INDIA’S NUCLEAR LEGAL FRAMEWORK | COUNTRY REPORT The stringent process unique to the nuclear industry


can lead to delays in the issuance of licensing approvals, which can then delay the planned construction schedule. Moreover, if the applicable regulations change during the construction period, the contractor may have to adapt its work to the new standards. For example, after the 9/11 terrorist attacks, regulators required design changes to consider the possibility of a plane crashing into an NPP. Likewise, after the Fukushima Daiichi nuclear accident in 2011, regulators required design changes to address similar NPP vulnerabilities. India is no different, and delays have already


occurred in the construction of some NPPs such as the Kundankulam plant. Disputes in the nuclear sector can be mitigated if


there is proper understanding and management of the associated risks from an early stage. First, risks can be managed during the procurement


and contract drafting stage. The construction contract must specify and define the objectives in the order of their priority, such as scope of work and performance requirements, price, and time of completion, as well as the circumstances giving rise to extension of time and additional costs. Second, the stage of contract management is important


for risk management. The parties should have clear and rigorous project management procedures in place that would help identify and mitigate risks arising from misunderstanding between the parties. Third, risk management can be addressed at the stage of handling disagreements and disputes between the parties. When a claim arises in the project, it should be fairly and efficiently addressed in the manner provided in the dispute resolution clause in the contract. Claims should not be allowed to accumulate, and a proper system must be in place for presenting and responding to claims by the parties. Disputes are likely to arise due to the expected rate of


involvement and investment by foreign entities, related to the construction of NPPs or otherwise. Given the international nature of these projects, and the risk of potential delays in resolving these disputes in the domestic courts in India, international dispute resolution (such as mediation or international arbitration) is likely to be a preferred choice. International construction contracts typically include an arbitration clause for resolution of


disputes that arise during the project. The regulations in force in different jurisdictions associated with the construction of NPPs to guarantee certain standards are of utmost importance here. Another avenue that can be adopted by investors


for dispute resolution is to initiate investment treaty arbitrations under the Bilateral Investment Treaty (BIT) in force between the country of the investor and the home State of the owner. Even disputes arising out of delays and cost overruns in the construction of an NPP can potentially be the subject of an investment arbitration in certain circumstances. The nuclear energy sector has also proven to be a fertile


ground for commercial disputes, giving rise to some of the most high-profile arbitration cases worldwide in recent years. In 2013, US-utility company Southern California Edison (SCE) initiated an ICC arbitration against Japan’s Mitsubishi, alleging that Mitsubishi delivered faulty steam generators for Edison’s San Onofre NPP in San Diego, USA. While in 2014, German energy group E.ON and its subsidiary PreussenElektra commenced an ICC arbitration against Belgian-based Electrabel over nuclear power tax payments arising from reciprocal electricity supply agreements entered into by the parties in 2009. Disputes arising from a commercial relationship between different entities can range from non-supply of nuclear fuel, or supply of faulty plant equipment, to protection of intellectual property rights. Given the size of the nuclear supply chain related to the construction of all of the large NPPs and SMRs India wishes to build in the coming years, numerous commercial disputes are likely to arise in the future.


Legal framework governing the sector The Atomic Energy Act (1962) of India is the foundational legislation that governs all regulations on the civil use of nuclear energy. But the 2010 Civil Liability for Nuclear Damage Act has had considerable implications for the development of the nuclear energy programme in India. The 2010 Act aims “to provide a civil liability for nuclear


damage and prompt compensation to victims of a nuclear incident through a no-fault liability to the operator.”1 The legislation allows the operator to have a right of recourse against the supplier for the compensation paid for a nuclear accident, if the accident results from the supplier’s action. U


Below: Flamanville 3 is another nuclear project that has been subject of a legal dispute Photo credit: EDF


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