Civil Liability for Nuclear Incidents in China: The State Council's 1986 Reply and Beyond

COMPARISON BETWEEN THE CONVENTIONS AND THE CHINESE RULES

The above Conventions have established the following main principles:

i. The Conventions apply to the civil liability in case of nuclear damages arising from a nuclear incident in a nuclear installation or involving nuclear substances coming from or sent to such an installation;

ii. Liability is channeled exclusively to the operators of nuclear installations;

iii. Liability attaches to the operator for nuclear damages in his or her nuclear installation or nuclear damages involving nuclear substances within his or her control;

iv. Liability of the operator is absolute regardless of fault, except for acts of armed conflict, hostilities, civil war or insurrection or grave natural disaster of an exceptional nature, and except gross negligence or intentional act with respect to the injured person;

v. Liability of the operator is limited in amount and time;

vi. Jurisdiction over actions lies exclusively with the courts of the contracting party in whose territory the nuclear incident occurred;

vii. Non-discrimination of victims on the grounds of nationality, domicile or residence;

viii. The operator must maintain insurance or other financial security to cover its liability set under the national laws pursuant to the Conventions.

China does not have a comprehensive body of law covering nuclear civil liability. The major principles in this regard were set out in the Reply, with certain key concepts further defined in several later laws and regulations. The PRC Civil Law General Principles (1986) and certain judicial interpretations of the PRC Supreme People's Court, meanwhile, define concepts with respect to personal death and injury and apply to the details of claims.¹ In general the PRC laws and rules in this regard correspond with the principles in the Conventions. As a matter of fact, the Reply was issued in response to the concerns raised by the foreign suppliers in China's first nuclear power station construction projects.

Below is an item-by-item comparison between the principles of the Conventions, as summarized above, and the Chinese rules.

i. The Reply applies to the nuclear damages in a nuclear power station within the PRC or involving nuclear substances coming from or sent to a nuclear installation within the PRC (paragraph 2).

ii. The nuclear civil liability lies with the operator exclusively (paragraph 2).

iii. Liability attaches to the operator for nuclear damages in his or her nuclear power station or nuclear damages involving nuclear substances within his or her control (paragraph 2).

iv. Liability of the operator is absolute regardless of fault, except for acts of armed conflict, hostilities, civil war or insurrection or grave natural disaster of an exceptional nature (paragraph 5). In addition, an intentional act or omission by another party gives rise to a right of recourse by the operator against such a party (paragraph 4). More generally, force majeure and intentional acts or omissions by the victim may exclude liability of the operator. Gross negligence of the victim, meanwhile, may reduce the liability of the operator, with the burden of proof on the operator.²

v. Liability of the operator is limited to Rmb18 million (US$2.2 million) in total per nuclear accident. However, in a case where the damages exceed Rmb18 million, the PRC government shall provide financial compensation up to Rmb300 million³ (paragraph 3). On the other hand, similar time limitations apply - i.e. three years from the date which the claimant knew or should know of the damage or the death/injury, subject to the maximum period of 10 years from the occurrence of the nuclear damage or death/injury (paragraph 6).

vi. All litigations for nuclear civil liability caused by nuclear accident within the PRC are subject to the jurisdiction of the PRC court sitting in the place of a nuclear incident (paragraph 7).

vii. No discrimination is provided in the PRC laws.

viii. No insurance or financial security for the operator is expressly required in China, but the state does provide limited supplementary financial compensation as described in (iv) above.

LEGAL STATUS OF THE REPLY

The Reply is the only government document, hitherto, specifying the civil liability rules for nuclear damage in China. The Reply was issued by the State Council, China's highest administrative authority, but not as a formal administrative regulation, rather a reply to the questions raised by certain government agencies. As such, the question is if the Reply provides a legal basis that can be relied upon in China.

Since July 1 2000, the hierarchy of the legal provisions in China has been expressly set out in the PRC Legislation Law as follows:

i. The Constitution passed by the National People's Congress (NPC);

ii. National laws passed by the NPC or its standing committee;

iii. Administrative regulations enacted by the State Council;

iv. Regulations issued by the ministries and commissions under the State Council/the local law passed by the local people's congress or its standing committee/local government regulation issued by the local people's government.⁴

In addition, outside the hierarchy specified in the PRC Legislation Law, the government or its departments, whether local or national, may issue a so-called 'normative document', applicable to unspecified persons, to perform its regulatory function. A normative document has a binding force with respect to the issuing government or department and its intended persons or activities, subject to compliance with the legal provisions of a higher hierarchy order. However, Chinese law does not clearly define the drafting of normative documents and interaction with the laws and regulations mentioned above is somewhat ambiguous. It is not clear, for example, if a State Council's normative document is higher or lower than a ministry-level regulation.

The Reply could be seen as a normative document of the State Council if viewed strictly according to the hierarchy of law under the PRC Legislation Law. However, the Reply was issued by the State Council in 1986 long before the enactment of the PRC Legislation Law. At that time, the hierarchy among various laws and regulations in China was not as defined as it is now. There has not been a Supreme People's Court's judicial interpretation of the effect of the Reply vis-à-vis the more recent generally applicable laws on torts in China such as the PRC Civil Law General Principles and the PRC Product Quality Law(中华人民共和国产品质量法).

It is generally accepted among the Chinese nuclear industry that the Reply should be the binding rule in respect of civil liability towards third parties in nuclear incidents. It is fair to say that the PRC courts would give deference to the Reply given that it was issued by the State Council, the highest Chinese administrative authority. The Reply is also the only rule relating to nuclear incidents in China, notwithstanding the later definition of the country's hierarchy of laws and the conception of other generally applicable tort laws. Given this, the Reply would probably be given the effect of an administrative regulation of the State Council in practice, and therefore, under the exception provided under Article 73 of the PRC Product Quality Law (see 'Elaboration of the Concepts in the Reply in the Later Laws and Regulations' below), be applied with respect to the civil liability for nuclear damage.

Despite this, the subject matter of the Reply should really have been addressed through a law, or at least an administrative regulation, to prevent the potential conflict with later laws.

DEFINITION AND SCOPE OF THE 'OPERATOR' UNDER THE CHINESE RULES

Both the Conventions and the Reply limit the civil liability for nuclear damage to the 'operator' of a 'nuclear installation'. Then what exactly is an operator under the Chinese rules?

In regard to the definition of an 'operator', the two Conventions have similar descriptions. For example, under the Vienna Convention, an operator refers to a person who is designated or recognized by the installation state as the "operator of a nuclear installation" (Article I, paragraph 1, c). A nuclear installation is defined as (i) any nuclear reactor other than those comprised in any means of air or sea transportation for propellant purpose or for other purposes; (ii) factories for manufacturing nuclear materials by using nuclear fuel, or processing of nuclear materials including reprocessing of irradiated nuclear fuel; and (iii) facilities for the storage of nuclear substances other than that which is incidental to the carriage of such substances (Article I, paragraph 1, j).

The Reply's definition of an operator is as follows: "A unit designated by the government authority to engage in the business of and carry out the operation of a nuclear power station, or to engage in the supply, processing/disposal and/or transportation of the nuclear materials for/of the nuclear power station which for these purposes owns (alternatively, possesses) other nuclear installations within the territory of the PRC" (paragraph 1).

The Reply expressly divides operators into two categories: operator of nuclear power stations and operators of other nuclear installations for the purpose of supply, processing/disposal and/or transportation of nuclear materials for/of the nuclear power station. It does not define the 'other nuclear installations'. However, please see the definitions of 'civil nuclear installations' and 'nuclear installations' detailed in the section below under points 1 and 3. These definitions should also be used in interpreting the Reply as well.

The Reply also details as to who can be an operator of a nuclear power station in China. It states that such an operator must first be designated by the authority of the Chinese government. Such an operator is considered as the Chinese entity that constructs, owns and operates a nuclear power station (please also see 'Conditions for the License of an Operator' below for the definition of a joint operator).

The operator of a nuclear installation other than a power station in China, who engages in supply, disposal and/or transportation of nuclear materials for/of nuclear power stations, under Chinese laws and regulations (e.g., see point 1 in the section below) must also be specifically licensed by the authority of the Chinese government. Furthermore, such an operator is limited to the supply, disposal and/or transportation of nuclear materials for/of nuclear power stations in China.

According to the definitions above, an equipment supplier, technology provider, technical consultant, or construction contractor is not an operator under the Reply. A nuclear material supplier may become an operator under the Reply only if it is licensed to own or possess a nuclear installation in China, as discussed above.

ELABORATION OF CONCEPTS IN THE REPLY IN LATER LAWS AND REGULATIONS

The Reply is still the only comprehensive Chinese rule on third party civil liability in nuclear incidents. However, several more recent laws and regulations have been promulgated in China - as detailed below - and should be noted for a fuller understanding of the Reply.

(I) The PRC Regulation on the Supervision and Management of Safety for Civil Nuclear Installations issued by the State Council of the PRC on October 29 1986 - this is an administrative regulation that addresses the safety safeguards and administration of civil nuclear installations. However, under Article 2 it also offers a definition of 'civil nuclear installations' as:

· Nuclear powered facilities (nuclear power station, nuclear thermal power plant and nuclear co-generation plant);

· Other reactors other than nuclear powered facilities (research reactor, experiment reactor, and nuclear critical installation);

· Facilities for nuclear fuel production, processing, storage, or after-treatment;

· Facilities for treatment and disposal of radioactive wastes;

· Other nuclear facilities requiring strict supervision and regulation.

An operator under this definition would be broader than the one under the Reply. Indeed, nuclear installations defined under the above are not necessarily limited to nuclear power plants and their associated nuclear materials.

Furthermore, while not specifically addressing civil liability, Article 7 of this regulation provides that the operating unit of a nuclear installation shall take overall responsibility for the safety of the nuclear installation and nuclear materials, as well as the safety of its personnel and other people and the safety of the environment.

Finally, the above regulation also provides a definition of an 'operating unit'. Such a unit is any organization that applies or possesses the Nuclear Installation Safety Licence, and may engage in the business of, and carry out the operation of, a Nuclear Installation (Article 24 (3)). This definition was made in a different way from the definition of an operator under the Reply. However, two criteria to becoming an operating unit of a nuclear installation are clearly set out: (i) having the Nuclear Installation Safety Licences issued by the Chinese government (see more details under point 4 below); and (ii) running the nuclear installation as a business. These two criteria are also reflected under the Reply.

(II) The Provisional Measures on Administration of Road Transportation of Spent Nuclear Fuel for Nuclear Reactors issued by the PRC National Defense Science and Technology Industry Commission, Ministry of Public Security, Ministry of Communications, and Ministry of Health on June 18 2003 - these Measures are a ministry-level regulation and apply to the domestic transportation of spent nuclear fuel in connection with nuclear power stations, research reactors and other types of reactors (Article 2). The Measures do not conflict with the Reply but rather further elaborate on the role of an operator with respect to transporting nuclear materials. Under the Measures, the consignor of spent nuclear fuel must have qualifications to possess nuclear materials and is regarded as the operator for nuclear civil liability purposes. A forwarding agent or carrier, meanwhile, is not considered such an Operator (Articles 3 and 4).

Given the scope of the application of the Measures above, a consignor would include not only a nuclear power station, but also a nuclear research entity possessing a research reactor and any entity possessing other types of reactors. Such entities are not necessarily engaging in supply, processing/disposal and/or transportation of nuclear materials for/of nuclear power stations. This apparently reflects the principle of the Reply and expands the coverage of the operator under it (see the definition of an operator under the Reply in point 3 below). This is understandable as the Reply was issued mainly in response to the concerns of foreign nuclear equipment suppliers in nuclear power projects.

(III) The PRC Prevention and Treatment of Radioactive Pollution Law, effective January 1 2003 - This law defines a nuclear installation in a very similar way as under point 1 above:

· Nuclear powered facilities (nuclear power station, nuclear thermal power plant and nuclear co-generation plant);

· Other reactors (research reactor, experiment reactor and nuclear critical installation);

· Facilities for nuclear fuel production, processing, storage, or after-treatment;

· Facilities for treatment and disposal of radioactive wastes.

(IV) Last but not least, the PRC Product Quality Law revised on July 8 2000. This law was first enacted in 1993 and is applicable to the production and sale of products in China. In general, this Law imposes a strict product liability on manufacturers (Article 41). In the 2000 amendments, a significant change was the addition of the following provision in Article 73:

"If laws and administrative regulations have different provisions on the compensation liabilities for the injury, loss and damage caused by the nuclear installation or nuclear product, such provisions shall prevail."

The reason for this addition is to carve out an exception to the general product liability rule in the case of a nuclear accident, reflecting the special features of nuclear products and installations and the Chinese practice and policy contained in the Reply.

CONDITIONS FOR THE LICENSE OF AN OPERATOR

As mentioned under point 1 above, Article 8 of the State Council's Regulation on the Supervision and Management of the Safety for the Civil Nuclear Installations provides that "the state carries out a licensing system for the safety of nuclear installations and the State Nuclear Safety Bureau is responsible for setting forth and approving the issuance of the Civil Nuclear Installations Safety Permit Certificates". These include:

i. "Licence to Build Nuclear Installations;

ii. Licence to Operate Nuclear Installations;

iii. Nuclear Installation Operator Licence; and

iv. Other documents required to be approved."

An operator of a nuclear installation must obtain a Licence to Build Nuclear Installations and a Licence to Operate Nuclear Installations.

Article 12 provides that a "Licence to Build Nuclear Installations and a Licence to Operate Nuclear Installations can only be approved and released when the following conditions are met:

i. The project in application has been approved by its competent department in charge and the state planning department or by the government on the provincial, autonomous region or municipality level in accordance with relevant provisions;

ii. The site selected has been approved by the State Council, or the urban and rural construction, environmental protection, and planning departments of the government on the provincial, autonomous region or municipality level and by the State Nuclear Safety Bureau;

iii. The nuclear installation so applied is in conformity with the relevant laws and nuclear safety regulations of the state; and

iv. The applicant has the ability to operate safely the applied nuclear installations and has committed to undertake overall responsibility for safety."

In addition, the operator needs to obtain an Approval for First Fill of Nuclear Materials before the start of commissioning of the Nuclear Installation (Article 10).

In normal cases, the operator is the entity who constructs, owns and operates a nuclear installation. However, for the Daya Bay nuclear power station and the Ling Ao nuclear power station, the State Nuclear Safety Bureau has issued the operator's licences jointly to the power station (i.e., Guangdong Nuclear Power Joint Venture Company and Ling Ao Nuclear Power Company) and the operating contractor of the power station (Daya Bay Nuclear Power Operating and Management Company).

In the Daya Bay and the Ling Ao nuclear power stations, the two power stations formed an operating and management (O&M) company to oversee their four units as a group in order to optimize the operation. The question is, what is the impact of such joint-licences on the civil liabilities of these parties?

Under the conditions of their licenses set out by the Bureau, the power stations and their O&M contractors act jointly as the operator and assume overall safety responsibility jointly.⁵ In particular, the O&M contractor is responsible for the safe operation of the power stations. As owner and a joint operator, the power stations take overall safety responsibilities other than the nuclear safety responsibility of the O&M contractor. They also provide resources and support as necessary for the O&M contractor to operate the power stations, including compensation in nuclear incidents.⁶

The above conditions appear to keep the civil liabilities with the owners of nuclear power stations. Indeed, it is not clear under these conditions whether the O&M contractor is responsible for the civil liabilities, or just takes safe operation responsibility. Under the Reply, civil liabilities lie with the operator. And since the O&M contractor is a joint operator, it could be liable for nuclear damages caused by the nuclear power station on a joint and several basis with the nuclear power station itself. This practice by the State Nuclear Safety Bureau seems to indicate that no O&M operator for a nuclear power station is allowed without an operator's licence, and an O&M contractor of a nuclear power station will need to be prepared to take the responsibility of an operator under the Reply.

Endnotes

1 The PRC Supreme People's Court's Opinions Regarding Several Issues in the Implementation of the PRC General Principles of Civil Law effective January 26 1988; the PRC Supreme People's Court's Interpretations on Several Issues in Application of Laws in Hearing Personal Death/Injuries Cases effective May 1 2004.

2 Articles 106, 107 and 123 of the PRC General Principles of Civil Law; Article 2, paragraph 2 of the PRC Supreme People's Court's Interpretations on Several Issues in Application of Laws in Hearing Personal Death/Injuries Cases.

3 These caps made in the 1980s have been criticized nowadays as outdated and too low compared with the limits under the Conventions.

4 As between the local laws passed by the local people's congress and the local government regulations enacted by the local people's government, the latter cannot contravene the former. In case of a conflict between a local law and a ministry-level regulation, it is the State Council that will adjudicate, subject to approval by the Standing Committee of the National People's Congress if the State Council rules against the local law. In the case of a conflict between a local government regulation and a ministry-level regulation, the State Council has the final authority to adjudicate. See Articles 78, 79, 80, 82 and 86 of the PRC Legislation Law.

5 See the State Nuclear Safety Bureau's Notice to Issue the Operator's Licence for Daya Bay Nuclear Power Station, and the Notice to Issue the Approval for the First Fill of Nuclear Materials for Ling Ao Nuclear Power Station, both dated March 31 2003.

6 Ibid.