Changes to the UK's Nuclear Third-Party Liability Regime (Feb 2022)
Changes to the UK`s Nuclear Third-Party Liability Regime
With the recent and long-awaited ratification of the 2004 Protocols amending the Paris and Brussels Conventions(1), the remaining provisions of the Nuclear Installations (Liability for Damage) Order 2016 have taken effect as from 1st January 2022.
The principal legislation in the UK covering the liability regime for nuclear accidents in the UK is the Nuclear Installations Act 1965. That Act implements both the Paris Convention and the supplementary Brussels Convention. The Act sets out the regime that applies to allow compensation for personal injury or property damage caused by a nuclear accident.
In 2004, signatories to the two Conventions adopted a protocol to amend the third-party liability regime and that protocol has only recently been amended by a sufficient number of signatory countries, thus allowing the changes to take effect.
The UK, in anticipation of the protocol coming into force, introduced the Nuclear Installations (Liability for Damage)Order 2016, amending the Nuclear Installations Act 1965. Whilst limited parts of that Act took effect shortly after the Order came into force, the majority of the provisions have only taken effect from 1st January 2022, now that the protocol is in force.
The Key Changes:
The value of claims that can now be made following a nuclear accident has increased from £140 million to €700 million in damages although a cap on claims at €80 million applies following damage in connection with the transport of nuclear material.
Annual caps are set on the liability of Operators of nuclear sites in the UK, initially at €700 million a year but increasing to a total Operator liability cap of €1.2 billion over a period of 5 years starting from 2022.
There is a requirement on Operators of licensed sites to make financial provisions for such liabilities, either by insurance or other means approved by the Secretary of State.
Perhaps even more significantly, the new regime expands the types of claims that can be brought.
This now includes (in addition to existing claims for personal injury and property damage):
· compensation for the cost of measures of reinstatement related to the impaired environment.
· loss of income derived from the impaired environment.
· the cost of preventive measures.
· and personal injury and property damage caused by such measures.
Also introduced are significant extensions to the geographical scope of those who could claim against the Operator. Additional parties are now able to bring a claim for damage incurred outside of the UK caused by a nuclear incident which occurs inside the UK (this would result in the channelling regime in the Nuclear Installations Act as amended applying to claims in the UK from Ireland.)
Finally, the Limitation periods are also amended so that the right to claim compensation for personal injury is increased from 10 years to 30 years. The time limit on bringing claims for all other types is 10 years.
Recognising the potential gap in the insurance market, at least in the short term, the UK Government has initially agreed to provide an indemnity to cover the increased personal injury liabilities as outlined above. For each site the maximum HMG liability will be between €70 million and €160 million depending on the Site`s classification, uptake of the indemnity by the Operator and whether transit of nuclear materials involved. The Government is also providing an indemnity to the Nuclear Decommissioning Authority (NDA), in their role as the responsible body for decommissioning of civil nuclear sites and who will need to ensure that appropriate cover is in place for the nuclear licensed sites.
The UK government has also signalled its intention to seek to join the Convention on Supplementary Compensation for Nuclear Damage (the “CSC”). The main reason cited is that this should improve the investment climate for new nuclear in the UK. In the event of a nuclear incident in a signatory state to the CSC, the UK would contribute an amount to the shared international fund. In the event of an incident in the UK, the UK government would be able to draw on the pooled CSC funds.
There is no doubt that the increased scope in the heads of damage may well have implications for existing contractual arrangements within the supply chain. In particular existing indemnities will need to be reviewed to ensure they adequately cover the new regime.
Whilst the UK government believes that the insurance industry will be able to cover all liabilities except the personal injury for the extended 30-year period, there is no doubt that the insurance industry does have real concerns over their ability to provide cover, bearing in mind the increased heads of damage and the extended tail for personal injury claims. The fact that the UK government has stepped in immediately to offer indemnities is an indication that this will be a genuine challenge for the insurance market.
Operators will need to check their cover with their insurance advisers to ensure they are adequately covered under the updated regime.
1 Respectively the Paris Convention on Third Party Liability in the Field of Nuclear Energy (the “Paris Convention”) and Brussels Supplementary Convention to the Paris Convention (the “Brussels Convention”).