SOME ISSUES IN RESPECT OF INDIA’S NUCLEAR LIABILITY LAW – ANALYSIS

By G. Balachandran

FEBRUARY 14, 2015

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Seemingly, the highlight of President Obama’s visit was the announcement that India and the United States had come to an understanding on the two major issues that stood in the way of the successful full implementation of the Indo-US nuclear deal. While the first issue related to some of the provisions of the Indian Civil Liability for Nuclear Damage Act (CLNDA), the second concerned a successful negotiation of the administrative arrangements for the implementation of the India-US 123 nuclear agreement. The issues in respect of CLNDA related to: (i) the conformity of CLNDA with the provisions of the Convention on Supplementary Convention (CSC), signed – but not yet ratified – by India; (ii) Sec. 17(b) of CLNDA, which allowed for Right of Recourse against the supplier; and (iii) Sec. 46, which allowed for legal cases against the operator under Acts other than the CLNDA. The administrative arrangements under discussion were with respect to the accounting and tracking of US-supplied nuclear materials and materials produced with the use of US-supplied equipment.

Neither side initially chose to share any further information on the subject. The Indian Foreign secretary merely stated the following:

“Based on three rounds of discussions in the Contact Group, we have reached an understanding on two outstanding issues namely civil nuclear liability and the administrative arrangements for implementing our 123 agreement. Let me underline, we have reached an understanding. The deal is done. Both these understandings are squarely within our law, our international legal obligations, and our practice. Insofar as liability is concerned, during the Contact Group meetings the Indian side presented our position concerning the compatibility of the Civil Liability for Nuclear Damage Act, and the Convention on Supplementary Compensation for Nuclear Damage, which we have signed, and responded to questions from the US Members concerning this position.”

In a sort of official statement, US Ambassador to India Richard Verma was reported in the media to have said – although the US Embassy refused to either clarify or deny his having ever made such a statement – that the liability issue was to be resolved through a “memorandum of law within the Indian system” that would not require a change of the Indian law. Later on, the spokesperson of the Indian Ministry of External affairs clarified the situation by the mere statement that “We will indeed be providing you that information and that will be copious in nature, it will answer all your questions.” This was done a few days back in a Frequently Asked Questions (FAQ) format, although this still leaves many questions unanswered. For instance, it does not answer how the understanding between the two sides will be formalised. On the contrary, the FAQ answers raise further questions that need to be answered. Obviously, a FAQ will not carry much weight in business decisions that have to be made in respect of nuclear transfers.

This silence of officials from both sides as well as the alleged ambiguous statement of the US Ambassador left the field open for much speculation by commentators. These speculations ranged from: “the “memorandum of law — designed for, and enforceable in, the Indian system — that is at the heart of the new accord is aimed at stemming the right of recourse against suppliers and permitting tort claims to be pursued only in India, thus blocking victims from filing claims in the supplier’s home country” to “it seems the Modi government has committed itself to providing a written legal assurance to the US that Indian victims will not be allowed to sue American suppliers under Section 46 of the CLNDA.”

While the exact nature of the understanding between the two countries is yet to be announced and in fact may never be officially released, it is possible to offer an outline of the possible “memorandum” with possible understandings on all the three liability issues as well as the administrative arrangements.

This commentary will deal only with the issues surrounding Sec. 46 of CLNDA. It will be followed by three commentaries dealing with (i) the compatibility of CLNDA with CSC provisions; (ii) Sec. 17(b) of the CLNDA dealing with the “Right of Recourse”; and (iii) the administrative arrangements to operationalise the 123 agreement.

Section 46 of CLNDA

Sec. 46 merely states that:

“The provisions of this Act shall be In addition to, and not in derogation of, any other law for the time being in force, and nothing contained herein shall exempt the operator from any proceedings which might, apart from this Act, be instituted against such operator.”

Before proceeding further, some words of explanation outlining the environment under which the “memorandum” will operate need to be offered:

It is extremely unlikely, given the current and near future distribution of membership in the two Houses of Parliament that the CLNDA can/will be amended in any manner to address the various concerns;

It is not possible either for any government or any current or future statute to prohibit any citizen from instituting proceedings against a supplier;

It is not possible for any government or government lawyer or for that matter anybody else to guarantee that a judge will not allow such a case to be proceeded with;

It is not possible for any government or for that matter anybody, lawyer or otherwise, to guarantee the outcome of such a proceeding, before the proceeding starts, except, of course, the judge;

No government can give a special preferential assurance to any one country, i.e., no government can give a special preference in respect of Sec. 46 to only the United States. It is very likely that such an action may be in violation of one or more of India’s international commitments or obligations.

So what can be expected from any understanding or “memorandum” exchanged between the two governments on the issue of Sec. 46 of CLNDA?

The suppliers’ concern about Sec. 46 arose from the possibility of their facing an unspecified, and potentially unlimited, liability on account of an action brought against them under the provisions of Sec. 46. Under the environment described above, what assurances can be given to suppliers about the non-possibility or near impossibility – a 100 per cent certain assurance is impossible – of any such liability ever arising as a result of an action under Sec. 46?

Such an assurance will rest on one of the cardinal principles of a modern functioning democracy – the separation of powers between the judiciary and legislature. Under this doctrine, while it is the prerogative of the legislature to pass laws, it is the judicial interpretation of the meaning of the statute that is meaningful and authoritative in a case before the court.

In Shanker Raju Vs Union of India, the Supreme Court held that:

“In a court of law or equity, what the legislature intended to be done or not to be done can only be legitimately ascertained from what it has chosen to enact either in express words or by reasonable and necessary implication – Where the Legislature clearly declares its intent in the scheme of a language of Statute, it is the duty of the Court to give full effect to the same without scanning its wisdom or policy and without engrafting, adding or implying anything which is not congenial to or consistent with such express intent of legislature.”

Elaborating further, the judges held that:

“In a court of law or equity, what the legislature intended to be done or not to be done can only be legitimately ascertained from what it has chosen to enact either in express words or by reasonable and necessary implication. Where the Legislature clearly declares its intent in the scheme of a language of Statute, it is the duty of the Court to give full effect to the same without scanning its wisdom or policy and without engrafting, adding or implying anything which is not congenial to or consistent with such express intent of legislature. Hardship or inconvenience cannot alter the meaning employed by the Legislature if such meaning is clear on the face of the Statute. If the Statutory provisions do not go far enough to relieve the hardship of the member, the remedy lies with the Legislature and not in the hands of the Court.”

With this as background, how would a case against a supplier be interpreted in a court? Fortunately in the case of the CLNDA, irrespective of whether one belongs to the “textualist” (the law is embodied in the language of the statute, as expressed in its plain meaning) or the “intentionalist” (the law is to be interpreted relying on the legislative history of the statute) schools, it is reasonably certain that a case under Sec. 46 cannot stand judicial scrutiny.

Sec. 46 is very clear from the language of that section that an action under it can be brought only against the operator (“be instituted against such operator.”). Therefore, a textual interpretation of the statute would not support action against the supplier.

What about the “intentionalist” interpretation of the statute? Fortunately due to the untiring and ceaseless efforts of the Left parties, especially the CPI and CPM, in Parliament this too was made abundantly clear during the passage of the CLNDA.

Considering the very high level of emotionalism against foreign, especially US, suppliers, during the debate on the bill – in view of the just then announced “Bhopal Gas” verdict – the Left parties pressed for inclusion of “suppliers” in Sec. 46, not once, but three times during the progress of the bill in parliament.

First, when the bill was being examined before the Parliamentary Standing Committee (SC) on Science and Technology, an amendment to Sec. 46 was put forward by CPM member Mr. Saman Pathak. Stating that “Further, as the Section stands, it may be limited to only operators and not suppliers,” Mr. Pathak proposed an amendment as follows:

“Clause 46: The provisions of this Act shall be in addition to and not in derogation of any other law for the time being in force. Nothing contained herein shall exempt the Operator and/or the Supplier of any material, design or services,from any proceeding which may, apart from this Act, be instituted against suchperson, either in any Indian or any external court.”

The amendment was rejected by the Standing Committee. Mr. Pathak then submitted a Dissenting Note stating:

“Since these changes have not been accepted, 1 am constrained to draw the conclusion that the provisions of the Bill will unduly favour the foreign suppliers of nuclear equipments. This is being done to make the provisions compatible with the Convention on Supplementary Compensation (CSC). I am not convinced why India should join the CSC.

I am of the form opinion that any legislation on civil nuclear liability should keep the interests of the Indian people, who may be affected in a nuclear accident, as its core concern. The provisions suggested in the Bill and those proposed by the Committee fail to ensure that. Hence my dissent on the Report.”

The second opportunity to include suppliers in Sec. 46 was during the debate of the bill in the Lok Sabha. On this occasion, another CPM member, Shri Basu Deb Acharia, moved an amendment that proposed substituting the phrase “shall exempt the operator and/or the supplier of any material, design or services, from any proceeding which may, apart from this Act, be instituted against such person either in any court located in India or abroad” for “shall exempt the operator from any proceeding which might, apart from this Act, be instituted against such operator.” This proposed amendment, too, was rejected. As the report of the Lok Sabha stated, “The amendment was put and negatived.”

The third opportunity arose during the debate on the bill in the Rajya Sabha. During the debate, two left party members, Mr. D. Raja of the CPI and Mr. Sitaram Yechury of the CPM moved two separate amendments to Sec. 46 of the bill. As reported in the Rajya Sabha proceedings:

“Mr. DEPUTY CHAIRMAN: Are you pressing?

SHRI D. RAJA (TAMIL NADU): Sir, I move:

(No. 16) That at page 13, for lines 33 to 35, the following be substituted, namely:-

“46. The provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being in force, and nothing contained herein shall exempt the operator or supplier of the material, equipment or services from any proceeding which might, apart from this Act, be instituted against such operator or supplier”.

MR. DEPUTY CHAIRMAN: There is one more amendment (No. 4) by Shri Sitaram Yechury. Are you pressing, Mr Yechury?

SHRI SITARAM YECHURY (WEST BENGAL): Sir, I move:

(No. 4) That at page 13, for lines 33 to 35, the following be substituted, namely:-

“46. The provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being in force, and nothing contained herein shall exempt the operator or the supplier of any material, design or services, from any proceeding which might, apart from this Act, be instituted against such person either in any Indian or any external court.”

The questions were put and the motions were negatived.

Clause 46 was added to the Bill.”

The above possible explanation of the resolution of the Sec. 46 dilemma should go a long way towards allaying the fears of suppliers both Indian and foreign, even though they are not iron clad assurances either at the bilateral or legal levels, which is not possible. There are still a few things that can upset the above reasoning. A future parliament may decide to amend the CLNDA either way – explicitly including the supplier or excluding the supplier. A future Supreme Court may decide to override or reinterpret the Doctrine of binding precedent and hold that the present CLNDA does admit the possibility of a case against a supplier. Or, who knows, the Supreme Court may even hold the CLNDA to be unconstitutional! After all, it has already admitted a writ petition challenging the constitutional validity of CLNDA, which is yet to be decided upon.

The above discussion does not, by any means, preclude any business/commercial transaction between the suppliers and the operator. It only points to the obvious fact that such decisions, as in any other business decision, will carry some risks. It is up to the various players to judge the costs and benefits of entering into business contracts and make sound financial decisions from their own vantage points.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India