Nuclear Law & Regulation

The purpose of this note is to provide an overview of:

1. the new UK nuclear programme;
2. the English regulatory regime in connection with that programme; and
3. civil liability for third party nuclear damage under English law (and briefly, the interrelationship between English law and international law).

1. The new UK nuclear programme

The election of the Conservative-Liberal Democrat Coalition Government (“the Government”) in 2011 gave the green light to the new build programme in the UK, and a new era of British energy policy began. In particular, new planning, siting, design and licensing regimes were introduced and these have since been improved and expanded upon to pave the way for the new build.

The new legislative measures have been met by a proactive response from industry which is also gearing up for the new build. British Energy was acquired by EDF,1 a 20% stake in British Energy was subsequently sold on by EDF to Centrica, and EDF sold off its network division to the Cheung Kong Group. Various other joint ventures and commercial collaborations have been announced, most recently between the Japanese multinational Toshiba and GDF Suez of France, who finalised a deal on 30 June 2014 for three new AP1000 reactors to be built at the Moorside site in Cumbria.2

The reasons behind the new build are both regulatory and need driven. The Government is obliged by the EU to generate 15% of UK energy from renewable sources by 2020 and it has a commitment to around a 30% reduction in carbon emissions by the same date.3 In addition to this, the UK currently has 19 reactors which generate about 18% of its electricity and all but one of these will have reached the end of their natural lives by 2023.4

The cost of the new build will be enormous. Alan Key, Chief Operating Officer of Costain, estimates that the likely spend per nuclear power station will be around £5bn with a total estimated spend for the new build of £40bn, the contracts for most of which will probably be awarded to UK contractors, or consortiums of which UK contractors will form a part.

It is expected that around 80% of the finance will come from private sources and the Government therefore took steps in the Energy Act 2013 (“the 2013 Energy Act”) to try and give greater certainty to those who invest in nuclear power. The 2013 Energy Act introduced the principle of long-term, fixed-price contracts for low-carbon energy production that have a market strike price at which low-carbon energy producers would receive a subsidy from the taxpayer. This provides a very attractive investment opportunity whereby minimum returns on investment will effectively be guaranteed by the Government.

Further comfort has been provided to investors by the launch of (i) a £3 billion Green Investment Bank in 2012 which will fund the early and risky construction phases of complex infrastructure projects such as the new build, and (ii) the UK Guarantees scheme which provides a government-backed guarantee for private sector loans to nuclear projects (amongst other qualifying projects).

2. Nuclear industry legislative framework

The safety, design, siting, licensing, construction and operation of all nuclear installations in the UK are regulated by the Office for Nuclear Regulation (“ONR”), which was given statutory footing by the Energy Act 2013 to provide the statutory framework for the new build.

Planning issues are regulated by the Planning Act 2008 (“the Planning Act”).

The legislative framework is explained further below.

Health and Safety

Health and safety considerations are paramount for those who work and live in the vicinity of nuclear power plants. In the UK, operators of nuclear power plants must comply with the standards set out in the Health and Safety at Work Act 1974 (“the Health and Safety at Work Act”), which requires operators to ensure, so far as is reasonably practicable, the health, safety and welfare of all those working on nuclear installations.

The ONR has principal responsibility for ensuring that the nuclear industry controls its hazards effectively, and it appoints inspectors under the Health and Safety at Work Act to enforce all health and safety legislation relevant to the safety of nuclear sites.
Inspectors will, for example, assess the safety of the proposed designs for new nuclear sites and their operation; assess the competence and capability of the licence holder’s organisation; monitor compliance with any licence conditions; and investigate any incidents or complaints that may arise.

Design

In order to deal with design issues, the ONR and the Environment Agency have adopted a Generic Design Assessment (“GDA”) process under the provisions of the Planning Act, whereby the safety and environmental impact of each of the industry’s preferred reactor designs can be assessed by the regulators at the request of the reactor vendor prior to a site licence being applied for. GDAs are valid for 10 years.

The purpose of the GDA process is to provide developers and promoters of new nuclear power stations with an indication as to whether a proposed design will be accepted, and a site licence obtained, prior to them committing significant sums to the planning, licensing and build stages. Most potential operators will wait for the outcome of any GDA prior to submitting an application to the ONR for a site licence which is needed in addition to planning consent for nuclear build sites.

GDAs are not site specific, but they can provide a prospective new build operator with a reasonably clear indication as to whether a generic design would meet the necessary regulatory requirements in advance of a licence application being submitted.

In order to obtain clearance from the ONR as to the suitability of a site for a licence, the design must demonstrate that the site would have good defences against various hazards within the vicinity (for example, earthquakes, tsunami and flooding); the location must be suitable to put in place an adequate emergency plan; and the siting proposal must be consistent with the Government’s siting policy.

If the ONR is satisfied with the generic design that is advanced, it will issue a design acceptance confirmation that the generic design is capable of being built in the UK in accordance with the relevant regulatory requirements.

If a nuclear licence is subsequently applied for, the ONR will consider any subsequent site-specific aspects that may have arisen since the issue of the GDA, as well as any changes that might have been made to the design or safety aspects since the GDA was conducted, and make provision for them in the licence.

Planning / Siting

The planning inquiry for Sizewell B took 27 months and cost around £30 million, and the previous Labour Government was therefore forced to take steps to ensure that there would not be a repeat for the new build. The Labour Government implemented the Planning Act for the purposes of the new build,5 and eleven sites were originally nominated by the Labour Government with a view to nuclear reactors being built on them.

Most of the proposed new build sites are in areas with a pre-existing nuclear presence, in line with the Department for Energy and Climate Change’s (“DECC”) policy to limit the number of people who might be affected in the unlikely event of a nuclear accident.

The Government has continued to reform the planning system to improve its speed and efficiency for the new build and has continued the Planning Act system of unified consent for Nationally Significant Infrastructure Projects. This system is essential in light of the short timescale for the new build.

The cornerstone of unified consent is the Nuclear National Policy Statement for Nuclear Generation (“Policy Statement”) which was drafted by the Labour Government and subsequently revised by the Coalition Government to exclude two of the sites that had previously been earmarked for nuclear development.

The revised Policy Statement provides assurance from the Government that it is satisfied that there are sufficient measures in place for the disposal of nuclear waste for the developments that are to proceed. The public was provided with the opportunity to comment on the siting proposals, and following consultation, a list of locations in England and Wales deemed to be strategically suitable for new nuclear power stations was produced.6

The Government’s current policy on siting appears in the Nuclear Safety Convention and the Joint Convention on the Safety of Radioactive Waste Management.7 The ONR is responsible for administering the DECC’s siting policy and it will take the DECC’s siting policy into account when deciding whether to grant a site licence.

Licensing

Under the Nuclear Installations Act 1965 (“the Nuclear Installations Act”), a licence is required from the ONR for the installation and operation of a nuclear reactor or any other nuclear installation prior to the placement of the first structural concrete.8

In considering a request for a licence from a named corporate body to install or operate a nuclear installation, the ONR will consider the capability; organisation and resources of the applicant; the nature of the prescribed activities; the safety case advanced by the corporate body; and the nature and location of the site.

The ONR will attach such conditions as it considers necessary or desirable in relation to the safety, handling and disposal of nuclear matter which will apply throughout the duration of the licence and may be added to or revoked at any time. The conditions may address the design, construction, commissioning, operation and decommissioning of the site, require certain documents to be submitted for examination, or require things to be done in a particular way (for example, for nuclear waste to be stored in a specific way).

A nuclear site licence is granted for an indefinite period, and provided there are no material changes to the basis on which the licence was granted, it can cover the whole life cycle, from installation and commissioning, through to the operation and eventual decommissioning of the site.

Licences are not transferable, but installations may be re-licensed and a new licence granted to a different corporate body provided that body is able to demonstrate it is fit to hold a licence. If there are any changes to the site boundary, or the types of nuclear activity for which the site is licensed, then the site will also have to be re-licensed.

The ONR may recover the costs it incurs in relation to its licensing and any inspection work on a time spent basis, and a charge may also be made for any research and independent technical assistance that may be necessary.9

3. Third party liability for nuclear damage under English law

Operators of nuclear power plants are liable for any damage caused by them regardless of fault pursuant to the Nuclear Installations Act which adopts the provisions of the Paris Convention on Third Party Liability in the Field of Nuclear Energy of 1960 (“the Paris Convention”), and the Brussels Supplementary Convention to the Paris Convention of 1963 (“the Brussels Convention”).

The principles of that legislation include the following:

1. Liability rests with the operator / licensee of the nuclear installation.
2. That liability is absolute and fault is therefore irrelevant other than in cases of acts of war, civil war or armed conflict, hostilities, or insurrection.
3. Under the Nuclear Installations Act, the licensee of a nuclear site is under an absolute duty to cause no “injury to any person or damage to any property of any person…” arising from radiation, or from a combination of radiation and the toxic, explosive or other hazardous properties of nuclear matter.10
4. Recoverable damage to property must be physical damage to tangible property or property rights, as opposed to pure economic loss which is not recoverable.11
5. Where damage is not covered by the Nuclear Installations Act, it would fall to be covered by the common law and would be subject to the usual issues of causation and remoteness of loss, which can raise difficult issues in the nuclear context. Whereas it would be relatively straightforward to establish a causal link between a major nuclear incident and persons who suffer physical symptoms such as radiation sickness shortly after, it would be much more difficult for a causal link to be established if a person contracted cancer some years later, and sought then to allege that the cancer was caused by the same nuclear incident.12
6. The definition of nuclear damage under English law does not presently extend to environmental damage, preventative measures, or economic loss.
7. The liability of the operator is currently limited to no more than 300 million Special Drawing Rights (“SDR”)13, and no less than 5 million SDR under the Paris and Brussels Conventions per nuclear site, the first £140m of which must be insured by the licensee under the provisions of the Paris / Brussels Conventions.
8. Currently, the liability of operators under the Nuclear Installations Act stands at £20 million per incident, and there is a lower limit of £5 million for certain small prescribed sites.
9. The limitation period for bringing a claim under the Nuclear Installations Act is 30 years from the occurrence giving rise to the claim, or, where the occurrence is continuing, 30 years from the last occurrence. Any claims made within the first 10 years of the occurrence are to be backed by insurance, with the remaining claims being met by the Government. Any government pay out would only be intended to meet immediate claims and the Government’s outlay may be the subject of a subrogated recovery from the operator in due course in the event of liability on the operator’s part.
10. Operators must maintain insurance or other financial security (for example, an indemnity) for an amount of time corresponding to their liability. This will be 10 years following the period of responsibility under the licence, and any earlier period of responsibility for which a claim is pending.

The Government is proposing legislation that would require operators’ insurance to provide total coverage of €1.2 billion to ratify amendments that have been made to the Paris and Brussels Conventions. Proposals are also afoot for the Government to provide waivers, indemnities and government-backed insurance to nuclear operators in circumstances where commercial insurance is not readily available.

In addition to raising the limit of liability, the Paris and Brussels Conventions have also amended the definition of nuclear damage. Nuclear damage now broadly includes:

• economic loss arising from loss of life / personal injury and loss or damage to third party property;
• the cost of reinstating an impaired environment;
• the loss of income from a direct economic interest in any use or enjoyment of the environment incurred as a result of significant impairment of that environment; and
• the cost of preventative measures, and the costs of implementing those measures.

The UK is expected to ratify these further amendments in due course.

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• 1. EDF is heavily involved in the nuclear build and is working towards the first of its four proposed reactors being operational and up and running by 2025. Its current focus is on Hinckley Point which is the first nuclear power station to be built in the UK for 25 years.
• 2. Europe’s largest new nuclear project, which will provide 7% of the UK’s future electricity requirements onwards of 2024.
• 3. The effect of this obligation is that nuclear energy will be required to provide between 35% and 40% of the UK’s electricity needs onwards of 2030.
• 4. By the late 1990s, nuclear power plants contributed to around 25% of total electricity generation in the UK but this has declined as obsolete plants have closed and age-related problems have affected plants’ productivity.
• 5. Albeit the Planning Act has the scope to create obstacles as it provides limited opportunities to challenge decisions which might contravene the European Convention on Human Rights.
• 6. See National Policy Statement for Nuclear Power Generation (EN-6).
• 7. See http://www.onr.org.uk/joint-convention.htm.
• 8. It may be possible for a developer to undertake excavation of building foundations and placement of the blinding layer before a nuclear site licence is granted.
• 9. See section 24A of the Nuclear Installations Act.
• 10. Section 7. Section 12 imposes the liability for breach of this statutory duty. See also Merlin v British Nuclear Fuels Ltd [1990] 3 All ER 711 which considers the meaning of “damage” under the Nuclear Installations Act at first instance, and the later Court of Appeal decision in Blue Circle Industries Plc v Ministry of Defence [1998] 3 All ER 711. There is no reported decision on the meaning of “injury to any person” but it is likely that difficulties of causation, the nature of nuclear harm, and the timing of the onset of symptoms will make personal injury claims very difficult to prove. See Maria Lee, Civil Liability of the Nuclear Industry, Oxford University Press, 2000 for a discussion on the issues that arise out of nuclear-related environmental harm.
• 11. See Merlin, supra.
• 12. See the Sellafield personal injury cases of Reay v British Nuclear Fuels [1992] 4 LMELR 195 and Hope v British Nuclear Fuels [1993]. 5 ELM 178 in which it was found that the requisite causal link had not been established to prove that radiation had caused cancer, notwithstanding the increase in cancers in the Sellafield area.
• 13. A SDR is a unit of currency of the International Monetary Fund and is equal to around 1.5 US dollars.