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8. The PRC is not a party to any of the international conventions and
the liabilities contained therein would not therefore apply. The PRC
authorities have, however, already indicated that they will look to HMG to
assume some sharing of the financial liability for third party risks.
the extent that HMG takes an equity holding in the proposed Hongkong Investment
Company, which is to be the joint owner and operator of the nuclear power
station, it would inevitably do so, since this very investment would be
at risk. (There would be additional liabilities attaching to the transport
of nuclear materials to and from the UK (described at Annex B), but these
would arise in any arrangement for the supply of fuel services by the UK.) The important point to be considered is whether HMG should accept any further
liability.
10. The PRC could contend that since the construction and operation of the
nuclear power station will be a joint venture by PRC, Honging and UK interests, with Hongkong sharing in the station management and product, the Hongkong and UK Governments should accept a proportionate share of the third party liability. Against this, it could be argued that while western interests will be involved in the running of the station, the operating
company will be incorporated in the PRC and will ultimately b under PRC control. Moreover, the "statutory" responsibility for the maintenance of
safety standards would rest with the PRC authorities.
11. A decision on whether HMG should accept a share of third party liability is essentially one of tactics. If an unwillingness to accept a share
appeared likely to prejudice the project, it might be necessary to reach some compromise. One possible approach could be to propose that the operating company should be responsible for meeting claims for nuclear damage wherever it occurred, subject to an insurable limit, but that the PRC should be
relieved of any residual liability above that limit in respect of damage
in Hongkong. In return, the PRC should accept that no claims could be made
against the Hongkong or UK governments in respect of damage in the PRC.
It would of course be necessary to provide (either in Hongkong or UK legis-
lation) that claims for compensation for damages in Hongkong which could
not be met by the operating company, would be met (subject to an overall
limit) by the Hongkong and/or UK governments.
12. The above approach would have the following advantages:
3