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BREXIT AND EURATOM: NO RUSH TO EXIT?

As the UK government moves towards the formal process to exit the EU, Jonathan Leech and Rupert Cowen consider the implications of Brexit for the nation’s membership of the European Atomic Energy Community (Euratom).

We would challenge the view that withdrawal from Euratom is inevitable, at least at this stage, and consider how the government’s approach now may help or harm its ability to minimise disruption to the UK’s position within the global nuclear community.

It is clear from Theresa May’s speech on 17 January that the government sees little room for compromise in exiting the EU – there is to be no “partial membership of the European Union, associate membership …, or anything that leaves us half-in, half-out. … We do not seek to hold on to bits of membership as we leave.”  It is also clear that Government is committed to re-establishing the supremacy of UK law within the UK. “Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast. And those laws will be interpreted by judges not in Luxembourg but in courts across this country. Because we will not have truly left the European Union if we are not in control of our own laws.

Where does this leave UK membership of Euratom?  Created alongside the European Economic Community in 1957, Euratom has long shared the institutions of the EU but continues as a separate and legally distinct entity.  Remaining in Euratom would entail partial membership of EU institutions and would leave significant areas of UK law subject to directives and regulations made in Brussels and (ultimately) interpreted in Luxembourg.

A rapid exit from Euratom could however do serious harm to the UK nuclear industry.  One of the most significant aspects of Euratom is its role in establishing members’ credibility and acceptability within the global nuclear community.  Many of the nuclear co-operation agreements relied on by the UK are in fact Euratom agreements.  Where the UK has current bilateral nuclear cooperation agreements in place, those agreements are predicated on application of the Euratom safeguards regime within the UK. Nuclear cooperation agreements can take much time to put in place, possibly longer than the two-year negotiating window provided by the Article 50 process.

Without adequate arrangements in place for international cooperation, including safeguards to provide assurance that nuclear materials and technology will be applied only for peaceful purposes, in many cases it would not be a matter of trade on unfavourable terms – but simply of no trade at all.  This could have serious implications within the UK for nuclear new build and the nuclear fuel cycle, and also for progress in dealing with the UK’s waste and legacy decommissioning liabilities.

Some commentators assert that a UK exit from Euratom is an inevitable consequence of triggering Article 50 to exit the EU. This would place the UK in an invidious position. In addition to untangling all other aspects of Euratom without prejudicing UK interests, it would require wholesale replacement of the UK’s current nuclear cooperation agreements (including arrangements within the Euratom Treaty itself) within the fixed two-year timetable.

All of this would have to be done in the face of an automatic hard exit at the end of that period unless all other members unanimously agree an extension. It may be that, on a political and practical level, ultimately the UK has no real choice other than to exit Euratom and Theresa May’s statements this week certainly point to this. However, put simply, accepting the view that a Euratom exit is automatic would convert the challenge of untangling Euratom within the two-year exit timetable from a shared problem faced by all Euratom members to a UK problem with a UK deadline. This is neither a necessary nor a strong position from which to open negotiations.  It is also not what the Euratom Treaty says.

There is no legal link between the triggering of Article 50 under the Treaty on European Union and an exit from Euratom.

The point turns on the meaning of Article 106a of the Euratom Treaty, which states that (amongst other things) Article 50 of the Treaty on European Union “shall apply to this Treaty”. Article 106a then goes on to explain how Article 50 is to work in context of Euratom – inserting references to Euratom and the Euratom Treaty in place of references to the EU and EU Treaties. Re-writing Article 50 in this way creates a similar but separate exit process.

If Euratom was to be included in a single Article 50 process then Article 106a of the Euratom Treaty would simply have added references to Euratom into Article 50, retaining references to the EU. It does not do this. Triggering exit from the EU therefore has no legal effect on the UK’s membership of Euratom.

There is no legal need for the UK to trigger a Euratom exit at the same time as leaving the EU, or at all.

Aside from the benefits of Euratom membership and the complexity of withdrawal, the objectives set out by the Prime Minister in relation to control of our own laws and control of immigration are of particular relevance to any decision on the need for, and timing of, a UK exit from Euratom.

Remaining within Euratom would of course preserve supremacy of European law over UK law, but only in a very specific field where UK law is ultimately driven by a raft of international treaties and standards and will inevitably remain so.

In the context of immigration, the Euratom Treaty establishes a specific nuclear common market.  The freedoms on which the nuclear common market are based are, however, very different from those underpinning the Single Market. Euratom members must not restrict the rights of nationals of any other member “to take skilled employment in the field of nuclear energy” (Euratom Treaty Article 96) or apply “restrictions based on nationality … to … persons … under the jurisdiction of a Member State, where they desire to participate in the construction of nuclear installations …” (Euratom Treaty Article 97). This is far removed from the free movement of persons without internal frontiers required by EU membership.

Given that there is no legal necessity to trigger a Euratom exit now, arguably there is little to gain and much to lose by doing so. That is not to say that long term UK participation in EU institutions solely for the purposes of Euratom would not itself present challenges, but there is no need for the UK to back itself into a corner and face a cliff edge created by an immediate two-year Euratom exit timetable. Neither is there any need to add nuclear law and cooperation to the already vast list of issue to be dealt with in negotiating terms for withdrawal from the EU.

Instead, any Euratom exit could form part of the “phased process of implementation” advocated by Theresa May for areas such as the future legal and regulatory framework for financial services. Crucially this would allow sufficient time for the UK to negotiate replacement nuclear cooperation agreements and address safeguarding and other requirements without the risk of a destabilising hiatus in international nuclear trade and cooperation.

Rupert Cowen

Rupert Cowen joined Prospect Law having been a partner at Hammonds and then Dentons’ London energy and infrastructure practice. He has worked in various countries on nuclear projects for the developer vendor and has drafted for and provided ongoing guidance to those creating or revising national legal regulatory frameworks. He is recognised as a leading expert in international nuclear law and regulation; he lectures on a frequent basis around the world and has published papers on various aspects of nuclear regulation, particularly nuclear waste strategies.

Jonathan Leech

Jonathan Leech was a partner in Dentons energy practice before joining Prospect Law’s Projects, Energy and Natural Resources team in September 2016. He is a solicitor specialising in project and infrastructure work, with particular emphasis on the energy, nuclear and utility sectors. His work includes advising on legal and contracting strategies and regulatory issues associated with major nuclear development, decommissioning, waste and reprocessing projects, energy infrastructure and other utility and infrastructure related projects.

This article was originally published in World Nuclear News on 20th January: http://www.world-nuclear-news.org/V-Brexit-and-Euratom-No-rush-to-exit-20011701.html

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.  

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

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HINKLEY POINT GO-AHEAD: HAS THE “GOLDEN ERA” IN UK/SINO RELATIONS BEEN MAINTAINED?

The UK government has given the go-ahead for construction of the nuclear power station at Hinkley Point.  Although there is to be no amendment to the commercial terms of the project, to be built by EDF with co-investment from the China National Nuclear Corporation (CNNC) and China Guangdong Nuclear Power (CGNP), there are to be “new rules governing foreign investment in critical infrastructure”.

In undertaking a review of the “public interest” test in the Enterprise Act 2002, determining when Government can intervene in significant deals, the impact of the nuclear programme is uncertain.

We are told that in future there will be:

  • …[a]…”legal framework for foreign investment in critical infrastructure”; and
  • “…additional security scrutiny to which the government plans to subject future nuclear projects…”.

The first of these, whereby the government will in future hold a golden share in all nuclear power projects, is unexceptional.  But of more concern, potentially to Beijing, is the as yet unclear nature of additional security scrutiny.

China agreed to invest £6bn into Hinkley Point so as to be able to build its own reactors in the UK as a shop window for its capabilities.  None of the major components in the Hinkley power plant, all of which have already been procured, will come from China. Should additional regulatory scrutiny restrict China’s other nuclear ambitions in the UK, notably a planned power plant at Bradwell, it could jeopardise the rationale for Chinese investment at Hinkley Point.  EDF has warned that, without Chinese money, it may not proceed with the Hinkley scheme.

Although the concerns of security chiefs and Nicholas Timothy, the prime minister’s adviser, have been addressed with a compromise that avoids an outright block, there is no clarity on the extent to which China is to be encouraged to play a strategic role as an investor in the UK nuclear programme.

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.   

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact Edward de la Billiere on 01332 818 785 or by email on: edlb@prospectlaw.co.uk.

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HINKLEY POINT C: DECISION DELAY

“At its meeting on 28 July 2016, EDF’s Board of Directors made the final investment decision and gave the President the authorisation to ensure its full execution in the framework of the signature process of all the contracts and agreements necessary to build the two nuclear reactors at Hinkley Point C (HPC) in Somerset, in south-west England.” So reads EDF Energy’s press release.

However, the decision has suffered a last minute hitch with Business Secretary Greg Clark now saying that the government will “consider carefully” before backing it, much to the consternation of EDF’s CEO and no doubt many others.

After months of delays, rumours and counter rumours, two senior executive resignations, and voicing of serious reservations by the French unions, the board of EDF has finally given approval to its two-thirds share of the £18bn construction cost of Hinkley Point C nuclear power plant.

This is certainly a major decision by the French utility giant. Not only is it investing in a country which has recently decided on Brexit from the European Union, but one-third of the finance is being stumped up by the Chinese. Much has also been made of the £92.50 per megawatt-hour “strike price” the UK government has guaranteed it will subsidise, with the National Audit Office saying that future top-up payments would rise from about £6bn to nearly £30bn over the 35-year length of the contract. This does not necessarily mean the consumer will pay more than it would have done – estimated at £10 per year – because of the way the plant is financed.

Hinkley Point C will comprise two European Pressurised (water) Reactors (EPRs) providing 3200 MW(e) or 7% of the UK’s electricity supply for 60 years. By comparison, its neighbours the Hinkley Point B twin Advanced Gas Cooled Reactor delivers 955 MW(e) but will close in 2023 after 47 years operation, and the first generation Hinkley Point A delivered ~470 MW(e) between 1965 and 2000. If successful, more EPRs will follow at Sizewell in Suffolk to add to the ones under construction in Finland, France and China. The ones currently under construction have faced various well publicised difficulties, but EDF and its Chinese partners clearly have the confidence that these will be overcome by the time Hinkley point C starts its 10-year construction period in 2019.

It is interesting to note that it is financial risk which is causing most detractors of the project their concerns, rather than nuclear risk; even Greenpeace’s executive director focused on the “terrible value for money”. This is despite the events at Fukushima-Daiichi and other countries moving away from nuclear such as Germany, Switzerland, Japan and, of course, Scotland.

So what benefits may the development of Hinkley Point C bring? A quick look at EDF Energy’s website and you will see a plethora of statistics: 25,000 employment opportunities over its 10-year construction, £100m per year into the regional economy at peak construction with £40m per year during its operation, and more than 60% of the construction value will go to UK suppliers.

Hinkley Point C will also contribute to the UK’s obligations to meet its emission reduction targets, along with solar and wind power, but, crucially, it will provide baseload power which some sources of power cannot.

Why is the UK government now apparently having second thoughts? No doubt there is more to this perhaps than meets the eye. There has been talk of security concerns this morning, centering on the involvement in the Hinkley Point C project of a major Chinese state owned enterprise. The Government is now saying that its final decision will be made in the “early autumn”. Heathrow’s third runway decision has also been deferred until around then. We will continue to monitor the situation.

Prospect Law and Prospect Advisory provide legal and business consultancy services for clients involved in the infrastructure, energy and financial sectors.

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact Edward de la Billiere on 07824 506 022 or by email on: edlb@prospectlaw.co.uk.

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THINKING OF GOING NUCLEAR? SMALL MODULAR REACTORS (SMRs) IN THE UK

In 2014, a National Nuclear Laboratory (NNL) led consortium published a feasibility study for the Department of Energy and Climate Change (DECC).

In summary, this considered whether the UK should develop its own SMR design, either alone or in partnership, or purchase an existing design. The report concluded that there is an opportunity for the UK to regain technology leadership in the ownership and development of low-carbon generation and secure energy supplies through investment in SMRs.

The Government announced in the Chancellor’s 2015 Autumn Statement that DECC will invest £250m in an “ambitious nuclear R&D programme designed to make the UK a global leader in innovative nuclear technologies”. In March of this year, it announced the first phase of a competition which would gauge market interest among SMR developers and potential investors, eventually leading to identifying the best value SMR design for the UK.

But why would the UK want to invest in SMR’s when there are plans for new reactors to be built at Hinkley Point in Somerset, Sizewell in Suffolk, Wylfa on Anglesey, Oldbury in Gloucestershire, Moorside in Cumbria and Bradwell in Essex?

These sites have not yet received their final investment decisions and not all have completed their regulatory review through the Generic Design Assessment process. The first of these new reactors is not due to be commissioned until 2025 and the Government aims to have 16 GW(e) installed capacity by 2030; SMR deployment could supplement this by a further 7 GW(e).

It is interesting to note that the Government welcomes the diverse approach of several different reactor designs for the large scale projects; however, with respect to SMRs it just wants to choose one. Thirty-eight companies submitted expressions of interest to the Government’s competition and it is reported 33 will go through to the next stage.

It should also be noted that no SMR has yet been licensed and built anywhere in the world, although several are under construction. So a key step in the UK case is that the chosen design will need to go through the GDA process, which to date takes about five years. This means construction of the first SMR could also be achieved by 2025 with commissioning by 2030.

Not only will this help with the UK’s low-carbon policy, but success in the UK will undoubtedly lead to it becoming an exporter of the technology and UK manufacturing getting a good slice of the anticipated £250-450 billion global market.

Prospect Law provides a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article remains the copyright property of Prospect Law and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law.                                                                                                                                                                  

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THE IMPACT OF BREXIT ON THE UK NUCLEAR AND RENEWABLE ENERGY SECTORS

Brexit has become reality. No member of the EU has ever decided to leave, so the process of withdrawal is untested, although the vote for Brexit is only the start – not the end – of a process which may or may not, result in complete withdrawal. The position of the UK at the end of this process is as yet unclear.

It is important to understand that until the process of withdrawal is complete the UK continues to be a full member of the EU and remains subject to EU law.

The Main Question: Trading Relations and the Single Market
The main questions to be resolved between the UK and the EU will relate to trading relations. The extent to which applicable law will be capable of change depends on whether the UK wishes to enter the European Economic Area, with continuing reciprocal market access. This question was not a matter for the referendum and will be decided by Parliament following negotiations with the continuing states. The degree to which EU laws and regulations will need to be unpicked depends on those negotiations.

It is the trading relationship between member states and the UK as a non member state that will determine the extent to which the UK is required to maintain current EU legislation.

It is too early to have any view as to the likely relationship that the UK will have with the EU and, while it is possible to draw parallels between the EU’s current arrangements with states outside the EU, none of these can be said to offer a precedent. No indication has been forthcoming from the EU as to what terms may be on offer, and indeed there will, inevitably, be differing views between members states each of which hold a veto.

Fundamentally, if open access to the EU market is to be maintained through membership of the EEA / EFTA, the UK will have to agree to the free movement of goods, services and, in theory at least, labour – a compromise which, if carried through to reality, would seem to perpetuate the primary concerns of those who have recently voted to leave the EU.
Against this developing background we have sought to consider some of the issues likely to be relevant to those working in the nuclear and renewable energy sectors in the UK.

Nuclear Energy
The nuclear sector is most affected by safety and environmental law, which is governed by a number of layers. International treaties, conventions, EU directives, EU regulations, and laws established by the devolved administrations. Withdrawal from the EU will not mean automatic repeal of these various layers.

International treaties, such as the Paris and Brussels Conventions, and the domestic enabling legislation, the Nuclear Installations Act, are independent of EU legislation and will continue unchanged.

The Euratom treaty is also an independent legal treaty which, although entered into at the same time as the Treaty of Rome creating the EEC, remains independent from the subsequent Maastricht and Lisbon Treaties. The Euratom treaty is however, administered by the European Commission on which, following withdrawal, the UK will cease to have representation. The UK and the remainder of the EU will undoubtedly wish for the UK to remain subject to Euratom and therefore this is an area for future discussion.

EU directives are directly applicable in states and require domestic legislation to implement them, whereas EU regulations apply once in force. The domestic legislation implementing EU directives is made under specific legislation which can be repealed. There will have therefore, to be an evaluation exercise as to whether EU laws should be replaced by similar laws or repealed.

Renewable Energy
The UK commitment to the Kyoto protocol and the Climate Change Act 2008 is unlikely to be revoked and so, policies to encourage the generation of power through low carbon sources will continue.

It will be difficult for the UK to have substantially different policies to the remainder of Europe on global issues such as decarbonisation and cross border energy distribution if any trading relationship is to be maintained.

One area of concern is energy subsidy, where EU funding has provided an element of the financing for ROC and FIT. These will need to be covered by the UK government if continuity of projects currently under development is to be maintained.

Conclusion
At present, without further clarity being provided as to either the timetable for or the actual extent of the planned UK withdrawal from the EU, it is difficult to offer precision in relation to the effect of Brexit on these sectors. We are monitoring developments and will begin to prepare regular bulletins as to how clients should consider protecting themselves.

Introduction to Prospect Energy and Prospect Law
This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For more information please contact Edmund Robb on 01332 818 785 or by email on: er@prospectlaw.co.uk

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THINKING OF GOING NUCLEAR: SMALL MODULAR REACTORS (SMRs) EXPLORED

In this series of blogs, we look at a major decision a country would need to consider before pursuing the nuclear option for energy generation; the choice of reactor.

The alternatives are the so-called small modular reactors (SMRs), or the full scale offerings. With the latter, there is then the choice of vendors of which there appears to be no shortage, a subject we may cover at another stage. However, to date no newcomer country has opted for an SMR.

It is first of all worth explaining what an SMR is. “SMR” can stand for either “small modular reactor” or “small and medium sized reactor”. However, the “modular” acronym seems to have come into wider use these days, and will be used here.

An SMR is usually defined as an advanced reactor with 300 MW(e) to 500 MW(e) output, whereas the full scale modern varieties are around 1000 MW(e) to 2000 MW(e) output. By way of comparison, EDF Energy’s Sizewell B PWR and its Advanced Gas Cooled Reactors have ratings around 1200 MW(e), and the older Magnox were between 50 MW(e) and 490 MW(e) (these would never be described as SMRs as they were not “advanced” in their design).

SMRs can be deployed either singly or in multiples to build up to the required capacity. Deploying single units will be convenient for countries with dispersed centres of population but without any grid connection between them. Moreover, as well as power supply for homes and businesses, they can be utilised for heavy industry purposes including process heat and desalination. Being modular, new units can be added to a suite of existing ones when needed, or when further finance becomes available (which can be generated from the profits of the existing ones).

As with the larger reactors, there is a large range of designs of SMRs – up to 45 according to the IAEA. They fall into four broad categories: light water cooled reactors, high temperature gas cooled reactors, molten salt and liquid-metal (sodium or lead) cooled fast reactors.

Additional advantages of SMR’s include:

Ease of Construction: They can be factory built and transported on the back of a truck or railcar to site, thus assuring the construction programme and minimising the need for onsite activities. The Russians even have floating designs – not to be confused with nuclear propelled vessels which have been around for some time.

Affordability: Being smaller, they are more affordable and open up a number of financing models.

Safety: The advanced design means they have inherent and passive safety features which have fewer moving parts that can go wrong and a reliance on natural circulation of the coolant if something does.

It’s not just newcomer countries that are interested in SMRs. Those with existing nuclear programmes, such as the US and Russia, are also looking at their use, as is the UK. The total global market is estimated to be between £250 and £400 billion.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.
For more information please contact us on 01332 818 785 or by email on: info@prospectlaw.co.uk

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HINKLEY POINT C: UK IN “NON-COMPLIANCE” WITH ESPOO CONVENTION

The UK has been found in “non-compliance” with its obligations under the Espoo Convention, a treaty that requires signatories to discuss major activities likely to have a cross-border environmental impact.

In February the Implementation Committee of the Convention of the Environmental Impact Assessment in a Transboundary Context investigated complaints from Belgium, Spain, the Netherlands and Norway, who alleged that an accident at Hinkley Point would have the potential to cause serious pollution across Europe, and that the UK had failed to properly consider the possible impact of such an incident.

The committee informed the Department of Communities and Local Government of their “profound suspicion” that the UK had fallen foul of the convention, which has been in force since 1997.

The UK has long argued that as the Hinkley Point C Project is unlikely to create a “significant transboundary environmental impact”, there is no need for discussions with European neighbours. However, the UN Economic and Social Council have now found the UK to be in “non-compliance” with Article 2, Paragraph 4 and Article 3, Paragraph 1.

The Council recommended that the UK:

  • Endorse the committee’s view that the UK is in “non-compliance” with the convention in relation to the planning of the Hinkley Point C project.
  • Engage in discussions with those parties likely to be affected by the Hinkley Point C NPP, including those “that cannot exclude a significant adverse transboundary impact from the activity at HPC”.
  • Report back to the Committee on the progress any such discussions.
  • Send notifications to all parties that could potentially be affected by an incident at any other Nuclear Power Plant they may plan, bearing in mind the worst possible scenario.

The planned total capacity of the Hinkley Point C Nuclear Power Plant is 3.2GW, enough to cover 7% of the UK’s electricity needs. However, EDF Energy, the French developer with responsibility for the project, recently announced that they are unlikely to make a final investment decision on whether to build the Nuclear Power station until September.

In light of this latest setback, whilst some do question the likelihood of Hinkley Point C ever materialising, it should not be forgotten that the Horizon Nuclear Power and the NuGen projects continue to proceed. Further, in addition to the Chinese funding of Hinkley Point C and Sizewell C, they have aspirations to build their own HPR1000 design at Bradwell – it will be interesting to see if this ambition will survive a negative EDF decision.

Report of the Implementation Committee of the Convention of the Environmental Impact Assessment in a Transboundary Context on its thirty–fifth session:

http://www.unece.org/fileadmin/DAM/env/documents/2016/EIA/IC/ece.mp.eia.ic.2016.2.advance_unedited_8Apr2016.pdf

Introduction to Prospect Energy and Prospect Law

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.           

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For more information please contact Edward de la Billiere on 01332 818 785 or by email on: edlb@prospectlaw.co.uk.      

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NUCLEAR INSTALLATIONS (LIABILITY FOR DAMAGE) ORDER 2016: IMPLICATIONS FOR THE UK’S NUCLEAR LIABILITIES REGIME

After some 12 years of discussion and development, the Nuclear Installations (Liability for Damage) Order 2016 was made on 4 May 2016.  The Order will change the UK’s nuclear liabilities regime, implementing the 2004 Protocols to the Paris and Brussels Conventions on nuclear liabilities.  Those Protocols were themselves a response to the 1986 Chernobyl disaster and a realisation that existing compensation provisions are inadequate.

In essence the Protocols and the Order will make more compensation available to a wider class for wider heads of loss.

  • More losses covered, including reinstatement of impaired environment, loss of income derived from the environment and cost of preventive measures.
  • More potential claimants, including those suffering damage in a non-convention state with no nuclear installations.
  • Increased liability caps, from the current cap of £140m up to €70m, €160m or €1200m, depending on the category of installation, and €80m for incidents in transit.
  • Inclusion of disposal sites.
  • Increased limitation periods, including 30 years for death and injury and 10 years for other claims.

The Order will come into force when the Protocols themselves come into force.  These have been subject to repeated delays due to the need to synchronise ratification by EU member states and to ensure that adequate insurance cover is available to meet the increased extent and duration of potential liabilities.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.       

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

Rupert Cowen has worked in various countries on nuclear projects and has drafted for and provided ongoing guidance to those creating or revising national legal regulatory frameworks. He is recognised as a leading expert in international nuclear law and regulation; he lectures on a frequent basis around the world and has published papers on various aspects of nuclear regulation, particularly nuclear waste strategies.

For more information please contact us on 01332 818 785 or by email on: info@prospectlaw.co.uk.

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THINKING OF THE NUCLEAR OPTION? THE ROLE OF THE REGULATOR

Last month we gave an overview of the building blocks that a country needs before it can put in place an internationally accepted nuclear power programme. In summary, a country will go through three phases in developing its infrastructure (as defined by the International Atomic Energy Agency):

Phase 1: Considerations before a decision to launch a program is taken

Phase 2: Preparatory work for contracting and construction of a nuclear power plant

Phase 3: Implementation

The end of each phase is marked by the achievement of a milestone which essentially describes a state of readiness that the country has achieved. The whole process, from aspiration to commissioning, will take at least 15 years, and so, for countries which have elections, the commitment has to be an enduring one capable of outlasting what may eventually turn out to be several changes in administration. The IAEA also recognises some 19 infrastructure issues, many of which we listed last month, and so this month we will take a look at the first, and possibly most important of those – the nuclear regulator.

Many countries without a commercial nuclear power plant will in any case have some form of nuclear regulator, stemming from the country having a research reactor. That regulator will need to build up its capabilities to deal with the much wider range of issues that come with a civil nuclear programme involving power reactors many hundreds of time bigger.

The most important aspect of a regulator is that it should be “independent” – but what does this mean in reality? Certainly, it can’t be associated with the owner or operator of the nuclear plant. The main aim is to avoid conflicts of interest, or even perceived conflicts. It is generally recognised that it should be part of government, and, depending on the legislation which seeks to create it and give it its remit, will depend upon which government department sponsors it. This can also be contentious, in that the government department which a regulator reports into should not be the same one as the department which is responsible for developing the nuclear program, such as the Ministry of Energy.

One of the criticisms coming out of investigations into the Fukushima accident was that the nuclear regulator (Nuclear and Industrial Safety Agency) was indeed ultimately responsible to the same ministry (Ministry of Economy, Trade and Industry (METI)) which promoted nuclear policy – that has since changed with a new regulator created, the Nuclear Regulation Authority, NRA, now reporting to the Ministry of Economy.

The regulator plays a key part in enabling the nuclear programme to be introduced. It has to establish the relevant laws, regulations and guidance and it must also have the ability to enforce these. It doesn’t do this blind, but can rely on guidance documents from the IAEA and others, and of course, engage the services of specialist consultants and law firms.

In addition to independence, the regulator also requires the necessary financial and human resources. As an organisation, the regulator doesn’t just grow overnight, but has to develop and grow with the programme. Several newcomer countries rely on “importing” the required capability until they can train up and populate their staff tree with their own nationals. This can be expensive, but in relation to the whole cost of the programme, it will be relatively insignificant.

The role of the regulator means that it does not just enforce the legislation. It is also there to help build public trust in itself, acting as their advocate in many respects in challenging the developer. Some countries also have two regulators associated with nuclear, the second one being responsible for environmental matters. The range of matters both should deal with not only covers nuclear safety, including licensing, but also nuclear security and safeguards, and transport.

This has been a brief introduction to the role of the nuclear regulator. Readers may care to look at their own country’s regulatory system and whether they have the following characteristics:

  • Are they truly independent? Do they report into a separate government department from the one which is responsible for nuclear policy?
  • Do they have adequate resources, both financial and human?
  • Are they open and transparent in dealing with the proponent?
  • In developing legislation and regulations, do they seek the views of the public as well as the more usual stakeholder?
  • Do they seek international peer review, e.g. by the IAEA, on their regulatory capability?

Next month we will take a look at how a nuclear programme may be financed.

Introduction to Prospect Energy and Prospect Law

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For a PDF of this blog click here

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THINKING OF THE NUCLEAR OPTION?

Thinking of the nuclear option? No, this is not a reference to a country adopting a nuclear weapons capability, but the more peaceful avenue of choosing an energy source, although the dividing line between both can sometimes appear to become somewhat confused!

Many countries continue to think about adopting nuclear power despite the accident at Fukushima Daiichi. Others, of course, are winding down their nuclear programmes. But what makes a country, particularly one which does not have nuclear at the moment, want to continue? And what do they need to put in place to ensure this can happen in a safe and secure manner? This series of blogs will examine these issues.

It is hard to believe that the accident at the Fukushima Daiichi nuclear power plant in Japan occurred almost five years ago on 11 March 2011. In the aftermath of the disaster, many countries reviewed the safety of their existing nuclear reactors and, where appropriate, upgraded them to make them more resilient against unexpected extreme events, such as flooding, earthquakes, terrorist attacks and aircraft impact. Many countries also took the opportunity to review their nuclear policy and some, notably Germany, Switzerland and Taiwan, decided to phase out nuclear altogether.

Some countries, such as China, Russia, the UK, US and UAE, have continued with their new build programmes. The accident at Fukushima Daiichi also does not seem to have deterred some non-nuclear countries from pursuing the option; these would include Turkey, Jordan and Vietnam, amongst others. These decisions will often be motivated by security of supply, energy diversity and climate change objectives.

Deciding to go down the nuclear route is a major commitment for any country and it takes years of planning to establish an appropriate infrastructure which will enable it to develop the programme in a sustainable way. Once that infrastructure is in place, which may take between 10 and 15 years, the lifecycle for a nuclear facility is upwards of 100 years taking into account its licensing, construction, operation, closure and decommissioning.

Add to that the waste management aspects, which in themselves add several hundred years for dealing with the low level waste, and potentially thousands of years for the spent fuel and higher activity waste management, and you can see that the decision as to whether to invest in a nuclear power programme is not to be taken lightly.

Over the next few months we will explore the building blocks countries new to Nuclear energy have to put in place. These will include:
 Regulation / legislation and the requirement to develop an independent nuclear regulator.
 Financing for new build – where does the money come from?
 The human resource dimension, where do the (right/trained) people come from?
 Decommissioning planning and financing.
 Stakeholder engagement
 What types of reactor are available to the newcomer country, covering small and medium sized reactors (SMRs) and full scale power stations?
 Physical aspects such as the requirements for an adequate transmission and distribution grid.
 Waste management and disposal
 Fuel leasing and reliable fuel supplies
 Nuclear safety
 Nuclear security
 Nuclear safeguards

Please revisit this site for the first instalment, which will discuss the regulatory aspects.

Introduction to Prospect Energy and Prospect Law

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For a PDF of this block click here