On April 15, 2015, the Convention on Supplementary Compensation (CSC) entered into force — on the 90th day following the date on which at least five countries with a minimum of 400,000 units of installed nuclear capacity deposited an instrument. The final trigger for its entry into force was a decision by Japan to join the CSC. Other members of the CSC include the United States, Argentina, Morocco, Romania, and the United Arab Emirates.
One key feature of the CSC is the creation of an “international supplementary fund,” which provides an additional tier of compensation not otherwise available under a country’s national law. In the U.S., this means creation of a new risk pooling program for nuclear suppliers to pay the U.S.’s contribution to the international supplementary fund. The purpose of the risk pooling program is to allocate the contingent costs equitably, on the basis of risk, among the class of nuclear suppliers relieved by the Convention from the risk of potential liability resulting from any covered incident outside the U.S. This scheme is still under development at the U.S. Department of Energy – see 79 Fed. Reg. 75076 (December 17, 2014). Comments on the risk pooling program are due on April 17, 2015. Regardless of when the rule goes into effect or in what form, the U.S. is now obligated to pay its share of the international supplementary fund should there be a triggering event.
Looking ahead, the risk pooling program in the U.S. will likely involve a premium to be assessed retrospectively (i.e., a deferred payment) based on a risk-informed formula taking into account specified factors. The pooling program will likely include contributions from power reactor operators, fuel cycle facilities, and certain vendors and suppliers to the international nuclear industry. In effect, the U.S. government will be imposing a financial obligation (or at least the risk of a new obligation) on the U.S. nuclear industry, creating another challenge to U.S. vendors seeking to participate in international markets against state-owned nuclear vendors and suppliers. But the CSC does have some benefits. Other countries are also developing mechanisms for allocating contributions to the CSC’s international supplementary fund. In Japan, 30 different entities would be responsible for contributing funds with the amount determined, in part, by reference to the size of each contributors’ reactors.
Overall, the CSC’s entry into force is likely be a net positive for signatory countries generally, particularly in the context of providing compensation to affected members of the public. But, like many schemes designed to clarify liability, there will undoubtedly be those whose risk increases as a result. And, at least for now, the CSC remains limited to just a few countries, with the U.S. and Japan making up the bulk of the installed capacity covered by the convention. Until there is more widespread adoption, the CSC’s entry into force marks only the dawn of a possible global nuclear liability regime.