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The tale of two liabilities

Operator liability is similar to an ex gratia award. Supplier liability is governed by the same rules that proved Union Carbide guilty.

delhi Updated: Aug 23, 2010 22:15 IST
Pramit Pal Chaudhuri
Pramit Pal Chaudhuri
Hindustan Times

Assume: A reactor blows up in India because of a defective component supplied by a foreign company. If the present nuclear liability Bill is passed, says its opponents, victims of this blowout will get compensation only from the Indian government, even though the government is not to blame. The foreign supplier of the component will get away scot-free.

The opponents are right about the compensation part. But the victim can also go to court and sue the supplier. In effect, he is eligible for double compensation.

He will get one regardless of who is to blame for the reactor blowout. This is “nuclear liability” and closer, in character, to an ex gratia payment during a natural disaster. The other compensation he will get through the much slower process of product liability law, where blame has to be proved in a court of law. Because the first type of liability is unique in providing for compensation regardless of who is to blame, the liability is capped. The second type, because blame is fixed, has none. This is left to judges to decide – as the Supreme Court has ruled.

What has happened in the debate over the Civil Nuclear Liability Bill has been the conflation of the two types of liabilities. So, you have some say nuclear liability means the supplier of a defective component will never have to pay for anything. Dead wrong.

You have others say only the taxpayer will have to pay as compensation for nuclear liability in India will, for decades to come, be government only. Wrong again.

Clause 17 on suppliers’ liability is an alien part of the Bill. The rest of the Bill is about “nuclear liability” as the international system knows it: compensation paid without any need to fix blame. Clause 17, put in because of public and political confusion, is about normal product liability, where blame is to be fixed.

Rather than trying to explain all this, the government seems to have concluded it’s better to try and contort the English language so that Clause 17 can do what it should do, namely, limit supplier’s liability because they are already liable under existing laws, while looking like it is doing what it should not do, which is make suppliers liable for liabilities even when they are not at fault.