With the 25th anniversary of the Chernobyl nuclear power plant explosion approaching on 26 April, the British government chose an apt time to announce a seven-fold increase in the potential liability of nuclear operators. In a statement issued on 24 January, Chris Huhne, Secretary of State for Energy and Climate Change, said that companies will be obliged to take on a liability of 1.2 billion Euros (US$1.59 billion) at each of their sites, compared with a current level of £140 million (US$216 million). Operators will also be liable for clean-up costs related to the environment, while the geographical scope of individuals eligible to claim for compensation will be widened. Acknowledging that nuclear operators may find difficulty in obtaining insurance on the commercial market to cover their new liabilities, the statement added that it may be necessary for it to provide reinsurance for any gaps, “if there is any genuine market failure".
A public consultation on the proposals will run until 28 April.
It's the Engineering Case, Stupid
The announcement prompted a quick response from EDF Energy, the British division of French state-owned Electricite de France (EDF), which operates the Hartlepool nuclear power plant in north east England. In 2009, EDF took over British Energy, the operator of the UK's formerly state-owned nuclear power plants. An EDF spokesman said that in the event of a nuclear accident, insurance is only part of the answer, and that it is important to engineer out the risk of an incident rather than simply to insure against it.
EDF has probably recognised public opinion better than the politicians. Ever since the 1979 accident at the Three Mile Island nuclear plant in Pennsylvania, and later the 1986 explosion at the Chernobyl plant in Ukraine, then part of the former Soviet Union, public opposition to nuclear energy has been founded on fears of another explosion. With energy demand increasing and power generation capacity shortages looming in most countries, public acceptance that nuclear power generation may have to increase has been slow, reluctant and grudging. Energy and engineering experts involved in the nuclear power business have accepted privately that they have not yet won over public opinion. They argue that during the Three Mile Island accident in 1979 the design of the plant was a success because it contained the accident in the reactor core. In contrast, the Chernobyl plant, like other Soviet nuclear power plants of the time, had no containment structure at all for its reactor. So when the 1986 explosion occurred, they say, its consequences were uncontrollable.
International Conventions
The Chernobyl accident spread detritus as far as the shores of the Atlantic Ocean and caused continuing genetic problems in the populations of Ukraine and Belarus who lived near the plant. It also triggered a major inter-governmental effort to amend international Conventions which define operators’ liabilities. These are the Paris Convention and Brussels Supplementary Convention, both of which are administered by the Paris-based Nuclear Energy Agency (NEA), and the Vienna Convention, administered by Vienna-based International Atomic Energy Authority (IAEA). These regimes have created a complicated legal patchwork. Many signatories of the Conventions have not ratified them in their own legislatures. The Conventions themselves are linked by a variety of protocols which also have not been ratified by all of their signatories. European Union (EU) member states are divided between the Conventions. The United States, Canada and Japan are not signatories to any such Convention and have their own national nuclear liability legislation.
The purpose of these Conventions has been twofold: to provide compensation for the victims of nuclear accidents, and to protect the nuclear industry. Even before the Chernobyl and Three Mile Island accidents, the protection of the nuclear industry was becoming politically unacceptable. Germany introduced the concept of unlimited nuclear liability in 1977 and Switzerland followed suit in 1983. Finland and Sweden are planning to do the same, as is India in its proposed nuclear legislation. Limited liability in both time and amount has been an effective government subsidy for the nuclear industry.
But the introduction of the concept of unlimited liability may not change this significantly. No single commercial entity would be strong enough financially to compensate for another Chernobyl without going bankrupt. So companies will only be able to buy commercial insurance to a fixed limit, leaving governments in the role of reinsurers of last resort and hence liable for the final risk. In October last year, UK Energy Secretary Chris Huhne said in an energy policy statement to the British Parliament that there would be "no public subsidy for new nuclear power" in Britain. Government critics argue that in practice, the subsidy remains.
Ongoing Problems for Individual Claims
Meanwhile, for individuals affected by nuclear accidents the situation has changed little. No country has proposed the creation of an independent international nuclear claims tribunal which could act as a single forum for members of the public seeking compensation after a nuclear accident. Within the EU, at the insistence of France and Britain, nuclear power is a matter decided solely by member states and not at European Council level. Claimants will have to pursue their cases in the courts of the country where the accident occurred.
The EU's ever-increasing labyrinth of regulations complicates matters for claimants even further. European Council Regulation 44/2001 places international commercial disputes into EU jurisdiction. But this Regulation conflicts directly with the Paris and Brussels Conventions which recognise national jurisdictions. Now the European Commission wants to broaden Regulation 44/2001 and extend its jurisdiction rules to countries outside the EU where the same case in pending in courts. This may appear to help a nuclear accident claimant in a non-EU country, but the reality is that it probably will lead to more confusion. US nuclear liability legislation, under the Price-Anderson Act, allows claimants to seek legal costs. The Paris and Vienna Conventions do not have a provision to compensate claimants for their legal costs. Lawyers argue that only large corporations, not private individuals, would have the financial muscle to pursue a nuclear accident compensation claim through international courts..
Environmental damage
Signatories to the Paris and Brussels Conventions agreed in 2004 to increase liability limits on operators to a minimum of 700 million Euros (US$963 million) and broaden the categories of damage covered. The latter include the cost of measures to reinstate impaired environment. Several years ago, nuclear operators in the EU won a five-year reprieve from the 2004 EU’s Environmental Liability Directive. At the time, broad coalition of left-wing and green parties in the European Parliament sponsored an amendment to this Directive that would have included in the nuclear energy sector in its scope. Had it been passed, it would have imposed unlimited liability on operators for nuclear accidents. Consequently, governments and the nuclear industry were expected to find a way of compensating for environmental damage in the intervening period.
The amended Paris and Brussels Conventions, signed in 2004, but not ratified by any state yet, were the starting points for addressing this obligation. The British government’s January proposals on nuclear liabilities are the latest moves. But the only real change so far is that nuclear operators will see their insurance costs rise, nuclear industry insiders say. Governments will continue to subsidise the nuclear sector and probably pay for most of any clean-up costs, while access to compensation for potential victims of accidents remains as restrictive as ever.
Maria Kielmas - Maria Kielmas
