Daily Special Current Affairs Material for IAS (Pre) 2013 National Issues - Topic: "Liability Rules Leave Very Little Recourse"

Daily Special Current Affairs Material for IAS (Pre) 2013

Chapter: National Issues

Topic: Liability Rules Leave Very Little Recourse

Q. What are Rule 24, Rule 17 and Rule 46 of the Civil Liability for Nuclear Damage Rules, 2011?

Ans. Rule 24 revisits the issue of the right of recourse contained in Section 17 of the Act, widely acknowledged as a major sticking point for nuclear suppliers.
Crucially, sub-section (b) of Section 17 which allows operators recourse, i.e. to claim damages from suppliers when the nuclear accident happens owing to the fault of a supplier, such as a patent or latent defect or sub-standard services, caused particular consternation when the Act was passed. This was because Section 17(b) was not in conformity with the Convention on Supplementary Compensation for Nuclear Damage, which represents international best practice, and would consequently entail greater liability on suppliers.
Its effect on suppliers would be all the more onerous owing to the vaguely worded Section 46, whose effect, if not its intention, was arguably to allow tort claims against operators in the event of a nuclear accident, which they could, in turn, claim from suppliers if the accident was caused due to the latter’s fault.

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Q. What are the Key Concerns of Rule 24?

Ans. Three key concerns make Rule 24 deeply problematic.

  • First, it limits the amount which can be claimed by exercise of the right of recourse to the extent of the operator’s liability or the value of the contract, whichever is less. This means, theoretically, that even if the damages paid by the operator to victims of a nuclear accident, owing to the fault of the supplier, run into crores of rupees, if the value of the contract is say one lakh rupees, the supplier will not be liable for anything more than the value of the contract. Besides, when damages to be paid by the supplier by way of recourse are to be computed, the only relevant amount is what has been paid by the operator by way of damages to the victims.

  • Second, the Rule limits the time during which the right of recourse is available to operators to the product liability period in the contract or the period of initial licence issued under the Atomic Energy Rules, 2004 (a maximum period of 5 years).

  • Finally, this Rule represents an arguably illegal backdoor attempt to limit supplier liability owing to recourse. Legally, there is no specific warrant in the Act to prescribe rules regarding the right of recourse.

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