TNAG-0950-FCO40-1169-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 189

CONFIDENTIAL

GUANGDONG: THIRD PARTY LIABILITY

DSR 11C

1.

The construction and operation of a nuclear power

station inevitably carries the risk of a nuclear accident

causing damage to persons and property unconnected with the station itself. Although the probability of such an accident

is small, the resulting damage could be very great. It is

generally accepted that the scale of the potential damage

is such that it is uninsurable in full and that it is

unrealistic to expect commercial companies to bear the

whole risk of third party claims.

2.

The question has arisen whether in view of its interest in the Guangdong project HMG should assume some share of this financial liability. To the extent that it takes an equity

holding in the proposed Hong Kong Investment Company which

is to be the joint owner and operator of the nuclear power station, it will inevitably do so, since this investment will

be at risk. There are additionally certain liabilities

which attach to the transport of nuclear materials to and

from the UK (described at Annex A). But these arise in any arrangement for the supply of fuel services by the UK, and are not affected by the particular circumstances of the

Guangdong project. Is there any reason why HMG should accept any further liability?

3. The practice under international conventions to which

the UK (but not the PRC) is a party (see Annex B) is for

strict liability (ie without proof of negligence or other

fault) to be placed on the responsible operator up to a

fixed (insurable) limit, with the relevant government

bearing liability for damage in excess of this, again up to a fixed limit. In the present case the PRC authorities have already indicated that they will look for HMG involve- ment in this. They may be expected to argue that since the construction and operation of the nuclear power station

will be a joint venture by PRC, Hong Kong and UK interests, and with Hong Kong sharing in the station management and

product, the Hong Kong and UK Governments should stand behind 'their' part of the operating company and accept a

proportionate share of the third party liability. Against

/this

CONFIDENTIAL

Dd 0532000 400 M 5178 HMSO Bracknell