US: Japan should accept liability to receive international help at Fukushima Daiichi

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As reported last week, United States Energy Secretary Ernest Moniz requested that Japan join a treaty called the Convention on Supplementary Compensation for Nuclear Damages.  This treaty collects funds from participating nations to assist with payments for damages resulting from nuclear disasters.

What most mainstream media sources failed to relate, was that the treaty also assigns accident liability to the operators of the nuclear power plant, rather than the vendors which develop the technology or construct the equipment.

To receive help, the United States essentially told Japan that they would have to incur the losses and sign a treaty which would prevent them from seeking compensation from contracted companies, like those which built and constructed the Fukushima Daiichi nuclear power plant, and instead must satisfy itself only with seeking repayment from the operator, Tokyo Electric – who is facing bankruptcy and relies largely upon the Japanese government for funds to prevent a financial meltdown.  In the wording of the treaty, “the operator’s liability for nuclear damage shall be absolute”, and “the right to compensation for nuclear damage may be exercised only against the operator liable.”

Currently, the situation surrounding the utility reminds one of an operation to remove a leg to prevent further damage to the host body.  TEPCO is facing the end of life as they know it, as being forced to cover the full brunt of the Fukushima Daiichi nuclear disaster would put the entire organization into a financial pit they would likely never find a way out of.

Instead, TEPCO is working on new reorganization plans, in order to prevent the more drastic options proposed by the Japanese government, like breaking up the company or the equivalent of a Chapter 11-style bankruptcy.  Sources have told the Reuters that TEPCO may reorganize itself into a holding company, which would separate the electricity generation and transmission businesses from the Fukushima Daiichi cleanup operations.

Seeing as Tokyo Electric will be unable to pay back the money they owe in the near future, this means Japan must accept to largely handle the financial costs themselves, aside from the amount that they would receive from the international funds.

Readers may ask why Japan would accept this deal that obviously appears to be the short end of the stick.  Even if Japan were to attempt to seek compensation from the American companies that designed and constructed the Fukushima Daiichi nuclear power plant, like General Electric, they are not guaranteed to get judgment in their favor.  By signing the treaty, Japan will receive some monetary compensation, and while it will likely be far less then they could seek as damages – it is more certain of a process then the legal system.

Source: Bloomberg

Source: CNBC

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