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NUCLEAR RISK: THE INSURANCE PERSPECTIVE: PART II

This article is published further to the Prospect Group seminar held at the Centre, Birchwood Park, Warrington, on Tuesday 30th April 2019.

Please click here to see the event flyer.

The seminar addressed gaps in the world of nuclear contracts, with a focus on insurance and the gaps to look out for in nuclear contracts and insurance arrangements, as well as the options available to minimise or remove these gaps. This is one of three sequentially linked papers that summarise the seminar’s content.

Part I outlined the insurers’ role in the development of the nuclear liability channelling principle, through the introduction of the radioactive contamination exclusion clause. This clause is used to manage the exposure and insurance availability from specialist insurers to cover a severe nuclear accident.  This paper looks at some specific gaps in cover that can affect contractors, operators and/or buyers of insurance.

Financial security requirement for third-party liability

  • Nuclear site operators need financial security for specified amounts to cover liability for nuclear damage; both the financial amount and the scope of cover will change when the 2004 Protocol to revise the 1960 Paris Convention is ratified. In the UK the Nuclear Installations Act will be amended to introduce these changes into UK law, probably in 2020.
  • At present insurance capacity will be available to cover the new financial amount, but insurance for the full scope of the revised nuclear damage cover is not available.
  • Governments (including the UK) are considering providing some form of insurance or reinsurance to fill some of the gaps, if the insurers cannot do so when ratification occurs.

Liability assumed by contract

  • The nuclear liability Conventions permit reallocation of liability by contract; therefore, site operators can try to pass liability to contractors.
  • Although this undermines the principle of strict liability, several options exist to mitigate this exposure, including insurance.

Onsite operator or contractor property damage

  • The liability Conventions are unclear on the final liability for onsite damage (i.e. not 3rd party).
  • Insurance contracts must be crafted carefully to ensure no gaps remain and any contractors’ nuclear liability is re-allocated.

Liability arising outside the geographical scope of the nuclear liability Conventions

  • Once ratified, the Convention revisions will reduce this exposure; however, transporters can be exposed to additional liability. Insurance solutions for this are available.
  • Possible gaps in cover can arise in the complex world of nuclear transport liability and insurance. A thorough review and understanding of the whole voyage is essential.

New build and onsite construction

  • Construction insurance policies generally exclude nuclear exposure; gaps in cover can occur both with new build (as nuclear exposure increases) and with onsite projects.
  • Gaps or overlaps between insurance and warranties must also be carefully analysed.

About the Author

Mark Tetley has wide experience gained from senior positions across the London insurance market as  both an underwriter  and a broker , in a variety of sectors. He provides advice and assistance on a wide range of insurance and risk issues, including comprehensive nuclear liability and property insurance assistance, complex infrastructure project programme design and review, claims and policy reviews, assistance with project insurance design and implementation in developing countries, and many other aspects of risk mitigation.

Prospect Group is an award winning Multi-Disciplinary Practice combining the legal services of Prospect Law with the consultancy services of Prospect Advisory. Our lawyers and technical experts provide a single point of reference for clients involved in energy, infrastructure and other development projects.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

NUCLEAR RISK: THE INSURANCE PERSPECTIVE: PART 1

This article is published further to the Prospect Group seminar held at the Centre, Birchwood Park, Warrington, on Tuesday 30th April 2019.

Please click here to see the event flyer.

The seminar addressed gaps in the world of nuclear contracts, with a focus on insurance and the gaps to look out for in nuclear contracts and insurance arrangements, as well as the options available to minimise or remove these gaps. This is one of three sequentially linked papers that summarise the seminar’s content.

The Traditional Role of Insurance

The purchase of insurance is a key risk mitigant and generally occurs at the final stage of the risk management process. After risks have been identified and analysed, an insurance policy is bought with an expectation that it will respond to the scope of risk outside of the policyholder’s financial resources or risk appetite.

However, disappointment (or worse) can result when the policy does not cover what was expected of it. The more specialist the sector being insured, the greater the likelihood that, through misunderstanding, gaps in cover can appear.  Over the past sixty or so years the commercial nuclear industry, and its associated international liability framework, have seen the parallel development of a specialised insurance market. Indeed, some of principles behind the liability arrangements were introduced at the behest of insurers. This cocktail of complexity leaves plenty of scope for coverage gaps.

The Nuclear Insurance Market

However, before considering actual insurance coverage gaps, it is necessary to appreciate the relationship between the civil nuclear industry and its insurance arrangements. At its most basic, insurance is a promise to pay an insured’s claim, contingent upon a specified event occurring and after the payment of a premium. Insurers, using the law of large numbers, analyse millions of policies to calculate that premium.

Nuclear is different because the sector does not have millions of policies to analyse (there are only a little over 400 power reactors globally). Moreover, the risk itself offers a low frequency of claims, yet the prospect of a very severe loss should a claim occur.

Therefore, volatility is inherent in nuclear insurance. In today’s regulatory environment, this can disadvantage insurers of nuclear risks in a competitive capital environment, so reducing the size and restricting the structure of the available market. For those insurers that have committed to nuclear, certainty of exposure is critical to help manage the volatility; adequate certainty is achieved by the application of the nuclear liability channelling principle, which sees all liability for nuclear damage focused on the nuclear site operator.

The Radioactive Contamination Exclusion Clause (RCE)

The insurance mechanism that directs liability to the operator is the radioactive contamination exclusion clause (RCE). At the insistence of insurers, this clause has been applied to most non-life insurance policies since the start of the civil nuclear programme.

With cover for nuclear contamination removed from all normal insurances by the RCE, the nuclear operator is made strictly liable for nuclear damage, as specified in the nuclear liability conventions and associated national nuclear laws; each operator must then purchase nuclear liability insurance or provide other financial security, for an amount specified in the Conventions, to cover nuclear damage to third parties. It is this nuclear insurance policy that should account for the insurers’ total exposure to nuclear damage liability for an accident emanating from that specific site.

Unfortunately, the application of the RCE clause, the complexities of the nuclear liability regimes and most of all the interface between nuclear and non-nuclear insurances can leave insurance coverage gaps for nuclear operators, contractors and transporters. Some of these gaps are described in the next paper.

About the Author

Mark Tetley has wide experience gained from senior positions across the London insurance market as  both an underwriter  and a broker , in a variety of sectors. He provides advice and assistance on a wide range of insurance and risk issues, including comprehensive nuclear liability and property insurance assistance, complex infrastructure project programme design and review, claims and policy reviews, assistance with project insurance design and implementation in developing countries, and many other aspects of risk mitigation.

Prospect Group is an award winning Multi-Disciplinary Practice combining the legal services of Prospect Law with the consultancy services of Prospect Advisory. Our lawyers and technical experts provide a single point of reference for clients involved in energy, infrastructure and other development projects.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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BUILDING A SOCIAL LICENSE TO OPERATE: HUMAN RIGHTS, SECURITY AND EFFECTIVE GRIEVANCE PROCEDURES

Close adherence to the UN Voluntary Principles on Security and Human Right (VPSHR) enables corporates to build and maintain an effective SLO in complex environments.

The VPHSRs state that risk assessments are vital to the promotion and protection of human rights. These risk assessments must consider the available human rights records of public security forces, paramilitaries, local and national law enforcement, as well as the reputation of private security. Awareness of past abuses and allegations will help corporates to avoid recurrences, as well as to promote accountability in the future.

Corporates should take care to ensure that their contractors and partners are familiar with VPHSRs.

General Principles of Ethical Conduct

  • Regular consultation between corporates, their partners and contractors, and government representatives and local communities, about the impact of security arrangements on those communities, and clear communication between all stakeholders about the need for ethical conduct and respect for human rights by public service providers.
  • The primary role of public security agencies should be to maintain the rule of law, including the safeguarding of human rights, and deterrence of acts which might threaten personnel and facilities.
  • Individuals credibly implicated in human rights abuses must not be allowed to provide security services, and force should only be used when strictly necessary and to an extent proportional to the threat.
  • The rights of the individual should not be violated while exercising the right to exercise freedom of association and peaceful assembly, the right to engage in collective bargaining or other related rights of Barrick employees – as recognised by the Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work.
  • Corporates should ensure the holding of structured meetings with public security on a regular basis, to discuss security, human rights and related workplace safety issues. Support should be given to host nation governments to provide human rights training and education for public security, as well as their efforts to strengthen state institutions to ensure accountability and respect for human rights.
  • In respect of recent allegations of human rights abuses, corporates should actively monitor the status of any ongoing investigation and press for proper resolution of these issues, in consultation with the host nation Government and relevant NGOs. The security and safety of sources must be protected and additional or more accurate information that may alter previous allegations must be made available, as appropriate, to concerned parties.

Private Security Companies

  • Corporates must ensure that private security companies observe correct policies with regard to ethical conduct and human rights, the law and professional standards of the host nation, emerging best practice developed by the industry, civil society and governments and the promotion of the observance of international humanitarian law.
  • In particular, private security contractors must act in a lawful manner, exercising caution and restraint in a manner consistent with international guidelines on the use of force, including the UN Principles on the Use of Force and Firearms by law enforcement officials and the UN Coode of Conduct for Law Enforcement Officials, as well as emerging best practice.
  • Furthermore, private security companies must have policies regarding appropriate conduct and the use of force, which are open to monitoring.
  • Such monitoring should encompass detailed investigations into allegations of abusive or unlawful acts and the availability of disciplinary measures sufficient to prevent and deter, as well as procedures for reporting allegations to relevant local law enforcement authorities when appropriate.
  • All allegations of human rights abuses by private security must be recorded, and credible allegations investigated. Once those allegations have been forwarded to the relevant law enforcement authorities, corporates should actively monitor the status of investigations and press for their proper resolution.

The Importance of Effective Grievance Procedures

An essential component in any plan to build relationships with stakeholders is the existence of a clear set of procedures for handling grievances. Effective grievance procedures provide an indispensable took for communities and companies to address difficulties in a non-confrontational manner.

Confrontation occurs when stakeholders feel they have no mechanism for addressing problems in a peaceful manner. The key principle to be applied when handling grievances is Respect. The manner in which grievances are heard is often as important to the complainant as the outcome.

A respectful grievance procedure will be characterized by six principles:

  • Clarity and transparency – Feedback needs to be available throughout the process.
  • Accessibility – Arrangements for the submission of grievances must be public and available to all.
  • Safety – No complainant should face any danger as a result of making a report.
  • Predictability/timeliness – A grievance procedure needs to be guided by clear timelines and processes, with a clear documented outcome.
  • Compliance – The process identified for handling a grievance must be strictly adhered to.
  • Existence of a recourse mechanism – A committee must be established as a fall back, in the event of disagreements.

About the Author

Mark Jenkins advises clients on Corporate Social Responsibility (CSR), security and risk management issues affecting the viability of on and off-shore energy, mining and infrastructure sector projects in Europe, the Middle East and Africa. Mark’s experience has been focussed on creating reliable community support for projects through the development of a Social License to Operate (SLO) based on effective CSR initiatives. The success of these initiatives has been based on a thorough understanding of local environmental, commercial, and cultural dynamics, especially Islamic ones.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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UPCOMING PROSPECT LAW SEMINAR ON NUCLEAR INSURANCE & RISK MANAGEMENT

We are pleased to announce that we are hosting a seminar on the management of risk in nuclear related contracts. The seminar will address the contractual and insurance protections which a party can bring to bear to minimise risk and liability when entering into a contract. The session will be jointly given by one of our insurance advisors (Mark Tetley) and one of our nuclear lawyers (Rupert Cowen), and will be followed by a networking session.

Places are strictly limited but if you are interested in attending please contact Victoria Thompstone on vlt@prospectlaw.co.uk to enquire about the availability of spaces. Priority will be given to nuclear operators and those in the supply chain.

Click here to see the flyer

  • Seminar Title:          Nuclear Risk: Minding the Gap                       
  • Location:                  The Centre, Birchwood Park, Warrington WA3 6YN
  • Date:                         Tuesday 30 April 2019

The schedule will be as follows:

4.30 p.m:         Registration                                                                                                                                          5.00 p.m:         Talk / Q & A                                                                                                                                              6:00 p.m          Drinks & Canapés                                       

For a PDF of this notice click here             

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ENVIRONMENTAL LAW AND POLITICS POST-BREXIT

How will your business be affected by the major changes in environmental law and regulation that are taking place, many flowing from Brexit?

Prospect Law’s William Wilson, Senior Environmental and Regulatory Lawyer, has developed short, focussed briefings on some of the key areas, designed to help your business map a way through a rapidly changing legislative landscape.

We can tailor these briefings to your specific business, or deliver them in short interactive lunchtime sessions aimed at senior management or groups of staff with particular interests.

Defra’s Resources and Waste Strategy

This Strategy takes forward, in England, the Circular Economy elements of Defra’s 25 year plan. This briefing considers coverage of product lifecycle (on the circular economy model); topical areas (such as waste crime and food waste) and the bigger picture (for example marine plastics, research and innovation, and data monitoring), and key commitments including those on producer responsibility for packaging.

REACH Chemicals Regulation, and UK REACH

Disengagement from the EU REACH chemicals regulation, and from related regulations such as Biocidal Products, has been one of the most vexed aspects of Brexit for businesses affected by environmental laws. This Briefing considers relations with ECHA post-Brexit, the position of Downstream Users and Only Representatives, issues with UK REACH, the waste/chemicals interface and implications for firms undertaking cross-border trade.

Environment (Principles and Governance) Bill

On leaving the EU, the UK will cease to apply EU Treaty provisions supporting environmental protection and will no longer have environmental laws applied by the European Commission and the Court of Justice of the European Union. This Briefing considers the arrangements that the government is proposing for England to replace these structures with a new Office for Environmental Protection, and what has been learned from pre-legislative scrutiny by the EFRA Committee, including Michael Gove’s evidence of 6 March 2019.

Environment Bill

The wider Environment Bill, promised for the next session of Parliament, is supposed to include the draft Environment (Principles and Governance) Bill; air quality protection; enhancement of landscapes; wildlife and habitat; more effective handling of resources and waste; better management of surface, ground and waste water. This will be the most important Environment Bill for over 20 years, and this Briefing considers the ways in which it will affect the environment and businesses.

Illegal waste sites issues

Illegal waste sites are a massive issue for many parts of the UK, happening on a much greater scale than is generally realised and resulting in millions of pounds of avoided Landfill Tax for government and regulators, as well as unfair competition for legitimate businesses. This Briefing considers some of the latest technological options for locating and identifying illegal waste sites, and bringing them to the attention of regulatory authorities.

Air Quality Strategy, Clean Air Zones, Air Quality Legislation

Air quality legislation is undergoing a major overhaul, with big implications for the economy, the environment and human health. This Briefing considers Clean Air Zones, the ClientEarth litigation, the Government’s new Air Quality Strategy, air quality in the Environment Bill, and some of the effects that this legislation is already having, for example on the car market.

Pesticide policy, law and Brexit

In the short term, pesticide policy review seems to have fallen victim to the “Brexit first” approach within government. In the medium term it is likely to be subject to major review. This Briefing considers the trends from recent European judgments, and the way in which their influence may continue to be felt, despite Brexit and divergence from EU law.

Devolution, Environmental Law and Brexit

The development of distinctly different environmental laws and regulations, in England, Scotland, Wales and Northern Ireland, is going to result in an increasingly challenging environment for compliance for businesses working across these jurisdictions. This Briefing gives a very brief overview of the main differences, and considers both the possible problems and potential solutions for an integrated approach to environmental regulation.

Labour Party policy, the environment and energy

Is your business up-to-date on Labour Party policies on the environment and energy, and how it may be affected by them in the event that the Labour Party wins a future election? This Briefing reviews the party’s policies in these key areas, and considers how they may affect businesses.

Environmental Law and trade

Alignment of environmental regulations with either the EU, the USA or any other jurisdiction is clearly going to be a major factor in any future trade talks undertaken by the UK. This Briefing considers what to expect, and what is at stake.

About the Author

William Wilson is a specialist environmental, regulatory and nuclear lawyer with over 25 years experience in government, private practice and consultancy. He worked as a senior lawyer at the UK Department of the Environment/DETR/DEFRA, and helped to build up the environmental and nuclear practices at another major law firm, as well as running his own environmental policy consultancies. William has experience of all aspects of environmental law, including water, waste, air quality and industrial emissions, REACH and chemicals regulation, environmental protection, environmental permitting, litigation, legislative drafting, managing primary legislation, negotiating EU Directives and drafting secondary legislation.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

To discuss which of these Briefings may be relevant to your business, and how to arrange a session to deliver them in-house, or to follow up advice required on any of the issues covered, please contact William Wilson at wew@prospectlaw.co.uk or on +44 (0)7885 551 405.

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WHOLESALE ENERGY PRICES: JANUARY – FEBRUARY 2019

In this article, Dominic Whittome covers recent changes to wholesale energy prices.

Crude Oil

Dated Brent has risen some 25% in two months, in a crude market rattled by deepening geo-political tensions worldwide and continuing worries about medium-term supply from embargoed Venezuela. There are also concerns over Iran, which is subject to US sanctions, whilst there are threats of upheaval in Nigeria and Sudan.

New US sanctions and talk of military pressure to remove President Nicolás Maduro have contributed to oil production falling below 1 million barrels a day, down from circa 2.5 million barrels just four years ago.

Venezuela only recently overtook Saudi Arabia to become OPEC’s largest player in terms of proven reserves. A well publicised ‘re-newel of vows’ or closer military accord with Russia will only have stoked tensions further. While global petroleum prices have had a good run, they have potentially further to go, especially if we see investor flight into hard commodities. Dated Brent remains well below its most recent $85/bl peak in October last year.

Natural Gas

Short-term market changes and the geo-political situation may have caused a breakdown of gas price correlation to oil, with Forward Year prices down by eight per cent. Seasonal gas demand slipped back last month and the market has been well supplied to date.

Gas prices followed electricity down, for here the price convergence between these two commodities increased over the last year. On 1st Jan, 2018 forward gas prices stood at 46.60 p per therm, with electricity trading at £44.85/MWh versus 54.47 p and £56.18 today. One factor at play here is the carbon market. The second half of 2018 saw struggling nuclear output and renewable electricity both fuelling demand for fossil generation. This was chiefly offset by rising gas and coal-fired plant. Indeed fairly extensive new-build coal programmes are already underway in Poland and Germany.

In the short-term, elevating coal-fired plant further up the generation stack has served to increase demand for carbon permits. This contributed to soaring carbon prices on the EU Emissions Trading Scheme. In 2018, the prices of traded EUAs soared by over 400% at one point, from circa € 7.50/ tonne CO2 in January 2018 to current trading levels closer to €20. The carbon factor has increased the running cost of gas-fired plants in the UK, paradoxically undermining the economics of new-build plants which the country may need to maintain supply cover ahead, a point we can look at now.

Electricity

In January, Hitachi cancelled its planned 2,900 MW nuclear power station project destined for Wylfra in Wales from 2027, hot off the heels of Toshiba’s own aborted 3,400 MW project in Cumbria.

Given the very price swap/Contract-For-Difference subsidies involved, it is perhaps tempting to think that the termination or suspension of any more nuclear plants will alleviate the pressure on future prices. However, the reality is probably much more sobering, because the non-fossil alternatives may well prove equally or more expensive, certainly in the electricity volumes which may needed.

The Forward Market may well be even more reliant on potentially expensive imports via interconnectors. These entail an additional security of supply risk. Although the UK has a healthy-looking pipeline of new interconnector projects, the existence of new cables is no guarantee of supply.

The cross-Channel interconnectors, new 1 GW and 2 GW wires from Holland, Belgium, Denmark and the six espected from France may each be subject to competition from Continental buyers when it comes to peak demand days. Although Norwegian and Icelandic exports may be dedicated to the UK mainland, the technical issues will remain here too, with volumes being exported over longer distances and at very high voltages to minimise transmission losses. Sub-sea networks generally involve sophisticated equipment which can fail, even with state of the art technology. Hence, this is simply a new element of risk which the UK market may have to grapple with, together with competition for supply.

Taking a far-forward look at commercial power prices, it is worth considering the demand effects of government legislation. These became more apparent last month, with Whitehall confirming measures to phase out all domestic gas use, starting with new-build homes after 2024, on top of government targets set for electric vehicles. The numbers are still being crunched as we speak. However, our initial calculations suggest that to meet current Whitehall targets for domestic gas reduction and electric vehicle uptake by 2030, new supply volumes of 40 TWh/y and 160 TWh/y will be required, which could increase existing national demand to 520 TWh/y compared its 320 TWh/y level today.

In fact, any demand figure above 500 Terra Watt hours would look challenging given the current grid and generation constraints ahead. With all of the UK’s existing nuclear power stations bar Sizewell due to be retired well before then, it will be interesting to see how the government, grid companies and generators may work together to square this circle, without some shift in energy policy or without causing some consternation in the Forward Markets.

About the Author

Dominic Whittome is an economist with 25 years of commercial experience in oil & gas exploration, power generation, business development and supply & trading. Dominic has served as an analyst, contract negotiator and Head of Trading with four energy majors (Statoil, Mobil, ENI and EDF). As a consultant, Dominic has also advised government clients (including the UK Treasury, Met Office and Consumer Focus) and private entities on a range of energy origination, strategy and trading issues. 

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way. 

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

For a PDF of this blog click here

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HIGH LEVEL RADIOACTIVE WASTE: NOVEL GEOLOGICAL DISPOSAL CONCEPT PROPOSED

International consensus holds that deep geological disposal is the right answer for higher activity radioactive waste such as spent nuclear fuel, vitrified high level waste and long-lived intermediate level waste.  Other options such as indefinite storage have been discounted.

Moreover, the view is that deep geological disposal should be done without imposing undue burden on future generations; i.e. it should be implemented in a sustainable manner by the generation that produced the waste.

Different Approaches

Deep geological disposal involves burying the waste several hundred metres underground to isolate it safely from the human environment for many tens of thousands of years. Disposal of lower activity waste is practiced in many countries through near-surface or shallow facilities, such as LLWR in the UK and El Cabril in Spain.

In effect there are two broad geological disposal concepts in play: disposal in a mined, deep geological repository several hundred metres down, and the vertical borehole concept which would extend to several kilometres deep. Both of these have been the subject of study in several countries for many years, with the former concept in the process of being implemented in several. The vertical borehole concept is yet to be adopted as the preferred solution in any country.

However, things might change for the borehole concept with the recent introduction of a horizontal borehole design by a US company which challenges some of the technical drawbacks of the vertical design, although not without introducing several of its own.

In this article we look at each of these methods and consider what the future may hold for the horizontal concept in particular.

Mined Geological Disposal

There are several design variations for this concept depending on the rock type utilised and the wasteform disposed of. The three principle rock types are hard rock (such as granite), clay formations and evaporites (such as salt). The basic concept is that nuclear waste is carried down to underground vaults either through a vertical shaft or inclined roadway (see Figure 1). The layout of the vaults themselves varies depending on the type of waste involved and its heat generation, but it can cover many square kilometres.

There are three countries with the most advanced geological disposal programmes. Finland started construction of its 400-450m deep repository in hard rock for spent nuclear fuel in 2015 and disposal operations are planned to commence in the 2020s. Sweden has selected a hard rock site for its 500m deep repository and expects to start construction in the early 2020s. France is investigating deep geological disposal in an underground research laboratory in a clay formation. This is planned to be extended in 2022 to commence a “pilot industrial phase”, progressively leading to full operations. Several other countries are at various stages of facility site selection with the UK having recently embarked on a new siting process.

Figure 1. SKB’s deep geological disposal concept. Courtesy Swedish Nuclear Fuel and Waste Management Company

Vertical Borehole Disposal

The concept for vertical boreholes is for the high-level waste to be sealed in cylindrical canisters which are lowered to the bottom of the hole with subsequent canisters stacked on top of each other (see Figure 2). The advantage of this over the more conventional mined designs is that they can be constructed more quickly and are potentially more cost effective. However, the disadvantage is the large number that would be required to take even a small nuclear power programme’s inventory.

Vertical boreholes of a relatively shallow depth of a few hundred metres have been proposed, for example by the IAEA, for the disposal of spent sealed radioactive sources that arise from industry and medicine. These are particularly applicable for countries with no nuclear energy programme and which would therefore have no other disposal facilities available, nor the demand for the higher volumes of disposal space that a nuclear energy programme would require.

A further disadvantage of vertical boreholes that is often cited is that they represent many possible routes for potentially contaminated groundwater to reach the surface if the boreholes are not adequately sealed – more so than for the mined design which could just have as few as three or so possible routes. Although the vertical borehole concept has not been adopted as the favoured method of geological disposal by any country, it is being studied for example by the Department of Energy in the US, and by the University of Sheffield in the UK.

Horizontal Borehole Concept

A further variation of the borehole which has recently been put forward and has stimulated much discussion, particularly in the US, is the horizontal borehole.  The novel variation lies in the hole turning through a large radius curve at the required depth to a slight upward incline (see Figure 3). The company that is proposing the idea (Deep Isolation) claims this uses conventional drilling technology utilised in the shale fracking industry, and point out that the length of the horizontal segment can be up to two miles. However, it does admit that these are usually only up to 200mm in diameter, whereas spent nuclear fuel canisters would be 450-500mm in diameter, and any borehole drilled would also need to be lined, implying a yet larger diameter.

Figure 2: Source US Nuclear Waste Technical Review Board.

A report to the U.S. Congress and the Secretary Of Energy Technical Evaluation of the U.S. Department of Energy Deep Borehole Disposal Research and Development Program. January 2016

There are other issues for the moment with this concept which would need to be resolved before it could be put into practice. Safety cases would need to be made for the operational and post closure phases of any facility. One aspect that equally applies to a vertical borehole would be the lowering of a heavy, highly radioactive, spent fuel canister down several kilometres: jamming of the canister, breakage of the lowering cable and failure to release the cable would need to be considered. Assuming the canisters could be successfully emplaced in the horizontal tunnel, standard radiological safety cases would need to be performed, taking account of criticality and long-term radiological safety. The company admits these have yet to be undertaken.

Potential Users

Who could use such a design? Large nuclear programmes such as those in the UK and France would still need to develop the more conventional designed deep geological repositories as their inventories include waste packages much larger than the feasible borehole diameters of the horizontal borehole.

However, depending on the repository footprint available, the horizontal borehole design could be used to supplement the conventional deep repository. As noted, advanced repository programmes such as those in Sweden and Finland are progressing well with their deep repository developments, so introducing the horizontal borehole concept may just provide an unwanted diversion.

Potential users of the horizontal concept might therefore include those countries with only one or very few reactors.

What Next?

Whilst it is still relatively early days and although the company has recently demonstrated the basic technology, it has yet to build a demonstration facility that could take spent-fuel sized canisters. As noted, it also has to develop its safety cases for the operational and post-closure phases.

As with the siting of any geological disposal facility, there will be the usual issues associated with transport, siting, retrievability of the waste, legislative and regulatory requirements, community engagement, licensing and so forth. There is much experience in all of these aspects from both within the US and around the world which Deep Isolation would be able to make use of. Before it gets into the addressing these, however, the main challenge for the company will be to convince a naturally sceptical radwaste community that it has a concept worthy of serious consideration. We will watch their progress with much interest.

Figure 3: Deep Isolation disposal concept. Source: Technology of the Deep Isolation Repository. Richard A. Muller. 2019

About the Author

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way. 

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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PLANNING LAW: A BRIEF ANALYSIS OF RECENT DEVELOPMENTS

Rosewell Review of Planning Inquiries Published

On 12 February 2019, the Government published the report of Bridget Rosewell OBE, further to her review of the planning appeal system.

The Report makes a series of thoroughly sensible recommendations, across all stages of the appeal process, which have been received well by practitioners, including:

Submission to Start Date

  • Streamlining the validation process by introducing pro-forma documentation that can be electronically checked.
  • A Reform of statements of case, through use of pro-formas as well as greater engagement and precision.
  • Streamlining the process for determining a mode of appeal.
  • Faster issuing of the start letter identifying the inspector with responsibility for the appeal.

Start Date to Inquiry

  • A senior inspector should lead on the date and venue of the inquiry (identified as a present source of delay). There is a suggestion for greater consultation and flexibility by permitting the appellant to contribute to the cost of the venue.
  • Statements of common ground should be more informative and produced earlier (policed by the inspector).
  • Greater pre-inquiry management (telephone conferences are strongly encouraged).
  • Greater use of round table procedures and topic based approaches to inquires.
  • Greater accessibility to information through the online portal.
  • The possible use of transcription technology
  • Inspectors are advised to manage cross-examination effectively, reporting inappropriate behaviour to professional bodies.

Can Privacy from Overlooking be Protected by the Tort of Nuisance?

In Fearn v Board of Trustees of Tate Gallery, the neighbours to the Tate Gallery sought an injunction to restrain the use of its viewing gallery.

Amongst the interesting issues in the case, Man J addressed whether overlooking could form the basis a claim in nuisance, finding that the law of nuisance is capable of ”protecting privacy rights from overlooking in an appropriate case”, and noting that whether it does or not would depend on whether there is “a legitimate expectation of privacy”, having regard to locality.

Interestingly, Mann J rejected the submission that the planning process by itself “is a sufficient mechanism for protecting against infringement of all privacy rights…”. Indeed, in the instant case, the Judge found that overlooking did not appear to have been considered within the planning process and so provided “little or no assistance” to resolving the nuisance claim.

Accordingly, this judgment may give rise to claims in nuisance, further to the conclusion of a planning process, where neighbouring landowners remain aggrieved by an impact of overlooking on the enjoyment of their land.

Yet another CJEU Habitats ruling: Holohan v An Bord Pleanála

On 7 November 2018 the CJEU gave judgment in Holohan, a  case concerning a proposed ring road around Kilkenny in south-east Ireland. The proposed route will cross rivers which form part of a Special Area of Conservation.  The CJEU decided, at [40], that:

“… an ‘appropriate assessment’ must, on the one hand, catalogue the entirety of habitat types and species for which a site is protected, and, on the other, identify and examine both the implications of the proposed project for the species present on that site, and for which that site has not been listed, and the implications for habitat types and species to be found outside the boundaries of that site, provided that those implications are liable to affect the conservation objectives of the site.”

The judgment appears to interpret the EU Environmental Directives more onerously, so as to mean that in addition to assessing the impact on habitat types and species for which the site is protected, appropriate assessments must also consider other habitat types and species which happen to be present on the site, and those outside the boundaries of the site which might also be affected.

Scope of section 73 of Town and Country Planning Act 1990 reconsidered

It is well established that the grant of an application under s.73 of the 1990 Act results in a fresh and stand-alone grant of planning permission (see London Borough of Lambeth v Secretary of State for Communities and Local Government). The power under s.73 has been held to mean:

“[a power] impose different conditions upon a new planning permission, but only they are conditions which the council lawfully have imposed upon the original planning permission in the sense that they do not amount to a fundamental alteration of the proposal put forward in the original application…”.

The decision in R (Vue Entertainment Ltd) v City of York Council appeared to suggest a nuance to that test, as follows:

“… it is not open to the council to vary conditions if the variation means that the grant (and one has therefore to look at the precise terms of grant) are themselves varied.”.

Most recently, in Finney v Welsh Ministers, Sir Wyn Williams considered that observation and held that:

“… a variation pursuant to section 73 can be lawful notwithstanding that it may necessitate a variation to the terms of the planning permission which preceded the section 73 application.”

Accordingly, there is no hard-edged rule that a local authority (or inspector) may not grant an application under section 73, if it would result in a variation to the terms of the planning permission. The test is simply whether the fresh grant of permission which results from s.73 would amount to “… fundamental alteration of the proposal put forward in the original application”.

About the Author

Ashley Bowes was called to the Bar as a Prince of Wales scholar by Gray’s Inn. He holds a doctorate in law and specialises in Planning, Property, Environmental and Public law. He is the Assistant Editor of Sweet and Maxwell’s Journal of Planning and Environment Law and a contributor to Moore and Purdue’s A Practical Approach to Planning Law (13th ed.). Ashley Bowes has appeared in the recently created specialist Planning Court within the High Court, and has wide experience of Public Inquiry work covering planning and enforcement appeals, local plans, village greens, common land and rights of way.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way. 

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

For a PDF of this blog click here

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INVESTORS AND ENTREPRENEURS: AN UPDATE ON THE TIER 1 VISA ROUTE

The Home Office published a detailed statement of changes to the Immigration Rules on 7th March, in which they confirmed that the Tier 1 (Graduate Entrepreneur) and the Tier 1 (Entrepreneur) route are to be replaced by “Start-up” and “Innovator” visas.

These changes also clarify details of their significant reforms to the Tier 1 (Investor) requirements.

Click here to read the Home Office’s detailed statement of changes

Start-up and Innovator Visas

On 29 March 2019, the Tier 1 (Entrepreneur) route will close and the Tier 1 (Innovator) route will open in its place. The required investment for this route has decreased from £200,000 to £50,000.

On 6 July 2019 the Tier 1 (Graduate Entrepreneur) route will close and the Tier 1 (Start-up) route will open in its place. This visa is for those starting a new business for the first time in the UK. Applicants will no longer need to be graduates and will not need to have secured any initial funding.

For both these routes, however, applicants will now need to be endorsed by trusted organisations in the UK, such as “business accelerators, seed competitions and government agencies, as well as higher education providers”. The endorsing body will be obligated to judge the applicant’s business plan, to assess if their business is “innovative, viable and scalable”. Successful applicants will need to stay in contact with those endorsing bodies regularly and will require further endorsement when applying for extensions to their visas. These will require them to prove they have made significant achievements in line with their business plan. A higher level of English will also be required.

Applications for Indefinite Leave to Remain will also require a further endorsement letter.  In order to receive this endorsement, the applicant will have to satisfy several requirements, including evidence to showing that they have successful businesses employing numerous people or generating significant revenues.

Tier 1 (Investor)

There will be significant changes to the Tier 1 (Investor) route from 29 March 2019. These primarily affect the types of permitted investment and the source of an investor’s funds.

Permitted Investments

Applicants will no longer be able to invest their money in UK government bonds. Instead, they will have to invest in active and trading UK companies. The rules on routing investment funds via “intermediary vehicles” will also become stricter, and will include a requirement that such vehicles be regulated by the Financial Conduct Authority. The definition of “active and trading” companies is also being tightened.

Source of Funds

The period for which funds must be held prior to applying for an investor visa will be increased from 90 days to two years. However, this requirement can be circumvented (as is possible under the current rules), if you can provide mandatory evidence of the source of your funds. Furthermore, the requirement to open a UK bank account before applying for an investor visa will also be tightened, to make explicit that the bank must carry out all required due diligence checks and confirm that these have been done.

Please note that there are transitional arrangements in place for those on existing Entrepreneur and Investor visas.

About the Author

Alice Boyle is a solicitor with extensive experience in all areas of immigration law. She can assist both corporate and individual clients with any immigration, nationality or asylum matter and possesses a sound understanding of Tier 1 Investors, Tier 1 Entrepreneurs and Tier 2 matters. Alice has substantial experience of challenging UK Home Office decisions, regularly representing clients in appeals at both the First-Tier and Upper Tribunal and also by way of Judicial Review applications in both the Upper Tribunal and UK High Court.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way. The above is only a very brief summary of some of the principal changes the Home Office has announced. Please contact us for further detail, or if we can assist you in connection with any of the applications mentioned in this article.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

For a PDF of this blog click here

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CYBER RISK – INSURANCE AS A RISK MITIGATOR IN THE ENERGY AND POWER SECTORS: PART I

The rather gloomy reading provided by the World Economic Forum’s (WEF) 2019 Global Risks Report highlights the growing threat of cyber-attacks. In terms of both likelihood and impact, cyber-attacks remain firmly in the top 10 of the WEF’s risks for 2019.

The Report draws on the WEF’s annual Global Risk Perception Study, which observes that over 80% of respondents believe that cyber-attacks of some sort will increase during 2019.

Click here to read the WEF Report.

Introduction

Across so many aspects of our daily lives, we all experience the creeping domination of technology that often brings great benefits, but also can bring great risks. Whether this is a gradual move to a cashless society, the steady automation of our manufacturing processes or the use of computing to manage our power networks, the advance of technology in our increasingly globalised world continues apace.

In the 2019 risk barometer report produced by Allianz, the global insurer, business interruption and cyber threats were listed first and second in the risk ranking.  The potential for damage is perceived to lie in interruption to complex automated and interdependent supply chains, which have become essential to so many larger enterprises.

To compound the gloomy outlook, a January 2019 report from CyRim (Cyber Risk Management) calculates that the economic cost of a concerted global cyber-attack could range between $85 billion and $193 billion.

Possible Financial Exposure

Despite such a high awareness of cyber-risk, there is frequently less understanding of what financial exposure it presents at an individual company level.

In 2018, the insurance broker Marsh commissioned research into the energy sector, which revealed that over half of respondents had not calculated or were completely unaware of their worst possible exposure to cyber risk. Further, over 75% of respondents cited business interruption as the principle likely impact, again highlighting supply chain vulnerabilities as an issue.

Allianz estimates that the average cyber-attack claim now costs €2m, exceeding the average fire/property claim of €1.5m. However, this average hides extremes – for example, in 2017 a four hour IT outage at an Amazon cloud computing division collectively cost affected businesses over $150 million.

This contrast, between awareness and quantification of cyber exposure, is paralleled in the insurance market. Insurers are aware of the growing exposure they face from cyber-claims, whether through physical damage resulting from malicious interference in system controls, business interruption resulting from supply chain breakdown or other liabilities arising from litigation following a data breach, cyber fraud or information theft.

The wide scope of possible losses, to so many different types of insurance policies, has worried insurers, who find it easy to contemplate a significant single cyber-attack involving many businesses across multiple countries, creating a truly catastrophic market loss.  This complex potential for loss, coupled with the ever-changing technological environment, has led insurers to impose policy exclusions or cyber exposure sub-limits as an initial response.  Moreover, with the actual incidence of claims still quite low, insurers are still analysing the multifaceted nature of cyber events in an attempt to develop appropriate underwriting models that quantify exposure and thus risk pricing.

Conclusion

It is apparent that awareness of the potential material disruption from cyber-attacks is driving the institutionalisation of cyber risk management in businesses globally. Meanwhile, insurers are working hard to understand the likely exposure and to develop innovative new products to help mitigate this headline exposure for their clients.

In future blogs we will continue to explore the state of the cyber insurance market, and specifically the extent to which insurance can mitigate cyber-risks in the energy and power sectors.

About the Author

Mark Tetley has wide experience gained from senior positions across the London insurance market as  both an underwriter  and a broker , in a variety of sectors. He provides advice and assistance on a wide range of insurance and risk issues, including comprehensive nuclear liability and property insurance assistance, complex infrastructure project programme design and review, claims and policy reviews, assistance with project insurance design and implementation in developing countries, and many other aspects of risk mitigation.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd 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.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

For a PDF of this blog click here