| Discussion with NDA | | Print | |
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The NIA Suppliers’ Consultation Forum (the “Forum”) has been engaged with two consultation workstreams on behalf of NIA members: (1) with the DTI regarding the forthcoming amendments to the Nuclear Installations Act 1965 (the “Act”) and (2) with the NDA on a variety of legal / commercial issues. DTI consultation The Forum met with David Rutland, a member of the nuclear liabilities policy team within the DTI, and John Harris, a lawyer assisting the DTI in relation to the amendments to the Act on 4 July 2006. In 2004, amendments were agreed by the contracting parties to the Paris Convention on Third Party Liability in the Field of Nuclear Energy 1960 (the “Paris Convention”) and the Brussels Supplementary Convention 1963 (the “Brussels Convention”) (together the “Conventions”), and which are a fundamental reform. The Conventions are incorporated into the UK legislation by the Act. There was an agreement in the EU Council of Ministers that all EU member states that are contracting parties would do their best to implement the amendments by December 2006. The UK will not be in a position to amend the Act by December 2006. The current estimate is that it may be ready to do so by July 2007. The DTI are aiming to undertake a full public consultation of the amendments to the Act towards the end of this year and it is anticipated that the Forum will have a further meeting with DTI to provide feedback from NIA members as part of that consultation. The Conventions establish a strict, no fault and exclusive liability on nuclear operators in the event of nuclear damage subject to a financial and a time limit for claims. The Paris Convention channels liability to the nuclear operator and the Brussels Convention to the Government, albeit that both Conventions compensate the same type of damage. The current limit of liability for a UK operator is £140 million and the limit of liability for Government is 300 million Special Drawing Rights (approximately £240 million). The operator has to give a financial guarantee, usually through insurance for its liability. Operators in the UK are currently liable for 10 years and claims beyond 10 years are the responsibility of the Government, for up to 30 years. The ability to claim compensation currently only applies to countries that are parties to the Conventions. The amendments are more fundamental than a simple increase in the financial limits. Operator liability has been increased from £140 million to £500 million and state liability has increased from £240 million to £1000 million. In addition, the heads of damage have been widened: Previously, the types of claim which could be made were restricted to damage to property, personal injury and death. Now the Conventions cover environmental damage and the economic consequences thereof. Time limits for claims will increase from 10 years to 30 years for personal injury. More types of facilities are covered and the range of beneficiaries has widened. The Paris Convention no longer benefits only the contracting parties: non-nuclear states, parties to the Vienna Joint Protocol and states offering equivalent reciprocal benefits, may all now make claims in the UK courts. Governments may also now bring representative actions on behalf of victims. A particular difficulty is the insurability of the expanded heads of damage and the increased time limits for claims. It remains to be seen how DTI will provide for financial guarantees in the absence of insurance, especially for those site licence companies that are in contract with the NDA. Discussion with the NDA As a second and further ongoing consultation stream the Forum prepared a detailed list of issues for discussion with the NDA at a meeting with Mark Leggett and Fiona Hammond on 5 September 2006. The minutes of that meeting are available on the NIA website. The list is also available to members on the NIA website and includes for example an in depth supply chain response to the application of CT-15 as well as an examination of some broader commercial themes. The NDA are in the process of developing its new Parent Company Agreement (“PCA”) with Site Management Companies (“SMC”) and also examining changes to the existing M&O Contracts with the Site Licence Companies (“SLC”). It is hoped that both will be completed by April 2007 with a draft available for comment before Christmas this year. With the encouragement of the NDA and as part of the NDA consultation, ahead of publication by the NDA of its new PCA, the Forum are facilitating Tier 1 meetings with SMCs, aspirant SMCs and SLCs with a view to discussions with the NDA in parallel with the continuing consultation with NDA on specifically supply chain issues. So far as the latter is concerned the NDA have agreed to a further meeting to discuss the CT-15 response but believe that many of the concerns that have been expressed will be addressed in the revised contractual arrangements. The discussion with NDA covered issues such as bid cost recovery, tax efficient contract structures, NDA micro-management of SLC, consistency of flow down terms as well as the issues of liability and application of EU procurement rules and a summary of the discussion on those two issues is now set out. Liability Currently the liability of SMC to the NDA is unlimited for Disallowable Costs and limited to loss of the Fee for Allowable Costs of the SLC. The Forum highlighted that unlimited liability is unlikely to be acceptable in the new market place. The NDA acknowledged that its intention is that there would be a limit of liability in the PCA commensurate with the level of reward; that cash flow for the SLC would be neutral with no expectation of pass-on of pre-transfer liabilities or a need for any significant working capital requirement from SMC. So far as nuclear liability is concerned the NDA reiterated its previous promise to correct defects in the current drafting and provide retrospective protection to the supply chain contractors. EU procurement rules The Forum raised with the NDA the question of whether post the first round of Tier 1 competitions SLC will be a contracting authority for the purpose of the EU procurement regime. The NDA acknowledged the issue and confirmed that it was carrying out its own research the result of which was not yet known. However, it was currently felt that compliance with the EU rules was the prudent course of action. We believe that this is an important time for industry to express its views on a range of important legal and commercial issues and encourage NIA members to engage on the consultation workstreams now being undertaken by the Forum.  ...and an artist’s impression of a decommissioned Dounreay, one of the sites to be affected by contracts to be competed under the NDA |
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