United Arab Emirates: Guide To Global Nuclear Liability Insurance And Claims

Last Updated: 8 March 2019
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, April 2019

1. Introduction

Power and energy supply is the backbone of every economy of this world. Despite the leaps made in technological advancement to cater to the ever-growing demand of power with the exponential increase of human population, we are falling short of the power supply. To provide an adequate amount of power, man has employed various resources from non-renewable to renewable, yet an equilibrium between demand and supply seems far-fetched. Most of the power today is derived from thermal plants which use coal as a primary resource. The recent years have witnessed a shift to clean energy for power generation, i.e. nuclear energy as an alternative to the conventional sources. However, power generation from nuclear reactors poses a more substantial threat of causing major mishaps and accidents which could potentially damage property, cause personal injury, and damage the environment on a magnanimous scale. The potential underlying risk has thrown a significantly challenging question before the political heads of the world – who will be liable for the damage caused by such a nuclear incident? Several nations have addressed the concept of nuclear liability insurance and compensatory claims made by the injured parties through legally binding international conventions or/and national laws which have been analyzed in great length in this paper.

2. How is nuclear energy liability insurance structured?

The insurers found it challenging to resolve the problem of figuring out how to provide cover for the nuclear industry. To them the apparent catastrophic risk posed a high level of uncertainty, in addition to the multiple individual claims, should the nuclear accident occur, resulting in an objectionable accumulation and an undesirable exposure to insurers' solvency margins. On one hand, in essence, it was clear that no individual insurer could cover the risk alone; and on the other hand it was obvious that since nuclear power is required to meet the world's energy demands and that in order for it to continue doing so, individual operator liability had to be curtailed or capped to an absolute upper limit beyond which the risk needed to have consorted. The state would have to step in and accept responsibility as insurer of last resort, as with everything else in industrial societies.

While structuring insurance for nuclear reactors, the only factor which ought to be considered is the high potential perils associated with installation and operations of nuclear fission and fusion; this drastically differs from the risk associated to that of other industries of global sectors. The fundamentals of any nuclear liability insurance are:

A. Channeling of liability on the operators: The nuclear operators are liable for all damages caused by a nuclear incident notwithstanding fault liability.

B. Trans-border nationality: A nuclear energy disaster affects not only the country in which it is located but the surrounding states as well. Hence, national laws are augmented with international conventions which are needed to defend the cross-border inflictions of such disasters.

C. Limited liability: Limited civil liability concept has been incorporated by the international conventions on the basis which the national laws have been formulated, putting a maximum cap limit on the nuclear operators, beyond which the state will take up the liability.

(Detailed explanation is provided in the latter part of this article)

Due to such high-risk and strict liability, the nuclear operators opt for third-party civil liability insurance which finds its root in either of the two forms:

A. National Insurance Pool:

To cover the potential liability of the nuclear industry, many insurers agreed to pool in their resources for the associated high-potential risks. A pool is where a group of insurance companies jointly participate to a fixed percentage in the insurance of a particular risk or class of business. These are created in the circumstances involving risks which, in practicality, cannot be provided by any individual insurer on a stand-alone basis. In most countries, national insurance pools have been formed based on the requirements laid down by the federal laws (based on international conventions), pooling together insurance for the domestic nuclear operators.

B. Mutual Insurance Associations: USA (the Nuclear Electric Insurance Limited) and Europe (the European Mutual Insurance for Nuclear Installations) have insurance associations which deal with the physical damage and liability in the event of a nuclear accident which is set up by the nuclear industry itself.

Principles or fundamentals governing Nuclear Liability Insurance:

In recognition of this exposure caused by nuclear accidents, international conventions and nuclear liability insurance were formulated in the light of the seven fundamental principles:

A. Strict Liability:

The operator is directly and strictly liable for the damage caused by the nuclear incident. The aggrieved need not prove that the operator was negligent or at fault.

Only the link between the damage caused and the nuclear incident needs to be demonstrated. The operator is liable for any damage resulting from a nuclear event at his installation, in principle irrespective of its cause.

B. Channeling liability to the operator (Exclusive liability):

All liability arising from the damage caused by a nuclear accident is channeled to the operator, thereby protecting the rights of the public. The operator is exclusively liable for damage resulting from a nuclear incident. He is held liable to the exclusion of any other person and regardless of who caused the damage. Hence, the damage is charged to the operator himself and not the suppliers. The channeling of liability might seem unfair as it means that the operator could be liable even if a third party were negligent or at fault. The victim of a nuclear incident can only present his claim to the operator of the installation causing damage or his insurer. Furthermore, such exclusive liability brings certainty in insurance claims as the compensation settlements would be quick and avoid costly and time-consuming claim procedures. Had the situation been otherwise, then insurers would have to hold separate pools or covers for every party involved in the nuclear reactor chain.

C. Limitation of liability in Time:

This is an important concept because the injury caused by a nuclear incident may not manifest for several years. Ergo, a limitation period is intended to help the claimant where the consequences may not reveal for several years; thereby not divulging them of their right to seek damage, and at the same time it protects the rights of the operators and insurers by not exposing them of liability for an indefinite period. For example, in the UK, the Nuclear Installations Act 1965 states that any claim made after 10 years (from the date of occurrence of the nuclear incident) but less than 30 years, will be made directly to the Government instead of the insurer or the operator.

D. Limitation of Liability in Time:

The amount of liability charged to an operator under the principle of strict and exclusive liability is capped to a limit to shelter them from the full risk amount. This concept is introduced to bring a balance or quid pro quo status against strict and exclusive liability. Beyond the limit, the state covers the liability amount.

E. Insurance or other financial security:

Operators are obligated to carry financial security to cover their potential liability amount in the event of a nuclear incident. Usually, insurance pools tend to third-party claims. However, in certain situations, operators take the liability on themselves and cover the same by providing financial security in the form of government guarantees, bank guarantees, letters of credit, mutual fund, operators' pooling etc.

F. Jurisdiction:

Jurisdiction over claim actions lies exclusively with the courts of the country where the nuclear incident occurred. The courts of other contracting states will not be competent to hear the claims. Judgments made by the competent court will be recognized and enforced in other contracting countries. This principle is only useful when many states have ratified either the same convention or a bridging convention. Victims may, on first impressions, see it as an advantage to be entitled to sue all possible parties in different courts for nuclear damage. However, it is pertinent in the victims' best interest to disburse compensation equitably.

G. Applicable Law:

The applicable law is the national law of the competent court that has jurisdiction. The federal law must also be applied without discrimination on the grounds of nationality, domicile, and residence. The applicable law principle helps prevent costly and lengthy arguments about which law applies, especially with regard to the complexities of the national and international rules surrounding the conflict of laws. Click here to read more.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions