It is for operator to exercise ‘right of recourse’ under section 17 of Civil Liability for Nuclear Damage Act

Under sustained pressure from the Obama administration, the Manmohan Singh government is looking to use the opinion of the Attorney- General to effectively neutralise a key provision of India’s nuclear liability law that would hold American reactor suppliers liable in the event of an accident caused by faulty or defective equipment.

In an opinion to the Department of Atomic Energy, which referred the matter to him on September 4, Goolam Vahanvati has said it is for the operator of a nuclear plant in India to decide whether it wished to exercise the ‘right of recourse’ provided to it by section 17 of the Civil Liability for Nuclear Damage Act.

The AG’s opinion effectively paves the way for the Nuclear Power Corporation of India Ltd, which will operate any nuclear plant using imported reactors, to repudiate a right that Parliament explicitly wrote into section 17(b) of the law to ensure that foreign suppliers don’t get away scot-free if a nuclear accident is traced back to “equipment or material with patent or latent defects or sub standard services.”

American nuclear vendors Westinghouse and GE have lobbied hard with Washington and Delhi to have this provision amended or removed. Though India has publicly stuck to the line that dilution of this provision is not possible, Mr. Vahanvati’s view opens a door for the government to accommodate the U.S. demand when Prime Minister Manmohan Singh meets President Barack Obama on September 27.

Reiterating the opinion he gave to the government in October 2012 in the context of the Inter-Governmental Agreement between India and Russia, Mr Vahanvati noted, “Section 17(a) provides for recourse if such right is expressly provided for in a contract in writing. If the operator chooses not to incorporate such a provision in the contract, it would be open for him to do so.”

In its reference to the AG, the DAE had sought confirmation “regarding the presumption that the existing provisions of section 17 of the Act facilitate the operator either to exercise his ‘right of recourse’ by incorporating a clause in the contract or to waive his right or to limit the liability on the part of the supplier.”

The AG endorsed the view expressed by the Ministry of External Affairs in an internal note that “a right was given to the operator to have recourse against the supplier but there was no mandatory obligation or requirement for the operator to do so and that the operator could choose not to exercise that right.”

The AG’s view is likely to be challenged by the opposition, since section 17 grants the operator the right of recourse under one of three conditions: (a) if the right is expressly provided for in writing; (b) if the accident is caused by faulty material or equipment provided by the supplier; or (c) the accident results from an act of commission or omission of an individual done with intent to cause nuclear damage.

Since 17(b) suggests Parliament intended to hold suppliers responsible even if there is no contractual liability, it is not clear how a public sector undertaking like NPCIL, which is answerable to Parliament, could give its suppliers a free pass.

In 2008, India had promised American companies 10,000 MWe worth of contracts for setting up nuclear power plants in return for the U.S. administration helping to end the country’s nuclear isolation.

Now, five years later, NPCIL and Westinghouse are set to sign an agreement that in theory will give the American company the go ahead to begin work on its proposed nuclear power park in Mithi Virdi, Gujarat.

Keen to improve the ‘atmospherics’ around the signing of the pact, likely to be on the day Dr. Singh and Mr. Obama meet at the White House, the government is asking NPCIL to announce $100-175 million as the first token payment for the Gujarat reactor.