Right of recourse claims based on latent defects in the nuclear energy sector in India: brace yourself for fact-intensive disputes

Abstract

This paper analyses how a case were to unfold if an operator of a nuclear installation were to exercise its right of recourse against a supplier in the event of supply of equipment or material with latent defects, as envisaged under the unique Section 17(b) of the Civil Liability for Nuclear Damage Act, 2010 (CLND Act), adopted by the Indian Parliament. This study is relevant as no such right of recourse claim has ever been exercised yet by a nuclear installation operator against a supplier, in the absence of any contractual agreement — and yet, this is precisely what this new law in India foresees as a perfectly valid legal option. The uniqueness of this provision and many grey areas surrounding this law have had a dampening effect on the global supplier market for nuclear power plants in India, other than for the indigenously designed Pressurised Heavy Water Reactors. This is why it is worth dissecting how such a case were to unfold, should the Indian nuclear power operator nevertheless decide to rely on this right of recourse provision. Unlike the relationship between claims filed by victims against the nuclear operator, the right of recourse claim by the operator against the supplier would be governed by standard tort law. We, therefore, evaluate general tort law principles as well as case law derived from comparable sectors, such as the oil and aviation industries, where any major accident is perceived as a low- probability event, but with high impact on the society. In doing so, we will also scrutinise the meaning of “latent defects” as defined contractually, with the supplier’s obligation to remedy the defect, versus the monetary damage claim from the operator against the supplier based on a latent defect after the occurrence of a nuclear incident. Hence, this paper is intended as a guide for all practitioners in the nuclear energy field, but it could also be of interest to experts in comparable sectors, or even large infrastructure projects.