Is it a ‘done deal’?

I.S.Chadha

Feb 2 2015

Some understanding reached on Indo-US civil nuclear agreement

For the past few years the deadlock over the operationalisation of the Indo-US Civil Nuclear Agreement has been a major obstacle in the efforts to strengthen bilateral ties. As was to be expected, the issue dominated the discussions at the recent Summit and was aptly described by Prime Minister Modi as the “centre piece of the transformed relationship”. Both leaders were effusive in their praise for the progress achieved. There were important differences, however, in the language used in describing it. President Obama referred to it as “a breakthrough understanding”. Prime Minister Modi was a little more categorical and said that “we are moving towards commercial co-operation, consistent with our international obligations”. The joint statement merely “welcomed the understanding reached” without spelling out any details. The then Foreign Secretary, however, went much further and claimed that it was a “done deal”.

To assess the veracity of this claim it is necessary to separate facts from speculation. The core issue was the liability, if any, of the suppliers in the event of a nuclear accident. Under the 123 Agreement India was committed to ensure that its liability law would be consistent with international law and practice, notably the Convention on Supplementary Compensation (CSC) for Nuclear Damage, to which India is a signatory. The Bill introduced in Parliament by the then UPA government was in fulfilment of this commitment. The Opposition, led by the BJP, however, insisted on introducing amendments, which were not consistent with the CSC and opened the possibility of holding the suppliers liable in perpetuity for any damage. This was not acceptable to the US and as a result the deal could not be operationalised.

Another contentious issue was the US insistence on “tracking” the materials and equipment supplied by them so as to ensure that they are not misused. India has, however, consistently taken the stand that there is no need for such tracking in addition to the IAEA safeguards to which we are committed. The US demand was patently unreasonable and it is not surprising that they agreed to drop it. The liability issue, however, is far more complicated. The two contentious provisions of the Indian liability law are Section 17(b) under which the operators can claim compensation from the suppliers and Section 46, which safeguards the right of individuals to file claims for damages under the tort law. The US position all these years has been that the law must be amended to remove the offending provisions. It was thus a monumental task to resolve the differences on this issue within the framework of the existing law. Although it is being claimed that an understanding has been reached, details have yet to be worked out. 

The liability of suppliers under Section 17(b) is sought to be met from an insurance pool to which the Government of India and public sector companies, including the General Insurance Corporation, will contribute a total of Rs. 1,500 crore, which is the limit prescribed under Section 7 of the Act. From the US point of view, this amounts to a virtual amendment of the law that they were seeking and explains its ready acceptance. It is, however, a moot point whether there is any sense in having a law which casts a liability on the suppliers and then seeks to meet it from a pool funded with the taxpayers’ money!

It is still not clear how the problem of claims under the tort law will be dealt with. The US wanted an express provision in the Act barring such claims. According to experts, this is a fundamental right which cannot be legislated away. US spokesmen have maintained that the issue will be addressed via, what they have called, a “memorandum of law”. It remains to be seen whether the terms of such a memorandum satisfy prospective US investors or indeed whether they would stand a legal scrutiny in India.

It is important to understand why the question of suppliers’ liability raises such emotions in this country. It is evident that those who are taking rigid positions on this issue have in mind the bitter memories of the Bhopal Gas tragedy. What is not generally appreciated is the fact that in the case of the plant in Bhopal, Union Carbide was itself both the supplier as well as the operator and the company could not escape liability even if it were to be restricted to the operator. A possible way out of the current impasse with the nuclear deal, which has been suggested in some quarters, is to work out an arrangement whereby the Indian operator, which will be in the public sector, is also designated as the supplier (of the designs etc.), who could then outsource some of the supplies to foreign companies. This will raise legal issues, which may not be easy to resolve.

Given these uncertainties, can we contend that the “deal is done”? Substantial progress has no doubt been achieved and the logjam has been broken to the extent that the US has abandoned its insistence on amending the liability law and is willing to proceed to work out the necessary administrative arrangements for operationalising the stalled deal. But the jury is still out on the question whether these efforts would succeed. We will have to withhold our judgement until a contract is actually negotiated between a US supplier and an Indian operator. As of now, the position in this regard is by no means clear. When the Chairman of Westinghouse was asked whether the company is now ready to invest in India, he could not go beyond saying “maybe”. Admittedly this is in contrast with a clear “no”, which would have been the answer before the latest developments and to that extent it gives hope for the future.

It is indeed a pity that the Indo-US nuclear deal, which marked a turning point in the relations between the two countries and ended our nuclear “apartheid”, has remained unimplemented all this time. However, it is important to appreciate the real reasons for the impasse. To contend that “Modi has managed to achieve what Manmohan Singh could not”, as some commentators have been inclined to do, is to grossly underestimate the latter’s monumental contribution in bringing India on to the global stage via the path-breaking agreement with George Bush. The problems, which are now sought to be resolved, were largely the creation of the BJP itself. I am sure that if the remaining hurdles are overcome due to the efforts of those who created them in the first place, no one would be happier than the real architect of the nuclear deal.

The writer is a former Diplomat and was India's Ambassador to the Conference on Disarmament in Geneva.