Convention on Supplementary Compensation on Nuclear DamageSenate Consideration of Treaty Document 107-21
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[Senate Treaty Document 107-21] [From the U.S. Government Printing 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). --------------------------------------------------------------------------- \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.'' --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- \11\ See footnote, page 39. --------------------------------------------------------------------------- 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.