Legal News

Japanese Taxpayers Likely to Shoulder Nuclear Liability

By Ashby Jones

At the end of the day, who’s going to pay to compensate the victims of the problems at Japan’s nuclear reactors?

Had the earthquake and resulting issues happened in the U.S., the answer would likely be quite complicated. In Japan, it’s simpler: the Japanese taxpayer will shoulder the burden, according to this WSJ story by Andrew Dowell and Erik Holm.

Japan’s nuclear liability law holds operators of nuclear facilities-in this case Tokyo Electric Power Co.– fully responsible for damage caused by nuclear accidents. But when catastrophic natural disasters are involved, the obligation shifts to the Japanese government.

That means Tokyo Electric and the companies that supplied the reactors now at risk of melting down, including General Electric and Toshiba, could be insulated from a potential cascade of lawsuits seeking damages.

The key phrase once the debates start may be “except in the case where the damage is caused by a grave natural disaster of an exceptional character.” That language in Japan’s nuclear-damage compensation law could let Tokyo Electric off the hook for any offsite damage caused by the incident.

But even without that determination, the government is still the most likely party to pay, said Omer Brown, a Washington lawyer specializing in nuclear liability.

Japan requires operators to hold 120 billion yen (about $1.5 billion) in insurance coverage. Those policies don’t cover earthquakes or tsunamis, however. Insurance against those events is purchased from the government.

The law doesn’t cap utilities’ liability. But the government can step in at its discretion to cover losses exceeding 120 billion yen. “It’s a government issue in either case,” Mr. Brown said.

Suppliers like GE are even more insulated by the law, which by design channels all liability to the nuclear-plant operator, lawyers said.

“If Tepco wanted to turn around and sue a supplier in Japan, as a matter of law they cannot,” said Paul Murphy, a senior attorney who works on nuclear liability at Milbank, Tweed, Hadley & McCloy.

Full post as published by Law Blog - WSJ.com on March 18, 2011 (boomark / email).