Time for a debate on liability and damages

Paul Kerr of the Congressional Research Service runs a quiet but useful blog on arms control issues. Thanks to him, we have the on-the-record answers provided to questions submitted in writing by Senator Robert P. Casey Jr. on September 18 to Under Secretary William F. Burns and Acting Under Secretary John D. Rood.

There's nothing really very new or dramatic in the exchange, though a 'completist' like me still found the document useful. However, I was struck by one of the questions -- on India's commitment to accede to the Convention on Supplementary Compensation for Nuclear Damage (CSC) -- and the answer provided by Burns and Rood.

Question: Press reports indicate that the Indian government has provided an oral assurance to senior U.S. officials that, regardless of the exemption authorized by the NSG, India will not commence civilian nuclear trade with any NSG member until the Congress approves the Article 123 agreement, thereby authorizing U.S. civilian nuclear trade with India in a manner consistent with the NSG exemption and the terms of the Hyde Act.

The September 10, 2008 letter from Indian Foreign Minister S. Menon to Undersecretary of State William Burns states, “it is the intention of the Indian Government to take all steps to adhere to the Convention on Supplementary Compensation for Nuclear Damage prior to the commencement of international civil nuclear cooperation under the Agreement.”

Does that mean that India has pledged to hold off on all civil nuclear trade with all NSG members, as authorized by the NSG exemption, until this Convention enters into force for India?

Answer: India has pledged to take the steps necessary to adhere to the Convention on Supplementary Compensation for Nuclear Damage (CSC), and we expect it to do so soon. This senior-level Indian commitment to become a party to this international liability regime as soon as possible is an important step in ensuring that U.S. nuclear firms can compete on a level playing field with other international competitors who have other liability protections afforded to them by their governments. Because of these differing circumstances, Indian ratification of the CSC has not been a determining issue for nuclear industries in a number of other countries. It is also worth noting that the CSC still has not entered into force and, even with India’s ratification, will not do so until the ninetieth day following the date on which at least five States with a minimum of 400,000 units of “installed nuclear capacity” have ratified the Convention.

OK, now we know that India made a commitment on the CSC from Burns's on-the-record statement during the Senate Foreign Relations Committee hearing of September 18. So that's not news. But the Q&A tells us the pledge was formally communicated in a letter by the Foreign Secretary, Shiv Shankar Menon on September 10, 2008.

Here is yet another example of important policy matters with legislative implications being stealthily discussed with a foreign power by the Manmohan Singh government even as the Indian parliament and public are kept completely in the dark about this.

So what is this CSC? And why has the US nuclear industry been insisting that Indian accession is a precondition for nuclear sales to the country when no such insistence has been made for China? Indeed, the fact that most countries with a major nuclear power industry have not signed on is a little odd, to say the least, even though several of them are parties to the 1963 Vienna Convention on Civil Liability for Nuclear Damage and the OECD's Paris and Brussels Conventions. I should think a vigorous debate on the pros and cons of the CSC is needed in India, and needed urgently.

Within America, the Price-Anderson Act has been used to subsidise liability protection for nuclear operators. The U.S. ratified the CSC in May this year after a sustained campaign by US nuclear operators and vendors concerned about liaibilty for accidents involving U.S. reactors abroad. The State Department has an article-by-article analysis of the Convention here.

Last year, Jack Spencer of the Heritage Foundation laid out the reasons why the CSC was important to the U.S. in an article entitled 'Congress Must Implement CSC Treaty to Reinvigorate U.S. Nuclear Industry':

The existing U.S. liability system for nuclear operations only covers activities inside the United States and does not apply to international commerce. As a result, competing for projects abroad exposes U.S. companies to unlimited liability in U.S. courts. In cases where U.S. firms do compete abroad, they do so with increased risk or within the context of additional regulation, adding cost and undermining competitiveness.

In contrast, many foreign countries provide liability coverage for their nuclear firms or cap their liability exposure. This enables foreign companies to operate freely in the United States (or elsewhere), because they do not risk their entire business by participating in a specific project. The protection offered by other nations puts U.S. companies at a disadvantage in the global marketplace.

The CSC would fix this problem. It establishes an international liability regime that creates common, international standards for handling nuclear facility accident claims. In addition to providing supplemental international funds to pay victims, the treaty would keep liability in the country where the accident occurs. This would help protect U.S. companies from frivolous lawsuits. Under the current system, when a U.S. company engages in international commerce, it potentially risks the entire company. (emphasis added)

Why should India sign the CSC? The CSC creates a contributory compensation fund, limits liability, channels law suits through specific courts and also has a mechanism for dealing with cross-border liability stemming from a nuclear accident. Are these good enough reasons? And if France and Russia are not bothered by the CSC, should we sign on just because one supplier nation, the U.S., wants us to?

I have been told by sources in the GOI that even without the Indo-US agreement, India was looking at the CSC because of the proximity of Koodankulam to Sri Lanka.

I hope that makes the Lankans feel all warm and glowy inside!