UK: DECC Consultation on Nuclear Liability

Last Updated: 15 March 2011

Originally published 14 February 2011

The UK Department of Energy and Climate Change ("DECC") published on 18 January 2011 its public consultation on the "Implementation of changes to the Paris and Brussels Conventions on nuclear third party liability" (the "Consultation"). The Paris and Brussels Conventions are part of the international regime that aims to ensure that funds are available for compensation to injured parties in the event of a nuclear incident and to also encourage private investment in the nuclear industry by limiting the operator's liability. This is done by channelling nuclear-related liability to the operator, capping the operator's liability in time and amount and requiring the operator to maintain insurance or other financial security up to the capped limit.

The existing principles of the Conventions are implemented into UK law by the Nuclear Installations Act 1965 (the "1965 Act"). The Consultation now proposes to amend the 1965 Act to implement into UK law amendments that were made to the Conventions in 2004 to increase the operator's financial liability per incident, include additional categories of damage for compensation, increase the time limits for making claims for compensation for personal injury and loss of life and extend the geographical scope of the Conventions. The amendments to the Conventions are not yet in force at the international level as they have not been ratified by the requisite number of countries. The European Union countries have agreed to ratify the Conventions simultaneously to promote the harmonious adoption of the increased levels of protection across the EU countries at the same time, and so the proposed amendments to the 1965 Act will not come into force until the Conventions have been ratified accordingly. The Consultation proposes to implement the amendments to the Conventions as set out below.

Higher financial limits

The 1965 Act currently sets the financial limits on the operator at £140 million per incident at, or in transit from, a standard site, and provides for a lower cap of £10 million per incident for low risk sites and for transit from low risk sites. If the compensation required for an incident exceeds the amount to be provided by the operator (referred to under the Brussels Convention as the "First Tier"), the Brussels Convention provides that the national government of the country in which the installation is situated will cover the difference up to 175 million Special Drawing Rights ("SDR") (approximately £170 million)1 (the "Second Tier"), and if further funds are required, the Brussels Convention countries will each contribute an amount calculated by reference to their GDP and nuclear capacity to the Third Tier funds providing a further SDR 125 million (approximately £122 million) per incident, bringing the total funds available per incident to SDR 300 million (approximately £292 million).

The 2004 amendments seek to increase these financial limits on the operator's liability to a minimum of €700 million for standard sites (reduced to a minimum of €70 million for low risk sites and a minimum of €80 million for transit of low risk nuclear materials) (the First Tier under the Brussels Convention), and to increase the Second Tier amount of public funds to the difference between the First Tier and €1,200 million, and to increase the Third Tier amount of funds from the Brussels countries to €300 million, bringing the total amount of compensation available per incident to €1,500 million.

The Consultation, however, proposes to increase the operator's liability for standard sites by sevenfold to €1,200 million (i.e. including both the First and Second Tiers) so that no funds are required to be provided by the UK government under the Second Tier. This is to ensure that the UK government is not seen as providing a subsidy to nuclear power in the form of compensation to injured parties. However, the UK government will still be contributing to the funds available for compensation under the Third Tier together with the other Brussels countries. The €1,200 million cap will be phased in over 5 years in €100 million yearly increments from a starting point of €700 million. The lower limits of €70 million will apply for low risk sites and €80 million will apply for transit of low risk nuclear substances in line with the amended Conventions. The table below summarises these proposals:

 

Current as implemented in the Nuclear Installations Act 1965 ("1965 Act")

Amended Paris/ Brussels Conventions ("Amended Conventions")

Proposed amendments to the 1965 Act to implement the Amended Conventions

Standard sites

  • £140m cap
  • Minimum €700m
  • €1,200m cap, to be phased in over 5 years in €100m annual increments starting from €700m

Low risk sites

  • £10m cap
  • Minimum €70m
  • €70m cap

Incidents in transit

  • £140m cap - transit from standard sites
  • £10m cap - transit from low risk sites
  • Minimum €80m for transit of low risk substances
  • €80m cap for transit of low risk substances
  • phased in €1,200m cap will apply to transport of higher risk substances

Additional cover under the Brussels Convention

  • First Tier (SDR 5m minimum) - covered by operator as above
  • Second Tier (difference between First Tier and SDR 175m) - UK government covers
  • Third Tier (additional SDR 125m) - covered by UK government and other Convention signatories
  • First Tier (at least €700m) - operators to cover
  • Second Tier (difference between First Tier and €1,200m) - UK government covers
  • Third Tier (€300m) - covered by UK government and other Convention signatories
  • First Tier (at least €700m) - operators to cover as above
  • Second Tier (difference between First Tier and €1,200m) - operators to cover as above
  • Third Tier (€300m) - covered by UK government and other Convention signatories

Total cover

  • SDR 300m (approx. £292m)
  • €1,500m (approx. £1,269m)
  • €1,500m (approx. £1,269m)

Additional categories of damage

Currently, the 1965 Act covers property damage and personal injury or loss of life as per the Conventions as currently in force. The Consultation proposes to provide for the additional rights of compensation set out in the amended Conventions for economic loss arising from property damage or personal injury, cost of measures of reinstatement of impaired environment, loss of income deriving from a direct economic interest in any use or enjoyment of the environment and cost of preventive measures.

Increased time limits

The Consultation proposes to increase the time limits within which a claim must be brought for personal injury or loss of life from 10 years to up to 30 years in accordance with the amended Conventions. Time limits remain at 10 years for all other types of damage.

Expanded geographical scope

The geographical scope of the coverage of the compensation available under the 1965 Act is proposed to be extended in line with the amended Conventions to cover damage incurred in non-Paris Convention countries to the extent that they are either non-nuclear states (e.g. Austria or Luxembourg); countries that are a party to the Vienna Convention (an international convention based on similar principles to the Paris Convention that has been signed up by countries outside of Western Europe) and the Joint Protocol; and any other country that has reciprocal arrangements.

DECC is seeking the views of existing operators of nuclear licensed sites, commercial facilities used for the disposal of nuclear waste, public bodies that can take measures to reinstate the environment and the insurance and financial sector on the proposed amendments before the Consultation closes on 28 April 2011. The Consultation can be accessed by clicking here.

For more information or advice, please contact:

Robert Pitcher
Partner
Tel: 0845 497 4714
robertpitcher@eversheds.com

Footnote

1. Using an exchange rate of SDR to pounds sterling as at 11 February 2011 of SDR 1 = £0.97.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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