Taxpayer liability for safety at the Wylfa Nuclear power project

The United Kingdom is party to the following international conventions managed under the auspices of the OECD Nuclear Energy Agency which establish a framework for nuclear liability:[1]

• the Convention on Third Party Liability in the Field of Nuclear Energy of 29th July 1960, as amended by the Additional Protocol of 28th January 1964 and by the Protocol of 16th November 1982 ("the Paris Convention")
• the Convention of 31st January 1963 Supplementary to the Paris Convention of 29th July 1960, as amended by the Additional Protocol of 28th January 1964 and by the Protocol of 16th November 1982 (“the Brussels Convention”)

These Conventions establish a framework for compensating victims of a nuclear incident and are mainly implemented into UK law through the Nuclear Installations Act 1965. The requirements are summarised below (taken from the Explanatory Memorandum of a 2016 SI):

The Paris Convention establishes certain key principles which displace ordinary tort (in Scotland, delict) law rules. These principles include:

• strict liability of the operator, i.e. liability without having to prove fault;
• exclusive liability of the operator i.e. no other party (such as a supplier or contractor) is liable;
• the liability of the operator is limited in amount, time and the types of damage that are compensable;
• an obligation on the operator to cover its liability by insurance or other financial security;
• claims may only be made in respect of damage suffered within a specified geographical area; and

• rules on jurisdiction to ensure that the courts of one Paris country deal with all claims relating to a particular incident. Judgements of the court with jurisdiction must be recognised by the courts of the other Paris countries.

The Brussels Convention builds on the Paris Convention, making provision for additional public funds to be made available if the compensation payable under the Paris Convention is insufficient. The geographical scope of the Brussels Convention is more limited than that of the Paris Convention. In particular, it does not extend to damage in countries that are not parties to it. [2]

In 2004, changes to the Conventions were agreed through the ‘2004 protocols’:

• the Protocol of 12 February 2004 to amend the Paris Convention ("the 2004 Paris Protocol")
• the Protocol of 12 February 2004 to amend the Brussels Convention ("the 2004 Brussels Protocol")

The changes to the Conventions upgrade the existing liability regime so that, in the unlikely event of a nuclear incident, an increased amount of compensation will be available to a wider category of claimants in respect of a broader range of damage than is currently the case. The Protocols are yet to be ratified in the UK but the UK Government has prepared regulations that will be necessary on ratification.

The Nuclear Installations (Liability for Damage) Order 2016 gives effect to the changes made by the 2004 protocols. Most of the 2016 Order will not come into force until the Protocols are ratified. The explanatory notes of the 2016 Order outline the changes to the liability regimes (this can also be found under Section 16 of the Nuclear Installations Act 1965 as amended by the 2016 Order):

1. Power plants and other "standard" sites: an immediate increase from the current £140 million to €700 million, rising by a further €100 million annually up to €1200 million;
2. Operators of "intermediate" sites: an immediate change from the current £140 million to €160 million;
3. "Low risk nuclear sites": an immediate increase from the current £10 million to €70 million;
4. "Low risk" transport: the level will be €80m (in effect it is currently £10 million as this is the low risk site limit).

Where a lower level of liability is set for an operator, public funds are still required by the Convention to be available to top up the funds to either €700 million (Paris only claims) or €1500 million (Brussels claims)(section 18(1A) and (1D) of the 1965 Act).

A new nuclear power plant at Wylfa would be classed as a power plant or “standard” site. As such, operators must secure insurance up to the maximum level designated for a standard site. In the case of an accident, the operator pays for claims up to the risk category limit, and the Government pays any difference between this limit, and the €700 million for Paris claims and €1500 million for Brussels claims.

The 2016 Order also makes provisions for liability, such as extending limitation periods, widening geographical scope and adding new categories for damage. In addition, the 2016 Order gives the Government the power to provide insurance if operators could not find it on the market as the explanatory notes describe:

7.32 One of the key features of the Paris regime is the requirement for operators to maintain insurance or other financial security to cover their liabilities under the Convention.

7.33 Up to now operators have been able to meet this requirement mostly by purchasing insurance from the market. However, there is now a question whether the market is willing to provide cover to the full extent of the operators’ new liabilities. At present our understanding is that cover will be available for all categories of damage apart from the extension of the 30 year limitation period for personal injury claims.

7.34 The Government will, subject to any EU or UK legal requirements such as state aid, consider arrangements to fill any gap in cover, but on commercial terms. New section 20A of the 1965 Act (article 34 of the Order) confers a power on the Secretary of State to make such arrangements.

The explanatory note for the 2016 Order suggests that further Regulations would need amending to implement the changes. The Nuclear Installations (Excepted Matter) Regulations and The Nuclear Installations (Insurance Certificate) Regulations were made in September 2017, and the Nuclear Installations (Prescribed Sites and Transport) Regulations 2018 were made in January 2018.

The Government confirmed in a Written Statement on 4 June 2018 that they would enter into negotiations with the Japanese firm Hitachi about the proposed Wylfa Newydd nuclear power plant on Anglesey in north Wales.

On 29 May 2018, the Japanese paper Nikkei Asian Review reported in an article on ‘Higher offer from UK keeps Hitachi at table for nuclear project’ that the company planned to insist on accident responsibility changes in relation to their financial liability.

An article in The Times from 30 May 2018 on ‘Hitachi ‘won’t pay’ for nuclear accidents at proposed Wylfa plant on Anglesey’ picked up on these reports and stated that “Hitachi could seek to absolve itself of financial responsibility for any accidents at its proposed new nuclear power station in north Wales”, although also noted it was “unclear what alternative arrangement or safeguards Hitachi might be seeking”

On 14 June 2018, Tommy Sheppard asked the Government “whether (a) Hitachi and (b) other private sector companies will be financially liable for safety failures at the proposed Wylfa Newydd power station.” The Minister Richard Harrington responded:

As announced in my Rt. Hon. Friend the Secretary of State’s statement to Parliament on 4th June 2018, the Government has decided to enter into negotiations with Hitachi over the Wylfa Newydd new nuclear project.

Safety and security are of paramount importance and the UK has a robust and effective regulatory regime. No final decisions have been taken to proceed with the project.

The successful conclusion of these negotiations will be subject to full Government, regulatory and other approvals—including, but not limited to, value for money, due diligence and state aid requirements. These negotiations are commercially sensitive and no final decision has yet been taken to proceed with the project. [3]

On 10 July 2018, Drew Hendry MP tabled an Early Day Motion on ‘Financial Liability for Nuclear Power Station Safety’ expressing concern about reports that Hitachi would have different financial responsibility for accidents. [4]

[1] A summary of the UK’s nuclear liability regime is provided by law firm Clifford Chance in a May 2017 report on ‘Changes to the UK Nuclear Liability Regime: implications for the industry’.

[2] Summary taken from the Explanatory Memorandum for the Nuclear Installations (Liability for Damage) Order 2016

[3] PQ 153877

[4] EDM 1501, Financial Liability for Nuclear Power Station Safety,