[Senate Executive Report 109-15]
[From the U.S. Government Publishing Office]
109th Congress Exec. Rept.
SENATE
2d Session 109-15
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CONVENTION ON SUPPLEMENTARY COMPENSATION FOR NUCLEAR DAMAGE (TREATY
DOC. 107-21)
_______
July 28, 2006.--Ordered to be printed
_______
Mr. Lugar, from the Committee on Foreign Relations,
submitted the following
R E P O R T
[To accompany Treaty Doc. 107-21]
The Committee on Foreign Relations, to which was referred
the Convention on Supplementary Compensation for Nuclear
Damage, done at Vienna on September 12, 1997, and signed by the
United States on September 29, 1997 (Treaty Doc. 107-21),
having considered the same, reports favorably thereon with a
declaration and a condition as indicated in the resolution of
advice and consent, and recommends that the Senate give its
advice and consent to ratification thereof, as set forth in
this report and the accompanying resolution of advice and
consent.
CONTENTS
Page
I. Purpose..........................................................1
II. Background.......................................................2
III. Summary of Key Provisions of the Protocol........................3
IV. Implementing Legislation.........................................7
V. Committee Action.................................................7
VI. Committee Recommendation and Comments............................8
VII. Resolution of Advice and Consent to Ratification.................8
I. Purpose
The Convention on Supplementary Compensation for Nuclear
Damage would create a legal framework for defining,
adjudicating and compensating civil liability resulting from
covered nuclear incidents that is consistent with the existing
U.S. nuclear civil liability system. In addition, it would
establish an international supplementary compensation fund in
the event that such an incident exhausts the funds made
available, in accordance with the Convention, by the party in
which the incident takes place. It is the first convention in
this area with the potential for global application.
II. Background
There are currently two multilateral treaties in force
relating to civil liability for nuclear incidents: the Vienna
Convention on Civil Liability for Nuclear Damage (``Vienna
Convention'') \1\ and the Paris Convention on Third Party
Liability in the Field of Nuclear Energy (``Paris
Convention'').\2\ Neither of these treaties has been adopted
globally. Nor is the United States--the world's largest nuclear
power generator--a party to these international instruments, as
they would require significant changes to the U.S. tort
liability system.
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\1\ Further information on the Vienna Convention may be found at
http://www.iaea.org/Publications/Documents/Conventions/liability.html.
\2\ Further information on the Paris Convention may be found at
http://www.nea.fr/html/law/nlparis_conv.html.
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Because the United States is not a party to any nuclear
civil liability convention, U.S. suppliers of nuclear
technology face potentially unlimited third party civil
liability arising from their work in foreign markets. This
potential liability limits commercial opportunities for these
U.S. companies, as well as their participation in the provision
of safety assistance to Soviet-designed nuclear power plants
that would help decrease the risk of future accidents in such
plants. Moreover, the absence of a global system has left many
potential victims of nuclear accidents outside of the United
States without assurances of prompt and adequate compensation.
In order to address these two significant concerns related
to nuclear power--victim compensation and industry liability--
the United States worked with the international community to
draft the Convention on Supplementary Compensation for Nuclear
Damage (``CSC'' or ``Convention''). The CSC was adopted on
September 12, 1997, in Vienna at the 41st General Conference of
the International Atomic Energy Agency (``IAEA''), and signed
by the United States on September 29, 1997, the day it was
opened for signature. On November 15, 2002, the President
transmitted the CSC to the Senate for advice and consent to
ratification.
The Convention is open to any state that is a party to
either the Vienna Convention or the Paris Convention, or that
declares that its national law complies with the provisions of
the Annex to the CSC. The Annex was designed to permit the
United States to join the Convention without making substantive
changes to the Price-Anderson system (the U.S. domestic system
for compensation for nuclear damage). In addition, any state
with a nuclear installation as defined in the Convention on
Nuclear Safety (a separate treaty to which the United States is
a party) must also be a party to that convention in order to
become a party to the CSC. The CSC will enter into force 90
days after at least five States with a minimum of 400,000 units
of installed nuclear capacity have deposited an instrument of
ratification, acceptance or approval with the IAEA. To date, 13
countries have signed the CSC, and Argentina, Romania, and
Morocco have ratified it.\3\
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\3\ CSC Ratification Status can be found at: http://www.iaea.org/
Publications/Documents/Conventions/supcomp_status.pdf.
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III. Summary of Key Provisions of the Protocol
The CSC contains two main elements: a harmonized system of
civil liability for nuclear accidents; and an international
supplementary fund to compensate victims of such accidents in
the event that such an incident exhausts the funds made
available, in accordance with the Convention, by the party in
which the incident takes place.
Liability System
The CSC requires parties to adopt harmonized nuclear
liability laws conforming with certain basic principles already
in use in the United States under the Price-Anderson Nuclear
Industries Indemnity Act of 1957 (42 U.S.C. Sec. 2210)
(``Price-Anderson Act'').\4\ The operator of the nuclear
installation is liable for damage caused by a nuclear incident
occurring at its facility. Once causation is proved, the
operator is strictly liable for the damage, avoiding the need
for protracted litigation over fault. All claims resulting from
a nuclear incident are to be resolved in a single forum,
generally the courts of the party in whose territory the
incident occurs.
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\4\ The Price-Anderson Act has been renewed numerous times, most
recently in 2005 through the Energy Policy Act, which extended it
through 2025. The Act requires operators of nuclear power plants to
obtain the maximum possible private insurance coverage against
accidents and provides for a retrospective pooling arrangement among
all operators to cover any claims in excess of the private insurance.
Thus, the Price-Anderson Act effectively channels all economic
liability to the operators of nuclear power plants. Thus far, a total
of $151 million has been paid to cover claims (including legal
expenses), all from primary insurance, including $70 million for the
Three Mile Island incident. The Price-Anderson Act channels all
economic liability to the Department of Energy with respect to
accidents resulting from activities on its behalf.
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Compensation
The CSC creates a two-tiered system of compensation for
damage caused by nuclear incidents. The first tier of
compensation is set at 300 million Special Drawing Rights
(``SDRs''),\5\ currently worth approximately $450 million, and
is to be provided by funds made available under the laws of the
installation state.\6\ Under a transition period in effect
until 2007, parties may declare a lower first tier amount, but
it must be at least 150 million SDRs (approximately $225
million), after which the 300 million SDR requirement applies.
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\5\ SDRs are used by the IMF and represent a basket of currencies
including the US dollar, the British pound, Japanese yen and Euro. On
July 17, 2006, one SDR equaled approximately $1.47. Daily SDR rates can
be found on the IMF's webpage: http://www.imf.org/external/np/fin/
rates/param--rms--mth.cfm.
\6\ Article I paragraph (e) defines ``installation state,'' as ``in
relation to a nuclear installation . . . the Contracting Party within
whose territory that installation is situated or, if it is not situated
within the territory of any State, the Contracting Party by which or
under the authority of which the nuclear installation is operated.''
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A second tier of compensation, to be drawn on by the
installation state to compensate victims of a nuclear incident
in the event that the first tier funds are exhausted, is
provided by an international supplementary compensation fund
made up of contributions by the parties. Approximately ninety
percent of the contributions are assessed based on the nuclear
power generating capacity of each party, with the rest based on
the United Nations assessment on each party. Should all major
nuclear power generating states participate in the CSC, the
supplementary fund would total over 300 million SDRs. The
United States portion of this amount would be approximately 100
million SDRs, as the United States has about one third of the
world's nuclear generating capacity. The CSC contains a capping
mechanism that, during the period between entry into force and
participation by most major nuclear power generating states,
would operate to limit the United States contribution to an
amount lower than what would otherwise result from application
of the formula in the CSC for calculating the contribution from
a party.
Key Provisions
A detailed article-by-article discussion of the Convention
may be found in the Letter of Transmittal from the Secretary of
State to the President, which is reprinted in full in Treaty
Document 107-21. A summary of the key provisions of the
Convention is set forth below.
Article I of the CSC defines the ``nuclear damage'' that is
subject to compensation under the Convention. Loss of life,
personal injury, and property loss or damage are compensable,
while certain other types of damage--the costs of environmental
reinstatement, loss of income due to environmental damage, the
costs of preventive measures taken to mitigate damage from an
imminent or actual nuclear incident, and any other economic
loss recognized by the civil liability law of the competent
court--are compensable ``to the extent determined by the laws
of the competent court.'' With the exception of preventive
measures, only damage arising out of or resulting from the
release of ionizing radiation is covered. Preventive measures
and measures of reinstatement relating to impairment of the
environment must be ``reasonable,'' which is defined as those
measures ``found under the law of the competent court to be
appropriate and proportionate, having regard to all the
circumstances.''
Article II provides that the purpose of the Convention is
to supplement the compensation available under the national law
of a party that implements the Vienna Convention or the Paris
Convention, or that complies with the Annex to the CSC. It also
establishes that the Convention 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 Convention, the Paris Convention, or
national law that complies with the Annex.\7\ ``Nuclear
installation used for peaceful purposes'' excludes military
facilities from coverage. Each party is to decide which of its
installations are used for peaceful purposes. The executive
branch, in response to questions for the record from the
Committee, explained that nuclear installations operated by the
Department of Defense will be excluded from coverage of the
Convention under this provision, as will Department of Energy
facilities ``that prepare nuclear material or equipment to
utilize nuclear material for use by the Department of Defense,
or that receive such material and equipment from the Department
of Defense, unless or until such material and equipment are
transferred permanently to and managed within exclusively
civilian programs.''
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\7\ ``Nuclear installation'' is to be defined in accordance with
each party's domestic law, which must be based on the Vienna
Convention, the Paris Convention, or the Annex to the CSC. The
executive branch has indicated to the Committee that the United States,
pursuant to the Annex, uses an alternative definition that is
``explicitly restricted to civil facilities that are reactors or
facilities for processing or storing spent fuel, or certain products or
waste that pose a significant risk (for example high-level radioactive
waste).''
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Article III contains the central obligation under the CSC:
that each party with one or more nuclear installations ensure
the availability of compensation in case of a nuclear incident
with respect to which it is the installation state. Paragraph
1(a) obligates the installation state to ensure the
availability of at least 150 million SDRs until September 29,
2007, thereafter increasing to 300 million SDRs.\8\ These
funds are to constitute the first tier of compensation
available in the event of a nuclear incident. Paragraph 1(b)
establishes the obligation on all parties to the CSC to make
available public funds to the international supplementary
compensation fund as specified in Article IV, which makes up
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 so that transboundary victims are treated the same as
domestic residents. The installation state may, if consistent
with its international obligations, exclude damage suffered in
a non-party state from the first tier of compensation.
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
international fund for the compensation of transboundary
damage). Paragraph 3 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 it allocates proportionately
any such interest and costs among the various possible
contributors to the first two tiers, which may cause their
total contributions to exceed the contribution caps established
by the CSC.
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\8\ The executive branch has indicated in response to Committee
questioning that the United States would ensure that 300 million SDRs
is available as a first tier of compensation to victims of nuclear
incidents covered by the CSC with respect to which the United States is
the installation state.
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Article IV establishes the formula for calculating each
party's contributions to the international supplementary fund.
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 and the total of such
rates for all CSC parties. Subparagraph (c) caps the
contribution for each party, other than the installation state,
at a percentage equal to its U.N. rate of assessment plus eight
percentage points.\9\ The cap could result in a temporary
reduction of the total value of the fund until a sufficient
number of states have joined the CSC, but is meant to encourage
the major nuclear power generating countries to ratify the CSC
by reducing the disproportionate financial burden they might
otherwise have to shoulder at the outset in the absence of such
a cap. The cap begins to phase out once countries representing
625,000 MW have ratified the CSC.
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\9\ Under this formula, the U.S. contribution would be capped at 30
percent of the total contributions from all CSC parties calculated
without reference to the cap. For example, in a situation where total
contributions would be 150 million SDRs from all CSC parties including
100 million SDRs from the United States without reference to the cap,
the cap would limit the contribution from the United States to 45
million SDRs and the actual total contribution from all countries
including the United States to 95 million SDRs.
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Article V specifies the geographic limitations for recovery
from the international supplementary fund. Nuclear damage is
covered if suffered within the territory of a party or over its
exclusive economic zone (``EEZ'') or continental shelf in
connection with the exploitation or exploration of the natural
resources of the EEZ or continental shelf. The CSC also covers
nuclear damage occurring in 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 (including, at the option of each party,
habitual residents); (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 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
political subdivisions.
Article VI obligates the party whose courts have
jurisdiction over claims to notify the other parties if it
appears that the damage caused by an incident is likely to
exceed the party's first tier amount, thus requiring
contributions to the international supplementary fund.
Following such notification, parties are obligated immediately
to make arrangements for providing the necessary funds.
Article VII provides that the party whose courts have
jurisdiction shall have exclusive jurisdiction to disburse
these funds to victims.
Article VIII sets up a system for creating and maintaining
a register of nuclear reactors for the purpose of calculating
the contributions required of each party to the international
supplementary fund.
Article IX 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 the operator may have to recover damages
from a third party. U.S. law does not provide a right of
recourse to a nuclear operator unless explicitly provided in a
private contract between the operator and the other party to
the contract.
Article X provides that the court of the party that has
jurisdiction over the nuclear incident shall establish the
system of payments of funds under Article III(1), and that
claimants will not be required to bring separate proceedings to
recover from both the national and the international
supplementary funds. Paragraph 3 guarantees that no party will
be asked to contribute to the international supplementary fund
unless first tier funds are insufficient to cover all claims.
Article XI allocates the international supplementary fund
as follows: one half is allocated to compensate for damage
incurred in all parties without differentiation; the other half
is available for the compensation of transboundary damage. If
less than 300 million SDRs are available under the first tier,
the proportion of the international supplementary fund
available for transboundary damage is increased proportionately
to cover the difference. Paragraph 2 provides that, in cases
where more than 600 million SDRs are available in the first
tier, the specific allocation for transboundary damage is
eliminated and the entire international supplementary fund is
available on a non-differentiated basis.
Article XIII defines which court is competent to decide a
claim, providing exclusive jurisdiction over claims brought
under the CSC to the courts of the party within whose territory
(or waters) the incident occurs. If it cannot be determined
where the nuclear incident occurred, or the incident occurred
outside the territory or EEZ of a party, then the jurisdiction
lies with the installation state (i.e., the state under whose
authority the installation is operated). The courts of each
party are to recognize and enforce the judgments of each other
under the CSC unless such judgments result from fraud or are
otherwise inconsistent with due process or public policy.
Article XIV specifies that the law of the party whose court
is competent, whether based on the Paris or Vienna Conventions
or the CSC Annex, as appropriate, is to be applied to all
claims related to a specific nuclear incident.
IV. Implementing Legislation
The executive branch has submitted to the Congress
proposed implementing legislation required for the United
States to comply with the Convention's provisions. The CSC will
not require substantive changes to the U.S. civil liability
system for nuclear damage under the Price-Anderson Act. Under
the executive branch proposal, in the event of a nuclear
incident in the United States covered by the Convention, the
first tier of compensation required under the Convention would
be funded through the Price-Anderson system. With respect to a
nuclear incident covered by the Price-Anderson system, the U.S.
contribution to the international supplementary compensation
fund, if needed, would be funded by making use of funds already
required under the Price-Anderson system in a manner that would
not impose any new cost on operators of domestic nuclear power
plants or on U.S. taxpayers. With respect to nulcear incidents
not covered by the Price-Anderson system, U.S. suppliers of
nuclear technology, who stand to benefit from the adoption of
harmonized liability rules under the CSC, would bear the cost
of a U.S. contribution to the international supplementary
compensation fund, if needed; U.S. taxpayers will not be asked
to contribute to this fund.
V. Committee Action
The Committee held a public hearing on the Convention on
September 29, 2005, in which it heard testimony from
representatives of the Departments of State and Energy (a
transcript of this hearing and questions and answers for the
record may be found in S. Hrg. 109-324). On May 23, 2006, the
Committee considered the Convention, and ordered it favorably
reported by voice vote, with a quorum present and without
objection, with the recommendation that the Senate give its
advice and consent to its ratification subject to one
declaration and one condition, as set forth in this report and
the accompanying resolution of advice and consent to
ratification.
VI. Committee Recommendation and Comments
The Committee on Foreign Relations believes that the
Convention presents a significant opportunity to create a
global nuclear civil liability regime compatible with the
existing U.S. nuclear civil liability law. Such a system would
be beneficial to U.S. interests in several ways. It would limit
the liability now facing United States suppliers of nuclear
technology with respect to their activities in foreign markets,
leveling the playing field for them and bringing more
predictability to the market. It would also encourage
improvements in civilian nuclear plant safety overseas by
helping U.S. companies export nuclear safety technology to
foreign nations. At the same time, the CSC's creation of a
supplementary international fund is expected to help ensure
that potential victims of a civil nuclear incident overseas
will be adequately compensated. The Committee urges the Senate
to act promptly to give advice and consent to its ratification.
The Committee has included one declaration and one
condition in the resolution of advice and consent to
ratification. The declaration relates to dispute settlement.
Article XVI provides for the Parties involved in a dispute over
the interpretation or application of the CSC, following 6
months of consultations, to submit the dispute to binding
arbitration or to the International Court of Justice. Paragraph
3 of the article allows Parties to opt out of either or both of
these dispute settlement procedures by submitting a declaration
to this effect, at the time of ratification, acceptance,
approval or accession. The Executive Branch has recommended,
and the Committee has included in the resolution of advice and
consent, a declaration opting out of both of these dispute
settlement procedures.
The condition calls for reports by the Secretary of State.
The CSC will only prove to be beneficial to U.S. nuclear
suppliers and potential victims if there is broad international
adherence to it. Because the Committee believes that widespread
adoption of the CSC is important, it has included in the
resolution of advice and consent a condition that the Secretary
of State report to the Congress on: the number of parties to
the Convention; a description of their legislation implementing
Article III of the Convention, which contains the obligation to
contribute to the international supplementary compensation
fund; and United States diplomatic efforts to encourage other
countries to become parties. The first report would be due no
later than six months following entry into force of the
Convention for the United States, with annual reports
thereafter for four years.
VII. Resolution of Advice and Consent to Ratification
Resolved (two-thirds of the Senators present concurring
therein),
SECTION 1. SENATE ADVICE AND CONSENT SUBJECT TO DECLARATION AND
CONDITION.
The Senate advises and consents to the ratification of the
Convention on Supplementary Compensation for Nuclear Damage,
done at Vienna on September 12, 1997 (Treaty Doc. 107-21),
subject to the declaration in section 2, and the condition in
section 3.
SECTION 2. DECLARATION.
The advice and consent of the Senate under section 1 is
subject to the following declaration, which shall be included
in the United States instrument of ratification:
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.
SECTION 3. CONDITION.
The advice and consent of the Senate under section 1 is
subject to the following condition:
Not later than 180 days after entry into force of the
Convention for the United States, and annually thereafter for
four additional years, the Secretary of State shall submit a
report to the Committees on Energy and Natural Resources and
Foreign Relations of the Senate, and the Committees on Energy
and Commerce and International Relations of the House of
Representatives that includes the following:
(A) Ratification.--A list of countries that have
become a Contracting Party to the Convention and the
dates of entry into force for each country.
(B) Domestic Legislation.--A description of the
domestic laws enacted by each Contracting Party to the
Convention that implement the obligations under Article
III of the Convention.
(C) U.S. Diplomacy.--A description of United States
diplomatic efforts to encourage other nations to become
Contracting Parties to the Convention, particularly
those nations that have signed it.