[Senate Executive Report 109-15]
[From the U.S. Government Publishing Office]



109th Congress                                              Exec. Rept.
                                 SENATE
 2d Session                                                      109-15

======================================================================



 
  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.

                                  
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