against the Right of
Recourse, the system designer can avail of the insurance policy that is meant for the suppliers. Vendors,
other than the system designer, have no liability under the Right of Recourse. A harmonious analysis of
debates and various documents indicates that the Section 46 of the Act is directed only towards the
Operator. This paper examines the issue of Supplier's liability in the light of explanation about a supplier
as included in the Rules.
© 2017 Elsevier Ltd. All rights reserved.
Keywords:
Nuclear liability
India's nuclear liability legislation
Suppliers liability
Role of system designer
Indian nuclear insurance pool
Defence in depth
1. Introduction
1.1. Nuclear power growth in India
India is keen to accelerate the growth of nuclear installed capacity by setting up a mix of different reactor types. This includes
Pressurized Heavy Water Reactors (PHWRs) and Fast Breeder Reactors based on indigenous design as well as light water reactors
being set up in technical cooperation with other countries. Given
the growing energy demand in India, nuclear energy must be an
integral part of the energy mix and the Government of India has
articulated its support for nuclear energy in several ways. Three
different articulations made by the Government in the recent past
follow.
a Union budget presented every year in the Parliament reflects
policies of the Government. In the budget speech presented on
February 29, 2016 by the Finance Minister, paragraph 82 reads
as follows, “In the power sector, we need to diversify the sources
of power generation for long term stability. Government is
E-mail address: rbgrover@hbni.ac.in.
drawing up a comprehensive plan, spanning next 15e20 years,
to augment the investment in nuclear power generation.
Budgetary allocation up to ₹3000 crores1 per annum, together
with public sector investments, will be leveraged to facilitate the
required investment for this purpose” (Economic Times, 2016a).
For every nuclear power plant set up in recent years, debt to
equity ratio has been 70:30 and therefore, provision of ₹3000
crores by the government will translate to an investment of
₹10,000 crores.
b In December 2015, India submitted to 21st Conference of Parties
(CoP21) to the United Nations Framework Convention on
Climate Change (UNFCCC) its “Intended Nationally Determined
Contributions (INDC) for the Period 2021 to 2030”. Through this
statement, India has committed “to achieve about 40 percent
cumulative electric installed capacity from non-fossil fuel based
energy resources by 2030 with the help of transfer of technology
and low cost international finance from Green Climate Fund
(GCF)” (INDC, 2015). The phrase “non-fossil fuel based energy”
includes nuclear energy.
1
Crore is a word in Hindi and other Indian languages and means ten million. As
per exchange rate on 05.04.2017, ₹10,000 crores ¼ ~ $ 1.54 billion. ₹ is a symbol for
Indian rupee.
http://dx.doi.org/10.1016/j.pnucene.2017.04.012
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Please cite this article in press as: Grover, R.B., The Civil Liability for Nuclear Damage Act of India: An engineering perspective regarding
Supplier's liability, Progress in Nuclear Energy (2017), http://dx.doi.org/10.1016/j.pnucene.2017.04.012
2
R.B. Grover / Progress in Nuclear Energy xxx (2017) 1e8
c Eighth BRICS summit was held at Goa and paragraph 54 of the
Goa declaration issued on October 16, 2016 says, “We recognise
that nuclear energy will play a significant role for some of the
BRICS countries in meeting their 2015 Paris Climate Change
Agreement commitments and for reducing global greenhouse
gas emissions in the long term. In this regard, we underline the
importance of predictability in accessing technology and finance
for expansion of civil nuclear energy capacity which would
contribute to the sustainable development of BRICS countries”
(BRICS, 2016).
Worldwide, nuclear industry has been subjected to intense
public scrutiny in view of perceived risks and there is a sharp
divide between “the public” and “the expert”. Even the categorisation as “the public” and “the expert” is objected to by those
who are opposed to nuclear power. However, given the large and
growing energy needs of India and other developing countries,
nuclear energy is necessary to provide energy security; its benefits are many and its risks can be mitigated (Berger et al., 2017).
Regulations to ensure safety of nuclear power plants and methodology to assess safety have been continuously evolving (Keller
and Modarres, 2005) and regulators are moving towards Risk
Informed Regulations (RIR) which have been evolved based on
probabilistic risk assessment methods. All such developments
provide basis for the evolution of liability legislations at the national level and treaties at the global level. This paper concentrates on the Indian scene and examines India's legislation on civil
liability for nuclear damage.
1.2. Enactment of a legislation on civil liability for nuclear damage
In view of envisaged nuclear power growth, and possible
spread of radioactivity over large areas in case of an incident,
howsoever rare, it was considered necessary to have a legislation
on civil liability for nuclear damage. To understand this issue, the
Department of Atomic Energy (DAE) awarded a study-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” to V. B. Coutinho and S. Rajagopal in 1999 with the objective of going into various aspects of
civil liability arising out of any nuclear damage (Parliament of
India, 2010). The study recommended enactment of a legal
framework based on generally accepted principles that is
providing prompt compensation to victims of an incident based
on a no-fault liability regime, clarity about court of jurisdiction,
and ensuring that there is no discrimination based on citizenship
in disbursing compensation. This study was followed by deliberations within the Government.
While deliberations were going on, the Government of India
launched an initiative to open international civil nuclear cooperation with the objective to source uranium from international markets, and have access to manufacturers of nuclear equipment
abroad to accelerate the growth of nuclear installed capacity in the
country (Grover, 2017 in this issue). This initiative demanded India
to be a party to one of the international conventions on the subject.
This led to expediting the ongoing work and eventually ‘The Civil
Liability for Nuclear Damage Act, 2010’ (DAE, 2010), hereinafter the
CLND Act or the Act, was passed by the Parliament and notified. The
Act along with the Rules (DAE, 2011) made thereunder constitute
India's domestic legislation and forms the basis for ratification by
India of the Convention on Supplementary Compensation for Nuclear Damage (CSC) which was opened for signatures at Vienna on
September 29, 1997 at the 41st General Conference of the International Atomic Energy Agency (IAEA, 1998). It also provides an
assurance to the Indian public that in the case of an incident,
howsoever unlikely, there is a mechanism for providing prompt
compensation to the victims.
2. Key features of the Indian legislation
This section describes the key features which are in line with the
international liability regime. There is one unique feature and that
is described in the next section. Preamble or the long title of the Act
sets the tone. It talks about broad principles such as no-fault liability regime, channelling liability to the operator, appointment of
Claims Commissioner, and establishment of Nuclear Damage
Claims Commission.
Section 4(1) states that “The operator of the nuclear installation
shall be liable for nuclear damage caused by a nuclear incident …”
Further, Section 4(4) states that “The liability of the operator of the
nuclear installation shall be strict and shall be based on the principle of no-fault liability.” Section 8(1) states that “The operator
shall, before he begins operation of his nuclear installation, take out
insurance policy or such other financial security or combination of
both, covering his liability …” All these provisions along with the
long title of the Act make it clear that the liability is strict, and
channelled to the Operator through a no-fault liability regime.
Section 6 limits liability in amount and Section 18 limits the
time during which claims have to be made. Section 5 provides for
exclusions for liability for operator by imposing liability on the
Government in case of events like grave natural disaster and armed
conflict.
A nuclear incident has to be notified (Section 3(1)) by the
regulator that is the Atomic Energy Regulatory Board (AERB) and
whosoever suffers nuclear damage shall be entitled to claim
compensation in accordance with the provisions of the Act (Section
13(1)). The Act also provides for a single court of jurisdiction
(Section 9(2) and Section 19), which is either Claims Commissioner
or a Nuclear Damage Claims Commission. This provision implies
that Indian law provides for a dedicated court, and this will speed
up settlement of claims by victims. A comparison of the Indian
legislation with international principles has been presented by
other authors (Ram Mohan, 2014; Sutaria, 2014) and is not included
in this paper.
3. A unique feature in the Indian legislation
3.1. The unique feature
One feature in the Indian legislation is unique and has been a
topic of debate. The Bhopal Gas Tragedy2 resulted in a huge loss and
made India aware about the need of a sound public policy to
compensate the victims of a severe accident. The verdict of the trial
court for the case of State of Madhya Pradesh v. Warren Anderson and
Ors instituted in 1994 was delivered on June 7, 2010. In India, bills
are discussed in detail in Standing Committees and the first hearing
of the Standing Committee to discuss Civil Liability for Nuclear
Damage Bill was held on June 8, 2010. The verdict was extensively
reported in the media, and the Bhopal Gas Tragedy is likely to have
weighed heavily on all who participated in the discussions of the
Standing Committee resulting in the unique feature in the Bill
related to a right of recourse against the supplier by the operator
although Union Carbide was the Operator.
The unique feature is the right of recourse provided in the
Section 17 of the Act and Rule 24 which elaborates Section 17.
Section 17 reads as follows.
2
There is an extensive write-up on Bhopal gas Tragedy in Wikipedia. As in early
April 2017, the write-up had 106 references.
Please cite this article in press as: Grover, R.B., The Civil Liability for Nuclear Damage Act of India: An engineering perspective regarding
Supplier's liability, Progress in Nuclear Energy (2017), http://dx.doi.org/10.1016/j.pnucene.2017.04.012
R.B. Grover / Progress in Nuclear Energy xxx (2017) 1e8
“17. The operator of a nuclear installation, after paying the
compensation for nuclear damage in accordance with section 6,
shall have a right of recourse where d
b
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
supplier or his employee, which includes supply of equipment or
material with patent or latent defects or sub-standard services;
c. the nuclear incident has resulted from the act of commission or
omission of an individual done with the intent to cause nuclear
damage.”
This section uses the words “Operator” as well as “Supplier”. The
word “Operator” is defined in the Act, while the word “Supplier” is
not defined; it is used only once in section 17 and nowhere else. It is
explained in the Rule 24 as follows.
c
““Supplier” shall include a person who e
(i) manufactures and supplies, either directly or through an agent,
a system, equipment or component or builds a structure on the
basis of functional specification, or
(ii) provides build to print or detailed design specifications to a
vendor for manufacturing a system, equipment or component or
building a structure and is responsible to the operator for design
and quality assurance; or
d
(iii) provides quality assurance or design services.”
This explanation about the word “supplier” has remained
under-examined in the literature on India's nuclear liability legislation and despite debate on nuclear liability in the media, has
remained under-reported. Sutaria (2014), Ram Mohan (2014) and
Ameye (2015) have analysed Section 17 and the Rule 24, but have
not included implications of the explanation in their analyses.
Ignoring the explanation has resulted in Heffron et al. (2016) calling
section 17 vague and ambiguous, and opining that a victim will
have to resort to a multitude of court cases. This paper examines
this issue in detail and presents basis for designating individuals as
suppliers or vendors based on engineering practices followed by
nuclear industry.
Complete text of Rule 24 is given in Annex 1. The second
explanation is also important as it clarifies that an Operator cannot
claim more than what it has paid to the victims. This clearly limits
the liability of a Supplier to the same value as that of the Operator.
3.2. Some observation regarding channelling to the operator
Legal channelling to the Operator provides a one stop solution to
the victims of an incident, but continues to be debated among legal
experts. It has been examined in detail by Ameye (2009, 2015) and
one can make certain observations, some contrarian, about
channelling.
a It is the Operator who has the control over the activity at the
time at which the incident occurs and therefore, must be liable
for damages. Citing Harvard Report, Ameye writes that a welldesigned system may become dangerous if badly run. Postdelivery, suppliers lose control over their products, and are
not even aware of the health of equipment and components
supplied by them. This aspect has acquired further importance
now when life of plants is being extended way beyond what was
initially envisaged and new plants are being designed to have a
life of 60 or beyond. Plants having long life will see replacement
e
3
of equipment and components as well as incorporation of
altogether new features.
Channelling of liability solely to the Operator prevents pyramiding of insurance. Addition of supplier insurance will add to
costs that will be passed to the consumer in the form of higher
tariff of electricity generated. Contrarian viewpoint is that insurance companies will perform risk assessment studies using
principles of probabilistic risk assessment and quantify the
contribution of every major equipment to core melt probability.
Such studies will form the basis of determining the premium for
the policy to be issued to the vendor of a given equipment.
Overall the premium will get adjusted and tariff for the consumer might not be affected.
The way nuclear industry is evolving, design knowledge is
becoming proprietary information of vendors. As the design
knowledge becomes more hermetic, it will be hard to sustain
channelling of liability to operator for risks, he is not aware of or
even worse, for risks he cannot perceive (Ameye, 2009). Practice
by vendors withholding key safety information challenges the
presumption that the Operator has control over the activity and
this amounts to challenging the very basis of channelling liability to the Operator.
Design integrity of a nuclear installation has to be maintained
throughout the lifetime of the plant and one important element
to do so is setting up a design authority as a part of the operating
organisation (IAEA, 2003). The design authority is expected to
have requisite knowledge of “the overall basis for safety of its
nuclear facilities throughout the full lifecycle of those facilities”
(AERB, 2015). In the opinion of the author, the mandatory provision by regulators about having a competent design authority
favours channelling to the Operator and challenges the tendency of vendors to maintain design knowledge hermetic. This
provision needs to be implemented strictly and the system
designer should share design information with the design authority set up by the operating organisation. This is discussed in
detail in the next section.
The US law provides for economic channelling thereby holding
suppliers responsible. This is achieved by providing “umbrella
insurances covering the liability of operators, suppliers and designers” (Ameye, 2015). Consequence to the US joining CSC, the
additional fund that the US must contribute to meet its obligations under the CSC, will be contributed by the nuclear
suppliers as provided in the US Energy Independence and Security Act, 2007. The US law differs from laws in other countries, and the CSC, through its Section 3, grandfathers the
provision in the US law.
The word ‘supplier’ has been used by many authors, and appears
in some legal documents, but is not defined anywhere. Indian
legislation explains the word ‘supplier under Rule 24. Prior to
examining the explanation about a supplier in the Indian legislation and its implication on the right of recourse, it is necessary to
examine certain basic principles of reactor design, construction and
operation.
4. Basic principles of nuclear power reactor design,
construction and operation
4.1. Fundamental safety functions
A nuclear power reactor consists of several Structures, Systems
and Equipment. It is designed to deliver power to the grid.
Underperformance of a system or equipment can lead to reduced
delivery of power and may or may not be significant with respect to
safety. Safety relates to three functions (IAEA, 1999) that protect
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R.B. Grover / Progress in Nuclear Energy xxx (2017) 1e8
against any release of radioactive material in the public domain:
controlling reactor power;
cooling the fuel; and
confining radioactive materials within the appropriate physical
barriers.
4.2. Defence in depth
Since the early days of nuclear power, the principle of ‘Defence
in Depth’ or DiD has been the primary means of preventing accidents in a nuclear power plant and mitigating the consequences of
accidents if they do occur (Keller and Modarres, 2005). DiD has
been continuously evolving. It is “centred on several levels of protection including successive barriers preventing the release of radioactive material to the environment. The concept includes protection of
the barriers by averting damage to the plant and to the barriers
themselves. It includes further measures to protect the public and the
environment from harm in case these barriers are not fully effective.”
Special attention is focussed on safety functions by making use of
“redundancy and diversity of design and the physical separation of
parallel components, where appropriate, to reduce the likelihood of the
loss of a vital safety function” (IAEA, 1999). In practice, this is achieved by providing three trains each of 100% capacity, or four trains
each of 50% capacity with appropriate precautions regarding
physical separation and diversity.
Further, “initiation and operation of the engineered safety features
are highly reliable. This reliability is achieved by: the appropriate use
of fail-safe design; by protection against common cause failures; and
by independence between safety systems and plant process systems.
The design of these systems ensures that failure of a single component
would not cause loss of the function served by a safety system (the
single failure criterion). Where a system is relied upon to perform both
safety and process functions, special consideration is given to ensuring
that the safety function is not affected by expected or inadvertent
process control demands” (IAEA, 1999).
“Safety components and systems are chosen that are qualified for
the environmental conditions that would prevail if they were
required to function. The effects of ageing on normal and
abnormal functioning are considered in design and qualification.”
(IAEA, 1999)
Guidance provided by the IAEA has been incorporated in domestic regulatory guides by regulators (For example, AERB, 2005)
and after Fukushima has further evolved (AERB, 2015; OECD, 2016).
“This concept is applied to all safety related activities, whether
organisational, behavioural or design related, and whether in full
power, low power or various shutdown states. This is to ensure that all
safety related activities are subjected to independent levels of provisions in a hierarchical manner, so that if a failure were to occur in a
level, it would be detected and compensated for or corrected by
appropriate measures by the subsequent level” (AERB, 2015).
There are five levels as follows (OECD, 2016).
1 Normal operation: To prevent deviations from normal operation,
and to prevent failures of structures, systems and components
important to safety.
2 Operational occurrences: To detect and intercept deviations from
normal operation, to prevent anticipated operational occurrences from escalating to accident conditions and to return the
plant to a state of normal operation.
3 Design basis accidents: To minimise the consequences of accidents and prevent escalation to beyond design basis accidents.
4 Beyond design basis accidents: To ensure that radioactive releases
caused by beyond design basis accidents, including severe accidents, are kept as low as practicable.
5 Mitigation of radiological consequences: To mitigate the radiological consequences of potential releases of radioactive materials that may result from accident conditions.
Levels 1, 2 and 3 are incorporated to prevent and mitigate
anticipated events and design basis accidents. Level 4 addresses
beyond design basis accidents which might result from extreme
external events, multiple failures, and/or human errors. Essentially
any radioactive release in public domain from a nuclear facility will
be the result of failure of multiple systems and not an isolated
equipment. Further, a variety of design principles are used to promote and implement DiD and these include “redundancy, diversity,
segregation, physical separation, train/channel independence, singlepoint failure protection and, as far as practical, independence between levels” (OECD, 2016).
4.3. Design authority
Nuclear power plants consist of several systems and equipment
and have a long operating life. During the long operating life,
changes can arise due to a variety of reasons including physical
ageing, obsolescence of hardware and software, improvements
made in the plant based on feedback from operating experience, to
address regulatory changes, or to upgrade the plant in view of new
knowledge. However, integrity of design of a nuclear installation
must be maintained throughout its operating life. A report by the
International Safety Advisory Group, INSAG-19, provides details
(IAEA, 2003) and advocates formalising this process by setting up a
design authority within the operating organisation. This recognises
the peculiarities of nuclear industry which can be summed up as (i)
regulatory authority holding the operator responsible for the
design and safe operation, (ii) channelling of liability to the operator, (iii) each nuclear power plant being a unique combination of
nuclear island, balance of plant and site dependent features, and
(iv) nuclear island designer, steam cycle designer and balance of
plant designer coming together only for a specific plant. This results
in operating organisation as the only entity having knowledge of
the overall design and implication of any change that is made
during the lifetime of the plant.
The guideline about setting up a design authority has been
adopted by AERB as well (AERB, 2015). Specific provision included
in the AERB document is as follows, “The prime responsibility for
safety rests with the organisation responsible for operating the nuclear
power plant that gives rise to radiation risks. The responsible organisation should set up a formal process to maintain the integrity of
design of the plant. A formally designated entity i.e. design authority
within the responsible organisation shall take responsibility for this
process.” It continues, “The formally designated entity (design authority) that has overall responsibility for the design process shall be
responsible for approving design changes and for ensuring that the
requisite knowledge is maintained throughout the plant life.”
The structure of nuclear industry in India is unique. For setting
up PHWRs in India, Nuclear Power Corporation of India Limited
(NPCIL) is the system designer (or integrator), the constructor as
well as the operator. Combination of roles in a single entity is
helpful in ensuing that design basis knowledge is available to the
operator, which is a factor contributing towards safe operation. The
recommendation of INSAG (IAEA, 2003) regarding setting up a
design authority within the operating organisation is built into the
structure of NPCIL. As NPCIL sets up light water reactors in technical
collaboration with vendors in other countries, it must ensure that a
competent design authority for light water reactors is established
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R.B. Grover / Progress in Nuclear Energy xxx (2017) 1e8
within NPCIL and contracts signed with foreign vendors should
appropriately address this aspect. Attention should be given by the
design authority to understand the design basis of all systems
including those that are called upon to function only during serious
incidents. This might call for addressing issues related to intellectual property rights during contracts upfront.
Considering the success of the model adopted by NPCIL, BHAVINI, the company tasked with setting up fast reactors, is evolving
on similar lines. Entities engaged in operating fuel cycle facilities
are also following the same approach.
5
rating. Its safety function comes into play following a station
blackout when heat is transferred to secondary side by thermosyphon. The important feature determining thermosyphon is the
elevation at which the steam generator is placed relative to the
reactor core. Adequacy of thermosyphon to remove decay heat,
being a safety function, is always investigated in detail (Vijayan
et al., 1993). Main responsibility of performance for the safety
function of the steam generator lies with the system designer since
it is the system designer who determines the elevation of the steam
generator relative to the reactor core and the overall flow path. One
can extend similar arguments to all safety systems and equipment.
4.4. Duration of license by AERB
AERB issues licenses under the Atomic Energy (Radiation Protection) Rules, 2004, which says, “Every licence issued under rule 3
shall, unless otherwise specified, be valid for a period of five years
from the date of issue of such licence.” The period of licence has
been kept short so as to give the regulator an authority to periodically examine the plant and ask the operator to keep the plant in a
safe condition in accordance with the current safety criteria. The
provision of having a design authority as a part of the operating
organisation is a step towards ensuring that the plant design meets
the current safety criteria.
Rule 24, sub-Rule (2) provides for duration of Right of Recourse
as the longer of two possible time periods: product liability period
as included in the contract or the period of initial licence issued by
the Atomic Energy Regulatory Board. As per the practice prevailing
in the industry, general conditions of contract for supply of
equipment specify five years as the period of warranty for latent
defects and one year for patent defects.
5. The Supplier: an explanation
5.1. Construction of PHWRs in India
In India, PHWRs are being designed, constructed and operated
by the NPCIL. Vendors only supply systems and equipment as per
detailed design specifications or ‘build to print’ drawings provided
to them by NPCIL. Vendors have no control on how the specifications and/or drawings of individual equipment are evolved, the
systems are designed, and the systems are integrated in the final
plant configuration. One can take the example of a pump in a shutdown cooling system, which is a safety system. The system designer
decides the flow rate and the pressure to be developed by the
pump. Flow rate is calculated to remove decay heat generated after
reactor shut down and the pump vendor has no role in the calculations. The vendor supplies the pump as per specifications provided to him. Any inadequacy in the specified flow rate or the
pressure is the responsibility of the system designer. One can argue
that shaft seizure can result in the failure of the pump and for that
the pump vendor must be held responsible. This argument overlooks the basic design philosophy that no single failure can cause a
nuclear accident and in case, system designer has overlooked this
vital aspect, then fault is with the plant system designer, and not
with the pump vendor.
Take another example, say a steam generator which transfers
heat from the primary fluid to the secondary fluid. The system
designer decides the number of steam generators to be deployed in
a reactor, its boundary conditions like inlet and outlet temperature,
elevation at which it is to be placed in the plant, its controls and
may ask the vendor to design its internals. Manufacturing done by a
vendor is subject to quality assurance at the apex level by engineers
belonging to NPCIL. Steam generator performs both process function and safety function. Under normal operation, it performs
process function and any inadequacy in its design influences plant
5.2. Construction of reactors in technical cooperation with vendors
from other countries
One additional aspect needs attention. For nuclear power plants
to be set up in technical cooperation with other countries, designer
of the nuclear island will be someone else, say a company X. The
Indian company setting up the plant as an Operator will be influencing design by asking the designer to meet regulatory criteria
applicable in India. However, company X will accept or refuse to
implement suggested changes based on its analysis. Since it would
take decision after due analysis, the responsibility for the overall
system design remains with company X.
5.3. Linking the explanation in rule 24 with practices in nuclear
industry
One can now link this discussion to the explanation given in the
Rule 24 about the Supplier. The explanation has three parts: (i) a
Supplier could be a person who provides system, equipment and
structures against ‘functional specifications’, or (ii) a person who
has provided ‘build to print’ drawings or detailed design specifications, or (iii) a person who has provided ‘design or quality
assurance services’. It is to be noted that providing flow rate and
pressure to be delivered by a shutdown cooling pump doesn't
amount to providing functional specifications. Functional specifications for a shutdown cooling pump would involve the operator
listing all conditions under which the pump will have to provide
cooling water and the heat load to be removed. Similarly specifying
functional specification for a gasket for use in a flanged joint would
involve the Operator specifying pipe size, fluid, flow rate, temperature, pressure, type of flange and all forces and bending moments
coming on a flanged joint.
Further, a system designer will hire services of vendors for
providing design services, but the final design check has to be done
by the system designer himself. Similarly, an operator (or in some
cases the system designer) might engage vendors for providing
quality assurance services at intermediate stages of equipment
manufacture and plant construction, but at the final stage or at the
apex level, quality assurance has to be supervised by him directly.
The explanation about the word supplier as included in Rule 24
has a clear linkage with practices followed by nuclear industry and
leads one to conclude that Supplier is a person who designs and
integrates the complete reactor system. Vendors supplying individual equipment and systems, or providing intermediate quality
control services, or performing design calculations for individual
equipment or systems are not suppliers. This is further explained in
the next section with respect to the structure of nuclear industry in
India.
It is pertinent to add here that the supply chain for a nuclear
facility can be divided into several tiers. Different countries/regions
follow different nomenclature for various tiers. In the UK (HM
Government, 2012), it is classified in 6 tiers with the technology
vendor as the first tier, system integrators as the second tier, and
Please cite this article in press as: Grover, R.B., The Civil Liability for Nuclear Damage Act of India: An engineering perspective regarding
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R.B. Grover / Progress in Nuclear Energy xxx (2017) 1e8
equipment and component manufacturers, fabricators, raw material suppliers etc. comprising the remaining tiers.
Analysis of major accidents also brings out the importance of the
system designers along with Operators. So far there have been
three major accidents in nuclear power plants and all three have
been analysed in detail. The first is the accident at Three Mile Island,
which was initiated by an equipment failure, but inappropriate
operator action turned the failure into a serious accident. This in
turn was the result of inadequate training and deficiencies in the
design of the control room (Kemeny, 1979).
The accident at Chernobyl was caused by a combination of
several factors: “specific physical characteristics of the reactor; specific design features of the reactor control elements; and the fact that
the reactor was brought to a state not specified by procedures or
investigated by an independent safety body. Most importantly, the
physical characteristics of the reactor made possible its unstable
behaviour” (IAEA, 1992).
The most recent accident has been at Fukushima and was the
result of a total outage of electricity at the plant. As per the report of
the investigation commission appointed by the National Diet of
Japan (Diet, 2012), it was a manmade disaster. The Operator was
aware of the risk of a total outage of electricity in case of a tsunami
larger than that assumed at the initial design stage. He was also
aware that such a tsunami could occur, but didn't take any remedial
action.
6. Right of recourse
With this explanation, one can discuss the Right of Recourse as
included in the Indian legislation. Three points need to be considered. First is that there is a difference between events that can lead
to a situation which has to be categorised as a nuclear incident as
per the Act, and events leading to unavailability of the plant for
operation or operation at reduced power. Latent or patent defects in
equipment referred to in Section 17 (b) of the Act may hamper plant
operation, but about any effect on safety from radiation in public
domain, one has to look at it along with the basic principles of
nuclear power reactor design, construction and operation. Though
patent or latent defects are included in Section 17 (b), safety from
radiation in public domain can be jeopardised only if the design of
the complete system has not been done following the principles of
DiD, and steps to maintain integrity of design throughout operating
lifetime of the installation have not been taken.
Second is the fact that post-delivery, vendors generally do not
play any role in operation and maintenance of the products
supplied by them and have no control over any changes made by
the Operator in the plant which might influence their products or
services. Incidents in any plant can be caused by several reasons
including poor maintenance practices, operating under conditions not permitted by design specifications, or human error by
the Operator. Vendors are liable only as per product liability they
have taken up under the contract. The Act itself includes patent
and latent defects under Section 17 b. This argument is in harmony with the basic precept followed by the nuclear industry
that the primary responsibility of nuclear safety lies with the
Operator.
The third issue pertains to differentiating between a Supplier
and vendors. As stated in the previous section, Supplier is a person
who designs and integrates the complete reactor system and is
responsible for the quality assurance at the apex level. Going by the
explanation of the Supplier, in the considered opinion of the author,
for PHWRs being set up in India as at present where NPCIL is the
system designer, NPCIL is the Supplier. It is clearly stated by Ministry of External Affairs (MEA, 2015), which in response to question
10 in the document giving frequently asked questions and answers,
says that “… in some cases the operator (NPCIL) itself may be a
Supplier as it provides build to print or detailed design specifications to a vendor.” This is also incorporated by the NPCIL in its
General Conditions of Contract as given in Annex 2 (NPCIL, 2017).
Extending this logic, for the Prototype Fast Breeder Reactor being set up at Kalpakkam, Bharatiya Nabhikiya Vidyut Nigam Limited
(BHAVINI) is the Supplier and for reprocessing facilities, Bhabha
Atomic Research Centre is the Supplier.
One can now extend this logic to a nuclear power plant which is
set up by an Operator in India in technical cooperation with a
vendor, whether Indian or Foreign, where the vendor designs the
complete nuclear power plant. The vendor could be X or Y or Z. Any
such vendor will design the complete plant and develop build to
print drawings or detailed design specifications for equipment,
components and systems. Such a vendor will source equipment and
components from individual sub-vendors. In the light of discussion
above, the lead vendor that is X or Y or Z will be the Supplier for the
Right of Recourse. Sub-vendors will have no liability under the
Right of Recourse. To protect his interest, the system designer that
is X, Y, or Z can avail of the insurance policy meant for Suppliers.
7. Reference to other laws in section 46 is directed towards
the operator
Views have been expressed about the applicability of Section 46
to suppliers (Sutaria, 2014; Ram Mohan, 2014; Ameye, 2015). The
report of the Standing Committee (Parliament of India, 2010) has
two notes of dissent and one is from Mr. Saman Pathak, CPI(M) MP
from Rajya Sabha. This note of dissent has three different parts and
one part pertains to proposing an amendment to Section 46 as
follows.
Proposed Amendment:
Clause 46: The provisions of this Act shall be in addition to and not
in derogation of any other law for the time being in force. Nothing
contained herein shall exempt the Operator and/or the Supplier of
any material, design or services, from any proceeding which may,
apart from this Act, be instituted against such person, either in any
Indian or any external court.”
The amendment essentially proposes to add the words, “and/or
the supplier of any material, design or services.” Similar amendments were moved in Rajya Sabha and were not accepted
(Balachandran, 2015). The Section 46 of the Act now reads as
follows.
“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 such
operator.”
Further, because of debate in the Standing Committee, clause 35
was amended and the words “Save as otherwise …. the Constitution)” were substituted in place of the words “No civil court” at the
beginning of the clause 35. The Section 35 of the Act now reads as
follows.
“Save as otherwise provided in Section 46, no Civil Court (except
the Supreme Court and a High Court exercising jurisdiction under
articles 226 and 227 of the Constitution) shall have jurisdiction to
entertain any suit or proceedings in respect of any matter which the
Claims Commissioner or the Commission, as the case may be, is
empowered to adjudicate under this Act and no injunction shall be
Please cite this article in press as: Grover, R.B., The Civil Liability for Nuclear Damage Act of India: An engineering perspective regarding
Supplier's liability, Progress in Nuclear Energy (2017), http://dx.doi.org/10.1016/j.pnucene.2017.04.012
R.B. Grover / Progress in Nuclear Energy xxx (2017) 1e8
granted by any court or other authority in respect of any action
taken or to be taken in pursuance of any power conferred by or
under this Act.”
A harmonious reading of the debate in the Standing Committee
on clause 46, amendments moved and rejected in the Rajya Sabha
and linkage between Section 35 and Section 46 brings one to the
conclusion that Section 46 is directed only towards the Operator,
and provision of remedy under Articles 226 and 227 of the
constitution is available to the victims against the Operator.
It is erroneous to assume that Section 46 provides a basis for a
right of recourse to the Operator against the Supplier, or victims can
or have to (as stated by Heffron et al., 2016) file claims against
suppliers under Section 46. Right of Recourse against the Supplier
under Article 17 is available only for compensation that has been
paid by the Operator under Section 6 of the Act within caps provided therein. The language as included in Section 46 is similar to
what is included in other Indian legislations such as Electricity Act,
2003 (Section 175), Securities and Exchange Board of India Act
(1992) (Section 32), Insurance Regulatory and Development Authority Act, 1999 (Section 28) Act, and implies continued applicability of other laws in their respective domains.
8. Steps taken after the notification of the Act
Section 3(1) of Act provides for AERB to notify the occurrence of
an incident and the AERB has already issued a safety directive titled
“Criteria and Assessment Procedure for Notification of Nuclear
Incident under the Civil Liability for Nuclear Damage Act, 2010” on
December 9, 2013 (AERB, 2013). This directive gives the composition of an ‘Event Review Committee’ and criteria in detail to
determine whether an event qualifies as incident under the Act.
Section 7 (2) of the Act gives an option to the Central Government to set up a Nuclear Liability Fund by charging a levy from the
Operator and this option has been exercised by the Government of
India (DAE, 2015) . At the current rate of electricity generation by
NPCIL and the minimum rate of prescribed levy, it will amount to
the Government collecting about 2000 million every year.
Section 8 (1) of the Act gives two options to the Operator; one of
them is taking an insurance thereby subrogating ‘Right of Recourse’
to the insurer. Indian Nuclear Insurance Pool (INIP) was launched
on June 12, 2015 to provide policies as follows to Operators and
Suppliers (Business Standard, 2015).
Nuclear Operators Liability (CLND Act, 2010) Insurance Policy,
and
Nuclear Suppliers' Special Contingency (against Right of
Recourse) Insurance Policy.
There is only one nuclear insurance pool in India and will be
providing insurance to both the operator and the supplier. NPCIL
has since received the insurance policy covering all nuclear power
plants operated by it and the total premium is around 1000 million
for a risk cover of 15,000 million (Economic Times, 2016b).
9. Concluding remarks
India has ratified CSC and is in talks with the US companies for
setting up of reactors. As per the US Government sources, key
concerns of US companies about India's liability legislation have
been addressed. (Biswal, 2016). While Westinghouse is having a
dialogue with NPCIL for setting up reactors (Indian Express, 2016),
GE is still not satisfied and is seeking clarity (Economics Times,
2016c). The position taken by the US companies has been
7
criticised by some legal experts as the US law also has differences
with the global practice (Ameye, 2015). The US law provides for
economic channelling and not legal channelling to the operator and
Ameye calls US-India discord as “oxymoronic”.
INIP has issued insurance policy to an operator that is NPCIL.
Suppliers policy has also been launched and is available for
subscription.
Rules formulated under the Act were tabled in the Parliament.
As per the procedure in India, rules must be tabled for a period of
thirty sitting days, and MPs may move a motion to amend or annul
the rules till the last date of the subsequent session. No such motion
was moved in case of CLND Rules. The Committee on Subordinate
Legislation (CSL) did raise queries and response to all queries has
been provided by the Government. In the subsequent Action Taken
Report, with regard to explanation about the ‘Supplier’, the CSL has
noted that “whether the term ‘supplier’ is to be defined in the Act
itself is a matter of drafting and policy on which DAE may take
appropriate decision in consultation with the Legislative Department” (Lok Sabha Secretariat, 2014).
A harmonious analysis of debates and various documents indicates that the Section 46 of the Act is directed only towards the
Operator and the remedy under articles 226 and 227 of the
constitution available to the victims is also against the operator.
Rule 24 provides explanation about a supplier and when one looks
at the explanation along with practices in the nuclear industry, one
concludes that it is the plant system designer, who is the Supplier.
The ‘explanation’ has been formulated based on an analysis of engineering practices followed by the nuclear industry. Any examination of the Indian law without studying the ‘explanation’ will
lead to erroneous conclusions. To protect his interest against the
Right of Recourse, the system designer can avail of the insurance
policy that is meant for the suppliers. Sub-vendors have no liability
under the Right of Recourse.
Annex 1
Rule 24: Right of Recourse
(1) A contract referred to in clause (a) of section 17 of the Act
shall include a provision for right of recourse for not less than
the extent of the operator's liability under sub-section (2) of
section 6 of the Act or the value of the contract itself,
whichever is less.
(2) The provision for right of recourse referred to in sub-rule (1)
shall be for the duration of initial license issued under the
Atomic Energy (Radiation protection) Rules, 2004 or the
product liability period, whichever is longer.
Explanation 1: For the purposes of this Rule, the expressions:
(a) “product liability period” means the period for which the
supplier has undertaken liability for patent or latent defects
or sub-standard services under a contract;
(b) “Supplier” shall include a person who e
(i) manufactures and supplies, either directly or through an
agent, a system, equipment or component or builds a
structure on the basis of functional specification, or
(ii) provides build to print or detailed design specifications
to a vendor for manufacturing a system, equipment or
component or building a structure and is responsible to
the operator for design and quality assurance; or
(iii) provides quality assurance or design services.
Explanation 2: For the removal of doubts it is clarified that an
operator's claim under the rule shall in no case exceed the
Please cite this article in press as: Grover, R.B., The Civil Liability for Nuclear Damage Act of India: An engineering perspective regarding
Supplier's liability, Progress in Nuclear Energy (2017), http://dx.doi.org/10.1016/j.pnucene.2017.04.012
8
R.B. Grover / Progress in Nuclear Energy xxx (2017) 1e8
actual amount of compensation paid by him up of the date of
filing such claim.
Annex 2
Extracts from the General Conditions of Contract
The term “supplier” and the duration and extent of supplier's
liability are explained in Rule 24 of the Civil Liability for Nuclear
Damage (CLND) Rules, 2011. For any questions relating to supplier's
liability under section 17 of the Civil Liability for Nuclear Damage
(CLND) Act, 2010, Government of India's clarifications dated
February 08, 2015 may be referred to. These have been posted at the
websites of the Ministry of External Affairs and the Department of
Atomic Energy under the title “Frequently Asked Questions and
Answers on Civil Liability for Nuclear Damage Act, 2010 and Related
Issues.”
In regard to contracts with manufacturers of or vendors for
supply of systems, equipment, components, or building of structures, or provision of services to nuclear installations which are
operating or are under construction or those to be installed in
future for which NPCIL is the system designer and technology
owner, being responsible for safety design of such installations,
NPCIL shall assume the role of supplier in accordance with the
explanation of the term “supplier” given in Rule 24 of the CLND
Rules, 2011 and in the context of section 17(a) and (b) of the CLND
Act, 2010.
Other suppliers can avail of the Nuclear Suppliers' Special
Contingency (Against Right of Recourse) Insurance Policy provided
by the India Nuclear Insurance Pool to cover any liability exposure
under section 17(a) and (b) of the CLND Act, 2010. NPCIL maintains
the operator's statutory insurance under the CLND Act, 2010 by
subscribing to the Nuclear Operator's Liability Policy offered by the
India Nuclear Insurance Pool, thereby subrogating to the India
Nuclear Insurance Pool the operator's “right of recourse” against
suppliers under section 17 (a) & (b) of the CLND Act, 2010.
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Please cite this article in press as: Grover, R.B., The Civil Liability for Nuclear Damage Act of India: An engineering perspective regarding
Supplier's liability, Progress in Nuclear Energy (2017), http://dx.doi.org/10.1016/j.pnucene.2017.04.012