In a third attempt to indemnify foreign suppliers, the government now wants them to be liable only if they intentionally cause an accident....
22 August 2010
Final version of nuclear bill lets suppliers off the hook again
Despite assuring the Left and the BJP that their concerns on the government’s proposed nuclear liability law had been fully addressed, the final version of the bill – as cleared by the Union Cabinet on Friday – protects foreign companies in the event of a nuclear accident caused by gross negligence or defective supplies on their part.
It does this by raising a legal barrier against damage claims that is so high it will be impossible to scale. The amended version of the bill says the suppliers of any defective equipment involved in an accident can be sued by the Indian operator of a nuclear facility only if the supply in question was made “with the intent to cause nuclear damage”.
In other words, the operator, who is wholly liable in the first instance for any damages resulting from an accident caused by that faulty equipment, can recover his money only if it is proved that the supplier intentionally caused the accident.
Clause 17(b) of the original draft allowed a right of recourse for the operator in the event of an accident resulting from “a wilful act” or “gross negligence” on the part of the supplier. As reported by The Hindu on March 8 and April 1, U.S. nuclear suppliers want this clause deleted as they feel it would expose them to litigation.
Critics in India, on the other hand, saw these conditions as too weak. The Standing Committee on Science & Technology, whose report on the bill was released earlier this week, felt the “vague” language of 17(b) offered suppliers an “escape route” and needed strengthening. “In case an incident takes place, it would be difficult to prove and establish the fact that it was a wilful act or gross negligence on the part of the supplier”, the report said. “Hence there should be clear cut liability on the supplier of nuclear equipments/material in case they are found to be defective”. The committee also quoted the testimony of the Secretary (Legislative Department) to argue the use of the doctrine of mens rea, or criminal intent, though common in criminal and tax law, “is grossly inadequate and misplaced” in compensation cases.
Accordingly, the Standing Committee expanded the scope of the right of recourse in 17(b) to include nuclear incidents resulting “as a consequence of latent or patent defect, supply of sub-standard material, defective equipment or services” in addition to gross negligence.
The government’s first attempt by stealth to indemnify suppliers from legal action came in June, when it circulated amendments to the Standing Committee deleting 17(b) altogether. When the Opposition cried foul, it backed off, seeking instead to negate the clause by making it contingent on 17(a), which grants operators a right of recourse against suppliers only if expressly provided for in a contract. Forced to backtrack there too, the government now appears to have hit upon the inclusion of intent as the best way of ensuring foreign suppliers never face legal action in the event of a nuclear accident.
Thus, the amended 17(b) gives the operator a right of recourse where “the nuclear incident has resulted as a consequence of an act of supplier or his employees, done with intent to cause nuclear damage, and such act includes supply of equipment or material with patent or latent defects or sub-standard services”.
Since accidents resulting from the intentional acts of a “person” (including corporate entities like a supplier) are already covered by 17(c) of the original draft, the government is now proposing to replace the word “person” in 17(c) with “individual” to avoid the charge of redundancy.
If the earlier subterfuge was to merge 17(b) with 17(a), the attempt now is merge it with 17(c). Either way, the Manmohan Singh government’s aim is the same: to produce legal language that would shield foreign suppliers from civil suits.