Nuclear Installations (Liability for Damage) Order 2016

Lord Grantchester Excerpts

Wednesday 27th April 2016 Grand Committee

I do not believe that that is sufficiently precise at a couple of levels. First, I have never heard of that exchange rate. Google has not heard of it. There are many different and very successful commercial ways of defining exchange rates like that. Secondly, it does not say whether it is a bid, an offer or even a mid-market exchange rate. I think that that article could do with a fresh look, or perhaps I have missed something and I should be grateful to be corrected by the Minister.

[Lord Grantchester (Lab)]

My Lords, before I begin my remarks on the order before the Committee today, I should like to start by congratulating the Minister on his visit to New York last week to sign the Paris agreement on climate change on behalf of the United Kingdom. I trust that it was a wonderful experience as well as an honour to sign on our behalf, and I am sure that he will not mind me reminding him of this from time to time during our debates in future. Regarding the signing, perhaps I may ask him whether there are further legal requirements to make the Paris agreement operational. Is there a need for formal parliamentary ratification or, indeed, for possible amendments to the Climate Change Act down the line?

However, returning to more normal events, I thank the Minister for his introductory explanation today. The order is a lengthy document, and he has given the Committee an excellent summary. The instrument amends the Nuclear Installations Act 1965 in order to update and extend changes following the Paris agreement, as he has mentioned, and the Brussels supplementary convention, to both of which the UK is a signatory. The order covers the aspects of insurance liabilities for nuclear operating companies and how they are changing. As the Minister said, the powers to make the order come from the Energy Act 2004.

In the other place, questions focused on the decision to phase in higher levels of cover, from €700 million to €1,200 million, over five years, and whether that should be speeded up. The questions also covered the higher and lower aspects of the transport risks of materials and the pricing costs around the Hinkley Point deal. These were very helpful, and I understand the responses made by the Minister there, especially on the problems with pricing mechanisms where there is little or no track record of claims dealing with low-probability outcomes. The fact that any outcome could have high impact adds to the complexity.

At this point, I should declare my interests as a dairy farmer in Cheshire as I reflect that my reading of the order was made poignant by remembering the effects on farmers in north Wales at the time of the Chernobyl accident in the Soviet Union, when rain from the east deposited radioactive sediment on grass consumed by livestock in that area. At the time, there were thoughts that the land might be contaminated for several decades. Therefore, in noting the new category of,

“Loss of income deriving from a direct economic interest in any use or enjoyment of the environment”,

for which the example of “fishermen and cockle-pickers” is cited, I assume that this would also apply to farmers who have grazing on common land. Are there any definitions around “insignificant” in paragraph 7.14 of the Explanatory Memorandum, which states that,

“the impairment must not be ‘insignificant’”?

Any comments that the Minister could make on that would be helpful.

Following on from that, I also note the new category “Costs of preventive measures”, in paragraphs 7.15 and 7.16 of the Explanatory Memorandum, to mitigate the damage that might result from an incident. Here I could envisage a situation where the contamination of a large area could lead to food retailers refusing to take supplies of agricultural produce as a precaution, even though certain products could be said to be uncontaminated. Can the Minister say whether this situation would be compensatable?

The Explanatory Memorandum also explains the concept of an “occurrence” and cites the Magnohard case. Paragraph 7.31 explains that the order makes specific provision to address the point and that,

“the court took an expansive view of the meaning of ‘occurrence’ … The Order … does not adopt as broad an approach”.

Is the Minister able to explain why and what is the effect of this? The memorandum is silent on this point.

Lastly, I have a simpler question. The order requires that nuclear operators assume full responsibility for any breach, that insurance cover is to rise to new levels and that liability is extended to 30 years for claims for personal injury. The Explanatory Memorandum states:

“The Government will, subject to any EU or UK legal requirements such as state aid … fill any gap in cover”.

It is understood that such a gap may exist regarding extension to 30 years for claims for personal injury. Given that personal conditions and physical reactions can take several years to develop and can be severe and costly, will the Minister confirm that the Government will be providing the shortfall of cover in these circumstances? This will be a matter of prime public interest.

The UK has one of the strongest nuclear regulatory regimes in the world. Even as new reactor designs are developed, we can be confident that regulatory regimes will continue to maintain and improve all aspects of safety at nuclear installations. I am happy to approve the order before the Committee today.

[Lord Bourne of Aberystwyth]

My Lords, I am very grateful to noble Lords who have contributed to this debate and thank them for their general support. I reiterate that the United Kingdom has a very strong record both on nuclear safety and on protection in the event of a nuclear accident. I shall try to deal with the various points that have been raised by noble Lords.

First, I thank the noble Earl, Lord Kinnoull, for his comments and general support. I am most grateful for that. I reiterate that we have very strong performance in the London insurance markets—and, indeed, internationally, as this is not limited to just the United Kingdom—and he is right that the competitive element, not just in the UK but internationally, will help to ensure that standards are even better than before. On the noble Earl’s precise question on Article 37, I confess that I am not nearly as expert as him in these areas of the London closing exchange rate. I shall endeavour to find out and provide him with a more precise answer than the one I am now giving, but I would anticipate that either it is custom and practice that there is a particular exchange rate closure on a particular day or that there is a definition elsewhere that is cross-referred in the order. We are definitely checking that and the team will provide me with an answer. I shall write to the noble Earl and copy in the noble Lord, Lord Grantchester.

I thank the noble Lord, Lord Grantchester, very much for his typically kind and generous comments about signing the Paris agreement. It was indeed a great privilege to be there signing the agreement for the United Kingdom. I am conscious of the amount of hard work that has been done by many people, not just within the United Kingdom, but clearly within the United Kingdom cross-party—and, indeed, beyond party—that made all that possible, building on the success at Paris. The most challenging part of the whole ceremony was avoiding Zimbabwe—sitting straight behind us in the shape of Robert Mugabe. That apart, it was a very enjoyable and significant occasion.

The noble Lord asked whether the signing had a particular impact and when the agreement will come into place. It will come into place when 55 states have ratified, out of the 185 that concluded the agreement in Paris. I should say that 175 countries signed on day one, but they have to go through their internal ratification procedures, so it is 55 states representing 55% of emissions worldwide. As he and other noble Lords will know, the European Union made a joint statement on the position with regard to meeting the targets. Therefore, because the United Kingdom is part of the European Union, our position on ratification is that we will not ratify—and therefore the European Union will not ratify, because it depends on unanimity—until we have agreement on the effort share among the 28 member states. Work on that has begun.

The noble Lord referred to the coverage of the order. As he rightly said, it also covers Hinkley and is designed to cover potential new sites, as I think I said initially. He mentioned Chernobyl. Of course, there have been two major international nuclear incidents, of which Chernobyl was one; Fukushima was the other. The impact of Chernobyl, as he rightly said, was felt in north Wales—as I know—Cumbria and parts of Scotland. The increased protection that we have here will not help in that regard because Ukraine is not a party to this convention. We would be thrown back on to international law because Ukraine is not a party to the other major treaty either, the Vienna treaty, which has a less generous compensation regime.

The noble Lord asked why we are saying that it has to be something “significant” and therefore ruling out incidents that are “insignificant”. This is a fairly common legal practice—a de minimis situation to stop something that is so minor—to prevent vexatious litigation. I think that is the thinking behind it. He also asked whether this would allow claims by the likes of grocery shops, butchers and so on if there were a nuclear incident like Chernobyl in a member state of the convention. I think there would be an issue—I am treading very carefully because the noble Lord, Lord Faulks, is sitting close by—about the remoteness of damage and how far down the chain you can go in such a situation, but I will write to the noble Lord.

[Lord Grantchester]

I may be able to help the noble Lord, in so far as I think that third-party traders may not be affected. I meant the produce from that area may be affected, even though it could not be said to be contaminated, because of a general ban on products from that area getting into the food supply chain.

[Lord Bourne of Aberystwyth]

I thank the noble Lord for that clarification. I think there are two issues in relation to that. One is indeed the remoteness: it would be a question of how far down the chain you could go in terms of liability. I did refer the noble Lord and other noble Lords to the fact that this new protection allows for the costs of preventive measures where there is a grave and imminent threat of nuclear damage and consequential compensation. I think that might cover it. The noble Lord raised a specific issue about Magnohard. I will write to him on that to give him a definitive answer.

I am grateful for noble Lords’ help and their broad acceptance and approval of the order. This is a more generous system. It is widely welcomed. It provides added protection and characterises our approach to nuclear energy.

[Lord Grantchester]

Has the Minister had confirmation from the officials behind him that the Government will be picking up any gaps regarding personal injury claims being extended to 30 years?

[Lord Bourne of Aberystwyth]

I thank the noble Lord. I had written that down in my notes but I missed it. Yes, we will. I covered that in my introduction, I think. I said that we will fill that gap until the commercial market is able to take over. We will be making a commercial charge to cover that, but we will certainly fill that gap.

I commend the order to the Committee.