Now that Japan’s Diet, as of November 21, 2014, has approved Japan’s ratification of the Convention on Supplementary Compensation for Nuclear Damage (CSC) and implementing domestic legislation, Japan presumably will soon deposit its instrument of ratification with the International Atomic Energy Agency (IAEA). Ninety days following such action by Japan, the CSC will enter into force, since its requirement for entry into force (a minimum of five ratifying parties collectively having at least 400,000 MW(t) of installed nuclear generating capacity) will have been satisfied. While the additional compensation aspect of the CSC’s impending entry into force has attracted global attention, less consideration has been given to the CSC’s impact on the nuclear liability of sellers and purchasers of components, nuclear fuel and related technology and services for the construction and operation of nuclear power stations. This client alert provides our views concerning the most significant near-term implications of the CSC’s entry into force.

Benefits for the Nuclear Industry -

While the long-awaited entry into force of the CSC—which was originally adopted by the participating countries and opened for signature in 1997—will clearly be a “watershed” event, the immediate benefits (and costs) to nuclear suppliers and purchasers will be relatively modest, except with respect to U.S. and other suppliers that are located in a country that has ratified the CSC; and provide products or services for the construction, operation, maintenance or decontamination/decommissioning (D&D) of a nuclear power station in a country that has ratified the CSC. Since only five countries (the United States, Romania, Argentina, Morocco and the United Arab Emirates) have ratified the CSC, Japan’s ratification of the CSC will cause the CSC, once in force, to be applicable only to nuclear incidents at facilities within those six countries, as well as certain nuclear incidents that occur during transportation of nuclear material to or from facilities in those countries. Unless additional countries that have leading roles as consumers or suppliers of such components, services and nuclear materials become parties to the CSC, the protective effect of the CSC will be geographically narrow. Progress toward the goal of near-universal adherence to the CSC is likely to be quite slow, especially in view of the apparent reluctance of the Western European countries to become CSC parties.