NEA Issue Brief: An analysis of principal nuclear issues

No. 4 - 1st revision, November 1993

International nuclear third party liability


I. Why is nuclear third party liability covered by international regimes?

As the accident at Chernobyl illustrated, the geographical scope of damage caused by a nuclear accident is not confined to national boundaries. In the event of a nuclear accident causing damage in more than one country, it is desirable that the protection accorded to victims by a third party liability regime be accorded equitably among affected countries. Although the high safety standards of the nuclear industry mean that the risk of an accident is very low, the possible magnitude of damage from a nuclear accident is such that insurance coverage of liability requires international collaboration between national insurance pools. These considerations were recognised in the early years of the nuclear power industry and inspired States to develop the existing international regimes. Furthermore, there is a significant amount of transboundary transport of nuclear materials. Such international movement is both better- regulated and facilitated by being subject to one uniform regime.


II. What are the relevant regimes and their main features?

There are two basic international regimes for nuclear third party liability: the Convention on Third Party Liability in the Field of Nuclear Energy ("the Paris Convention") was established on 29 July 1960 under the auspices of the OECD Nuclear Energy Agency (NEA) and covers most West European countries, while the Convention on Civil Liability for Nuclear Damage ("the Vienna Convention") was established on 21 May 1963 under the auspices of the International Atomic Energy Agency (IAEA) and is worldwide in character.

The Paris Convention regime is supplemented by the Supplementary Convention on Third Party Liability in the Field of Nuclear Energy of 31 January 1963 ("the Brussels Supplementary Convention"). The Paris Convention and the Brussels Supplementary Convention have both been twice amended: by Additional Protocols adopted respectively in 1964 and 1982. More recently, the Paris and Vienna Conventions have been linked by the Joint Protocol Relating to the Application of the Vienna Convention and the Paris Convention of 21 September 1988 ("the Joint Protocol") which entered into force on 27 April 1992. The Paris and the Vienna Conventions are supplemented, in relation to maritime transport, by the Convention Relating to Civil Liability in the Field of Maritime Carriage of Nuclear Material of 17 December 1971 ("the 1971 Brussels Convention").


A. Paris Convention and Vienna Convention

The drafters of the Paris and Vienna Conventions were concerned both to provide adequate protection to the public from possible damage, the risks of which were small but the possible gravity, very high, and to ensure that the growth of the nuclear industry, from which this same public would benefit, would not be hindered by bearing an intolerable burden of liability. To satisfy these two potentially conflicting aims, these two Conventions have promoted special regimes founded on a number of important principles.

  • The operator of a nuclear installation is exclusively liable for accidents at and in relation to that installation, including in the accidents at and in relation to that installation, including in the course of the transport of nuclear substances. This "channelling" of liability onto the operator simplifies and therefore expedites actions for damages brought by victims. It also minimises the burden upon the nuclear industry as a whole, as the various persons who contribute to the operation of a nuclear installation, such as suppliers and carriers, do not require insurance coverage additional to that held by the operator.

  • This liability is "absolute". This is to be contrasted with the general tort law based on fault or negligence. Under the Conventions, the operator of a nuclear installation is liable, regardless of whether fault can be established. This also greatly simplifies actions for damages, as the nuclear field is so complex that fault could be very difficult to prove.

  • While the liability imposed upon the operator is exclusive and absolute, it is limited in both amount and time.

    • Under the Paris Convention, the maximum liability of an operator is 15 million SDRs(1). However, a Party may, taking into account the possibilities of obtaining insurance or other financial security, establish a greater or lesser amount by legislation, to a lower limit of 5 million SDRs. The OECD Steering Committee for Nuclear Energy, the governing body of the NEA, has recommended that Contracting Parties to the Paris Convention aim at setting the maximum liability at not less than 150 million SDRs. Under the Vienna Convention, the liability of an operator may be limited to not less than US$5 million(2).

    • With respect to time, the basic rule under both Conventions is that the right of compensation expires if an action is not brought within ten years of the nuclear accident. In addition, States may limit the operator's liability to no less than two years (under the Paris Convention) or three years (under the Vienna Convention) from the time when the damage and the operator liable have become known to the victim (or ought reasonably to have become known).

  • The operator must have insurance or some other financial security equivalent to the amount of its liability.

  • The provisions of both Conventions and national legislation pursuant to the Conventions are to be applied without any discrimination based on nationality, domicile or residence.

  • Unity of jurisdiction: competence with respect to actions for compensation under the Conventions is restricted to the courts of the Party in whose territory the accident occurred.


B. Brussels Supplementary Convention

Soon after the adoption of the Paris Convention, a number of its Signatories developed a supplementary compensation regime to provide public funds, should the compensation under the Paris Convention prove insufficient to compensate damage caused by a nuclear accident. These public funds are to be provided, not only by the State where the installation of the nuclear operator liable for the damage is located, but also by contributions from all Parties to the Brussels Supplementary Convention. The Brussels Supplementary Convention is thus based on a strong bond of financial solidarity between its Parties.


The Paris Convention and the Brussels Supplementary Convention, together with their respective amending Protocols, provide for compensation to a maximum of 300 million SDRs.

This compensation is comprised of three tiers:

  • Each Party to the Paris Convention is required to establish by legislation an amount of at least 5 million SDRs, to be provided by insurance or other financial security (the first tier).

  • The second tier provides for compensation beyond that provided pursuant to the first tier up to a total of 175 million SDRs. This compensation is to be provided from public funds to be made available by the Party in whose territory the nuclear installation is situated.

  • In so far as the damage exceeds this level, the third tier provides a further amount of 125 million SDRs out of public funds to be contributed jointly by all the Parties to the Brussels Supplementary Convention.


C. Joint Protocol

In spite of the similarity between the Paris and Vienna Conventions, their existence does not in itself, provide a single uniform third party liability regime for ail countries which are Parties to either Convention. Until 1992, the two Conventions operated in isolation from each other, so that each Convention benefited only victims within the territory of its own Parties. It followed that, for example, damage occurring in a Paris Convention Party, caused by an accident in a Vienna Convention Party, would not be covered by either Convention. (No State is a Party to both Conventions due to the potential conflicts involved in their simultaneous application.) This significant gap in the protection of victims was filled by the Joint Protocol (adopted in 1988) which links the two Conventions.

Since its entry into force on 27 April 1992, Parties to the Joint Protocol are treated as though they were Parties to both Conventions. The liability of an operator and the amount of that liability are still determined by the Convention which covers the State where the operator's installation is located. The Protocol also resolves potential conflicts between the two Conventions, particularly in the case of transport, by ensuring that only one Convention applies to any accident.



D. Maritime transport: the 1971 Brussels Convention

As noted above, one of the main features of the Paris and Vienna Conventions is the channelling of the liability onto the operator, including for accidents occurring during the course of the transport of nuclear substances. Under the 1971 Brussels Convention, developed under the auspices of the OECD, the IAEA and the International Maritime Organisation (IMO), any person who might be held liable by virtue of an international convention in the field of maritime transport, for damage caused by a nuclear accident is to be exonerated if the operator of a nuclear installation is liable under the Paris or the Vienna Convention.


III. When do these regimes apply?

Nuclear damage

The Paris and Vienna Conventions provide for compensation for damage to or loss of life of any person, and for damage to, or loss of, any property caused by a nuclear accident in a nuclear installation or during transport of nuclear substances to and from installations. This does not, however, include damage to the nuclear installation itself.


Nuclear installations

Nuclear installations are installations such as reactors other than those comprised in any means of transport; factories for the manufacture or processing of nuclear substances, for the enrichment of uranium, and for the reprocessing of irradiated nuclear fuel; and facilities for the storage of nuclear substances. Under the Paris Convention, provision is also made for the NEA Steering Committee to include other installations in which there are nuclear fuel or radioactive products or waste within the coverage of the Convention. This mechanism enables the Convention to accommodate readily developments in the nuclear field. It has been used to date to add to this list installations for the disposal of nuclear substances.

Facilities which do not involve high levels of radioactivity will be covered by the general law. For example, facilities for uranium mining and milling and the physical concentration of uranium ores and installations, where only small amounts of fissionable materials are to be found, are not covered by the Convention.


Transport

As in the case of installations, the special regimes of the Paris and Vienna Conventions need not apply to the transport of substances which do not involve high levels of risk. Thus the transport of radioisotopes directly usable for industrial, commercial, agricultural, medical or scientific purposes is excluded from the scope of the Conventions.


Nuclear operator

Compensation under the Paris and Vienna Conventions is paid by the liable nuclear operator. This is the person designated or otherwise recognised, in advance, by the relevant national authorities as the person who would be liable, should an accident occur at a particular installation or in the course of transport to or from that installation. This person be responsible for holding the insurance or other financial security to cover the maximum level of liability prescribed by the national legislation under the relevant Convention.

In the case of the transport of nuclear substances, it is necessary to determine whether the sending or the receiving operator will be liable. The same solution is adopted in the Paris and Vienna Conventions. Liability is, in principle, imposed on the operator sending the nuclear substances because it is the sending operator who will be responsible for packing and containment. This liability passes to the receiving operator upon the assumption of liability by that operator pursuant to the express terms of a written contract or, failing such contractual provision, when that operator takes charge of the materials. In the case of transport to or from operators in States which are not Parties, special provisions apply to ensure that an operator to which the Convention regime applies will be liable.


Territorial scope

Both the Paris Convention and the Vienna Convention are of course primarily intended to benefit their Parties. Accordingly their application is subject to certain territorial limitations. The Paris Convention applies when an accident causing damage occurs in the territory of a Party and in so far as damage from this accident is suffered in the territory of a Party. Territory includes the territorial sea. Parties have the option, however, of extending the territorial scope of the Convention by national legislation and this has been the object of recommendations by the NEA Steering Committee. By contrast, the Vienna Convention does not specifically define its territorial scope. The general view is that, like the Paris Convention, it covers damage in the territories of States which are Parties, but that it does so regardless of where the accident occurs. It should also be borne in mind that the territorial scope of the Paris and Vienna Conventions is modified in cases where the Joint Protocol applies.

Of course, the application of both the Paris and Vienna Conventions to accidents occurring in States which are not Parties to the relevant Convention will be limited to accidents occurring in the course of transport where the liable operator is the operator of a nuclear installation in a State which is a Party to that Convention.


IV. Current issues and objectives

The Paris Convention and the Brussels Supplementary Convention were both revised in 1964 and in 1982. The first revision of the Vienna Convention is currently under study in the framework of the IAEA, with the active participation of the NEA and its Member countries. Given the existence of the Joint Protocol, any amendments made to the Vienna Convention may require equivalent modification of the Paris Convention. The following issues are amongst those being considered in the course of the revision.


Number of States Parties

Many States are not Parties to either the Paris or the Vienna Convention, including several countries with significant nuclear industries, such as the United States, Canada, Japan and the countries of the former USSR. It was because the USSR was not a party that, following the first accident at a nuclear installation to cause major off-site damage, the accident at Chernobyl, the benefits of these Conventions were unavailable. Indeed, of the over 400 nuclear power plants world-wide, over two-thirds do not come under the provisions of either Convention. It is hoped that these non-Party States may be attracted to join a revised nuclear liability regime.


Limitation of liability

As stated above, the maximum amount of liability established by the Paris Convention is, in principle, 15 million SDRs. This amount was established, at the time the Convention was developed, by reference to the then capacity of the insurance market. Since that time this capacity has increased significantly. The Convention, however, has never been modified in this respect. Although the maximum liability indicated by the Paris Convention remains unchanged, many States Parties have recognised the availability of higher levels of private insurance cover and have increased the amount of the operator's maximum liability prescribed in their national legislation. In addition, as mentioned above, the NEA Steering Committee has recommended national limits of at least 150 million SDRs. Neither has the minimum limit under the Vienna Convention been raised since the adoption of the Convention in 1963. Not only is it likely that the minimum liability limits in the Paris and Vienna Convention will be raised as part of the current revision but it is also proposed that the Conventions should include a simplified procedure for increasing the liability amount from time to time.


Supplementary funding

The establishment of a new system of supplementary funding has also been proposed. This system would be anologous to that of the Brussels Supplementary Convention, but would use funds provided by the nuclear industry as well as public funds. It would complement both the Vienna and Paris Conventions.


Damage

Another issue which was brought to the foreground by the accident at Chernobyl is the scope of the "damage" covered by the Paris and Vienna Conventions. The concept of "damage" is not precisely defined in either Convention. As indicated above, both Conventions apply to injury to, or the death of, any person and damage to, or loss of, any property. A more precise definition is however left to be determined by national legislation and national courts. This approach was taken in recognition of the differences between national legal systems. Experience after the Chernobyl accident raises the question of whether the cost of measures taken with the aim of preventing or reducing the damage caused by a nuclear accident are compensable under the Convention regime. For instance, measures may include the evacuation of populations and restrictions on the sale of foodstuffs so entailing costs for the government ordering the measures, and loss to individuals, such as farmers who are deprived of expected profits by the prohibition of the sale of crops. Some recent international Conventions in other fields have expressly included the cost of preventive measures in the definition of the damage for which the Convention provides a right to compensation.

Another issue which reflects changing attitudes is damage to the environment, which is probably not covered as such, by the definition of "nuclear damage" in the Conventions, but which a number of States now consider should be covered.

Amendment of the definition of "nuclear damage" to take these factors into account has been proposed. In considering these questions, account needs to be taken, not only of the desirability of compensating a particular type of damage, but also of the effect of an extended definition on the overall amount of compensation available to those who suffer direct damage from an accident.


Territorial scope

Proposals have been made for extension of the scope of the Conventions to damage suffered in the territory of a non-Contracting State, with the possibility for Contracting Parties to declare that they are not bound by such an extension at least in the case of damage in nuclear States which do not provide equivalent benefits.


Other proposed modifications

Other proposals under discussion include: express coverage of military nuclear installations, extension to 30 years of the time limits for personal injury claims; inclusion of a system of priorities for distribution of compensation; provisions requiring the facilitation of compensation claims brought by victims in a foreign country.



REFERENCES


  1. Paris Convention on Third Party Liability in the Field of Nuclear Energy; Brussels Convention Supplementary to Paris Convention OECD/NEA,1989

  2. Civil Liability for Nuclear Damage: Official Records, International Conference, Vienna, 29th April - 19th May 1963, IAEA Legal Series No.2 1964.

  3. Paris Convention: Decisions, Recommendations, Interpretations OECD/NEA,1984

  4. Nuclear Liability: Joint Protocol relating to the Application of the Vienna Convention and the Paris Convention,1988 IAEA and OECD/NEA,1989

  5. International Legal Conference on Maritime Carriage of Nuclear Substances, 1971: Final Act of the Conference including the text of the adopted Convention IAEA, IMO and OECD/NEA, 1972

  6. The radiological impact of the Chernobyl Accident in OECD Countries NEA 1987

  7. Nuclear legislation: Third Party Liability OECD/NEA.1990



Footnotes

  1. SDR stands for the Special Drawing Right as defined by the International Monetary Fund. This unit of account is calculated on the basis of a basket of currencies of five of the most important trading nations. In August 1993, an SDR was equivalent to US$1.4.

  2. Defined by reference to its value in terms of gold on 29 April 1963; that is US$35 per one troy ounce of fine gold.