Nuclear Installations (Compensation for Nuclear Damage) (Amendment) Regulations 2025

Considered in Grand Committee

15:45:00

Moved by

That the Grand Committee do consider the Nuclear Installations (Compensation for Nuclear Damage) (Amendment) Regulations 2025.

My Lords, the regulations were laid before the house on 19 May 2025 and the Government have published an Explanatory Memorandum alongside them. This instrument makes technical changes to the way the Convention on Supplementary Compensation for Nuclear Damage, known as the CSC, will operate in the UK upon the UK’s accession to this treaty. These changes streamline the operation of the different conventions as well as the domestic implementing legislation. Nuclear power is central to this Government’s mission to become a clean energy superpower and a key part of our industrial strategy to revive Britain’s industrial heartlands. It provides clean homegrown energy, creates thousands of jobs and complements other technologies by providing stable and reliable electricity to the grid. To drive forward new nuclear and deliver on our mission, the Government made a series of bold commitments in the recent spending review. A £14.2 billion investment was announced to build Sizewell C, ending years of delay and uncertainty and creating 10,000 jobs. The Government have also pledged over £2.5 billion for the small modular reactor, or SMR, programme over this spending review period. Rolls-Royce SMR has been selected as the preferred bidder to partner with Great British Energy – Nuclear to develop these reactors. Together with Hinkley Point C, these announcements represent the biggest nuclear rollout for a generation, delivering more nuclear to the grid than in the past 50 years. Participation in nuclear third-party liability, or NTPL, treaties is important for supporting nuclear development while also safeguarding the interests of potential victims in the highly unlikely event of a nuclear incident. NTPL treaties ensure that minimum levels of compensation are available to victims of a nuclear incident, that claims are channelled exclusively to the operator of a nuclear installation, and that claims are channelled to the jurisdiction in which a nuclear incident has occurred. The UK is currently party to two NTPL treaties: the first is the Paris Convention on Third Party Liability in the Field of Nuclear Energy, which is referred to as the Paris convention; the second is the Brussels Convention Supplementary to the Paris Convention on Third Party Liability in the Field of Nuclear Energy, also known as the Brussels supplementary convention. These two treaties are implemented domestically in the Nuclear Installations Act 1965. The Paris convention sets a minimum operator liability amount of €700 million. An additional €500 million of compensation is available above this to compensate victims in a Brussels convention country, together with a shared international fund of €300 million, made up of contributions from Brussels convention members—again, used to compensate damage in Brussels states. To remove some potential barriers for investors in the nuclear supply chain, and to support exports, we are now pursuing accession to another NTPL treaty, the Convention on Supplementary Compensation for Nuclear Damage, known as the CSC, which is under the auspices of the International Atomic Energy Agency. The UK is the first Paris convention member to seek to accede to the CSC. Accession to the CSC will expand by 11 the number of countries the UK has NTPL treaty relations with. This expansion will remove some potential barriers to inward investment and support UK exports in the future. CSC accession will enhance the UK’s attractiveness as a destination for nuclear investment and support the successful delivery of future projects. This is because the mutual respect of the principles of NTPL treaties will apply to more countries. In the highly unlikely event of a nuclear incident, accession to the CSC will also increase the amount of compensation available to victims. The CSC establishes a shared international fund made up from contributions of the contracting parties to compensate victims of a nuclear incident. A country’s contributions are calculated based on installed nuclear capacity and UN contribution rates, expressed in special drawing rights. At present, with the UK as a member, the shared international fund would be approximately £120 million, with the UK’s contribution being £7 million. To date, there have been no calls on this fund. As we are the first Paris convention country to seek accession to the CSC, there is no established path for countries seeking participation in both conventions—the UK is a pioneer in this respect. To enable CSC accession, provisions were included in the Energy Act 2023 to amend the Nuclear Installations Act 1965, which provides for the UK’s participation in the various NTPL regimes. Our initial approach has been to reflect the minimum national compensation amount required for claims under the CSC at £300 million special drawing rights, or SDRs, equivalent to €370 million, by setting this as the liability limit for operators. This was to come out of operators’ existing financial security provision. This instrument makes a technical change to the way the CSC will operate in the UK upon accession to the treaty. This technical amendment will align the operator liability limit under the CSC with that of the Paris convention: that is to say, it will create a single first tier of compensation available under both conventions, with a limit of €700 million. This remains within the existing financial security provided by operators, meaning there will be no increase in the liability burden for operators. For sites with lower liability levels, namely low-level sites and intermediate sites, their financial security requirements will also remain unchanged. This approach will simplify the operation of the different conventions and the classification of claims in domestic legislation. It will benefit the administration of funds by ensuring that the CSC shared international fund comes into operation only once the operator financial security limit of €700 million is exhausted. It will continue to ensure that the additional funds available under the Brussels supplementary convention and the CSC go only to those entitled to make a claim under these conventions. In conclusion, this instrument makes a technical change to the way the CSC will operate in the UK. We continue to work towards CSC accession, which will support the delivery of new nuclear projects and exports, while continuing to safeguard the interests of victims in the highly unlikely event of a nuclear incident. This Government have been clear on our support for nuclear, and these measures contribute to creating the best possible investment climate. I beg to move.

My Lords, we very much welcome these changes and we thank the Government for taking a world-leading approach here. The Government seek a resurgence of nuclear power, both large-scale reactors and SMRs, as part of their plan to decarbonise our energy generation and reach net-zero goals. It is absolutely right that the appropriate compensation be available to any potential victims associated with these undertakings. We welcome this statutory instrument and recognise its critical role in ensuring that a minimum amount of compensation is available to victims in the unlikely event of any nuclear incident. We also strongly support the principle that claims are channelled directly to the operator of the nuclear installation in the country concerned. These regulations are a small, technical, yet important amendment to the Nuclear Installations Act 1965. Their primary purpose is to implement the Convention on Supplementary Compensation for Nuclear Damage, known as the CSC, within the UK. The move is particularly significant as the UK is a pioneer in this respect, being the first Paris convention member to seek to accede to the CSC. At the heart of these changes is a simplification and alignment of our nuclear third-party liability regime. Currently, the UK is a party to the Paris convention and the Brussels supplementary convention. This instrument makes a technical change to align the compensation under the CSC with that of the Paris convention. This means that any claims brought under the CSC, or under both the CSC and the Paris convention, will have a cap of €700 million. Critically, this operator liability aligns with CSC claims. This approach simplifies the operation of the different conventions and the classification of claims in domestic legislation, and will help bring clarity and certainty to the wider industry operating in the UK. It is important to note that this revised liability remains within the existing financial security provided by operators. Importantly, this means no increase in their liability burden. For potential victims, however, accession to the CSC will increase the amount of compensation available through a shared international fund. With the UK as a member, this fund would currently stand at approximately £120 million, with the UK’s contribution being £7 million. From a broader perspective, participating in nuclear third-party liability treaties such as the CSC is essential for supporting nuclear developments while safeguarding the interests of potential victims. The extension is intended to remove barriers to participation for inward investment and support UK exports, helping to enhance the UK’s attractiveness for inward nuclear investment, thus supporting the successful delivery of planned projects. If the Minister does not mind, I have two small questions I would like clarification on. First, the Explanatory Memorandum says that the CSC “would not impose additional liability on nuclear operators”, but “there is a risk that the insurance industry may choose to increase operators’ annual insurance premiums as a result of accession. It is unknown how much premiums might increase by, if at all”. Given the intention behind the instrument, which I welcome, and the plans to build further nuclear power facilities, what measures will the Government take to ensure that the insurance industry does not take advantage of these changes to unduly put up premiums? What methods will the Government use to monitor any increases in insurance premiums that could come into being as a result of this measure? Finally, I absolutely welcome the fact that the UK Government are doing this but, since they are now in a world-leading space on this, what action, if any, will they take to encourage other nuclear countries to follow the route they have taken? Will any consideration be given to asking other nuclear countries and their companies that are working in the UK to follow these examples in relation to any contracts they may have with us, currently or in the future, as part of their contracting process?

My Lords, I thank the Minister for introducing this instrument. As we have heard, it is intended to facilitate the UK’s accession to the Convention on Supplementary Compensation for Nuclear Damage—the CSC—by raising the liability limit for nuclear operators under the regime. Although the change is framed as technical, it raises broader questions that merit further attention. First, on the process, there appears to have been no formal public consultation on this measure, and although His Majesty’s loyal Opposition recognise that key stakeholders in the industry were consulted, nuclear liability is not just a matter for industry; it is also a matter of deep public interest. We would welcome the Minister’s assurance that the Government will maintain transparency as and when the CSC framework is implemented, particularly in relation to how claims are assessed and public communications are relayed in the event of a nuclear incident.

16:00:00

Secondly, I turn to insurance, which was highlighted so eloquently by the noble Earl, Lord Russell. The Explanatory Memorandum suggests that there is not expected to be a significant increase in premiums for nuclear operators. That may well prove to be true, but we have to ask whether the department has conducted, or will commit to conducting, further analysis to monitor any negative cost implications for operators, and whether these costs might ultimately be passed on to consumers.

Thirdly, although this instrument ensures alignment between the CSC and the Paris convention in terms of liability caps, it would be useful to hear more from the Minister about the Government’s long-term strategy. How does CSC accession fit into the UK’s wider strategy for nuclear energy, particularly as new nuclear projects are brought forward in pursuit of net zero? Do the Government anticipate further legislative changes as part of that direction of travel?

Finally, we would be most grateful for clarification on whether the CSC provides any additional recourse for victims in the event of a nuclear incident occurring outside of UK territory, whether through claims mechanisms or cross-border co-ordination.

My Lords, I am grateful for the valuable contributions and the insightful questions. As I said, this is a technical issue, so it is only right that it be looked at technically and in detail. I say to the noble Earl, Lord Effingham, that a formal public consultation was not undertaken for this draft statutory instrument. The amendment is technical in nature and does not introduce new policy, which is why there was no public consultation. However, we have engaged extensively with international partners and key stakeholders throughout the development of the approach. We recognise that there will be many impacts resulting from the changes required by operators and insurers as a result of CSC accession—an issue raised by the noble Earls, Lord Russell and Lord Effingham—so we will work with them in advance of accession to the treaty. I will write to the noble Earls on this more technical point. I welcome the support of the noble Earl, Lord Russell, for the SMR programme and the changes. We will keep support for our nuclear sector in view all the time. The CSC is important because it includes another 11 countries that can be part of this process and that can be confident in the UK. They will, therefore, help to enhance the supply chain going forward, which is one of the reasons for doing this—other than, obviously, looking after particular incidents that might happen. Many countries recognise the benefits that establishing a trading relationship can bring for industry, investors and potential victims of nuclear incidents. Contracting parties to the Paris convention are interested in the UK’s approach to CSC implementation as we are the first Paris convention country to seek to do this; we expect other states to be supportive of the UK’s accession to the CSC. Operators have discretion to cover their nuclear liabilities using a range of financial mechanisms. Officials are in regular contact with nuclear operators and insurers through an annual review process of operations arrangements. To drive forward new nuclear and deliver on our mission, the Government made a series of bold commitments in the recent spending review, including a commitment to Sizewell C and the delivery of SMRs. Key to supporting these projects and our wider ambitions is creating the best possible investment climate for nuclear. As I have set out, accession to the CSC will expand by 11 the number of countries with which the UK has NTPL treaty relations. This expansion will remove some potential barriers to inward investment and support UK exports in future. CSC accession will enhance the UK’s attractiveness as a destination for nuclear investment and support the successful delivery of future projects. It will also increase the amount of compensation available in the unlikely event of a nuclear incident. This instrument makes technical changes to the way the CSC will operate in the UK upon accession to the treaty. It aligns the compensation from operators available under the CSC to that of the Paris convention, to which the UK is already a party. This does not increase the liability burden for operators as claims made under the CSC will be met from their existing financial security. It simplifies the operation of the different conventions, ensures that shared international funds are used only once the operator’s liability limit has been exhausted, and continues to ensure that the international funds available under the Brussels supplementary convention and the CSC go only to those entitled to make a claim under those conventions.