Japan recently submitted its instrument of acceptance to the International Atomic Energy Agency’s Convention on Supplementary Compensation for Nuclear Damage, triggering the CSC’s entry into force on April 15, 2015.

Last November, the Japanese Diet approved a bill to ratify the Convention on Supplementary Compensation for Nuclear Damage (CSC). On January 15, 2015, the Japanese representative to the International Atomic Energy Agency (IAEA) signed and delivered to IAEA’s director general Japan’s instrument of acceptance of the CSC.[1]The CSC is now expected to enter into force on April 15, 2015.[2] Once the CSC enters into force, it will make a significant additional international fund available to compensate third parties for damages in the event of a nuclear accident and will also introduce restrictions on jurisdiction over incidents that involve nuclear installations within the territories of CSC parties. Thus, the CSC will provide new protections to U.S. vendors that do business overseas, although the breadth of these protections will largely depend on how many countries adopt the CSC.

The CSC opened for signature in 1997, and the United States became a party to it in 2008. The CSC is generally intended to supplement and enhance the existing system of compensation for damages that result from a nuclear incident beyond the provisions of the Paris Convention, the Vienna Convention, or national laws for those countries that are not parties to either convention.[3]

The CSC will come into force after ratification by at least five countries whose combined nuclear fleets total more than 400,000 megawatts thermal (MWt).[4] Prior to Japan’s ratification, the CSC had been ratified by five countries: the United States, Argentina, Morocco, Romania, and the United Arab Emirates.[5] With the addition of Japan, the installed nuclear capacity of the contracting countries will increase from the current 318,000 MWt to approximately 450,000 MWt. This will now bring the CSC into force.

A number of other countries, such as Canada, India, the Czech Republic, and Ukraine have signed but not ratified the CSC.[6] Last year, the United States and France signed an agreement to encourage other nations to sign existing nuclear liability conventions, including the CSC. It remains unclear, however, when or whether France or any other Western European country will accede to the CSC.

Once the CSC enters into force, each contracting country must make available at least 300 million special drawing rights (“SDRs,” approximately US$427 million as of January 16, 2015) as compensation for damages caused by a nuclear incident.[7] The CSC also provides for an international public fund to supplement the compensation available under national law, in the event that damages exceed 300 million SDRs. A contracting country must contribute to this fund, under a formula specified in Article IV of the CSC, depending on the installed nuclear capacity of the country and the United Nations’ rate of assessment for the country. 

Like the Vienna Convention and the Paris Convention, the CSC specifies that jurisdiction over damages from a nuclear incident lies only with the courts of the contracting country of the nuclear installation involved in the incident.[8] Thus, nuclear vendors that do business in a foreign country that is a party to the CSC can be sued only for damages for a nuclear incident in that foreign country in its courts—not in the courts of the vendor’s home country.

One significant question raised by the CSC’s now-pending entry into force is the source of U.S. contributions to the international fund in the event of a nuclear incident. The U.S. implementing legislation for the CSC, passed in 2007, authorizes the U.S. Department of Energy (DOE) to issue regulations that establish a retrospective risk-pooling program, funded by U.S. nuclear suppliers, to cover U.S. obligations under the CSC for a nuclear incident not covered by the Price-Anderson Act (i.e., in general, an incident that occurs outside the United States).[9] This statute requires the DOE to develop a risk-informed assessment formula to allocate retrospective contributions among U.S. suppliers for events outside the United States not covered by the Price-Anderson Act.

The DOE recently published a Notice of Proposed Rulemaking (NOPR) and held a public meeting for stakeholders on January 7, 2015.[10]Some of the key challenges associated with this NOPR include (1) how to define nuclear “suppliers” that would be liable for potential retrospective premiums; (2) how to fairly allocate retrospective contributions among  U.S. suppliers; (3) whether and how the DOE will provide information to suppliers to allow them to quantify their potential liabilities under the retrospective risk-pooling program; (4) the burden suppliers have to develop initial reports of nuclear exports, which the DOE proposes should include transactions that date back to 1960; and (5) the lack of any dispute resolution procedures in the NOPR for suppliers to contest the DOE’s calculations of their liability.

At the January 7 public meeting, the DOE appeared receptive to stakeholder input on many aspects of the NOPR, particularly input supported by data or backup information from suppliers. The DOE intends to hold a follow-up “workshop” at its headquarters in Washington, D.C., to solicit additional public input and provide initial feedback. The workshop is expected to be held in February but has not yet been scheduled. Comments on the NOPR are due by March 17, 2015