[Senate Treaty Document 107-21]
[From the U.S. Government Publishing Office]



107th Congress                                              Treaty Doc.
                                 SENATE                     
 2d Session                                                 107-21
_______________________________________________________________________

                                     



 
      CONVENTION ON SUPPLEMENTARY COMPENSATION FOR NUCLEAR DAMAGE

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 CONVENTION ON SUPPLEMENTARY COMPENSATION FOR NUCLEAR DAMAGE, DONE AT 
   VIENNA ON SEPTEMBER 12, 1997. CONVENTION ADOPTED BY A DIPLOMATIC 
 CONFERENCE CONVENED BY INTERNATIONAL ATOMIC ENERGY AGENCY (IAEA) AND 
OPENED FOR SIGNATURE AT VIENNA, SEPTEMBER 29, 1997 DURING IAEA GENERAL 
                               CONFERENCE




 November 15, 2002.--Convention was read the first time, and together 
  with the accompanying papers, referred to the Committee on Foreign 
     Relations and ordered to be printed for the use of the Senate
                         LETTER OF TRANSMITTAL

                              ----------                              

                                The White House, November 15, 2002.
To the Senate of the United States:
    I transmit herewith, for Senate advice and consent to 
ratification, with a declaration, the Convention on 
Supplementary Compensation for Nuclear Damage done at Vienna on 
September 12, 1997. This Convention was adopted by a Diplomatic 
Conference convened by the International Atomic Energy Agency 
(IAEA) and was opened for signature at Vienna on September 29, 
1997, during the IAEA General Conference. Then-Secretary of 
Energy Federico Pena signed the Convention for the United 
States on that date, subject to ratification. Also transmitted 
for the information of the Senate is the report of the 
Department of State concerning the Convention.
    The Convention establishes a legal framework for defining, 
adjudicating, and compensating civil liability for nuclear 
damage that results from an incident in the territory of a 
Party, or in certain circumstances in international waters, and 
creates a contingent international supplementary compensation 
fund. This fund would be activated in the event of an incident 
with damage so extensive that it exhausts the compensation 
funds that the Party where the incident occurs is obligated 
under the Convention to make available.
    The international supplementary fund would be made up 
largely of contributions from Parties that operate nuclear 
power plants. The improved legal certainty and uniformity 
provided under the Convention combined with the availability of 
additional resources provided by the international 
supplementary fund create a balanced package appealing both to 
countries that operate nuclear power plants and those that do 
not. The Convention thus creates for the first time the 
potential for a nuclear civil liability convention with global 
application.
    Prompt U.S. ratification of the Convention is important for 
two reasons. First, U.S. suppliers of nuclear technology now 
face potentially unlimited third-party civil liability arising 
from their activities in foreign markets because the United 
States is not currently party to any international nuclear 
civil liability convention. In addition to limiting commercial 
opportunities, lack of liability protection afforded by treaty 
obligations has limited the scope of participation by major 
U.S. companies in the provision of safety assistance to Soviet-
designed nuclear power plants, increasing the risk of future 
accidents in these plants. Once widely applied, the Convention 
will create for suppliers of U.S. nuclear equipment and 
technology substantially the same legal environment in foreign 
markets that they now experience domestically under the Price-
Anderson Act. It will level the playing field on which they 
meet foreign competitors and eliminate the liability concerns 
that have inhibited them from providing the fullest range of 
safety assistance.
    Second, under existing nuclear liability conventions many 
potential victims outside the United States generally have no 
assurance that they will be adequately or promptly compensated 
in the event they are harmed by a civil nuclear incident, 
especially if that incident occurs outside their borders or 
damages their environment. The Convention, once widely 
accepted, will provide that assurance.
    United States leadership is essential in order to bring the 
Convention into force soon. With the United States as an 
initial Party, other countries will find the Convention 
attractive and the number of Parties is likely to grow quickly. 
Without U.S. leadership, the Convention could take many years 
to enter into force. The creation of a global civil liability 
regime will play a critical role in allowing nuclear power to 
achieve its full potential in the diverse and environmentally 
responsible world energy structure we need to build in the 
coming decades.
    The Convention is consistent with the primary existing U.S. 
statute governing nuclear civil liability, the Price-Anderson 
Act of 1957. Adoption of the Convention would require virtually 
no substantive changes in that Act. Moreover, under legislation 
that is being submitted separately to implement the Convention, 
the U.S. contingent liability to contribute to the 
international supplementary fund would be completely covered, 
either by funds generated under the Price-Anderson Act in the 
event of an accident covered by both that Act and the 
Convention, or by funds contributed to a retrospective pool by 
U.S. suppliers of nuclear equipment and technology in the event 
of an accident covered by the Convention but falling outside 
the Price-Anderson system. In either case, U.S. taxpayers would 
not have to bear the burden of the U.S. contribution to the 
international supplementary fund.
    The Convention allows nations that are party to existing 
nuclear liability conventions to join the new global regime 
easily, without giving up their participation in those 
conventions. It also permits nations that do not belong to an 
existing convention to join the new regime easily and rapidly. 
The United States in particular benefits from a grandfather 
clause that allows it to join the Convention without being 
required to change certain aspects of the Price-Anderson system 
that would otherwise be inconsistent with its requirements.
    The Convention, without relying on taxpayer funds, will 
increase the compensation available to potential victims of a 
civil nuclear incident, strengthen the position of U.S. 
exporters of nuclear equipment and technology, and permit us to 
provide safety assistance to the world's least-safe reactors 
more effectively.
    I urge the Senate to act expeditiously in giving its advice 
and consent to ratification of the Convention on Supplementary 
Compensation for Nuclear Damage, with a declaration as set 
forth in the accompanying report of the Department of State.

                                                    George W. Bush.
                          LETTER OF SUBMITTAL

                              ----------                              

                                    The Secretary of State,
                                    Washington, DC, August 7, 2001.
The President,
The White House.
    The President: I have the honor to submit to you the 
Convention on Supplementary Compensation for Nuclear Damage, 
done at Vienna on September 12, 1997. I recommend that this 
Convention be transmitted to the Senate for advice and consent 
to ratification, with a declaration.
    This Convention was adopted by a Diplomatic Conference 
convened by the International Atomic Energy Agency (IAEA), and 
was opened for signature at Vienna on September 29, 1997, 
during the IAEA General Conference. Then-Secretary of Energy 
Pena signed the Convention for the United States on that date, 
subject to ratification.
    Acting in the light of the 1986 Chernobyl accident, the 
General Conference of the IAEA decided in 1989, with U.S. 
support, to establish within the IAEA a Standing Committee on 
Nuclear Liability (SCNL). The SCNL's mandate was to examine 
ways to strengthen the existing international legal regime 
governing third party liability in the event of another nuclear 
accident. The SCNL met formally 17 times in Vienna over the 
intervening 7 years. It focused on two projects: (1) 
modernizing and strengthening the Vienna Convention on Civil 
Liability for Nuclear Damage of May 21, 1963 (the Vienna 
Convention), to provide a greater level of protection to third 
party victims of a nuclear accident to which that convention 
applied; and (2) drafting a new convention on supplementary 
funding that would mobilize funds on the international plane to 
supplement national funds made available by the ``installation 
state'' under its national law and its obligations under other 
nuclear liability conventions to which it might also be party.
    In May 1997, the SCNL adopted and forwarded to the IAEA 
Board of Governors the texts of a Protocol to Amend the Vienna 
Convention and of a ``Supplementary Funding Convention'' (as 
the Convention on Supplementary Compensation for Nuclear Damage 
was then known). The texts were considered by the Board of 
Governors at its June 1997 meeting. It decided to convene a 
Diplomatic Conference for the week of September 8-12, 1997, to 
adopt the two texts and open them for signature. The Diplomatic 
Conference adopted the two texts on September 12 and opened 
them for signature on September 29, the first day of the 1997 
IAEA General Conference. Along with the United States, six 
other states (Australia, Lebanon, Lithuania, Morocco, Romania, 
and Ukraine) signed the Convention on Supplementary 
Compensation for Nuclear Damage (the ``CSC'') during the 
General Conference. Six other states (Argentina, the Czech 
Republic, Indonesia, Italy, Peru, and the Philippines) have 
since signed the CSC, and three states (Argentina, Morocco, and 
Romania) have ratified it. (The United States did not sign the 
Protocol to Amend the Vienna Convention; it is not party to the 
underlying Vienna Convention or to the Organization for 
Economic Cooperation and Development's (OECD) Paris Convention 
on Third Party Liability in the Field of Nuclear Energy of July 
29, 1960 (the Paris Convention), because those conventions do 
not take into account the U.S. system of tort liability based 
on the laws of the States of the United States.)
    The CSC is divided into two parts, a main body and an 
annex. The main body creates mechanisms for compensating 
nuclear damage caused within the territory of Parties to the 
CSC (and in certain cases outside their territory) by a nuclear 
incident in a covered installation for which an operator within 
a state that is a Party to the CSC is liable under the CSC. 
Under the regime created by the CSC, the first tier of 
compensation is provided by funds made available under the laws 
of the ``installation state.'' The CSC defines an 
``installation state'' in relation to a covered nuclear 
installation as the Party within whose territory that 
installation is situated, or if it is not situated within the 
territory of any state, the Party by which or under the 
authority of which the nuclear installation is operated. The 
minimum first tier compensation level for CSC Parties is set at 
a convertible currency equivalent to 300 million special 
drawing rights (SDRs) \1\ (about $400 million at current rates 
of exchange). There is, however, provision for a phrase-in 
period ending in 2007, until which time states may join the CSC 
with a first tier amount equivalent to not less than 150 
million SDRs (about $200 million). After 2007, the 300 million 
SDRs requirement applies to all Parties.\2\ With respect to 
accidents within the territory of the United States (including 
its territory of the United States (including its territorial 
sea), and certain accidents occurring outside U.S. territory, 
the requirement for the United States to ensure the 
availability of the equivalent of 300 million SDRs in first 
tier compensation is already met (with two narrow exceptions) 
\3\ by funds that would be provided under the Price-Anderson 
Act (42 U.S.C. Sec. 2210).
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    \1\ A special drawing right is the unit of account defined by the 
International Monetary Fund and used by it for its own operations and 
transactions.
    \2\ By contrast, the current version of the Vienna Convention 
allows parties to limit liability to as little as the equivalent of 5 
million 1963 gold dollars (about $50 million at recent gold prices). 
Under the Paris Convention (to which most Western European countries 
belong) the operator's liability maybe limited to as little as 15 
million SDRs per incident. The January 31, 1963, Brussels Convention 
Supplementary to the Paris Convention (the Brussels Convention), to 
which most Paris Convention Parties also belong, provides for the 
Paris/Brussel system to make available no less than 300 million SDRs to 
compensation damage in those Paris states that also being to the 
Brussels Convention. By comparison, once broadly adopted the CSCs will 
assure that no less than 600 million SDRs (about $800 million) will be 
available to victims.
    \3\ With respect to any nuclear incident occurring outside the 
United States involving contractors of the Department of Energy (DOE) 
transporting U.S. Government nuclear material, the Price-Anderson Act 
limits aggregate legal liability to $100 million. DOE has already 
recommended to Congress in its 1999 Report to Congress on the Price-
Anderson Act, submitted to Congress in March 1999 (the 1999 Price-
Anderson Act, submitted to Congress in March 1999 (the 1999 Price-
Anderson Report), that this amount be increased to about $500 million, 
which would exceed the CSC requirement of 300 million SDRs. See the 
analysis of Annex Article 5 below for a discussion of a narrow set of 
potential accidents occurring outside the United States not covered by 
the Price-Anderson Act, but for which the United States would be the 
``installation state.''
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    The second tier of compensation is provided by the 
international supplementary compensation fund that gives the 
CSC its name. The obligation to contribute to the fund would be 
triggered if the ``installation state'' notifies the Parties 
that the amount of all eligible claims may exceed the minimum 
first tier amount that applies to that state. Approximately 90 
percent of the international supplementary fund would be made 
up of contributions assessed on the basis of the nuclear power 
generating capacity (if any) of each Party to the CSC at the 
time the incident occurs; the remainder would be made up of 
contributions assessed on the basis of each Party's United 
Nations assessment.
    Were it needed in its entirety today and were all major 
nuclear power generating states party to the CSC, the 
international supplementary fund would provide in excess of 300 
million SDRs to compensate victims. Of this amount, the United 
States, as it possesses about one-third of the world's nuclear 
generating capacity, would be obligated to contribute the U.S. 
dollar equivalent of approximately 100 million SDRs (about $131 
million). When only a few states are party, the U.S. 
contribution would be far less (see discussion below of Article 
IV(1)).
    Legislation to implement this requirement in the United 
States in a manner that does not impose a cost on U.S. 
taxpayers is being submitted separately to Congress. It 
provides that, if an accident covered by the CSC is also 
covered by the Price-Anderson Act, funds drawn from 
contributions made pursuant to that Act by U.S. nuclear 
utilities will cover the U.S. contribution to the international 
supplementary fund. In the event of an accident covered by the 
CSC, but not covered by the Price-Anderson system, the 
legislation would provide that U.S. firms that supply nuclear 
equipment and technology will be required to contribute to a 
retrospective risk pooling program that will be used to 
reimburse the United States for its contribution to the 
international supplementary fund (plus any interest and costs 
awarded). The obligation of suppliers to pay into the pool 
would be deferred until the United States is called upon to 
contribute to the international supplementary fund with respect 
to an actual covered incident.
    A third tier of compensation would be available in some 
states, such as the United States, that make available national 
funds of more than 300 million SDRs under domestic legislation. 
States that make available third tier funds are free to raise 
and distribute them in accordance with domestic law, with the 
single condition (already met by the United States) that the 
availability of these funds not be conditioned on the existence 
of reciprocal obligations with other nations that do not have 
nuclear installations on their territory.
    The CSC incorporates three well-accepted principles that 
form the basis for the Price-Anderson system as well as the 
Paris and Vienna conventions. It (1) requires that all claims 
resulting from a covered nuclear incident be adjudicated in a 
single forum (in most cases the courts of the Party within 
which the nuclear incident occurs), (2) channels liability for 
all claims to the nuclear installation operator, and (3) 
provides for the strict liability of the operator (i.e., 
without the need to prove negligence).
    The CSC establishes two legal criteria to be met by a state 
wishing to become a Party. First, each CSC Party must also be a 
Party to the 1994 Convention on Nuclear Safety. The United 
States met this condition on July 10, 1999. The second is that 
each Party to the CSC must also either be party to the Vienna 
Convention, the Paris Convention, or must have domestic nuclear 
liability statutes that conform to the requirements set forth 
in the CSC's Annex. The Annex, in turn, contains a grandfather 
clause specifically designed to permit the United States to 
join the new Convention without substantive change to the 
Price-Anderson system.
    The CSC assures that in most cases significantly greater 
resources will be available from both domestic and 
international sources to compensate potential victims and 
provide for restoration of the environment in the territory of 
Parties in the event of a nuclear incident. It also lays the 
foundation for a global legal regime governing nuclear 
liability. This regime would link, through legally binding 
treaty relations, states that are party to the Vienna 
Convention (32 states, including a number of Central and 
Eastern European states), the Paris Convention (17 states in 
Western Europe) and those states that are currently not party 
to either the Vienna Convention or the Paris Convention, 
including the United States, Canada, China, Japan, Russia, and 
South Korea, as well as many states that do not produce 
nuclear-generated power. Previous efforts (in particular those 
using the Vienna convention as a basis) failed to create such a 
global regime because the United States, the world's largest 
nuclear power-generating state, was not prepared to alter its 
fundamental tort-law system to conform to the Vienna Convention 
and because non-nuclear power generating states had no 
incentive to join that regime.
    The CSC addresses the first of these problems by providing 
the grandfather clause in Article 2 of the Annex that allows 
the United States to become a Party without significantly 
altering Price-Anderson as it currently exists.\4\
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    \4\ Becoming a Party, would, however, affect the U.S. Comprehensive 
Environmental Response, Compensation and Liability Act of 1980, as 
amended (42 U.S.C. Sec. 9601, et seq.) (CERCLA), insofar as it applies 
to a narrow category of nuclear incidents, namely those occurring in 
international waters that affect the environment or natural resources 
of the U.S. Exclusive Economic Zone (EEZ) and over which U.S. courts 
would have jurisdiction under the CSC. This change would limit the 
scope of parties liable for damage but would result in the guarantee of 
more funds available to compensate nuclear damage from this category of 
nuclear incidents than is available under CERCLA.
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    The second problem is addressed by the international 
supplementary fund, which has no analog in the Vienna 
Convention. Fifty percent of the fund is to be used to 
compensate damage occurring outside the ``installation state'' 
(transboundary damage), including transboundary damage 
occurring in a non-nuclear power generating Party. The 
availability of this fund, especially as half of it must be 
applied toward transboundary damage, creates a strong incentive 
for such non-nuclear states to join the regime, creating for 
the first time the potential for a nuclear liability convention 
that will apply globally.
    Increasing potential compensation for victims and for 
environmental damage and eventually creating a uniform global 
legal regime are important goals in themselves, but U.S. 
ratification of the CSC may also have two additional benefits. 
First, the CSC can strengthen U.S. efforts to improve nuclear 
safety, because, once widely accepted, the CSC will eliminate 
ongoing concerns on the part of U.S. suppliers of nuclear 
safety equipment and technology that they would be exposed to 
damage claims by victims of a possible future accident at a 
facility where they have provided assistance. This exposure to 
liability exists not only in the country where safety work has 
been performed and in other countries where damage might occur, 
but also in the United States because the suppliers are based 
here and are therefore subject to suit in U.S. courts. The CSC 
provides a mechanism for removing these liability concerns for 
suppliers, thus creating a legal environment that facilitates 
the provision of safety assistance.
    Second, U.S. participation in a global liability regime 
will allow U.S. exporters of nuclear technology and equipment 
to compete more effectively in foreign markets generally. 
Today, as noted above, these firms are exposed to potentially 
unlimited liability in their foreign businesses and to suit in 
U.S. courts. Even if the suits are baseless, expenses to defend 
such cases can be substantial. When the United States and the 
state whose nationals are involved are both Parties to the CSC, 
however, liability exposure will be channeled to the operator 
in the ``installation state,'' thus substantially limiting the 
nuclear liability risk of U.S. suppliers. Once the CSC is 
widely adopted, the entire nuclear supplier industry will be 
able to operate abroad under a single set of rules similar to 
those that have applied in the United States under the Price-
Anderson Act since the beginning of the commercial nuclear 
power industry in the 1950s, and that have contributed to the 
development of safe and effective nuclear technology in this 
country.
    The following is an article-by-article analysis of the CSC:
    The Preamble refers to the existing international 
instruments and national legislation that form the legal 
context within which the CSC is designed to operate, states the 
goals of creating a worldwide liability regime and increasing 
the amount of compensation for nuclear damage, and recognizes 
that the existence of such a worldwide regime would encourage 
regional and global cooperation to increase the level of 
nuclear safety.
    Article I contains definitions of 12 terms used in the CSC. 
They include definitions of the Vienna and Paris Conventions, 
``Special Drawing Right,'' ``nuclear reactor,'' ``installation 
state,'' ``nuclear damage,'' ``measures of reinstatement,'' 
``preventive measures,'' ``nuclear incident,'' ``installed 
nuclear capacity,'' ``law of the competent court'' and 
``reasonable measures.'' The definition of ``nuclear damage'' 
is substantially longer and more involved than the others, 
reflecting a need to accommodate different concepts of tort 
liability found in a wide variety of domestic legal systems 
while at the same time ensuring uniformity with respect to 
certain core elements. The types of damage covered by CSC are 
thus divided into two categories: those that must be 
compensated (loss of life, personnel injury, and property loss 
or damage), and those that are to be compensated ``to the 
extent determined by the laws of the competent court.'' This 
second category provides the national court adjudicating claims 
under the CSC with flexibility to determine under that state's 
legal system how and to what extent to compensate the following 
types of losses: those economic losses not falling in the 
categories of loss of life, personnel injury, and property loss 
or damage; the costs of measures of reinstatement of impaired 
environment; loss of income deriving from an economic interest 
in any use or enjoyment of the environment; the costs of 
preventive measures taken to mitigate damage from an imminent 
or actual nuclear incident; and any other economic loss 
recognized by the general law on civil liability of that court. 
The types of loss or damage enumerated in Article I are (with 
the exception of the costs of preventive measures) only covered 
by the CSC to the extent that the loss or damage arises out of 
or results from ionizing radiation emitted inside a nuclear 
installation or emitted from nuclear fuel or radioactive 
products or waste in, or of nuclear material coming from, 
originating in, or sent to, a nuclear installation.
    Article II lays out the overarching scope of the CSC and 
the extent of its application and establishes the relationship 
of the Annex to the CSC. Paragraph 1 states that the CSC's 
purpose is to supplement the system of compensation provided 
pursuant to national law that implements the Vienna Convention 
or the Paris Convention or that complies with the CSC's Annex. 
Paragraph 2 states that the CSC applies ``to nuclear damage for 
which an operator of a nuclear installation used for peaceful 
purposes situated in the territory of a Contracting Party is 
liable'' under the Vienna or Paris Convention or under national 
law that complies with the Annex. The limitation to 
installations used for peaceful purposes excludes military 
facilities from the coverage of the CSC.\5\ Paragraph 3 
incorporates the Annex as an integral part of the CSC.
---------------------------------------------------------------------------
    \5\ Each Party will decide which of its installations are used for 
peaceful purposes under the CSC. In the United States, installations 
used for peaceful purposes would not include nuclear submarines and 
other installations used for military operations, i.e., all operations 
of the Department of Defense. Some of the installations operated by the 
Department of Energy may also be excluded from coverage of the CSC.
---------------------------------------------------------------------------
    Article III contains the central undertaking of the CSC. 
Paragraph 1(a) obligates the ``installation state'' to ensure 
the availability of 300 million SDRs, or a greater amount it 
may have specified to the Depository (the Director General of 
the IAEA) before the incident, or an amount not less than 150 
million SDRs during the transitional period ending September 
29, 2007. The funds made available under this subparagraph 
constitute the first tier of compensation available in the 
event of a nuclear incident in a Party to the CSC. Paragraph 
1(b) establishes the obligation on all Parties to the CSC to 
make available public funds according to the formula specified 
in Article IV. These contributions make up the international 
supplementary fund that constitutes the second tier of 
compensation.
    Paragraph 2(a) requires that first tier funds be 
distributed equitably without discrimination on the basis of 
nationality, domicile or residence. The courts of the 
``installation state'' are thus required to treat domestic and 
transboundary victims without regard to their nationality when 
allocating the first tier of compensation. Subject to 
obligations it may have under other conventions on nuclear 
liability, the ``installation state'' is, however, free to 
include or exclude damage suffered in an non-Party state from 
the first tier. Paragraph 2(b) subjects the international 
supplementary fund to the same non-discrimination requirement, 
subject to Article V (which determines the geographical scope 
within which damage must occur in order to be eligible for 
compensation from the fund) and Article XI(1)(b) (which 
reserves 50 percent of the fund in favor of compensating 
transboundary damage).
    Paragraph 3 of Article III reduces contributions to the 
fund proportionately among the contributing Parties if the 
damage compensated does not use up the entire fund. Paragraph 4 
creates a separate category of interest and costs that may be 
assessed by a competent court and allocates any such interest 
and costs among the various possible contributors to the first 
two tiers proportionately. Contributions by the various 
possible contributors of their proportionate share of any 
interest and costs awarded will be required in addition to 
their actual contributions made pursuant to paragraph 1(a) and 
paragraph 1(b) of Article III and may cause their total 
contributions to exceed the contribution caps or minimums 
otherwise specified in the CSC. Interest and costs are allowed 
by the Price-Anderson Act and CERCLA and will be provided for 
in the implementing legislation that will be submitted with 
respect to the financing of U.S. contributions to the 
international supplementary fund.
    Article IV establishes the formula under which 
contributions to the fund are to be calculated.
    Paragraph 1(a)(i) assesses 300 SDRs per unit of installed 
capacity, which is defined in paragraph 2 as one megawatt of 
thermal power. Paragraph 1(a)(ii) assesses an additional amount 
equal to 10 percent of the amount assessed in (i), to be 
contributed by all Parties on the basis of the ratio between 
their United Nations rate of assessment for the year preceding 
the year in which the nuclear incident occurs and the total of 
such rates for all CSC Parties.
    Subpargraph (b) states that each Party's contribution shall 
constitute the sum of the amounts attributable to it under 
subparagraph (a), provided that states assessed the minimum 
rate by the United States and having no nuclear reactors shall 
be exempt from the requirement to contribute. The proviso was 
added in order to facilitate adherence to the CSC by very small 
developing states (e.g., Pacific Island nations).
    Subparagraph (c) contains a contribution cap. It provides 
that the maximum contribution that may be charged to a Party, 
other than the ``installation state,'' must not exceed a 
specified percentage, equal to its UN rate of assessment plus 
eight percentage points, of the fund as a whole. For the United 
States this percentage would be 33 percent (assuming a United 
Nations rate of assessment of 24 percent plus 8 percent); i.e., 
the U.S. share of the fund would be capped at one-third, based 
on a U.S. assessment of 25 percent.\6\ Absent the cap, if the 
United States and only a few other states were Parties (e.g., 
soon after the CSC enters into force), the proportion 
represented by the U.S. contribution would otherwise be much 
higher. For example, if the supplementary fund were to be 
activated when the United States, South Korea, Canada and Japan 
were the only nuclear power-generating states party to the CSC, 
the U.S. contribution to the fund without the 33 percent cap 
would be about 93 million SDRs out of a total fun of about 150 
million SDRs (i.e., the United States would contribute 62 
percent). Under the cap, however, the U.S. contribution would 
be limited to about 50 million SDRs (33 percent of 150) and the 
fund would actually total 107 million SDRs.
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    \6\ The recent reduction in the U.S. assessment to 22 percent 
lowers the U.S. contribution under Article IV(1)(b) and the U.S. cap 
under Article IV(1)(c) with respect to covered nuclear incidents 
occurring after the year 2001.
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    When the cap applies, the fund created would be smaller 
than it would otherwise have been, but this possible reduction 
of funds available for victims was judged to be acceptable when 
weighed against the likelihood that major nuclear power 
generating countries would not ratify the CSC if they faced a 
potentially disproportionate financial burden in the early 
states of building a global regime. To emphasize the 
transitional nature of the cap, the subparagraph further 
provides that it begins to phase out when a substantial 
fraction of the world's nuclear generating capacity, 625,000 
MW, is represented by Parties to the CSC, at which point each 
Party's cap is increased by one percentage point. For each 
75,000 MW in excess of 625,000 MW represented by CSC Parties, 
the level of the cap further increases one percentage point.
    Paragarph 2, which defines a unit of installed capacity as 
1 MW of thermal power, states that the formula shall be 
calculated on the basis of the installed capacity of the 
reactors shown at the date of the incident on a list 
established and updated pursuant to Article VIII.
    Paragraph 3 provides that for the purpose of calculating 
contributions, a reactor shall be taken into account from the 
date when nuclear fuel elements are first loaded into the 
reactor and shall be excluded when all fuel elements have been 
removed permanently from the reactor core and have been safely 
stored in accordance with approved procedures. For the United 
States, these procedures are those approved by the Nuclear 
Regulatory Commission.
    Article V, paragraph 1, describes the geographical 
locations within which damage must be suffered in order to 
qualify a claimant for compensation from the international 
supplementary fund, provided a Party's courts have jurisdiction 
under Article XIII. Nuclear damage is covered if suffered: 
within the territory of a Party, or in or above the EEZ or the 
continental shelf of a Party in connection with the 
exploitation or exploration of the natural resources of that 
zone or shelf. Also covered is nuclear damage suffered in or 
above maritime areas beyond the territorial sea of any Party 
(but outside the territorial sea of any non-Party) where the 
damage is suffered (a) by a national of a Party; (b) on board 
or by a ship flying the flag of a Party; (c) on or by an 
aircraft registered in a Party; or (d) on or by an artificial 
island, installation or structure under the jurisdiction of a 
Party. Paragraph 2 permits a state to assimilate persons having 
their habitual residence in its territory as its nationals for 
the purposes of paragraph 1(b)(ii) (concerning treatment of a 
national of a Party damaged while on the high seas). Paragraph 
3 clarifies that the term ``national of a Contracting Party'' 
includes juridical and natural persons, as well as the Party 
itself or any of its constituent subdivisions.
    Article VI obligates the Party whose courts have 
jurisdiction over claims arising from a nuclear incident to 
notify the other Parties of the incident if it appears that the 
damage caused by the incident exceeds, or is likely to exceed, 
its first tier amount and that contributions to the 
international supplementary fund may be required. Following 
such notification, Parties are required to make arrangements 
for determining which procedures shall apply for making funds 
available, if subsequently required.
    Article VII requires the Party whose courts have 
jurisdiction, once it has given notice pursuant to Article VI, 
to request the other Parties to make available funds for the 
international supplementary fund (up to the maximum amount 
required from each Party under the contribution formula) when 
and to the extent required without any restriction and gives 
that Party exclusive competence to disburse those funds.
    Article VIII sets up a system for establishing a list of 
nuclear reactors in each Party for the purpose of calculating 
the contributions to the international supplementary fund in 
the event an incident occurs.
    Paragraph 1 obligates a state when it deposits its 
instrument of ratification, acceptance, approval or accession 
to communicate to the Depository a list of its reactors 
containing the necessary particulars (i.e., the thermal 
capacity) of those reactors. Paragraph 2 requires Parties to 
communicate promptly modifications to their list of reactors. 
When a reactor is to be added, the notification must be made at 
least 3 months in advance of the introduction of nuclear 
material into the reactor. Paragraph 3 permits other Parties to 
challenge particulars contained in the list submitted under 
paragraph 1 or subsequent modifications thereof and to submit 
any unresolved differences to the CSC's dispute resolution 
provisions discussed below. Paragraph 4 obligates the IAEA to 
maintain, update and circulate the list on an annual basis. 
Paragraph 5 obligates the IAEA to notify Parties of 
communications and objections it receives with respect to this 
list.
    Article IX, paragraph 1, requires each Party to enact 
legislation permitting it or other Parties to the extent they 
have made contributions to the international supplementary fund 
to benefit from any right of recourse (a right to recover 
damages from a third party) enjoyed by the liable operator. The 
implementing legislation to be submitted separately to Congress 
will contain a provision giving effect to this requirement in 
the CSC with respect to situations where the Price-Anderson Act 
does not apply but there is a right of recourse. (There is no 
right of recourse under the Price-Anderson Act.) Paragraph 2 
permits the Party of the liable operator to provide for the 
recovery from the operator of any public funds made available 
to compensate damage from a nuclear incident if the damage 
results from fault on the part of the operator. Paragraph 3 
permits the Party whose courts have jurisdiction over claims 
arising from an incident under the CSC to exercise the rights 
of recourse provided under paragraphs 1 and 2.
    Article X, paragraph 1, provides that the system of 
disbursements of the Party whose courts have jurisdiction shall 
be applied to all funds made available under the CSC. Paragraph 
2 provides that the Party whose courts have jurisdiction shall 
not require claimants to bring separate proceedings depending 
on the source of the funds provided (i.e., whether they came 
from first tier funds, the second tier comprised of the 
international supplementary fund, or third tier funds provided 
under the law of the ``installation state'') and that Parties 
may intervene in the proceeding against the operator liable. 
Paragraph 3 guarantees that no Party will be asked to 
contribute to the international supplementary fund if required 
first tier funds are sufficient to cover all claims.
    Article XI, paragraph 1, stipulates the allocation of the 
international supplementary fund. Subparagraph 1(a) allocates 
one half of the fund for the compensation of damage in all 
Parties without differentiation. Subparagraph 1(b) makes the 
other half of the fund available for the compensation of 
transboundary damage. Subparagraph 1(c) provides that if the 
funds in the first tier are less than the equivalent of 300 
million SDRs (i.e., if the ``installation state'' is benefiting 
from the 10-year phase in when the incident occurs), the 
proportion of the international supplementary fund available 
for transboundary damage is proportionately increased.
    Paragraph 2 deals with the special case when a Party has 
exercised its option under Article III(1)(a) and has declared a 
first tier amount that is 600 million SDRs or greater. In that 
case, the allocation to transboundary damage is eliminated and 
the entire international supplementary fund is available on a 
non-differentiated basis.
    Article XII deals with the relation between the CSC and 
other existing or possible future conventions in the field of 
nuclear liability. Paragraph 1 allows Parties to the Vienna 
Convention or Paris Convention to invoke their rights under 
those conventions against other Parties to them that are also 
party to the CSC in order to accumulate public funds that they 
may be called upon to supply to the CSC's international 
supplementary fund. Paragraph 2 permits Parties to make 
provisions for a third tier of compensation of nuclear damage 
above and beyond the first tier amount and the international 
supplementary fund should they so choose (e.g., the provisions 
under the Price-Anderson Act that would result in additional 
compensation with respect to a U.S. accident once the first 
tier and the international supplementary fund had been 
exhausted). Where availability of the third tier under a 
Party's domestic law would otherwise depend on reciprocity from 
a Party, lack of reciprocity may not be used to deny 
compensation to a Party that has no nuclear installations on 
its territory. (The Price-Anderson Act does not require 
reciprocity in any case, and, because Price-Anderson makes the 
U.S. third tier open to all, U.S. citizens would meet 
reciprocity requirements of any Party that mandates them.) 
Paragraph 3 makes clear that Parties are free to enter into 
regional or other agreements for the purpose of accumulating 
funds to satisfy their obligation to provide first tier funds 
or to provide other additional funds for the compensation of 
nuclear damage. Notice of an intention to enter into such 
agreements must be given to the other Parties.
    Article XIII determines which Party's courts shall have 
jurisdiction over claims brought under the CSC and how 
judgments rendered by the courts of one Party are to be 
recognized by those of another. Paragraph 1 states the general 
rule that (vis-a-vis the courts of other Parties) only the 
courts of the Party within which the incident occurs shall have 
jurisdiction. Paragraph 2 deals with the exceptional case where 
the incident occurs within a maritime area coextensive with an 
EEZ (i.e., an area extending seaward up to 200 nautical miles 
from the baselines from which a state's territorial sea is 
measured) that has been or could be established by a Party and 
that has been notified to the Depositary. (The United States 
will notify the Depositary of its EEZ upon deposit of its 
instrument of ratification.) Under this paragraph, the courts 
of the coastal Parties exercise exclusive jurisdiction vis-a-
vis the courts of other Parties. Parties to the Paris or Vienna 
Convention are permitted to follow the corresponding 
jurisdictional provisions of those Conventions with respect to 
non-Parties to the CSC. Paragraph 3 grants exclusive 
jurisdiction to the courts of the ``installation state'' vis-a-
vis the courts of other Parties where the incident occurs 
outside the territory of any Party and outside the maritime 
area defined in paragraph 2. Paragraph 4 requires the Parties 
involved to determine by agreement which of their courts will 
have exclusive jurisdiction where jurisdiction would lie with 
the courts of more than one Party under the foregoing rules 
(e.g., if the incident were to occur in a maritime area where 
the actual or potential economic zone claims of two or more 
Parties overlap). Paragraph 5 stipulates that once no longer 
subject to appeal, a judgment rendered under the CSC in one 
Party's courts shall be recognized in the courts of all other 
Parties, except when the judgment was obtained by fraud, the 
defendant was not given a fair opportunity to present his case, 
or where the judgment is contrary to the public policy (order 
publique) of the Party where enforcement is sought or is not in 
accord with fundamental standards of justice. Under paragraph 
6, a judgment recognized under paragraph 5 shall be enforceable 
as though it were a judgment of the courts of the Party where 
enforcement is sought and the merits shall not be subject to 
further proceedings there. Paragraph 7 extends the recognition 
of judgments to include settlements effected in accordance with 
conditions established by national legislaiton that are paid 
out of the international supplementary fund.
    As with similar jurisdictional provisions in earlier 
treaties submitted to the Senate for advice and consent to 
ratification, it is anticipated that the provisions of Article 
XIII would be applied without the need for further implementing 
legislation. It should be noted that, after the United States 
deposits its instrument of ratification to the CSC, the effect 
of Article XIII will be to remove jurisdiction from all U.S. 
Federal and State courts over cases concerning nuclear damage 
from a nuclear incident covered by the CSC except to the extent 
provided in the CSC. Where jurisdiction would lie with courts 
in the United States under the CSC, however, the CSC will not 
affect the allocation of jurisdiction between State and Federal 
courts within the United States.
    Article XIV determines which law shall be applied by the 
competent court to cases arising under the CSC. Paragraph 1 
stipulates that the Vienna Convention, the Paris Convention, or 
the Annex to the CSC, as appropriate, shall apply exclusively 
to a nuclear incident. Paragraph 2 stipulates that the law 
applied shall be that of the competent court, subject to the 
provisions of the Vienna Convention, the Paris Convention, or 
the Annex, whichever applies pursuant to paragraph 1.
    Article XV provides that the CSC does not affect the rights 
and obligations of a Party under public international law. 
Article XVI deals with dispute settlement. Paragraph 1 
obligates the Parties involved in a dispute over the 
interpretation or application of the CSC to consult with a view 
to settling the dispute by negotiation or other peaceful means. 
Paragraph 2 permits any Party to a dispute to submit it after 6 
months of consultations to binding arbitration or to the 
International Court of Justice. Paragraph 3 permits a Party to 
opt out of either of the dispute settlement procedures provided 
in paragraph 2 by declaring, at the time of ratification, 
acceptance, approval or accession, that it does not consider 
itself bound by either or both of the dispute settlement 
procedures provided for in paragraph 2. I recommend therefore 
that that the U.S. instrument of ratification be subject to the 
following declaration:

          As provided for in paragraph 3 of Article XVI, the 
        United States of America declares that it does not 
        consider itself bound by either of the dispute 
        settlement procedures provided for in paragraph 2 of 
        that Article, but reserves the right in a particular 
        case to agree to follow the dispute settlement 
        procedures of the Convention or any other procedures.

    Paragraph 4 permits a Party that has taken advantage of the 
option presented under paragraph 3 to reverse its decision at 
any time.
    Pursuant to Article XVII the CSC was opened for signature 
by all states on September 29, 1997, and it remains open for 
signature until its entry into force.
    Article XVIII deals with ratification, acceptance and 
approval of the CSC. Under paragraph 1, instruments of 
ratification, acceptance or approval may be accepted by the 
Depositary only from a state that is party to the Vienna 
Convention or the Paris Convention, or that declares that its 
national law complies with the provisions of the Annex, and 
provides further that such state, if it has a nuclear 
installation on its territory, must also be party to the 1994 
Convention on Nuclear Safety. Paragraph 2 designates the 
Director General of the IAEA as the CSC's Depositary. Paragraph 
3 requires each Party to provide the Depositary with a copy of 
its national legislation implementing the Vienna or Paris 
Convention or the provisions of the Annex, as well as any 
notification pursuant to Article III(1)(a) (designating a first 
tier amount greater than 300 million SDRs), Article XI(2) 
(indicating a first tier amount not less than 600 million 
SDRs), or Article III(1)(a)(ii) (taking advantage of the phase-
in of the minimum national compensation amount). The Depositary 
is required to circulate these notifications to the Parties.
    Article XIX deals with accession. It applies the same 
criteria and provisions that are applied by Article XVIII to 
states that ratify, accept, or approve the CSC to states that 
accede to it (i.e., states that do not sign the CSC, but seek 
to become party after its entry into force).
    Article XX states that the CSC will enter into force on the 
90th day following the date on which at least five states 
representing among them at least 400,000 units of installed 
nuclear capacity have deposited an instrument of ratification, 
acceptance, or approval and that the CSC will enter into force 
for any state which subsequently ratifies accepts, approves, or 
accedes to the CSC 90 days following the deposit of its 
instrument. Article XXI permits any Party to denounce the CSC 
upon 1 year's notice.
    Article XXII deals with cessation. Under paragraph 1, if a 
Party notifies the Depositary that it has ceased to be party to 
the Vienna or Paris Convention, it shall cease to be party to 
the CSC unless it notifies the Depositary that its national 
legislation complies with the provisions of the Annex and has 
provided the Depositary with a copy of that legislation. Under 
paragraph 2, a Party whose national law no longer complies with 
the provisions of the Annex and which is not party to the 
Vienna or Paris Convention ceases to be party to the CSC.
    Under paragraph 3, any Party having a nuclear installation 
on its territory which notifies the Depositary that it has 
ceased to be party to the 1994 Convention on Nuclear Safety 
ceases to be party to the CSC.
    Pursuant to Article XXIII, the CSC continues to apply to 
any nuclear damage caused by a nuclear incident which occurs 
before a Party's denunciation or cessation becomes effective.
    Article XXIV authorizes the Depositary to convene, after 
consultations with the Parties, a conference for the purpose of 
revising or amending the CSC, and requires the Depositary to 
convene such a conference at the request of not less than one-
third of the Parties.
    Article XXV deals with amendment of the CSC by simplified 
procedure. Under paragraph 1, the Depositary is required to 
convene a meeting of the Parties on the request of at least 
one-third of them for the limited purpose of amending the 
amounts stipulated in Article III(1)(a) and (b) (the first tier 
amount, the minimum level at which a state may phase in its 
first tier amount, and the amount of the international 
supplementary fund yielded by application of the contribution 
formula set out in Article IV) and the categories of 
installations, including contributions payable for them, 
referred to in Article IV(3). This reference to the categories 
of installations referred to in Article IV(3) was intended to 
allow the Parties to change the date when a nuclear reactor 
would be included or excluded from the contribution 
calculation. Under paragraph 2, amendments proposed at the 
meeting shall be adopted if no negative votes are cast. Under 
paragraph 3, amendments adopted at the meeting shall be 
notified to all Parties. If, within a period of 36 months 
following the notification, it is accepted by all states that 
were Parties at the time the amendment was adopted, the 
amendment will enter into force 12 months after the final 
acceptance is received. Under paragraph 4, if the amendment is 
not accepted by the states that were Parties at the time it was 
adopted within the 36-month period, it is to be considered 
rejected. Under paragraph 5 if a state becomes a Party to the 
CSC during the 36-month period, that state will be bound by the 
amendment if it enters into force. If a state becomes a Party 
after the 36-month period, it will be bound by the amendment 
when it enters into force. In both cases, the amendment enters 
into force for the state in question when the amendment enters 
into force or when the CSC enters into force for that state, 
whichever is later.
    Article XXVI specifies the functions of the Depositary, 
which is required to notify Parties and all other states and 
the Secretary-General of the OECD (the Depositary of the Paris 
Convention) of all significant developments concerning the CSC. 
Article XXVII establishes the authentic languages of the CSC 
and directs the IAEA's Director General to send certified 
copies of the CSC to all states.
    The Annex obligates a Party to the CSC that is not party to 
the Vienna or Paris Convention to ensure that its national 
legislation is consistent with the provisions of the Annex, 
insofar as those provisions are not directly applicable as 
national law in that Party. A Party having no nuclear 
legislation necessary to enable it to give effect to its 
obligations under the CSC. As noted above, in the few instances 
where implementing legislation is needed to meet the CSC's 
obligations, such legislation will be submitted to Congress 
separately. With respect to the CSC's other obligations, its 
provisions would operate directly.
    Article 1(1) sets out definitions of certain terms used in 
the Annex (the terms defined in Article I of the CSC also apply 
to their use in the Annex). Five terms are defined in Article 
1: ``nuclear fuel,'' ``nuclear installation,'' ``nuclear 
material,'' ``operator,'' and ``radioactive products or 
waste.'' Paragraph 2 permits an ``installation state'' to 
exclude a nuclear installation or small quantities of nuclear 
material from the application of the CSC if criteria and limits 
for such exclusions have been established by the IAEA's Board 
of Governors and the exclusions satisfy those criteria and do 
not exceed those limits.
    Article 2 is a grandfather clause that permits the United 
States to become a Party to the CSC with only minor changes to 
the Price-Anderson system (although as noted below, certain 
provisions of the Annex could supersede other U.S. laws which 
could govern any nuclear incident that were to occur in the 
EEZ, to the extent such U.S. laws are inconsistent with the 
Annex and such unclear incident is not covered by the Price-
Anderson system). In particular, the grandfather clause permits 
the United States to retain the concept of economic channeling, 
under which operators are required to indemnify those legally 
liable for nuclear damage. The Paris and Vienna Conventions, as 
well as the Annex provisions from which the United States is 
exempted under the grandfather clause, employ the concept of 
legal channeling, under which all legal liability for nuclear 
damage is imputed exclusively to the operator. In both systems, 
the end result is essentially the same in that no one but the 
operator is responsible for compensating nuclear damage caused 
by an incident in an installation of involving nuclear material 
for which the operator is responsible. Paragraph 1 deems the 
national legislation of a Party to be in conformity with the 
provisions of Annex Articles 3, 4, 5, and 7 if that legislation 
contained on January 1, 1995, and continues to provide for 
three elements: (1) strict liability in the event of a nuclear 
incident, (2) the indemnification of any person liable for 
nuclear damage other than the operator (i.e., economic 
channeling of liability to the operator), and (3) the 
availability of the equivalent of at least 1,000 million SDRs 
in the event of an accident in a civil nuclear power plant and 
at least 300 million SDRs in the event of an accident in other 
types of civil nuclear installations. The United States is the 
only state that meets these three criteria, through the Price-
Anderson Act. It is intended that, where the Price-Anderson Act 
does apply, it will apply to the exclusion of any other causes 
of actions or remedies (except for availability of funds from 
the international supplementary fund) that might be implied in 
or created by the CSC.
    Subparagraph 2(a) permits a Party that satisfies the 
criteria of paragraph 1 to apply a broader definition of 
nuclear damage than other Parties, thus allowing the damage 
concept under applicable U.S. law to be applied without any 
restrictions with respect to incidents where the United States 
is the ``installation state.'' Paragraph 2(b) permits a 
grandfathered Party to apply a more narrow definition of 
``nuclear installation.'' This definition is found in paragraph 
3 and is consistent with the types of installations currently 
covered by the Price-Anderson Act.
    Paragraph 4 of Article 2 applies the provisions of Annex 
Articles 3-11 to a nuclear incident occurring outside the 
territory of a grandfathered Party over which its courts have 
been granted jurisdiction under Article XIII, but to which the 
national law under which it qualified as a grandfathered Party 
(i.e., the Price-Anderson Act) does not apply. To the extent 
Annex Articles 3-11 are inconsistent with other laws of the 
grandfathered Party, the Annex provisions prevail. In the case 
of the United States, the Price-Anderson Act, under which the 
United States qualified for grandfathered status, does not 
apply to most potential incidents within the U.S. EEZ, but 
Article XIII grants U.S. courts jurisdiction over incidents 
occurring there.\7\ Annex Articles 3-11 would as a result apply 
directly to a non-Price-Anderson incident covered by the CSC 
occurring in the U.S. EEZ, and would prevail over other 
existing U.S. statutes to the extent they are inconsistent. For 
example, CERCLA currently imposes potential liability on 
several categories of parties connected to the nuclear material 
in the event of a nuclear incident in the U.S. EEZ (vessel 
owners, vessel operators, shippers, cask manufacturers, etc.). 
Annex Article 3 of the CSC, however, provides for channeling of 
all nuclear liability to the operator on the basis of strict 
liability, and would thus prevail over the provisions of the 
CERCLA to the extent such provisions would otherwise permit 
different defendants to be sued. In addition, to the extent 
CERCLA or any other existing law established lower limits on 
operator liability than does Annex Article 4, the provisions of 
the Annex would prevail.\8\
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    \7\ In the 1999 Price-Anderson Report, the Department of Energy 
suggested that Congress consider amending the Price-Anderson Act by 
revising the definition of the United States to include the EEZ. Such 
action would eliminate almost all situations where the United States 
would have jurisdiction under the CSC but Price-Anderson would not 
apply.
    \8\ To avoid any ambiguity concerning the application of Article 4, 
legislation, which is being submitted separately to Congress, should be 
adopted to make explicit that, notwithstanding any other provision of 
law, the legal liability of the operator may not be limited to less 
than 300 million SDRs, plus the amount to be made available under the 
international supplementary fund with respect to nuclear incidents 
outside the United States for which U.S. courts have jurisdiction 
pursuant to the CSC but as to which Price-Anderson is not applicable.
---------------------------------------------------------------------------
    With respect to incidents occurring outside the U.S. EEZ 
(other than those involving DOE contractors and U.S. 
Government-owned material, to which the Price-Anderson Act 
applies) with regard to which the United States is the 
``installation state,'' but which cause damage only in the EEZ 
or territory of another CSC Party and not in the U.S. EEZ or 
territory, neither Price Anderson nor CERCLA currently apply. 
In such circumstances, Annex Articles 3-11 would create causes 
of action cognizable in U.S. courts for loss of life, personal 
injury, and property loss or damage. Consistent with the CSC 
definition of ``nuclear damage'' in Article 1(f), Annex 
Articles 3-11 would not, however, create any obligations with 
respect to any other economic loss (such as the cost of 
environmental restoration in international waters), unless 
there is a cause of action for such other economic loss 
recognized under U.S. law independent of Price-Anderson or 
CERCLA.
    Article 3 establishes and describes the liability of the 
operator in the event of a nuclear incident. As noted above, 
since the United States would benefit from the Article 2 
grandfather clause, for the United States Article 3 would only 
apply to an incident that is not covered by the Price-Anderson 
Act. Paragraph 1 establishes the operator's liability for 
nuclear damage when it is proved that the damage was caused by 
a nuclear incident in that operator's installation or involving 
nuclear material coming from or originating in that 
installation over which that operator has control, unless the 
incident involves nuclear material in transit stored in that 
installation, but for which another operator is responsible.
    Paragraphs 1(b)(iv) and 1(c)(iv) are intended to establish 
when an operator of a nuclear installation covered by the CSC 
is liable for nuclear damage with respect to nuclear material 
sent between such covered installation and a person within the 
territory of a non-Party.
    Paragraph 2 permits Parties under their national law to 
allow a carrier of nuclear material or a person handling 
nuclear waste to be designated as an operator at the carrier's 
request and with the approval of the actual operator concerned 
so that the carrier is treated under the CSC as the operator 
with respect to that nuclear material.
    Paragraph 3 states that the liability of the operator for 
nuclear damage shall be absolute (i.e., applying the doctrine 
of strict liability to nuclear incidents covered by the 
Article).
    Paragraph 4 deems non-nuclear damage that is not reasonably 
separable from nuclear damage to be nuclear damage. Paragraph 4 
also provides that, to the extent that damage is caused jointly 
by a nuclear incident covered by the CSC Annex and by an 
emission of ionizing radiation not covered by it, the Annex 
does not limit or otherwise affect the liability of any person 
who may be held liable in connection with the emission of 
ionizing radiation.
    Subparagraph 5(a) excuses an operator from liability if the 
nuclear incident was caused directly by an act of armed 
conflict, hostilities, civil war or insurrection. Subparagraph 
5(b) similarly excludes damage caused by a nuclear incident 
directly due to a grave natural disaster of an exceptional 
character unless the law of the ``installation state'' provides 
to the contrary.
    Paragraph 6 permits Parties through their national law to 
relieve an operator from the obligation to pay compensation to 
a person the operator proves was responsible for the incident 
due to gross negligence or an intentional act or omission.
    Subparagraphs 7(a) and (b) relieve the operator from 
liability for nuclear damage to the installation itself and 
associated property or to any other nuclear installation on the 
same site. Subparagraph 7(c) relieves the operator in the event 
of a transport incident from liability for nuclear damage to 
the means of transport upon which the nuclear material involved 
was at the time of the incident, unless otherwise provided by 
the national law of the ``installation state.'' In that case, 
damages paid to compensate nuclear damage to the means of 
transport may not reduce the operator's remaining liability 
below 150 million SDRs or any higher amount established under 
that national law.
    Paragraph 8 stipulates that the operator's liability 
outside the CSC for damage to means of transport for which the 
operator is not liable under subparagraph 7(c) remains 
unaffected.
    Paragraph 9 states that the right to compensation for 
nuclear damage may only be exercised against the operator 
liable, or, if national law permits, against any supplier of 
funds (e.g., an insurer or pooling arrangement among operators) 
made available under national law to ensure compensation. This 
paragraph incorporates the principle of legal channeling, which 
is central to the Vienna and Paris Conventions. As noted above, 
the Price-Anderson Act employs economic channeling to reach 
substantially the same objective.
    Paragraph 10 states that the operator shall not incur 
liability for damage that lies outside the provisions of 
national law that is in accordance with the CSC. This provision 
is intended to prevent Parties from defining damage covered by 
the CSC as non-nuclear in their domestic law, thus 
circumventing the CSC's channeling requirement.
    Article 4 elaborates upon the obligation created in Article 
III(1) (a) to make available a first tier of compensation funds 
of not less than 300 million SDRs (subject to a possible phase-
in) with respect to Parties that are subject to the Annex 
(i.e., non-Parties to the Vienna or Paris Convention), to the 
extent they are not exempted from Article 4 by the grandfather 
clause (as the United States is with respect to those nuclear 
incidents covered by the Price-Anderson Act). In situations to 
which Article 4 applies, paragraph 1 allows such Parties to 
limit the liability of its operators to an amount not less than 
150 million SDRs per incident if public funds are available to 
make up the difference between that amount and 300 million 
SDRs.\9\ Paragraph 2 creates an exception to paragraph 1, 
allowing such Parties to reduce maximum operator liability to 
not less than five million SDRs having regard to the nature of 
the nuclear installation or the nuclear substances involved and 
to the likely consequences of an incident arising from that 
installation or material, again so long as public funds are 
available to cover the gap between the operator's liability and 
the applicable first tier amount. Under paragraph 3, the 
amounts established under paragraphs 1 and 2 are to be applied 
wherever the nuclear incident occurs.
---------------------------------------------------------------------------
    \9\ To the extent that there are currently not any limits in U.S. 
law on the liability of operators for damages arising from certain 
nuclear incidents (e.g., an accident on the high sea not covered by 
Price-Anderson or CERCLA), neither the ratification of the CSC by the 
United States nor the changes in U.S. domestic law contemplated in 
connection with ratification will establish upper limits on that 
liability.
---------------------------------------------------------------------------
    Article 5 deals with financial security to be provided by 
operators. Under subparagraph 1(a) operators in ``installation 
states'' that are Parties subject to the Annex, to the extent 
such states are not exempted by the grandfather clause (as the 
United States is with respect to those incidents covered by the 
Price-Anderson Act), must be required to obtain financial 
security (e.g., insurance) to cover their liability for nuclear 
damage in such amount, of such type, and under such terms as 
the ``installation state'' may require. Claims that exceed the 
yield of financial security maintained by the operator must be 
met through the provision of public funds, up to the applicable 
limit, if any, established under Article 4. When an 
installation state has not limited the liability of an 
operator, the amount of financial security that operator is 
required to obtain may not be less than 300 million SDRs. 
Again, if the yield of financial security is insufficient to 
meet claims up to the amount of security required, the 
difference must be made up through public funds. A provision 
similar to that found in Article 4(2) is included in 
subparagraph 1(b) to permit ``installation states'' to impose a 
requirement that operators obtain financial security as low as 
five million SDRs with respect to installations and materials 
that pose a reduced risk of nuclear damage in the event of an 
incident, but in this case public funds must be made available 
to cover any claims not covered by this lower amount of 
security up to the limit specified in subparagraph 1(a). 
Paragraph 2 exempts Parties and their political subdivisions 
that are operators for the purposes of the CSC from the 
requirement found in subparagraph 1 to obtain insurance or 
other financial security. Paragraph 3 states that funds 
provided by insurance or other financial security or by the 
``installation state'' pursuant to paragraph 1 of Article 
4(1)(b) shall be used exclusively for compensation due under 
the Annex. Paragraph 4 states that no insurer or financial 
guarantor shall suspend or cancel the insurance or other 
financial security provided pursuant to paragraph 1 without 
giving at least 2 months' written notice to the competent 
public authority, or, in the case when insurance applies to 
nuclear material being transported, while the material is being 
transported.
    Article 5 does not apply to the United States with respect 
to incidents covered by the Price-Anderson Act. It would apply 
to the United States with respect to any nuclear incidents 
outside the United States not covered by the Price-Anderson Act 
where the United States is the ``installation state.'' Such 
situations would be rare because U.S. shippers normally 
transfer title to nuclear materials to their foreign consignees 
(which then become the operator for purposes of the CSC) when 
the shipment first enters international waters. To cover the 
unlikely possibility that title is not transferred, 
administrative authority exists under the Atomic Energy Act 
that could be used to require that insurance be taken out by 
U.S. operators to the extent it was determined that the nature 
of the transportation and the nuclear material involved and the 
likely consequences of a nuclear incident during transportation 
required mandatory insurance.\10\ As noted above, if the 
proceeds of such insurance and the contribution of the liable 
operator were to fail to cover claims up the applicable limit 
of liability, or if there were no insurance, the U.S. 
Government would be obligated to make up the differences or pay 
any otherwise unpaid portion of the required United States 
share.
---------------------------------------------------------------------------
    \10\ This administrative authority also could be used to specify 
requirements as to when title transferred and could establish certain 
necessary terms of any insurance required to be obtained by shippers.
---------------------------------------------------------------------------
    Article 6 (from which the United States is not exempted 
under the grandfather clause) pertains to incidents occurring 
during the transportation of nuclear materials. Paragraph 1 
states the general rule that during carriage the maximum amount 
of liability is determined by the national law of the 
``installation state.'' \11\ Paragraph 2 creates an exception 
to the general rule, permitting a Party through whose territory 
nuclear material is passing to require that the liability of 
the operator be increased to an amount not to exceed the limit 
of liability of an operator of a ``nuclear installation'' 
situated in that state. Paragraph 3 stipulates that the option 
created under paragraph 2 may not be exercised with respect to 
shipments of nuclear material by sea when there is a right of 
entry in cases of urgent distress into the ports of a Party or 
a right of innocent passage through its territorial sea, or to 
shipments by air where, by agreement or under international 
law, there is a right to fly over or land on the territory of a 
Party.
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    \11\ See footnote, page 39.
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    Article 7 covers the theoretically conceivable case where 
more than one operator may be liable for a single nuclear 
incident. (The Article does not apply to the United States 
under the grandfather clause with respect to those incidents 
covered by the Price-Anderson Act.) Under paragraph 1, the 
operators liable shall be held jointly and severally liable 
unless the damage attributable to the respective operators is 
reasonably separably. The ``installation state'' is authorized 
to limit the amount of public funds made available in this case 
to the difference between the amount made available by the 
liable operators directly or through their insurers and the 
first tier compensation amount established pursuant to Annex 
Article 4(1) and Article III(1)(b).
    Paragraph 2 deals with an incident occurring during 
transportation (e.g., when nuclear material belonging to more 
than one operator is being shipped together). In this case, the 
total amount of liability shall not exceed the highest amount 
applicable to any one of the operators involved pursuant to 
Article 4(1). Under paragraph 3, the liability of any one 
operator involved shall not exceed the amount applicable to 
that operator under Article 4(1). Paragraph 4 covers the 
possibility of an operator having more than one installation 
involved in the same incident. In this case, the liability 
limit applicable to that operator is multiplied by the number 
of installations involved. The ``installation state,'' however, 
is authorized to limit public funds made available to the 
difference between the total amount made available by the 
operator and the amount it has established pursuant to Article 
4(1).
    Article 8 deals with compensation under national law. (The 
United States is not exempt from Article 8 or subsequent Annex 
Articles.) Under paragraph 1, the amount of compensation 
provided pursuant to the CSC shall be determined without regard 
to any interest or costs awarded. Paragraph 2 requires that 
compensation for nuclear damage outside the ``installation 
state'' be provided in freely convertible form. Paragraph 3 
allows the national law of the Party where damage has been 
compensated to be applied to the question of whether and to 
what extent public health insurance, social insurance, and 
other national or applicable intergovernmental programs that 
may have compensated victims of a nuclear incident have rights 
of recourse.
    Article 9 establishes periods of extinction for rights of 
compensation for claims brought under the CSC. Paragraph 1 
establishes the period of extinction at 10 years, but allows 
this period to be extended if, under the law of the 
``installation state,'' the liability of the operator is 
covered by insurance or other financial security or by state 
funds for a longer period, which then becomes the limit under 
the CSC. Under paragraph 2, the period of extinction for an 
incident involving stolen, lost, jettisoned, or abandoned 
nuclear material is calculated from the date of the incident, 
but in no case, unless the national law of the ``installation 
state'' permits and operator and state funds remain available, 
shall the period exceed 20 years from the date of the theft, 
loss, jettison, or abandonment. Paragraph 3 permits the law of 
the competent court to establish a period of prescription or 
extinction of not less than 3 years from the date a person 
suffering nuclear damage had actual or constructive knowledge 
of the damage and of the operator liable for that damage, but 
this period may not exceed the periods established under 
paragraphs 1 and 2. Under paragraph 4 the law of a Party that 
provides for a period of extinction or prescription longer than 
10 years must contain provisions for the equitable and timely 
satisfaction of claims for loss of life or personal injury 
filed within 10 years from the date of the nuclear incident. 
The provisions of the Price-Anderson Act already satisfy these 
requirements. With respect to nuclear incidents not covered by 
Price-Anderson (i.e., certain incidents outside U.S. 
territorial waters), the provisions of Article 9 govern and, in 
the absence of U.S. statutory provisions for a period of 
extinction longer than 10 years, rights of compensation will be 
extinguished in the United States if an action is not brought 
within 10 years from the date of the nuclear incident.
    Article 10 addresses rights of recourse. It permits the 
national law of a Party to allow an operator to have rights of 
recourse against others only if these rights are provided for 
by a written contract or, if the nuclear incident for which the 
operator is liable under the CSC results from an act or 
omission done with intent to cause damage, against the 
individual who has acted or omitted to act with such intent.
    Article 11 states that, subject to the provisions of the 
CSC, the nature, form, extent and equitable distribution of 
compensation for nuclear damage caused by a nuclear incident 
shall be governed by the law of the competent court.
    The Department of Energy, the Nuclear Regulatory Commission 
and other interested U.S. Government agencies join the 
Department of State in recommending that the Convention on 
Supplementary Compensation for Nuclear Damage be transmitted to 
the Senate at an early date with a view to receiving its advice 
and consent to ratification, subject to the declaration 
permitted under Article XVI, paragraph 2, as described above.
    Respectfully submitted.
                                                   Colin L. Powell.


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