The 21 st Century Public Policy Institute
Policy Proposal

Toward the Establishment ofa New Compensation System
for Nuclear Damages
Supervision:

Akihiro Sawa, Senior Executive Fellow

Nuclear Policy Issues Committee

November 2013

Table of Contents

Executive Summary ................................................................... v
Committee members ................................................................... xxviii
Part IThe Historical Context of Nuclear Operations and Nuclear
Damage Compensation in Japan ....................................................... 1
Chapter 1

Introduction ............................................................ 1

1. The purpose of this study and the structure of the report ...... 1
2. Understanding the issue (Damages from the Fukushima
accident and the current status of nuclear operators) ............. 6
Chapter 2

Historical Context of Nuclear Power in Japan .......... 10

1. Important perspectives in understanding the history of
nuclear power in Japan.............................................................. 10
2. The evolution of nuclear operations in Japan ......................... 11(1) 1950s: Developments leading to the introduction of
nuclear power in Japan ........................................................ 11(2) 1950s to 60s: Determining the entity to assume nuclear
power operation .................................................................... 15(3) 1970-80s: A nuclear business scheme “privately run undernational policy” established in the Oil Crises .................... 17(4) Beyond 1990 to the Fukushima accident: deregulation andeconomic stagnation ............................................................ 20
Chapter 3 Fundamental Principles of a Nuclear Damage
Compensation Scheme ..................................................................... 29
Chapter 4 The features of Japan’s Act on Compensation for
Nuclear Damages: its origin and context of amendments ............. 34
1. Historical context of the enactment of the Nuclear
Compensation Act ...................................................................... 34
2. History of amendments ............................................................. 40
3. The features of Japan’s Nuclear Compensation Act ................ 44i

Chapter 5 Legal frameworks in other countries and international
agreements ....................................................................................... 59
1. The U.S. Price Anderson Act ..................................................... 59
2. German Law ............................................................................... 67
3. International agreements .......................................................... 72
Part IIThe Shortcomings of the Current Nuclear Compensation
Law and Perspectives for its Amendment ....................................... 75
Chapter 1 Responding to the TEPCO Fukushima accident .......... 75
1. Historical context of the establishment of the Nuclear Damage
Compensation Facilitation Corporation Act ............................ 75(1) Confusion after the accident: discussions on exclusion ofoperators from liability ........................................................ 75(2) Beginning of provisional payments by TEPCO .................... 80(3) Historical context of the enactment of the Nuclear Damage
Compensation Facilitation Corporation Act ....................... 80(4) Deliberation in the Diet on the Nuclear Damage
Compensation Facilitation Corporation Act ....................... 82
2. Overview of the Nuclear Damage Compensation Facilitation
Corporation Act .......................................................................... 84
3. Significance and challenges ...................................................... 87
4. Provision regarding revision ..................................................... 97
5. Direction of revision ................................................................. 98(1) The legitimacy of other nuclear operators shoulderingcosts and foreseeability ....................................................... 98(2) Increased operator burden (increased burden among thegeneral public and consumers) ............................................ 99(3) Government involvement in local restoration .................. 103
Chapter 2
The risks accompanying nuclear operations revealedin the Fukushima accident ............................................................ 104
1. Nuclear accident risk (for both front end and back end
operations) ............................................................................... 105
2. Increased costs accompanying ex -post alterations in policy
and regulations (for both front end and back end operations)................................................................................................. 106
3. Risks of technological challenges (decommissioning of reactor
in accident, back end operations including reprocessing) .... 109
ii

Chapter 3
The Challenges of the current nuclear compensation
scheme and ideas for revision ....................................................... 112
1. Ideas for limiting risks and risk-sharing ............................... 112(1) Problems arising from the ambiguity of the definition of“nuclear damage” ............................................................... 112(2) Considerations of increasing the financial security amount .... 117(3) The problems of unlimited liability for operators ............ 126(4) Confusion regarding the liability of operators ................. 139(5) Issues regarding exculsive liability of the operator ......... 148(6) The necessity for considerations on prescriptions .......... 153
2. Addressing major nuclear disasters ........................................ 155
3. The optimal legal system for nuclear power operations ....... 159
Part III
Toward the Establishment of a New Compensation
System for Nuclear Damages ......................................................... 163
Chapter 1

Liability For Damages In Civil Society .................. 163

1. Negligence liability and freedom of action ............................ 163
2. Negligence liability and foreseeability ................................... 165
3. Categories and scope of damages to be compensated ........... 166
4. The Nuclear Compensation Act and the Civil Code ............... 167
5. The structure of Part III ......................................................... 168
Chapter 2
Proposal of a Law for the Indemnification of Nuclear
Damages .......................................................................................... 171
1. Introduction ............................................................................. 171
2. The role and limits of damage compensation law ................. 173(1) The features of modern tort law ........................................ 173(2) The evolution of post-war tort law .................................... 174(3) Scope of damages ................................................................ 175
3. Compensating for nuclear damages and the limits of tort law................................................................................................. 175(1) Legally protected interests ................................................ 175
4. Conclusion ............................................................................... 204

iii

Chapter 3
The Compensation Regime of the Nuclear
Compensation Law Based on Strict Liability and the Ideal Remedy
for Victims of a Nuclear Accident ................................................. 215
1. Significance of the Nuclear Compensation Act in terms ofstrict and unlimited liability .................................................. 215(1) Introduction of strict liability in German law .................. 216(2) Development of special statutes on strict liability inGermany ..................................................................... 217(3) Limits of liability under strict liability ............................ 218(4) Liability for nuclear damages as unlimited liability ........ 219(5) Differences between unlimited liability regimes in theGerman Atomic Energy Act and the Japanese Nuclear
Compensation Act ............................................................... 224
2. The Nuclear Compensation Act and its approach tocompensation for nuclear damages in the TEPCO Fukushima
accident .................................................................................... 226(1) Status quo of compensation for damages .......................... 227(2) Compensation for major nuclear damage .......................... 228(3) A new compensation scheme for nuclear damages from theTEPCO Fukushima accident: Act for the Indemnification of
Damages from Nuclear Accidents (tentative title) ............ 230
Chapter 4 Proposal of a Law for the Indemnification of Nuclear
Damages .......................................................................................... 232
1. Issues regarding the current Nuclear Compensation Law ..... 232
2. The concept of a new nuclear damage indemnification scheme................................................................................................. 235
3. Compensation liability ............................................................ 236
4. Administrative committee ...................................................... 238
5. Nuclear damages to be covered by indemnities ..................... 239
6. Relationship with tort compensation ..................................... 241
7. Exemption reasons .................................................................. 242
8. Strict and limited liability of nuclear operators and theGovernment’s indemnification ................................................ 242(This report is the English translation of the Japanese report releasedin Nov. 2013 by the 21st Century Public Policy Institute.)iv

Executive Summary

Toward the Establishment of a New
Compensation System for Nuclear Damages

The 21 s t Century
Committee
Nov. 14 t h , 2013

PublicPolicyInstitute

Nuclear

PolicyIssuesThis report is composed of three parts. Part I explains how Japan’s
nuclear power operations have evolved, with a focus on historical facts
including the context in which the business model of being “privately
run

under

national

policy”ofdevelopment

backgroundcompensationthesystem,

as

was

well

established
of

as

and

Japan’s

relevantthehistorical

nucleardamageoverseas

laws

and

international agreements. Based on the nuclear risks that wererevealed in the Fukushima Daiichi Nuclear Power Plant accident as wellas the historical context and ongoing discussions concerning thecurrent

schemeforaddressing

such

risks

(under

the

Act

on

Compensation for Nuclear Damages, etc.), Part II summarizes theunresolved issues of the current nuclear damage indemnification
system and perspectives for its amendment, with reference to thediscussions held at The 21st Century Public Policy Institute Nuclear
Policy Issues Committee meetings. Part III “Toward the Establishmentof a New Compensation System for Nuclear Damages” is a proposal
made independently of the debates held at Committee meetings by agroup ofmembers, namely, Project General

Manager, Mr. Akio

Morishima and Committee members, Mr. Ikufumi Niimi and Mr.
Michitaro Urakawa.
Based on this report, Mr． Akihiro Sawa and Ms. Sumiko Takeuchi
has compiled a policy proposal “Toward a Comprehensive Solution for
Nuclear Policy and Business Challenges” (21st Century Public Policy
Institute research project) which we would be more than honored tohave our audience also read.

v

1.

The focus of this report
In Japan, electric power has been supplied by private companies

that have enjoyed the institutional benefits of tariff regulations basedon fully distributed cost (FDC) pricing and general mortgage bonds
which enable low-interest financing, as well as regional monopoly
which ensures demand. A stable and inexpensive electric power supply
is vital to national livelihood and economic development. Requiring
large long-term investments, electric power operations are state -run in
most countries, with the exception of countries such as Japan and the
U.S., where these operations have been assumed by private companies.
Furthermore, Japan has been gained worldwide recognition as a “model
country of peaceful nuclear use” because it has managed the entire
nuclear process, including back end operations 1 , mainly throughprivate initiative.
Nuclear power operations are not simply a means of power
generation but embrace radioactive material management and energy
security

and

other

complexaspects

that

must

be

delib erated

comprehensively at the national policy level; and therefore, government
guidance and support have been considered necessary for its promotion.
With

government

supportinvariousdimensions,

includingtheestablishment of a scheme to ensure safe and appropriate operations
and the implementation of relevant regulations, as well as the provisionof support for local governments hosting nuclear power plants, andtechnology development, nuclear power operations have developed as abusiness “privately-run under national policy” in Japan.
A scheme where private companies backed by government support
could develop their businesses with flexibility was very beneficial undernormal circumstances, but the recent accident at Tokyo Electric Power
Company(TEPCO)’s

Fukushima

DaiichiNuclear

Power

Plant

(hereinafter, “Fukushima accident”) brought to light the significant
disadvantages of an ambiguous sharing of risks and responsibilities
between the government and the private sector. In particular, the Act
In nuclear operations, fuel production and power plant construction are referred to as“front end operations,” whereas radioactive waste management, the reprocessing of usedfuel and the decommissioning of nuclear reactors are called “back end operations.”
1

vi

on

Compensation

for

NuclearDamages(hereinafter,“Nuclear

Compensation Act”), which stipulates the scheme for compensating
victims of nuclear accidents and sharing the risk of accidents relevant
to nuclear power operations, provides for private-sector nuclear power
operators to assume unlimited liabilities and for the government tosupport them. Therefore, primarily and solely liable for all damages,
TEPCO is currently supplying its customers with electricity while itcompensates the massive number of victims and as sumes the costs
incurred in the decommissioning and decontaminating operations withthegovernment

supportstipulated

in

the

NuclearDamageCompensation Facilitation Corporation Act (“ Facilitation CorporationAct”) and the Law Concerning the Special Measur es on Coping withEnvironmental Contamination with Radioactive Substances Released at
the Accident of Fukushima Daiichi Nuclear Power Station.
With the establishment of a compensation scheme under the
Facilitation Corporation Act, it would seem that a cert ain degree ofstability has been secured in addressing the aftermath of the accident,
including energy supply and compensation issues. TEPCO has allocatedas many as 10,000 employees in its compensation operations 2 , butmany cases are yet to be resolved. In addition, it has become evident
that monetary compensations do not promise to restore the local
communities fractured by the Fukushima accident. This could be
regarded as a fundamental flaw in the current victim reimbursement
scheme.
The Nuclear Damage Liability Facilitation Fund (“Facilitation
Fund”)

had initially estimated that 5 trillion yen would be required forcompensation payments and thus set up a support fund by issuinggovernment compensation bonds. However, overall accident -related
costs including those for decontamination and the interim storage ofcontaminated soil are estimated to amount to as much as 10 trillion
yen. 3 According to estimates announced by the Board of Audit on
October 16, 2013, even in the event that 5 trillion yen were subs idized,

TEPCO “Records of Applications and Payouts for Indemnification of Nuclear Damage”
www.tepco.co.jp/en/comp/images/jisseki -e.pdf
2

The Nikkei Shimbun, November 8, 2012 “Uncertainty in Implementation of Support for
TEPCO: Government Addresses “10 Trillion” with Caution”
3vii

it would take as long as 31 years to recover total costs. 4 The
circumstances have induced the Government to become proactively
involved in some

aspects of nuclear operations–

for example,

decommissioning and treating radiation-tainted water. Nevertheless,with the roles of the private and public sectors in dealing with theconsequences of a nuclear accident and in continuing nuclear power
operations not yet made explicit and demarcated on an ad-hoc basis,
operators and other concerned parties are still faced with challenges inassessing the risks of future nuclear power operations.
Moreover, the prospects of future nuclear power operations havebecome even more obscure with ongoing discussions on the electric
powersystemreforms

that

could

involvetheabolishmentofconventional schemes that have supported the financing of electricity
operations, which require large long-term investment. 5 One of thereasons that Japan has engaged private companies in electric power
operations is, apart from fiscal constraints, the flexibility available inprocuring funds through large bank loans, corporate bonds and capitalincreases. For private electric power companies, the abolishment oftariff regulations (revenue guarantee) based on fully distributed cost
(FDC) pricing and the issuance of general mortgage bonds which haveenabled low-interest financing, as well as regional monopoly , which has
facilitated the ensuring of demand for electricity generated from
nuclear power, means that they can expect less major investments to
be made in their electric power operations.
In the event that Japan should retain nuclear power operations
Board of Audit of Japan “Report on the Audit on the Implementation Status ofGovernment Support for Compensations for Nuclear Damages Related to the Tokyo
Electric Power Company”(Summary) www.jbaudit.go.jp/pr/kensa/result/25/pdf/251016_youshi_1.pdf (available
only in Japanese)
4

The Expert Committee on the Electricity P ower Systems Reform Report of February
2013 implied a possibility of changes after a certain period of provisional measures.
According to the report, “the further neutrality of the transmission and distributionsector shall be promoted in light of future t rends of the financial market; and in terms offinancial debts, including general mortgage bonds, and behavioral regulations, theimplementation of measures (provisional measures) that will not hinder the procurementof funds required for the stable supply of electricity, while securing the healthy
development of electric power operations, such as setting a fair environment for equal
competition among operators will be called for.
www.meti.go.jp/committee/sougouenergy/sougou/denryoku_system_kaikaku/pdf/rep ort_0
02_01.pdf
5viii

for a certain period of time, the continuation of operations could
become inevitably impossible without an appropriate institutional
design that clarifies how the various risks ((i) risk of accident; ii) riskofex-postpolicyorregulatorychanges;

andcomplexity (especially technologies for backdecommissioningofreactors

after

iii)

technologicalend operations, theaccidents

andrepr ocessing))

inherently accompanying the use of nuclear technology can be avoided,
dealt with or shared among the parties concerned.
This report focuses on two issues: how we can recover the damages
inflicted by a nuclear accident which can victimize a massi ve numberof people and inflict unprecedented damages, such as the destructionof entire communities and how we should design a system for thecontinued peaceful use of nuclear technology, if that is the decisionthat Japan makes.

２ ．Basic structure of the compensation scheme for nuclear
damages: the features of Japan’s Act on Compensation for
Nuclear Damages and the context of its amendment
The Nuclear Compensation Act basically comprises three pillars:i) from the perspective of victim protection, it requires nuclear power
operators to assume liabilities (strict liability, concentrated liability,
limited immunity) that are more stringent than those usually requiredin modern law; ii) it requires the securing of financial resources forcompensation through private insurance; and iii) it provides that in theevent such measures are insufficient, the Government shall provide
compensation. 6 Given the historical context in whichcountries

Refer to: Takeuchi, Akio, Genshiryoku songai nihou no gaiyou (Outline of Two Laws
Concerning
NuclearDamage),Jurist No236 (available only in Japanese)
www.yuhikaku.co.jp/static_files/shinsai/jurist/J0236029.pdf;
Tanabe,Tomoyuki, M. Maruyama, Fukushima Daiichi Genshiryoku Hatsudensho Jikoga Teikishita waga kuni no genshiryoku songai seido no kadai to sono kokufuku ni muketa
seido kaikaku no houkousei (The issues concerning Japan’s compensation system fornuclear damages raised by the accident at Fukushima Daiichi Nuclear Power Plant andthe direction of system reforms to overcome the challenges), Central Research Instituteof Electric Power Industry （ 2012） ; and other reports. It should also be noted that, forexample, Utatsu states in Genshiryoku mondai no houritsu mondai (Legal issues of6ixformulated their nuclear compensation schemes in agreement with the
U.S.’s demand of its export partners that American nuclear power
facility manufacturers, such as General Electric (GE), would not be held
liable for any nuclear accidents, the basic institutional principles,
including the purpose of relevant laws, are nearly globally common.
Common Principles of Compensation Schemes for Nuclear Damages
1) Tightening up and concentration
Nuclear power operators are subject to strict liabilityof liability
and limited immunity. In addition, even if an accident
should occur due to causes attributable to thefacility supplier, the operator shall be solely liable.
“Nuclear damages” under a nuclear damage

2) Scope of applicationcompensation scheme are caused by accidents thatare attributable to reactor operations.

3) Mandatory financial security

Compulsory subscription to private insurance and/orindemnity agreement with government to secure theoperator’s ability to pay4) Limitation of compensation
payments

A maximum liability amount is set for compensation
payments so that the operator is not held liable forunlimited sums of money. Japan, Germany and
Switzerland have exceptionally not set ceilings , andtherefore operators in these countries assume
unlimited liability.

5) Government compensation

When operators are not capable of making
compensation payments in full, the government
compensates for remaining amounts . *Japan’s
Nuclear Compensation Act does not include explicit
provisions about compensation by the government.

３ ．The features of Japan’s Act on Compensation for Nuclear
Damages, its origin and amendments
Japan’s Nuclear Compensation Act contains no explicit provisions
about compensation by the government. A report by the Special
SubcommitteeonCompensation

for

NuclearAccidents,

which

nuclear damage compensation) that i) strict liability, ii) limited liability, iii) exclusive
liability, and iv) mandatory financial security are the four common principles of liability.

xdeliberated the design of a compensation scheme for nuclear damage,
had explicitly concluded that in the event that compensation costs
exceed the insured amounts, the government should assume theremaining costs. However, under Japanese law, operators assume
unlimited liability and “the Government shall give a nuclear operator
such aid as is required“ (Section 16 of the Nuclear Compensation Act)
as a result of debate within the Government, or to be more precise,
opposition by the Ministry of Finance, and also as indicated by Hoshino(1972)

7 ,the agreement by nuclear power operators to assume

unlimited liability in order to increase acceptance among the residents
of local communities and governments hosting nuclear power plants.
Given

the

term

stipulated

in

Section20,

theNuclearCompensation Act has been amended once every decade. However, only
thefirst amendment involved discussions on such fundamental

framework issues as risk-and-burden-sharing between the national
government and private nuclear business entit ies; and therefore,
despite indications of fundamental flaws and major changes to thecircumstances surrounding nuclear power operations from the timingof the adoption of the Act, Japan ended up addressing the Fukushima
accident with the Nuclear Compensation Act maintaining its original
structure.

４ ．Overseas legal systems and international agreements

Of the many overseas legal systems and international agreementsthat can be informative guides to the Japanese , we summarized
information on the U.S. and Germany’s compensation system scheme
fornucleardamage

and

on

the

Convention

on

Supplementary

Compensation for Nuclear Damage (CSC). The U.S. Price-Anderson
Nuclear Industries Indemnity Act (“Price-Anderson Act”) is based on
Hoshino, Eiichi, Genshiryoku saigai hoshou (Compensation for Nuclear Disasters).
Minpo Ronshu Vol.3 (Symposium on Compensation for Nuclear Disasters) . p436; Hoshino,
Eiichi, Nihon no genshiryoku songai baisho seido (Japan’s Compensation System for
Nuclear Damage) (Ja pan-Germany Comparative Nuclear Power Law: First Symposium on
German Nuclear Power Law)7xi

limited liability, whereas the German law takes an unlimited liability
approach.

The

Price-Anderson

Act

securesfinancialprotection

amounting to the large sum of approximately 1.2 trillion yen through a
375-million-dollar liability insurance and a 12.22-billion-dollar（ 11.19
billion dollars ☓1.05 8 ☓104 reactors） mutual insurance arrangement.
The mutual insurance arrangement takes an ex -post levy collection
approach which contributes not only to securing a large sum offinancial protection

but also to increased safety through nuclear

safety peer reviews conducted among operators.
The Price-Anderson Act provides that in the event of a nuclear
incident involving damages in excess of the limits established by law,
payment should be required of as wide a range of parties as possible;
and therefore, strictly speaking, it could be interpreted that the Price Anderson Act does not actually limit the liability of operators as it has
generally been considered to do. However, unlike the Japanese systemof unlimited liability, placing a cap - even if it may be provisional - on
the amount of liability an operator has to face has the effect of reducing
financial risks and assuring operators that they will be able to secure
the necessary funds for investing in nuclear power p lants. Therefore,
the U.S. system is better than that of Japan from the perspective ofpromoting the sound development of nuclear business.

Moreover, its

provisions on burden-sharing among the President, Congress, thecourts, the Nuclear Regulatory Commission (NRC), etc. and the relevant
procedures to be taken when compensation payments are likely tosurpass the pooled amount, and those on the formulation of a
distribution plan for the allocation of available funds, as well as thecall for the use of private insurance company services and functions to
the maximum extent possible in dealing with liability claims should
serve as good reference for Japan.
German law does not allow for any immunity on the part of operators.
A 1985 amendment transformed its nucl ear compensation system fromlimited liability to unlimited liability. However, given the provision that“where legal liabilities to pay compensation for damage resulting froman incident are expected to exceed the amount available to satisfy such

8

Includes legal fees equivalent to 5% of levied insurance fees. (Section 170(e)(1)A))xii

liabilities, their apportionment and the procedure to be observed in thiscontext shall be governed by an act or, pending such act, by statutory
ordinance” (German Atomic Energy Act Section 35 paragraph (1)), it
could be understood to require government interventi on, particularly
in terms of distribution and procedures. The deliberations which took
place at the time of the Atomic Energy Act’s establishment also support
this interpretation. It should be noted that the Swiss Nuclear Energy
Liability Act (discussed in detail in Part II), which also does not grant
exemption from liability, includes provisions for major disasters which
stipulate that in the event the damage exceed s the amount covered byfinancialsecurity

andgovernment

compensation,

thefederalgovernment shall establish a compensation framework and decide thebasic principles regarding compensation to victims by ordinance.
A close observation of different compensation schemes brings us
to the conclusion that those based on limited liability and others basedon unlimited liability are not completely contradictory. Given theimpossibility to pool unlimited amounts for compensation under ascheme founded on unlimited liability, the reasonable idea is thatgovernment intervention is supposed to be envisaged for cases where
total damages are likely to significantly exceed the financial security
amount. On the other hand, even under a limited liability scheme,
refusal to compensate for damages surpassing a cert ain upper limit
would not be politically nor socially accepted (unless the entire country
is in a devastating state and there is no rationale to provide relief only
to victims of nuclear disaster); and therefore, it is only natural toassume that additional payments will be required of operators andother concerned parties based on the judgment of the government,
President or the legislature. This consequently places the predictabilityof costs on the part of operators and the flexibility of the compensatio nscheme in a trade-off. However, the attribution of liability should bedetermined by taking into consideration all factors, including corporate,industrial,

economic

andpolitical

circumstances,

based

on

the

fundamental principle of not compelling helpless victims to meekly
accept damages. Nuclear damages are, in this sense, a matter ofxiii

political judgment rather than a legal matter. 9 It is important that theroles of the executive and legislative branches of government andrelevant procedures are explicitly predetermined by law in order tosecure the transparency of the process.

５ ． Thesignificanceandchallenges

of

addressing

theFukushima accident (under the Nuclear Damage Compensation
Facilitation Corporation Act)The Fukushima accident aroused heated debate over whether or
not TEPCO would be lawfully exempted from liability pursuant to an
exceptionalclauseinSection3

paragraph

1.

The

Facilitation

Corporation Act was then established, attributing primary liabilit y to
TEPCO. Support from the government is covered by payments from the
Facilitation Fund to the national treasury (Facilitation Corporation Act,
Section 59 paragraph 4), which will, in principle, be repaid in the future
by TEPCO via the Facilitation Fund. This public support scheme is morein the character of an emergency bridge loan than a relief measure for
TEPCO using public funds or government compensation for nuclear
damage.
The advantages of promptly implementing this scheme were: 1) the
prevention of panic among victims; 2) the securing of funds fordecommissioning and the provision of a stable supply of electricity; and3) positive effects on financing for other electric power companies. Its
shortcomings involve: 1) the deterioration of TEPCO as a c orporate body(itsdegradedproblem-solving

capacity,

inparticular);

2)

the

incompatibility with electric power system reforms (concerns that the
new scheme may not be based on a system where revenue and profit isguaranteed by regional monopoly and FDC p ricing; 3) questions fromthe perspective of minimizing public burden; 4) the lack of versatility
asacompensation

schemefornucleardamages;

5)questions

Lawmaker Takeo Tanaka and sworn witness Sakae Wagatsuma appropriately engaged
in exchange on the very subject at the 14 th meeting of the Special Committee for Scienceand Technology Promotion of the 38 th Diet session.
kokkai.ndl.go.jp/SENTAKU/syugiin/038/0068/03804260068014a.html
9xivconcerning the legal justice of having other operators shoulder
compensation costs through a levy; and 6) the limits to victim relief
based on monetary compensation pursuant to tort systems.

６ ．The risks of nuclear operations revealed in the Fukushima
accident
Many risks of nuclear operations, including those of which had
already been envisaged, were revealed in the Fukushima accident.
These are: 1) the costs involved in the occurrence of a nuclear accident,
namely, i) compensation costs, ii) additional fuel costs for increased
thermal power generation, iii) costs incurred in terminating theaccident and those required for the decommissioning of reactors, andiv) growing difficulties in continuing operations as a result of theseincreased

costs;

2)

theincreased

costs

accompanying

ex -post

alterations in policy and regulations, namely, i) increased fue l costs
due to the stoppage of nuclear power plants, ii) costs incurred inmeeting the requirements of new regulations, iii) growing difficulties incontinuing operations due to these increased costs (in particular, for
The

Japan

AtomicPower

Company(JAPC);

and

3)

given

the

technological challenges of the back end process, i) increased deficits
due to delayed work on the part of JAPC, ii) increased costs , required
to address such delays, and iii) growing difficulties in continuing
operations due to increased costs and problems in determining a final
disposal site for nuclear waste.
In May 2006, the Subcommittee on Electric Power Deregulation
and Nuclear Power, established under the Nuclear Power Subcommitteeof the Electric Utility Industry Subcommittee und er the Advisory
Committee for Natural Resources and Energy , published a report 10 on
the impacts to be imposed on electric power sources such as nuclear
power

that

requirelarge

long-term

investment

in

the

face

of

Draft Report of the Subcommittee on Electric Powe r Deregulation and Nuclear Powerwww.meti.go.jp/committee/materials/downloadfiles/g60519a03j.pdf
Report of the Subcommittee on Electric Power Deregulation and Nuclear Power(Outline) www.meti.go.jp/committee/materials/downloadfiles/g60607f03j.pdf
10xv

advancements made in deregulating the electric power sector. It
analyzed from the perspectives of finance, location and demand,
whether Japan would be able to maintain the nuclear ratio provided forin the Nuclear Policy Outline adopted by the Government i n the eventthat operators were left to make investment decisions under open
competition, and indicated that the following issues would have to beaddressed:1) lowering and dispersing investment risks unique to nuclear power
generation
2) decreasing and leveling initial investments and decommissioning
costs3) promoting wide-area operations4) visualizing the advantages of nuclear power generation
OECD has also analyzed the difficulties in procuring funds fornuclear power in a competitive electric p ower market. 11 In the U.S., theshale gas revolution has undermined the competitiveness of nuclear
power, thereby triggering the freezing of nuclear energy plans, thedecommissioning of reactors, and the corporate withdrawal of operators(France’s EDF) 12 .

The U.K., on the other hand, is rediscovering thesignificance of nuclear power generation and has decided to introduce
a Feed-in-Tariff with Contracts for Difference (FIT -CfD) scheme as apolicy measure to ensure that investments made in nuclear power
generation can be recovered. 13

Nuclear Power in Competitive Markets
www.oecd-nea.org/ndd/reports/2000/nea2569 -dereg.pdf
11

Coverage includes: The Nikkei Shimbun August 6, 2013 “The ‘economic efficiency’
barrier of U.S. nuclear plants”
12

On October 21, 2013, the U.K. Department of Energy and Climate Change (DECC) andenergy company EDF Energy (subsidiary of France’s EDF) announced that they hadreached agreement on a plan to build two 1.6 million kW reactors in Hinkley Point C. The
strike price is has been set at 89.5 pound s per MWh and will be generally guaranteed
over 35 years from the point of beginning power generation.
(www.gov.uk/government/news/hinkley-point-c)
13xvi

７ ．The problems of the current nuclear compensation system
and ideas for reform
Based on the discussions held at Committee meetings and ideas
provided by concerned parties, this section is divided into three parts
to identify the schemes that must be reformed or improved in order toretain nuclear operations as well as the direction in which they should
be taken, while reducing the risks and uncertainties of nuclear power
generation and adequately preparing for major disasters.

１ ）Limiting risks and ideas for risk-sharingi) Problems arising from the ambiguity of the definition of “n uclear
damage”
This point is elaborated in Chapter 2 of Part III. Many Committee
members indicated that the inclusion of pure economic loss ( damage
inducedbyharmfulrumors)andenvironmental

damage(decontamination) in “nuclear damages” should be carefull y deliberated,considering the impact such conclusions would have on theories of tort
law. It should be noted that the Committee does not take the positionof denying any compensation for these damages, but instead believes
that such items should be considered under a scheme separate from acompensation scheme for nuclear damages based on tort law.
ii) Considerations on increasing the financial security amount
The Fukushima accident revealed that the current financial
security amount was insufficient. Then, to what extent could theamounts

coveredbyprivateinsurance

contractsbeincreased?

Although precise estimations cannot be made without detailed premises,
it has been suggested that a maximum of 200 billion yen would be theceiling amount to enable the stable provision of insurance. We also
explored the possibility of increasing the financial security amount by
non-insurance-based means, including the ex-post mutual insurance
scheme under the U.S. Price Anderson Act , in which operators areassessed a share of the exceeding amounts, as well as procuring funds
xviifrom the capital market, that is,

the formulation of a nuclear

catastrophe bond. Committee members pointed out that if a nuclear
catastrophe bond were to be formulated, high interest rates would be
required in order for it to be appealing to investors, but that in reality,
given the requirement to ensure information transparency to investors
and to disclose risk quantification and analysis processes, we would
face the fundamental issue of not being able to present substantial
reasons for setting certain interest rates because nuclear accidents do
not always occur as a consequence of earthquakes and tsunamis
exceeding a given level. Although catastrophe bonds, in general, arebeing issued in growing numbers, nuclear catastrophe bonds have yet
not been issued anywhere in the world, presumably because thechallenges described above are yet to be overcome.
iii) The problems of unlimited liability for operators
Committee members expressed that not limiting the liability ofoperators

wasinconsistent

with

the

purposeofthe

NuclearCompensation Act (the sound development of nuclear power business),and raised concerns for increased public burden through electricit ytariff raises, the impairment of stable power supply , and potential
negative impacts on the financing of electric power operations and on
the stock market.

However, fundamentally, “under modern civil law,a company is recognized its right to conduct unr egulated activities,
while naturally, it is simultaneously required to shoulder all of thecosts incurred by the damages attributable to it.” 14 In addition to
discussions regarding the legal justice of Government compensation,
we identified the issues that would need to be considered if a scheme
based on limited liability were to be adopted:ⅰ ) the infringement of a victim’s property rightsⅱ ) a moral hazard in association with safetyⅲ ) a distribution plan for compensation fundsⅳ ) the reinstatement of operations

Kanazawa, Yoshio, “Kojin no songai baishou sekinin ni taisuru kokka no hokannteki
sayou (The State’s Complementary Function in a Person’s Liability for Damages)”
14

xviii

ⅴ ) the inhibitory effect on the of foreign capital in nuclear
operations
In particular, in terms of the reinstatement of operations (iv),there have been calls

among stakeholders for the clarification of

responsibility, and assertions thatthe fundamental principle ofcapitalism should be observed are reasonable to a certain extent.
However, various problems are likely to occur: a) the victims’ right toclaim compensation for damages would be subordinate to the bond related lien or security interest in reorganization; b) the “reconstruction”
of TEPCO under the Corporate Reorganizati on Act was initially judged
to be impossible at the breakout of the accident because the costs
requiredforcompensation

anddecommissioning

were

then

unpredictable; c) a body to assume liability for damages must be
secured; d) the public is faced with burdens amounting to several
trillion yen, including the 1 trillion yen already injected by thegovernment; e) the funds required may impair the allocation ofnecessary funds for supplying electricity and addressing the aftermathof the accident; f) financing costs may rise as a result of other nuclear
operators’ loss of credibility; and g) the morale of electric power supply
and decommissioning operations may be impacted. The framework of
the Facilitation Corporation Act not being a versatile compensation
scheme for nuclear damage, other options should also be pursued. We
also considered the alternative of applying corporate reorganization
procedures, the challenges and possible countermeasures regarding
which are summarized below:
A proposal is made for each challenge, followed by relevant
concerns.
Proposal 1: Potential treatment of victims' right to seek damage
compensation as a common benefit claim 15 pursuant to permission of
the court.
A claim regarding the costs required for rehabilitation procedures and costs
indispensable to the continuity of operations, which are incurred after bankruptcy
proceedings based on Civil Rehabilitation Law are initiated. Even in the event ofliabilities which occurred previous to the decision of initiation, costs indispensable to thecontinuity of operations can be common benefit claims, provided permission is obtained
from the court and supervisor. Common benefit claims are categorized as claims that areentitled to preferential receipt of reimbursement and are of the same rank as priority
bankruptcy claims.（ excerpt from: www.exbuzzwords.com/static/keyword_4894.html ）15xix

(Concerns)
・

Can the requirements for court permission that such trea tment is
indispensable for reorganization and that the equity principle is notundermined be met?

・

As no order of priority is determined among common benefit claims,
would it not be necessary to grant rights to receive preferential
payment 16 in the reorganization procedures, in order to avoid
conflict with legal common benefit claims such as tax collection
rights?

Proposal 2: Fund procurement would still be possible even if the“general mortgage clause” which secures bonds with blanket mortgage,
were to be deleted.
(Concerns)
・In order to avoid confusion in the corporate bond market, the rights
granted to outstanding bonds under existing systems should takeprecedence; and therefore this option would not be applicable inaddressing the Fukushima accident.

・It would be technically possible to issue new bonds without generalmortgage, but the widening of spreads observed after the accident
despite an effective “general mortgage clause” raises concerns over
how to mitigate the negative impacts of higher financing costs andimpaired stability in procuring funds.

・The same can be said regarding loans from the Development Bank ofJapan (DBJ).
Finally, Chapter 3 of Part III discusses the limits to liability for

dangerous products, a theory which has developed under German law.
iv) Confusion regarding the liability of operators
The Fukushima accident aroused heated debate over whether or
not operators would be legally exempted from liability pursuant to the
exceptional clause in Section 3 paragraph 1. The experiences in the
Fukushima accident revealed that “the comprehensive and flexible

It was noted that preferences should be placed on different common benefit claims,
thereby discriminating “preferred common benefit claims”.
16xxphrase, ‘exceptionally grave natural disaster’” 17’ could ignite confusion.
It has also been indicated that even if operators were to be exemptedfrom liability, it would be impossible to co nclude that victims would bedeniedindemnification,

and

hence

an

established

Government

compensation scheme would have to be available; however, given the
ambiguity of the Government’s role, it is structurally difficult underJapan’s Nuclear Compensation Act to exempt operators from liability 18 .
In order to overcome these challenges, the Committee collected
information on German and Swiss nuclear compensation laws, both ofwhich do not contain any clauses for exclusion from liability 19 . In ourreport we have summarized the current status of nuclear power
operations and the legal system for compensation for nuclear damages
in Switzerland, whose scheme of combining of liability insurance andgovernment compensation is simpler and clearer than that of Germany.
v) Issues regarding exclusive liability of the operator
The Committee discussed indications that although it is notrealistic to hold manufacturers (suppliers) liable for damages, theyshould at least be required to cooperate in dealing with an accident or
to provide information. The possibility of applying the Act Concerning
State Liability for Compensation was also discussed. Regarding thelatter issue, in light of the role that the Government has played innuclear operations – that nuclear operations have been placed highly
under Government control and that even after the accident, the Nuclear
Emergency Response Headquarters and other various Government
bodies were responsible for announcing evacuation instructions,establishingfoodsafetystandards

and

implementing

shipping

restrictions after the accident – the application of claims for state
Takeuchi, Akio, Jurist 236 (tnihei.tumblr.com/post/5661848585/36 -10-15-31-236)
Tanabe,Tomoyuki, M. Maruyama, Fukushima Daiichi Genshiryoku Hatsudensho Jikoga Teikishita waga kuni no genshiryoku songai seido no kadai to sono kokufuku ni muketa
seido kaikaku no houkousei (The issues concerning Japan’s compensation system fornuclear damages raised by the accident at Fukushima Daiichi Nuclear P ower Plant andthe direction of system reforms to overcome the challenges), Central Research Instituteof Electric Power Industry （ 2012）17
18

Based on information provided by Mr. Noboru Utatsu of Sompo Japan Nipponkoa
Insurance Services Inc., material publishe d by Japan Atomic Industrial Forum, Inc.
(JAIF) (www.jaif.or.jp/ja/seisaku/genbai/genbaihou_series43.html), and Swiss Info
（ www.swissinfo.ch/jpn/detail/content.html?cid=34224944 ）19xxi

redress should also be considered. Concerning whether or not the
principle of exclusive liability, which is stipulated in Section 4 of the
Nuclear Compensation Act, exempts the Government from liability fordamages, the general interpretation is that it does not.
vi) The necessity for considerations on prescriptions
Since the Nuclear Compensation Act contains no provisions
regarding extinctive prescription, the former clause of Article 724 of the
Civil Code on restriction of the period of the right to demandcompensation for damages in tort is applied; and therefore, thedominant interpretation is that if a victim does not exercise his/herright of claim within three years from the time when he/she comes toknow of the damages, the right to de mand compensation for damages
will be extinguished by the operation of prescription. On May 29, 2013,
the Government enacted an act on special measures concerning theinterruption of prescription (Law on Special Measures Concerning theInterruption of Prescription Concerning the Use of Procedures forMediation of Settlement by the Dispute Reconciliation Committee for
NuclearDamageCompensation

on

Disputes

RegardingtheCompensation of Nuclear Damages Related to the Great East Japan
Earthquake), under which, in order to interrupt prescription, a victim
must make an appeal to the Nuclear Damage Compensation Dispute
Resolution Center (ADR Center) for mediation of settlement before thetermination of the period of prescription and bring an action to thecourt within one month from the breakdown of a mediation of
settlement. Furthermore, leaving a possibility that the effect ofinterruption of prescription may not apply to items that were notincluded in the original appeal, the law has not succeeded in providingafundamental

resolution.

Accordingtothemedia,

theLiberalDemocratic Party (LDP) intends to extend the period of prescription for
the right of claim for nuclear damages to ten years in the extraordinary
Diet session to be convened in October this year. 20 Given the wide
diversity of responses required according to the scale of accidents, it
For example, TOKYO Web, September 22, 2013, etc. At the timing of compiling thisreport (as of October 28, 2013) details are yet to be announced.
www.tokyo-np.co.jp/article/feature/nucerror/list/CK2013092202100005.html
20

xxii

may be more reasonable to address prescription issues when making
decisions on the scheme to deal with the aftermath of an accident.
However, the provisions of the current Nuclear Compensation Act ,whichcompels the Government to request flexibility on the part of thevictimizer, should be amended in the future, drawing on the results ofinvestigations on the Fukushima accident.

2) Addressing major nuclear disasters
Many Committee members stated that the Fukushima accident
destroyed “places of being,” such as homes, workplaces and local
communities and that many evacuees are seeking the reconstruction ofthese lost “places of being.”Interviews conducted in the Town of Namie
by a group of Committee members also revealed many calls for thereconstruction of local community. With view to the fact that largescale disasters such as the Fukushima accident cause damages thatare not reimbursable with money and that these damages hinder thereconstruction of the victims’ livelihoods, efforts by the national or local
government to revitalize the local community must be made at an earlystage after an accident. Also, a Government compensation scheme fordamagesmust

beformulated

separately

from

tort

law -oriented

measures, based on, for example, the Land Expropriation Act, which isapplied in dam development, in order to reconstruct villages andcommunities.

3) The optimal legal system for nuclear power operations
After the Fukushima accident, questions were raised about thefact that no indications have yet been made about the operator,
TEPCO’s infringement of national safety regulations and about themissing link between compliance with the Reactor Regulation Act andjudgment of liability under the Nuclear Compensation Act. Despite theimportance for nuclear power operators to proactively advance andfurther their efforts to improve safety levels, Japan’s current legal
system for nuclear operations is fragmented, with safety regulations,the compensation system and disaster prevention schemes all designed
individually.
Upon revising the current compensation system for nuclearxxiii

damage,acomprehensive

pictureoftheentirenuclearrisk

management framework must be envisioned, with the acknowledgementthat it is a part of a larger bundle of risk coverage and management
measures for the use of nuclear power, which secure mutual andcomplementary

role

and

coordination

withvariousinstitutions,

including nuclear safety regulations, disaster prevention schemes,
community reconstruction support schemes and international nuclear
cooperation. The agenda is to determine which reimbursemen ts to give
precedence to within the limits of the resources available, how toprevent the damage from spreading, how to revitalize local communities
and how to address these issues promptly and realistically.
We believe that Japan should consider acceding to international
treaties concerning nuclear damages, or more precisely, to the CSC 21 .
The significance of becoming a party to the CSC would be:i) When a domestic manufacturer exports a nuclear power plant,
liabilities for damages in any nuclear accident that occurs in theimporting country would be held exclusively by the nuclear power
operator of the importing country, provided that the importing
country is also a party to the CSC. Therefore, Japan would be able
to avoid business risks.
ii) In the event that liabilities are in excess of 300 million SDR 22(approximately 45 billion yen), the country in whose territory theaccident occurred is awarded supplementary funding based oncontributions from all parties to the Convention.
iii) Jurisdiction over actions concerning the nuclear damage of a
nuclear accident that occurs in Japan will lie only with Japanesecourts, even in the case of transboundary damages in other countries.

The significance and challenges of becoming a party to CSC can be found in “Anata ni
shittemoraitai genbai seido 2012 ban (A Guide to the Compensation System for Nuclear
Compensation 2012), JAIF, P198 - and “Genshiryoku songai no hokanteki hosho ni
kansuru jouyaku: kakujou no kaisetsu oyobi houteki mondaiten no kentou (Convention on
Supplementary Compensation for Nuclear Damage: An interpretation of articles andstudies of legal issues)” Japan Energy Law Institute, November
2012(www.jeli.gr.jp/report/jeli -R-126@2012_11_CSC.pdf); and “Genshiryoku songai no
hokanteki hosho ni kansuru jouyaku ni tsuite (Convention on Supplementary
Compensation for Nuclear Damage)” Office for Compensation for Nuclear Damage,
Ministry of EducationCulture, Sports, Science and Te chnology ， November 2011(www.jeli.gr.jp/report/jeli -R-126@2012_11_CSC.pdf)
21

22

According to the exchange rate as of September 30, 2013, 1SDR=1.534080USD

xxiv

Apart from these advantages, the following potential challenges
should also be considered:i) Clarifying who would shoulder the contributions to the fund and how
it would be doneii) Addressing research reactors and other facilities with only small
mandatory financial security amountsiii) Jurisdiction issues (Japan will have to accept the requirement thatin the event that Japan is affected by damages caused by a nuclear
accident that occurred in another country, pursuant to the principleof concentration of jurisdiction, Japanese citizens must take legal
action in the country in whose territory the accident occurred.)

８ ．Toward the establishment of a new compensation scheme
for nuclear damages
Part III contains a proposal made by Project General Manager, Mr.
Akio Morishima and Committee members, Mr. Ikufumi Niimi and Mr.
Michitaro Urakawa, “Toward the Establishment of a New Compensation
System for Nuclear Damages”. Chapter 1 describes the basic concept ofdamage compensation law in the context of laws of civil society which
supportmarketeconomy.

While

the

main

purposeofdamagecompensation law lies in the compensation of damages suffered by
victim, it also includes consideration for the individual’s freedom ofaction in society. Requiring “negligence” on the part of the actor in
determining liability is one such aspect, and even under strict liability,
the limitation of liability

ensures actors foreseeability. We also

discussed adequate causation, which sets a certain limit to thecategories and scope of damage compensation.
Chapter 2 elaborates further on the categories and scope ofdamages to be compensated which are briefly explained in Chapter 1.
In the Fukushima accident, compensation was acknowledged for
unconventional categories of damage, such as those business loss es
and damage induced by harmful rumors, which had never before before
been addressed in tort compensation, but have been considered to fallwithin the limits of adequate causation in the Dispute Reconciliationxxv

Committee’s

guidelines.

With

referencetointern ational

debate,including ongoing discussions in the U.S and the U.K., it should be
noted that acknowledging compensation for these categories of damage
would mean that the scope of compensation will exceed the limits offoreseeability. Chapter 3 discusses the relationship between strict
unlimited liability and government compensation. In Germany, whose
Atomic Energy Act also adopts a strict and unlimited liability system,
it had been deliberated that in the in the event of major damages thatexceed a certain amount available to satisfy such liabilities, , the Stateshould consider providing appropriate government compensation,
acknowledging the incident as a national disaster that cannot be
overcome by means of civil liability. The Swiss law also provides forintervention by Parliament in the event the damages exceed a certain
amount covered by financial security. As clarified in Part II, there aremajor limitations to compensating for damages through individual
procedures under the current Nuclear Compensati on Act. Therefore, we
propose the establishment of an administrative compensation system
similar to the Law Concerning Pollution-Related Health Damage
Compensation and other Measures that will function separately but
concurrently with the existing damage compensation system under thecurrent Nuclear Compensation Act . Furthermore, Chapter 4 proposes afundamental revision of the current Nuclear Compensation Act， which
does not assume large-scale nuclear accidents such as the recent
accident caused by TEPCO that will impose a diversity of damages upona massive number of victims. Therefore, we propose a new amendment
to the Nuclear Compensation Act based on recent experiences. The
scheme for pooling amounts for compensation should be designed inaccordance with the U.S. Price-Anderson Act, and therefore require
nuclear power operators to make additional payments backed bygovernmental support in the event of an emergency. If the Nuclear
Compensation Act aims to “contribute to the sound development of thenuclear business” and to “protect persons suffering from nuclear
damage,” it is insufficient under the current system to simply impose
strict unlimited liability on operators while the Government only
providesloans

Facilitation

Fund

by

issuing

government

bonds.

Furthermore, the law should provide for the establishment of an
administrative committee that manages compensation procedures andsupervises the categories of damages, compensation amounts andxxvipayment procedures, and for the right to bring an action to th e courtin the event that a victim is dissatisfied with the treatment provided by
the committee.
Chapter 1 and 4 was contributed by Project General Manager, Mr.
Morishima, Chapter 2, by Committee members, Mr. Niimi, and Chapter
3, by Mr. Urakawa.
We hope that this report will contribute to the improvement of ourcountry’s scheme for compensating victims of nuclear disaster and thatit contributes to the sound development of nuclear power operations in
the event that Japan decides to sustain them. We would also like toextend our prayer to the victims of the Great East Japan Earthquake
and the Fukushima accident in hope of their early recovery from thedisasters experienced.

*This report is a research result of the 21st Century Public Policy
Institute, and does not show the view of the Keidanren.
xxvii

The 21 st Century Public Policy Institute" Nuclear Policy Issues Committee" Committee members

Project General Manager
Akio Morishima, Professor emeritus, Nagoya University
lawyer, Kato, Nishida & Hasegawa Law Office
Coordinator
Akihiro Sawa, Senior Executive Fellow
Deputy Project Leader
Sumiko Takeuchi, Deputy Project Leader of Nuclear Policy issues
Committee members
Tomotaka Fujita, Professor, The University of Tokyo Graduate
Schools for Law and Politics
Masato Dogauchi, Professor, Waseda University, Law School
lawyer, senior counsel at Nagashima Ohno & Tsunematsu
Ikufumi Niimi, Professor, Faculty of Law, Meiji University
Hiroko Yotsumoto, lawyer, Partner at MORI HAMADA &MATSUMOTO
Michitaro Urakawa, Professor, Faculty of Law, Waseda University
Ken Koyama, Managing
Economics, Japan
Yoshihito Iwama,
KEIDANREN

Director,

Director,

The

InstituteEnvironmentalof

PolicyEnergyBureau,ObserverMitsuo Matsuzawa, Representative Director, Japan Institute ofBusiness Law
xxviiiPart IThe Historical Context of Nuclear Operations
and Nuclear Damage Compensation in Japan
Sumiko Takeuchi
Deputy Project Leader
Nuclear Policy Issues Committee
21st Century Public Policy Institute

Chapter 1

Introduction

1. The purpose of this study and the structure of the report
In Japan, electric power has been supplied by private companies
that have enjoyed the institutional benefits of tariff regulations basedon fully distributed cost (FDC) pricing and general mortgage bonds
which enable low-interest financing, as well as regional monopoly ,which ensures demand. A stable and inexpensive electric power supply
is vital for stable national livelihood and economic development.
Requiring large long-term investments, electric power operations arestate-run in most countries, with the exception of rare examples such
as Japan and the U.S., where these operations have been assumed byprivate companies. Japan has gained worldwide recognition as a “model
country of peaceful nuclear use ” because it has managed the entire
nuclear process, including back end operations 23 , mainly throughprivate initiative.
Nuclear power operations are not simply a means of power
generationbutacomplexissue

embracingradioactive

material

management and energy security among other aspects that must be
deliberated comprehensively at the n ational policy level; and therefore,
government guidance and support have been considered necessary for
its promotion. With government support in various dimensions,
including the establishment of a scheme to ensure safe and appropriate
operations and the implementation of relevant regulations, as well as
In nuclear operations, fuel production and power plant construction are referred to as“frontend operations,” whereas radioactive waste management, the reprocessing of usedfuel and the decommissioning of nuclear reactors are called “back end operations.”
23

1

the provision of support for local governments hosting nuclear power
plants and technology development, nuclear power operations havedeveloped as a business “privately-run under national policy” inJapan 24 .
A scheme where private companies backed by government
support could develop their businesses with flexibility was very
beneficial under normal circumstances, but the recent accident at
Tokyo Electric Power Company (TEPCO)’s Fukushima Da iichi Nuclear
Power Plant (“Fukushima accident”) brought to light the significant
disadvantages of an ambiguous sharing of risks and responsibilities
between the government and the private sector. In particular, the Act
on Compensation for Nuclear Damages (“Nuclear Compens ation Act”),
which stipulates the scheme for compensating victims of nuclear
accidents and sharing the risks of accidents relevant to nuclear power
operations, provides for private-sector nuclear power operators toassume unlimited liabilities and for the government to support them.
Therefore, primarily and solely liable for all damages, TEPCO currently
suppliesitscustomers

withelectricity

while

it

concurrently

compensates the massive number of victims and assumes the costs
incurredindecommissioning

anddecontaminating

operations,

supported by the government aid stipulated in the Nuclear Damage
Compensation Facilitation Corporation Act (“ Facilitation CorporationAct”) and the Law Concerning the Special Measures on Coping withEnvironmental Contamination with Radioactive Substances Released at
the Accident of Fukushima Daiichi Nuclear Power Station.
With the establishment of a compensation scheme under the
Facilitation Corporation Act, it would seem that a certain degree ofstability has been secured in addressing the aftermath of the accident,
including energy supply and compensation issues. However, in thethirty months since the accident, it has not been successful in restoring

Comment made by Toshimitsu Motegi, Minister of Economy, Trade and Industry at theBudget Committee meeting of the House of Representatives held on May 13, 2013: “Theprivate and public sectors have shared roles in nuclear policy, which has been promotedwith private businesses assuming the operation of nuclear power plants and theGovernment establishing a scheme to secure the safety of nuclear power plants andappropriate business operation, implementing regulations and deciding the future
direction of nuclear policy.”
24

2the victims’ livelihoods and its drawbacks as a victim compensation
scheme have been brought to light. Furthermore, exposure of theambiguity of the nuclear power operation-related risk-sharing scheme
could threaten the sound development and sustenance of nuclear
operations. In light of these circumstances, the government has be comeproactively

involvedindecommissioning

anddecontamination

operations 25 , but with the allocation of burdens regarding nuclear
accidents and the continuity of nuclear operations still not clarified,risk assessment remains a challenge for operators and other concerned
parties. As undermentioned, the ongoing debate on electric powersystem reforms has made prospects for nuclear operations increasingly
vague.
The 21st Century Public Policy Institute Nuclear Policy Issues
Committee, with a membership of prominent academics whose names
are listed at the beginning of the report, discussed Japan’s nuclear
compensation system and operational framework based on a wide rangeof expertise provided by concerned parties, including nuclear operators.
It

had

two

purposes:toproposeimprovements

to

the

current

compensation scheme in order to enab le the prompt compensation of
those victimized in the Fukushima accident and to deliberate the designof a renewed nuclear damage compensation scheme that would
contribute to the sound development of nuclear business.
This report comprises three parts. Part I explains how nuclear

Statement made by Prime Minister Shinzo Abe at House of Representatives Budget
Committee meeting on May 13, 2013: “It is wrong to hold TEPCO entirely responsible […]for the accident at the Fukushima Daiichi Nuclear Power Plant. I believe the Government
should come forward to assume the responsibilities that we ought to assume. For exampl e,
the Government should be sure to take care of funds required for research on
decommissioning.”
Statement made by Prime Minister Shinzo Abe at House of Representative plenary
session on October 17,2013: “We will not leave this solely in the hands of TE PCO. The
Government will come out in front to firmly assume its responsibilities.”
On September 3, 2013, the Nuclear Emergency Response Headquarters decided that theGovernment should come forth to address radiation -tainted water issues and that 47
billion yen of public funds would be injected( Website of the Nuclear Emergency Response
Headquarters:www.kantei.go.jp/jp/singi/genshiryoku ).
If the act for special measures for addressing radiation -tainted water issues currently
under deliberation is legislated, the government will assume the costs for contaminatedwater-related operations, which will be supervised directly by the competent minister.
Government funds to be injected in contaminated water treatment under directsupervision of minister: LDP Resea rch Commission to propose special legislation, Sankei
News sankei.jp.msn.com/politics/news/130920/plc13092021350015 -n1.htm
25

3

power operations have evolved in Japan, with a focus on historical facts
including the context in which the business model of being “privately
run under national policy” was established, the historical backgroundof the development of Japan’s nuclear damage compensation system,
and relevant overseas laws and international agreements . As Part I was
compiled with the intention of providing background information to
support future discussions, readers who wish to capture an overall ideaof the current situation and challenges are advised to begin with Part
II, which summarizes the unresolved problems regarding the current
nuclear damage compensation system and perspectives for amending
its legal framework. Part II begins with an elaboration of the risks
related to nuclear operations that were revealed in the Fukushima
accident as well as the historical context and ongoin g discussions
concerning the current scheme for addressing such risks (under the Act
on Compensation for Nuclear Damages, etc.)

and refers to thediscussions held at The 21st Century Public Policy Institute Nuclear
Policy Issues Committee meetings. It should be noted that somediscussions have been duplicated in Part I and Part II for those readers
who may not read both parts.
Part III “Toward the Establishment of a New Compensation System
for Nuclear Damages” is a proposal compiled by a group of Committee
members, namely, Project General Manager, Mr. Akio Morishima andCommittee members, Mr. Ikufumi Niimi and Mr. Michitaro Urakawa.
Chapter 1 describes the basic concept of damage compensation law inthe context of laws governing civil society which p rovide the framework
for market economy.
Chapter 2 elaborates further on the categories and scope ofdamages which should be compensated for. In the aftermath of the
Fukushima accident, compensation was acknowledged for categories ofdamage, such as those from business loss and harmful rumors, which
had hardly been discussed in tort law before, but have been considered
to fall within the limits of adequate causation in the Dispute
Reconciliation

Committee

forNuclearDamageCompensation’s

guidelines. With reference to debates in the U.K. and U.S., it points outthat including these categories among liable damages would take thescope of compensation beyond the limits of predictability. Chapter 3
4

discusses the relationship between strict and unlimited liabil ity andgovernment compensation. In terms of the TEPCO Fukushima accident,
there are major limitations to compensating for damages throughindividual procedures under the current Nuclear Compensation Act.
Therefore,

theestablishmentofaseparatebut

conc urrent

administrative compensation process, such as that under the Law
Concerning Pollution-Related Health Damage Compensation and otherMeasures, is proposed. Chapter 4 goes on to propose a fundamental
amendment to the current Nuclear Compensation Act. The current
scheme of having operators bear strict and unlimited liability while thegovernment just provides loans to the Nuclear Damage Liability
Facilitation Fund by issuing government bonds is inadequate infulfilling the aims of the Nuclear Compensation Act, namely “the sounddevelopment of nuclear power business” and “to protect persons
suffering from nuclear damage.” Furthermore, the law should provide
for the establishment of an administrative committ ee that manages
compensation procedures and supervises the categories of damages,
compensation amounts and payment procedures, and for the right tobring an action to the court in the event that a victim is dissatisfied
with treatment by the committee.
Chapters 1 and 4 were contributed by Project General Manager,
Mr. Akio Morishima, Chapter 2, by Committee member, Mr. Ikufumi
Niimi, and Chapter 3, by Mr. Michitaro Urakawa.
Based on the discussions at the Committee mee ting, Mr． Akihiro
Sawa and Ms. Sumiko Takeuchi have compiled a policy proposal“Toward a Comprehensive Solution for Nuclear Policy and Business
Challenges” (a 21st Century Public Policy Institute research project)which we would be more than honored to have our audience also read.
We hope that this report will contribute to the improvement of Japan’s
scheme for compensating victims of nuclear disaster and that it willcontribute to the sound development of nuclear power operations in theevent that Japan decides to retain them.

52. Understanding the issue (Damages from the Fukushima
accident and the current status of nuclear operators)
Thirty months are about to pass since the Great East Japan
Earthquake and the Fukushima accident. However, approximately 102
thousand people are still under evacuation from the official evacuation
zone

and

approximately

146

thousandpeoplefrom

Fukushima

Prefecture as a whole 26 are suffering in the aftermath of the Fukushima
accident. As of October 23, 2013, the Government has provided 3
trillion 96.4 billion yen (in loans) through the Nuclear Damage Liability
Facilitation Fund (“Facilitation Fund”) to TEP CO 27 , has contributed 1
trillion yen to increase TEPCO shares, and has spent 1.3 trillion yen in
decontamination (as of fiscal 2013, likely to be charged to TEPCO in
the future). The Government has also assumed 112.5 billion (100 billion
yen in fiscal 2011-2013 and 12.5 yen in budget requests for fiscal 2014)
as decontamination costs, with TEPCO scheduled to assume 950 billion
yen. According to the National Institute of Advanced Industrial Scienceand Technology (AIST), the decontamination costs alone will amount toa maximum of 5.13 trillion yen. 28 Furthermore, the Government has
recently decided to provide 47 billion yen for the treatment of radiation tainted water. Based on initial estimates of compensation costs, theFacilitation Fund was allocated government compensation bonds of 5
trillion yen, but overall accident-related costs, including those fordecontamination and the interim storage of contaminated soil , areestimated to amount to as much as 10 trillion yen. 29 TEPCO is to repay
these costs in the next ten years by taking measures including a 3.3
trillion yen corporate downsizing. 30 Before the accident, in 2010, theReconstruction Agency. Fukko u no genjou to torikumi (The status of reconstruction
and measures) (September 25, 2013) p44, available atwww.reconstruction.go.jp/topics/main-cat7/sub-cat7-2/20130925_sanko1-2.pdf
26

On October 23, 2013, an additional 48.3 billion yen in financial support was provided.
www.ndf.go.jp/gyomu/tokujikei/inform/inf20131023.html
27

AIST. Josen no kouka to hiyou ni kansuru kaiseki (Analysis of decontamination costs
and effects (July 23, 2013), available at :confit.atlas.jp/guide/event-img/jsap2014s/18p-D3-2/public/pdf?type=in
28

The Nikkei Shimbun, November 8, 2012 “Uncertainty in I mplementation of Support
for TEPCO: Government Addresses “10 Trillion” with Caution”
29

30

TEPCO. Keiei kouritsuka e no torikumi (Measures to improve business efficiency) (May6

company

hadreported

consolidated

current

account

profitsofapproximately 200 billion yen, which had been supported by reduced
fuel costs induced by the strong yen and the operation of Reactors 6
and 7 at the Kashiwazaki-Kariwa Nuclear Power Plant. With this inmind, under the current circumstances, it should take an extremely
long period of time for TEPCO to repay Government support. According
to estimates announced by the Board of Audit on October 16, 2013, it
has become evident that even in the event that the government
compensation bonds issued amounted to 5 trillion yen, it would takeas long as 31 years to recover total costs. 31
The Fukushima accident has not only affected TEPCO but also
other electric power companies as well. With public trust in the safetyof nuclear technology lost, almost all nuclear power plants throughout
Japan were shut down, thereby threatening the survival of electric
power companies. Fuel costs for alternative energy sources increased
by a total of 3.6 trillion yen across all nine electric power companies infiscal 2013, and if nuclear power plants continue to be out of operation
for another year then costs will rise to as much as 3.8 trillion yen . 32
The costs required to meet the new safety standards compiled by the
Nuclear Regulation Authority (NRA) on January 31, 2013 33 have also
become a substantial burden. At a meeting of the Fundamental Issues
Subcommittee of the Advisory Committee for Natural Re sources andEnergy held on October 16, 2013, it was estimated that a total of about
1.7 trillion yen would be additionally imposed upon electric powercompanies as a result of the enactment of the new safety measures.
Against this background, TEPCO raised its electricity tariff in2012), available at:www.tepco.co.jp/e-ates/individual/kaitei2012/images/agreement/ index/agreement_06.pdf
Board of Audit of Japan. “Report on the Audit on the Implementation Status ofGovernment Support for Compensations for Nuclear Damages Related to the Tokyo
Electric Power Company”(Summary) www.jbaudit.go.jp/pr/kensa/result/25/pdf /251016_youshi_1.pdf (available
only in Japanese)31

www.meti.go.jp/committee/sougouenergy/kihonseisaku/denryoku_jukyu/pdf/002_02_0
0.pdf
32

Document distributed at meeting of Advisory Committee for Natural Resources andEnergy, Subcommittee on Basic Policy, available at:www.enecho.meti.go.jp/committee/council/basic_policy_subcommittee/007/pdf/007_002.p
df
33

7

September 2012, to be followed by the by the Kansai Electric Power Co.,
Ltd. (KEPCO) and the Kyushu Electric Power Co., Ltd. (“Kyuden”) in
May the next year, and the Tohoku Electric Power Co., Ltd. ( “Tohoku
EPCO”), the Shikoku Electric Power Co., Ltd. (“Yonden”) and Hokkaido
Electric Power Co., Ltd. (HEPCO) later in September. 34 However, fromthe perspective of reducing impacts upon national livelihood, raises
were minimized, thereby destabilizing the business environment forelectric power companies. It became evident that nuclear power could
cut both ways – that it was an overly competitive power source inoperation but would impose a serious burden upon the balance of
payments when stopped and even jeopardize the survival of thecompany in the event of an accident.
Furthermore, the changes in the business environment for electric
power companies induced by the Fukushima accident have accelerated
discussions on electric power system reform. One of the reasons th at
Japan has engaged private companies in electric power operations is toenable the flexible procurement of funds by means of large bank loans,
corporate bonds and capital increases, free of budget constraints. The
new system currently under discussion wi ll entirely deregulate retailsales of electricity, consequently abolishing the regional monopoly
scheme which has enabled companies to secure demand, tariff
regulations based on FDC pricing (guaranteed revenue), and the issuingof general mortgage bonds 35 , which will make it difficult for privatecompanies to make large long-term investments in electric power
operations.
In the event that Japan should retain nuclear power generation

Chubu Electric Power Co., Ltd.(“Chuden”) also started to consider tariffs raises on
September 17, 2013.
www.chuden.co.jp/corporate/publicity/pub_release/teirei/__icsFiles/afieldfile/2013/09/17/
130917_2.pdf
34

According to the report by the Electricity System Reform Committee of February 2013,“The further neutralization of the transmission and distribution s ector shall be based on
consideration of future financial market trends, and financial debts including generalmortgage and conduct control should be addressed by implementing measures(transitional measures), such as those for the establishment of a level playing field among
operators, which do not impair the procurement of funds required for the stable supply ofelectricity while ensuring the sound development of electricity business.” This implies
that changes may be made after certain transitional measu res have been implemented.
www.meti.go.jp/committee/sougouenergy/sougou/denryoku_system_kaikaku/pdf/report_0
02_01.pdf
35

8

for a certain period of time, the continuation of operations could
become inevitably impossible without an appropriate institutional
design that clarifies how the various risks ((i) risk of accident; (ii) riskofex-postpolicyorregulatorychanges;

and

iii)

technologicalcomplexity (especially concerning technologies for back end operations,the decommissioning of reactors after accidents and reprocessing))
inherently accompanying the use of nuclear technology can be avoided,
dealt with or shared among the parties concerned.
This report focuses on two issues: recovering the damages
resulting from nuclear accidents which could potentially victimize a
massive number of people and inflict unprecedented damages, such as
the destruction of entire communities, and designing the different
schemes that would be required for the continued peaceful use of
nuclear technology, if that is the decision that Japan makes , with a
special focus on discussions on the nuclear damage compensation
system.

9

Chapter 2
Japan
1.

Historical Context of Nuclear Power in

Important perspectives in understanding the history of

nuclear power in Japan
In order to understand the origin as well as the historical evolutionof nuclear business and policy in Japan, the following three aspects
must

be

considered:proliferation

36

;

2)

1)

internationalenergysecurity

nuclear/controleconomic

and

non -

efficiency

andtechnological issues; and 3) the business scheme and risks of electric
power companies.
After World War II, the U.S., the U.K., France and the U.S.S.R
competed to develop nuclear technology for military use. When the
U.S.S.R conducted atomic tests and declared its possession of nuclear
bombs in September 1949, the U.S. was forced to steer its nuclear
policy 37 in a different direction. The U.S. diverted from monopolizing
nuclear technology and refusing to share it with any other country to
promotingits

peacefulusethroughtechnologicaltransferandinformation exchange under bilateral agre ements with allies, andsought to entrust an international organization (the International
Atomic Energy Agency (IAEA)) with the management of nuclear
substances. According to Shimoyama (1976) 38 , the Atomic Energy Act
of 1946 was “the product of serious U.S.-U.S.S.R. confrontation whenthe monopolization of nuclear technology was an overriding imperative ,and was in character a state secret protection law.” The amended
Atomic Energy Act of 1954, which was enacted in the year following thedelivery of the “Atoms for Peace” 39 speech by then US President Dwight
Eisenhower at the eighth session of the United States General Assembly,

refer to Kimura, Naoto. Kaku security no kiso chishiki (Basic knowledge of nuclear
security) (The Japan Electric Association, Newspape r Division, 2012)36

Tanaka, Shingo .Nichibei genshiryoku kyotei no seiritsu: Nihon gawa koushou katei nobunseki (The conclusion of the Japan -U.S. Nuclear Cooperation Agreement: an analysis
of Japanese negotiations), Knowledge Archive , (Osaka University, 2009)37

Shimoyama, Shunji (1976) Genshiryoku, Yamamoto, soji et al. Mirai shakai to hou(Future society and law), Chikumashobo
38

39

aboutusa.japan.usembassy.gov/pdfs/wwwf -majordocs-peace.pdf

10opened opportunities for bilateral nuclear cooperation agreements
which had been strictly restricted. The U.S. concluded its first nu clear
cooperation agreement with Turkey in 1955 and concluded similar
agreements with more than 30 countries including Japan before 1956.
Led by U.S. initiative, the IAEA was established in 1957 to promote
the peaceful use of nuclear power and to prevent diversion to militaryuse. This marked the beginning of the peaceful use of nuclear power by
Nuclear Non-proliferation Treaty (NPT) non-nuclear weapon states.

2.

The evolution of nuclear operations in Japan 40(1) 1950s: Developments leading to theintroduction of

nuclear power in Japan<Opposition and support for the introduction of nuclear power
technologies in Japan and decision of their adoption>
Having lost World War II, Japan had been forbidden to conduct
nuclear studies. The ban was lifted with the entry into force of the San
Francisco Peace Treaty, but having experienced two atomic bombing s
during the war, it was only natural that Japan embraced strong
opposition against the introduction of nuclear technology, even forpeaceful use. Many scientists of the time felt ashamed that they had
been forced to cooperate in war and feared that nuclear studies would
lead to the development of nuclear weapons. As a result the pros andcons of promoting nuclear studies were fiercely debated. 41 Thearguments are well described in Yukoku no genshiryoku tanjo hiwa (Theuntold story behind the creation of nuclear patriotism) , a book written
by a former Socialist Party of Japan (SPJ) lawmaker of the House of

The following references were referred to: Nichibei kyoutei no ugoki (Developments in
the Japan-U.S. nuclear cooperation agreement) White Paper on Nuclear Energy 1997,
available at: www.aec.go.jp/jicst/NC/about/hakusho/wp1977/sb2030201.htm;
Nihon no gensiryoku seisaku no hensen to kokusai seisaku kyouchou ni kansuru
rekishiteki kousatsu: higashi asia chiiki no genshiryoku hatsuden dounyuu e no
implication (The history of Japan’s nuclear policy and a historical observation ofinternational policy coopera tion; implications for the introduction of nuclear power
generation in East Asia), available at: www.rieti.go.jp/jp/publications/pdp/09p002.pdf
40

Goto, Shigeru (2012) Yukoku no genshiryoku tanjo hiwa (The untold story behind thecreation of nuclear patriotism), Energy Forum books
41

11

Representatives:[…] In the midst of such a prevailing mood, Professor Fushimi of Osaka
University submitted a paper titled “Why we should promote nuclear
power” to the Rondan column of the Asahi Shimbun newspaper (dated
November 4, 1952)‘Japan is poor in energy resources. Most of its coal has already been
mined and hydropower has only the potential of a twofold or threefold
increase. If Japan cannot succeed as an agricultural country, it has no
choice but to struggle to secure the energy r esources required for its
industrial foundation. The opening of nuclear technology has taught usthat uranium reserves hold a tremendous amount of energy resources toreplace coal and oil. Having been the first people to experience the tragic
consequences of the atomic bomb, the Japanese have a right to demand
the world to supply it with uranium. We must respond to those people
who made and used the atomic bomb by showing them that we can use
atomic energy in a peaceful way. Tens of thousands of tons of ura nium
are being mined throughout the world today, mostly to be used inweapons. However, if we used it to generate electric power, then it would
be equivalent to using hundreds of billions of tons of coal.’
The following day, Professor Shouichi Sakata of Nagoya University
submitted a report titled “The challenges of nuclear power in Japan” t hesame Rondan column:
‘This

issue

shouldbedeliberated

in

a

newly

establishedgovernment institution with adequate budget resources. Accepting
sudden increases to an originally marginal research budget is like
spontaneously surrendering academic independence and becoming apolitical slave. It contains the risk of ending up in a shameful suicidal
act of the scientist who seeks to gain research funds in exchange for
their independence, which is the soul of academic studies. In the past,
Japanese scientists have degraded themselves to mere workmen
manipulated by politicians and soldiers in order to obtain large amountsof research funds by cooperating in criminal war. W hen the Science
Council of Japan was established, we were supposed to have repented
such obsequious attitudes. I sincerely hope that Japanese scientists will
not repeat the mistake of deviating from their principles and tarnishing
their academic dignity with dishonorable research fees.’
12However, as implied in the Emperor Showa’s description of WorldWar II as a war that had “begun with oil and ended with oil (begun witha desperate pursuit for oil resources and was lost due to a lack of oil
resources)” 42 Japan had little resources, and therefore nuclear power
generation, which did not require fossil fuels, would provide the “dreamenergy” for the coming century. Coverage in the press gradually
increased 43 , advocating that its introduction would be the equivalent of
a second industrial revolution. 44 Against the background of the U.S.’snuclear policy shift, the momentum for introducing nuclear power
generation

in

Japan

was

enhancedinits

pursuitofsecuring

inexpensive and abundant electricity and reducing the amount offoreign currency required for fossil fuel purchases.
As if to express frustration for the reluctance among academics, amotion to request the addition of a nuclear power budget of 235 million
yen to the Government budget proposal was brought forth by amultiparty group of lawmakers (from the three conservative parties,
namely, the Liberal Party, the Japan Liberal Party and the Reform
Party), and was adopted. This was an extraordinary motion not only
from the perspective that it had not reflected the intentions of the
Science Council of Japan but also from the aspect that the ruling party
had submitted a proposal for revision of the Government budget
proposal.
Ironically, in March the same year, the Daigo Fukuryu Maru, aJapanese tuna fishing boat, was exposed to and contaminated by
nuclear fallout from the U.S.’s hydrogen bomb test on Bikini Atoll.
Aikichi Kuboyama, the boat's chief radioman, died six months later.
However, the incident did not hinder enthusiasm towards promoting
nuclear research and development in Japan.
Scientists announced a “Declaration to demand the principles ofYoro, Takeshi, Kotaro Takemura. Honshitsu wo minuku chikara: kankyou, shokuryou,
energy (The power to see the truth: environment, food energy) (PHP shinsho , 2008,)
42

Tanaka, Shingo. Nichibei genshiryoku kyotei no seiritsu: Nihon gawa koushou katei
no bunseki (The conclusion of the Japan -U.S. Nuclear Cooperation Agreement: ananalysis of Japanese negotiations), Knowledge Archive , (Osaka University, 2009),
available at: ir.library.osaka -u.ac.jp/dspace/bitstream/11094/12271/1/24 -11_n.pdf
43Genshiryoku ni heiwa no youto (A peaceful way of using nuclear energy). The Asahi
Shimbun, February 29, 1948
44

13

disclosure, democracy and autonomy in nuclear research and use” andrequested that the Government respect the opinions and intentio ns ofscientists so that nuclear studies would not lead to the development of
nuclear weapons. In light of these requests, the Atomic Energy Basic
Act 45 , the Act for Establishment of the Japan Atomic Energy
Commission and the Nuclear Safety Commission , and the Act to Amend
the General Administrative Agency of the Cabinet Establishment Act
were adopted on December 19, 1955 at the 23rd extraordinary Diet
session. The Atomic Energy Basic Act was based on a joint proposal by
the Liberal Democratic Party (LDP) an d the Socialist Party of Japan(SPJ) (ruling and opposition parties). This phenomenal event is an
implication of nationwide enthusiasm to advance the use of nuclear
technologies.
In January 1955, the U.S. approached Japan with an offer toprovide nuclear technology-related support, including the provision ofenriched uranium and the establishment of a nuclear reactor school. 46
With the signing of the Japan-U.S. Nuclear Cooperation Agreement inNovember the same year, Japan took a great leap towards the use of
nuclear technology. 47
According to the Long-Term Basic Program for Development andUtilization of Nuclear Energy 48 informally adopted at a regular meetingof the Japan Atomic Energy Commission ( JAEC) held on September 6,
1956 and the Long-Term Plan for Nuclear Reactors for Electric Power
Generation (the First Long-Term Basic Program for Development andUtilization of Nuclear Energy) 49 announced on December 18, 1957,
Japan would need to reduce the amount of foreign currency used forenergy imports from a balance of payments perspective, given forecasts
in the Outlook for Long-Term Supply and Demand of Energy thatelectricity demand would increase from 61.1 billion kWh in 1957 to 185

White Paper on Nuclear Energy 1956, available at:www.aec.go.jp/jicst/NC/about/hakusho/wp1956/index.htm
45

46

www.rist.or.jp/atomica/data/dat_detail.php?Title_Key=17-01-02-03

Details can be found in: Goto, Shigeru (2012) Yukoku no genshiryoku tanjo hiwa (Theuntold story behind the creation of nuclear patriotism ), Energy Forum books, written by
47

a former SPJ lawmaker of the House of Representa tives
48

www.aec.go.jp/jicst/NC/tyoki/tyoki1956/chokei.htm

49

www.aec.go.jp/jicst/NC/about/ugoki/geppou/V03/N01/195801V03N01.HTML14

billion nearly twenty years later in 1975 and that 48 percent of totalenergy demand would be supplied by imported energy sources . Basedon an analysis that concluded that by introducing nuclear power, an
additional 160 million dollars would be required in foreign currency up
to 1968, but 100 million dollars would be generated in savings by 1975,
it was decided that “in order to secure low-cost energy, reduce foreign
currency spending, stabilize Japan’s energy supply and demandbalance and contribute to industrial development, it would be bothnecessary and appropriate to put nuclear power generation to practicaluse at a comparatively early time. 50 ” Hence, the introduction of nuclear
power generation technology was led by the government out of adesperate call for an inexpensive and abundant electricity supply.

(2) 1950s to 60s: Determining the entity to assume nuclear
power operation
The Government and private companies were divided concerning
who would take the initiative in constructing and operating Japan’s
first practical nuclear power plant. The fierce controversy between a
proposal for a government-led establishment of a special public
corporation (supported by Electric Power Developing Co., Ltd. (“JPower”) 51 ) and the idea of establishing a private company under the
initiative of the private sector (supported by the nine electric powercompanies) was a completely different response from that of theAmerican private sector to initial government calls to engage in nuclear
operations. The U.S. private sector had strongly appealed that privatecompanies could not take part in such operations without not only
fiscal support for the nuclear power generation plan but also special“Overview of the plan”
www.aec.go.jp/jicst/NC/about/ugoki/geppou/V03/N01/195801V03N01.HTML50

The Electric Power Developing Co., Ltd. (“J-Power”) was established as a special public
corporation as provided in the Law for Electric Power Resources Development Promotion
on September 16, 1952 (with the Minister of Finance holding a 66.69 percent share ofcapital and the nine electric power companies holding the remainder). Despite thedivision of Japan Electric Generation and Transmission Co., Ltd. into regional electric
power companies, these companies lacked the financial foundation to make theinvestments required to support the socioeconomic development of the entire country.
Hence, J-Power was established with policy intentions of complementing these financial
drawbacks.
51

15

measures to be applied in case of acci dents. 52 Perhaps in response tosuch contentions, the Price-Anderson Nuclear Industries Indemnity Act(“Price-Anderson Act”), which stipulates the U.S. system for nuclear
damage compensation, explicitly provides for government compensation
for damages exceeding the amounts pooled through liability insurance.
The differences observed between the American and Japanese risk
allocation schemes – in terms of how risk is allocated between theprivateandpublicsectorsintherespective

nucleardamagecompensation systems - might be attributed to the historical context inwhich they developed in the two countries.
With the establishment of the Japan Atomic Energy ResearchInstitute under the Japan Atomic Energy Research Institute Law in1955, theGovernment took the

initiativeinpromotingnucleartechnology research, involving the private sector in its application. The
establishment of the Mitsubishi Nuclear Engine Committee was among
the first efforts of Japanese manufacturers preparing to take part in
the nuclear industry. The debate over the business model of the entity
to assume nuclear operations was finally politically resolved with theestablishment of the Japan Atomic Power Company (JAPC) in 1957.
Privatecompanies

including

the

nine

electric

power

companies

contributed 80 percent of capital while the Government contributed 20
percent, thereby launching a scheme where the Government would ha ve
regulatory and supervising rights and the private sector would assume
the actual operations.
There was further debate over whether to apply U.S. technology or
U.K. technology in Japan’s first practical reactor. After an agreementon the introduction of British technology was signed in 1958, the Tokai
Power Station 53 began operating in July 1966. The plant employed amodified Calder Hall-model reactor, which was a carbon dioxide-cooled
reactor fuelled by natural uranium, developed and commercialized in
the U.K. and modified to implement seismic design unique to Japan.
However, the Windscale fire of 1957, which involved a nuclear reactor

Shimoyama, Shunji (1976) Genshiryoku, Yamamoto, Soji, et al. Mirai shakai to hou(Future society and law), Chikuma Shobo, p455
52

Japan Atomic Power Company (JAPC) website:www.japc.co.jp/project/haishi/tokai.html
53

16

that was supposedly the prototype of the Calder Hall model andreleased radioactive substances to surrounding areas , aroused doubts
regardingthesafetyofthetechnology

used.

These

concerns,

accompanied by those regarding the high costs entailed, led to its
replacement with American light-water reactor technology.
Other electric power companies drew on the knowledge gaine d inconstructing and operating the Tokai Power Station. The Tsuruga Power
Station was opened by JAPC in 1970, to be followed by KEPCO’s
Mihama Nuclear Power Plant Unit 1 reactor, the first reactor to be
operated by a private electric power company. In 197 1, TEPCO started
to operate the Fukushima Daiichi Nuclear Power Plant Unit 1 reactor.
By 1978, nuclear power accounted for over 10 percent of electric power
generated in Japan.

(3) 1970-80s: A nuclear business scheme “privately run undernational policy” established in the Oil Crises
After China successfully conducted atomic tests in 1964, othernations also joined the “nuclear club,” thereby increasing the necessity
for international nuclear control. This led to the signing of the TreatyontheNon-proliferationofNuclearWeapons

(NPT)

in

1968.

Simultaneously, research on nuclear fuel cycle technology having madegreat advancements in the U.S., the U.K. and France, Japan sought toobtain the technology for government-led development of basic fuelcycle

technologies.

The

revisedJapan-U.S.

NuclearCooperation

Agreement of 1968 allowed Japan to reprocess spent fuel in domestic
facilities and the Power Reactor and Nuclear Fuel Developme nt
Corporation (PNC) was established as the research institution toadvance nuclear fuel cycle technology development. PNC consecutively
launched projects to build thefast-breeder reactor, “Joyo,” theadvanced thermal reactor “Fugen” and a reprocessing plant in Tokai
Village.
The accident caused by the nuclear-powered ship “Mutsu” which
had released radioactive substances triggered many administrative
lawsuits by local residents, all of which were found in favor of the
defendant. As Takagi (2011) 54 indicates, the court had ruled that
Takagi, Shinjiro. Moshi kaisha kousei de kaiketsu suru to sitara (If the issue was tobe solved using corporate rehabilitation procedures) (Kinyu za isei jijo, May 30, 2011)5417

electric power companies had only supplied the electricity required
according to the safety standards determined by the government basedon all the scientific expertise available and that nuclear power plants
which were built in compliance with such safety standards were capableof resisting disaster.
In 1973, the foundation of Japan’s energy policy was shaken by theFirst Oil Crisis. Having depended on oil for approximately 70 percent
of its electric power supply, Japan could not avoid serious impacts on
its national livelihood. Therefore, in order to promote the diversificationof power sources, Japan decided to encourage the further use of LNG fired thermal power and nuclear power. Nuclear power was anespecially promising option as nuclear power plants would not require
additional fuel for a couple of years once it was loaded and uranium
reserves were distributed widely throughout the world.
In support of electric power development and operation, theGovernment adopted what is known as the Power Source Siting Laws,
namely the Act on the Development of Areas Adjacent to Electric Power
Generating Facilities, the Law on Promotion of Power Resources
Development Tax and the Act on Special Accounts (originally, the Law
on Special Accounts for Electric Power Development Acceleration
Measures). These laws allowed local governments hosting nuclear
power plants to receive subsidies not only during the construction of a
nuclear power plant but also during its operation. Esti mates offinancial advantages enjoyed by a local government hosting a 1,350 MW
nuclear power plants are displayed in Table 1 55 . Subsidies werereviewed on several occasions as difficulties increased in siting nuclear
facilities; and therefore, they have been amplified to a great extent fromthe initial scheme.
The

enactment

of

the

Power

SourceSitingLaws

enhancedgovernment involvement as a result of the two Oil Crises in 1973 and1979 and with a view to establish the nuclear fuel cycle. It marked thefoundation of a “nine-company convoy system privately run undernational policy” which would serve as the framework for Japan’s
nuclear operations. In the 1970s and the 1980s, subsidies for local
governments hosting nuclear power plants invited a rush to construct

Agency for Natural Resources and Energy. Dengen ricchi seido no gaiyo (Overview ofthe power source siting policy), available at:www.enecho.meti.go.jp/about/pamphlet/pdf/dengenrichi.pdf
55

18

light-water reactors, which had by then developed into domestic
technology, therefore boosting the ratio of nuclear power to 30 percent
of Japan’s power generation portfolio.
(100 million yen)
Des ig n(3
yea rs )Con st ruc ti on

Ope ra tio n1

Ope ra tio n2

Ope ra tio n3

To t al(7 ye a rs )(15 y rs)

(14 y rs)

(6 yr s)

(45 y rs)

Gra nt s f or a rea l oc ati ng

Sch em e 1

1,1 2 5ele ct ric p ow er st at ion s
Gra nt s f or i nit ia lcos ts fo r si tin g

5.2

ele ct ric p ow er

5.2

52

H, N,P

20. 3

14 2

H, N

sta ti ons
Gra nt s f or p rom ot io nof si tin g el ect ri c
pow er st at io ns
Gra nt s f or a rea s
sur ro und in g ele ct ri c

39 - 11. 7

11. 7

11. 7

11. 7

59 7

H, N

3-1 3

3- 6 -

6

6

27 5

P

2-3

4.5

6.9 2

14 9

H

5- 0

25

P

17 3
(28. 8 )1,2 4 0(27. 5 )pow er st at io ns 2
Gra nt s f or e lec tr ic ity
tra ns mit ti ng
pre fe ctu re s 3
Gra nt s f or l ong -t er m
dev el opm en t
mea su res o f are a
sit in g n uc le ar po we r
sta ti ons 4
Gra nt s f or d eve lo pm entof ar ea lo ca tin g nu cle ar
pow er st at io ns 5
To t al gr an ts by p er iod(an nu al am ou nts )16(5.2 )

43 4(62. 0 )30 7(20. 4 )31 1(22. 2 )*1 Basic schemes: H indicates subsidies provided to local governments (cities, towns andvillages) hosting nuclear power facility; N indicates subsidies provided to prefectures for the
benefit of neighboring local governments; P indicates subsidies provide to prefectures*2 Grants for areas surrounding electric power stations: subsidies of 3.9 billion yen during
the fourth to sixth years, 2.34 billion yen during the seventh and eighth year s, 11.7 billion
yen during the ninth and tenth years and onwards*3 Grants for electricity transmitting prefectures: subsidies of 1 billion yen in the fourth year,
1.3 billion yen during the fifth to eighth years, 0.3 billion yen during the ninth to eleventh
years, 0.6 billion from the eleventh year onwards (provided primarily to prefectures anddistributed in part to hosting local governments and adjacent communities)*4 Grants for long-term development measures of area siting nuclear power stations: 0.2 billion
yen in the eleventh year, 0.3 billion yen during the 12th to 25th years, 0.45 billion yen
duringthe 26th to 39th years, 0.692 billion yen in the 40th year and bey ond*5 Grants for development of area locating nuclear power stations (a component of grants forpromotion of siting electric power stations): 0.5 billion yen during the 40th to 44th years (therecipient prefecture can distribute monies to either the hosting local government orneighboring communities)

Source: Genpatsu ricchi jichitai no zaisei kankyo mondai(Financial and economic issues for local governments hosting nuclear power plants )Chosa to joho No.767 56

Table 1 Example of Financial Resources(1350MW reactor, 10 years required before operation)

56

available at: dl.ndl.go.jp/view/download/digidepo_6019846_po_0767.pdf?contentNo=1

19

(yen/kwh)

1,200(Bil. kwh)
Second Oil
Crisis(1979)

1,000

New energy

800

Nuclear600

Osaka
Exposition(1970)First Oil
Crisis(1973)Petroleum, etc.
LNG

Coal
Pumpedstorage hydroHydropower

400

Lighting
Power
Total lighting &
power

200

1966
Operations
started at Tokai
NPP

1970-1974
Operations
started at Tsuruga,
Mihama,Fukushima Daiichi,
Shimane &Takahama NPPs

1975-1984
Operations
started at
Hamaoka, Ikata,
Tokai Daini, Oi,& Fukushima
Daini NPPs

1985-1993
Operations
started at
KashiawazakiKariwa, Tomari& Shiga NPPs

2005
Operations
started at
Higashidori*It should be noted that electricity rates are
subject to factors other than fuel consumption
amounts.
Source (electricity supply) : Dengen kaihatsu no
gaiyou (Overview of energy development)
Source (electricity rates): Electricity Demand(confirmed report) (FEPC);
financial statements announced by individual
electric power companies

Figure 1 Electricity tariffs and fuel consumption trends(4) Beyond 1990 to the Fukushima accident: deregulation andeconomic stagnationi) Nuclear back end risk consortium
Nuclear development in the Democratic People’s Republic of Korea(DPRK) had become a new threat, structurally different from theconfrontation between the U.S. and the U.S.S.R. . The DPRK had joined
the NPT in 1985 but withdrew from the organization in 1994, for the
alleged development of nuclear weapons 57 . Subsequent negotiations led
to the conclusion of the U.S.-DPRK Agreed Framework, according towhich the Korean Peninsula Energy Development Organization (KEDO)
was established for its implementation. Under the agreement, the DPRK
was provided two light-water reactors entailing little risk of becoming asource of nuclear proliferation and an annual supply of 500,000 tonsof heavy oil until their completion, which were jointly financed by Japanand the Republic of Korea (ROK), with a view to drive the DPRK into
abandoning the use of its graphite moderated reactor and its plan todevelop nuclear weapons. However, the DPRK is suspected of having

Overview of the Nuclear Non -proliferation Treaty (NPT) available on the Ministry ofForeign Affairs website
57

20

continued to pursue nuclear development, as it refused to accept IAEA
investigations and finally withdrew from IAEA. The liquidation of KEDO
was decided at an Executive Board meeting in 2005.
Against this backdrop, in 1980, Japan Nuclear Fuel Services Co.,
Ltd. (currently, Japan Nuclear Fuel Limited (JNFL)) was establishedunder the co-financing of nine electric utilities and JAPC with theimportant mission of setting a model for the peaceful use of plutonium
under the supervision of the IAEA. In 1993, it began constructing the
Rokkasho Nuclear Reprocessing Plant, which marked the launching ofa 1 trillion yen project, according to initial estimates 58 . There are few
examples in the world where a private business has assumed nuclear
back end operations. Particularly closely linked with nuclear security,
the reprocessing and reuse of spent fuel in the nuclear fuel cycle cannot
be pursued without intensive government involvement. However, interms of financing, to the extent that FDC pricing and regionalmonopolyisretained

as

a

means

of

guaranteeing

thestableprocurement of large sums of money, private sector involvement
encompasses the advantage of being able to employ flexible measures
to address the issues of siting and financing nuclear facilities while thegovernment would only have to provide indirect support throughsubsidies. As electric power companies shifted from the initial phase of
constructing new nuclear power plants to mutually maintaining acertain operation rate, the “back end risk consortium” comprising thenine electric power companies and JAPC, joint shareholders (400 billion
Japanese yen in capital) and joint guarantors (1 trillion Japanese yen)of JNFL, evolved into a more robust framework , premised on whichelectric companies became substantially legally obliged to reprocess all
spent fuel (Designated Radioactive Waste Final Disposal Act , Spent
Nuclear Fuel Reprocessing Fund Act). Hence, the framework for nuclear
operations “privately run under national policy” was enhanced.

The cost structure of back end business as a whole is discussed in detail in theestimates conducted by the Cost Verification Committee, Advisory Committee for Natural
Resources and Energy
www.cas.go.jp/jp/seisaku/npu/policy09/pdf/20111221/hokoku.pdf
5821ii)Climate change issues and the Nuclear RenaissanceIn

the

1990s,

climatechangebecamethenextthreattohumankind after the Cold War. In 1992, the United States Framework
Convention on Climate Change (UNFCCC) was adopted at the United
Nations Conference on Environment and Development(often called

the “Rio Earth Summit,” after the host city, Rio de Janeiro ). With the
adoption of the UNFCCC which ultimately aims to stabilize atmosphericgreenhouse gas (GHG) concentrations and the Kyoto Protocol which wasformulated based on the Convention’s philosophy, the world waschallenged with the resolution of climate change issues and thus
developed higher expectations for the expansion of nuclear power,
which emits no carbon dioxide during operation . Also referred to as the
Nuclear Renaissance, Matsui (2011) 59 explains the background of thephenomenon:
Firstly, many countries which had refrained from ordering newplants have been begun to place orders again, more countries areplanning to build new plants, and some countries, including China andIndia, have announced major construction projects.
Secondly, in addition to the upgrading of light-water reactors andtheir enlargement, the development of various types of reactors,
including small-sized nuclear reactors, thorium-based nuclear reactors
and high-temperature gas reactors, which had previously not been
considered attractive options have come to draw attention. Furthermore,developments have been made in probability studies regarding thenuclear fuel cycle, including fast reactors.
Thirdly, new concepts for using nuclear power generation inhydrogen and magnesium production are being seriously considered.
The Basic Energy Plan adopted in June 2010 by the DPJ
administration, which pledged to reduce GH G emissions by 25% from1990 levels by 2020, provided for the constru ction of nine new nuclear
reactors

andtheachievementofanational

operation

rate

of

approximately 85% by 2020, (against 54 reactors in operation with anoperation rate of approximately 60% at the time of its adoption). It

Matsui, Kenichi. Fukushima genpatsu jiko wo norikoete – global energy shift no jidai(Overcoming the Fukushima nuclear power plant accident: the global energy shift era)
(Energy Forum books, 2011) P5559

22

further provided for the construction of at least 14 new nuclear reactors
and aimed to achieve an operation rate of 90% by 2030. This implies
that the expansion of nuclear power use was necessary in securing astable and low-carbon electricity supply, and hence, the Nuclear
Renaissance became mainstream not only in Japan but also in many
countries around the world.
However, this may not simply be a sign of the revival of nuclear
energy as an effective means to counter global warming but of the
return of global trends towards relying on nuclear power for “econom iesof scale,” now that many electric power companies have merged aftermarkets in many developed countries were deregulated in the 1990s,
thereby impeding the large investments required for nuclear power. 60
Although some developed countries shifted towards nuclear phase -out
after the Fukushima accident, the world as a whole has not changed its
course in promoting nuclear power introduction. According to IAEA
forecasts of September 2012, global installed nuclear power capacity is
projected to increase by 25% to 100% in 2030 (90-370 reactors will be
newly built in total, on an annual basis of 5 -20 reactors based on aconversion to 1 MW nuclear power plants).
Western Europe（115GW => 70GW/126GW）

East Asia（80GW => 153GW/274GW）

Eastern Europe（49GW => 80GW/107GW）

North America（114GW => 111GW/148GW）

Middle East / South Asia
（6GW => 30GW/52GW）

Number of nuclear power plants
as of January 1, 2013
○Operable: 429 reactors,
approx. 390 Mil kW○Under construction: 76 reactors,
approx. 78 Mil kW○Planned: 97 reactors,
approx. 100+ Mil

Global nuclear power generation
capacity (GW)Countries with only reactors operable
Countries with reactors operable +reactors under construction
Countries with new reactors underconstruction / planned (incl. proposed)[Present=>high projection/low projection]

Africa（2GW=>5GW／13GW）South America（4GW => 7GW/14GW）Southeast Asia / Pacific（0GW => 0GW /6GW）

Present (as of 2011)
2030 (high projection)

Compiled based on global nuclear power
development trends (JAIF) and additional recent
developments

2030 (low projection)

Nuclear power generation capacity (GW*) was based on IAEA forecasts (September 2012). *1GW=1 Mil kW; Number of reactors estimated by the Agency of
Natural Resources and Energy, assuming an output of 1 million kW per reactor.

Figure 2 Status of major nuclear power development and forecasts
for future nuclear power generation
Takemori, Shunpei. Kokusaku minei no wana (The trap of private businesses led bynational policy) (Nihon keizai shimbun shuppansha, 2011) P73
60

23

The Japanese Government has explicitly stated its intentions tocontinue to encourage exports of nuclear power plants as a part of its
growth strategy 61 , and is negotiating nuclear cooperation agreementswith relevant countries in order to transfer nuclear substances andnuclear equipment and technology overseas .
iii) Slow demand due to a stagnant economy and advancements inderegulation
At the same time, the 1990s was a period of slow electricity
demand growth due to economic stagnation and developments inderegulation, which had a significant impact on nuclear business.
Given calls for the closure of price differences between domestic andinternational markets in the early 1990s , the electric power market was
gradually deregulated from 1995, leading to the deregulation of 60
percent of electricity demand, with the exception of the household
sector. However, after almost 20 years since the initial implementationof partial deregulation measures, newcomers to the market represent
only 3 percent of total supply, due to the fundamental problem that few
businesses can compete with major electric companies, which possess
overwhelmingly

price-competitive

nuclearpower

plants.

Littlecompetition has occurred among existing electric power companies(with the exception of the sole case between Kyuden and Chubu Electric

According to Kumao Kaneko, “During his visit to the Middle East in May, this spring,
Prime Minister Abe concluded bilateral nuclear cooperation agreements with the Un ited
Arab Emirates (UAE) and Turkey and agreed with Saudi Arabia on beginning talks on abilateral agreement. Upon Indian Prime Minister Singh’s visit to Japan in late May,
Japan and India agreed on the early conclusion of the Japan -India Nuclear Cooperation
Agreement, followed by agreement with four East European countries on the promotionof fostering a mutual relationship on nuclear cooperation i n Warsaw, at the first top-levelmeeting with these countries. […] Prime Minister Abe has been misunderstood t o havesuddenly begun scrambling to export nuclear power plants, but under the DPJ
administration, ten months after the TEPCO Fukushima Daiichi Nuclear Power Plant
accident, four bilateral nuclear cooperation agreements with Vietnam, Jordan, theRepublic of Korea and Russia were ratified upon Diet approval. Nuclear cooperationagreement negotiations are currently underway with South Africa, Brazil and Mexico aswell.” excerpts from “The Denki Shimbun “Wave” column, August 7, 2013
Information can also be found on the Ministry of Foreign Affairs website:www.mofa.go.jp/mofaj/area/jordan/data.html#6
Furthermore, at the Upper House plenary session on October 18, 2013, Prime Minister
Abe restated his intentions to export nuclear power plants: “It is Japan’s responsibility
to contribute to enhancing the safety of nuclear power plants worldwide by sharing thelessons learned in the accident at Fukushima Daiichi Nuclear Power Plant with the world.”
61

24

Power Co., Ltd. (“Chuden”)); and therefore, the conventional structureof stable revenue and market shareaccording

to

some

estimates,

past

remains unchanged. Whilederegulation

measureshave

suppressed electricity tariffs by as much as 5 trillion yen as a result ofcompetition pressure 62 , another analysis points to the fact that electric
power companies hindered the effect of deregulation measures byliterally forming a “revenue-securing consortium” that maintained theoperation rate of nuclear power plants, as well as a “nuclear back end
risk consortium.” 63

However, despite its continued ties with the“nuclear back end risk consortium,” Chuden 64 launched business
operations in TEPCO’s service area in August 2013, followed by
Kanden 65 in September. This implies that the “nuclear back end
consortium” might not have been the sole impediment to deregulation.
In May 2006, the Subcommittee on Electric Power Deregulation
and Nuclear Power, established under the Nuclear Power Subcommitteeof the Electric Utility Industry Subcommittee of the Advisory Committee
for Natural Resources and Energy, published a report 66 on the
projected impacts that progress in the deregulation of the electric power
sector would have on electric power plants such as nuclear power
plants that entail large-scale and long-term investment. It analyzed
from the perspectives of finance, siting and demand, whether Japan
would be able to maintain the nuclear ratio provided for in the Nuclear
Policy Outline adopted by the Government in the event that operators
were left to make investment decisions under ope n competition, andindicated that the following issues would have to be addressed:

Agency for Natural Resources and Energy. Denryoku system kaika ku to sono kouka(Electricity system reforms and effects) (May 2013), available at:www.enecho.meti.go.jp/committee/council/basic_policy_subcommittee/past/003/pdf/003_0
11.pdf62

Kikkawa, Takeo. Tokyo denryoku shippai no honshitu (TEPCO: the essence of its
failure) (Toyo Keizai, Inc., 2011)
63

Chuden press release on acquisition of Diamond Power Corporation stock andestablishment of an electricity generation company available at:www.chuden.co.jp/corporate/publicity/pub_release/press/3225133_6926.html
64

KEPCO press release on launching plans for a new integrated energu business by
Kanden Energy Solution Inc., Co. available at :www.kepco.co.jp/pressre/2013/0920_1j.html
65

Draft Report of the Subcommittee on Electric Power Deregulation and Nuclear Powerwww.meti.go.jp/committee/materials/downloadfiles/g60519a03j.pdf
Report of the Subcommittee on Electric Power Deregulation and Nuclear Power(Outline)www.meti.go.jp/committee/materials/downloadfiles/g60607f03j.pdf
66251) lowering and dispersing investment risks unique to nuclear power
generation
2) decreasing and leveling initial investments and decommissioning
costs3) promoting wide-area operations

t h o u s an d k W)

In s t al l e d ca pa ci t y ( 1 04) visualizing the advantages of nuclear power generation

Less than 30% of
total power
generated

F i s c alye ar*Ratio of nuclear power against total electric power generation assuming a constantoperation rate of 75%, just below the average rate for the past ten years (77%)

Figure 3 Installed capacity of nuclear power facilities in thecase of no replacements of aged plants

HEPCO
Tohokuelectric
TEPCO

ChudenHokurik u-electric
KEPCO
Chugokuelectric
YondenKyudenSource: Compilation (Overview) by Subcommittee on Electric Power Deregulation
and Nuclear Power, Agency of Energy and Natural Resources, May 30, 2006

Figure 4 Depreciation periods for subsequent replacements ofnuclear power plants after 60 years of operation
26

The OECD has also conducted an analysis on the difficulties inprocuring funds for nuclear power in a competitive deregulated electric
power market. 67 In the U.S., the competitiveness of nuclear power has
been undermined by the shale gas revolution, which has triggered thesuccessive freezing of nuclear energy plans, the decommissioning ofreactors, and the corporate withdrawal of operators (France’s ED F) 68 .
The U.K., on the other hand, is rediscovering the significance of nuclear
power generation. The U.K. began to deregulate its electric power
market in 1990 and fully deregulated the retail market in 1999, with
the nuclear power sector already having been privatized 1995. However,acknowledging the need to address a declining energy self-sufficiency
rate resulting from reduced oil produce in the North Sea oil and gas
fields, climate change issues and anxiety that a stable electric power
supply may not be maintained, the U.K. has been enthusiastic aboutdeveloping nuclear power as well as renewable energy. In order toensure that investments made in nuclear power generation can berecovered, it has recently decided to introduce a Feed-in-Tariff with
Contracts for Difference (FIT-CfD) scheme for which the U.K
government has been negotiating with nuclear operators the terms ofpurchase. On October 21, 2013 the U.K. Department of Energy andClimate Change (DECC) and operator EDF Energy (a subsidiary ofFrance’s EDF) announced that they had reached agreement on a project
to build two 1600MW reactors at Hinckley Point C 69 which would
generally guarantee a strike price (the fixed wholesale price ofelectricity generated at a newly constructed site) of 89.5 po unds per
MWh over 35 years.
iv) The JCO accident
On September 30, a criticality accident occurred at Japan Nuclear
Fuel Conversion Co. (JCO)’s nuclear conversion plant in Tokai Village,
Ibaraki Prefecture. The accident was classified by the Japanese
authorities as Level 4 on the IAEA International Nuclear andRadiological Event Scale (INES), indicating that it was an event without
significant off-site risk, and became the first event to which the Nuclear

Nuclear Power in Competitive Markets
www.oecd-nea.org/ndd/reports/2000/nea2569 -dereg.pdf
67

Coverage in “The ‘economic efficiency’ barrier of U.S. nuclear plants” The Nikkei
Shimbun, August 6, 2013
68

Department of Energy and Climate Change www.gov.uk/government/news/hinkley point-c
69

27

Compensation Act was applied. However, the accident is distinctly
different from the TEPCO Fukushima accident in terms of geographicaland temporal coverage, content and character. Based on Japan’s
experiences in the accident, the Act on Special Measures Concerning
Nuclear Emergency Preparedness was adopted in December 1999,
giving the Prime Minister full power to directly provide instructions tolocal governments and nuclear operators in order to prevent the wider
expansion of disaster and to allow evacuation, once the Prime Ministerhas declared a state of nuclear emergency. However, as later mentioned,
the Nuclear Compensation Act unfortunately did not undergo revision
then nor at any later time before the Fukushima accident.
Liability of operators
regarding cause of
accident
Impact on residents ofsurrounding areas

Period of evacuation
Human casualties
Characteristic ofdamagesCompensation
amount / no. of cases
Compensation
amounts exceeding
operator capacity
Administrative costs
incurred incompensation
negotiations

Accident caused by breaches of manual
Evacuation order to 40 households within a 350 meterradius of the accident site, evacuation advisory toresidents within a 500 meter radius, indoor evacuation
order to 100,000 households within a 10 kilometers
radius.
Indoor evacuation orders to residents within a 10
kilometer radius of the accident site announced at
20:30, lifted at 16:30 the following day.
Out of the three workers, two died, one sufferedradiation
injury.
Secondaryexposure,etc.
offirefighters.
No direct damages, including soil contamination andhealth hazards caused by dispersed radioactive
material or health hazards due to radioactive rays,
observed. Most damages attributed to harmful rumors.
(Some have noted that there is room for discussion
whethersuchdamagesqualifyfordamagecompensation under the Nuclear Compensation Act.)Approximately 15.4 billion yen / 7000 cases

Support from parent company, Sumitomo Metal
Mining Co.
Damages limited to Ibaraki Prefecture and mainly
involved harmful rumors. Hence, comprehensive
negotiations
withindustrygroupspossible.
Negotiation costs inferred to be relatively low due tolocal government support in negotiations.

Compiled by author from MEXT meeting documents 70 , CRIEPI research report 71 ,and report by the Expert Committee on Nuclear Safety Investigation 72

Table 2 Features of the JCO accident

www.mext.go.jp/b_menu/shingi/chousa/kaihatu/016/shiryo/__icsFiles/afieldfile/2011/0
4/20/1305111_5.pdf
70Central Research Institute of Electric Power Industry,
criepi.denken.or.jp/jp/kenkikaku/report/detail/Y02012.html
71

72

www.nr.titech.a c.jp/~hsekimot/AESJSafety/

28

reportavailableat:Chapter 3
Fundamental Principles of a Nuclear
Damage Compensation Scheme
The purposes of a compensation scheme for nuclear damages are
to “protect persons suffering from nuclear damage” and “to contributeto the sound development of nuclear business.” Many countries
including

Japan

have

embeddedthese

purposes

in

their

laws

concerning nuclear compensation. As damages from nuclear disasters
are likely to extend over a wide geographical and temporal range , there
is a need to make available adequate compensation amounts for liability
claims. Furthermore, given the complexity and novelty of nuclear
technology, it is difficult for the victims of a nuclear accident to identify
the parties liable and provide relevant evidence. Therefore, theprocedures of identifying the liable parties and claiming compensation
for damages must be facilitated under a nuclear compensation scheme.
The basic framework of a compensation scheme addresses such callsfor victim protection, while also maintaining the foreseeability andstability of nuclear business in order to encourage private sector
involvement and thus foster it, by employing insurance to cover for agiven scope of financial burdens and explicitly providing for government
involvement under certain circumstances and in the event thatcompensation amounts exceed a given upper limit 73 .
Given the historical context in which countries formulated their
nuclear compensation schemes in agreement with the U.S.’s demand ofimportingcountries

that

Americannuclearpower

facility

manufacturers, such as General Electric Company (GE), would not beheld liable for any nuclear accidents, the basic institutional principles,
including the purpose of relevant laws, are nearly globally common. The
basic principles are provided below:

JAIC. Anata ni shitte moraitai genbai seido (Introduction to Japan’s Nuclear
Compensation System) (2012), p1473291) Tightening up andconcentration of liability2) Scope of application

3) Mandatory financial security

4)Limitation
payments

ofcompensation

5) Government compensation

Nuclear power operators are subject tostrict liability and limited immunity. In
addition, even if an accident should
occur due to causes attributable to thefacility supplier, the operator shall besolely liable. (exclusive liability)“Nuclear damages” under a nuclear
damage compensation scheme arecaused by accidents that are
attributable to reactor operations.
Compulsory subscription to private
insurance and/or indemnity agreementwith government to secure theoperator’s ability to pay
A maximum liability amount is set forcompensation payments so that theoperator is not held liable for unlimitedsums of money. Ceilings have
exceptionally not been set in Japan,
Germany and Switzerland, andtherefore operators in these countries
assume unlimited liability.
When operators are not capable ofmaking compensation payments in full,
the government compensates forremaining amounts. *Japan’s Nuclear
Compensation Act does not include
explicit provisions about compensationby the government.

Compiled by the author from material published by the Japan Atomic
Industrial Forum, Inc 74
Table 3 Internationally common principles in compensation
schemes for nuclear damages

Modern law developed based on the fault liability principle,
therefore holding a person liable for damages only when there isevidence of criminal intention or negligence. This principle is based on
the “theory of imposing minimal restriction upon an individual’s
freedom of action,” 75 which has contributed greatly to the developmentof modern capitalism. However, against the backdrop of economic
growth and the advancement of science and technology, modern
companies came to be inherently subject to risk, and therefore risk-

JAIC. Anata ni shitte moraitai genbai seido (Introduction to Japan’s Nuclear
Compensation System) (2011, 2012)74

Wagatsuma, Sakae. Jimu kanri, hutou
management, illegal gains and acts of tort )75

30

ritoku,

huhou

koui

( Administrative

based liability (strict liability principle) 76 emerged and came to be
applied to damages to third parties resulting from accidents , such as
airplane and cosmic crashes and oil spills in oceans as well as theoperation of nuclear facilities and nuclear-powered ships 77 . Principle
１ on the aforementioned list of internationally common principles innuclear compensation schemes – the tightening up of liability - is basedon calls for the protection of victimized parties , and incorporates thefault liability principle, thereby holding parties who caused the damage
liable regardless of their intentions or negligence. It also limits theextent to which exclusions are accepted in order to widely recover thedamages suffered. As will be later discussed herein, recommendations
made by the Expert Committee on Nuclear Disaster Compensation (c.f.
Table 4) explicitly advocated that nuclear operators should bear strict
liability on grounds that “the concept that any person who is operating
a business that entails risks that are inevitable products of modern
science should be liable for damages occurring from it regardless of his
intentions or negligence is indeed an established principle which has
already been widely applied to traffic accidents.“ 78The adoption of the principle of exclusive liability owes greatly tothe fact that companies in recipient countries of nuclear technology
could not receive the technology unless they guaranteed that U.S. andU.K. suppliers of nuclear technology and material would not be held
liable for nuclear damages. At the same time, the principle promised torelieve victims of the burden of identifying the source of an accident
and to avoid the duplication of insurance agreements, as well as topreventany

reluctanceamong

nuclear

plant

and

component

manufacturers and other private companies to engage in nuclear
business in fear of liability risks. The exclusive liability principle is notprovided for in written law under some nuclear liability schemes (suchas the U.S. Price-Anderson Nuclear Industries Indemnity Act ( “PriceKanazawa, Yoshio. Kojin no songai baisho sekinin ni taisuru kokka no hokanteki sayou(The government’s complementary role in an individual’ s liability for damages)
76

Yamamoto, Soji. Kokusaihou ni okeru kiken sekinin shugi (Risk -based liability ininternational law) was also referred to77

Report by the Expert Committee on Nuclear Disaster Compensation on December 12,
1959, available atwww.aec.go.jp/jicst/NC/about/ugoki/geppou/V04/N12/19591206V04N12.html
7831

Anderson Act”)), but by including all parties which have any possibilityof bearing liabilities as joint insureds in an insurance agreement signed
by nuclear operators, liabilities are in effect centered upon licensees inthese schemes as well.
Furthermore, as it would be insufficient to merely hold parties
liable for damages, financial security must mandatorily be maintainedin order to guarantee the availability of monies for compensation(principle 3). As this is an extremely important when actually executing
nuclear compensation, the maintenance of financial security is atypical requirement for operating reactors. Measures for maintaining
financial security include deposits and mutual assistance programs aswell as private insurances, which all inherently have limited capacities.
Government compensation covers for damages exceeding such
limits or exclusions in insurance agreements (principle 5).
Hence, from the perspective of protecting victimized parties, thebasic framework of nuclear compensation comprises three pillars,
namely, demanding that nuclear operators bear a level of liability more
stringent that what is usually required under modern law (strict
liability, exclusive liability and limited immunity), requiring operators
to secure financial resources for compensation payments by means ofprivate insurance, and providing government compensation in the event
such insurances fail to recover all damages. 79
Japan has concluded bilateral agreements with not only countries
which already employ nuclear power but also with countries that are
newly introducing nuclear power. The latter have also establishedcompensation schemes with similar frameworks. (As of September 2012,
Japan has concluded nuclear cooperation agreements with the U.S.,

Refer to: Takeuchi, Akio. Genshiryoku songai nihou no gaiyou (Outline of Two Laws
Concerning
NuclearDamage),Jurist No236 (available only in Japanese)
www.yuhikaku.co.jp/static_files/shinsa i/jurist/J0236029.pdf;
Tanabe,Tomoyuki, M. Maruyama . Fukushima Daiichi Genshiryoku Hatsudensho Jikoga Teikishita waga kuni no genshiryoku songai seido no kadai to sono kokufuku ni muketa
seido kaikaku no houkousei (The issues concerning Japan’s compensa tion system fornuclear damages raised by the accident at Fukushima Daiichi Nuclear Power Plant andthe direction of system reforms to overcome the challenges), (Central Research Instituteof Electric Power Industry ,2012） ; and other reports. It should also be noted that, forexample, Utatsu states in Genshiryoku songaibaishou no houritsu mondai (Legal issuesof nuclear damage compensation) that i) strict liability, ii) limited liability, iii) exclusive
liability, and iv) mandatory financial security are the four common principles of liability.
79

32

the U.K., Canada, Australia, France, China, the European Atomic
Energy Community (EURATOM), Kazakhstan, ROK, Vietnam, Jordan
and Russia. 80

A list of agreements related to nuclear energy is available on the Ministry of Foreign
Affairs website : www.mofa.go.jp/mofaj/gaiko/atom/topics/jyoyaku.html
8033

Chapter 4
The features of Japan’s Act on Compensation for Nuclear Damages: its origin and context ofamendments
1.

Historical context of the enactment of the Nuclear

Compensation Act
As discussed above in Chapter 2, Japan decided to engage in thepeaceful use of nuclear power with the aim to secure an abundant andinexpensive source of energy and to reduce its foreign currency needsbycutting

down

onthermalpower.

Nucleartechnology

being

monopolized by the U.S. and the U.K. at the time, the establishment of
a nuclear compensation scheme was required for the introduction of
nuclear technology. As aforementioned, the need for legislation on
nuclear compensation was first acknowledged when the Japan -U.S.
Nuclear Cooperation Agreement was concluded in 1956 and theprovisionon

exempting

Americanmanufacturers

fromliability

provoked domestic controversy 81 . Later in 1957, the Act on theRegulation of Nuclear Source Material, Nuclear Fuel Material andReactors (“Nuclear Reactor Regulation Act”) was enacted, to beamended in 1959 to obligate nuclear reactor licensees to maintainfinancial security for potential damages imposed upon third parties
based on criteria determined by ordinance (Act No. 103 of 1959). As
Japan gradually prepared the platform for introducing nuclear energy,
it

was

faced

with

an

increasing

need

to

establishanuclearcompensation scheme. The events leading to the enactment of the twolaws on nuclear compensation are compiled into a chronological tablebelow 82 .

Sakae Wagatsuma, Takeo Suzuki, Ichiro Kato, Ryo Inoue, Katsuji Fukuda, Seisho Horii,
Shozo Nagasaki, Keiichiro Sugimura . Zadankai: genshiryoku saigai hosho wo megutte(Round-table: compensation for nuclear damages), Jurist No.236, October 15, 1961
81

Genshiryoku saigai hoshou kanren houki no seibi (Establishment of laws regarding
compesation for nuclear disasters)www.aec.go.jp/jicst/NC/about/hakusho/wp1960/sb20201.htm
Genshiryoku saigai hoshou ni tsuiteno kihon houshin no kettei (Decision on basic polic y
for compensation for nuclear disasters) (Genshiryoku geppo u, 1958)
www.aec.go.jp/jicst/NC/about/ugoki/geppou/V03/N11/195801V03N11.HTML
Report by the Expert Committee on Nuclear Disaster Compensation on December 12,
1959,
available
at
82

34

Date

Event

Description

Nov.
1956

Conclusion of the Agreement for
Cooperation between the
Government of Japan and theGovernment of the United States ofAmerica on Civil Uses of Atomic
EnergyAgreement of leasing fuel forexperimental nuclear reactor at
Tokaimura, Ibaraki Prefecture.
Included provision that “uponreceipt of fuel, the Government ofJapan shall exempt theGovernment of the United States ofAmerica from all liabilities
occurring from the production,
processing, ownership, leasing,possession, and use of fuel.”

1957

Deliberations
onnuclearcompensation scheme launched in
the Atomic Energy Council
Decision on the “Key Principles for aCompensation Scheme for Nuclear
Disasters”

Oct.
1958
Dec.
1959
Mar.
1960
Apr.
1960
May
1960

Report submitted by the Expert
Committee on Nuclear Disaster
Compensation
Informal decision on the“Establishment of a Scheme for theCompensation of Nuclear Damages”
Cabinet decision on Compensation
for Nuclear Damages bill
Submission of the bill to Diet

Oct.
1960

Resuming of the Expert Committee
on Nuclear Disaster Compensation

May.
1961

Discussion at the Special Committee
for Science and Technology
Promotion meeting: adopted byunanimous vote with collateral
resolution

Jun.
1961

Deliberation at Upper House
Committee on Commerce andIndustry: adopted by unanimous
vote
Passing of the bill in Diet plenary
session, promulgation of the Act

Jun.
1961

Establishment of Expert
Committee on Nuclear Disaster
Compensation (Chaired by Sakae
Wagatsuma)
Deliberations in Atomic Energy
Council, adjustments with relevant
ministries and agencies

Pending due to confusion related
to Japan-U.S. Security Treaty
issues ; later withdrawn
Preparations for drafting the Act
on Indemnity Agreements forCompensation for Nuclear Damage
bill
Collateral Resolution:
1) Establish safety criteria andimplement preventive measuresagainst nuclear accidents.
Conduct radiation dose checks forresidents living in surrounding
areas; 2) Implement measures toaddress employee hazards asnecessary; 3) Provide government
assistance for damages exceeding
5 billion yen and instruct
operators to pool profits; 4) Takerequired government measures inthe event an international
agreement has been concluded

Compiled by the author based on
White Paper on Nuclear Energy and Genshiryoku geppou ( JAEC Monthly), etc. 83

Table 4 Events leading to the enactment of the two laws on nuclear compensationwww.aec.go.jp/jics t/NC/about/ugoki/geppou/V04/N12/19591206V04N12.html

Genshiryoku saigai hoshou ni tsuiteno kihon houshin no kettei (Decision on key
principles for compensation for nuclear disasters) . Genshiryoku geppo u 1958.Vol.3,No.11
83

35

The basis for deliberations on a compensation scheme for nuclear
disasters was laid in the “Key Principles for a Compensation Scheme
for Nuclear Disasters” 84 which was announced by the JAEC in October
1958. It set out the following four principles:(1) Implement necessary measures to obligate nuclear reactor
licensees, etc. operating a nuclear reactor to ensure its capacity tocompensate for potential damage occurring from operation.
(2) Promote the establishment of nuclear liability insurance under thecurrent Insurance Business Act in order to allow licensees tosubstantively be prepared with capacities provided for in (1)(3) Seek the establishment of a nuclear damage compensation systemcentered on a privately operated nuclear liability insurance in orderto resolve various issues related to nuclear compensation, drawing
on developments in other countries.
(4) Consider further solutions, including Government compensation,in the event the abovementioned measures are prove to be
insufficient.
The key principles explicitly provided for the maintenance offinancial security centered on private nuclear liability insurance andthe consideration of Government compensation in the event suchmeasures were insufficient (when damages exceeded the amounts
covered by financial security). The recommendations compiled by theExpert Committee on Nuclear Disaster Compensation on establishing a
nuclear compensation scheme had of course been in line with theseprinciples. However, the final decision made by the JAEC and the billdrafted based on the outcome of adjustments mad e among relevant
ministries and agencies drastically deviated from them. A comparisonof the recommendations made by the Expert Committee and the final

www.aec.go.jp/jicst/NC/about/ugoki/ geppou/V03/N11/195801V03N11.HTML
Genshiryoku hoshou senmon iinkai no toushin (Report by the Expert Committee on
Nuclear Disaster Compensation). Genshiryoku Iinkai Geppou, 1959. Vol.4, No.12,
available at: www.aec.go.jp/jicst/NC/about/ugoki/geppou/V04/N12 /19591206V04N12.html
Genshiryoku saigai hoshou seido no kakuritsu ni tsuite (Establishment of acompensation scheme for nuclear disasters). Genshiryoku Iinkai Geppou, 1960. Vol.5,
No.3, available at:www.aec.go.jp/jicst/NC/about/ugoki/geppou/V05/N03/196 005V05N03.html
Genshiryoku songai no baishou oyobi genshiryoku songai baishou hoshou keiyaku ni
kansuru houritsu, seitei (Compensation for nuclear damages and enactment of Act on
Indemnity Agreements for Compensation for Nuclear Damage). Genshiryoku Iinkai
Geppou, 1961. Vol.6, No.6, available at:www.aec.go.jp/jicst/NC/about/ugoki/geppou/V06/N06/19610616V06N06.html
Genshiryoku saigai hoshou ni tsuiteno kihon houshin no kettei (Decision on key
principles for compensation for nuclear disasters) . Genshiryoku geppou 1958.Vol.3,No.11,
available at www.aec.go.jp/jicst/NC/about/ugoki/geppou/V03/N11/195801V03N11.HTML84

36

decision made by the JAEC is provided below 85 :Liability ofoperator
Ex clusions

Definition of
nuclearaccident
Limitation of
liability

Financialsecurity

Options
available inevent ofex ceedance offinancial
sercuityCompensation
processing body

Recommendations made by
the Ex pert Committee on
Nuclear Disaster
Compensation (Dec. 1959)
Strict, limited and exclusive
liability
In the event of exceptional force
majeure (e.g. grave natural
disaster of an exceptional
character)
Includes normal operation
N.A.

Given payment amounts coveredby financial security
Private insurance policies limit:
5 billion yen per facility l
To be increased based on
consideration of underwriting
capacity of private insurance
Government compensation-Maintain balance with otherbusinesses by collecting
indemnity fees orreimbursement-Right of reimbursement t o be
claimed only when intention or
gross negligence can be
acknowledged-No provision of the exact
amount of Government
compensation nor operator
liability caps
Administrative committee(Nuclear Damage Compensation
Committee)

Informal Decision by the JAEC
(March 1960)
Strict, unlimited and exclusive
liability
same as left

same as left
Upper limit of compensation
payment is equivalent to the sum
covered by financial security andGovernment compensation
amounts.
=>No provision of the exact amountof Government compensation nor
operator liability caps
Given payment amounts covered byfinancial security
Private insurance policies limit: 5billion yen per facility

Compensation by operators-Government shall provide
operators with monies for damages
exceeding measures within a range
permissible in accordance withfinancial circumstances tocompensate third parties-Right of reimbursement to beclaimed by the Government only
when an accident was caused by
the operator with intention

Not confined to administrative
committee (specially designatedcompensation processing
committee)
Compiled by author based on
White Paper on Nuclear Energy and Genshiryoku iinkai geppou (JAEC Monthly), etc.

Table 5 Comparison of Recommendations made by the Expert Committee
on Nuclear Disaster Compensation and Informal Decision by the JAEC

A comparison of the recommendations made by the Expert

Genshiryoku hoshou senmon iinkai no toushin (Report by the Expert Committee on
Nuclear Disaster Compensation). Genshiryoku Iinkai Geppou , 1959. Vol.4, No.12,
available at: www.aec.go.jp/jicst/NC/about/ugoki/geppou/V04/N12/19591206V04N12.html
Genshiryoku saigai hoshou seido no kakuritsu ni tsuite (Establishment of acompensation scheme for nuclear disasters). Genshiryoku Iinkai Geppou, 19 60. Vol.5,
No.3, available at:www.aec.go.jp/jicst/NC/about/ugoki/geppou/V05/N03/196005V05N03.html
8537

Committee on Nuclear Disaster Compensation and the decision madeby the Atomic Energy Commission reveals that the latter is regressivein terms of Government involvement.
In the recommendations made by the Expert Committee on
Nuclear Disaster Compensation, the operator was subject to unlimited
liability but the Government was to compensate for damages exceedingtheamounts

coveredbyfinancialsecurity.

Hence,

theExpertCommittee had sought to clarify the Government’s liability andexplicitly referred to its reasons in its report, which are quoted below(emphasis added by author):“Nuclear business will, needless to say, deliver significant benefits
both academically and industrially, but simultaneously entails risk ofincalculable damage in the event of an accident. Furthermore, much is
yet to be scientifically revealed regarding its operation. Therefore, solong as the Government has decided upon a policy to foster thisbusiness while taking into account various circumstances, it should, ofcourse, make an effort to prevent the occurrence of accidents by taking
all possible measures, but at the same time implement appropriate
measures so that in the event of an accident, nuclear operators will nothave to bear liabilities to the extent that the continuation of business
operations is jeopardized, as well as make sure that nuclear operators
are subject to heavy liabilities in order to provide victimized parties
with sufficient compensation, thus not compelling victims to meekly
surrender to the circumstances.”
The underlined point is important as it requires the Government
to be fully committed to the prevention of accidents and t he provisionof compensation for victims, should an accident occur, on the grounds
that it was the Government who made the judgment that nuclear
technology was a necessity for Japan despite its risks, due to various
circumstances. The reasons for the substantial change from the reportto the current Nuclear Compensation Act will be elaborated

insubsection 3 (“The features of Japan’s Nuclear Compensation Act” ). An
outline of the two laws on nuclear compensation is provided in the tablebelow:

38

Liability of operator
Requirement for
exclusion ofoperator’s liability
Requirement for
exclusion of private
insurance’s liability
Limitation of
liability
Financial security
Options available inevent of exceedanceof financial security
Options available inevent of absence ofliable party(in event of
exclusion ofoperator liability)
Compensation
processing body

Act on Compensation for Nuclear Damage (A)Act on Indemnity Agreements for Compensation of
Nuclear Damage (B)(March 1962)
Strict, unlimited and exclusive liability (A Sections 3 &4)
Insurrections or grave natural disaster of an exceptional
character (A Section 3, exceptional clause)
Normal operation; earthquake, tsunamis, and volcanic
eruptions; claims filed after ten years since occurrence (BSection 3)
No limitations (no provision)
Private insurance or deposit (Initially, 5 Bil. yen
perfacility. Currently, 120 Bil. yen per facility) (A Sections
6-15)
Government aid, when the Government deems it necessary(A Section 16)
Necessary measures to relieve victims and prevent thedamage from spreading

Dispute Reconciliation Committee for Nuclear Damage
Compensation (A Section 18)-Alternative dispute resolution, formulation of guidelines,
investigation and evaluation of nuclear damage
Compiled by the author

Table 6 Act on Compensation for Nuclear Damage / Act on
Indemnity Agreements for Compensation of Nuclear Damagewww.mext.go.jp/a_menu/genshi_baisho/gaiyou/index.htm(last accessed on October 12, 2013)

Figure 5 Structure of Nuclear Compensation System39

2.

History of amendments
The Nuclear Compensation Act has been amended approximately

every ten years since its enactment, based on Section 20, which
stipulates the term of the law. The following paragraphs will o utline thehistory of the law’s amendments. It should be noted that the amounts
provided as financial security represent the upper limit of available
amounts.
-First amendment (1971) 86
The limitation of liability on the part of nuclear operators andGovernment measures were fundamentally discussed in the Expert
Committee on the Compensation System for Nuclear Damages . The
discussion appears to have been largely influenced by the compositionof the committee members. The committee was chaired by Sakae
Wagatsuma, Professor emeritus at the University of Tokyo , who had
also chaired the Expert Committee on Nuclear Disaster Compensation,
the subcommittee was chaired by Eiichi Hoshino, then Professor at the
University of Tokyo and previously member of the form er Expert
Committee, and other committee members were also academics who
had been involved in the compilation of the Expert Committee report.
However, the deliberations in a total of fourteen Expert Committee
meetings and subcommittee meetings were concluded with an opinion
statement that, as undermentioned, appears to sympathize with bothsides of the argument (emphasis added by the author).
Some opinions requested amendment:
・ International agreements and nuclear compensation schemes in
the U.S. and Europe place a cap on the compensation payment
amounts that nuclear operators are liable for and in the eventthat nuclear damages exceed the amount covered by financial
security,

includingprivateliability

insurance,

government

compensation schemes are adopted in order to compensate fordamages suffered by victimized parties up to a certain amount.

Genshiryoku Iinkai Geppou , 1970. Vol.15, No.12, available at:www.aec.go.jp/jicst/NC/about/ugoki/geppou/V15/N12/197029V15N12.html
8640

・ In Japan, as well, for the purposes of protecting persons
suffering from nuclear damage and seeking the sounddevelopment of nuclear power business, the ideal way forward
would be to draw on these overseas legislations, therefore
limiting the liability of nuclear operators to a certain amountandexpandingthecoverageofgovernment

indemnity

agreements (“Government compensation”) which is premised
upon the collection of appropriate indemnity fees to recoverdamages exceeding the amounts available through measures
such as private insurance policy.
However, there were very strong conservative opinions as well:・ Japan is different from European countries , which sharecontiguous borders with other countries, and therefore there isno urgent need for Japanese legislation to conform to those ofother countries.
・ Nuclear power plants are already being constructed under thecurrent nuclear compensation scheme. There have not yet been
any events in which the protection of victimized persons and thesound development of nuclear business would be undermined
without

limitationcompensationofliability

has undermined,or

expanded

Governmentand such events will notnecessarily occur in the near future.
・ Limiting the liability of nuclear operators to a certain amountwould not necessarily be appropriate from the perspectives ofpublic sentiment and recent social conditions.
As a result, these issues were recorded as “issues for future
consideration,”

althoughsuch

discussions

on

the

fundamental

framework of a nuclear compensation scheme were n ever reopened
during deliberations for the four succeeding amendments. In this firstamendment, the financial security amount was increased from theinitial amount of 5 billion yen to 6 billion yen.

41

-Second amendment (1979) 87
No major amendments were made other than increasing thefinancial security amount from 6 billion yen to 10 billion yen.
-Third revision (1989) 88
Havingexperienced

Compensation

Act

was

the

Chernobyl

associatedwithaccident,andthe

Nuclearc omparedwithinternational agreements as well as legislations in other countries. As
Asian countries were not parties to either the Paris Convention on Third
Party Liability in the Field of Nuclear Energy (“Paris Convention”) or the
Vienna Convention on Civil Liability for Nuclear Damage (“Vienna
Convention”), the two international conventions which had alreadyentered into effect at that time, the Nuclear Compensation Act wasamended to provide that should a nuclear accident occur in aneighboring

country,intergovernmental

negotiations

shall

be

conducted and damage may be addressed by ex post facto laws asnecessary. Discussion of this issue was to be continued.
The financial security amount was increased from 10 billion yen
to 30 billion yen.
-Fourth revision (1999) 89
Thisrevisionpresented

the

idea

that

the

conceptsofenvironmental damage and preventive measure costs would be includedin

nuclearrequirements

damages.
for

Discussions

exclusion

should

were
be

held

amendedonwhether

as

the

the

ViennaConvention which had been amended the previous year no longer
exempted liability in “a grave natural disaster of an exceptional
character.” It was concluded that those suffering damages were
sufficiently protected under Section 17 which provides for Government

Genshiryoku Iinkai Ge ppou, Vo.24, No.11, available at:www.aec.go.jp/jicst/NC/about/ugoki/geppou/V24/N11/197904V24N11.html
87

Report by the Expert Committee on the Compensation System for Nuclear Damages,
December 2, 1988, available at:www.aec.go.jp/jicst/NC/about/ugoki/ geppou/V33/N12/198808V33N12.html
88

Report by the Expert Committee on the Compensation System for Nuclear Damages,
December 11, 198, available at:www.aec.go.jp/jicst/NC/iinkai/teirei/siryo98/siryo70/siryo12.htm
8942

compensation and an amendment would not be necessary.
The financial security amount was raised from 30 billion yen to 60
billion yen.
-Fifth amendment (2009) 90
The Nuclear Compensation Act had been applied for the first timein the JCO accident, which occurred immediately after the previous
amendment. In order to draw on this experience, the Panel on Reviewing
the Nuclear Compensation System was established under the Director
General of the Research and Development Bureau of the Ministry of
Education, Culture, Sports, Science and Technology (MEXT). Six
meetings were held (from June 2008, chaired by Toyohiro Nomura,
Professor of Gakushuin University, Faculty of Law), but the JCO
accident did not lead to the fundamental revision of Japan’s nuclear
compensation

systembecause,aselaborated

in

after-mentioned

comparisons with the TEPCO Fukushima accident, it had embraced
many circumstances unique to the accident. The JCO accident had
been caused by actions of high illegality on the part of the operators,
the number of persons who suffered damages was limited, thecompensation payment amount could not be afforded by the operator
itself but could be fully covered with the support of its parent company ,and the operator that caused the accident was not a general electricutility bearing responsibilities for supplying electricity. Hence, thisamendment

only

improved

operational

aspects

of

the

act

by

establishing guidelines on the use of the Dispute Reconciliation
Committee for Nuclear Damage Compensation (“Dispute Reconciliation
Committee”).
The financial security amount was increased from 60 billion yen
to 120 billion yen.

Panel on Reviewing the Nuclear Compensatio n System on
www.mext.go.jp/b_menu/shingi/chousa/kaihatu/007/index.htm ;www.meti.go.jp/committee/materials2/downloadfiles/g81209c06 j.pdf
90

43

MEXT

website:3. The features of Japan’s Nuclear Compensation Acti) Purpose: “protection of victimized persons” and “sound developmentof nuclear business”
Japan’s Nuclear Compensation Act is a special law on the law of
torts stipulated in Section 709 and succeeding sections of the Civil
Code which “completes the framework of conflict resolution between
private persons.” 91 It also stipulates two purposes, as does the nuclear
compensation laws of other countries, namely, the “ protection of
victimized persons” and the “sound development of nuclear business.”
However, the very purpose of this Act was the target of heateddebate within the government upon its legislation. There were strong
demands for the deletion of the “protection of victimized persons” fromthe purpose of the law on the grounds that the government could
implement supportive measures for the fostering of a business but
could not assume responsibility for the protection of persons victimized
by such business operations. Discussions led to leaving the call for
public protection in the provision, but it has been indicated that theconcept can be found redundantly in the framework of the law. 92
The two purposes appear to be completely independent of eachother, but have a mutually synergetic effect: “Only when nuclear
business develops soundly and the financial resources required forpotential compensation payments are therefore accumulated, can any
promise to compensate victims become realistic, and only when victim
relief is ensured can the siting of nuclear power plants be promoted
based on a sense of assurance among local residents , therefore
enabling the sound development of nuclear business.” 93

Prior to the

Tanabe,Tomoyuki, M. Maruyama . Fukushima Daiichi Genshiryoku Hatsudensho Jikoga Teikishita waga kuni no genshiryoku songai seido no kadai to sono kokufuku ni muketa
seido kaikaku no houkousei (The issues concerning Japan’s compensation system fornuclear damages raised by the accident at Fukushima Daiichi Nuclear Power Plant andthe direction of system reforms to overcome the challenges), Central Research Instituteof Electric Power Industry （ 2012）91

Sakae Wagatsuma, Takeo Suzuki, Ichiro Kato, Ryo Inoue, Katsuji Fukuda, Seisho Horii,
Shozo Nagasaki, Keiichiro Sugimura . Zadankai: genshiryoku saigai hosho wo meg utte
(Round-table: compensation for nuclear damages), Jurist No.236, October 15, 1961
92

Tanabe,Tomoyuki, M. Maruyama . Fukushima Daiichi Genshiryoku Hatsudensho Jikoga Teikishita waga kuni no genshiryoku songai seido no kadai to sono kokufuku ni muketa
seido kaikaku no houkousei (The issues concerning Japan’s compensation system for
93

44

TEPCO Fukushima accident,emphasis on this synergetic effect might

have had the effect of generating a shared understanding among
concerned parties that even if damages exceeding an operator’s
financial resources occurred, Government aid could be expected withhigh certainty 94 . Given that Section 16 of the Nuclear Compensation
Act does not provide for unconditional Government aid, the relationshipbetween these two purposes, in this context, would be better referred
to as a trade-off.
In the JCO accident, damages exceeded the financial security
amount (1 billion yen) by large, surging to as much as approximately
15.4 billion yen. As aforementioned, the accident was characterized by
special circumstances, such as th at it had been caused by actions ofhigh illegality on the part of the operators, that the damage was limited,that the compensation payment amount could not be afforded by theoperator itself but could be fully covered with the support of its parent
company, and that the operator that caused the accident was not a
general electric utility responsible for supplying electricity. It was madeapparent in this accident that Government aid would not automaticallybe offered, but even given this experience, succe eding amendments of
the Nuclear Compensation Act failed to fundamentally resolve the risks
embraced by the Act, therefore allowing not only nuclear operators but
many other concerned parties including financial institutions tocontinue to believe that they could expect Government support in theface of a nuclear accident. This was presumably a consequence of thecontext in which nuclear business developed. Nuclear business has
been “privately run under national policy” from its introductory phaseand this framework was enhanced as nuclear operators evolved into a“nuclear back end risk consortium”, as described in the subsection on

nuclear damages raised by the accident at Fukushima Daiichi Nuclear Power Plant andthe direction of system reforms to overcome the challenges), (Central Research Instituteof Electric Power Industry,2012）
Tanabe,Tomoyuki, M. Maruyama . Fukushima Daiichi Genshiryoku Hatsudensho Jikoga Teikishita waga kuni no genshiryoku songai seido no kadai to sono kokufuku ni muketa
seido kaikaku no houkousei (The issues concerning Japan’s co mpensation system fornuclear damages raised by the accident at Fukushima Daiichi Nuclear Power Plant andthe direction of system reforms to overcome the challenges), (Central Research Instituteof Electric Power Industry, 2012） . It should be noted that th is report expresses what isreferred to as a “trade-off” herein as “having conflicting features.”94

45

the historical context of nuclear business.
ii) Operators’ unlimited liability
The most important feature of Japan’s Nucl ear Compensation Act
is that it imposed unlimited liability upon nuclear operators. Section
16 of the Nuclear Compensation Act stipulates that in the event
damages

exceedingthefinancialsecurity

amountoccur,“

theGovernment shall give a nuclear operator […] such aid as is requiredfor him to compensate the damage […] when the Government deems it
necessary in order to attain the objectives of this act” (which include
the protection of victimized persons and the sound development of
nuclear business)” (paragraph 1). “Aid as provided for in the preceding
paragraph shall be given to the extent that the Government isauthorised to do so by decision of the National Diet.“ (paragraph 2)
Hence it is explicit that liability is attributed to nuclear operators andthe Government is only in the position of providing indirect aid tooperators. “Aid” is not defined in the act itself or any of its subordinate
laws, nor are any criteria provided other than the ambiguous conditi on
when the Government “deems it necessary.” As the Government may
make decisions based on arbitrary interpretations, this poses greatrisks for those financing nuclear business. The Government refrained
from providing aid in the JCO accident of 1999, and hence, the details
of Section 16 of the Nuclear Compensation Act was defined for the firsttime in the Nuclear Damage Compensation Facilitation Corporation Act(“Facilitation Corporation Act”) enacted after the TEPCO Fukushima
accident.
With unlimited liability, the operator cannot foresee its financial
future which impedes the achievement of the “sound development of
nuclear business,” a purpose of the Nuclear Compensation Act. Given
the adoption of an strict liability regime which sets wide limits on
reasons for exclusion from liability, imposing unlimited liability undersuch strict conditions could also be viewed as lacking in legal balance.
Hence, many countries utilizing nuclear power have set ceilings upon
the liability amounts to be paid by operators (although in Germany and
Switzerland, such limitation of liability has been abolished). As Hoshino46

(1961) 95 states, “it should be clearly understood that, be that as it may
formally, in effect, unlimited liability does not serve to protect
victimized parties. Such a scheme will push operators into bankruptcy,
only to entitle victimized parties to equal footing with other creditors.”
Hence, it should be noted that imposing unlimited liability upon
operators would seem to be protective of victims, but does not meanthat their financial sources for compensation are unlimited.
As aforementioned, the Expert Committee on Nuclear Disaster
Compensation recommended that when damages exceeded the financial
security

amount,Government

compensation

shouldbeprovided(December 1959). It brings us to wonder how these recommendations
led to unlimited liability.
Prior to legislation, electric power companies naturally expressed
their opposition to bearing unlimited liability. Some of these opinions
were delivered at the third 96 and fourth 97 meetings of the JAEC
advisory committee. These included objections against weakened
government involvement:

Soichi Matsune, Vice-Chairman, Federation of Electric Power Companies(FEPC) (Third meeting of the JAEC advisory committee)“The purpose of the nuclear compensation system is to provide third
parties with assurance as well as to promote cooperation between theprivate sector and the government to give nuclear business a boost.
However, this proposal has deviated from what had o riginally been
conceptualized because it seems to say that we will be allowed to makemoney with nuclear power but if we make a mistake we will be penalized.
We may arrive at points where we have to make compr omises in ournegotiations at the working level with the Ministry of Finance, butdecisions must be made based on

the general idea of promoting

Hoshino, Eiichi. Genshiryoku songai baishou ni kansuru hutatu no jouyakuan (Two
proposals for international agreements on nuclear compensation). Jurist No236 (Oct. 15,
1961) P48
95

Third meeting of the Japan Atomic Energy Commission advisory committee on March
17, 1960, available atwww.aec.go.jp/jicst/NC/about/ugoki/geppou/V05/N04/196004V05N04.html
96

Fourth meeting of the Japan Atomic Energy Commission ad visory committee on June2, 1960, available atwww.aec.go.jp/jicst/NC/about/ugoki/geppou/V05/N07/196006V05N07.html
9747

technological development.”“I do not intend to say that we must follow the footsteps of other countries,
but given examples from overseas, I just find it problematic that we should
have

to

fall

behind

them.

I

would

hope

that

the

ministers

andcommissioners of the JAEC would thoroughly consider whether this isreally the right choice to make in light of promoting nuclear business.”Katsuji Fukuda, Managing Director, JAPC (Third meeting of the JAEC
advisory committee)“The Government is required to be involved [in the U.K., the U.S. andGermany], while in Japan the principle and exception are reversed, basedon the notion that the Government will support nucl ear business but does
not need to be as involved. Compared with the outline proposed in pastexpert committee meetings and industrial meetings, I feel that we havetaken a step backward on this point. Given the Government’s lack ofenthusiasm towards nuclear business, I am worried whether this is theright stance for it to take. I am also concerned about how to address theissue of electricity tariffs increasing when insurance is used to cover forcontingent damages.”“I would hope that in principle, the Government is to assume suchcompensation payments.”“I am also dissatisfied with the idea that operators bear unlimited liability
when strict and exclusive liability is already imposed upon them.”

Ryokichi Sagane, Advisor, JAPC (Fourth meeting of t he JAEC advisorycommittee)(In response to the explanation by Inoue, Manager of the Policy Division
under the Nuclear Energy Bureau, Ministry of International Trade andIndustry, that the bill had been submitted to the National Diet in May andwas under deliberation) “Does that mean that it has now left the hands of
the JAEC and cannot be revised?”(In response to Chairman Sakae Wagatsuma’s question on which points
he felt were setbacks compared to the recommendations made by theExpert Committee) “To start with, some examples would be: 1) thedefinition of “nuclear damage” is unclear from a scientist’s perspective
and may arouse issues on whether certain damage constitutes nuclear48

damage when an accident actually does occur; and 2) the wording in
Section 16 remains inexplicit.”

However, as Hoshino (1972) points out 98 , it should also be
understood that operators had “jumped” at the opportunity of engaging
in nuclear business and voluntarily consented to unlimited liability inorder to increase acceptance among local residents of potential nuclear
plant sites. The following is a quote of the relevant passage:“On the other hand, Japan’s nuclear industry embra ced inherent problems.
To begin with, the Japanese nuclear industry has developed in a different
context compared with that in other countries. In all countries, with the
exception of the U.S., where private companies are very strong, privatecompanies are unlikely to so easily jump at a business that entails risk ofaccident and is problematic in terms of short -term profits. Therefore,
Governments engage in the initial development of such a business from along-term energy policy perspective and gradually brings it down to thecorporate level. Private companies are reluctant about becoming involved insuch a business not only because of their viability but also because ofconcerns related to compensation for damages; and hence, compensation laws
are formulated based on the concept that the Government will provide
adequate support. However, in Japan, companies have raced to seize thenuclear industry as if to jump on to a bus and have found themselves inintense competition with foreign companies. Under such circumstances,
Japanese companies cannot enjoy the internationally prevailing logic thatcompanies are asked to assume the risks entailed for the sake of long-term
national policy and in return will not have to concern themselves about thelargest issue of damage compensation. Therefore, companies have no grounds
to object to opinions that such businesses “sh ould be addressed at acompany’s own risk if it was so interested in becoming involved.”

Hoshino, Eiichi. Symposium: Genshiryoku saigai hoshou (Symposium: Compensationin nuclear disaster). Minporonshuu dai3kan (Civil law pape rs Vol. 3) , P436; Hoshino,
Eiichi. Nihon no genshiryoku songai baishou seido (Nuclear compensation system inJapan). Nichidoku hikaku genshiryokuhou: dai 1 kai nichidoku genshiryokuhou
98

symposium: (Japan-Germany comparative nuclear energy law: the first Japan -Germany
nuclear energy law symposium)

49It should be noted that the author has received comments fromthose who are familiar with the context in which the law was legislated
that the Professor emeritus Hoshino has captured the situation well.
The retrogressive approach regarding Government involvement
was deemed problematic not only among nuclear operators but also in
the National Diet. For example, in the thirteenth meeting of thePromotion of Science and Technology & Innovation Special Committeeof the 38th Session of the Diet 99 , in response to the question, “Does the
purpose of the bill include the idea that damages exceeding the amountcovered by private insurance should be compensated by taking
necessary measures, including legislation that explicitly stipulates theGovernment’s liability for damages?” Yasuhiro Nakasone, then Ministerof State stated, “[…] It should not be left solely to operators, andtherefore the idea is that for damages exceeding the private insurance
amount,third

parties

shallbeprotected

through

Government

involvement based on the indemnity agreement. Also, when damages
exceed 5 billion yen, the Government is to take action and protect
victims within the authority granted by the D iet. In this sense, I believethat the idea is that private companies and the national government
should cooperate in implementing measures for third parties.” Further
questioned, he explained in detail, “In other words, when damages
exceed 5 billion yen and an operator has the financial sources tocompensate victims on its own, the operator shall assume the portion
which it is objectively capable of paying. However, third parties should
naturally be compensated for damages exceeding such amounts and up
to the damage amount objectively acknowledged , and we believe that
this portion would be compensated in full by the government.”(Emphasis added by the author.) Minister Nakasone went on to say ,“[Article 16, paragraph 1 of the Nuclear Compensation Act ] stipulates
that the Government ‘shall give’ which is not as strong as ‘is required
to give’ but is intended to mean that the Government ‘will’ do so.
Therefore, given such clear indication of the Government’ s will tocompensate what cannot be covered by the nuclear operator, the99

kokkai.ndl.go.jp/SENTAKU/syugiin/034/0068/03405180068013a.html

50

provision can be literally read to mean that there will not be anyloopholes.”Deliberation on the nuclear compensation bill was procrastinatedfor continued discussion as national security talks led to disarray atthe 34th Diet session. The bill was later withdrawn and resubmitted tothe 38th Diet session in 1961, the following year, accompanied by thebill on Indemnity Agreements for Compensation for Nuclear Damage
regarding government indemnity agreements 100 .
The comment made by Mikio Mizuta, Minister of Finance, isrepresentative of the stance taken by the Ministry of Finance, which
had opposed the recommendation made by the Expert Committee on
Nuclear Disaster Compensation, but simultaneously carefully avoids
makingany

clear

statements.

Questioned

about

the

detailsofgovernment aid at a meeting of the House of Representative’s Promotionof Science and Technology & Innovation Special Committee of the 38th
Session of the Diet, Finance Minister Mizuta replied, “As many different
situations can be expected, there are many different potential ways ofproviding aid depending on the contents and form of damage as well as
many other elements, but we do not yet have a clear idea.” As ked again
about the Government’s determination as well as what would constitute
Government aid, he referred only to the fact that the issue would be left
up to the Diet’s judgment. “[…] We will do what the Government has
the authority to do, and when the Government does not have authority,
it would mean that we would have to take budgetary measures approvedby the Diet.” When asked, “Why did the Ministry of Finance weaken thebill [on Nuclear Compensation: complemented by the author] when wecannot expect nuclear business to develop unless the frameworkprovides for the Government to take the initiative in assuming
compensation payments?” he replied in one lengthy sentence that
obscured the main point. His comment is provided below:“It is formally best to primarily compensate damage by utilizing
insurance schemes provided by private insurance companies and let
the Government be responsible for what cannot be covered by such

100

Nuclear Energy Bureau, Science and Technology Agency eds. Genshiryoku songai

baishou seido (Nuclear compensation system) (1962) P23

51

means, and that is why we have formally adopted this approach, butwhen it comes to utilizing private insurance, what has been rei nsured
with a foreign insurance company, which would naturally have certain
limitations for what it can insure, will be limited to that given scope,and if matters extend beyond that scope, then it would mean that the
expected disaster is not so small in scale, in which case, viewing how
the current Diet works, it would not be left as is, and so the Government
would, apart from this, implement a variety of measures, so formallyspeaking, the insurance scheme would be primarily utilized and mainly
using this, what exceeds this amount – looking at overseas examples,
there have not been a single major disaster, and although there havebeen a few small disasters which have been recovered solely by the
nuclear operator, there have been none which required payment frominsurance companies 101 , and based on these circumstances, I still
believe that we should formally begin from here.” Mizuta was intent on
not explicitly referring to Government involvement, which could even
imply that there had not been consensus among Cabinet members.
Passed as law in this context, the Nuclear Compensation Act
comprised a framework in which nuclear operators assumed unlimited
liability and the Government supported compensation payments. Th ereason is implied in the statement made by sworn witness, Sakae
Wagatsuma said at a meeting of the Houseof Representative’s

Promotion of Science and Technology & Innovation Spec ial Committeeof the 38th Session of the Diet held on April 26, 1961. He said, ”I haveheard that in principle, the Government will compensate for all
damages, but it was later decided that it would not be formally set out
that compensation payments

would be

made

using

Government

expenditures, because of opposition mainly coming from the Ministryof Finance.” Thus it is presumable that there was strong resistancewithin the government – in the Ministry of Finance – against limiting
the liability of operators and legally imposing liability upon the
Government. It was also debated that setting a ceiling on compensation
payments

fornucleardamagecould

potentiallyconstitutean

Takemori, Shunpei. Kokusaku minei no wana (The trap of private businesses led bynational policy) (Nihon keizai shimbun shuppansh a, 2011) P194101

52

infringementofpropertyrights,

and

thus

a

breachoftheConstitution 102 . This is a natural contention under the circumstancesthat infringement of victims’ property rights cannot be avoided bycertainmeasuresincludingGovernment

involvement.

Asimilarargument was presented in court when the constitutionality of limiting
the liability of nuclear operators to a certain amount was challenged in
the U.S. (Duke Power Co. v. Carolina Env. Study Group, 438U.S.59(1978)). The court ruled that such measures were constitutional. (Thiscase will be discussed in detail in Part I, Chapt er 5.)
In a symposium on nuclear disaster compensation held after theenactment of the law, Professor Sakae Wagatsuma criticized it, sayingthat the adopted law and the report stood on completely different
concepts. “The peaceful use of nuclear power is an unprecedented
operation in history. Its benefits may be large, but at the same time, it
entails risks of grave damage in case of an accident. Therefore, if thegovernment acknowledges the need to accelerate its benefits anddecides to go on with it, it should be based on the premise that the
government will make sure that not a single victim will be compelled tomeekly accept damages.” That having been said, he stated that the
government, “disguised in the name of operator support and protection,
will only indecisively provide ‘aid’ (Section 16). In practice, victims will
be protected by the wisdom of the government and the Diet.” 103 The late
Akio Takeuchi, then associate professor and later professor emeritus at
the University of Tokyo, pointed out that it would be an ideal framework
if, as stipulated in the law, it promised to provide unlimited aid as isrequired to compensate for the damages, but if the reason that thelegislation’s deviation from the concept of the report was a reflection of
judgment within the government that the government lacked thefinancial capacity to accept it, it would imply “regression” in terms ofgovernment involvement, and would therefore put operators in anxiety.
Furthermore, he stated that “when the Promotion of Science andWagatsuma, Sakae, Takeo Suzuki, Ichiro Kato, Ryo Inoue, Katsuji Fukuda, Seisho
Horii, Shozo Nagasaki, Keiichiro Sugimura . Zadankai: genshiryoku saigai hosho u wo
megutte (Round-table: compensation for nuclear damages), Jurist No.236, October 15,
1961
102

Wagatsuma, Sakae. Genshiryoku nihou no kousou to mondaiten (The framework andflaws of the two nuclear power-related laws), Jurist No.236
10353

Technology

andRepresentatives

Innovation
adoptsaSpecialCommittee

of

the

House

peculiar

resolution

accompanying

oftheenactment of the law that reads, ‘in order to ensure that victims will bethoroughly protected to the last person, the government should provide
adequate aid, and simultaneously, in accordance with the purpose ofprotecting victims, provide guidance […] to operato rs […] on reserving
earnings”, it is doubtful whether the government and Diet have any
intention to provide support for operators without fail.” 104
In conclusion, as Professor Sakae Wagatsum a said as sworn
witness at a meeting of the Promotion of Science and Technology andInnovation Special Committee of the House of Representatives of the
38th Session of the Diet, despite concerns that the law in practicewould be dependent on the wisdom of the Government and Diet, it wasunderstood to be “no different from indemnification, in effect,” 105 to theextent that wisdom prevailed. Hence, the legal structure of the act
underwent no changes until the TEPCO Fukushima accident. As
aforementioned in the subsection about the historical context ofamendments, limited liability of nuclear operators was deliberated in
discussions for only one out of the five amendments made to the Act.
iii) Provision for exclusion of liability and Government “measures” incase of exclusion of liability
As aforementioned, the Nuclear Compensation Act is considered
to be a set of special provisions to the law of torts in the Civil Code.
Normally, tort liability under the Civil Code is acknowledged only when
the four requirements, namely, the illegality of the action (infringementof a right), intention or negligence on the part of the victimizer (failure
to observe duty of care and duty to avoid risk), occurrence of damage,and adequate causation between the action and damage, are satisfied.
However, in order to facilitate the procedures for claiming damages and

Takeuchi, Akio. Genshiryoku songai nihou no gaiyou (Outline of Two Laws Concerning
Nuclear Damage), Jurist No236
104

Genshiryoku songai no baishou oyobi genshiryoku songai baishou hoshou keiyaku ni
kansuru houritsu, seitei (Compensation for nuclear damages and enactment of Act on
Indemnity Agreements for Compensation for Nuclear Damage). Genshiryoku Iinka iGeppou, 1961. Vol.6, No.6, available at:www.aec.go.jp/jicst/NC/about/ugoki/geppou/V06/N06/19610616V06N06.html
10554

to provide sufficient protection for victims, the Nuclear Compensation
Act stipulates, as in similar laws in other countries, that nuclear
operators which have set up reactors bear strict liability (Section 3).
However, as it would be too severe to hold operators liable fordamages at all times under all circumstances, many international
agreements

andnuclearcompensation

schemes

in

many

other

countries provide for exclusions. Japan’s Nuclear Compensation Act
stipulates, “except in the case where the damage is caused by a n
exceptionally grave natural disaster or by an insurrection.” Somecountries such as Germany and Switzerland do not allow for any
exclusions whatsoever, while others such as the U.S. and the U.K. grant
exclusion in the event of war or armed conflict. Japan’s exceptionalclause is found in Section 3, paragraph 1. Ichiro Kato, professor at the
University of Tokyo explains that “Japan coul d have taken the approachof leaving room for no exclusions, but given high concerns forearthquakes in Japan, it would be illogical to have operators bear
liability for everything, as we can never be careful enough in siting
reactors when all of Japan, so to speak, sits on a seismic zone.” 106 The
scope of events which constitute exclusion does not automaticallyrelate to the heaviness or lightness of victim protection and should beconsidered multi-dimensionally, in the context of its relationship withinsurance and particularly Government compensation 107 . However, theambiguity of the definition of “an exceptionally grave natural disaster”
led to intensive discussion regarding the criteria for acknowledging
such events.
Asked to express the magnitude of such disasters in terms of anearthquake at the 9th meeting of the Promotion of Science andTechnology & Innovation Special Committee of the 38th Session of theDiet 108 , Bunkichi Yuzuriha, Office of the Prime Minister clerk (Director
Sakae Wagatsuma, Takeo Suzuki, Ichiro Kato, Ryo Inoue, Katsuji Fukuda, Seisho
Horii, Shozo Nagasaki, Keiichiro Sugimura . Zadankai: genshiryoku saigai hosho womegutte (Round-table: compensation for nuclear damages), Jurist No.236, October 15,
1961
106

Symposium: Genshiryoku saigai hoshou (Symposium: Compensation in nuclear
disaster. Hoshino, Eiichi. Minji sekinin no mondai (Issues of civil liabi lity). Shiho Vol.22
107

Proceedings of the ninth meeting of the Promotion of Science and Technology &Innovation Special Committee of the 38th session of the Diet, available at:
kokkai.ndl.go.jp/SENTAKU/syugiin/038/0068/03804120068009a.html
10855

General, Nuclear Energy Bureau, Science and Technology Agency)
replied, “I would say, earthquakes twice or triple the size of the Great
Kanto Earthquake, or even larger than that. That is how we haveinterpreted it.” In response to a question about who would make that
judgment, he answered that the Science and Technology Agency, as
supervising agency, would judge whether the exceptional clause could
be applied to an event, with the involvement of the JAEC and thatdecisions could be fought in court should there be any objections. The
Government declared at a significantly early time after the Great East
Japan Earthquake that the exceptional clause would not apply , and if
it were to follow Yuzuriha’s

explanation, the current supervising

government authority, Ministry of Education, Culture, Sports, Scienceand Technology (MEXT) should present the grounds on which it hadarrived at that conclusion. However, Yoshiaki Takagi, Minister of
Education, Culture, Sports, Science and Technology only provided theconclusion and failed to reveal the process which led to such
judgment 109 .
At the 14th meeting of the Promotion of Science and Technology &Innovation Special Committee 38th Session of the Diet, Professor Sakae
Wagatsuma referred to events to which exclusion of liability isapplicable as “extraordinary force majeure ," which was unlikely tooccur. In response to opinions that if such an event was unlikely tooccur, there should be no need to insert an exceptional clause,
Wagatsuma said that it was needed in order to counterbalance theimposing of unlimited liability upon private companies and “it wouldn’t
make

sense

to

hold

them

liableforsomethingbeyondhuman

prediction.” 110 Other interpretations of “an exceptionally grave natural

Asked at a mee ting of the Upper House’s Committee on Education, Culture, Sports,
Science and Technology of the 177th Session of the Diet, the view held by MEXT, thesupervising authority of the nuclear compensation scheme), Takagi answered that “[thesituation assumed in the exceptional clause of Section 3, paragraph 1,] is described to be
one of a large magnitude, unexpected by humans and beyond all imagination. It is myunderstanding that nuclear operators shall not be granted exclusion from liability unless
it is too severe to hold such nuclear operators liable.” That having been said, he concluded,“Based on what I have said, we have judged that the main clause of Section 3, paragraph
1, instead of its exceptional clause should be applied.”109

Fourteenth meeting of the Promotion of Science and Technology & Innovation Special
Committee of the 38th session of the Diet, available at:
kokkai.ndl.go.jp/SENTAKU/syugiin/038/0068/03804260068014a.html
11056

disasters” are provided in Part II, Chapter 2, subsection 1 -(4) which
discusses confusion regarding operator liability.
There has also been discussion on whether to provide the events
required for exclusion from liability in a detailed list. In a symposium
on nuclear disaster compensation, Eiichi Hoshino, an associate
professor at the University of Tokyo indicated that the advantages ofproviding more detailed examples of events would be th at judgment
would be facilitated, conflict could be avoided to some extent in theevent of an accident, and as a result, compensation payment s could be
made

more

promptly,

but

also

made

note

of

the

scientificallytechnological and legally technical obstacl es in doing so. The phrase“exceptionally grave natural disasters“ of the exceptional clause of
Section 3, paragraph 1 of the Nuclear Compensation Law wasformulated based on then OEEC’s wording, “a grave natural disaster ofan exceptional character” and the IAEA proposal of “unforeseeable andunavoidable force majeure.” However, it should be noted that the “a nexceptionally grave natural disaster” as worded in the Japanese Act isa significant deviation from the original phrase. If the provision was tobe true to the original phrase, it is the “character” of the natural
disaster that humans have never before experienced that matters, andtherefore,

earthquakes

andtsunamis,

which

we

have

alreadyexperienced in the past would not apply, regardless of their magnitude.
Although it is unclear whether the Japanese wording was a result of
misinterpretation, or as indicated by Ichiro Kato, professor of the
University of Tokyo, based on the recognition that it would be illogicalto exclude all earthquakes, Japan adopted the phrase “exceptionallygrave”; thereby providing for judgment on the graveness of an event,instead of its character, in order to acknowledge whether the exclusionof liability could be applied.
In terms of how victims are to be compensated in the event an
operator is excluded of liability under the exceptional clause of Section
3, paragraph 1, the Nuclear Compensation Act, Section 17 provides that“the Government shall take the necessary measures to relieve victims
andtoprevent

thedamagefromspreading.”Hereagain,

theGovernment is not a direct indemnitor but shall only take measures
57

such as those taken under general disaster relief laws 111 . Sakae
Wagatsuma, Chairman of the Nuclear Disaster Compensation criticize dthe adopted law in Genshiryoku nihou no kousou to mondaiten (Theframework and flaws of the two nuclear power -related laws), saying thatthe “Government measures are greatly indifferent” compared to limiting
the operators’ liability and letting the Government provide aid whendamages exceed the financial security amount of 5 billion yen , “because,
the adopted law, under which it is unthinkable that the Government
would take any responsibility for what nuclear operators are not liable
for, and the recommendations stand on fundamentally controversial
concepts.”

Sakae Wagatsuma, Genshiryoku nihou no kousou to mondaiten (The framework an dflaws of the two nuclear power-related laws), Jurist No.236
111

58

Chapter 5
Legal frameworks in other countries andinternational agreements
1. The U.S. Price Anderson Act 112
As aforementioned in Chapter 2, given the former U.S.S.R.’s
declaration of its possession of nuclear energy, the U.S. drasticallychangedits

nuclearpolicyandthus

concluded

agreementsoncooperation in nuclear research with other countries and began toengage the private sector in promoting the peaceful use o f nuclear
energy. However, as “the actual level of maturity and cost -effectivenessof nuclear power generation technologies did not promise corporate
profits” 113 at the time, companies that were invited to join the federal
government’s nuclear development plan contended that they could notparticipate in the plan unless the government took a clear stance ontechnology development and “public liability” 114 in the event of an
accident. Based on such contentions, in 1957, the U.S. government
enacted the Price-Anderson Act, which stipulates its system for nuclear
damage compensation, as a partial amendment to the Atomic Energy
Act. The Price-Anderson Act provided for government compensation in
the event damages exceeded 60 million dollars covered by private
liability insurance. With the incorporation of a mutual assistancescheme among operators later in 1975, the Act has been greatlychanged from its original form in terms of the character of its liability
regime and its method of collecting monies for compe nsation.
The Price-Anderson Act was enacted for the two main purposes of:i) eliminating the fears held by nuclear operators that if an accident
should

occur

they

would

potentiallybeliableforenormous

Sec. 170 of the Atomic Energy Act of 1954 UU.S.C.2210 Section 170 can be found in
Volume 1.Page1-113 pbadupws.nrc.gov/docs/ML1327/ML13274A489.pdf
112

113

Shimoyama. Mirai shakai to hou (Future soci ety and law), P454

Different Japanese translations of the term “public liability” have been used in
Shimoyama. Mirai shakai to hou (Future society and law), P455, Utatsu. Gendai
genshiryokuhou no tenkai to houriron dai 2 han (The development and legal theory ofmodern nuclear energy law, second edition) , P38 and Japan Energy Law Institute.
Genshiryoku songai baishou housei shuyou kadai kentoukai houkokusho (Report of the
Panel on Major Issues Regarding a Legal Framework for Nuclear Compensation) (May2005). This report has been written in line with the terminology used by Shimoyama.
114

59

compensation payments, and thus

encourage their participation in

nuclear research and development as well as business; and ii) securing
financial protection to ensure adequate compensation to victimized
parties. This approach of including both the promotion of soundbusiness by providing a certain level of support for operators andguaranteeing the recovery of damages suffered by the victims of a
nuclear disaster are common among nuclear compensation scheme saround the world, including that of Japan.
The current Price-Anderson Act comprises a liability insurance(Tier1) and an ex-post-levy-collection-based mutual assistanceprogram (Tier 2).
When it was first enacted in 1957, the Price -Anderson Act
provided that damages which exceeded the amounts covered by theliability

insurance

(Tier

1)

would

be

addressedbygovernment

compensation. It was later amended in response to calls for more
extensive public protection and claims from mainly the coal industry
that the government was overprotective of the nuclear industry, toinclude a second tier, or a mutual assistance program. 115
Currently in the U.S., 375 million dollars in liability insurance
and 12.22 billion (11.19 dollars×1.05 116 ×104 reactors) under themutual assistance program collectively constitute financial protection
amounting to an equivalent of 1.2 trillion yen . If nuclear damages
should exceed this amount:1) The Nuclear Regulatory Commission (NRC) or Department of Energy(DOE) (the supervising authority) shall make a survey of the causes
and extent of the damage and submit a report setting forth theresults of such survey to the Congress, to the Representatives of theaffected districts, to the Senators of the affected States, to theparties involved, and to the courts. (Section 170 (i)(1))
2) Not later than 90 days after any determination by a court that the
public liability from a single nuclear incident may exceed theapplicable amount of aggregate public liability the President shallUtatsu, Noboru. Gendai genshiryokuhou no tenkai to houriron dai 2 han (Thedevelopment and legal theory of modern nuclear energy law, second edition)(Nihonhyouronsha, 2012 ) P39
115

116

Includes legal costs equivalent to 5% of surcharge (Section 170 e(1)(A))

60

submit to the Congress

recommendations for additional sources offunds to pay claims exceeding the applicable amount of aggregate
public liability and recommendations that funds be allocated or set
aside for the payment of claims that may arise as a result of latent
injuries that may not be discovered until a later date (Section 170(i)(2))
3) The abovementioned recommendations for additional sources offunds to pay claims exceeding the applicable amount of aggregate
public liability shall consider a broad range of possible sources offunds (including possible revenue measures on the sector of theeconomy). (Section 170 (i)(2)(B))
The first and second piers set limits to liabilities and thus ensures
the foreseeability of nuclear business, while leaving room for Congress
to make judgments depending on the size of damage, as the magnitudeof nuclear damages are “only to be known when they occur.” It was also
noted during our Committee meetings that not only the U.S. but manyother countries have adopted similar schemes.

Figure 6 Transition of the structure of the Price-Anderson
Act 117

117

Provided by Noboru Utatsu

61

Item

Description

1

Obligation offinancialprotection

2

Financialprotection
amounts

3

Exclusive
financialliability andauthority of
NRC toconcludeindemnity
contracts

4-Limitation
on public
liability of
nuclearoperators-Measuresfor damages
in excess of
the amountof aggregate
publicliability

5

Use ofservices ofprivateinsurers
Compensation plans

6

Provi
sion
The NRC in the exercise of its licensing and regulatory (a)authority and responsibility shall require the licensee(nuclear operator) in accordance with subsection (b) of thissection to cover public liability claims in order to implement
public liability.
The licensee shall maintain, as a requirement of operation, (b)the maximum amount of liability insurance available fromprivatesources(nucleardamageliability
insurance
underwritten by U.S. nuclear insurance pool (ANI: American
Nuclear Insurers) wi th maximum insurance coverage of 375
million dollars) as primary financial protection, and in
addition, a prorated share of up to 111.9 million dollars(maximum of 17.5 million dollars per reactor per year) as
standard retrospective premium under the mutual assistancearrangement (SFP: second financial protection) (*). The
licensee shall submit to the NRC evidence of compliance.
The nuclear operator shall bear the responsibility of (c)maintaining the measures to cover public liability claims toensure indemnification from public liability arising from
nuclear incidents and the NRC shall have the authority toconclude contracts of indemnity with nuclear operators up to
December 31, 2025. The Price -Anderson Act does not include
provisions on exclusive liability as nuclear compensation
laws of other countries do, but concentrates liability tonuclear operators in effect by adopting an omnibus approach.
1)The aggregate public liability for a single nuclear incident (e)(1)(of persons indemnified shall not exceed the amounts A)
obligated under subsection (b) (includes legal costs (o)(1)(equivalent to 5% of surcharge)
E)2) In the event of a nuclear incident involving damages in (e)(2)excess of the amount of aggregate public liability (e)(3)abovementioned, the Congress will thoroughly review
compensation plan formulated in accordance with subsection(i) of this section and will determine the necessary actions(including approval of appropriate compensation plans andappropriation of funds) to provide full and prompt
compensation to the public for all public liabili ty claims.
3) No provision of paragraph (1) may be construed to preclude
the Congress from enacting a revenue measure, (applicable tolicensees of the Commission) required to fund any action
undertaken pursuant to 2)
In administering the claims for damages from victimized (g)parties, the facilities and services of private insuranceorganizations shall be used to the maximum extent
practicable.
-After any nuclear incident involving damages that are likely (i)(1)
to exceed the applicable amount of aggregate public liability (i)(2)
the NRC or DOE (as appropriate) shall make a survey of the (i)(2)(
causes and extent of damage and expeditiously submit a B)
report setting forth the resu lts of such survey to theCongress, to the Representatives of the affected districts, to
the Senators of the affected States, to the parties involved,
and to the courts.
-Not later than 90 days after any determination by a courtthat the public liability f rom a single nuclear incident may
exceed the applicable amount of aggregate public liability, thePresident shall submit to the Congress, recommendations for
additional sources of funds to pay claims exceeding theapplicable amount of aggregate public liab ility and allocationof funds for the payment of claims that may arise as a resultof latent injuries that may not be discovered until a later
date.
-Abovementioned recommendations for additional sources offunds to pay claims exceeding the applicable amou nt of
aggregate public liability shall consider a broad range ofpossible sources of funds (including possible revenue
measures on the sector of the economy).

Table 7(1) Provisions of the Price-Anderson Act 118

118

Provided by Noboru Utatsu

62

Item
7
Principle ofliability

8

Statute oflimitation in
the event ofENO

9Jurisdiction

10

Plan for
distributionof funds andlegal costs

11

Precautionary
evacuation
costs

12

Punitivedamages

Description-Waiver of defenses are applicable only in an
extraordinary nuclear occurrence (ENO)-In the event of ENO, the NRC and DOE may
incorporate provisions in indemnity agreements,and may also require provisions to be incorporated
in insurance policies or contracts, which waive or
withdraw any defense (contributory negligence)
granted the claimant of indemnities for damages
caused by torts under state laws.
-Before amendment in 1988, requirement for
waiver of defense was that for the suit to beinstituted within three years from the date on
which the claimant first knew of his injury or
damage, within 20 years of the nuclear accident.
-With the deletion of the statute of limitation in
the 1988 amendment, the provision has become
more stringent for licensees.
-State laws apply to non-ENO accidents.
Federal district court in district where
nuclear incident takes place (all nuclear
accidents)-Before the 1988 amendment, the United States
district court had jurisdiction for ENO and state
courts, for other nuclear incidents.
-Since the Act of 1988, the United States district
court in the district where the nuclear incident
takes place shall have original jurisdiction for all
nuclear incidents, not limited to ENO.

Plan for distribution of funds
Whenever the court determines upon the petitionof any indemnitor or other interested person thatpublic liability from a single nuclear incident may
exceed the limit of liability under the applicable
limit of liability:(1) Total payments made by or for all indemnitors
as a result of such nuclear incident shall not
exceed 15 per centum of such limit of liability
without the prior approval of such court;(2) The payments in excess of 15 per centum ofsuch limit of liability shall be executed inaccordance with a plan of distribution which has
been approved by the court
Legal costs(E) If the sum of public liability claims and legal
costs authorized as reasonable and appropriate
exceeds the maximum amount of financial
protection, any licensee shall be charged such an
amount, but in no case more than 5 percent of the
maximum amount of standard deferred premium.
-Legally determined a public liability which a
nuclear operator shall bear in 1988 amendment-Interpretation in terms of nuclear liability
insurance policy is as follows:-In the event the nuclear operator is an electriccompany licensed by the NRC, it shall be liable fordamage due to loss of use during removal orbanned use as a result of imminent danger ofradioactive contamination which shall be deemed
property damage for both liability insurance and
SFP-DOE contractors shall be indemnified if
definition under Price -Anderson Act is applicable

Provision(n)(1)

No court may award punitive damages in any
action with respect to a nuclear incident or
precautionary evacuation against a DOE
contractor-In states that do not ban awarding of punitive
damages, courts may award public liability against
nuclear operators licensed by the NRC pursuant tostate laws
In re TMI Metro. Edison Co., 67 F.3d 1119(3dCir.1995)(s)Table 7(2) Provisions of the Price-Anderson Act
63(n)(1)(n)(2)

7
F.3d
119

(q)

Although it has been explicitly stipulat ed that when damages are
in excess of the applicable amount of aggregate public liability,
payment could potentially be demanded of other concerned parties aswell as operators, who are, needless to say, required toshoulderadditional monies, there is no fixed interpretation of what is assumed
by a “broad range of possible sources of funds .” This does, however,present an undeniable

possibility that operators will be demanded

additional payments, therefore implying that the Price -Anderson Act,
which has generally been believed to take a limited liability approach ,may not actually do so. Nevertheless, it is a well-designed scheme which,unlike Japan’s unlimited liability approach , offers operators and otherconcerned parties a certain degree of foreseeability by providing theapplicable financial protection amount as an initial ceiling.
A

close

observation

of

the

JCO

accident

and

the

TEPCO

Fukushima accident reveals that different magnitudes of nuclear
disaster should be envisaged and that there should be room forflexibility

inaddressing

occurrences

once

they

happen.

This

consequently places the predictability of costs on the part o f operatorsand the flexibility of the compensation scheme in a trade -off. However,
the attribution of liability should be determined by taking into
consideration all factors, including corporate, industrial, economic andpolitical circumstances, based on the fundamental principle of notcompelling helpless victims to meekly accept damages. From thisperspective, nuclear damage is a matter of political judgment more than
it is a legal issue 119 .
Moreover, the Price-Anderson Act contains explicit provisions on
burden-sharing among the President, Congress, the courts, the N RC,
etc.

and

the

relevant

procedures

to

be

taken

when

damagecompensation amounts are likely to surpass the pooled amount. The
President must report in detail to Congress; i) how the national budget

Lawmaker Takeo Tanaka and sworn witness Sakae Wagatsuma appropriately engaged
in exchange on the very subject in Proc eedings of the fourteenth meeting of the Promotionof Science and Technology & Innovation Special Committee of the 38th Session of the Diet,
available at:
kokkai.ndl.go.jp/SENTAKU/syugiin/038/0068/03804260068014a.html
11964

will be affected by providing indemnification for victims; and ii) on
additional financial protection. When damage compensation amounts
exceed the limit of liability under the applicable limit of liability,compensation payments to victimized partie s shall not exceed 15% ofsuch limits of liability without prior court approval. With explicit roles
determined for each concerned party, the compensation plan anddistribution plan for the allocation of available funds formulated basedon these roles will provide the general public with an idea of the total
amount of damages. This can also prevent victims with a stronger voicefrom being served first. The call for utilizing private insurance company
services and functions to the maximum extent possible in dealing withliability claims should serve as good reference for Japan. As of April 30,
2013, TEPCO has allocated 10,000 employees to address liability
claims 120 .
Although our experience with the TEPCO Fukushima accident
brings us

to wonder how much in detail we can actually foresee thedamage within 90 days from the occurrence of an accident, the Price Anderson Act encompasses many provisions to be drawn on. Our
Committee held particularly intense discussions on the significance ofincreasing compensation payments through a mutual

assistancearrangement, or the second tier. These discussions will be introduced
in Part II, Chapter 3.
An interview with the U.S. Nuclear Energ y Institute (NEI) 121
conducted by Prof. Akio Morishima, project leader and Sumiko
Takeuchi, Deputy Project Leader in April 2013 revealed that the mutual
assistance arrangement has been more effective than what hadoriginally expected of the scheme when it was first introduced in the1975 amendment (including responding toaforementioned calls forincreased public protection and claims that the nuclear industry wasover-protected. )The mutual assistance arrangement implied that once an operator
causes an accident, all other operators are at risk. The Institute of

TEPCO website: Status of compensa tion, removal of contamination and promotion ofrevitalization at the Fuk ushima Revitalization Headquarters (April 30, 2013), available
at: www.tepco.co.jp/fukushima_hq/images/k130430_01 -j.pdf
120

121

NEI www.nei.org

65

Nuclear Power Operations (INPO) 122 which was established after theThree Mile Island accident, conducts an extremely strict peer review
once every two years, with the participation of the CEOs of companies
in rating all reactors. As insurance premiums are determined based onthese ratings, operators strive to maintain a high safety level to earn
good ratings and this is enhanced by the presence of corporate leaders.
Furthermore, cooperation with government authorities is also beingsought under a program funded by the DOE by contract and close ties
with the NRC. This is useful information for Japan from the perspectiveof fostering appropriate relationships among operators and regulatory
authorities 123 . As Shimoyama (1976) points out, the amended Price Anderson Act draws out not only compensation measures applicable inan accident but also a stronger role for the Advisory Committee on
Reactor Safeguards (ACRS) and a revised licensing system for nuclear
power plants, including an enhanced safety inspection system; andhence, it has valuable implications for Japan in establishing an
integrated risk management system for nuclear operations, linking thecompensation

schemewithsafetyregulations ,nucleardisaster

response, business frameworks (regulation) and other policy programs.

---Column--The NEI provides policy proposals on the beneficial use of nuclear
technology and energy as well as conducting outreach activities andpublichearings.

It

has

gainedwide

publicrecognition

asanorganization communicating fair information by a wide range of experts
from companies engaged in nuclear power generation, plant design,
engineering, fuel supply, and services, radiology companies, as wells asuniversities, research institutes and labor unions . The Clean Safe
Energy Coalition (CASE), a campaign launched by the NEI seven years

122

www.rist.or.jp/atomica/data/dat_detail.php? Title_Key=13-01-03-10

INPO’s role is elaborated in: Suzuki Tatsujiro, Hideaki Shiroyama, Setsuo Takei.
Genshiryoku anzen kisei ni okeru beikoku sangyoukai no jishu kisei taisei to minkan
kikan no yakuwari to sono unyou keiken: nihon ni totte no shisa (Vo luntary nuclear safety
regulations in U.S. industry and the role and practice of private organizations:
implications for Japan
www.jstage.jst.go.jp/article/sociotechnica/3/0/3_0_11/_pdf ;shakai-gijutsu.org/vol3/3_11.pdf
In Japan, the Japan Nuclear Safe ty Institute bears a similar role: www.genanshin.jp
123

66

ago, has developed into an organization with a membership of 3000
people from economic, academic and political circles led by co-chairs
Patrick Moore, founder of environmental organization Greenpeace, andChristine Todd Whitman, former governor of New Jersey. NEI has
actively provided nuclear information for thirty years to redeem thepublic confidence and understanding towards nuclear technology once
lost in the Three Miles Island accident. In our interview with NEI , welearned the significance of enlightening the public on the uniquepatterns of expert thinking and the definition of jargon in simple words
as well as the positive effect of communicating at least what we have“noticed” on occasions of nuclear trouble in leading the public toappropriate information pathways. We gained a wealth of useful
information for both the Government and operators to consider futurecommunication activities in Japan, where public trust for nuclear
technology has been impaired as a result of the TEPCO Fukushima
accident.

------------

2.

German Law 124
The framework of the German nuclear compensation scheme

comprises the direct application of the Paris Convention and theConvention Supplementary to the Paris Convention of 29 July 1960("Brussels Supplementary Convention") along with the provisions on
nuclear compensation in the German Act on the Peaceful Utili zation of
Atomic Energy and the Protection against its Hazards (“Atomic EnergyAct”). Germany amended the Atomic Energy Act in 2002 to phase out
nuclear energy by 2022 but decided that such a phase out would not
be viable from the perspective of securing a stable electricity supply

Reference material on the German nuclear compensation scheme include: Japan
Energy Law Institute. Genshiryoku songai baishou housei shuyou kadai kentoukai
houkokusho (Report of the Panel on Major Issues Regarding a Legal Framework for
Nuclear Compensation) (May 2005) and JAIC, Anata ni shitte moraitai genbai seido(Introduction to Japan’s Nuclear Compensation System) (2012). Despite reports ofamendments made to provisions regarding nuclear compensation in summer 2013,
amended provisions could not be obtained in time for this report.
124

67

and thus extended the end date of nuclear energy by fourteen years in
2010. However, after the TEPCO Fukushima accident it announced that
it would renew its plans for an early phase -out of nuclear power andclose all nuclear power plants by 2022, initially suspending operations
at the eight plants which started operation previous to 1980, out of the
17 domestically operating plants 125 .
When the Atomic Energy Act was amended in 2002, its original
purpose“to promote nuclear research and the development and useof nuclear energy for peaceful purposes” was deleted and replaced with“to phase out the use of nuclear energy for the commercial generationof electricity in controlled manner, and to ensure orderly operation up
until the date of termination.” This implies that the German Atomic
Energy Act aims solely to protect victimized parties.
The concentration of liability upon operators is pursuant to theprovisions of the Paris Convention which call for “strict and exclusive
liability”. The operator is granted a right of recourse (Paris Convention
Article 6, paragraph f) but not exclusion from liability, and hence theoperator primarily bears liability for damage and may claim recourse
afterwards.
Furthermore, the German Atomic Energy A ct does not grant
exclusion from liability in any case whatsoever (Section 25 paragraph3). However, in the event of nuclear accidents due to armed conflict andother force majeure, the operator’s liability must be limited to 2.5
billion euros, damage exceeding which will be assumed by thegovernment (government compensation).
A total of 2.5 billion euros are maintained as financial security,
consisting of 260 million euros in liability insurance and 2.24 billion
euros in a funding guarantee by the 4 major electricity companies,
which are the parent companies of nuclear operators . The 4 major
electricity companies share the funding guarantee according to thethermal output of the reactors in their possession and are required tosubmit a document to certify the availability of liquidity assets worth
twice the funding guarantee shouldered. Hence, although German law
Watanabe, Tokuko. Doitsu niokeru datsugenpatsu no tameno rippou sochi (Legislative
measures for nuclear phase-out in Germany), Gaikoku no rippou 250 (Foreign laws 250)
(Nov. 2011)125

68

provides for unlimited liability on the part of nuclear operators, as does
Japanese law (and Swiss law, as undermentioned), it sets a ceiling forthe amount of damage to be compensated.
A feature of the German Atomic Energy Act 126 is that although it
had originally adopted a limited liability regime with a ceiling of 500
million marks when it was first enacted, it was changed to an unlimited
liability regime in the 1985 amendment. “[W]here legal liabilities to pay
compensation for damage resulting from an in cident are expected to
exceedtheamountavailabletosatisfysuch

liabilities,

theirapportionment and the procedure to be observed in this context shallbe governed by an act or, pending such act, by statutory ordinance.”(Section 35, paragraph (1)) Paragraph (2) of the same section provides,“The statutory ordinance referred to in para. (1) above may only makesuch provision for the apportionment of the sums available to cover thelegal liability to pay compensation for damage as is necessary to avert
hardships. Such statutory ordinance shall ensure that satisfaction of
the claims of the injured persons as a whole shall not be unduly
prejudiced by the satisfaction of individual claims.” Hence the law does
not require full compensation to the victims but c onsiders the issue amatter of apportionment. Regarding the provision on damage in excessof the available financial security, some point out that “(in regimes such
as Japan. Germany and Switzerland,) liability for damages exceeding
the limited financial security amount is, in effect, shifted to thegovernment, but remains ambiguous in legal terms.” 127 However itshould be understood to require the Government to intervene and be
involved in the apportionment and procedures.
Indemnity against liability, supported by government funds is
stipulated in Section 34, paragraph 1, which provides that “thefederation shall indemnify the operator of the nuclear installation or
the owner of radioactive material from any liability to pay compensation
for damage to the extent such liability is not covered by or cannot besatisfied out of the financial security provided. ” This stands for

126

Refer to Part III, Chapter 3 for further detail.

Utatsu, Noboru. Gendai genshiryokuhou no tenkai to houriron dai 2 han (Thedevelopment and legal theory of modern nuclear energy law, second edition)(Nihonhyouronsha, 2012) P295
127

69

indemnity

againstindemnification,”

liability

which

by

coverstherisks

government,
which

are

or

“government

notcoveredbyinsurance such as damage resulting from armed conflict or damage
occurring ten years after the accident as well as bankruptcy risks on
the part of insurers 128 .
A party to the Paris Convention, Germany directly applies theprovisions of the Convention, which provides for limited liability on thepart of the operators, but nevertheless adopts unlimited liability inGerman domestic law. The JAIC says that “although the Paris
Convention stipulates limited liability in Article 7, German law seeks toremedy victims through the government’s indemnity obligations, whichmeans that the government isrequired to indemnify nuclear operatorsfrom liability using government funds 129 ” but what this exactly points
to remains unclear. Utatsu (2012) says that “the relationship between
maximum liability (limited liability) under Article 7 of the Paris
Convention and unlimited liability can be interpreted as follows: i) The
Paris Convention, Article 7 stipulates only the minimum amount of
payment

and

does

not

provideamaximum

amount.

Al iteralinterpretation of the provision leads to the understanding that as longas the liability and the financial security amount stipulated in Article
10, paragraph (a), are mutually consistent, any maximum amountwould be in line with the provisions of the Convention. ii) Even in an
unlimited liability regime, individual liabilities are naturally limited by
the total assets of liable parties, and hence, the only difference with alimited liability regime is that there is no general or conceptual ceilingto compensation payments. Therefore, despite incorporating unlimited
liability into the German Atomic Energy Act, Germany did not need tomake any revisions to the provisions of the Paris Convention, which isinterpreted to allow both limited and unlimited liability to be adopted
in the domestic nuclear compensation scheme in countries party to theConvention.” 130
Japan Energy Law Institute. Genshiryoku songai baishou housei shuyou kadai
kentoukai houkokusho (Report of the Panel on Major Issues Regarding a Legal Framework
for Nuclear Compensation) (May 2005) P20.
128

JAIC, Anata ni shitte moraitai genbai seido (Intro duction to Japan’s Nuclear
Compensation System) (2012), P142
1 3 0 Utatsu, Noboru. Genshiryoku mondai no houritsu mondai (Legal issues of nuclear
129

70

In the subsection discussing the U.S. Price -Anderson Act, theauthor pointed out that although the Act has been considered to
explicitly stipulate limited liability on the part of the operator, it mayvery likely not the case. There is no fixed interpretation of the German
nuclear compensation scheme, but based on an observation of thedeliberations which took place upon the amendment of the German
Atomic Energy Act, we should reach the understanding that anunlimited liability regime and a limited liability regime are not mutuallycontradictory. Given that even under an unlimited liability regime, itwould be impossible to make available unlimited amounts of financial
security, government intervention is naturally assumed when thecompensation payments required are expected to exceed the financial
security amount. It could be concluded that there is no major difference
between limited and unlimited liability regimes - under the PriceAnderson Act, as aforementioned, the exceedance of the larger financial
protection amount (Tier 2) triggers government intervention, whereasin Germany, which adopts an unlimited liability scheme, when damage
is expected to rise to threefold or tenfold of the financial security
amount 131 , the situation constitutes a national catastrophe, which
induces government intervention. It should be noted that the Swiss
Nuclear Energy Liability Act, which will be elaborated upon in Part II,
includes provisions for major disasters which stipulate that in the eventthe damage exceeds the amount covered by financial security andgovernment compensation, the federal government s hall establish acompensation framework and determine the basic principles regarding
compensation to victims by ordinance. The author wishes to note thatfurther studies and verification of overseas nuclear compensation
schemes should be conducted with a p rofound and comprehensive

damage compensation). (Kinyu zaisei jijo kenkyukai, 2012) P55
Details can be found in Part III, Chapter 3. When Germany turned from limited
liability to unlimited liability in 1985, Norbert Pelzer, then Professor at Göttingen
University, indicated that a situation in which damages exceed triple the amount of 1
billion marks, which was the given maximum amount of government indemnification,
should be considered a national catastrophe calling for Government intervention
pursuant to Constitutional requirements (thereby changing a civil liability issue into amatter of disaster relief by the Government). Roman Herzog, la ter President of Germany,
pointed out that a situation where damages would exceed tenfold to . twentyfold of 1
billion marks, should be addressed with measures beyond the Atomic Energy Act.
131

71

understanding of the country’s legal system and legal practice as wellas broad insight on the direction of its nuclear policy and relevantinternational agreements.

3. International agreements 132
International agreements (the Paris Convention, the Vienna
Convention and the Convention on Supplementary Compensation for
Nuclear Damage (CSC)) have been concluded in case nuclear damages
extend beyond national borders. As observed in the responses ofneighboring countries to TEPCO’s release of radiation -contaminatedwater, nuclear damage entails risks of spreading out beyond borders
and triggering international conflict.
International agreements regarding nuclear damage include theParis Convention (adopted in the OECD/NEA in 1960, entered into force
in 1968, and readopted in 2004 as the amended Paris Convention towhich Switzerland became a signatory country along with the fifteen
countries party to the former Convention, but which is yet to beeffective; provides for 700 million euros in financial security) to which
European countries are parties and the Vienna Convention (adopted in
the IAEA, entered into force in 1977 with the participation of 34
countries from Central and East Europe and Central and South America,
amended in 1997 with the additional participati on of Argentina,
Belarus and Morocco and entered into force as the amended Vienna
Convention in 2003) to which mostly Central and East European
countries and Central and South American countries are parties. A
third framework is the CSC (adopted in the IAE A in 1997, ratified by
the U.S. in 2008, and yet to enter into force as of June 2012) to which

References discussing international agreements on nuclear compe nsation include:
JAIC, Anata ni shitte moraitai genbai seido (Introduction to Japan’s Nuclear
Compensation System) (2012), Japan Energy Law Institute. Genshiryoku songai baishou
ni kakaru houteki wakugumi kenkyuuhann houkokusho (Report of the Working Group on
Legal Frameworks for Nuclear Compensation) (March 2007), Genshiryoku baisho noarikata ni kansuru kentoukai daiichiji houkokusho (First Report of the Panel on Nuclear
Compensation Schemes) (December 2008) available at:www.mext.go.jp/b_menu/shingi/cho usa/kaihatu/007/gaiyou/__icsFiles/afieldfile/2009/06/2
9/1279826_1_1.pdf, www.jaif.or.jp/ (JAI F website)
132

72

Argentina, Morocco, Romania and the U.S are parties and which
provides for smaller amounts of financial security compared to the yetpending amended Vienna Convention. Japan is not a party to any ofthese conventions.
Japan has not ratified any of these international agreements ,presumably for the reasons that it is an island country, that there islittleanticipatedrisk of transboundary

damageconsidering thedirection of westerlies, that it has a sufficient nuclear compensation
scheme, and that neighboring Asian countries are not parties to any ofthese international agreements. In our Committee as well, a member
commented that “it had been believed that there w as little chance thatJapan would ever impose nuclear damage upon other countries andthat there would be more disadvantages than advantages in ratifying
such agreements, and therefore, Japan never ratified any international
agreements.” Hence, Japan did not ratify any international agreements
based on the general belief that if Japan were to become a party to aninternational convention on nuclear compensation, Japanese victims
would be put at an disadvantage in the event that Japan suffered
nuclear damages from an accident occurring in another country, whose
courts would have jurisdiction over the issue.
However, considering the interest expressed by neighboring
countries regarding transboundary nuclear damage and the fact thateven after the TEPCO Fukushima accident, Asian countries have notsuspended their energy plans to proactively introduce nuclear power,
Japan should lead the development of an international nuclear
compensation regime in the Asian region by joining international
agreements.

AlthoughtheformerU.S.S.R.

did

notprovideany

compensation to neighboring countries after the Chernobyl accident, it
is unlikely that Japan would be able to persist in maintaining such astrong stance. Therefore, Japan should seriously consider fostering aninternational framework to be prepared for both nuclear incidents
occurring in Japan and overseas. After the TEPCO Fukushima accident,
actions were taken against TEPCO in the U.S., 133 drawing attention to

Announcement on Actions against
www.tepco.co.jp/ir/tekiji/pdf/130315 -j.pdf
133

TEPCO

73

in

the

U.S.

on

TEPCO

website:the drawbacks of not having jurisdiction concentrated in the country
in which the accident occurred. Furthermore, jurisdiction -related
concerns may arouse reluctance among foreign companies to become
involved in the decommissioning of the Fukushima Daiichi Nuclear
Power Plant. The U.S. has repeatedly asked for Japan’s ratification of
the CSC upon various occasions, including summit meetings. 134 In
response to such circumstances, Fumio Kishida, Minister of Foreign
Affairs, expressed enthusiasm towards joining the CSC at the House ofRepresentative Budget Committee meeting on October 23, 2013. 135
However, there are many issues that must be studie d regarding
the coherence between the CSC and Japan’s Nuclear Compensation Act
which will be discussed in Part II, Chapter 3.

Japan-U.S. summit meeting on April 30, 2012www.mofa.go.jp/mofaj/kaidan/s_noda/usa_120429/pmm .html
134

135

Sankei Biz www.sankeibiz.jp/macro/news/131023/mca1 310231251012-n1.htm

74

Part IIThe Shortcomings of the Current Nuclear
Compensation Law and Perspectives for its
Amendment
Sumiko Takeuchi
Deputy Project Leader
Nuclear Policy Issues Committee
21st Century Public Policy Institute

Chapter 1 Responding to the TEPCO Fukushima
accident
This chapter is a compilation of the decisions made on how tolegally address damage compensation and the discussions leading tothese decisions which took place after the TEPCO Fukushima accident .

1.

Historical context of the establishment of the Nuclear

Damage Compensation Facilitation Corporation Act 136(1) Confusion after the accident: discussions on exclusion ofoperators from liability
In the early days after the accident at Tokyo Electric Power
Company (TEPCO)’s Fukushima Daiichi Nuclear Power Plant (“TEPCO
Fukushima accident”), there was much discussion on whether the
exceptionalclauseofSection3,

paragraph

1

of

the

Act

on

Compensation for Nuclear Damages (“Nuclear Compensation Act”),
would apply, acknowledging the incident as “an exceptionally grave
natural disaster” and thereby excluding TEPCO from liability, as theGreat East Japan Earthquake, which had caused the accident had beenreferred to as a “once-in-a-thousand-years type of major disaster.” As
The following paper was referred to: Oshima, Takeshi. Genshiryoku songai baishou
no enkatsu na jisshi ni muketa kokkai giron: genshiryoku sonngai baishou shien kikou
houan (Discussions in the Diet for facilitated compensation for nuclear damages: theNuclear Damage Compensation Facilitation Corporation billwww.sangiin.go.jp/japanese /annai/chousa/rippou_chousa/backnumber/2011pdf/20111108
029.pdf
136

75

the supervisory authority of the nuclear compensation system, Yoshiaki
Takagi, Minister of Education, Culture, Sports, Science and Technology,
explained that “[the situation assumed in the exceptional clause of
Section 3, paragraph 1,] was described to be one of a large magnitude,
unexpected by humans and beyond all imagination in Diet deliberations
which took place upon the submission of the bill” , and that therefore,
the situation was being addressed by applying the main clause of
Section 3, paragraph 1. 137 On April 29, Prime Minister Naoto Kanstated, “acknowledging the provision as it is would mean excluding
TEPCO

from liability. TEPCO has primary liabilityinterms ofdamages.” 138 However, Prime Minister Kan also said at a meeting of theHouse of Representatives’ Budget Committee on the same day th at“although TEPCO is primarily liable for compensating the damages, I
believe that in the end, the Government should be responsible formaking sure that damages are appropriately compensated,” 139 implyingthat there was initial disagreement or confusion wit hin the Cabinet,
which finally converged on the conclusion that TEPCO would not be
exempted from liability.
The reasons for this conclusion are presumably that in responseto the tsunami that struck a wide area of Japan (c.f. table8), all reactors
at both TEPCO’s Fukushima Daini Nuclear Power Plant and the Tohoku
Electric Power Company’s Onagawa Nuclear Power Plant successfully
reached cold shutdown, and that the magnitude of the earthquake andMeeting of the Committee on Education, Culture, Sports, Science and Technology of
the Upper House on April 19, 2011, available at:
kokkai.ndl.go.jp/cgibin/KENSAKU/swk_dispdoc.cgi?SESSION=120 41&SAVED_RID=1&PAGE=0&POS=0&T
OTAL=0&SRV_ID=9&DOC_ID=8125&DPAGE=1&DTOTAL=7&DPOS=2&SORT_DIR=1&
SORT_TYPE=0&MODE=1&DMY=16094
137

138

Meeting of the Budget Meeting of the House of Representatives on April 29, 2011,

available at:

kokkai.ndl.go.jp/cgibin/KENSAKU/swk_ dispdoc.cgi?SESSION=4952&SAVED_RID=1&PAGE=0&POS=0&TO
TAL=0&SRV_ID=9&DOC_ID=7526&DPAGE=1&DTOTAL=1&DPOS=1&SORT_DIR=1&S
ORT_TYPE=0&MODE=1&DMY=6068
139

Meeting of the Budget Meeting of the House of Representatives on April 29, 2011,

available at:

kokkai.ndl.go.jp/cgibin/KENSAKU/swk_dispdoc.cgi?SESSION=4952&SAVED_RID=1&PAGE=0&POS=0&TO
TAL=0&SRV_ID=9&DOC_ID=7526&DPAGE=1&DTOTAL=1&DPOS=1&SORT_DIR=1&S
ORT_TYPE=0&MODE=1&DMY=6068

76

ensuing tsunami (c.f. table9) was not “exceptionally grave” compared toothershistoricallyexperiencedbyhumans.

However,

given

the

Government’s failure to provide an explicit explanation of the grounds
for such judgment and the diversified statements made by different
ministers, including the Prime Minister, as aforementioned, manyquestions have been raised regarding the process and even the
Government’s judgment that the clause on exclusion from liability
would not be applied 140 . It could also be indicated that the government
should have set clear requirements be fore the accident occurred.
The final judgment of whether or not TEPCO should be excluded
from liability should be made by judicial ruling, 141 and now that ascheme that is premised on TEPCO’s liability has been established after
two and a half years since the accident, it is difficult to find any
significance in discussing whether or not TEPCO should have been
excluded from liability. However, it should be noted that the current
Nuclear Compensation Act, with a provision on exclusion from liability
in the absence of clear identification of the requirements for its
application,embracestheshortcomingthat

operators

and

the

Government must allocate time and energy to related discussions when
they are required to be fully committed to the recovery of damages

For example, Morishima, Akio. Genshiryoku jiko no higaisha kyusai (1) – songaibaisho
to hosho (Victim relief in nuclear accidents (1): indemnification and compensation fordamages), Toki no Hourei , Vol. 1882 states that such interpretations, ignorant of thewording of the exceptional clause in Section 3, paragraph 1 of the Nuclear Compensation
Act and are contradictory to the spirit of the law, and that the application of exclusionfrom liability should be considered. However, other opinions state that exclusion of
liability is inapplicable as in Hitomi, Takeshi. Fukushima daiichi genshiryoku
hatsudensho jiko no songai baishou (Compensation for damages from the accident at
Fukushima Daiichi Nuclear Power Plant). Hougaku seminar (December 2011) and Otsuka,
Tadashi. Fukushima daiichi genshiryoku hatsudensho jiko ni yoru songai baisho(Compensation for damages from the accident at Fukushima Daiichi Nuclear Power Plant).
Houritsu jiho Vol.83 No.11.
140

Tokyo District Court, July 19, 2012 (Compensation claims by TEPCO shareholders
against the Government): The media reported that the court ruled that the Government
decision not to acknowledge TEPCO’s exclusion from liability was lawful, but it should be
noted that the ruling only read that “the action of the Government officer who […] judgedthat the Great East Japan Earthquake and the ensuing tsunami are not relevant to suchan event (as provided for in the Nuclear Compensation Act, Section 3, paragraph 1) andformulated guidelines on the scope of nuclear damage on the premise that the Tokyo
Electric Power Company was liable for damages caused by the accid ent at the Tokyo
Electric Power Company’s Fukushima Daiichi Nuclear Power Plant cannot be referred toas a violation of Article 1, paragraph 1 of the State Redress Act” (emphasis added byauthor), and did not make a judgment regarding the relevance of the premise.
141

77

induced by an accident or natural disaster. 142
Also, in light of the facts that nuclear business had been highly
under

Government

supervision

and

that

instructions

regarding

accident response (including those for venting and water injection),
evacuation instructions and shipping restrictions had been issued asGovernment measures, it is not difficult to imagine that the applicationof the State Redress Act was considered. In terms of applying the State
Redress Act, there has been debate over whether the princ iple of
exclusive liability under the Nuclear Compensation Act would also
exclude the possibility of compensation by the Government. This will
be elaborated in Part II, Chapter 3 143 .

Observation
point

Great East Japan
Earthquake(2011)

Ryori, Ofunato
City11.0-23.6m(runup height)

Near Port Kuji

13.4m
(runup height)

Near Port
Kamaishi

6.1-9.0m(runup height)

Near Port
Hachinohe

6.0-8.4m(runup height)

Meiji Sanriku Earthquake(1896)
38.2m(runup height, Usami,
2003)
21.0m
(runup height, Iwate Pref.
potential tsunami flooding
map)
8.0m
(runup height, Iwate Pref.
potential tsunami flooding
map)
3m(Watanabe, 1998)

Source:data for Great East Japan Earthquake obtained from Port and Airport
Research Institutecompiled from Takahashi, Yasufumi. Kaisetsu genshiryoku songai baishou
shien kikou hou (Guide to the Nuclear Damage Compensation FacilitationAct) (Shojihomu, 2012)

Table 8 Comparison of the height of tsunami waves in the Great East
Japan Earthquake and Sanriku Earthquake

Tanabe and Maruyama (2012) point out that the structure of the Act makes it difficult
to exclude operators from liability.
142

References discussing the relationship between the State Redress Act and the Nuclear
Compensation Act include: Hayakawa, Kazuhiro. Genshiryoku songai to kokka baishou(Nuclear damage and Government compensation). Omiya Law Review No.9; Takahashi,
Yasufumi. Kaisetsu genshiryoku songai baishou shien kikou hou (Guide to the Nuclear
Damage Compensation Facilitation Act). (Shoji homu, 2012); Takahashi, Shigeru andTadashi Otsuka. Shinsai, genpatsu jiko to kankyouhou (Earthquake -induced disaster,
nuclear accident and environmental law) (Minjihokenkyukai, 2013)
14378

Major earthquakes in Japan(Source: The Headquarters for Earthquake
Research Promotion)
Earthquake(beyond Edo
era)
Great East Japan
Earthquake(2011)
Hoei Earthquake(1707)
Ansei Tokai
Earthquake(1854)
Ansei Nankai
Earthquake(1854)
Meiji Sanriku
Earthquake(1896)
Great Kanto
Earthquake(1923)

Magnitu
de
(M)

Notes

Earthquake(20th century-)

Intensity at
Fukushima
Daiichi NPP was
6 upper(Intensityof6
upper has been
observein7
locationsinJapan from 20012010)

9.0

8.6

8.4

Chile
Earthquake(1960)
Great Alaska
Earthquake(1964)
SumatraEarthquake(2004)

8.4

Magnitu
de
(M)
9.5

9.2

9.1

9.0
Kamchatka
Earthquake(1954)

8.2-8.5

9.0

7.9

Major tsunamis in Japan(Source: The Headquarters for Earthquake
Research Promotion)
Earthquake(beyond
Edo
era)
Meiji Sanriku
Earthquake(1896)
Yaeyama
Tsunami (1771)
Meiji Sanriku
Earthquake(1986)
Hokkaido
Nansei-oki
Earthquake(1993)
Great East Japan
Earthquake(2011)

Major earthquakes of the world(Source: USGS)Height (m)Major tsunamis in Japan(Source NOAA database)

Earthquake

Height (m)38.2 (Ryouri, Sanriku
Town)

Litsuya(1954)

Bay

524.26(Alaska)

Approx.. 30 (Ishigaki
Island)Spirit(1980)

Lake

250(Washington)

29.0 (Tanohata)

Spirit(1980)

Lake

225(Washington )29.0 (Okushiri)

Great EastJapan
Earthquake(2011)

23.6 (Ofunato)23.6 (Ofunato)

Table 9 Historical comparison of earthquakes and tsunamis in Japanand the world79

(2) Beginning of provisional payments by TEPCOAgainstthisbackdrop,

on

April

11,

2011,

the

DisputeReconciliation Committee for Nuclear Damage Compensation (“Dispute
Reconciliation Committee”; Chairman: Yoshihisa Nomi, professor of
Gakushuin

University)wasestablished

as

a

body

to

assumeadministrative tasks regarding the preparation of general instructions
to help concerned parties (victims and TEPCO) reach voluntary
settlement of disputes. From the end of April, TEPCO began making
provisional compensation payments : i) 1 million yen per household and750

thousandyen

persingle-personhouseholdtoresidentsofevacuations areas and in-house evacuation areas (from April 26); ii)
agriculture, forestry and fisheries businesses (from May 31); and iii)
small- and medium-sized businesses (from June 10).

(3) Historical context of the enactment of the Nuclear Damage
Compensation Facilitation Corporation Act
Compensation payments for damages induced by the TEPCO
Fukushima accident were initiated with TEPCO, as operator, “primarily
bearing” liability. However, by June 15, 2011 the number of evacuees(including those evacuating according to evacuation instructions or
recommendations and voluntary evacuees) was estimated to be as muchas approximately 113 thousand people 144 , calling for compensation
payment amounts in excess of the financial security amount. TEPCO
requested the Government to provide aid pursuant to Section 16 of the
Nuclear Compensation Act. The Government required TEPCO to confirm
six conditions, including not setting a ceiling on total compensation
payments and asking for the support of all stakeholders, especiallyfinancial institutions, whose potential aid TEPCO would report to theGovernment. TEPCO agreed to these conditions and the Government
support scheme was adopted in a meeting held among relevant
ministers 145 . The ministerial meeting decided that “the Government
At a meeting of the Committee on Public Management of the House of Rep resentatives
held on June 16, 2011, Vice Minister Tadahiro Matsushita explained that in the area
covering evacuation areas, deliberate evacuation areas and evacuation -prepared areas incase of emergency, populated by 147 thousand people, 113 thousand peopl e were
estimated to have evacuated outside of the area.
144

145

The reason that it was not adopted as a Cabinet decision, as provided in the eleventh

80

must ensure: firstly, to take every possible measure for prompt andappropriate compensation for damage; secondly, to stabilize thecondition of TEPCO’s Fukushima Daiichi Nuclear Power Plant and to
avoid any adverse impacts on related operators, etc. dealing with theaccident;

andthirdly,tosupplystableelectricity,

which

is

indispensable for national livelihood. To ensure these three elements,
the Government shall acknowledge its social responsibility of promoting
nuclear policy with the cooperation of nuclear operators and at thesame time, within the framework of the Nuclear Compensation Act,
provide aid to the Tokyo Electric Power Company on the basis ofminimizing public burden.” It also explicitly said that “no limits shallbe set upon the aid, which shall be provided as many times as needed,so that all amounts required for damage compensation and capital
investment can be aided and the nuclear operator (TEPCO) shall not
become insolvent.” On June 14, this was adopted as a Cabinet decisionon the “Framework of government support to the Tokyo Electric Power
Company (TEPCO) to compensate for nuclear damage caused by theaccident at Fukushima nuclear power plant,” based on which the
NuclearDamageCompensation

Facilitation

Corporation

bill

was

submitted to the 177th Session of the Diet. The Nuclear Damage
Compensation Facilitation Corporation Act (“Facilitation CorporationAct”) was promulgated and enforced on August 10, 2011.
<Events leading to decision of the support scheme>
May 10

Request for aid from TEPCO to the Government (Minister
Kaieda of Economy, Trade and Industry 146

May 10

Notification of conditions to be confirmed by TEPCO from
Minister Kaieda 147

May 11

Notification of acceptance by TEPCO

May 13

Approvalofthesupportschemeinaministerial

meeting of the House of Representative’s Committee on Economy and Industry of the177th Session of the Diet (May 25, 2011) by Minister Banri Kaieda in response to aquestion set forth by committee member Takashi Tanihata, was that since a Cabinet
decision would immediately lead to the submission of a bill to the Diet, approval in aministerial meeting was taken as a n initial step in order to allow time for discussion in
the Diet.
146

www.meti.go.jp/earthquake/nuclear/pdf/songaibaisho_110511.pdf

147

www.meti.go.jp/earthquake/nuclear/pdf/songaibaisho_110511.pdf

81

meeting 148
June 14Adoption of the Cabinet decision on the support scheme
and

the

NuclearDamageCompensation

Facilitation

Corporation bill 149
August 10

Promulgation and enforcement of the Nuclear Damage
Compensation Facilitation Corporation Act(4)

Deliberation

in

the

Diet

on

the

NuclearDamageCompensation Facilitation Corporation Act
Discussions in the 177th Session of the Diet were focused on thefollowing points:i) Responsibility of the StateThe original draft had not referred to the Government’s liability,
but in view of opinions from the Liberal Democratic Party (LDP) thatthe responsibility of the Government should be made explicit, aprovision was inserted on “social responsibility” 150 for promoting
nuclear policy: Article 2 (Responsibility of the State)“In view of thesocial responsibility that comes along with its having promoted anuclear energy policy, the State shall t ake all necessary measures toenable the Nuclear Damage Compensation Facilitation Corporation toachieve the purpose described in the preceding Article.” 151“Framework of government support to the Tokyo Electric Power Company (TEPCO)
to compensate for nuclear damage caused by the accident at Fukushima nuclear power
plant” (decision of ministerial meeting among relevant ministers of the Team in Chargeof Responding to the Economic Impact caused by the Nuclear Power Station Incident
148

149

www.meti.go.jp/earthquake/nuclear/taiou_honbu/pdf/songaibaisho_110614_05.pdf

At the 29th meeting of the Upper House plenary session of the 177th Diet, Ministerof State, Yukio Edano stated, “the Government also acknowledges that, in view of having
promoted nuclear energy policy, we must implement sufficient measures for prompt andappropriate redress of victims. Such needs have been explicitly stated as social
responsibility in Article 2 of the bill.”
150

Takahashi, Yasufumi. Kaisetsu genshiryoku songai baishou shien kikou hou (Guide
to the Nuclear Damage Compensation Facilitation Act) states that for the Government toburden (pay) damage compensation, some form of legal respons ibility or social policy
reasons would be required and categorizes and analyzes, by legal or social aspects ornecessity, the “responsibility” referred to in different contentions that the Government’s
responsibility should be made explicit.
15182ii) Consideration of the legal liquidation of TEPCO
The legal liquidation of TEPCO was naturally als o debated upon
providing Government aid. Before discussion of the legal liquidation ofelectric power companies, the problems of legally liquidating TEPCO
under current laws are summarized below, based on quotes by thenPrime Minister Naoto Kan: 152a) “Reconstruction” under the Corporate Rehabilitation Law wasdetermined impossible given uncertainties regarding not only thecompensation payment amounts but also decommissioning costs.
(According to the Comprehensive Special Business Plan , jointly
formulated by TEPCO and the Nuclear Damage Liability Facilitation
Fund (“Facilitation Fund”) and whose changes were approved on May
9, 2012, the compensation payment amounts required are 2 trillion
546 billion 271 million yen, estimated decommission costs are 900.2
billion yen, based on reasonable estimates conducted by TEPCO, but
1 trillion 151 billion yen in estimates based on the U.S Three Miles
Island accident, and decommissioning measures will take 30 years.)b) Current law prioritizes the protection of corporate bondholders to
the protection of victims(The Electricity Business Act Article 37 provides that “bondholders
for a General Electricity Utility […] shall have the right to receive
paymentof

theirclaimsfromthecorporation's

p roperty

inpreference to other creditors” (paragraph 1) and that “its rank […]shall be the second to general statutory lien prescribed in the Civil
Code […].” Hence, the protection of bondholders are prioritized tothat of victims and may impede the purpo se of victim protection
provided for in the Nuclear Compensation Act. (It should be notedthat the formulation of a law should essentially involve close
investigation and adequate discussion of any potential conflict withexisting laws. It naturally should have been predicted that thestatutory lien of electricity bonds secured by general mortgage under
the Electricity Business Act was unlikely to be consistent with theProceedings of the Plenary Session of 177th Session of the Diet Vol.31, p4 and 14 (July8, 2011)15283

unlimited liability approach stipulated in the Nuclear Compensation
Act. Therefore, further studies need to be conducted on what
discussions took place upon legislation.)

2.

Overview of the Nuclear Damage Compensation

Facilitation Corporation Act 153
In

view

of

the

socialresponsibility

thataccompanies

theGovernment’s promotion of a nuclear energy policy, the purpose of the
Facilitation Corporation Act is to ensure the following three elements
by implementing sufficient measures for the provision of support fordamage compensation, on the basis of “aiming to minimize the burden
to be placed on the public”:(i)take every possible measure for the prompt and appropriatecompensation for nuclear damage;(ii)

stabilizetheconditionof

TEPCO’s

Fukushima

DaiichiNuclear Power Plant and avoid any adverse impacts on
related operators, etc. dealing with the accident;(iii)

stably supply electricity

With the establishment of the Facilitation Corporation Act,
nuclear operators (total of 12 companies 154 ) and the Government each
subscribed 7 billion yen to establish the Nuclear Damage Compensation
Facilitation Fund (“Facilitation Fund”).

Refer to Cabinet Secretariat. Overview of the Nuclear Damage Compensation
Facilitation Corporation Act, available at:www.cas.go.jp/jp/seisaku/keieizaimutyousa/dai1/s hiryou4-4houan.pdf
153“Nuclear Operators” under the Facilitation Corporation Act refers to persons who may
potentially cause nuclear accidents whose damages will exceed the financial security
amount stipulated in the Nuclear Compensation Act, Section 7, par agraph 1 (Article 38,
paragraph 1). The twelve operators wh ich subscribed to the Facilitation Fund upon its
establishment were the nine electric companies, the Japan Atomic Power Company,
Electric Power Development Co., Ltd., and Japan Nuclear Fuel Limited .
15484

Private Funds(million yen)

Hokkaido Electric Power Company

254

Tohoku Electric Power Company

418Tokyo Electric Power Company

2,379

Chubu Electric Power Company

622

Hokuriku Electric Power Company

236

Kansai Electric Power Company

1,229

Chugoku Electric Power Company

331

Shikoku Electric Power Company

254

Kyushu Electric Power Company

660

The Japan Atomic Power Company

332

Electric Power Development Co., Ltd.

168

Japan Nuclear Fuel Limited

117

Total

7,000
Source: compiled by author based on news sources

Table 10 Private Sector Contributions to Nuclear Damage
Compensation Facilitation Fund

When the required amount of compensation pursuant to theprovisions of Article 3 of the Nuclear Compensation Act is expected to
exceed the amount of financial security, the nuclear operator may apply
totheFacilitation

Fund

for

financialassistance(Facil itation

Corporation Act, Article 41). Upon receipt of an application for financial
assistance, the Facilitation Fund must decide whether to provide
financial assistance as well as decide the substance and the amount ofsuch financial assistance (Facilitati on Corporation Act, Article 42,paragraph 1). If it is necessary for the Facilitation Fund to be delivered
government bonds, it shall, working jointly with the nuclear operator
prepare a "Special Business Plan", which shall receive the approval of
the competent minister (Facilitation Corporation Act, Article 45).
The Facilitation Fund shall pay into the Treasury the financial
assistanceamountprovidedbytheGovernment(Facilitation

Corporation Act, Article 59, paragraph 4) and in principle is to be repaid
by TEPCO through the Facilitation Fund at a future date. Hence, thisfinancial assistance is more in the character of providing a bridge loan
85

than bailing out TEPCO using public funds.

www/meti.go.jp/earthquake/nuclear/taiou_honbu/pdf/songaibaisho.111 003_02.pdf(last accessed on October 17, 2013)

Figure 7 Assistance for damage compensation from the Nuclear
Damage Compensation Facilitation Fund

Although the Facilitation Fund provides assistance for TEPCO inits compensation payments for damages from the Fukushima accident,
it is considered to be an organization for “mutual assistance” forsupporting

nuclearoperators

compensatingfornucleardamageincurred by nuclear accidents in the past and future. Therefore, it isalso regarded an ex-post replication of the mutual assistance scheme
under the U.S. Price-Anderson Nuclear Industries Indemnity Act(“Price-AndersonAct”).

The

Government

will

providefinancialassistance to the newly established Facilitation Fund through thedelivery of government compensation bonds, but the Facilitation Fund,
which

is

eventuallytobemaintained
86

andoperated

based

on

contributions from nuclear operators, will repay the funds received
from the Government as government bonds; and therefore, the scheme
ultimately does not create Government (public) burden. The Facilitation
Fund is to be maintained to address future nuclear disaster s 155 , andthe timing of its dissolution is yet to be determined.
Also, the Act on Emergency Measures Related to Damage Causedby the 2011 Nuclear Accident (promulgated on August 5, 2011) provided
for the provision of prompt relief to the parties suffering from damage
through provisional payments to victimized parties made by the Stateand support for local public entities that have established emergency
funds for nuclear damage.

3.

Significance and challenges
The advantages and disadvantages of current responses based on

the Nuclear Compensation Act and the Facilitation Corporation Act
established under it are provided below:
Advantage 1: Avoidance of panic among victimized parties
An opinion brought forth at our Committee meetings, was that thereason that there was no panic over co mpensation payments after theaccident largely owes to the unlimited liability of operators stipulated
in the Nuclear Compensation Act.
Advantage 2: Securing business funds for TEPCO to proceed withdecommissioning reactors and stably supplying electricit yWith the embodiment of “Government aid,” stipulated in Section
16 of the Nuclear Compensation Act, in the Facilitation Corporation Act,the debates over pursuing shareholders’ responsibility, debt waivers,
and legal liquidation which were continued in the confusion after theProceedings of the 10th meeting of th e House of Representative’s Committee on
Economy and Industry of the 177th Session of the Diet (July 14, 2013): Banri Kaieda,
Minister of State, “It has been compiled so that we may be able to address future accide nt
as well […] so, even after the damages related to the accident caused by TEPCO havebeen completely compensated, the risk of nuclear accidents will remain, and therefore it
will be maintained.”
155

87

accident gradually settled. TEPCO stocks remained listed and financial
institutions continued to provide financing, and the interest payments
and redemption of TEPCO’S corporate bonds were conducted without
fail. With the establishment of the framework under the Facilitation
Corporation Act, TEPCO was provided funds to be paid to its suppliersof material required for electricity business operations, and hence,
TEPCO gained a financial basis for continuing its electricity business
operations as well as for compensating for damages. 156
Advantage 3: Positive effects on financing for other electric powercompanies
The TEPCO Fukushima accident greatly affected thefinancingavailable for other electric power companies. In fiscal year 2010, theten electric power companies collectively issued 1 trillion 5 billion yen
in corporate bonds, whereas in fiscal year 2011, the only corporate
bonds issued were 10 billion yen worth of bonds issued in June by
Okinawa Electric Power Company, which does not possess a nuclear
reactor, and 60 billion yen worth, by Tohoku Electric Power Company
in March. Hence, the ten electric power companies had to rely mainly
on loans from financial institutions. However, when the Facilitation
Corporation Act scheme began to function, it became clear that theGovernment would provide aid for nuclear operators, and the electricity
bond market gradually resumed its stability, with Kansai Electric Power
Company and Chubu Electric Power Company issuing new corporate
bonds 16 months after the accident.
However, the current scheme encompasses many disadvantages
as well:
Disadvantage 1: TEPCO’s deterioration as a corporate body, especiallyweakened problem-solving capacity
Under the current scheme, the Government delivers government

Hironari Nozaki, Managing Director of Citigroup Global M arkets Japan commented
in “Foreign Investors Vigilant about Unreasonable Political Intervention” (Kinyu Zaisei
Jijo, May 30, 2011) that the framework defined by Facilitation Corporation Act was anextremely well-designed scheme which “made full use of the time frame, while allowing
TEPCO to manage the compensation payments on its own.”
156

88bonds to the Facilitation Fund and financial assistance is provided to
TEPCO via the Facilitation Fund, on the premise that the funds
provided by the Facilitation Fund are not debts. 157 Pursuant to Article
52 of the Facilitation Corporation Act, TEPCO (the nuclear operator
receiving Special Financial Assistance) is not allowed to include theSpecialContribution

Amounts

paidinadditiontotheGeneralContribution Amounts in the electricity rates and mu st be paid out frombusiness profits (shareholder returns). As of October 23, 2013, 3
trillion 96.4 billion yen have been provided to TEPCO. According toestimates by the Board of Audit, if 5 trillion yen were to be provided, it
could take as long as 31 years to recover all payments. 158 With
payments expected to continue to increase, is it really viable for acompany to pursue its business of providing stable supply of electricity
while incurring ultra-long debts? As is often reported in the media, 159
there is much concern of an outflow of competent human resources anda decline in employee motivation. More than threefold of the average
year, or 465 people, left their job at TEPCO in 2011, with voluntary
resignations surging to 710 in 2012. The high problem-solving capacity,
or site-competence, of Japanese electric power companies has been amajor factor enabling the supply of high-quality electricity in Japan,
and its weakening will pose great challenges.
Disadvantage 2: Incompatibility with the deregulation o f the electric
power industry
As aforementioned in Disadvantage 1, TEPCO is to repay the funds
provided by the Facilitation Fund using the profits generated from its
Morimoto, Noriyuki. Fukushima genshiryoku jiko no sekinin (The responsibilities
related to the Fukushima nuclear accident) (The Japan Electric Association, Newspaper
Division) p68 and Saito, Makoto.Genpatsu kiki no keizaigaku (The economics of risks
related to nuclear power plants) (Nihon Hyoronsha) p184 - state that acknowledging thefunds provided as debt would put TEPCO in a state of insolvency, and therefore, they are
considered Special Contribution Amounts “to be repaid upon success” (op. cit. Morimoto). 157

Board of Audit, of Japan “Report on the Audit on the Implementation Status ofGovernment Support for Compensations for Nuclear Damages Related to the Tokyo
Electric Power Company”(Summary) www.jbaudit.go.jp/pr/kensa/result/25/pdf/251016_youshi_1.pdf
158

Jiji Press April 15, 2013 www.jiji.com/jc/zc?k=2013041500825
TEPCO decided to pay lump-sum payments of 100,000 yen to managerial personnel inJuly 2013 in order to stop the outflow of human resources.
www.sankeibiz.jp/business/news/130720/bsd1307200500006 -n1.htm
15989

electric power business. However, although securing such profits may
bepromised

under

the

conventionalframeworkfeaturing

fully

distributed cost (FDC) pricing and regional monopoly, when theseschemes are abolished under a deregulated electricity system, such
estimates will be invalid. In the Diet, as well,comments have been

made that the framework identified by the Facilitation Corporation Act
appear to be premised on the current electric power system, as provided
below (emphasis added by author):
Proceedings of the 13th meeting of the House of Representative’s Committee
on Economy and Industry of the 177th Session of the Diet (June 1, 2011) 160 ,question by Committee member Hidekatsu Yoshii:
According to the May 13 decision made at the ministerial meeting, theFacilitation Fund would first be established and the Facilitation Fund would
assist TEPCO in making its compensation payments by providing funds andcapital injection as many times as needed, without setting a ceiling. If
compensation payments increase, then government compensation bonds andgovernment guarantee for bank liabilities would also increase, meaning thatpublic burden will go on expanding.
If TEPCO fails to make repayments to the Facilitation Fund, the funds
will be covered by taxpayers’ money. TEPCO is substantively an insolvent andbankrupt company. Therefore, payments from TEPCO to the Facilitation Fundare to be made using TEPCO’s business profits. Under the current scheme of
FDC pricing and regional monopoly, would not business profits to repay
compensation payments, in the end, be generated by raising electricity tariffs?
Therefore, this framework is not a compensation scheme but rather a relief
scheme for TEPCO, premised on the continuation of TEPCO, is it no t?. […]Therefore, a scheme that aims to maintain regional monopoly and FDC pricing
is unlikely to be spared being referred to as a relief scheme for TEPCO, so weshould devise a completely different scheme. With this, I would like to end myquestion.

www.shugiin.go.jp/internet/itdb_kaigiroku.nsf/html/kaigiroku/009817720110601013.
htm
160

90

Disadvantage 3: Questions whether or not public burden has beenminimized
The framework provided for in the Facilitation Corporation Act
aimed to minimize public burden, comprising electricity tariffs and tax
burdens, and this is illustrated in the collate ral resolution of the
Facilitation Corporation Act which provides for “aiming to minimize theburden to be placed on the public.” 161 However, no ceiling has been set
for the provision of funds from the Facilitation Fund to TEPCO.
Premised on eventual repayment to the National Treasury, the scheme
embraces difficulties in promoting efficiency from the viewpoint ofminimizing burden. For example, with the enactment of the Act on
Special Measures concerning the Handling of Environment Pollution byRadioactive

Materials

Discharged

by

the

NuclearPower

StationAccident Associated with the Tohoku District Off the Pacific Ocean
Earthquake that Occurred on March 11, 2011 (“Act on Special
Measureson

Handling

Pollution

byRadioactive

Materials”),

alawmaker-initiated legislation, TEPCO suddenly had to assume alldecontamination costs, which were originally supposed to be assumed
by the Government. 162 “Nuclear damage” under Section 2, paragraph 2
Proceedings of the 16th meeting of the House of Representatives Special C ommittee
on Reconstruction from the Great East Japan Earthquake of the 177th Session of the Diet
(July 26,2011), available at:www.shugiin.go.jp/internet/itdb_kaigiroku.nsf/html/kaigiroku/024217720110726016.htm
Proceedings of the 18th meeting of the House of Councilors Special Committee on
Reconstruction from the Great East Japan Earthquake of the 177th Session of the Diet
(August 2,2011), available at:161

www.shugiin.go.jp/internet/itdb_kaigiroku.nsf/html/kaigiroku/024217720110802018.htm

Developments leading to the legislation are listed below:
August 1: Inquiries by the Ministry of the Environment to other ministries pursuant to arequest from the DPJ Project Team for Fukushima Nuclear Accident Assessment andSolutions (“PT”) (Chairman: Satoshi Arai)
August 3: Vice Chairman Issei Tajima explains “draft outline” at PT meeting*The burdening of costs “shall not preclude the right to claim compensation for damages
or right to indemnification against the operator (TEPCO).”
August 11: Vice Chairman Issei Tajima explains the “bill” at PT meeting and bill isapproved. Revisions made at Legislative Bureau House of Representatives.
*On Chairman Satoshi Arai’s website, it was noted, “Conclusion is yet to be reachedregarding financial measures, with the Ministry Internal Affairs and Communications
demanding that the Government assume all compensation payments based on requests
from local governments, and the Ministry of Finance is demanding that it be able toseek indemnification from TEPCO due t o financial difficulties”
August 12: Three-party conference among the Democratic Party of Japan (DPJ), Liberal
Democratic Party (LDB) the New Komeito.
*Revision of provision to “measures taken in relation to damages for which the relevant
nuclear operator (TEPCO) is liable shall be implemented at the expense of the relevant
16291

of the Nuclear Compensation Act is supposed to refer to damage with arelationship of adequate causation to the effects of the radiation from
nuclear fuel or of the toxic nature of such materials, and therefore theoperator who receives claims should be granted the opportunity todisprove the adequate causation between the damage and its said cause.
However, such opportunities are limited to individual settlements outof court and alternate dispute resolution (ADR). The costs shoulderedby the operator will eventually be shouldered by customers throughelectricity tariffs, or by the general public through taxes. Electricity
tariffs are, in effect, paid by the general public; and hence, as thescheme under the Facilitation Corporation Act merely excludes tax
burden, it is dubious whether that really serves to “min imize publicburden.” Also, as the scheme is premised on repayment from theoperator’s

futureprofits,

there

is

a

discrepancy

betweenthe

responsibility for implementation and cost distribution, therefore
undermining incentives for cost-effectiveness, improved efficiency andthe acceleration of decontamination activities and increasing costs,
while also delaying procedures. 163 It is also true that victimized peoplein Fukushima have voiced that “if they have that much to spend, wewould like to see that money spent on reconstructing our livelihoods.”
At the time of the enactment of the Facilitation Corporation Act,
then Minister of Economy, Trade and Industry, Banri Kaieda stated,concerning the minimization of public burden, that the generalcontribution amounts collected from electric power operators otherthan TEPCO, which caused the accident, could be assessed byincluding them in the electricity tariff and that the assessment would
serve to minimize public burden, 164 but as aforementioned in the

nuclear operator.”
August 18: Deliberation and approval in the “Lawmaker -initiated legislation coordinationteam”
August 23-36: Deliberation and adoption in the Diet. (with little time for deliberation in
the House of Representatives Committee on the Environment)
NHK Online News Watch 9, July 23, 2013
The Asahi Shimbun Opinion column decontamination officer at Date City, Fukushima
Prefecture, “Concerned about going too far. Look at reality” (March 12, 2013)
163

Proceedings of the 16th meeting of the House of Representatives Special Committee
on Reconstruction from the Great East Japan Earthquake of the 177th Session of the Diet
(July 26,2011), available at: www.shugiin.go.jp/index.nsf/html/index/kaigiroku.htm
16492description of Disadvantage 2, this view is premised on the continuityof assessments based on the FDC pricing method. Furthermore, generalcontributions constitute only a small portion of the funding sources 165
for financial assistance, while “government aid” 166 based on thedelivery of government compensation bonds is its main contributor.
Therefore, it would be extremely difficult to argue that public burden isminimized on the grounds that general contributions are assessed as acomponent of the electricity tariff.
Junko Nakanishi, fellow at the National Institute of Advanced
Science and Technology 167 made the following comments in aninterview on the radio 168 :-It is “abnormal” that the decontamination of a major “national project” suchas this has been taken forward with not even an overall estimate of the total
costs required revealed by the Government. I “have a presentiment” thatmoney will continue to be injected on and on, or otherwise the project will beabandoned before it is completed- An image of the entire costs should first be presented, followed by an ideaof what will be accomplished (the extent to which decontamination is possible
as well as what cannot be done); otherwise, victims are not capable ofreestablishing even their livelihoods.
-Without a full image of the costs, it is impossible to even present options forrehabilitation.
-Giving the wrong impression that decontamination will realize levels of
1mSv/yr may risk the increased injection of resources into decontamination
activities with low cost-efficiency.
-An

optionof

local

regenerationisconcentrating

resourcesfordecontamination in areas with low radiation and improving infrastructure inthese areas in order to establish a pioneering compact city.
-Local governments should be granted not on ly monies for contamination but
also funds for livelihood support, including funds for siting industries.

The source of funds provided to TEPCO through the Facilitation Fund are : i) generalcontributions; 2)special contributions; and 3) government aid
165

166

Facilitation Corporation Act, Article 48, paragraph 1,2, Article 49

The institute was analyzed on the effects and costs of decontamination.
Hukushima kennai no josennjissikuiki niokeru josenn no hiyou ni kannsuru kaiseki(hotaka, naito, The National Institute of Advanced Science and Technology, July 23,2013)
confit.atlas.jp/guide/event-img/jsap2014s/18p-D3-2/public/pdf?type=in
167

168

NHK Radio 1 “NHK Journal” (aired on July 23, 2013)

93

-The

generalpublicultimately

shouldersdecontamination

costs.

Decontamination activities should be considered not only from the viewpointof acceptance by victims but also by the general public.

Concerns have also been voiced about increasing financing costs.
Professor Akira Morita of Doshisha University has stated that “by not
explicitly saying that nuclear operators have been freed from unlimited
liability, TEPCO’s business base may become unnecessarily jeopardized”
and that “the decline of TEPCO’s capacity for self -sustained financing
is ironically increasing Government spending.” 169
Disadvantage 4: Lack of versatility as a compensation scheme fornuclear damages
In the event another electric power company cause s an accidentof the same scale as the TEPCO Fukushima accident (assuming that 4
trillion yen was provided by the Facilitation Fund for compensation
payments), a company with less than 1 trillion yen in annual sales may
require 100 years to repay all costs.
Million yen

Hokkaido
TohokuTokyo
Chubu
Hokuriku
Kansai
Chugoku
Shikoku
KyushuFY2010FY2011 (reference)
No. of employees
Operatin Current Operatin Current NonConsolidate
g profit
net profit g profit
net profit consolidate dd31,694
7,658 -115,493 -132,819
5,496
89,25625,805 -55,922 -103,698
12,42324,726284,443 133,775 -221,988 -685,292
35,761
48,252200,032 108,558 -14,483 -32,161
16,72330,847
4,714
169
11,758
98
4,693
7,006
227,661 127,170 -314,012 -243,422
20,88734,00781.51531,001-4,005 -21,951
9,173
14,54642,424
99,72722,079 -50,337 -42,896
41,812 -299,423 -332,470

4,772
11,705

8,445-

Source: compiled by author from summaries of financial statements
and Yahoo! Finance corporate information

Table 11 Comparison of operating profit, current net profit andnumber of employees

In addition, while TEPCO has allocated over 10,000 employees to

169

Keizai kyoushitu. Nihon Keizai Shimbun July 12, 201194

direct compensation services as of April 1, 2013 170 , some operators
have less than 10,000 employees on a consolidated basis, which would
make them incapable of providing the human resources requ ired forcompensation administration.
Furthermore, if a non-general electric power utility causes anaccident – for example, if Japan Nuclear Fuel Limited (JNFL) were tohave an accident at its reprocessing plant, its services to nuclear
operators, and thus its source of profits, would be suspended ; andtherefore, the company would have no prospects of repaying finances.
Therefore, the current scheme to address compensation issues
under the Facilitation Corporation Act may not be a realistic solution
unless an accident of the same scale as that experienced in Fukushima
is caused by Japan’s largest electric power company , TEPCO.
Disadvantage 5: Legal justice of general contributions to be shoulderedby other companies
Some questions have been raised concerning the legitimacy ofgeneralcontributions

paid

out

by

nuclearoperators.

Generalcontribution amounts are calculated by multiplying the total annual
general contribution amount determined by the Facilitation Fund by
thecontribution

rate

set

for

each

individual

nuclearoperator(Facilitation Corporation Act, Article 39, paragraph 1). The contribution
rate shall be set in accordance with the criteria prescribed by
Ordinance of the competent ministry , taking into consideration thescale, content of business, and other circumstances connected witheach nuclear operator's reactor operation, etc. (Facilitation Corporation
Act, Article 39, paragraph 3). Hence, although the Act provides forapproval by the competent minister based on a Management committee
resolution and consultation with the Minister of Finance, it is in effecta system that “tries to extract everything available from wherever it
can.” Since general contributions can be included in the electricity
tariffs, 171 there have not yet been any majo r opposition from other170

www.tepco.co.jp/fukushima_hq/images/k130430_01 -j.pdf

This was due to the adoption of the Minist erial Ordinance for Partial Revision of the
Accounting Rule for the Electricity Business (Ordinance No.57 of the Ministry of Economy,
Trade and Industry, 2011) which amended the Regulation for Calculating Electricity
171

95

nuclear operators. However, the legal validity of such burden isquestionable and should be reconsidered along with how much eachnuclear operator will actually be able to pay in contributions once thederegulation of the electricity market advances with the electric powersystem reform.
Disadvantage 6: Limits to victim relief based on monetary compensation
under tort systems
The

Facilitation

Corporation

Act

stipulatesaschemetoeconomically assist TEPCO in fulfilling its liabilities. The largest
challenge revealed in the aftermath of the TEPCO Fukushima accident
is how to recover “places of being,” such as homes, workplaces and local
communities, which are lost in major nuclear accidents. These damages
are impossible to compensate under tort systems 172 , and it has become
evident that such schemes cannot reconstruct livelihoods in the way
victims would hope for 173 . The voices of victims in Namie Town,
Fukushima Prefecture, where a voluntary group of Committee members
visited, and the difficulties in resolving the damages incurred by thismajor nuclear accident under a tort system will be elaborated later
herein.
Rates Stipulated in the Supply Provisio ns of General Electricity Utilities (OrdinanceNo.105 of the Ministry of Economy, Trade and Industry, 1999), the Regulation for
Calculating Electricity Rates Stipulated in the Wheeling Service Provisions of General
Electricity Utilities (Ordinance No.106 of the Ministry of Economy, Trade and Industry,1999), and the Regulation for Calculating Wholesale Supply Rates ((Ordinance No.107 of
the Ministry of Economy, Trade and Industry, 1999). Refer to Terakura, Kenichi.

Higashinihon daishinsaigo no genshiryoku songai baishou seido wo meguru keii to kadai(Developments and challenges of the nuclear damage compensation system after the Great
East Japan Earthquake)
Tanabe,Tomoyuki, M. Maruyama, Fukushima Daiichi Genshiryoku Hatsudensho Jikoga teikishita waga kun i no genshiryoku songai seido no kadai to sono kokufuku ni muketa
seido kaikaku no houkousei (The issues concerning Japan’s compensation system fornuclear damages raised by the accident at Fukushima Daiichi Nuclear Power Plant andthe direction of system reforms to overcome the challenges) (Central Research Instituteof Electric Power Industry, 2012 ） p35-, etc.
172

At the Plenary Session of the House of Representatives on October 17, 2013,
Katsumasa Suzuki, Secretary General of the People’s Life Party, asked, “Is it notnecessary to support the positive life -planning of victimized people by assisting theestablishment of ‘second homes’?” In response, Prime Minister Shinzo Abe said, “Weshould respect the decisions of local governments and individuals regarding whether or
not victims will return to their home towns, and the Government intends to adequately
consult and cooperate with local governments in order to provide prospects of futureradiation levels and pictures of local futures in order to enable individ uals to foster
positive life plans.”
173

96

4. Provision regarding revision
As the abovementioned issues had been debated before theenactment of the Act, Article 6 of the Supplementary Provisions of the
Facilitation Corporation Act stipulates its revision.
Article 6 (Review), paragraph 1 provides that in light of theverification of the causes, etc. of the TEPCO Fukushima accident, theimplementation status of compensations for nuclear damage, andeconomic and financial conditions, etc., the Government shall discuss
the clarification of State responsibility under nuclear compensation
system,and Governmentinvolvement and responsibility in addressing
an accident at a nuclear power plant, review the establishment of anorganization for the prompt and appropriate resolution of disputes
involving compensation for nuclear damage, and take necessary
measures, including a fundamental re-examination of the Nuclear
Compensation Act, including its amendment. Necessary measures areto be implemented within about a year 174 regarding the responsibilities
oftheGovernment

andnuclearoperators

under

the

NuclearCompensation Act and the functions of the Dispute Recon ciliation
Committee, as well as the Act on Special Measures Concerning Nuclear
Emergency Preparedness.
Paragraph 2 provides that the Government shall review the statusof enforcement of the Act from the perspective of minimizing the burden
on citizens, including burden-sharing among the nuclear operator
receiving financial assistance, the Government, and other nuclear
operators, and the burden shouldered by shareholders and any otherinterested parties, and that it shall take the necessary measures basedon the results of this review. Necessary measures are to be implemented
regarding the structure of burden (general contributions and special
contributions) under the Facilitation Corporation Act and TEPCO’s
revitalization of business within about two years a fter the enactment of
the Act 175
House of Representatives, Collateral Resolution No.11 to the Nuclear Compensation
Facilitation Corporation Bill,
Proceedings of the 16th meeting of the House ofRepresentatives Special Committee on Reconstruction fr om the Great East Japan
Earthquake of the 177th Session of the Diet, available at:www.shugiin.go.jp/internet/itdb_kaigiroku.nsf/html/kaigiroku/024217720110726016.htm
174

175

House of Representatives, Collateral Resolution No.11 to the Nuclear Compensation

97

Paragraph 3 provides that the Government shall, from theperspective of contributing to stability and improvement in the lives of
the citizenry and to the sound development of the national economy, inlight of reviews of energy policy, review the best way of addressing suchmatters as State responsibility in nuclear policy, and shall takenecessary measures based on the result of this review, including afundamental re-evaluation of acts related to nuclear power. In thediscussions upon the enactment of the Act, this paragraph wasconsidered to require revision in the middle - to long-term, but no exact
timing of revision has been determined.

5. Direction of revision
As aforementioned, the current scheme under the Facilitation
Corporation Act embraces disadvantages as well as advantages. Our
Committee did not go as far as to discuss revision, but the points that
could be important upon revising the current scheme are provided
below.

(1) The legitimacy of other nuclear operators shoulderingcosts and foreseeability
The source of funds provided to a nuclear operator by the
Facilitation Fund are: i) general contributions shouldered by nuclear
operators; ii) special contributions shouldered by the nuclear operator
which caused the accident; and iii) Government aid. As aforementioned
in the discussion on the fifth disadvantage, the legitimacy andforeseeability of general contributions, which are, shouldered by
obligation by all nuclear operators in Japan, including the operator thatcaused the accident, are questionable . General contributions could bereserves for future accidents, but under current circumstances, they

Facilitation Corporation Bill,
Proceedings of the 14th meeting of the House ofRepresentatives Special Committee on Reconstruction from the Great East Japan
Earthquake of the 177th Session of the Diet, available at: kokkai.ndl.go.jp/cgibin/KENSAKU/swk_dispdoc.cgi?SESSION=24696&SAVED_RID=2&PAGE=0&POS=0&T
OTAL=0&SRV_ID=9&DOC_ID=8202&DPAGE=1&DTOTAL=1&DPOS=1&SORT_DIR=1&
SORT_TYPE=0&MODE=1&DMY=2509

98

are used for compensation payments for damages incurred by the
TEPCO

Fukushimaaccident,

with

no

distinctionfromspecialcontributions. Therefore, they could constitute infringements of theproperty rights of electric power operators other than TEPCO. Also, as
implied in the reference to the contributions as informally but
administratively orchestrated “hogacho”-style contributions, , they are
determined intheabsenceof explicit criteria,

and

hence

lack

foreseeability. 176 The Japanese scheme is said to have been based on
the mutual assistance scheme under the U.S. Price -Anderson Act,
which collects ex-post levies, the criteria and method of which can bereasonably explained and therefore ensures foreseeability on the partof operators. Under normal circumstances , operators are obligated tosubmit to the NRC evidence to ensure their means of payment and thetotal amount of the ex-post levy to be shouldered is predetermined,
along with a ceiling amount for annual payments. This aspect should
be drawn upon in the Japanese scheme. Furthermore, the mutual
assistance arrangement among operators has also contributed to
improved safety through increased peer reviews. Japan should also
consider enhancing links between the nuclear compensation system
and laws related to the Act on the Regulation of Nuclear Source Material,
Nuclear Fuel Material and Reactors (“Reactor Regulation Act”). In
addition to encouraging peer reviews, it may be effective to redesign thescheme so that the contribution rate of general contributions wouldchange in accordance with the operators’ efforts in enhancing safetylevels.

(2)

Increased operator burden (increased burden a mong thegeneral public and consumers)
The Facilitation Fund provides the Government aid stipulated in
Section 16 of the Nuclear Compensation, but in effect provides
provisional financial assistance, which is to be recovered at a later date.

On March 22, 2013, the Nihon Keizai Shimbun reported that general contribution
amounts were determined to be a total of 100.8 billion yen. It also said, “The Government/ Facilitation Fund had hoped for 163 billion yen, twice the amount of fiscal year 201 1,
but held the total down at an amount equivalent to “seven months” of payments, withconsideration for electric power companies that would face business dificulties.”.
176

99

In a broad sense being a “loan”, it is questionable whether this financial
assistance really qualifies as the Government aid provided for in the
Nuclear Compensation Act. It is also doubtful that the current scheme
fulfills the two purposes of the Act, namely, “the sound development of
nuclear power business” and “to protect persons suffering from nuclear
damage.”An especially serious issue is that the Government determines thecriteria for decontamination which greatly impacts what is to beburdened by the operator, TEPCO, while it shoulders all expenses
under Article 44 of the Act on Special Measures on Handling Pollution
by Radioactive Materials.
As discussed in Section 3 of this chapter, upon the enactment of
the Act on Special Measures on Handling Pollution by R adioactive
Materials,

it

was

decidedwithout

sufficient

discussion

thatdecontamination costs would be shouldered by the operator. Likewise,
the grounds for setting the effective decontamination target are notclear either. The following figure illustrates the approach taken in
determining decontamination targets. The current target , set pursuant
to the basic principles of the Act on Special Measures on the Handlingof Pollution by Radioactive Materials , is to “limit additional exposure to
1mSv/y as a long-term target in areas where cumulative radiation
doses are below 20mSv/y.” This target aims to limit annual radiation
dosage in addition to that from natural background radiation (0.38
mSv/y in terrestrial radiation from the ground and 0.29 mSv/y incosmic radiation from space) to 1 millisievert per year. 177 The
developments leading to the determination of this target were extremely
political, as provided below:
April 19, 2011 Nuclear Emergency Response Headquarters sets 3.8 µSv/h(equivalent to 20mSv/y) as provisional criteria for using
school buildings and grounds in Fukushima Prefecture
April 29, 2011 Toshiso Kosako, Special Advisor to the Cabinet resigns in
opposition to the above criteriaFirst joint meeting of the Disaster -Related Waste Safety Assessment Committee andEnvironmental
RecoveryCommittee
onOctober
10,
2011,
available
at:www.env.go.jp/press/file_view.php?serial=18437&hou_id=14327
177

100

May 27, 2011

Ministryof

Education,

Culture,Sports,ScienceandTechnology (MEXT) decides to set provisional radiation dosetarget for students at 1mSv/y or less and to provide financial
assistance for activities to lower radiation dosage of soil
September 28, 2011Cabinet Office and Ministry of the Environment (MoE) set
out policy to conduct focused decontamination in areas withradiation doses less than 5mSv /y. Local governments express
strong dissatisfaction
October 2, 2011 Goshi Hosono, then Minister of the Environment announce s
in a meeting with the Governor of Fukushima that theGovernment will be responsible for the decontamination ofareas with radiation doses of 1-5mSv/y and provide financial
assistance

Figure 8 Approach taken in determining contamination targets

When

the

decontamination

targetwascoveredset

at

5mSv/y,approximatelythe

1800km 2

areaofrequiring

Fukushima

Prefecture, but once the target was set at 1mSv/y the target area
expanded to other prefectures in the north Kanto region, covering an
101area of approximately 13,000 km 2 178 .
According to a report compiled by the Cabinet Office Working
Group on Risk Management of Low-dose Radiation Exposure 179 , “healthrisks from annual radiation exposure of 20 mSv are considered to besmall when compared against, for example, t he risks from othercarcinogenic factors (smoking, obesity and a lack of vegetables in one’s
diet, etc.) and are comparable to the risks accompanying preventive
measures against radiation exposure (stress from evacuation, lack of
exercise due to avoidance of outdoor activities, etc.).” However, theexpansion of the criterion has created and established notions that
“nonconformity will entail risk” or that “the target must be immediatelymet,” therefore keeping residents from returning to their homes.
Against this backdrop, Fukushima Prefecture has also requested thatsafety standards based on scientific grounds be promptly present ed(comment by Governor of Fukushima at a meeting between the
Government and twelve local governments held on February 17,
2013 180 ).
Fukushima

Prefecture’s

requestwarrant

revisionofdecontamination criteria based on scientific grounds and the Nuclear
Regulation Authority (NRA) should be actively involved with such
scientific safety standards which are directly related to the healthissues of local residents. Article 3 of the Act for Establishment of the
Nuclear Regulation Authority stipulates that the miss ion of the NRA is“to ensure safety in the use of nuclear energy […] for the purpose ofcontributing to the protection of the life, health, and property of thecitizens, preservation of the environment, and national security ofJapan. The affairs under its jurisdiction stipulated in Article 4,paragraph 1 explicitly include “affairs concerning the prevention ofradiation hazards” (subparagraph (v)) and “affairs concerning thedevelopment and promotion of basic policies on the monitoring and

178

The Asahi Shimbun, October 11, 2011179www.cas.go.jp/jp/genpatsujiko/info/twg/111222a.pdf

On p35 of WEDGE September 2013, a comment made by Junichiro Tada of NPO
Radiation Safety Forum, which has continued to support Fukushima, is introduced: “Thetarget of 1mSv per year is now hindering rehabilitation in Fukushima.” It is also pointed
out that food safety standards, set at 100 becquerels per 1kg (for common food), have also
become one of the most strictest in the world based on political judgment.
180

102

measurement of radioactive material or radiation levels, and plans forallocating

expenses

among

the

relevant

administrative

organs”(subparagraph (vi)).
The current scheme, which obligates operators, without any
opportunity to prove otherwise, to shoulder all costs inclu ding thosewhich were increased in accordance with politically determined criteria,
should also be revised. Burdens borne by the operator will eventually
have to be shouldered by the general public and consumers in the formof taxes or electricity tariffs. Therefore, recalling the purpose of the
Nuclear Compensation Act and the role of the Facilitation Fund, ascheme under which the Government will guarantee payment ofamounts shouldered in excess of a certain amount and/or according to
the form, scope and substance of the burden, should be incorporated
into the Facilitation Corporation Act in order to seek prompt victim
relief.

(3) Government involvement in local restoration
As indicated in the discussion about the sixth disadvantage, local
communities which have been lost in major nuclear disasters such as
the recent TEPCO Fukushima accident cannot be restored, regardlessof how sufficiently tort-based monetary compensation is made available.
If local communities cannot be restored, victims cannot be trul yremedied;andhence,

aschemeindependent

of

the

nuclearcompensation scheme may need to be established.
The new scheme should be considered with a view to what
operators should shoulder as discussed in subsection (2). A detailed
proposal is made in Part III.

103

Chapter 2
The risks accompanying nuclear
operations revealed in the Fukushima accident
Chapter 1 discussed how the TEPCO Fukushima accident was
legally addressed and the context in which events occurred. Chapter 2
will discuss the risks accompanying nuclear operations that wererevealed in the TEPCO Fukushima accident , in order to identify thechallenges that need to be resolved if nuclear business is to be retainedin Japan.
Various risks entailed in nuclear business were revealed as aresult of the TEPCO Fukushima accident.
Since Japan’s first commercial reactor, JAPC’s Tokai Power
Station began operation in 1957, nuclear operations have beenpromoted under the basic principles of taking a “lockstep approach”
and being a “private business led by national policy”. This framework
was strengthened as a “back end risk consortium” (details can be foundin Part I, Chapter 2), undermining the risk assessment functions of acapital market. 181
Even before the TEPCO Fukushima accident, it was well -apparent
that nuclear business was a “two-edged blade” that could generate large
profits when in operation but could also be a significant burden,
including the fuel costs to be required in the increase d use ofalternative thermal power, once stopped. When the Niigata -Chuetsu
Earthquake that occurred in July 2007 stopped operations at TEPCO’s
Kashiwazaki-Kariwa Nuclear Power Plant, the company consequently
posted a net loss of 150.1 billion Japanese yen on a consolidated basis
in March 2008, running a deficit for the first time in 28 years since theSecond Oil Crisis. TEPCO marked a net loss of 84.5 billion in 2009,
therefore revealing that an electric power company’s business as awhole was dependent on the operation rate of nuclear power plants.
The risks of being a back end risk consortium had been brought

Takeo Hoshi, Professor at the University of California, San Diego, stated in “Boukoku
no Touden kyuusaian (TEPCO relief plans of a ruined country)” (Kinyu Keizai Jijo, May
30, 2011), “If Government aid is implemented, the supervision by financial suppliers
which had originally been weak will be further compromised.”
181

104

to light after a series of delays in the completion of the JNFL’s
reprocessing plant. A total of approximately 1000 tons of spent fuel are
generated annually from nuclear power plants throughout Japan and it
had been pointed out that if the reprocessing expected to be conductedby the JNFL is suspended, the storage pool and spent fuel pools at eachnuclear power plant will become full sooner or later , forcing Japan’s
nuclear power plants to cease operations. It should be noted, however,that if in the end it becomes impossible for the JNFL to provide services
to electric power companies due to additional regulations or otherreasons, it will no longer be able to receive payment of the reprocessing
costs set aside by each electric power company pursuant to the Spent
Nuclear Fuel Reprocessing Fund Act, and will therefore experience
funding difficulties. If the JNFL should fall into bankruptcy, then theelectric power companies supporting the JNFL as joint shareholders(400 billion Japanese yen in capital) and joint guarantors (1 trillion
Japanese yen) will risk being exposed to the domino effect.
The risks entailed in nuclear operations including those re vealedin the TEPCO Fukushima accident are marshalled below:

1.

Nuclear accident risk (for both front end and back end

operations)
Until the TEPCO Fukushima accident occurred, it had been widelybelieved among concerned parties that the safety level w as so high at
Japanese nuclear power plants that they would never have accidents 182 .

The “nuclear safety legend” had prevailed among not only nuclear p ower operators
but in wider spheres. For example, at a meeting of the House of Representatives Scienceand Technology Committee of the 145th Diet (March 16, 1999, asked about the safety of
nuclear power plants in neighboring countries, Shigeru Aoe, Directo r General of the
Science and Technology Agency’s Atomic Energy Bureau replied, “It is very important forJapan, as a country with high nuclear technology to cooperate to a certain extent withneighboring countries in improving their safety levels.” He went on to state, “Japan has
taken measures in international cooperation by taking the initiative in international
conferences, dispatching experts and accepting trainees.” One of the reasons given forJapan not having joined international frameworks on nuclea r damage compensation suchas the Convention on Supplementary Compensation for Nuclear Damage (CSC) at the firstmeeting of the Committee, was that campaigns to promote becoming a party to suchinternational agreements did not intensify because of concerns that if Japan was
victimized, the Japanese citizens’ right of access to the court could be limited, while there
182

105

However, the recent accident has brought us to understand the risk ofaccident and the magnitude of the impacts of a nuclear accident.
Impactsofanuclearaccident

include:i)theshoulderingofcompensation payments for damages (including administrative costs forcompensation); ii) additional fuel costs for increased thermal power
generation to replace suspended nuclear power generation; iii) the costs
incurred in terminating the accident and those required for thedecommissioning of reactors; and iv) growing difficulties in continuing
operations as a result of these increased costs. The first impact wasaddressed by enacting the Facilitation Corporation Act, the second
impact was resolved by having the costs burdened by users throughincreased electricity tariffs, and the third impact is currently being
addressed in the Agency for Natural Resources and Energy in theongoing discussions regarding the revision of accounting cr iteria on thedecommissioning of nuclear power plants which are being taken in the
direction of basically having consumers shoulder the costs that thereserved funds fail to cover. However, there have been no fundamental
discussion about the fact that electric power companies may facedifficulties in continuing their business due to these increased costs.
Furthermore, as electricity system reforms advance, schemes such as
tariff regulations based on FDC pricing and general mortgages whichhave supported the financing of electric power companies are likely tobe abolished.

2.

Increased costs accompanying ex-post alterations inpolicy and regulations (for both front end and back end
operations)
On the night of May 6, 2011, then Prime Minister Naoto Kan held
an emergency press conference to “request” the stoppage of operationsat Hamaoka Nuclear Power Plant run by Chubu Electric Power Company

was substantially little chance that a nuclear accident would occur in Japan, comparedto possibilities of Japan suffering damages from acciden ts in other countries.

106

(“Chuden”). 183 Chuden opened an extraordinary board meeting on May
9, and deciding to accept the request, suspended operations at the
Hamaoka Plant. As the Hamaoka Nuclear Power Plant is located in anarea in which a major earthquake, Great Tokai Earthquake, is projected
to occur, the request tends to be supported by many as an appropriate
measure. 184 However, its legitimacy remains extremely ambiguous 185
and the event set the path for many other developments in nuclear
regulation that have undermined the foreseeability of nuclear business.
Drawing on the lessons learned the TEPCO Fukushima accident,
on September 19, 2012 the Nuclear Regulatory Authority (NRA) and its
secretariat, the Nuclear Regulatory Agency were established pursuant
to the Act for Establishment of the Nuclear Regulation Authority 186 . The
NRA is to integrally govern affairs for independent nuclear safety
regulation based on expertise, from a neutral and fair standpoint.
Analyzing the TEPCO Fukushima accident, the National Diet of Japan
Fukushima Nuclear Accident Independent Investigation Commission(NAIIC) indicated that Japan did not have a backfit rule, or legal
framework for applying revised safety criteria on licensed nuclear power
plants. Although the lack of a system to guarantee the incorporation of
innovative safety technologies into Japan’s conventional administrative
practices for nuclear safety should be improved, the retrospective
application of regulatory criteria could pose risks for the business

The entire press conference on the request for suspension of operations at Hamaoka
Nuclear Power Plant is introduced on NHK Kabun blog, available at:www9.nhk.or.jp/kabun-blog/100/81095.html
183

Some evaluate the “request” as a b old decision. The following private blog is an
example: analyticalsociaboy.txt-nifty.com/yoakemaeka/2011/05/post -8fda.html
184

Matsui, Kenichi. Fukushima genpatsu jiko wo norikoete – global energy shift no jidai(Overcoming the Fukushima nuclear power plant accident: the global energy shift era)
(Energy Forum books, 2011) states that although the “request” had been made on the
grounds that the risks of Hamaoka Nuclear Power Plant sitting on an active fault had
been pointed out and that a Tokai Earthquake with a magnitude of 8 is likely to occur
with a probability of 87% within 30 years, such contentions would undermine
conventional views, as this fault is not included in the list approved by MEXT’s
Headquarters for Earthquake Research Promotion. The Shizuoka D istrict Court
dismissed motions for a court injunction to suspend operations at the Hamaoka plant(October 2007) ruling that the fault in question was “not an active fault .” Matsui also
points out that the Prime Minister’s “request,” in effect, a cknowledged that conventional
Government views and district court rulings had been mistaken (p108)
185

Outline of the Nuclear Regulatory Authority and draft for new safety criteria,
available at: www.jaif.or.jp/ja/news/2013/panel02_yamamoto.pdf
186

107

environment of nuclear power generation, depending on how suchframeworks are used. Detailed discussion on nuclear safety regulations
can be found in 21st Century Public Policy Institute’s report, Toward aComprehensive Solution for Nuclear Policy and Business Challenges. 187
Some of the impacts of such ex-post alterations in policy andregulations include: i) additional fuel costs for increased thermal power
generation to replace suspended nuclear power generation; ii) the costs
incurred in meeting the requirements of new regulations; and iii)
growing difficulties in continuing operations d ue to these increased
costs (in particular, for JAPC). Resolutions for the first and second
impacts have been sought through having customers shoulder the costsby raising electricity tariffs, but the third issue of JAPC facing
difficulties in continuing business is critical. JAPC has one nuclear
power plant in Tokai Village in Ibaraki Prefecture, and two, in Tsuruga
City, Fukui Prefecture. Regarding the fault fracture zone located within
the premises of the Tsuruga Nuclear Power Plant, the NRA has accepted
the report by a meeting of experts that the D -1 fracture zone whichruns right under the Tsuruga Power Station Unit 2 “is likely to be an
active fault that is taken into consideration in seismic design.” (Given
JAPC’s submission of an open letter to the N RA in December and its
intention to conduct independent studies, the debate is yet to beresolved at the time of writing this report.) JAPC faces criticaldifficulties in operating its nuclear power plants , including the Tsuruga
Power Plant Unit 1, an aged plant that began operations in 1970 which
is located on the same premises as Unit 2 and the Tokai No.2 Power
Station, which is exposed to strong opposition against its restart, . Ifthey are to be decommissioned, JAPC will not only lose the promised
profits from power generation but will also suffer a decrease in its total
assets and increased decommissioning costs which could jeopardize thecontinuity of the company’s business 188 . Hence, the need to discuss

For details, refer to: Sawa, Akihiro and Sumiko Takeuchi. Toward a Comprehensive
Solution for Nuclear Policy and Business Challenge (21st Century Public Policy Institute,
1872013). Skeptic views of the current regulatory activities by the NRA can be found in, forexample, “Genshi ryoku kisei iinkai no ayaui “yaruki” wo hihan suru (Criticizing thedangerous enthusiasm of the Nuclear Regulatory Authority)” available at agoraweb.jp/archives/1506695.html
188

The Asahi Shimbun dated July 12, 2013 reported that although the company has 16 2.9108

how risks and costs incurred by policy changes shou ld be shouldered
have been put forth by many, including Makoto Yagi, Chairman of theFederation of Electric Power Companies (FEPC) and President of Kansai
Electric Power Company (KEPCO), who said, “ We will discuss the costburden with the Government if nuclear power operators are compelled
to decommission nuclear power plants as a result of policy change .”3.

Risks of technological challenges (decommissioning ofreactor in accident, back end operations including
reprocessing)
The processing of spent fuel can be divided into a once through(or, open cycle) approach (where fuel is used once and then sent tostorage) and a reprocessing approach. Japan has pursued a policy
aimed

at

domesticallyestablishinganuclear

fuel

cycle

since

announcing the Long-term Plan for Research and Development andUtilization of Nuclear Energy 189 in 1956. The advantages of a nuclear
fuel cycle process are that: i) the volume of high -level radioactive waste
can be reduced to one-seventh through reprocessing and the use of fast
reactors; ii) the time required for the toxicity to be reduced to the samelevel as the original uranium fuel can be reduced from approximately
100,000 years to approximately 300 years; and iii) when the fastbreeder reactor fuel cycle becomes viable in th e future, uranium
resources will be able to be reused for thousands of years. 190 However,various problems including high costs and high -level radioactive liquid
waste issues have also been voiced from skeptics 191 .
Whether or not the nuclear fuel cycle policy should be sustained
must be considered not only from economic dimensions but also fromthe viewpoints of nuclear non-proliferation (plutonium management)
billion yen net assets, if the three reactors are to be decommissioned, it will end up withan asset deficiency of 98.2 billion yen.
189

www.aec.go.jp/jicst/NC/tyoki/tyoki1956/chokei.htm#sb1050507

Material compiled by the Agency of Natural Resources and Energy, November 2012.
www.enecho.meti.go.jp/committee/council/basic_problem_committee/033/pdf/33 -4.pdf
190

191

“Invoice of 19 trillion yen,” supposedly written by a young METI officer in spring 2004,
kakujoho.net/rokkasho/19chou040317.pdf

available at:109and energy security. The risks associated with private operators
continuing to shoulder the nuclear fuel cycle, which still embraces
technologicaluncertainties,

have

been

brought

tolight,

asundermentioned.
The current framework for back end operations is provided below:a) Decommissioning operations: respective nuclear operators (ownersof reactors); decommissioning costs are reserved by each nuclear
operatorb) Storage of spent fuel: JNFL (approximately 2,945 tons as of July2013), on-site storage at nuclear facilities by the respective nuclear
operators (approximately 14,000 tons as of March 2013); TEPCO and
JAPC have succeeded in siting an interim used fuel storage facility,
the Recyclable-Fuel Storage Company (RFS) Mutsu, which has yet tostart operations.
c) Reprocessing of spent fuel: JNFL
d) Final disposal of radioactive waste: JNFL (low -level), NUMO (highlevel, TRU waste)e) MOX fuel processing: JNFL
f) Consumption of MOX fuel in the near future: Plans for commercial
operation of the advanced converter reactor, Fugen, were aband oned
due to high costs. The “Pluthermal” policy is to be implemented in
all light-water reactors in Japan, beginning with the Ohma Nuclear
Power Plant under construction by Electric Power Development Co.,
Ltd. which will operate on full-MOX fuel.
In addition to the issues that reprocessing spent fuel entails morecost than underground disposal and that the final disposal site forhigh-level radioactive waste is yet to be determined, in terms ofreprocessing technology (c), although operations have started at theexperimental facility of the Japan Atomic Energy Agency (JAEA)(formerly,theCorporation

Power(PNC))

in

ReactorTokai

and

NuclearVillage,

Fuel

IbarakiDevelopment

Prefecture,thecompletion of the reprocessing plant that the JNFL is constructingin Rokkasho Village, Aomori Prefecture, has been postponed 19
times due to technological problems. The JNFL seeks to complete
construction by the end of this year and to initiate operations assoon as possible, but it remains uncertain where the safety chec ks
110conducted by the NRA based on the new safety standards will lead.
As aforementioned, if additional regulations should impair smooth
operations in the future, challenges including: i) increased deficits due
to delayed work on the part of JNFL; ii) incre ased costs required toaddress such delays; and iii) growing difficulties in continuing
operations due to increased costs will arise, as well as obstacles indetermining a final disposal site for nuclear waste. As mentioned in the
beginning of this chapter, if the JNFL should fall into bankruptcy, thenthe electric power companies supporting the JNFL as joint shareholders(400 billion Japanese yen in capital) and joint guarantors (1 trillion
Japanese yen) will experience worsening business conditions all at once.
All of these risks are related to the technological uncertainties of theback end process which have yet to be addressed.
This chapter discussed the risks related to nuclear businessincluding those which had not been revealed until the TEPCO
Fukushima accident. In Japan, especially, the difficulties of having theprivate sector shoulder the nuclear fuel cycle policy , which should be
supported by the nation as a whole , has aggrandized. Explicit politicaland administrative decision is required on wh ether Japan will continue
exhibiting to the rest of the world a model for the peaceful use of
nuclear technology centered on a nuclear fuel cycle policy or whether
Japan will make a policy change. The author would like to make astrong point that if Japan is going to maintain its nuclear fuel cycle
policy, an overall discussion on the sharing of responsibility, including
who and how risk of accident, risk of ex-post alterations in policy andregulations and risk of technological challenges should be shouldered,will also be called for.

111

Chapter 3 The challenges of the current nuclear
compensation scheme and ideas for revisionThis chapter will identify the schemes that need to be reformed or
improved in order to reduce the risks and uncertainties of nuclear
business and to be fully prepared for major disaster, while continuing
nuclear business, as well as the direction in which revisions should be
made. Based on the discussions held at Committee meetings and ideas
provided by concerned parties, issues will be discussed under three
categories.

1. Ideas for limiting risks and risk-sharing(1)

Problems arising from the ambiguity of the definition of“nuclear damage”
The estimated compensation payment amounts due to the TEPCO
Fukushima accident have increased with time, partly due to thedifficulty of predicting damages immediately after the occurrence of an
accident. The required compensation payment estimated in TEPCO’s
business plan is provided in table 12.
As aforementioned, the Act on Special Measures on Handling
Pollution by Radioactive Materials stipulates that decontamination
costs would be shouldered by the operator as damage for which “thenuclear operator who is engaged in the reactor operation etc. on thisoccasion shall be liable” pursuant to Section 3, paragraph 1 of the
Nuclear Compensation Act. According to estimates by the National
Institute of Advanced Industrial Science and Technology (AIST) 192 , thecosts required for decontamination may exceed 5 trillion yen.

Hodaka and Naito. Fukushima kennai no josen jisshi kuiki ni okeru josen no hiyou ni
kansuru kaiseki (Analysis on decontamination costs in decontamination areas in
Fukushima Prefecture) (AIST, July 23, 2 013), available at confit.atlas.jp/guide/eventimg/jsap2014s/18p-D3-2/public/pdf?type=in
192

112

TimingNovember
2011

February2012
May 2012

February
2013

June 2013

Emergency
specialbusiness plan
Emergency
specialbusiness plan
Comprehensive
SpecialBusiness Plan
Comprehensive
SpecialBusinessPlan(revised)

New Special
Business Plan

Estimated
requiredcompensation
payment amounts

1,010,908,000,000
yen

1,700,322,000,000
yen
2,546,271,000,000
yen
3,243,079,000,000
yen

3,909,334,000,000
yenReasons for estimate orrevision
Compensation payment
amounts for the range ofdamages that can be
estimated with reasonablecertainty at the timing of
formulating the plan
Beginning of compensation
for damages related tovoluntary evacuation
Beginning of partial inclusionof compensation for property
damage in estimates
Reflection of the Concept forCompensation Standards
following Review of the Areas
under Evacuation Orders
Revisions made in accordance
to progress in the Concept forCompensation Standards
following Review of the Areas
under Evacuation Orders;revision of the scope of
harmful rumor-induced
damages in agriculture, theforestry and fisheries sectors
and processing and the
distribution sectors

Source: compiled by author based on information on TEPCO website

Table 12 Required compensation payments estimated in TEPCO’s
business plan

How did the nuclear damages to be burdened by nuclear operators
increase to such an extent? According to comments made by Committee
members, it owes largely to the ambiguity of the definit ion of “nuclear
damages.”
The Nuclear Compensation Act, which stipulates that “ as used inthis act, ‘nuclear damage’ means any damage caused by the effects ofthe fission process of nuclear fuel, or of the radiation from nuclear fueletc., or of the toxic nature of such materials (which means effects thatgive rise to toxicity or its secondary effects on the human body by113ingesting or inhaling such materials)” (Section 2, paragraph2), only
refers to the causes of nuclear damage. Therefore, pursuant to theprinciples of the Civil Code, damage is compensated only to the extent
that adequate causation can be acknowledged between the damage andradiation. The approach that not all damages caused by negligenceshall be completely compensated but that only those with adequate
causation shall be compensated is based on the concept that the actor
must have calculability and foreseeability within a certain range ofrisk. 193
In English and American law and in German law, negligence tort
liability is limited for pure economic loss. The most important grounds
for this approach is that without limits, the victimizer’s liabilities would
be unlimited (“flood gate argument”) and therefore unreasonable.

194

Based on this theory, the damage induced by harmful rumors which
accounts for a large portion of the damage compensated by TEPCO
would be excluded from nuclear damage , limiting damage to personal
damage (including late injuries) and property damage accompanying
nuclear disasters. 195 In the Draft Summary of the Proceedings of the
Fourth Meeting of the Special Committee on a Nuclear Compensation
System 196 from September 30, 1998, the following acknowledgement isshared among committee members (emphasis added by author):<Concerning nuclear damage (costs for precautionary measures)>(Endo) Please tell us about interpretations or precedents on so -called damage
incurred by harmful rumors? I would also like to ask about interpretations ininternational agreements.
(Secretariat) Our understanding is that damage incurred by harmful rumors

Morishima, Akio. Genshiryoku jiko no higaisha kyusai (2) – songaibaisho to hosho(Victim relief in nuclear accidents (2): indemnification and compensation for damag es),
Toki no Hourei , Vol. 1882, p40
193

Details can be found in: Yoshino, Atsuto, “Junsui keizai sonshitu” ni kansuru
gakusetsu no kento – igirisu hou ni okeru giron wo chuushin ni (A study of scholarly
theories on “pure economic loss”: with a focus on discu ssions in English law), Houritsu
Rongen Vol.83, No.1
194

Japan Energy Law Institute. Genshiryoku songai baishou housei shuyou kadai
kentoukai houkokusho (Report of the Panel on Major Issues Regarding a Legal Framework
for Nuclear Compensation) (2005), p3
195

196

www.aec.go.jp/jicst/NC/senmon/old/songai/siryo/siryo05/siryo1.htm

114

is not nuclear damage. For example, in 1988, the Nagoya High Court ruledthat there was no adequate causation between harmful rumors about
radioactive contamination from JAPC’s Tsuruga plant and reduced fish s ales.
(Nohmi) First of all, if liability (negligence) can be acknowledged in for creating
the cause of harmful rumors and there is adequate causation between thatand the damage incurred by the harmful rumor, the damage can becompensated under tort law as stipulated in the Civil Code. However, theunderstanding is that since it is not nuclear damage, it is not an matter of
the Nuclear Compensation Act. International agreements are understood tofollow the same understanding.
<Concerning the concept of nuclear damage>(Yamazaki) Since the Nuclear Compensation Act is a special law under thelaw of torts in the Civil Code, nuclear damage is limited. The issue is whether
or not to indemnify costs incurred outside of nuclear damages(Chairman) That is beyon d the scope of the Nuclear Compensation Act andshould not be discussed here.
(Torii) The financial security amount is determined with no regard to theamount that must be compensated, and therefore, there is no meaning in
discussing how to allocate the fi nancial security amount.
(Nohmi) Of course, the financial security amount and compensation payment
amounts are separate, but when an accident occurs, the financial security
amount is first allocated for victim relief. Since this amount is limited, should
not personal damage with high levels of emergency be prioritized?

However, Guidelines 7-1 to 5 of the Interim Guidelines by the
Dispute Reconciliation Committee acknowledge damages incurred byharmful rumors. (Guideline 7-1 II “damage incurred by harmful rumor
shall be included in damages to be compensated if adequate causation
with this accident can be acknowledged.”)According to Professor Tadashi Otsuka of Waseda University
Graduate School of Law who is also a committee member on the Dispute
Reconciliation Committee, “In precedents in Japan, the scope ofcompensation has only been determined by applying Section 709 of the
Civil Code or applying Section 416 based on reasoning by analogy(ruling of the Supreme Court on June 7, 1973, Minshu Vol27, No.6,115

p681) and there is no reason to exclude pure economic loss.” 197 While
Japanese courts had conventionally been reluctant to acknowledge
damage induced by harmful rumors (Toyama Bay mercury pollutioncase, Tsuruga Nuclear Power Plant harmful rumor -induced damage
case,

JCO

criticality

accident

andfisheries

product

processing

company, JCO criticality accident and decline in real estate prices),some rulings had begun to acknowledge damage induced by harmful
rumors since the JCO criticality accident. (The court acknowledged
damage induced by harmful rumors for two claims which were filed by
natto manufacturers after the JCO criticality accident, but presented
largely different value judgments regarding temporal limits, including
when damage induced by harmful rumors would end, andthecalculation of compensation amounts.) 198 Taking these developments
into consideration, some contend that the reason that pure economic
loss and environmental damage have not been acknowledged as nuclear
damage in other countries is that because the liability of nuclear
operators is limited, there was a need to prioritize the damages to becompensated, and pure economic loss was excluded because of its
comparatively low priority, whereas in Japan, after the JCO accident,
damage induced by harmful rumors has gained wide recognition as aform of damage and is compensated without being given an order ofpriority in Japan’s unlimited liability regime. 199
However, many Committee members indicated that the inclusionof pure economic loss (damage induced by harmful rumors) andenvironmental damage (decontamination) in the concept of nuclear
damages should be carefully deliberated, considering the impact thatsuch conclusions would have on future theories of tort law. It should
be noted that the Committee does not take the position of denying any
compensation for these damages, but instead believes that such items

Takahashi, Shigeru and Tadashi Otsuka. Shinsai, genpatsu jiko to kankyouhou(Earthquake-induced
disaster,nuclearaccident
andenvironmental
law)(Minjihokenkyukai, 2013)197

Yamashita, Fujii, Sasaoka and Honda. Genpatsu jiko to huuhyou higai – higaishasouki kyuusai no kanten kara – (Nuclear accidents and damage induced by harmful
rumors: from the viewpoint of prompt victim relief) (NBL957, July 15, 2011)
198

Utatsu, Noboru. Genshiryoku songai baishou no houritsu mondai (The legal issues ofnuclear damage compensation), (KINZAI value series)
199

116

should be considered under a scheme separate from the compensation
scheme for nuclear damages, which is based on tort law.
( 2)

Considerations

ofincreasing

thefinancialsecurity

amountThe Nuclear Compensation Act determines the financial security
amount payable by each nuclear operator depending on the content andscale of its nuclear operations. Operators who operate nuclear r eactors
with thermal output of over 10,000 kW must make available 120 billion
yen in the form of: i) private insurance policies (nuclear damage liability
insurance policy) and agovernment indemnity agreement (indemnity
agreement for nuclear damage compensation; ii) deposit; or iii) othermeasure equivalent to i) or ii). TEPCO had concluded private liability
insurance policies and a government indemnity agreement worth 120
billion yen for the Fukushima Daiichi Nuclear Power Plant as a whole.
The Government provided 120 billion yen in indemnification payments
under its Second Supplementary Budget for fiscal year 2011 which was
paid out to TEPCO in November, 2011. (Private insurers were exempt
from payment because insurance policies exempt coverage of natural
disasters such as earthquakes and tsunamis.)
However, the TEPCO Fukushima accident revealed that thecurrent financial security amount was insufficient and that a series ofaccidents could concurrently occur on the same site. Then, to what
extent can the financial security amount be increased?
In Japan, nuclear insurance is provided as coinsurance by apool. 200 This is because: i) nuclear insurance covers a small number offacilities and is therefore not subject to the “law of large numbers;” andii) total subscriptions would add up to a large amount of money. The
initial financial security amount was determined to be 5 billion yen
when the Act was enacted, not because the required compensation
payment amounts were estimated to be 5 billion yen, but because that

The Japan Atomic Energy Insurance Pool was established in March 1960 to undertake
nuclear liability insurance and nucl ear energy property insurance as well as conduct
reinsurance operations. As of April 1, 2012, the pool comprises 23 companies and has
overseas reinsurance transactions with 22 nuclear insurance pools in UK and other EU
states, the U.S., South Korea, and Ch ina, etc.
200

117

was the maximum viable amount, including reinsurance by overseas
insurance

pools. 201

Asaforementioned, as insurancecompanies

provided more insurance, the financial security amount was increased,gradually approaching the current amount of 120 billion yen.
What is the upper limit to increasing amounts covered by private
insurance policies? Although precise estimations cannot be madewithout setting detailed premises, it has been suggested that 200
billion yen would be the ceiling amount to enable the stable provisionof insurance. Therefore, when the compensation payment amounts
required amount to several trillions of yen, as is the case in the TEPCO
Fukushima accident, an incident cannot be sufficiently covered in any
case.
The Committee studied the potentials of : i) an ex-post mutual
assistance scheme as that under the U.S. Price-Anderson Act; and ii)
financing from the capital market (nuclear catastrophe bonds).
i) Ex-post mutual assistance scheme among operators 202
When the Price-Anderson Act which stipulates the U.S.’s nuclear
compensation scheme was enacted in 1957, it placed a ceiling of 560
million dollars on the public liability of a nuclear operator per one
nuclear accident, requiring companies to obtain the largest coverageavailable in nuclear liability insurance from the private insurance
industry and provided for further government commitment. The largest
coverage available then was 60 million dollars, and hence, government
indemnification accounted for the remaining 500 million dollars. In
1957, as there was little known about nuclear risk and the number offacilities to be covered by insurance were limited, private insurance

However, Utatsu, Noboru. Gendai genshiryokuhou no tenkai to houriron dai 2 han(The development and legal theory of modern nuclear energy law, second edition)(Nihonhyouronsha, 2012) P294 points out that “insurers undertake more property
insurances (whereas in Switzerland, the property insurance coverage for a nuclear reactor
is fourfold of liability insurance amounts.” And “limitation of liability on the part of thenuclear operator cannot be justified by capacity limits of the insurer to unde rtake
insurance.”
201

Much information on the Price -Anderson Act was derived from Utatsu, Noboru.
Gendai genshiryokuhou no tenkai to houriron dai 2 han (The development and legal
theory of modern nuclear energy law, second edition) (Nihonhyouronsha, 2012) and from
Mr. Utatsu, himself.
202

118

companies would undertake small subscriptions. Therefore, the federal
government

had

to

offer

500

milliondollars

ingovernment

indemnification in order to limit the liability of operators to an
aggregated amount of 560 million dollars with the private insurance
amount, in order to promote private sector participation in the nuclear
business.
However, such government indemnification was cr iticized to be“overprotective” of the nuclear industry, in particular by conventionalenergy-related industries, including the coal industry. Hence, in the1975 amendment, a mutual assistance program (secondary financial
protection) was introduced among operators. Under this program, notonly the nuclear operator which caused the accident but also all othernuclear operators would provide a maximum of 5 million dollars per
nuclear reactor. With increased private insurance coverage (160 million
dollars as of 1982) and the introduction of the secondary financial
protection, the role of government indemnification was gradually
narrowed, until it finally diminished in November 1982, when the 80th
nuclear reactor was licensed and the total liability limit of 560 million
dollars could be collectively covered by 160 million dollars in private
liability insurance and secondary financial protection payments of 5
million dollars multiplied by 80 reactor units.
In the 1988 amendment, the ex-post payment amount to beshouldered by operators was increased to 63 million dollars per unit
(payable at a rate not to exceed 10 million dollars per year), given
opinions that Act should be amended to provide for unlimited liability
in effect, as well as impacts of the 1986 Chernobyl accident. The
current premium amount is 111.9 million dollars per unit (payable at
a rate not to exceed 17.5 million dollars per year), after inflation
adjustments every five years. The historical structural changes to thePrice-Anderson Act is illustrated in the figure below: 203

203

Provided by Noboru Utatsu.

119Figure 9 Price-Anderson Act

The general contributions payable under the current Nuclear
Compensation Act is said to be based on the mutual assistance programamong operators under the Price -Anderson Act. However, under thePrice-Anderson Act, the operator is obligated to submit to the Nuclear
Regulatory Commission (NRC) evidence of that it has secure d thesecondary financial protection amount (Section 170, subsection b) sothat

concerned

partiescanforeseetheceiling

setfordamagecompensation payments that they would have to shoulder . Given theprovision in Section 170, subsection i(2)b, “ recommendations for
additional sources of funds to pay claims exceeding the applicableamount of aggregate public liability shall consider a broad range ofpossible sources of funds (including possible revenue measures on the
sector of the economy), the Price -Anderson Act is sometimes referred to
as

“not

takingalimitedliability

approach

despitegeneralunderstanding of the Act.” Nevertheless, operators and other concerned
parties enjoy the advantages of guaranteed foreseeability of the near
future.
The reason that the mutual assistance program among operators
is also referred to as an “ex-post levy collection scheme” is because thepayments are considered to be retrospective premiums. In addition, theprovisions stipulate, in detail, means for securing payments, such as
120

that the U.S. nuclear insurance pool shall cover for up to a total of 30
million dollars per accident, or an accumulated total of 60 million
dollars of retrospective premiums that insured licensees fail to pay. 204
The mutual assistance program among operators is not only
effective in increasing financial security amounts but also - andperhapsmore

importantly-inencouraging

competition

among

operators in compliance with safety regulations through peer reviews(details can be found in the report on interviews in the U.S.
aforementioned).
Japan has 50 reactors, which is approximately half the number in
the U.S.. It was mentioned in Committee meetings that given the limits
to amounts coverable by insurance, a mutual assistance programamong operators may effectively boost the financial security amountand foster a mutual safety monitoring system among operators.
ii) Consideration of the potential procurement of funds for nuclear
damage compensation payments from the capital market
Inadditiontoanex-postmutualinsurance

scheme,theCommittee also considered the possibility of procuring compensation
payment amounts from the capital market, that is, the formulation ofa nuclear catastrophe bond, which securitizes ma jor natural disasterrisks.
Given the diversification, complexity and burgeoning of corporaterisks, the importance of risk financing has long been advocated 205 ,and consequently, various insurance and financial products have beendevised,amounts impossible to procure in the insurance or re -insurance market could be procured from the capital market. Of themany different types of risk financing that are available as exhibited in
the table below, catastrophe bonds (“cat bonds”) can be used in
response to extraordinary disaster risks such as earthquakes.

Utatsu, Noboru. Gendai genshiryokuhou no tenkai to houriron dai 2 han (Thedevelopment and legal theory of modern nuclear energy law, second edition)(Nihonhyouronsha, 2012), p43
204

The Ministry of Economy, Trade and Industry (METI) launched a Risk -Financing
Study Group in September 2005 for the purpose of encouraging many companies toappropriately address risk-financing. The report compiled the study group is available
from the National Diet Library’s digital collection at: dl.ndl.go.jp/info :ndljp/pid/1009715
205

121

A cat bond securitizes the risks of extraordinary disasters, suchas earthquakes, typhoons, cold waves, and hurricanes, which have a
low risk of occurring but will cause major damage when they do occur,and transfers such risks to the financial and capital markets. 206
Cat bonds feature many advantages including: i) the transfer ofrisk to the capital market (an indefinite number of investors) –by
dispersing risk among a number of investors, risk of a scale impo ssible
to cover in the insurance market can be transferred; ii) the flexibility of
product design; iii) the avoidance of credit risk (monies can be collected
before risks occur and credit risk is avoided as necessary monies are
secured by the special purpose vehicle (SPV)); and iv) the possibility oflong-term contracts. However, it should be noted that this is at theexpense of: i) issuing costs; and ii) disclosing the risk quantification
and analysis conducted in order to secure the transparency of
information for investors.
Cat bonds came to be widely used after Hurricane Andrew hit the
U.S. accompanying intense damage (amounting to approximately 2
trillion dollars in insurance payments). A well -known Japanese case is
the securitization of earthquake risks in 1999 by Oriental Land Co.,
Ltd., which owns Tokyo Disneyland 207 . Under Oriental Land’s scheme,
when an earthquake of a certain magnitude, originating at depths 101
km or less, occurs within a 10km, 50km, or 70km radius of Maihama,home to Tokyo Disneyland, the earthquake would constitute a trigger
event for principal reduction.

Cat bonds are discussed in the aforementioned Risk Financing Study Group Report(footnote 205); Yoshizawa, Takuya. Kigyou no risk finance to hoken (Corporate risk
financing and insurance) (Chikurashobou); Ministry of Land, Infrastructure andTransport (MLIT). Shakai shihon unei ni okeru kinyuu shuhou wo mochiita shizen saigai
risk heijunka ni kansuru kenkyuu (Study on leveling natural disaster risk using financial
methods in social capital operations) (Policy Research Institute for Land, Infrastructure,
Transport and Tourism Research Report Vo.62) available at: www.mlit.go.jp/pri/houkoku/
gaiyou/pdf/kkk62.pdf ; Cabinet Office Economic and Social Research Institute. Shizen
saigai risk no tokushusei to sono risk management no konnansei: kigyou no shizen saigai
risk management ni kansuru survey (Major Characteristics of Disaster Risk and the
Difficulties in its Ma nagement: A Survey of Corporate Disaster Risk Management), (ESRI
discussion paper series no.199) available at:www.esri.go.jp/jp/archive/e_dis/e_dis199/
e_dis199.pdf#page=26
206

Oriental Land Co., Ltd., Notice on fund procurement using risk financing to co ver
earthquakes,
www.olc.co.jp/wpmu/wp-content/blogs.dir/2/files/2011/09/20110906_0111.pdf
207

122

Ret en tio n/
tra ns fer

Ris k - fin an ci ng
met ho d

Sha re hol de requ it y-

Ret en tio n

Com mi tme nt
lin e

Ret en tio n & tra ns fe r

Cap ti ve
ins ur anc e

Tra ns fer

Ins ur anc e

Fin it e
ins ur anc e

Ins ur anc e
der iv ati ve

Cat b ond s

Tra ns fer

Con ti nge nt
equ it ies-

Sho rt ti me
req ui red f ro mocc ur ren ce o f
ris k to pa ym ent-

Ind iv idu al it y o f Adm in ist ra ti ve Con tr act Acc ou nti ng
p rodu ct
cos ts *p erio d
ap p roach **--Con tr act
sub st anc es
sta nd ard iz ed ,req ui rescom pa rat iv el ylit tl e t im e bef or econ cl usi on o f
con tr act
A t ai lor ed
pro du ct, r eq uir es
tim e to de si gn
sch em e

Con ti nge nt
deb t

Con ve nti onalins ur anc e

Pro mp tne ss o f
Bas is ri sk
p ayme nt

Rel at ive ly
sma ll ,com pa red t o
ris k - tra ns fe r
pro du cts .
(ob li gat io n forrep ay men t)-

On - ba lan ce
Use d topro cu refun ds ,unl im ite d toris k

Mos tl y
sho rt ter m t o 1
yea r
Off - b ala nc e
Mos tl y
lon g - ter m(se ve ral
yea rs )Con tr act
sub st anc es
com pa rat iv el ysta nd ard iz ed ,req ui rescom pa rat iv e l y
lit tl e t im e bef or econ cl usi on o f
con tr act

Rel at ive ly
sta nd ard iz ed
and c ove ri ng
var io us ri sk s,
Mos tl y 1
com pa rat iv el y
Off - b ala nc e
Usu al ly
yea r
low c ost
req ui res
aga in st ot he r
cer ta in am ou nt
ris k - tra ns fe rof ti me fr om
Act ua l
pro du cts
occ ur ren ce o f
dam ag e
ris k to pa ym ent amo un ts
Giv en hi gh
Off - b ala nc e
for d ama ge
pai d (fi rs t - A t ai lor ed
ind iv idu al it y,
Lon g (re qu ire s
inv es tig at io n
los s
pro du ct, r eq uir es pot en tia l hi gh ter m“ad eq uat e
andins ur anc e) tim e to de si gn
cos ts co mp ar ed (se ve ral
ris k
ass es sme nt
sch em e
to co nve nt io nal yea rs )tra ns fer ”)(pa ym ent s on
ins ur anc e
acc ou nt)
Req ui res
Basic ally
On - ba lan ce
Gen er all y, s ame est ab lis hm en t s a m e a s(if
as “c onv en ti ona l of in sur an ce
convention
con so lid at edins ur anc e”
sub si dia ry a nd a l
sub si dia ry )ope ra tin g co sts i n s u r a n c e
Con tr act
Gen er all y, sub st anc es
Giv en hi gh
sta nd ard iz ed topot en tia l
ind iv idu al it y,
Mos tl y
cer ta in de gr ee,
gap
hig he r c os ts
sho rt Sho rt ti me
req ui res
Off - b ala nc e
bet we encom pa red t o
ter m to 1
req ui red f ro mcom pa rat iv el y
act ua lcon ve nti on alyea r
occ ur ren ce o f
lit tl e t im e bef or e
dam ag e
ins ur anc e
ris k to pa ym ent
con cl usi on o f
andcon tr act
pay me nt
amo un ts
Off - b ala nc e
Dep en ds on
tri gg er
Giv en hi gheve nt ;Dep en ds on
ind iv idu al it y,
Gen er all y, A t ai lor ed
tri gg er ev en t;
pro
du
ct,
r
eq
uir
es
req ui res h ig h
pot en tia lgen er all y,tim e to de si gn
des ig n c os ts ;gap
Sho rt ti me
sch em esui ta ble f or
bet we en
req ui red f ro m
lar ge pr oj ec ts
act ua locc ur ren ce o f
dam ag e
ris k to pa ym ent
andpay me nt
amo un ts

Eff ec tiv e
use s

Use d tosec ur e
liq ui dit y af ter
occ ur ren ce o f
acc id ent s an ddis as ter s

Wid el y u se dfor v ari et y ofris ksSoi lcon ta min at ion a nd ot he r
ris ks wi th
lit tl e r is k
dat a
Ris k
man ag eme nt
cen te r

Mos tl y
hed ge s
wea th er ri sk(so me co ve r
ear th qua ke s
and o the rdis as ter s)(No c ase s in
Jap an )Mos tl y
Ext ra ord in ar ylon g - ter m On - ba lan ce
cat as tro ph e(se ve ral (Of f - bal an ce
ris ks (e .g .
yea rs )dep en din g on
ear th qua ke
sch em e)ris k)*Administrative costs: costs incurred in risk analysis and costs required for scheme design,
including, fees, attorney’s fees, registration costs,**Accounting (financial accounting) approach: how amounts provided as a result of using risk
financing (for example, “insurance payment” of an insurance policy), not costs incurred in
introducing risk financing products, are presented on the balance sheet.
Source: Risk Financing Study Group Report, Part 1 (Toward the developme nt of risk financing),
p11

Table 13 Major risk-financing methods

123

Figure 10 Scheme for risk securitization

In the U.S., in response to an indication by a major research on
nuclear cat bonds that “because the information asymmetry will impair
the optimization of financial resources, sufficient financial security
amounts may not be successfully derived from the i nsurance market”(refer to thte table below for the basic behavior of concerned parties
and the consequences), a view was presented that the insurance market
might undertake more insurance in the face of competition against
124

other financing methods.
Concerned
parties

Basic behavior

Nuclearoperators
InsurancecompaniesGovernmentConsequences

Underestimation of
nuclear risk
Risk-avoiding behavior(assertion of limited
insurance capacity)
Difficulties inquantitative
assessment of risk
Difficulties in accurate
assessment of nuclear
risk
Difficulties in grasping
capacity of insurancecompanies











Avoidance of excessive
insurance premiums
Joint undertakings
Premiums determined withconsideration of safety levels
Limited capacity forinsurance undertaking
Regulatory capture
Provision of excessive support
・ Limitation of liability of
nuclear operators
・ Government
compensation (lastresort)Inducement of excessive
regulations

Source: provided by Noboru Utatsu; compiled based on Tyran, J.R. andZweifel, P., “Environmental risk internalization through capital markets ( ERICAM)

Table 14

Basic behaviors of concerned parties of nuclear liability
insurance and their consequences

Committee members indicated that, nevertheless, if a nuclear
catastrophe bond were to be formulated, substantially high interest
rates would be required to make it appealing to investors. (Whereas U.S.
nuclear liability insurance premiums are 0.3-0.5% of insured amounts
and Japanese indemnity agreements are presumed to be 0.2%, natural
catastrophe bond rates are 2-10%.) As aforementioned, given therequirement to ensure information transparency to investors and to
disclose risk quantification and analysis processes, we would face thefundamental issue of not being able to present substantial reasons forsetting certain interest rates because although the probability of anearthquake occurring can be provided based on accumulated research,
nuclear accidents do not always occur as a consequence of earthquakes
and tsunamis exceeding a given level. For example, it was suggested
that it might be worth considering linking trigger events with the IAEA
nuclear event scale, but while rates should be determined based on the125probability that an event will occur, it would be extremely difficult topresent such probabilities. Although cat bonds are being issued in
growing numbers, nuclear catastrophe bonds have not been issued
anywhere in the world, presumably because the challenges describedherein are yet to be overcome.
Further discussion is needed on the potential use of new risk
financing schemes 208 such as nuclear catastrophe bonds, in addition
to employing the private insurance market, a mutual assistance scheme
among

operators

as

seen

in

the

U.S.

Price -Anderson

Act

and

Government compensation, to address grave damages incurred by
nuclear accidents.

(3)

The problems of unlimited liability for operators
Many issues were raised regarding imposing unlimited liability

upon TEPCO, a stock company with indirect limited liability as well asa general electricity utility with obligations to provide a stable supplyof electricity under the Electric Business Act. TEPCO shoulders not
only the compensation payments and related transaction costs such as
the provision of human resources 209 , but also large costs associatedwith the decommissioning of the reactor which caused the accident andincreased fuel costs required for alternative thermal power plants
operating in place of nuclear power plants.
Considering the context in which Chairman Sakae Wagatsuma of
the Expert Committee on Nuclear Disaster Compensation criticized the
newly adopted legislation, which took an approach unique to Japanthat operators would bear unlimited liability and that the Government
would support them, saying that “the adopted law and the report of theExpert Committee stand on completely different concepts”, it is only
natural that it would have many flaws. Committee members expressedthat unlimited liability was inconsistent with the purpose of the Nuclear
Compensation Act (the sound development of nuclear power business),

Discussion on new risk financing was written with reference to Kai, Toshitaka andNobuhiro Kato. Risk finance nyuumon (Introduction to risk financing) Kinzai Institutefor Financial Affairs, Inc., 2009)208

As of April 1, 2013, TEPCO has allocated over 10,000 employees to damage
compensation operations, www.tepco.co.jp/fukushima_hq/images/k130628_01 -j.pdf
209

126

and raised concerns regarding increased public burden throughelectricity tariff raises and the impairment of stable power supply, as
well as concerns regarding adverse impacts on financing electric power
operations and on the stock market. However, fundamentally, “undermodern civil law, a company is recognized its right to conduct
unregulated activities, while naturally, it is simultaneously required toshoulder all of the costs incurred by the damages attributable to it.” 210
If the liability of the operators is to be limited, then Government
compensation should be simultaneously considered as a package fromthe perspective of protecting victims. However, some Committee
members mentioned that it would be difficult to prove the legitimacy ofGovernment compensation for damages imposed upon a third party bya private company in its business ope rations. On the other hand,various literature contend that Government compensation should be
acknowledged under the nuclear damage compensation scheme as well,
given that compensation for damages in oil spills , which are also
expected to require large payment amounts, takes a limited liability
approach. Following a brief introduction of such literature, the issues
to be considered if a scheme based on limited liability is to be adopted
are discussed:
Literature in support of Government compensation:Yamamoto, Soji. Kokusaihou ni okeru kiken sekinin shugi (Risk based liability in international law) , P16
Among the different aspects of strict liability, the ‘mixed liability,’

observed in regard to damages imposed upon third parties due to an
accident at a nuclear facility or nuclear vessel, seeks to ensure theimplementation of damage compensation by combining the operator’s
civil liability for operations and the subsidiary or residual liability of
the Government. This is because “only the Government is in th e
position to regulate the establishment and use of the facility as well as
to compel operators to implement precautionary measures, and also
because the Government has emphasized the protection and fostering
Kanazawa, Yoshio. Kojin no songai baishou sekinin ni taisuru kokka no hokanteki
sayou (The government’s complementary role in an individual’s liability for damages)
210

127

of the nuclear industry as national policy.
Yamamoto, Soji. Kokusaihou ni okeru kiken sekinin shugi (Risk based liability in international law) , P224
The limitation of liability is common, as with the case for civil

liability, despite some differences regarding whether the manager isfully responsible for maintaining and providing guarantee or whether
the licensing state or state in which the facility is located shares such
responsibilities. However, the legal grounds and the legitimacy ofsetting such limitations on liability have been debated among scholars:i)

The equity of imposing unlimited liability or limitations on the
exclusion of liability

ii)Compensation payments should not be shouldered in undue
amounts that jeopardize the existence and development of anindustrial facilityiii)

If the technology has reached a level that enables the generalpublic to enjoy large benefits from its use, then the generalpublic and society should share the risk burden to the extent
benefits can be acknowledged.

iv)


Ceilings are indispensable conditions in setting guarantees.

Chairman Sakae Wagatsuma of the Expert Committee on Nuclear
Disaster Compensation. Jurist No.236, P17
The strict liability theory finds someone liable in the absence ofnegligence, but in relation with business, both horizontal (coverage)
and vertical (monetary) limits are rather fundamental aspects of strict
liability.


Nikkei Shimbun editorial, June 17, 2011
The recent accident has revealed that once a nuclear accident

occurs, compensation payments can surge to amounts unafford able bya private company alone. The time has come to review the compensation
system in preparation of the risk of accident. Japan’s nuclear
operations are implemented by listed companies in accordance withnational policies to promote them. Assuming that nuclear operations
will be continued as “a private business led by national policy,” it has
128becomeclear thattheapproach

taken

by

the

current Nuclear

Compensation Act that operators are to bear unlimited liability i s
unreasonable. The stock market is currently under the strong influenceof American and European investors, who represent almost 20 percent
of TEPCO’s stockholders. In only a few countries around the world,
including Japan, Germany and Switzerland, electric power companies
bear unlimited liability. If provisions were amended so that theGovernment would provide direct indemnification for damages in excess
of a fixed amount, the lack of transparency regarding damage
compensation which prevails in the market could be mitigated.
Akira Morita, Professor of Doshisha University, NBL Vol. 956, P27
Even if the law provides for unlimited liability on the part of theoperator, in reality, the Government inevitably assumes unlimited
liability. As a result, TEPCO has unsoundly become a “compensationcompany led by national policy.” If this is the case, there is no
significance in having electric power companies bear unlimited liability.
The issues that should be considered when adopting a limited
liability scheme are discussed below.
i) The infringement of a victim’s property rights
Concerns that limiting the operator’s liability would constitute an
infringement of the property rights of victimized parties were discussed
upon the adoption of the Nuclear Compensation Act . Also, in the U.S.
the constitutionality of limiting the nuclear operator’s liability to a fixedamount was challenged in the Federal Supreme Court 211 . In the DukePower Co. v. Carolina Environmental Study Group case, the trial court
ruled that the ceiling set on liable amounts did not ensure adequate
compensation for damages due to the accident and that it would
generate a moral hazard in association w ith safety, as well as that itconstituted a due-process violation and a violation of equity before thelaw. However, the Supreme Court unanimously ruled that the limitation
on liability under the Price-Anderson Act was constitutional for the211

Provided by Noboru Utatsu

129undermentioned reasons 212 :・ The imposition of a statutory limit on liability will encourage private
industry participation and hence bears a rational relationship to
Congress' concern for stimulating private industry's involvement in
the production of nuclear electric ene rgy.
・ Even in the event compensation amounts of 560 million dollars is
not sufficient enough to guarantee full indemnification of damages
in all potential circumstances, this will not constitute grounds that
limitation of liability is unreasonable or that it is a due-process
violation.
・ Hence, in view of the extremely remote risk of a major nuclear
accident in which damages will exceed the statutory limit on liability
and Congress’ intention to implement all necessary and appropriate
measures to for the indemnification of victims in the event of suchan accident, Congress’ decision to impose a statutory limit of 560
million dollars lies within its discretion and does not constitute a
violation of due process.
As indicated in this ruling, even if a certain limit is set upon theliability of the operator, an efficient disaster compensation scheme
incorporating Government measures as well would not directly limit thevictims’ property rights, but Government measures need to be clarified
under a limited liability scheme.
The current Price-Anderson Act, as aforementioned, seeks to set
limits on payment amounts than on liability. Hence, perhaps we should
be more careful when discussing the constitutionality of the act withreference only to a court ruling based on a former version of the act.
Nevertheless, whether adopting limited liability is a reasonable solution
or not requires comprehensive judgment, taking into consideration thefollowing aspects as well.
ii) Moral hazard in association with safety
There are concerns that a limitation on liability to a certain
Utatsu, Noboru. Gendai genshiryokuhou no tenkai to houriron dai 2 han (Thedevelopment and legal theory of modern nucle ar energy law, second edition)(Nihonhyouronsha, 2012)
212

130

amount will generate moral hazards in the operators’ efforts to ensure
safety 213 .
However,

this

can

be

avoidedbyconsidering

thenuclearcompensation scheme to be a part of comprehensive risk management
measures regarding nuclear operations, or establishing a link between
the compensation scheme and safety regulations. The aforementioned
mutual assistance program (ex-post insurance premium) under thePrice-Anderson Act does not only effectively contribute to raising thefinancial security amount but also to improving safety levels though
the encouragement of peer reviews among operators. The idea that acolleague’s mistake would be one’s own loss will natur ally serve as astrong incentive for operators to engage in peer reviews. Some
Committee members proposed that nuclear liability insurance rates, or
general contribution amounts under the Facilitation Corporation Act,
could be diversified based on probabilistic risk assessment (PRA)(economic incentive) - and the announcement of assessment results
could be made mandatory (reputation incentive).
Setting meaningful differences in proportion to safety costs would
be extremely difficult in terms of insurance rates and the mandatory
disclosure of PRA results would require a simultaneous amendment to
the Reactor Regulation Act. The NRC does not disclose insurance rates
but the Institute of Nuclear Power Operations (INPO) conducts plantevaluations on safety which are presented on a scale of five andreported only to the CEOs of INPO members and Nuclear Electric
Insurance Limited (NEIL). NEIL draws on the reports in determining
insurance rates, setting a maximum difference of 10% between“Excellent” and “Good” and imposing a penalty on “Fair” ratings.
iii) Distribution plan for compensation funds
Limited liability would require prioritization of damages and theformulation of a distribution plan and as aforementioned in Part I
Chapter 5, the U.S. Price-Anderson provides good reference. Section
At a meeting of the House of Representatives Science and Technology Committee ofthe 145th Diet (March 16, 1999, asked about the safety of nuclear power plants inneighboring countries, Shigeru Aoe, Director General of the Science and Technology
Agency’s Atomic Energy Bureau stated, “Nuclear operators shall conduct operations withdue care as nuclear operators shall bear full liability for damages suffered by victims.”
213

131

170, paragraph O(1) is a detailed provision on the distribution plan forcompensation funds and legal costs.
Plan for distribution of funds
Whenever the court determines upon the petition of any nuclear
operator or other interested person that public liability from a single
nuclear incident may exceed the applicable limit of liability , thefollowing restrictions apply:(1) Total payments made to victims as a result of such a nuclear
incident shall not exceed 15 per centum of such limit of liability without
the prior approval of the court;(2) The payments in excess of 15 per centum of such limit of liability
shall be executed in accordance with a plan of distribution which has
been approved by the court

Legal costs
If the sum of public liability claims and legal costs authorized asreasonable and appropriate exceeds the maximum amount of financial
protection, the licensee shall be charged no more than 5 percent of the
maximum amount of standard deferred premium.


If resources for compensation are to be limited, then discussions
on which damages would be prioritized are required. Drawing on thePrice-Anderson Act and other overseas legislations, extensive rule making on prioritizing personal damages and how to address latedamages (the amount of funds to be reserved) , etc. is called for.
iv) The reinstatement of operations 214215
Government (taxpayers) assumption of liabilities that should have
Professor Toshihiko Kubo of Ri tsumeikan University, College of Economics, provided
much implication regarding the legal liquidation of electric power companies.
Publications by Professor Kubo were also referred to: Genshiryoku songai baisho seido no
kadai (The challenges of the nuclear compensation system) ( The Ritsumeikan Economic
Review , November 2011); “Genshiryoku hatsudensho jiko ni tomonau songai baishou
saimu wo futan suru denryoku jigyousha no ari you ni tsuite (The status quo of electric
power companies shouldering nuclear liabi lities due to the nuclear accident) ( Letters of
Economic Science , April 2012); “Genpatsu jiko ni tomonau songai baishou seikyuuken no
kousei tetsuzuki ni okeru kyoueki saikenka ni tsutite (Conversion of claims for damages
from a nuclear accident to common benefit claims in reorganization procedures)” ( Reporton studies on tax and fiscal issues related to the great earthquake , March 2013))
214

Kinyu Zaisei Jijo (May, 30 2011) “Tokushu genpatsu baishou shien – kinyuu % jigyou
saisei no shiten (Special report: s upport for nuclear damage compensatoin from the
215

132

been shouldered by operators, may call for consideration of wha t would
be shouldered by the stakeholders of electric power companies,
especially creditors including shareholders, bondholders and financial
institutions. In May 2011, questioned by a journalist whether hebelieved that “the general public would accept th e injection of publicfunds on the premises that TEPCO’s pre -earthquake debts would not
be waivered at all,” then Chief Cabinet Secretary Yukio Edano replied,“I don’t believe at all that that would be acceptable to Japanese public”
and caused bank stock prices to decline by what was interpreted to be
an implicit demand for debt waivers of financial institutions. The Japan
Federation of Bar Association’s “Opinion paper on the framework forcompensation of damages induced by the accident at the Fukushima
Daiichi Nuclear Power Plant” (June 20, 2011) also advocates the legal
liquidation of TEPCO, 216 which was also intensively discussed in theDiet when the Facilitation Corporation Act was legislated 217 . Given calls
for the clarification of stakeholder responsibility by means of legal
liquidation, this solution would be compatible to a certain extent withassertions that the fundamental principle of capitalism should beobserved 218 . However, as introduced in Part II, Chapter 1, in thediscussion about the events leading to the enactment of the Facilitation
Corporation Act, a framework premised on the maintenance of TEPCO’s
corporate structure (which would provide unlimited financial support
through provision of funds or capital injection in order to avoid
insolvency) was established, due to possible subordination of thevictims’ right to claim compensation for damages to the bond -relatedlien or security interest in reorganization as well as to uncertainties
regarding

the

costs

requiredforcompensation

payment

anddecommissioning at the breakout of the accident that led to judgment

viewpoint of finance and business reorganization)” provides the perspectives of financial
market specialists and their acknowledgement of the issue.
216

www.nichibenren.or.jp/activity/document/opinion/year/2011 /110617_2.html

Proceedings of the Meeting of the Budget Meeting of the House of Representatives of
the 177th Session of the Diet, Vol. 23 (May 16, 2011), comment by Committee member
Yasuhisa Shiozaki, etc. available at:www.shugiin.go.jp/internet/itdb_ kaigiroku.nsf/html/kaigiroku/001817720110516023.htm
217

Saito, Makoto. Genpatsu kiki no keizaigaku (The economics of risks related to nuclear
power plants) (Nihon Hyoronsha), Chapter 7 “Genpatsu to toushika no sekinin (Nuclear
218

power plants and the responsibilities of investors)”, etc.

133

that reorganization under the Corporate Reorganization Act was
substantively impossible. Legal liquidation is inherently inconsistent
with the purpose of the Nuclear Compensation Act and the frameworkof the Electricity Business Act 219 and would undermine the credibility
and stability of Japan’s financial market. Furthermore, in addition to
the challenges indicated above, the following issues may arise: i)securing an entity to assume liability for damage compensation; ii) thegeneral public shouldering several trillions of yen including the 1
trillion yen in capital injection made into TEPCO by the Government;iii) possibly impairing the allocation of monies to supplying electricity
and dealing with the accident; iv) increasing financing costs due todeclines in creditability of other nuclear operators; and v) impacts on
the morale of electric power supply and decommissioning operations.
However, some Committee members state that the framewo rk of
the Facilitation Corporation Act not being a versatile compensation
scheme for all nuclear damage, as indicated as the fourth disadvantageofaddressing

nuclearaccidents

pursuant

totheFacilitation

Corporation Act, other options should also be purs ued. The debate overthe legal liquidation of electric power companies has been continued
without full understanding of its advantages and disadvantages 220 , andaccording to a Committee member, “under the current Nuclear“Kinyuu shihon shijou ni totsujo hassei shita “hirenzoku” e no taishohou wo kangaeru(Consideration of ways to address sudden emergence of “discontinuity” in the financial
capital market)” ‘Kinyu zaisei jijo, May 30 ,2011), con tributed by Shigeru Yamamoto,Kowa Real Estate Investment Advisors Co., Ltd.
219

“Tembou hirakenu kokuyuu touden saihujou suru houteki seiriron (State -owned
TEPCO makes no progress: legal liquidation revisited)” (The Nikkei Shimbun, November
1, 2012), available at: www.nikkei.com/article/DGXNASFP29001_Z21C12A0000000/“Touden hatan kaihi ga fukou no hajimari (Avoidance of TEPCO bankruptcy, thebeginning of misfortune)” (The Asahi Shimbun, Opinion column, September 27, 2013),
contribution by Shuya Nomura, Professor, Graduate School of Law, Chuo University
Comment by Diet member Yoshimi Watanabe at the Plenary Session of the House ofRepresentatives on October 17, 2013. “The reason for delays in response to the radiation tainted water issue lies in the tepid nationalization of TEPCO instead of allowing its
bankruptcy. TEPCO should be legally liquidated so that shareholders and creditors canassume responsibility.” It should be noted that in response to Diet member Watanabe,
Prime Minister Shinzo Abe replied, “If TEPCO were to be legally liquidated, we would
risk not being able to secure a framework to provide compensation to victims and anelectricity supply comparable to that serviced by TEPCO. TEPCO should continue to
unfailingly implement damage com pensation, proceed with decommissioning measures,
address of contaminated water -related issues, and stably provide electricity as a privatecompany.”220

134

Compensation Act, victims are held ho stage and the reinstatement ofoperations cannot even be put on the table for consideration.” The
Committee

also

discussed

thechallenges

andpotential

countermeasures involved with the alternative option of the legal
liquidation of electric power companie s, in particular the application of
corporate reorganization procedures (which embrace, compared to civil
reorganization procedures, stronger involvement of the court, andhence is more in line with public demand for fair procedures) .
Challenges and proposed solutions are summarized below in terms of
itsrelationtothedamagecompensation

schemeandbusinessmanagement:[Challenges in relation to the damage compensation scheme]i)

A victim’s right to claim compensation for damages is addressed
as a rehabilitation claim(unsecured claim), and is therefore

subordinate to bonds (electric power bonds are secured bygeneral mortgage pursuant to the Electricity Business Act) 221 andothersecurity

interestinreorganization.

( possible

large

reductions in compensation payment amounts)
ii)

General mortgage is acknowledged for borrowed indebtedness to
the Development Bank of Japan (DBJ) 222 , allowing payment inpreference to other creditors (Act on Security for Loans from theDevelopment Bank of Japan to Electric Utility Corporations,
Article 1)iii)

Repayments are not made until the reorganization plan is
accepted (which usually takes 6 -12 months from the initiationof rehabilitation procedure)iv)

Negotiations to determine a victim’s claim for damages must be
conducted individually with the electric power company (trustee)in question which leads to large burdens for both the victim andtrustee.

As of the end of fiscal year 2010, TEPCO’s corporate bonds issued stood at
approximately 4.9 trillion yen, representing 8% of outstanding straight bonds
221

222

As of March 2011, TEPCO’s debts outstanding to DBJ stood at 351.1 billion yen.

135

[Challenges in terms of business operations]i)

As business-related costs required for fuel and the terminatio n of
the nuclear accident will be addressed as rehabilitation claims,
large reductions in these items will be called for in the
reorganization plan, therefore impairing the procurement of fueland necessary materials and equipment, therefore complicating
the provision of a stable electricity supply and the termination of
the accident.

ii)

Given the need for major capital investment, an electric powercompany generally has a high interest-bearing debt ratio 223 , butwill be faced with financing difficulties upon im plementing its
reorganization plan.
Regarding these challenges, the undermentioned proposals andrelevant concerns were presented at Committee meetings.
Proposal 1: Potential treatment of victims’ right to seek damage
compensation as a common benefit claim 224 pursuant to permission of
the court.
(Concerns)
・ Can the requirements for court permission that such treatment is
indispensable for reorganization and that the equity principle is notundermined be met?
・ As no order of preference is determined among common benefit
claims, would it not be necessary to grant rights to receive
preferential payment 225 in the reorganization procedures, in order
The electric power business generally requires large capital investment, although
capital investment amounts did not exceed depreciation costs in recent years as a resultof partial deregulation measures and stagnant demand. The average interest -bearing debt
ratio to total assets of the nine electric power companies was 57.0% in the financial
results for the fiscal year ending in March 2013.
223

A claim regarding the costs required for rehabilitation procedures and costs
indispensable to the continuity of operations, which are incurred after bankruptcy
proceedings based on Civil Rehabilitation Law are initiated. Even in the even t ofliabilities which occurred previous to the decision of initiation, costs indispensable to thecontinuity of operations can be common benefit claims, provided permission is obtained
from the court and supervisor. Common benefit claims are categorized a s claims that areentitled to preferential receipt of reimbursement and are of the same rank as priority
bankruptcy claims.（ excerpt from: www.exbuzzwords.com/static/keyword_4894.html ）
224

225

The need for determining precedence among common benefit claims in the form of136

to avoid conflict with legal common benefit claims such as tax
collection rights?
Proposal 2: Fund procurement would still be possible even if the“general mortgage clause”, which secures bonds with blanket mortgage,
were to be deleted.
(Concerns)
・ In order to avoid confusion in the corporate bond market, the rights
granted to outstanding bonds under existing systems should takeprecedence; and therefore this option would not be applicable inaddressing the TEPCO Fukushima accident.
・ It would be technically possible to issue new bonds without generalmortgage, but the widening of spreads observed after the accident
despite an effective “general mortgage clause” raises concerns over
how to mitigate the negative impacts of higher financing costs andimpaired stability in procuring funds.
・ The same can be said regarding loans from DBJ.
As discussed herein, some Committee members proposed that aflexible approach taken by the court or amendments to the law could
solve some challenges while others presented their concerns about suchproposals.
Not only is it questionable whether such “flexible approaches” andspecial provisions are consistent with the call for stable legal order orwith the purpose of the Corporate Rehabilitation Act, it is unlikely thatthe monies for damage compensation could be secured in full even if
the right to claim damages were granted preference 226 , and hence, theprotection of victimized parties could be jeopardized. Insufficient victim
protection might arouse deep concerns among the residents of areas
hosting other nuclear facilities, thereby complicating the restarting of
nuclear power plants. Given the need to expand on the concept ofcommon benefit claims in order to secure current operating funds,“preferential common benefit claims” was indicated.
Takagi, Shinjiro. “Moshi kaisha kousei de kaiketsu suru to shitara (If resolution wassought through corporate reorganization)” (Kinyuu zaisei jijo, May 30, 2011) also
discusses the possibilit y that he right to claim damages could be partially curtailed
226

137

other concerns could be raised that the equity principle provided for in
the Corporate Rehabilitation Act and the fairness of reorganization
proceedings may not be maintained 227 .
Problems related to general mortgages will have a large impact on
not only nuclear business but on future electric power business as awhole. Requiring massive capital investment, electric power businesses
indispensably need to procure large amounts of external funds. In thetimes of capital shortage after the Second World War, general mortgage
was a requirement in enabling financing from overseas. However,granted tariff regulations based on FDC pricing and regional monopoly,
general electric utilities essentially enjoyed a stable financing scheme
which were supposed to dismiss fears of bankruptcy. Therefore, it is
not clear how effectively general mortgages actually served to reduce
financing costs. 228
The importance of general mo rtgage is likely to be acknowledged
as advancements are made in the deregulation of the electric power
sector. If emerging electric power companies and the general electric
power utilities are to stand on an equal footing in the abolishment ofgeneral mortgages, then financing costs for investment in electric power
equipment are bound to increase and could be added on electricity
Yamauchi, Hirotaka . “Touden wo dou subekika (jou) (What should we do with TEPCO?
(Part1)” ( The Nikkei Shimbun , “Keizai kyoushitsu” column, September 24, 2013) also
states that application of the Corporate Rehabilitation Act would have few advantages.
There are, however, opinions that the Corporate Rehabilitation Act should be applied.
Takeo Hoshi, Professor at the University of California, San Diego, stated in “Boukoku no
Touden kyuusaian (TEPC O relief plans of a ruined country)” (Kinyu Keizai Jijo, May 30,2011), that under the Corporate Rehabilitation Act “even if reorganization claims are
preferential, they are equally subject to alternations under the reorganization plan andmay also be bundled in the same group of claims as general reorganization claims if
acknowledged appropriate from the per spectives of fairness and equity,” and “theacceptance of a reorganization plan) should be based on considerati on of the precedenceof claims but does not require their strict application.” Also, indicating that theindemnification amounts paid to victims could be reduced because “victims are also
creditors and there is no reason for them to be granted preference to other credits under
the reorganization plan”, Hoshi states that “in the event such reductions are too large
from social fairness perspectives, the Government could be responsible for paying thedifference.”
227

Takahashi, Yasufumi. Kaisetsu genshiryoku songai baishou shien kikou hou (Guide
to the Nuclear Damage Compensation Facilitation Act) (Shojihomu, 2012), p68 states that“the “the total amount of outstanding general mortgage bonds are roughly 90% of electric
power companies’ operating costs, which means that although interest rate increases are
not always reflected upon electricity tariffs by 100%, if they were to be fully reflected on
tariffs, then a 100bp (1%) raise in interest rates would induce a 0.9% increase inelectricity tariffs.”
228

138

tariffs. If nuclear power plants are determined utility power plants
instead of merchant power plants in future electric power sy stem
reform debates, then institutional measures bearing the same effect as
general mortgages should be considered in terms of financing.
The legal liquidation of an electric utility involves various issues
which are not easily resolved. Options beyond th e framework of the
Facilitation Corporation Act should be continually studied.
v) Inhibitory effect on the entry of foreign capital in nuclear operations
The fact that private companies bear unlimited liability may have
had an inhibitory effect on the entry of foreign capital into the Japaneseelectric power market. An indirect effect of the Nuclear Compensation
Act, this may change with the introduction of operators’ limited liability(or a ceiling on the financial security amount), in which case thesimultaneous progress of the electric power system reform maydiversify the business structure of nuclear operations, potentiallyinviting overseas investment. This may require the reconsideration ofregulations regarding direct domestic investment under th e Foreign
Exchange and Foreign Trade Act (“Foreign Exchange Act”) as well as aconvincing explanation if foreign capital is to be regulated 229 , but thesechallenges will not be discussed further herein.

(4)

Confusion regarding the liability of operators
As aforementioned in Part II, Chapter 1, the TEPCO Fukushima

accident immediately aroused intense debate on whether TEPCO would
be excluded from liability pursuant to the exceptional clause of Section
3, paragraph 1 of the Nuclear Compensation Act. This is sue wasbrought up at Committee meetings as well, responded by views thatsome form of amendment was required for prompt victim relief, nowthat it has become clear that a certain degree of judgment is called for

Direct domestic investment regulations pursuant to the Foreign Exchange Act are
well presented in: www.enecho.meti.go.jo/topics/080416/04_sanko.pdf (The Agency ofEnergy and Natural Resources, April 2008)
Material regarding the termination order to The Children’s Investment Fund (TCI)
regarding its additional acquisition of J -Power stock can be found at:www.mof.go.jp/international_policy/gaitame_kawase/gaitame/recent_revised/tci2008051
3-03.htm and www.rieti.go.jp/users/shiraishi -shigeaki/serial/008.html
229

139

in a post-nuclear accident state of extreme confusion. Concrete
solutions would be to stipulate more stringent requirements for
exclusion from liability or to eliminate the clause. With regard to theformer option, Committee members pointed out that it was questionable
to what extent it would actually be possible to write into law, more
explicit and stringent requirements for exclusion from liability 230 andto what extent an amendment to the provision could clarify therequirements, as the application of a provision on exclusion fromliability is dependent on the interpretation or judgment of the court.
As for the latter option, eliminating the clause, debate on what
would constitute an “ exceptionally grave natural disaster” has been
continued since the legislation of the Nuclear Compensation Act, as
mentioned in the discussion on the features of Japan’s Nuclear
Compensation Act in Part I, Chapter 4. It should be noted that theclause was inserted for the purpose of maintaining balance, as it would
be too severe to always hold the operator liable under all circumstances.
Of the various interpretations of what a n “exceptionally grave natural
disaster” is, some major examples are provided below:


Recommendations by the Expert Committee on Nuclear Disaster
Compensation (December 12, 1959) 231
Nuclear operators shall bear unlimited liability for damages

induced by nuclear accidents and shall be excluded from liability only
on extremely special occasions, However, this special occasion does not
apply to all cases of “force majeure” but should be limited to especiallystrong cases of force majeure. Therefore, efforts should preferably bemade to precisely express this substance by using a phrase such as“exceptional and grave natural or social disaster.”

As aforementioned, in a symposium on nuclear disa ster compensation, Eiichi Hoshino,
an associate professor at the University of Tokyo indicated that the advantages ofproviding more detailed examples of events would be that judgment would be facilitated,conflict could be avoided to some extent in the ev ent of accident, and as a result,compensation payment could be made more promptly, but also made note of thescientifically technological and legally technical obstacles in doing so.
230

231

Recommendations by the Expert Committee on Nuclear Disaster Compensati on,

available at: www.aec.go.jp/jicst/NC/about/ugoki/geppou/V04/N12/19591206V04N12.html

140



White Paper on Nuclear Energy (1959-1960) 232
The liability of a nuclear operator is premised on the existence ofa causal relationship, but when damage occurs due to force majeure,the causal relationship is interrupted, thereby excluding the nuclear
operator from liability. However, given the many unknown f actors of
nuclear business, “force majeure” could be easily acknowledged,
arousing fear among victims; and therefore, nuclear operators shall be
excluded from liability only when the damage is the result of a n
exceptionally grave natural disaster or insurrection, such as anearthquake which causes damages exceeding those of the Great Kanto
Earthquake orarmed attack from overseas.

The reason for having nuclear operators bear almost absoluteunlimited liability is, needless to say, that nuclear op erations use stateof-the-art science and technology which encompass many elements yet
to be known; and therefore, having victims prove the nuclear operator’s
intention or negligence, or a defect of the facility would undermine
victim protection.
Akio, Takeuchi, Genshiryoku songai nihou no gaiyou (Outline of
Two Laws Concerning Nuclear Damage) (Jurist236, October 15,1961) 233
A “natural disaster” or “insurrection” refers to extremely limited“exceptional” and “grave” events for which preventive measures can not
be

taken

using

currently

availabletechnology

unlesseconomic

efficiency is ignored. […] Whether or not a “natural disaster” or“insurrection” is “exceptionally grave” determines whether victims will
be fully compensated for the damages suffered or whe ther they will only
receive relief. In this sense, the exceptional clause of Section 3,
paragraph 1 is almost equivalent to the recommendation s but has
nevertheless come to represent an extremely large meaning completely
different from the concept of the recommendation, which requires us
all the more to make even more limited judgment in relation withWhite Paper on Nuclear Energy (1959 -1960), Chapter
www.aec.go.jp/jicst/NC/about/hakusho/wp1959/sb1202.htm
232

233

12,

available

Jurist No.236, available at: tnihei.tumblr.com/post/5661848585/36 -10-15-31-236

141

at:

Sections 16 and 17, including whether an event is a “natural, social
disaster” that accompanies widespread and grave damage for which it
is completely impossible to compensate victims suffering nuclear
damage.


AtomicEnergyBureau,ScienceandTechnology

Agencyed.

Genshiryoku baishou seido (The nuclear compensation system),(Tsusho sangyou tsushinsha, 1980), P52
It seeks to limit exclusion from liability to extremely rare
circumstances (such as those undermentioned).
It refers to major earthquakes, major volcanic eruptions and major
typhoons and floods of scales unprecedented in Japan’s history. For
example, the Great Kanto Earthquake is a major earthquake but not an
extremely grave one, and applicable earthquakes must be substantiallylarger.
An insurrection must be a social incident which is equivalent inboth quality and scale to a grave natural disaster. War, armed attackfrom overseas, and civil war would be covered, but local riots anduprisings would not be covered.
Proceedings of the Promotion of Science and Technology andInnovation Special Committee of the House of Representatives of the34th Session of the Diet, (May 18, 1960), comment by Yasuhiro
Nakasone, Director-General, Agency of Science and Technology
A major earthquake at least triple the scale of the Great Kanto
EarthquakeProceedings of the Promotion of Science and Technology andInnovation Special Committee of the House of Representatives of the
38th Session of the Diet, No.9 (April 12, 1961), Bunkichi Yuzuriha,
Office of the Prime Minister clerk,

Director General, Atomic Energy

Bureau, Science and Technology Agency)
An earthquake, twofold or threefold of the scale of the Great Kanto
Earthquake – one that far exceeds that scale.
House of Representatives Science and Technology Committee of the142

145th Diet Session (March 16, 1999), comment made by Shigeru
Aoe,

Director

General,AtomicEnergyBureau,ScienceandTechnology Agency-For example, the recent Great Hanshin-Awaji Earthquake would
not be considered an extraordinary situation.
-The reference made to an event triple the magnitude of the Great
Kanto Earthquake in the recommendations made at the time ofenactment are understood to be an example of an event that would
cause an extremely extraordinary situation.
The experiences of the Fukushima accident revealed that “t hecomprehensive

andflexiblephrase‘exceptionallygrave

naturaldisaster’” (Akio Takeuchi, Jurist No.236) could ignite confusion. It has
also been indicated that even if operators were to be exempted fromliability, it would be impossible to conclude tha t victims would bedeniedindemnification,

and

hence

an

established

Government

compensation scheme would have to be available; however, given the
ambiguity of the Government’s role, it is structurally difficult underJapan’s Nuclear Compensation Act to exempt operators from liability. 234
In order to overcome these challenges, the Committee collected
information on German and Swiss nuclear compensation laws, both ofwhich do not contain any clauses for exclusion from liability 235 . A
summary of the current status of nuclear power operations and thelegal system for compensation for nuclear damages in Switzerland,
whoseschemeof combining

liability

insurance

andgovernment

compensation is simpler and clearer than that of Germany , is provided
below.
Switzerland has five operating nuclear reactors, which collectively

Tanabe,Tomoyuki, M. Maruyama, Fukushima Daiichi Genshiryoku Hatsudensho Jikoga teikishita waga kuni no genshiryoku songai seido no kadai to sono kokufuku ni muketa
seido kaikaku no houkousei (The issues concerning Japan’s compensation system fornuclear damages raised by the accident at Fukushima Daiichi Nuclear Power Plant andthe direction of system reforms to overcome the challenges) (Central Research Instituteof Electric Power Industry, 2012 ）
234

235

Based on information provided by Noboru Utatsu and material published by JAIF,

available at: www.jaif.or.jp/ja/seisaku/genbai/genbaihou_series43.html ; Swiss info:www.swissinfo.ch/jpn/detail/content.html?cid=34224944

143

generate approximately 40 percent of its electricity. After the TEPCO
Fukushima accident, in May 2011, it decided on a “nuclear power
phase-out” policy under which it will phase -out the five reactors
currently in operation and ban construction of and replacement withnewreactors.

In

December

2011,

the

Swiss

FederalAssembly

announced the “2050 Energy Strategy,” its long-term energy plan, but
as final decisions are very likely to be made by national referendum,
several years are expected to be required before the policy direction isdetermined 236 . There have been no reports as of yet that the Swiss Act
on Nuclear Third Party Liability (LRCN) which stipulates nuclear
damage compensation has been amended.
The Swiss nuclear damage indemnification act does not allow for
the operator’s exclusion from liability in any event (except when it has
been proven that the victim intentionally created the damage). It also
stipulates that operators bear unlimited liabilit y. However, private
liability insurance covers grave disasters of an exceptional characterand unpreventable nuclear damage

due

to terrorism . Insurance

amounts are limited (to 500 million Swiss francs), and damage in excess
of 500 million Swiss francs and those due to incidents which cannot be
addressed by private liability insurance (wars, etc.) are indemnified by
the federal government for amounts up to 1 billion Swiss francs(indemnity fees are collected and reserved in a nuclear damage fund).
It should be noted that the Swiss Act on Nuclear Third Party
Liability stipulates in Chapter 5 how major occurrences shall be
addressed. Section 29 provides that in the event of a major occurrence,in principle, if damages are in excess of the financial resources
available through financial protection and government compensation,then the Federal Assembly shall establish an indemnity scheme anddetermine the general principles for compensation of the injured parties
by Federal Order. Furthermore, Section 30 stipulate s that the Federal
Council is empowered to make modifications including the levying ofretrospective premiums on policy-holders. Information on the Swisssystem was provided as an example of combining private liability

JETRO “Shinkyokumen wo mukaeru Swiss no energy seisaku (Swiss energy policy
welcomes a new phase)” ( JETRO Euro Tren d, May 2012)
236

144

insurance and government compensation .
Relevant provisions from the Swiss Act on Nuclear Third Party
Liability 237 and an illustration of its structure are provided below:
Chapter II (Third Party Liability)
Section 3 (Principle)
1. The operator of a nuclear installation shall be liable without limit for
nuclear damage caused by nuclear substances in his installation,
Section 5 (Exoneration)
1. The operator of nuclear installation or the holder of a transport license
shall be relieved liability if he proves that the injured party caused thedamage intentionally.
2. He may be totally or partially relieved of liability if he proves that injured
caused the damages by gross negligence.
Section 11 (Limitation of insurance coverage)
1. Any person liable under this Act shall, in order to cover the insurable risk,
take out insurance with an insurer authorized to operate in Switzerland
for at least Sw.Frs. 300 million per nuclear installation, plus at least
Sw.Frs 30 million for interest payable and pro cedural costs in proportion
to the insurance payments. For each transit of nuclear substances throughSwitzerland the amount to be insured shall be at least Sw.Frs 50 million
plus at least Sw.Frs. 5 million for interest payable and procedural costs.
3. The Federal Council shall define the risks that private insurers may
exclude from cover irrespective of injured parties.
*According to the Federal Nuclear Energy Liability Ordinance (ORCN),
private insurance shall not cover the following damages. The injured pa rty
may not bring direct action against the insurer for damages n ot coveredby private insurance:(1) Nuclear damage due to extraordinary natural events or war and nuclear
damage amounting to Sw.Frs 500 million to 1 billion caused byunpreventable terrorist actions(2) Damage for which no proceedings have been brought within a period often years following the occurrence having caused the damage orconsequences with long-term impacts

237

Derived from the JAIF website: www.jaif.or.jp/melmag_db/2012/1126genbai.pdf

145

(3) Damage for which no proceedings have been brought within a per iod oftwenty years since the date of loss, theft, disposal or termination ofpossession of nuclear substances
Part2 Confederation
Section 12(Limitation of coverage by Confederation)

The Confederation shall cover the person liable for nuclear damage up to a
total of SW.Frs 1000 million per nuclear installation or transport operation,plus Sw.Frs 100 million for interest payable and procedural costs, in so far
as such damage exceeds the cover granted by private insurance or is excluded
therefrom (Section 11 paragraph 3).
Section 13 (Deferred damage)The Confederation shall cover, up to the amount specified in Section 12,
nuclear damage for which compensation can no longer be claimed f rom theperson liable because the thirty -year extinction period has run out (Section
10 paragraph 1).
Section 14 (Contributions by the persons liable)
1. For the purpose of covering its obligations under Sections 12 and 13 theConfederation shall levy contrib utions from the operators of nuclear
installations and the holders of transport licenses. Such contributions
shall be calculated so as to comply as far as possible with the principle ofcovering costs.
2. The Federal Council shall determine the amount of the contributions.
3. The authority designated by the Federal Council shall calculates and levy
the contributions. Its decision may be challenged in the Federal Count by
way of proceedings under administrative law.
Section 15 (Nuclear damage fund)
The Confederation shall establish a fund into which shall be paid thecontributions collected under Section 14 as well as the interest they earn.
*According to the Federal Nuclear Energy Liability Ordinance (ORCN), theoutline of the fund is as follows (ORCN Sections 8 a nd 9):(1) The Confederation shall establish a fund for nuclear damage compensation
which is not legally separate entity but is financially independent. The
fund shall be managed by theFederal Department of the Environment,

Transport, Energy and Communications (DETEC)

146

(2) The fund shall be procured from the following: a. contributions by the
persons liable; b. interest earned by the fund (Section 10, paragraph1); c.
right of recourse pursuant to Section 20(3) The fund shall be used for the following expe nditures: a. government coverpursuant to Sections 12 and 13; b. administrative costs (disastermanagement costs); c. pr ovisional payments by the fund(4) Revenue and expenditures of the fund shall not be incorporated in to thebudget of the Confederation
Chapter 5 Major occurrences
Section 29 (Principles for major occurrences)
1. If there are grounds for anticipating that the financial resources of theperson liable, the private insurer and the Confederation, available forcovering the damage, will not be sufficient to satisfy all claims (major
occurrence), the Federal Assembly shall establish an indemnity scheme bymeans of a Federal Order of general application, not subject to referendum.
This Order may cancel the right of recourse against the person lia ble of all
public and private insurers and sickness insurance funds, subject to theprovisions of Section 20. If necessary, the Confederation may pay
additional contributions in respect of damage not otherwise covered.
2, The Order shall determine the gen eral principles for compensation of the
injured parties in order to ensure the equitable distribution of all available
funds. In so doing it may derogate from the provisions of this Act.
3. The Federal Assembly may entrust a special independent body with t he
implementation of the indemnity scheme. Appeals to the Federal Court
against decision of this body shall be permissible.
4. The Federal Council shall take any provisional measures that may benecessary.
Section 30 (Modification of insurance premiums, retrospective premiums)
1. Where a state of emergency is created by a major occurrence the Federal
Council is empowered to issue regulations relating to private insuranceon:a) the modification of the insurers’ liability;b) the levying of retrospective premiums o n policy-holders;c) thededuction

of

such

retrospective

payments

147

premiums

frominsurance

2. This power shall not extend to the insurance for third party liability
required to be taken out by virtue of Sections 11, 12 and 18. The Federal
Council may take corresponding measures in relation to social insurance
and third party liability insurance.

Figure 11 Structure of the Swiss Act on Nuclear Third Party
Liability(5)

Issues regarding exclusive liability of the operator
Section 4 of the Nuclear Compensation Act stipulates that theoperatorissolelyliablefornucleardamages.

Stipulatedininternational agreements, including both the Paris Convention andVienna Convention, exclusive liability of the operator is an establishedprinciple, and it would not be a realistic choice for Japan to alter it,
given

the

possibility

that

Japan
148

might

seek

participationininternational frameworks on nuclear damage compensation.
However,
Investigation

examining
Report,thequestions

Fukushima
have

been

NuclearraisedAccident

regardingtheexclusive concentration of all liabilities on the operator, as theinstallation of emergency diesel generators in the basement and otherbaffling points regarding the design of the nuclear power plant havebeen discovered. Committee members stated that although it would not
be realistic to hold manufacturers (suppliers) liable for damages, theyshould at least be required to cooperate in dealing with an accident or
to provide information.
As aforementioned in Part I Chapter 3, the U.S. Price -Anderson
Act does not legally stipulate the principle of exclusive liability on theoperator, but by including all parties which have any possibility ofbearing liabilities as joint insureds in the insu rance agreement signed
by nuclear operators, liabilities are in effect exclusively centered upon
licensed nuclear operators (licensees). With plans to expand on nuclear
power generation, India enacted its Civil Liability for Nuclear Damage
Act in September 2010, providing for the operator’s right of recourse(Section 17) and for the act to be additional to any other law stipulating
the operator’s right to claim damages (Section 46) 238 . India has recently
signed the Convention on Supplementary Compensation for Nuclear
Damage (CSC) and has taken it up for ratification in Parliament but
has yet to clarify how it will seek consistency between its Civil Liability
for Nuclear Damage Act and the CSC, which is fundamentally based on
The Indian Civil Liability for Nuclear Damage Act stipulates that “ The operator of
the nuclear installation, after paying the compensation for nuclear damage in accordancewith section 6, shall have a right of recourse where” (Section 17), “the nuclear incident
has resulted as a consequence of an act of supplier or his employee, which includes supplyof equipment or material with patent or latent defects of sub -standard services” (Section
17, paragraph (b)), significantly relaxing the principle of “ exclusive liability”. India
adopted such rules for nuclear damage compensation which could be understood to be a”
deviation” from international standards in Parliament, presumably because theopposition party was against the bill on grounds that the compensation for dama ges
caused by the 1984 toxic chemical gas spill from a chemical plant in Bhopal, India were
yet to be paid by the operator’s parent company, the U.S.’ s Union Carbide Corporation.
Tanabe, Tomoyuki “’All -Japan’ ni yoru genshiryoku kokusai tenkai no kadai –gyoushubetsu kokusai tenkai senryaku option ni motozuku mondaiten no chuuchutsu tokaizen teian- (Some Problems of Recent "All Japan" Strategy for Nuclear Power Exports- Identification of its Problems and a Proposal for Improvement based on International
Development Strategies of the major three Categories of Businesses constituting Nuclear
Power Industry -)” (CRIEPI Research Report: Y10033, 2011) p37, available at:criepi.denken.or.jp/jp/kenkikaku/report/detail/Y10033.html
238

149

the principle of exclusive liability of the nuclear operator 239 .
The relationship between the principle of exclusive liability andthe State Redress Act should also be addressed. As aforementioned in
the discussion about the context in which the Facilitation Corporation
Act was enacted, the potential application of claims for state redress
should also be considered, in light of the fact that operations have beenhighly under Government control and that the Nuclear Eme rgency
Response Headquarters and other government bodies have been
responsible for announcing evacuation instructions, establishing foodsafety standards and implementing shipping restrictions after theaccident 240 .
The State Redress Act, Article 1, paragraph 1 stipulates that whena public officer who exercises the public authority of the State or of apublic entity has, in the course of his/her duties, unlawfully inflicteddamage on another person intentionally or negligently, the State or
public entity shall assume the responsibility to compensate therefor. In
past pollution lawsuits, the court has ruled that when failure to executeauthority exceeds acceptable limits and is significantly unreasonable,
such failure is acknowledged to be illegal 241 ; and given the role that theGovernment has played in nuclear safety regulation and the fact thatno breach of safety regulations have been found to date on the part ofTEPCO, it would appear to be reasonable to question the Government’s
responsibility for not having appropriate executed its authority. The

In early September 2013, India’s Goolam Essaji Vahanvati, Attorney -General, said,“it is for the operator of a nuclear plant in India to decide whether it wished to exercisethe ‘right of recourse,’” presenting the legal interpretation that the product liability
principle, which contradicted the principle of “exclusive liability” precluded by judgmentof the operator (“Gaikoku kigyou no genpatsu ‘suishin’ indo, kensetsu e no houkaishaku
henkou – nichiin kyoutei ni oikaze (India to “promote” nuclear power plants from overseas
manufacturers: alteration of legal interpretation with view to construction – a boost to
Japan-India Nuclear Cooperation Agreement)” ( The Nikkei Shimbun online , October 13,2013). It should be noted that letting Indian nuclear operators decide whether or not
apply the principle of concentrated liability does not determine the risk allocation
between the operator and manufacturer.
239

Hayakawa, Kazuhiro “Genshiryoku songai to kokka baishou (Nuclear damage andstate redress)” (Omiya Law Review No. 9), available at : www.omiyalaw.ac.jp/library/lawreview/No.9/No.9 -hayakawa.pdf was referred to regarding the relationship between
state redress.
240

ruling of the Supreme Court on April 27, 2004, Minshu Vol. 58, No.4, p1032 (Chikuho
region pneumoconiosis case); ruling of the Supreme Court on October 15, 2004, Minshu
Vol.58, No.7, p1802 (Kansai re gion Minamata disease case)
241

150

issue then would be whether or not the principle of exclusive liability,
which is stipulated in Section 4 of the Nuclear Compensation Act,
exempts the Government from liability for damages.
As aforementioned in the discussion regarding the context inwhich Japan’s nuclear compensation system was established, uponreceiving technological transfer from the U.S. and the U.K., Japan had
to guarantee that foreign suppliers (manufacturers and suppliers) 242
would not bear nuclear damage liabilities. It is presumed that theJapanese government was also required to free victims of the burden
on identifying the parties liable for damage compensation and toprevent insurance segmentation.
Therefore, the principle of exclusive liability under the Nuclear
Compensation Act is generally interpreted not to exclude the possibilityof claiming state redress 243 and few contend that the application of theState Redress Act should be denied. For example, Professor Tadashi
Otsuka of Waseda University says, “It should be noted that the issue of
whether the Government is liable for damages is a separate issue [fromthe issue of applying the exceptional clause to TEPCO]. Acknowledging
state liability would constitute joint tort or conflicting torts between
TEPCO and the Government, possibly arousing questions of how
Section 4 (exclusive liability of the nuclear operator) of the Nuclear
Compensation Act would be applied. However, in light of the context in
which

the

provisionwasestablished,itintends

toexcludemanufacturers from liability and is unlikely to exclude the liability of
the State. 244 ” Furthermore, questioned whether a victim of a nuclear

Morishima, Akio. Genshiryo ku jiko no higaisha kyusai (3) – songaibaisho to hosho(Victim relief in nuclear accidents (3): indemnification and compensation for damages)(Toki no Hourei, Vol. 1888) indicates that U.S. - later U.K. – suppliers of nuclear
technology and material strongly demanded the establishment of a system under which
they would not bear any liability for nuclear damages as a condition for their services.
242

Takahashi, Yasufumi. Kaisetsu genshiryoku songai baishou shien kikou hou (Guide
to the Nuclear Damage Compensation Facilitation Act) (Shojihomu, 2012) p28 - indicatesthat it is appropriate to basically assume that the State Redress Act can be applied (thatthe Government is not excluded from liability). References that deny the application of
the State Redress Law include: Atomic Energy Bureau, Science and Technology Agency
ed. Genshiryoku baishou seido (Nuclear Compensation System) , (Tsusho sangyou
tsushinsha, 1980), P52
243

Takahashi, Shigeru and Tadashi Otsuka. Shinsai, genpatsu jiko to kankyouhou(Earthquake-induced
disaster,nuclearaccident
andenvironnmental
law)(Minjihokenkyukai, 2013), p71
244

151

accident could claim compensation from the Government based on
Article 1, paragraph 1 of the State Redress Act at a meeting of the Houseof Councilors Special Committee on Reconstruction from the Great East
Japan Earthquake of the 180th Session of the Diet, Masaharu Kondo,
Director-General of the First Department at the Cabinet Legislation
Bureau responded that such an action could be taken pursuant to theprovision 245 .
An example of literature opposed to the application of the State
Redress Act is Atomic Energy Bureau, Science and Technology Agency
ed. Genshiryoku baishou seido (The nuclear compensation system),(Tsusho sangyou tsushinsha, 1980), which states that “[…] In the eventthat other persons who have contributed to the occurrence of said
nuclear damage is liable under other laws (State Redress Act,
Automobile Liability Security Act), the perso n may be held liable(possibly not bearing unlimited liability). Hence, it was made explicit in
thisprovision

that,

other

parties

shall

not

bear

any

liability

whatsoever.” 246
Although discussions at Committee meetings ended with suggestingthat manufacturers and suppliers should be obligated to cooperate indealing with an accident or to provide relevant information, further
discussions should be conducted on applying the State Redress Act toallow operators and the Government to share responsibi lities, in whichcase the Government and TEPCO would bear joint and several liability,
and thus parties would shoulder burdens according to their share ofnegligence, etc., or equally when such ratios cannot be determined.

House of Councilors Special Committee on Reconstruction from the Great East Japan
Earthquake of the 180th Session of the Diet (March 27, 2012); available at:
kokkai.ndl.go.jp/cgibin/KENSAKU/swk_dispdoc.cgi?SESSION=12154&SAVED_RID=1&PAGE=0&POS=0&T
OTAL=0&SRV_ID=9&DOC_ID=9075&DPAGE=2&DTOTAL=63&DPOS=30&SORT_DIR=1&SORT_TYPE=0&MODE=1&DMY=13588
245

Tanabe and Maruyama (2012) p34 -35 indicate that the scheme under the cu rrent
Nuclear Compensation Act which allows operators to claim compensation from theGovernment once all compensation claims have been paid to victims encompasses
unreasonable dimensions, one of the reasons being that the Government is likely topolitically contrive a flexible interpretation of adequate causation. However, given
contentions that adequate causation already tends to be extremely flexibly interpreted
under the current Nuclear Compensation Act, this no longer constitutes sufficientgrounds for concluding that the application of the State Redress Act is unreasonable.
246

152

(6)

The necessity for considerations on prescriptions 247
This subsection will provide an overview of issues regardingprescriptions

which

were

not

discussedbytheCommittee,

ascompensation had been promptly implemented after the JCO Criticality
Accident 248 and TEPCO expressed its intention of flexibly addressing
benefits of prescription in the TEPCO Fukushima accident 249 .
Since the Nuclear Compensation Act contains no provisions
regarding extinctive prescription, the former clause of Article 724 of the
Civil Code on restriction of the period of the right to demandcompensation for damages in tort is applied; and therefore, thedominant interpretation is that if a victim does not exercise his/herright of claim within three years from the time when he/she comes toknow of the damages, the right to demand compensation for damages
will be extinguished by the operation of prescription. In the TEPCO
Fukushima accident, given fears that the prescription period would
expire on March 10, 2014 for certain types of damages, Ministry of
Education, Culture, Sports, Science and Technology (MEXT) presented
a “Request regarding the extinctive prescription of right to claim
compensation for damages related to the nuclear accident of 2011.” In
response, on February 4, 2013, TEPCO announced “TEPCO’s approa chto the extinctive prescription of right to claim compensation for nuclear
damage” 250 which stated that the date that TEPCO began accept ing
claims for damage compensation would be deemed the starting point of
the term of extinctive prescription, that the receipt of direct mail fromTEPCO prompting the recipient to claim damages would constitute aninterruptionof prescription, and that thecompany

would take

Papers discussing prescription issues include: Matsumoto, Katsumi, “Genshiryoku
songai to shoumetsu jikou (Nuclear damages and extinctive prescription)” (Ritsumeikan
hougaku, January 2013)247

According to Tanabe, Tomoyuki “JCO rinkai jiko no songai baishou (hoshou) shori no
jissai ni miru jichitai no yakuwari to kadai (The role and challenges of local governments
observed in the management of compensation (indemnification) for dam ages from the JCO
criticality accident) (Y02012), the ratio of agreement on indemnification (damage
compensation) against claims reached 97.9% within a year of the accident (September 30,1999), and 99.6% at the end of the following year (end of December 2 001).
248

249

www.tepco.co.jp/comp/index -j.html“Shoumetsu jikou ni kansuru heisha no kangaekata ni tsuite (TEPCO’s approach toextinctive prescription)” available on TEPCO website:
www.tepco.co.jp/comp/images/13020401.pdf
250

153

measures to flexibly address the completion of prescription. On May 29,
2013, the Government enacted an act on special measures concerning
the interruption of prescription (Law on Special Measures Concerning
the Interruption of Prescription Concerning the Use of Procedures forMediation of Settlement by the Dispute Reconciliation Committee for
NuclearDamageCompensation

on

Disputes

RegardingtheCompensation of Nuclear Damages Related to the Great East Japan
Earthquake), which came into force on June 5.
Under the law, a person who has made an appeal for mediationof settlement is deemed to have brought an action to the court uponmaking the appeal if he/she brings an action to the court within one
month

of

receiptthatthemediationofsettlement

has

been

discontinued. However, this approach cannot fundamentally resolve
fears for the following reasons 251 : Firstly, interruption of prescription
is only recognized when a victim makes an appeal to the Nuclear
Damage Compensation Dispute Resolution Center (ADR Center) for
mediation of settlement before the termination of the period ofprescription and brings an action to the court within one month fromthe breakdown of mediation of settlement. Although MEXT would hopethat the law on special measures would serve to promote the use of themediation system 252 , it needs to take the more fundamentally approachof revising the system itself to be more user-friendly. Furthermore, theinterruption of prescription may not apply to items that were notincluded in the original appeal.
According to the media, the Liberal Democratic Party (LDP)
intends to extend the period of prescription for the right of claim fornuclear damages to ten years in the extraordinary Diet session to be

The Japan Federation of Bar Assoc iation, “Opinion paper in request of special
legislative measures regarding extinctive prescription of right to claim compensation fordamage from the accident at TEPCO Fukushima Daiichi Nuclear Power Plant”; available
at: www.nichibenren.or.jp/activity/document/opinion/year/2013/130418.html
NHK “Shiten/Ronten: Genshiryoku songai baishou to jikou (Commentators’ views andissues: Nuclear damage compensation and prescription” (NHK Shiten/ronten, July 1,2013); available at: www.nhk.or.jp/kaisetsu -blog/400/161228.html
251

MEXT website "Bill concerning special measures on the interruption of prescription
related to the use of the reconciliation and mediation procedures of the Nuclear
Reconciliation Committee for Nuclear Damage Compensation for disputes on nuclear
damage compensation concerning the Great East Japan Earthquake”
252

154

convened in October this year 253 .
Given the wide diversity of responses required according to thescale of accidents, it may be more reasonable to address prescription
issues when making decisions on the scheme to deal with the aftermathof an accident. However, the provisions of the current Nuclear
Compensation Act, which compels the Government to request flexibilityon the part of the victimizer, should be amended in the future, drawing
on the results of investigations on the TEPCO Fukushima accident.

2.

Addressing major nuclear disasters
Many Committee members stated that the Fukushima accident

destroyed “places of being,” such as homes, workplaces and local
communities and that many evacuees are seeking the reconstruction ofthese lost “places of being.” Interviews conducted in the Town of Namiein Fukushima Prefecture by a voluntary group of Committee members
revealed that the number of households in the town increased from
7,700 to 11,000 due to the fragmentation of families as a result of theaccident, that the approximately 1,700 children who had gone to thetown’s five elementary schools and three junior high school are now
dispersed in 699 different schools, including some overseas 254 , and thatcitizens had evacuated to all other prefectures throughout Japan except
Wakayama Prefecture as well as overseas 255 .
In interviews with residents living in provisional housing inFukushima City, many people – particularly the elderly – voiced calls
for the reconstruction of local community. Not only is it difficult toassess losses related to destroyed communities in terms of money,
including these losses in “damages for mental anguish” to provide

TOKYO Web, September 22, 2013, etc. At the timing of compiling this report (as of
October 28, 2013) details are yet to be announced.
www.tokyo-np.co.jp/article/feature/nucerror/list/CK20130 92202100005.html
www.mext.go.jp/b_menu/houan/an/detail/ __icsFiles/afieldfile/2013/05/27/1335522_01.pdf
253

For example, current schools of children from Namie Elementary School: www.namie es.jp/images/hinanzyoukyou_2506.pdf
254

Current status of evacuated citi zens of Namie Town (as of August 31, 2013):
www.town.namie.fukushima.jp/site/shinsai/20130831 -hinannzyoukyou.html
255

155

blanket compensation 256 will not resolve the victims’ dissatisfaction.
The need for the reconstruction of local communities was noted by
Yoshihisa Nohmi, Chairman of the Dispute Reconciliation Committee
forNuclearDamageCompensation(“Dispute

Reconciliation

Committee”) who visited the affected areas for the first time in August
2013 and said, “It is important for each local government to restore
communities to their original state to the extent possible. They must be
enabled to return to their lives before the accident through not only
damage compensation but other policy measures as well.” 257
On March 31, 2012, the Government enacted the Act on Special
Measures for Reconstruction and Revitalization of Fukushima 258 ,pursuant to which it will build public facilitie s and improve living
environments in areas where evacuation instructions have been lifted,
as well as support the reconstruction and revitalization of Fukushima
through special tax and regulatory measures. In March 2013, theamendedActonSpecialMeasuresforthe

Reconstruction

andRevitalization of Fukushima was enacted, with forecasts of the fiscal
2013 budget covering the construction of disaster recovery public
housing for 3,000 to 5,000 households 259 . Hence, now after more than
two years since the accident, there are prospects of Government efforts
to pave a way forward in improving local community.
Under the current Nuclear Compensation Act, the operators bear
unlimited liability, and the Government shall only give a nuclear
operator “such aid as is required for him to compensate the damage”
when the compensation amounts to be shouldered by the operator
exceeds financial security amounts (Section 16) and shall take direct
measures to relieve victims only when the operator is exonerated fromliability (Section 17). However, with view to the fact that large-scale

Takahashi, Shigeru and Tadashi Otsuka. Shinsai, genpatsu jiko to kankyouhou(Earthquake-induced
disaster,nuclearaccident
andenvironmental
law)(Minjihokenkyukai, 2013), p104 states that ”the interim guidelines presented by the
Dispute Reconciliation Committee for Nuclear Damage Compensation actually doesconsider the destruction of communities under damages for mental anguish.”
256

257

www.minpo.jp/pub/topics/jishin2011/2013/05/post_ 7135.html

Act on Special Measures for the Rebirth of Fukushima:
law.e-gov.go.jp/htmldata/H24/H24HO025.html
258

The Nikkei Shimbun, April 27, 2013, available at:www.nikkei.com/article/DGXNZO54440810X20C13A4CR8000
259

156

disasters such as the recent TEPCO Fukushima accident can cause
damages that are not reimbursable with money and that these damages
have been hindering the reconstruction of the victims’ livelihoods, theauthor would like to note that efforts by the national or local
government to revitalize the local community must be made at an earlystage after an accident.
Committee members also pointed out the need for a Government
disaster compensation scheme, which covers the reconstruction ofvillages and local communities, to be established separately from tort
law-oriented

measures

and

based

on,

for

example,

the

Land

Expropriation Act, which is applied in dam development,. While
dominant interpretations of the current Nuclear Compensation Act
support

the

idea

that

the

operator’s liability

fordamages andGovernment measures based on disaster relief laws 260 - or as
aforementioned State liability 261 - could be concurrently effective, others
point out that such interpretations are excessively artful and embrace
unreasonable aspects. 262
Having experienced both the JCO criticality accident and therecent TEPCO Fukushima accident, we have learned that nuclear
accidents can have diversified consequences. Therefore, proceduresshould be predetermined for deciding on the appropriate scheme to deal
with the aftermath of a nuclear accident, primarily in accordance withthe scale of the damage caused, at the earliest time possible after theaccident has occurred.

<Interviews in Namie Town>
A voluntary group of Committee members visited Namie Town,

Otsuka, Tadashi “Fukushima daiichi genpatsu jiko ni okeru songai baishou to baishou
shien kikou hou – huhou koui hougaku no kanten kara (Damage compensation in the
Fukushima Daiichi Nuclear Power Plant accident and the Nuclear Damage Compensation
Facilitation Corporation Act: from the viewpoint of law of torts” ( Jurist No.1433,
November 2011)
260

Takahashi, Shigeru and Tadashi Otsuka. Shinsai, genpatsu jiko to kankyouhou(Earthquake-induced
disaster,nuclearaccident
andenvironmental
law)(Minjihokenkyukai, 2013), p71 says: “It should be noted that the issue of whether theGovernment is liable fo r damages is a separate issue [from the issue of applying theexceptional clause to TEPCO]. Should State liability be acknowledged, it would be basedon joint tort or conflicting torts between TEPCO and the Government.
261

262

Tanabe and Maruyama (2012), p34 -35

157

Fukushima Prefecture on August 23, 2013. A summary of voices
regarding the compensation system heard in interviews with Mayor
Tamotsu Baba, Vice Mayor Teruyuki Hino and residents living in
Minami-Yano provisional housing in Fukushima City is provided below:i)

Frustration regarding the provision of information

・ Neither the operator nor Government communicated any
information regarding the accident. Feel profound responsibi lity
and anger for not being able to appropriately guide citizens toevacuate.
*Evacuation instructions for Namie Town were announced on March
12 at 5:44AM. Many citizens evacuated to the Tsushima branch
office of the town hall where highly radioactive su bstances are said
to have been in the air due to wind direction.
・ We have been left in the dark about how much longer we will beforced to live in provisional housing. Without relevant information,
it is impossible to decide whether to start new life in a new place,or if progress will be made in decontamination activities, enabling
us to return to our original lives. (by victimized resident of Minami Yano provisional housing)・ Information regarding low-dose exposure risks is also insufficient.
(Lectures are being given by JAEA employees at schools, etc.)
ii)

Requests for local revitalization

・ Although compensation procedures for property damage have been
initiated, they require too much time for the calculation ofindividual damage amounts, and are thus unreali stic.
・ Victims have suffered the loss of “places of being,” such as homes –the number of households in Namie Town increased from 7,700
before the accident to 11,000 after the accident, reflecting thefragmentation of large families - workplaces and local communities.
Given limits to monetary compensation, alternative measures are
required to support relocation, drawing on measures taken forpotentially submerging communities in dam construction under theLand Expropriation Act.
・ Towns cannot be sustained without work. Citizens will not return if158they find it impossible to restart their businesses, including thosein agriculture, forestry and trade. Prolonged evacuation makes it
difficult for citizens to decide whether or not to return based solely
on radiation levels.
・ Having friends close by is most important for the elderly. Many wi sh
to restart life near Fukushima City, Kawamata Town and otherneighboring municipalities where many people from Namie Town
have evacuated.

3.

The optimal legal system for nuclear power operations
After the Fukushima accident, questions were raised about thefact that no indications had yet been made about the operator, TEPCO’s
infringement of national safety regulations and about the missing link
between compliance with the Reactor Regulation Act and judgment ofliability under the Nuclear Compensation Act. It was particularly
questioned whether the lawmaker-initiated amendment made to theReactor Regulation Act in the post-accident confusion does not impair
the balance between securing the well-planned use of nuclear energy
and ensuring public safety.
Despite the importance for nuclear power operators to proactively
advance and further their efforts to improve safety levels, Japan’scurrent legal system for nuclear operati ons is fragmented, with safety
regulations, the compensation system and other disaster prevention
schemes all designed individually.
Upon revising the current compensation scheme for nuclear
damage,acomprehensive

pictureoftheentirenuclearrisk

management framework must be envisioned, with the acknowledgementthat it is a part of a larger bundle of risk coverage and management
measures for nuclear energy use , which secure share mutual andcomplementaryroles

and coordination

withvarious institutions,

including nuclear safety regulations, disaster prevention schemes,
community reconstruction support schemes and international nuclear
cooperation. The agenda is to determine which reimbursements to give
precedence to within the limits of the resources available, how to159prevent the damage from spreading, how to revitalize local communities
and how to address these issues promptly and realistically.
Althoughlittlewasdiscussed

among

Committee

members

regarding international agreements, the author believes that Japan
should consider acceding to international agreements concerning
nuclear damages, or more precisely, to the CSC 263 . Some implicationsof becoming a party to the CSC would be:i)When a domestic manufacturer exports a nuclear power plant,
liabilities for damages in any nuclear accident that occurs in theimporting country would be held exclusively by the nuclear power
operator of the importing country, provided that the importing
country is also a party to the CSC. Therefore, Japan would be
able to avoid business risks.

ii)

In the event that liabilities are in excess of 300 million SD R 264(approximately 45 billion yen), the country in whose territory theaccident occurred is awarded supplementary funding based oncontributions from all parties to the Convention.

iii)

Jurisdiction over actions concerning the nuclear damage of a
nuclear accident that occurs in Japan will lie only with Japanesecourts, even in the case of transboundary damages in othercountries. (*As aforementioned in Part I, Chapter 5, actions havebeen taken against TEPCO in the U.S. for damages suffered as aresult of the TEPCO Fukushima accide nt.)
Such advantages would have great significance to Japan, as

neighboring countries such as China, South Korea and Vietnam areprojected

toexpand

on

their

use

of

nuclearpower

generation

technologies, and it could therefore be important that Japan take theReferences on the significance and challenges of acceding to the CSC can be found in:
JAIC, Anata ni shitte moraitai genbai seido (Introduction to Japan’s Nuclear
Compensation System) (2012), p198-; JELI “Genshiryoku songai no hokanteki hoshou ni
kansuru jouyaku kakujou no kaisetsu oyobi houteki mondaiten no kentou (Convention on
Supplementary Compensation for Nuclear Damage: interpretation and consideration oflegal issues regarding provisions of the convention)” (Japan Energy Law Institute,
November 2012), available at: www.jeli.gr.jp/report/jeli -R-126@2012_11_CSC.pdf;“Genshiryoku songai baishou ni kansuru jouyaku ni tsuite (International conventions on
nuclear damage compensation)” (Nuclear Damage Compensation Division, MEXT,
November 2011), available at:www.aec.go.jp/jicst/NC/iinkai/teirei/siryo2011/siryo45/siryo1.pdf
263

264

1SDR=$1.534080, based on currency rate of September 30, 2013160

initiative in the establishment of an international framework fornuclear damage compensation.
However, thefollowing potential challenges should also be

considered:i)Clarification of who would shoulder the contributions to the fundand how it would be done
In the event of an accident in another country, Japan will also be
required to pay out contributions of 5 to 7 billion yen 265 to thefund; and hence it should be made explicit how and by whom
contributions will be shouldered.

ii)

Measures for research reactors and other facilities with small
financial security amounts
Under Japan’s Nuclear Compensation Act, the financial security
amount is determined according to the scale of each nuclear
facility. Adjustments will be required in terms of the differenc e
between the minimum amount of 300 million SDR required under
the CSC and the 4 billion yen in financial security set aside byresearch facilities and uranium fuel processing facilities.

iii)

Jurisdiction issues
When a nuclear accident causes transboundary da mages, theprimary issue is which country has jurisdiction and whichcountry’s laws apply 266 . Various situations, such as accidents at
nuclear facilities on land and those on the ocean, whiletransporting nuclear fuel, must be considered. As there is nocomprehensive global agreement on jurisdiction, in the absenceof a particular international legal framework, victims may takecourt action in the country with a body of substantive law mostbeneficial to them. This can be advantageous for the victim, while
imposing substantial burdens upon the party liable.

JAIC, Anata ni shitte moraitai genbai seido (Introduction to Japan’s Nuclear
Compensation System) (2012), p201. It should be noted that the currency rate of265

November 1, 2012 was used to convert amounts to yen and that future changes in currency
rates may affect contribution amounts.
Japan Energy Law Institute. Genshiryoku songai baishou ni kakakru houteki
wakugumi kenkyuuhann houkokusho (Report of the Working Group on Legal Frameworks
for Nuclear Compensation) (March 2007) analyzes the international framework on nuclear
damage compensation and contains detailed discussion on jurisdiction issues. The reportprovides important insight to be drawn on in future discussions on acceding to the CSC.
266

161

As aforementioned, 26 residents of the U.S. who worked as crew
members of a U.S. carrier vessel in the relief support activities after theGreat East Japan Earthquake have taken action against TEPCO in the
U.S. District Court for the Southern District of California, claiming
compensation for damages suffered by each plaintiff and punitive
damages, as well as demanding the establishment of a fund of aminimum of 1 billion U.S. dollars to cover costs required for theplaintiffs’ medical tests and treatment 267 . Should such actions continue,
Japan’s nuclear operators will have to cope with great burdens.
In contrast, Japan will have to accept the requirement that in theevent a nuclear accident occurs in another country and it is affected bydamages, pursuant to the principle of concentration of jurisdiction,
Japanese citizens must take legal action in the country in whose
territory the accident occurred. This is one of the reasons that Japan
has been reluctant to become a party to the CSC, and requires carefulconsideration. Even if Japan accedes to the CSC, actions may still betaken

simultaneouslyinnon-party

jurisdictions;andhence,

aframework encompassing all neighboring countries is required.

Announcement on Actions against
www.tepco.co.jp/ir/tekiji/pdf/130315 -j.pdf
267

TEPCO

162

in

the

U.S.

on

TEPCO

website:Part III
Toward the Establishment of a New
Compensation System for Nuclear Damages
Chapter 1

Liability For Damages In Civil Society
Akio Morishima
Professor emeritus, Nagoya University
Kato, Nishida & Hasegawa Law Office

1. Negligence liability and freedom of action
The

Act

on

Compensation

for

NuclearDamages(“NuclearCompensation Act”) which has been applied to the nuclear damages
caused by the Tokyo Electric Power Company, (TEPCO) Fukushima
Daiichi Nuclear Power Plant is a special act on acts of tort provided forin Article 709 and succeeding articles of Japan’s Civil Code. Section 3of the Nuclear Compensation Act holds nuclear operators liable fornuclear damages caused by the operation of nuclear reactors regardlessof negligence, unlike Article 709 of the Civil Cod e which requires aninfringement conducted by intent or negligence. However, in the eventthe damage is “caused by a grave natural disaster of an exceptional
character or by an insurrection” the nuclear operator is exempted fromliability. Furthermore, Section 4 of the Nuclear Compensation Act
constitutes an exception to the Civil Code by channeling liability
exclusively to nuclear operators (operators of nuclear power plants).
Therefore, suppliers of nuclear fuel and manufacturers of nuclear
reactors are not liable against victims of nuclear accidents. The Nuclear
Compensation Act also includes provisions on financial security thatguarantee compensation payments and on the establishment of a
Dispute Reconciliation Committee for Nuclear Damage Compensation(“Reconciliation Committee”), which do not modify or alter the principleof liability under the Civil Code. The Nuclear Compensation Act is a
special act to the Civil Code which channels strict liability exclusively
to nuclear operators.
Turning to the basics of the principle of responsibility under tort
163

law (compensation law), the current Civil Code, needless to say,assumes civil society based on a goods exchange economy. The law
principles and legal system of the Civil Code seeks to guarantee allindividuals the freedom of will, the freedom of action and property
rights in order to establish and functionalize a smooth market economy
society. For example, the fundamental principles of civil law, namely,
the “freedom of legal personality,” “absolute propert y rights,” andthe ”freedom of contract” constitute the legal doctrine underlying goods
exchange which allows all persons to trade his/her goods (including
labor and services) on equal footing with his/her counterparts, but thisshould not require elaboration.
The principle of negligence liability in compensation law is also
founded on the guarantee of an individual’s freedom of action andproperty rights in civil society. In civil society, an individual (A) can act
freely according to one’s will. In so doi ng, he/she may infringe uponanother individual (B)’s property rights (or physical body, hereundercollectively referred to as “property rights”), in the event of which A
must compensate for the damages imposed upon B if there is evidenceof negligence on the part of A. This is what is referred to as “negligenceliability” (Civil Code Article 709). “Negligence,” briefly explained, is thefailure to act with adequate care to prevent the occurrence offoreseeable damages.
Under negligence liability, A’s freedom of action is primarily
respected. An infringement upon B’s property rights is compensated for
only in the event that there is negligence on A’s part. This brings us towonder whether it wouldn’t be unfair to B if the damages suffered by B
remained uncompensated if there was no negligence on the part of A.
On the other hand, B also would not be liable for damages in anotherinstance of the like if B did not act in negligence, and hence, the system
has been considered is not to be necessarily unfair. This reasoning
would be justifiable as long as all individuals were capable ofparticipating in market transaction on an equal footing, that means A
and B are interchangeable. However, the most fundamental grounds fornegligence liability is the importance of calculability or predictability(foreseeability) in a market economy society. A market where the results
164

of an action could impose responsibilities that were not foreseeable
would be lacking in legal stability. Under a n egligence liability system,a person would have to compensate for damages when the actor fails toprevent the occurrence of foreseeable damages. Therefore, negligenceliability provides a certain degree of foreseeability to an actor’s freedomof action.

2.

Negligence liability and foreseeability
However, with the gradual prevalence of capitalism in the 20th

century and the rapid advancement of industrialization in developing
countries as well as global market domination and technologicalinnovation by major companies in developed countries, particularly
after the latter half of the 20 t h century, events which imposed serious
damages upon third parties came to occur frequently as a result ofcomplex operational processes of large companies. It is extremely
difficult to charge the offending company with negligence (to prove thatthe damages were foreseeable and therefore preventable). Hence, many
countries have adopted legislations that do not require the negligence
principle for tort compensation against the b ackdrop of increasingly
strong assertions that liability should be acknowledged without
consideration of negligence or no-fault on the part of actors ofdangerous corporate activities. (Europe already had laws of strict
liability governing the railway and mining sectors in the 19th century.)
The damage compensation system of modern society whichassumes a market economy embraces a system that allows thecontinuity of corporate activity by providing businesses a certain extent
of predictability (calculability). Most strict liability legislations arelinked with limited liability; and therefore, if a company bearing strict
liability obtains liability insurance which covers damages to the limitof liability under limited liability, the compensation payment will becovered by insurance, and therefore it will be able to continue its
business operations.

165

3.

Categories and scope of damages to be compensatedCompensation laws of civil society have not only limited theliability requirement to negligence but they have also acknowledged
only certain categories or scope of damages and therefore do notcompensate for all tangible and intangible damages. For example, theemotional damage suffered by witnessing another person’s physicaldamages is unlikely to be compensated as such damage is subjective
and cannot be sufficiently proved. A computer company that could notfinish calculations before a due date because of a blackout would likely
not be able to claim compensation for the damages caused by a person
who accidently collided into a steel pole and consequently cut the powerlines because such results were not foreseeable under ordinary
circumstances. Adequate

causationand pureeconomic loss are

addressed in many discussions regarding tort law; but nevertheless,modern tort law, which assumes a market economy, limits the scope ofdamages that should be compensated, and as a result leaves victims
with tangible and intangible damages. However, many damages suits
filed in the United States and United Kingdom this past half-century
have acknowledged the compensation for unconventional categories ofdamages and large compensation amounts.
Given such trends, P.S. Atiyah, former professor at Oxford
University proposed that actions for damages for injuries be abolishedin his 1997 book “The Damages Lottery” (Hart Publishing, Oxford), on
grounds that the present (bodily) damage compensation system is an
undisciplined unfair and inefficient compensation system. This book
was translated into Japanese by Professor Reijiro Mochizuki andpublished from Bokutakusha in 1999 under the title “Diversion of Law/
Damage Compensation: A Hotbed for the Blame Culture.” As thispaper’s main aim is not to introduce Professor Atiyah’s book, the author
will refrain from elaborating on further details, but the damage
compensation process of the TEPCO Fukushima accident would lead
one to think that the law has been going out of its way to charge TEPCO
with large debts instead of implementing measures to truly compensate
for damages suffered by victims. Professor Atiyah states that “the law
166[note: the expansion of damage compensation by judicial precedents]
encourages people to blame others for their misfortunes” (Mochizuki,
translated version, p 192) and that “the present [damage compensation]system has mislead the public to believe that large compensation
payments justify the wrongdoer’s actions” (Mochizuki, translated
version, P225). Observing the way TEPCO’s damage compensation
payments were gradually accumulate d, we are left with the impressionthat Professor Atiyah’s theory was not necessary exaggerated.

4.

The Nuclear Compensation Act and the Civil CodeThe tort law provisions under the Civil Code provide the actor =perpetrator with predictability (calculability) and therefore guarantees
his/her freedom of action, in terms of liability requirements as well as
the scope of damages that should be compensated, based on theconcepts of negligence and adequate causation which both hinge on
foreseeability. On the other hand, the victim must suffer the damages
when the perpetrator has not acted in negligence and the damages arebeyond adequate causation. The Act on Compensation for Nuclear
Damages (“Nuclear Compensation Act”) is a modification of Article 70 9of the Civil Code in terms of the requirements for liability. However, it
does not alter in any way the scope of damages which should becompensated. The current Nuclear Compensation Act has adopted
strict liability but nevertheless carries the “protection of persons
suffering from nuclear damage” and“the sound development of

nuclear power business” as its objectives (Section 1).
The former administration announced that it would compensate
for the damages suffered by victims in full, almost as if the n uclear
compensation system could cover all damages. Furthermore, theReconciliation Committee (Nuclear Compensation Act Section 18)
appointed by the former administration formulated the Preliminary
Guidelines on Determination of the Scope of Nuclear Damage , which isbased on an interpretation of adequate causation which ignores orsignificantly exceeds past judicial precedents as if to167“ justify thewrongdoer’s actions through large compensation payments.” However
the Guidelines formulated by the Reconciliation Committee do notnecessarily respond to the wishes of victims based on a thoroughunderstanding of the actual state of damages in affected areas, and are
therefore arousing an increasing sense of unfairness and aggravating
discontent and fear.

5.

The structure of Part III
Chapter 1 explained the basic concept of compensation law underlaws of civil society which support market economy. While the main
objective of compensation law is the compensation of damages sufferedby victims, it includes consideration for the individual’s freedom ofaction in society. Requiring “negligence” on the part of the actor in
determining liability is one such aspect (by excluding the liability of a
non-negligent action). Even under strict liability, the limitation of
liability, or setting a maximum amount for compensation payments,
ensures foreseeability for actors. This chapter also discussed adequate
causation which sets a certain limit to the categori es and scope ofcompensation.
In

Chapter2,

titled“The

NuclearAccidentandDamageCompensation Laws,” Committee member, Prof. Ikufumi Niimi will
elaborate further on the brief discussion herein on the categories andscope of damages to be compensated. Unconventional categories ofdamage such as business losses and damage induced by harmful
rumors, which had never been addressed in tort compensation, wereacknowledged in the compensation of nuclear damages resulting fromthe TEPCO Fukushima accident. Chapter 2 refers to overseas debates
including those in the U.S. and the U.K. and concludes that byacknowledging such compensation claims, the scope of compensation
has exceeded the limits of foreseeability. In Chapter 3, titled “The
NuclearCompensation

Act,

StrictLiability -based

DamageCompensation System and the Compensation for Damages Suffered byVictims of Accidents at Nuclear Power Plants, ” Commi ttee member Prof.
168

Michitaro Urakawa discusses the relationship between strict unlimited
liability and government compensation. In Germany, where the German
Atomic Energy Act also adopts a strict and unlimited liability system
similar to that of Japan’s Nuclear Compensation Act, there had been
deliberations that in the event of major damages that exceed a certain
amount available to satisfy such liabilities, the State should consider
providing appropriate government compensation, acknowledging theincident as a national disaster that cannot be overcome by means ofcivil liability. Swiss law also provides for intervention by Parliament in
the event damages exceed a certain amount covered by financial
security. There are major limitations to compensating for da mages
thoroughindividual

procedures

under

the

current

NuclearCompensation Act. Hence, Prof. Urakawa proposes the establishmentofanadministrativecompensation

systemsimilar

to

the

Law

Concerning Compensation and Prevention of Pollution -Related Health
Damage that will function separately but concurrently with the existingdamage compensation system under the current Nuclear Compensation
Act.
Chapter 4 proposes a fundamental revision of the current Nuclear
Compensation Act, which does not assume a major nuclear accident
that will impose a diversity of damages upon a massive number ofvictims. Hence a new nuclear compensation system is proposed in lightofrecentexperiences.

The

schemeforpoolingamounts

forcompensation should be designed in accordance with the U.S. PriceAnderson Nuclear Industries Indemnity Act (“Price -Anderson Act”), andtherefore require nuclear power operators to make additional payments
backed by governmental support in the event of an emergency. As
provided in Section1, if the Nuclear Compensation Act aims to“contribute to the sound development of the nuclear business” and to“protect persons suffering from nuclear damage,” it is insufficientunder the current system to simply impose strict unlimited liability on
operators while the Government only provides loans by issuinggovernment bonds. Furthermore, the law should provide for theestablishmentofanadministrative

committeethatmanagescompensation procedures and supervises the categories of damages,
169compensation amounts and payment procedures, and in the event thata victim is dissatisfied with the treatment provided by the committee
the victim may bring an action to the court.

170

Chapter 2
Proposal of a Law for the Indemnificationof Nuclear Damages
Ikufumi Niimi
Professor, Faculty of Law, Meiji University

1. Introduction
The cause of the accident at Tokyo Electric Power Company(TEPCO)’s

Fukushima

DaiichiNuclear

Power

Plant

(“Fukushima

accident”) having been attributed to TEPCO, compensation procedures
have been carried out according to the Act on Compensation for Nuclear
Damages (“Nuclear Compensation Act”)

with TEPCO primarily liable

for the damages caused by the Fukushima accident. Legislated as a
special act to the law of torts under the Civil Code, the Nuclear
Compensation Act imposes extremely stringent liability. H owever, theNuclear Compensation Law does not contain specific provisions on theconsequences awaiting those liable for damages. It only provides theconcept

that“nucleardamages”

aredamageswhichshouldbecompensated for and fails to define the categories and scope of thesedamages. Therefore, given the absence of specific provisions regarding
the categories and scope of damage compensation in the Nuclear
Compensation Act, which is a special act, it is assumed that thecategories and scope of damage compensation shall be determinedaccording to the tort provision in the Civil Code.
This chapter will review the discussions concerning the categories
and scope of damage compensation under tort law in order to seek towhat extent damages caused by a nuclear accident can be covered bytort law, or its limitation. Then it will provide ideas for pursuing theappropriate measures for compensating for damages exceeding such
limitation.
Nuclear accidents can occur in various scales. This chapter willassume an accident of a scale equivalent to the Fukushima accident
which caused the gravest consequences in Japan’s history.
The negative impacts of a massive nuclear accident can beextraordinarily widespread both in space and time. The most significant
171

reason for this is the risks imposed by the radioactive substances thatare emitted and dispersed from a nuclear accident (“radiation risks”).
If we can only say that there are no negative risks when the risk levelis zero, then radiation risks remain spatially to the extent thatradioactive substances have dispersed and temporally until its physicaldecay. Also, depending on the level of contamination by radioactive
substances,

the negative impacts of radiation risks can not only

violate the life, body, health, property or other rights and interests ofan individual but also greatly impact the electricity and gas supply of
cities and agricultural, mountainous and fishing villages as well as
infrastructure,including

roads

and

railways,anddiminishorundermine the functions of communities which have served as the basisofresidents’

livelihoods.

Furthermore,environmental

elements

including the soil, rivers, oceans and atmosphere will be destroyed ordeteriorated. When these negative impacts interact additively orsynergistically,

citizens

who

live,

work

or

own

businessesincontaminated areas are confronted with even graver circumstances.
The priority issue is how to compensate for the damages sufferedbythepublicasaresultoftheabovementioned

long -lasting,widespread and diversified negative impacts.
As stated in the beginning of this chapter, compensation measures
have been taken by applying the Nuclear Compensation Act to many,
although not all, negative impacts of the Fukushima accident, basedon the assumption that TEPCO is primarily liable for the accident. The
categories and scope of damages to be compensated for are to be
determined according tothegeneral lawof torts. However, as

undermentioned, the public cannot be adequately compensated under
tort law, which has its own given role. We must promptly discuss how
we can recover or compensate for the negative impacts that cannot be
fully compensated under tort law, with regard to its role and limits.

172

2.

The role and limits of damage compensation law(1)

The features of modern tort lawi) Overview of tort law

Damagecompensation

law,

which

aims

to

compensate

fordamages caused by a third party can be largely categorized into tort
liability law and contract liability law. The mutual relationship between
these two legal frameworks are varied among countries. For example,
countries governed by Common Law, where the freedom of contract isrespected, adopt a contract liability framework based on the literalinterpretation of the wording of a contract and seek to precisely
understand the will of concerned parties in o rder to avoid the arbitrary
interference of the courts. Tort liability is applied to cases which cannot
be addressed with a contract liability approach. Therefore, tort law canflexibly cover a wide scope of liabilities. German law contrarily focuseson protecting the individual’s freedom of action and consequently
applies tort law in a more stringent manner, although not as strictly as
the principle of legality in criminal law. When appropriate conclusions
cannot be derived by applying tort law, resolutions are sought throughthe most flexible interpretation possible of contract liability law. In
French law, both tort liability law and contract liability law can be
flexibly applied, but the concurrent application of

tort liability law is

excluded in the case of a conflict of laws (prioritization of contract law).
In comparison to the aforementioned countries, Japan interprets both
tort law and contract law flexibly and has yet to develop a theory for
conflict of laws such as that of France.
The features of Japan’s legal framework will be taken into
consideration in the subsections below:ii) Concepts underlying tort law
Tort law in modern civil society is supported by the concept ofensuring the freedom of individuals which underlies individualism 268 .
Kato, Ichiro (1974) Huhoukouihou [Zouhoban] (Tort law [expanded edit ion]).
Yuhikaku. p7; Maeda, Tatsuaki (1980) Minpo IV2 (Huhoukouihou) (The civil code IV2(Tort law). Seirin Shoin Shinsha. p8 -; Morishima, Akio (1987) Huhoukoihou Kougi (Tortlaw lectures). Yuhikaku. p255. Reference should also be made to Wagatsuma, Sakae
268

173

As in J.S. Mill’s theory of liberty, the prevalent idea of liberty was thatthat “the individual ought to be free to do as he wishes unless he
executes tangible harm upon others.” There was also strong belief thatsome extent of blameworthiness was required in or der to hold anindividual liable. Against this backdrop, tort law adopted a negligenceliability or self-liability principle and became reluctant to compensate
intangible damages and damages caused by nervous shock that does
not accompany a tangible infringement imposed upon the victim 269 .
After the Industrial Revolution, as society developed with theadvancement of science and technology, dangerous activities increased
and it became evident that the perpetrator and victim no longer stoodon equal footing. Hence, strict liability came to be acknowledged inwider fields as an exception to the principle of negligence liability (cf.
Part III Chapter 3) 270 .

(2)

The evolution of post-war tort law
In the 20th century, while the asymmetrical relationship between

the victim and the perpetrator became even more conspicuous against
thebackgroundofanincreasingly

maturesociety,themutualexchangeability of potential victims and perpetrators was enha nced
despite an asymmetrical relationship in some areas, including traffic
accidents. Also, liability insurance developed as a widely accepted formof insurance. Given these circumstances, the principle of equality, asemphasized in welfare statism, came to be strongly perceived; andhence, the theory that tort law should be rooted in compensating fordamages suffered by those victimized instead of blaming perpetrators
evolved, and, the primary purpose of tort law thus came to be the faircompensation of victims 271 .

(1988) Jimukanri / hutouritoku / huhoukoui [Hukkokuba.n] (Office management, unjust
enrichment, torts [reprinted edition]). Nihon Hyoron -sha. p96- (First published in 1937)
Given the natural consequence of the death of an individual to cause nervous sho cks
among those who were close to him/her, Article 711 of the Civil Code acknowledges thepayment for pain and suffering to a defined scope of next of kin. Article 711, is therefore,
an example of limitations upon the compensation for nervous shocks suffer ed byindividuals whose tangible rights have not been infringed upon.
269

270

Wagatsuma (1988) p97; Kato (1974) p9 -; Maeda (1980) p3-; Morishima (1987) p256-

271

Wagatsuma (1988) p98; Kato (1974) p9 -; Maeda (1980) p26-

174

(3)

Scope of damages
In its evolvement, tort law has not abandoned the theory ofprotecting the freedom of the individual. Both negligence liability andstrict liability tort law frameworks aim to compensate for damages
suffered by the private individual, and hence, they both pursue theprotection of private rights or private interests protected by law. Thisis evident in the amended Article 709 of the Civil Code which requires
the infringement of “any right of others, or legally protected interes t ofothers (“requirement of infringement of legally protected interests”),
whereas it required an infringement of the “rights of others” to satisfy
a damage in torts (“requirement of infringement of rights”), before theamendment of the Civil Code in 2004 . Protecting the freedom of theindividual continues to be an important theory in modern tort law
which can be achieved by determining the outer limits of legally
protected interests in order to secure foreseeability. Furthermore, thescope of damages caused by an infringement of legally protectedinterests which will be compensated should be made explicit to serve
the purpose of securing foreseeability and protecting the freedom of theindividual.

3.

Compensating for nuclear damages and the limits of tort
law

(1)

Legally protected interestsi) Changing from an infringement of rights to illegality: its significanceand challenges
As aforementioned, Article 709 of the Civil Code has been amended
to require an infringement of legally protected interests instead of an
infringement of rights in order to establish a tort. The amendment was
based on the acknowledgement by case law and scholarly theories that“legally protected interests” would constitute the “rights” referred to in
the “requirement of infringement of rights” and the prevailing orthodoxy
175

that an infringement of rights under this article can be established if“illegality” can be acknowledged based on a correlative judgment of theoffense and infringed interests (“illegality theory”).
Replacing the “requirement of infringement of rights” with the“requirement of infringement of legally protected interests” gives roomfor flexibility in determining the scope of compensation and for its
expansion, but simultaneously creates ambiguity in its limits. The
amendment was made presumably under the influence of German
debates, but it should be noted that there had been much discussion
upon drafting the Civil Code that the “infringement or rights” wasrequired with an aim to exclude indirect damages from th e scope ofdamages to be compensated under negligence tort liability law. It had
been understood from the timing of legislation that determining thescope of damages was a major issue in tort law. However, such
understanding waned with reinterpretation of the “requirement of
infringement of rights” to the “requirement of the infringement of legally
protected interests” and hence the prevalence of the correlative theory.
This may be in part related to the call for flexible identification ofdamages to be compensated in the framework of the Japanese Civil
Code which does not distinguish between negligence and intent as
requirements for establishing tortious acts.
ii) Theoretical confusion regarding legally protected interestsa) Indirect damage (in particular, corporate damage)The limits of business damages to be compensated is a major issueof debate in compensating for nuclear damages. A particularly serious
issue is whether or not to provide compensation for indirect damages
and damage from harmful rumors, and the scope of damages to becompensated when these damages are included. The approach taken bytort law regarding these two forms of damage are discussed in thefollowing paragraphs.
Indirect damages are damages imposed upon a person who has acertain relationship with the victim, as a consequence of the tangible
damages directly suffered by the victim. These include medical or
funeral expenses forced upon close relatives of a direct victim (“family
176case”) and business losses suffered by a company that lost aprospective contract because its employee was caught in an traffic
accident on his way to meet the counterparty (“business loss case”).
Other examples include lost profits resulting from being forced totemporarily close a business because the telephone lines are out ofservice as a result of a fire caused by negligence spreading to thetelephone exchange (“telephone line case”) and damages suffered by afrozen food company whose truck had been carrying frozen products
which melted and lost commercial value when it was caught in a
massive highway traffic jam triggered by an accident caused by
improper driving (“accident-triggered traffic jam case”).
Regarding the “family case,” precedents and scholarly theories
support without debate compensation for the indirect damages sufferedand often collectively refer to those suffering damages

as “thevictimized.” However, in terms of the “business loss case,” the Supreme
Court supports the original verdict that adequate causation can be
acknowledged when there is “socioeconomic unity” between direct andindirect victims 272 . This decision of the Supreme Court would seem tohave affirmed the discussion of whether to compensate for businesslosses based on judgment of adequate causation but substantiall ysupports the original verdict which required a special relationship of“socio-economic unity” to acknowledge adequate causation. This should
be interpreted as support for the application of a special framework
called “socio-economic unity,” to judge the presence of adequate
causation, which is usually determined based on whether or not an
event was foreseeable. Many lower court rulings do not apply theadequate causation theory but determine whether particular damages
should be compensated for based on the presence of “socio-economic
unity.” 273 Scholarly theories are divided between those which, in
support of precedents, categorically exclude business losses from thescope of damage compensation based on judgment of the presence ofSupreme Court decision of November 15, 196 8, Supreme Court Reports (civil cases)
22-12-2641
272

The status of precedents and scholarly theories are discussed in Hirano, Hiroyuki(2005) Kansetsu higaisha no hanrei sougou kaisetsu (Comprehensive guide to precedents
regarding indirect victims). Shinzan sha
273

177

“socio-economic unity” and those which contend that the scope ofcompensation should be determined as an issue of adequate causationor the scope of protection, with the former theory enjoying stronger
support. Precedents and scholarly theories basically take a similar
approach for other indirect damages.
b) Damage induced by harmful rumors“Damage induced by harmful rumors” are economic losses which
are suffered as a result of an unfounded reputation among the generalpublic 274 . In a modern information society where information is widely
communicated at high speed, harmful rumors spread quickly and canoccasionally impose grave damages upon victims. Also, given theadvancementofinformation

technology,

information

can

be

accumulated at low cost and can therefore be easily retrieved . Hence,
bad rumors tend to be sustained over a long period of time unless they
are explicitly denied.
Precedents

havedeveloped

analmostestablishedapproachtowards damages caused by harmful rumors which holds the sourcesof the rumors in question or person(s) who fueled their dissemination
liable for torts based on theories on defamation and damage to credit 275 ,and scholarly theories also support this view. 276

A multidimensional discussion on damages from harmful rumors can be found in
Sekiya, Naoya(2011) Fuuhyo higai: sono mekanizumu wo kangaeru (A study of themechanism of harmful rumors). Kobunsha
274

For example, the Supreme Court ruling of the Tokoroza wa Dioxin News Coverage case
(July 11, 2003, Supreme Court Reports (civil cases) 57 -7-815) held the news agency which
made misleading reports which created the harmful rumors of high -concentration
contamination of vegetables grown in areas surrounding the waste combustion plants
emitting dioxins liable for torts. Reference should also be made to the Tokyo High Court
ruling of the O-157 Food Intoxication case (May 21, 2003, Hanrei Jiho 1835-77, Monthly
Rulings 53-2-18) regarding the government press release of an interim report that
attributed O-157-induced food poisoning to radish sprouts grown in a certain region andcaused a drastic nationwide drop in radish sprout sales, which affirmed government
compensation, ruling that even if the interim report had no t been based on scientificevidence, the announcement itself was lawful whereas leaving the interpretation of theinterim report completely in the hands of the media and consumer was illegal.
275

The majority of reviews of the Supreme Court ruling of the To korozawa Dioxin News
Coverage case support the Court rulings. Hashimoto, Yasuhiro. Hougaku Kyoshitsu(Yuhikaku) No. 283 p102; Maeda, Yoichi. NBL No. 788 p83; Kamiya, Masako. Minshohozasshi (Journal on Civil & Commercial Law) Vol. 130 No. 4=5 p850; Matsunami, Shigeo.
Jurist No.1276 p140; Morita, Osamu. Hogaku-kyokai-zasshi Vol.121 No.9 p205; Uzaki,
Masahiro. Hanrei jiho Vol.1867 p180; Wada, Shinichi. Hogaku kyoshitsu Vol.294
276

178

Whether or not person(s) who generated the cause underlying therumored fact (“causer of rumored fact”) should be held liable fordamages caused by the harmful rumors in question has yet to be fully
discussed. Several precedents have addressed the liability of the“causer of rumored fact,”

which has in most cases been determinedaccording to the presence of adequate causation between the rumoredfact and the damages caused by harmful rumors. These court decisions,with the exception of Case 8 were made after the publication of the
Nuclear Damage Investigation Study Group, Final Report of Nuclear
Damage (“JCO Final Report”) on the compensation for damages suffered
as a result of the JCO criticality accident and many of them involved
claims for damages caused by harmful rumors (Cases 4, 5, 6, and 7).
Therefore, they were greatly impacted by the views presented in the
JCO Final Report. In the paragraphs below, the court ruling summaryof Case 8, which was resolved prior to the publication of the JCO Final
Report will be first discussed, followed by a study of the implications
made in the JCO Final Report and Cases 4, 5, and 6, and an additional
review of Case 3, which is not related to any nuclear accident. Cases 1
and 2 dismissed claims on the grounds that there was no evidence ofdamages and will therefore be excluded from discussions herein.
Case 8 regarding damages caused by harmful rumors aroused by
the leakage of radioactive materials from the Tsuruga nuclear power
plant dates back to before the JCO criticality accident and is presumed
to have had implications on the JCO Final Report. In Case 8, the court
ruled that “in the event that radiation leakage occurs in Urasoko Bay,located in Tsuruga Bay, it can be commonly acknowledged that theanxiety in consumer minds towards the possible risks would cause
them to want to avoid purchasing seafood caught in Tsuruga Bay, even
if the radiation leakage measurements are within a safe level and thisinformation is officially announced,” and therefore, “ the damages

supplementary volume (selected precedents of 2004) p2 3; Niimi, Ikufumi. Jurist extra
edition No.1269 p91 (commentary on important precedents of FY2003); Matsunami,
Shiego. Hoso Jiho Vol.53 No.3 p243; Yamaguchi, Itsuko. Jurist supplementary volume No.
179 p190; Matsunami, Shigeo. Commentary of supreme court p recedents (civil cases)(2003) p498; Tai, Yoshinobu. Shiho hanrei remarks (supplementary volume of Horitsu
jiho ) No.30 p58

179

suffered by concerned parties as a result of decreased sales of fisheries
products from Tsuruga Bay should be considered damages connected
to a certain limit by a link of adequate causation with the accident.”
However, regarding the sales drops of seafood fro m Kanazawa, it ruledthat when consumers “avoid purchasing fish from Kanazawa, […] whereradioactive contamination is completely unthinkable, and prefer not to
eat produce from regions even farther away, such a state of mind cannot
be commonly acknowledged, but is the result of consumers’ judgment
based on emotions aroused by the accident which cannot be found to
be a direct consequence of the accident;” and that “if compensation
orders were to be given on the grounds of emotional concerns regarding
the safety of fisheries products from Kanazawa, then the decline in
consumption in Kanazawa would also have to be acknowledged and thatwould unnecessarily expand the scope of damages;” and “even if […]sales did drop after the accident in question, th is is a result ofconsumers’ individual states of mind, which were extremely subjective
states of mind that consumers would not eat something that was safe;
and therefore, it is unlikely that the same circumstances will constantly
lead to the same situation, which was not in general terms foreseeable.”Hence, claims for compensation were dismissed on the grounds that
there was no adequate causation.
In Case 8, the court’s judgment on whether a link of adequate
causation could be found was based on whether “a state of mind inwhich consumers preferred to avoid fisheries products was commonly
acknowledgeable”

whensafetyhad

been

proved

in

terms

of

measurements but consumers were nevertheless concerned about therisks. However, any state of mind on the part of consumers who
consider fisheries products to be hazardous and thus avoid purchasing
them in the absence of objective evidence is subjective, and this can besaid in terms of both fisheries products from Tsuruga and surrounding
areas and for those from Kanazawa. The ruling does not clarify on what
grounds a state of mind would be commonly acknowledged or what
would constitute an subjective state of mind. From the statement thatavoiding the purchase of seafood produced in Kanazawa, “whereradioactive contamination is completely unthinkable” “is not commonly180

acknowledgeable,” it could perhaps be interpreted that such practices
are not commonly acknowledgeable in the event that “radioactive
contamination is non-existent” or there is zero risk, but that refraining
from purchasing fisheries products out of concerns regarding theirrisks is can be acknowledged under all other circumstances. Otherwise,
the adequate causation referred to in Case 8 cannot be logicallyexplained.
The JCO Final Report continued to adopt the approach taken by
the “Nuclear Damage Research Group’s Interim Confirmation – Views
on business damage” (“Interim Confirmation”) and acknowledged“business damages” to include: “for business operations related toagricultural and livestock products harvested in Ibaraki Prefecture soldwidely outside Ibaraki Prefecture, businesses

the actual reduction inincome (gross profit = total sales profits calculated by deducting thecost of sales from sales), which arose during the period up to the point
in time (November 2009) when the required and appropriate time had
passed for the general public to learn of the accurate information
provided through the report by the Accident Investigation Headquarters(November 4, 2009) and the explanatory meetings for local residents(November 13 and 14, 2009), from transactions with a production orbusiness base in Ibaraki Prefecture and for which rejection by thecounterparts could be acknowledged to be inevitable”; “for otherbusiness operations which are based in the in -house evacuation area,
the actual reduction in income which arose during the period up to thepoint in time (November 2009) when the required and appropriate time
has passed for the general public to learn of the accurate information
provided through the report by the Accident Investigation Headquarters(November 4, 2009) and the explanatory meetings for local residents(November 13 and 14, 2009), from transactions with a production orbusiness base in Ibaraki Prefecture and for which rejection by thecounterparts

could beacknowledged tobeinevitable ”;

and

the

reduction in income for which a link of adequate causation can be foundthrough individual verification.
The Interim Confirmation which served as the basis for the JCO
Final Report states that “business damages” are included in “nuclear
181

damages” under the Nuclear Compensation Act as long as a link ofadequate causation is found with the nuclear accident. Furthermore, it
acknowledges that (a) the inclusion of business damages and othereconomic damages incurred upon those who have no t suffered direct
bodily or physical damages as “nuclear damages” will infinitely expand
the scope of damages and may risk impairing a victim compensation
system; but nevertheless generally takes the approach that (b) “thedebate undertaken upon the legislation of the Nuclear Compensation
Act embraced views that all damages falling within the scope ofadequate causation should be compensated instead of ta king such a
restrictive

approach”,

application

should

that

not

“the

interpretation

narrowed

withoutofthereasonable

scope

of

grounds”

regarding items which are explicitly exempted in written law, and thatthe scope of application of the Nuclear Compensat ion Act should beinterpreted with due consideration of its raison d’etre and so that its
purpose of “protecting persons suffering from nuclear damages” is notundermined. That said, it states that (c) “it is undeniable that there ismuch unknown [regarding radiation, etc.] and that it is a well-known
fact that incorrect operations can risk grave and large impacts on thehuman body and physical matters”; and that (d) “given the fact thatJapan is the only country to have experience d atomic bombing and thatthe breakout of grave nuclear accidents in Three Mile and Chernobyl
has been covered in the news, the general public particularly faces fear
and a sense of danger towards radiation, radioactivity and nuclear
power”; and points out that (d) “the accident in question is a radiation
accident which has been designated level 4 under the International
Nuclear Event Scale (INES) and is unique in that three workers haveactually suffered extremely grave radiation damage.” It goes on toacknowledge that (e) “the members of the rescue squad and some local
residents living in surrounding areas are likely to have been exposed toradiation which was of levels not hazardous to the human body but
higher than natural levels. Given these circumstance s, it should be said
that the accident in question built an significant sense of fear anddanger among the general public (in particular, resident of surrounding
areas, counterparts and general consumers).” It also states that (f)182

“psychologicalandsubjective

factors

includingtheawareness,understanding and speculation of the ‘persons’ concerned with thetransaction in question play an important role in motivating anddetermining the value of property and human purchasing behavior.
Therefore, the abovementioned subjective factors cannot be dismissed
upon determining the scope of ‘nuclear damages’; and that (g) “it is not
appropriate to regard the sense of fear and danger embraced by thegeneral public to be an completely personal and transient inordinate
state of mind which should be excluded when determining the scope of‘nuclear damages.’”
The Interim Confirmation which includes “business damages”
among “nuclear damages” provides that the scope of compensation
would be determined based on the theory of adequate causation, the“adequateness” of which would be judged base d on temporal and spatial
factors. It provided that judgment should be based on concrete facts
derived by investigating the penetration level of an understanding of
thesafenessofthesituation

among

local

residents

livinginsurrounding areas and the point of time in which the market’s response
had calmed down, and stated that “at the timing of the publication of
the Interim Confirmation, the temporal scope of damages is identified
to be the period up to the end of November 2009 when the sense of fear
had been calmed down following the report to the Nuclear Safety
Commission

(NSC)

under

the

ScienceandTechnology

Agency,explanatory meetings for local residents and coverage in the mass
media, and the spatial scope is within a 10 kilometer radius of theaccident site. Based on the understanding of the average and generalperson, a transaction regarding which rejection [by counterparts] wasconsidered inevitable and income was actually reduced should beconsidered to have, in effect, a causal connection, and a link ofadequate causation should thus be acknowledged unless provenotherwise. Under the Interim Confirmation, (i) the temporal factor
would be defined not as the timing of the declaration of safety by theGovernment emergency headquarters but as the timing when the senseof danger among local residents living in surrounding areas or theunrest in the market had calmed down which should be determined
183

with reference to the point in time after accurate information has beencommunicated to settle the situation and a reasonable and adequate
amount of time has passed for such information to reach the generalpublic; and (ii) the spatial factor should be determined with reference
to the 10 kilometer radius of the accident site determined by publicauthorities on the grounds that being the area that Ibaraki Prefectureordered in-house evacuation based on measurements at the monitoring
post at the 7-kilometer point, it would serve as an objectively andadequately rational criterion for judgment, and that the general public
could have understood the in-house evacuation order to mean that“public authorities have designated the 10 kilometer radius of theaccident site as the radiation contaminated are a,” therefore leading to
avoidance of transactions.
The view provided in the Interim Confirmation and reconfirmed in
the JCO Final Report that “business damages” would be included in“nuclear damages” under the Nuclear Compensation Act and that theirscope would be determined based on the theory of adequate causation
can be described to have greatly influenced Case 4 through 7 which
dealt with damages attributable to harmful rumors from the JCO
criticality accident. Court rulings for both cases were based on theviews presented in the JCO Final Report. Case 7 dismissed claims on
the grounds that there was no evidence of rejection of transactions.
Cases 4, 5 and 6 also adopted the view presented in the JCO Final
Report. Cases 4 and 5 affirmed the presence of a link of adequate
causation with “business damages” within the determined temporal andspatial scope. (In Case 5, the court found that temporary payments had
been made in excess and ordered reimbursement, and therefore thejudgment made regarding adequate causation may be referred to asobiter dictum.) Case 6 indicated the timing of the confirmation of andreport on safety to determine the temporal scope in accordance with
the JCO Final Report and dismissed claims on the grounds that no linkof adequate causation could be found in a price decline which occurred
after that.
The JCO Final Report and the series of court cases regarding the
JCO criticality accident which adopt its views acknowledge the184presence of a link of adequate causation between the acci dent and thebusiness damages incurred during the period up to the point in time
when the understanding that there are no risks attributable to thecriticality accident. The largest issue here is that despite the fact thatthe party to which the accident is attributable (“attributable party”) did
not actually pose danger to surrounding areas, it was held liable fordamages attributable to harmful rumors which had occurred before
safety was confirmed and it became widely understood on the grounds
that the general public had faced extraordinary fear towards radiation
risks and that it had created the fact that became the target of harmful
rumors of danger. The question is whether it is reasonable to hold not
the “source of harmful rumors” 277 but the party that created the factthat became the target of the sense of fear and danger on the grounds
that the damages had aroused from the sense of fear and danger facedby the general public, regardless of the fact that there was actually nodanger upon life, health or property. Even if it were appropriate for the
public to embrace such sense of fear and danger, th e costs in question
were required for avoidant behavior based on precautionary risk
assessment; with that, would it be appropriate to instantly hold theattributable party liable under tort law, which is mandated tocompensate for resulting actual damages? The author finds that some
limitation would be required in order to affirm compensation foravoidant behavior costs. The approaches

taken towards damage

compensation in precautionary claims for the violation of a real rightand action for preservation of possession may be referred to.
Another issue to consider is that the scope of “business damages”
included in “nuclear damages” could expand infinitely, and hence limits
should be drawn. The theory of adequate causation is employed todetermine the scope of damage compensation in the JCO Final Reportand subsequent court cases, but it is doubtful whether it can be applied
to appropriately demarcate the scope of “business damages.” “Businessdamages” include both “indirect damages” and “damages attributable
to harmful rumors,” and as aforementioned, according to precedents
and many scholarly theories, the scope of compensation for “indirect277

The case introduced in footnote 275 is in support of this view.

185damages” cannot be appropriately demarcated based on the theory of“adequate causation”. In terms of “damages attributable to harmful
rumors,” it is strongly doubtful whether the temporal and spatial
factors of adequate causation can be rationally demarcated as a senseof fear or danger is correlated with individual expectations towards
safety and such emotions are influenced by information on risk , andalso because in the current IT environment, information can be widely
disseminated

and

is

often

not

transientbutrathercausesrepercussions into the future.
Damages attributable to harmful rumors about contamination bydioxins was disputed in Case 3, which arose after the JCO criticality
accident. The court ruled that, because the concentration level of
dioxins had exceeded environmental standards and the Ministry of theEnvironment stated in its declaration of safety that a comparatively
high concentration of dioxins (fivefold of environmental standards) had
been detected and that fisheries products from downstream should
preferably not be eaten, a link of adequate causation with businessdamages including declined sales had been present. Therefore, in Case3, the court found a link of adequate causation on the grounds that thesafety declaration announced by the Ministry of th e Environment
includedadvicetoavoid

consumptionoffisheries

products .

Nevertheless, although the advice to avoid fisheries products might
have

been

providedbytheMinistryoftheEnvironment

ina

precautionary context, it is unlikely to have been base d on adequate
consideration of the extent and details of risks accompanying dioxin
concentration levels five times the level of environmental standards.
That said, employing recommendations made for the purpose of
precaution, as standards for demarcating t he scope of ex-post damages
will unduly expand the scope of damage compensation. It is a wellknown fact that precautionary measures may be taken even with areasonable level uncertainty.
c)Compensation

for “business damages”

related to

the

TEPCO

Fukushima accident
Guidelines for the compensation for damages caused by the186TEPCO Fukushima accident were set out in the Interim Guidelines on
Determination of the Scope of Nuclear Damage resulting from the
Accident at the Tokyo Electric Power Company Fukushima Daiichi andDaini Nuclear Power Plants (“Interim Guidelines”) by the Dispute
Reconciliation

Committee

forNuclearDamageCompensation(“Reconciliation Committee”) in August 2011. The Interim Guidelines
provide the basic acknowledgement that in terms of the scope of nuclear
damage, there is no reason to take the view that it should be especiallydifferent from the scope of damage in any standard claim in tort fordamages, and that a nuclear operator is liable for the damage within
the range for which one can recognize an adequate causation. Hence,damage is considered “nuclear damage” when it is judged, based upon“social convention”, to be logical and reasonable consequences of thenuclear accident. The JCO Final Report would then be referred to inorder to determine the scope of damages to be compensated, taking into
consideration the circumstances unique to the TEPCO Fukushima
accident. The Interim Guidelines add that since it would be unfair tocompel victims to provide strict evidence, while presumption t o areasonable extent would be required, an option would be to adopt a
standardized

calculation

methodorpredetermined

compensation

amounts.
The Interim Guidelines provide that in areas in which instructions
or requests to evacuate have been issued by the government (geographic
scope), residents shall receive compensation for certain types of damage
and individuals who formerly operated or currently operates all or partof a business (public or private) shall be entitled to compensation forcertain types of business damage (including rumor-related damage).
For workers with a place of work located within the geographic scope,
the reduction in a worker’s salary resulting from inca pability to engage
in that work due to impossibility to continue business shall berecognizedasdamagewarranting

compensation.

Given

that

determining an end date for damages will present difficulties undercurrent circumstances, the Interim Guidelines state that a temporal
scope will not be determined for the time being.
Seeking to determine the scope of damages to be compensated by187the nuclear operator based on the presence of adequate causation, theInterim Guidelines present criteria to judge reasonability based onsocial convention. However, the criteria provided is

too abstract andthus does not promise to be functional in determining the scope ofdamages 278 . Only an extremely generalized geographic scope is provided
by the Interim Guidelines as a concrete criterion for judging whether
there is a reasonable relationship between the accident and the damage,and moreover,no temporal scope is given, with a note that it will be

examined at a future time as necessary. Furthermore, the requirements
to present evidence of damage have been mitigated. Such guidelines
pose a large risk of unlimitedly expanding the scope of damages that
nuclear operators are liable for and therefore may have “opened theflood gate,” as will be discussed below.
d) Overseas debate concerning pure economic loss
The debate on pure economic loss, which include indirect loss anddamage induced by harmful rumors 279 , may provide useful insight inreflecting on the Japanese government’s response to the Fukushima
nuclear accident. The following paragraphs will overview the ongoingdebate in the U.S. and Europe.
In Germany, the U.K. and the U.S. where Common Law ispracticed, compensation for negligence torts is only recognized to an
extremely limited extent.
The German Civil Code (GBG) Section 823 Paragraph 1 stipulates
that “a person who, intentionally or negligently, unlawfully injures thelife, body, health, freedom, property or another right of another person
is liable to make compensation to the other party for the damage arisingfrom this.” This would seem to protect a wide range of rights but many
precedents and scholarly theories regard only the infringement of
absolute rights, which does not include pure economic loss, to be

Issues regarding compensation of individuals who have evacuated v oluntarily havearisen.
278

In the U.S., liability on the part of the source of harmful rumors is considered in termsof defamation whereas the liability of the causer of the fact is addressed as a case of pureeconomic loss. See Travis M. Wheeler, Negligenc e Injury to Reputation: Defamation
Priority and the Economic Loss rule, 48 ARIZONA L. REV. 1103 (2006), at 1117 -27
279

188

covered by this provision. Hence, the provision, in principal, cannot beapplied for pure economic loss. 280 Pure economic loss can only becompensated for under Section 823 paragraph 2, Section 824 andSection 826, which cover torts characterized by high illegality as incriminal acts.
In the U.K., even after the Hedley Byrne v. Heller case 281 which
expanded the scope of liability for pure economic loss resulting fromnegligence on the part of possessing person with special skills, anintentional act of infringement is required for tort liability to berecognized for pure economic loss, with th e exception of

liability on

the part of a financial institution that has provided false credit
information, professional liability or misrepresentation on the part ofthose with special skills, such as accountants, or cases in which
incomplete services have been provided. The U.S. has a similar regime
to that of the U.K. 282
The French Civil Code Article 1382 provides that “any act
whatever of man, which causes damage to another, obliges the one bywhose fault it occurred, to compensate it” and does not prec isely define
the legal interests to be protected. Therefore, it does not exclude pureeconomic loss, for which compensation is recognized if adequate
causation can be acknowledged between the act of infringement anddamagecaused.

However,

precedents

ands cholarly

theories

differentiate the criteria for acknowledging the presence of adequate
causation 283 depending on whether the decision to be made is on therecoverability of damages in an infringement of life, body or property ofothers or in a case of pure economic loss. Hence, in the latter case, thescope of liability is often limited when judging the directness of the
Mauro Bussani & Vernon Palmer, The Liability regimes of Europe - their facades andinteriors , in PURE ECONOMIC LOSS in EUROPE (Mauro Bussan i & Vernon Valentin
Palmer eds., 2003) at 218. See also Helmut Koziol, Recovery for Economic Loss in theEuropean Union , 48 ARIZONA L. REV. 871 (2006), at 874
280

281

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465

In the U.S., discussions rega rding pure economic loss have been furthered in thedrafting of the restatement of torts related to transactions. The current status of
discussions are elaborated in ARIZONA LAW REV. vol.48.
282

In French tort law, it is interpreted that damages will only be awarded if they are a“certain and direct (certaine et directe) consequence” as in contractual torts (Civil Code
Article 1151).
283

189

consequences 284 . For example, the French Court of Cassation dismisseda claim filed by concert organizers against the offender that caused asinger’s injury for the compensation of damages resulting from thecancellation of a concert that the singer had been scheduled to sing in,on grounds that the damages were not “direct” consequences 285 . As thejudge is granted considerable discretion in dete rmining the causal
relationship between an event and said damage in France, each case isaddressed differently; and hence, no explicit rules have been set
regarding pure economic loss.
Austrian law takes a similar approach to French law. The Austria
General Civil Code (ABGB) Section 1295 provides that anyone who
intentionally or negligently causes damage to another person shall be
liable to compensate for the loss suffered, and does not limit the scopeof legal interests protected under the provision. Howe ver, according toprecedents and scholarly theories, pure economic loss shall berecovered only when stringent requirements including the presence ofintention are met and not merely as negligence tort 286 .
To briefly discuss legal regimes in other countries 287 , Article 6:162
of the Dutch Civil Law includes not only absolute rights and personal
rights but also quasi-real rights such as right of use and right ofusufruct among “rights” to be recovered under tort law; and hence, it
stands in between German law and English and French law. Sweden
and Finland adopt a rule similar to that of Germany that pure economic
loss resulting from criminal tortious acts shall be repaired. East andCentral European countries take a stance close to that of French law,
but of the three Baltic states, Estonia, takes an approach resemblingthat of Germany.

In France the judge is granted considerable discretion in determining the causal
relationship between an event and said damage; and hence, the judgment of the“directness” of the consequence is varied among cases. In this sense, French law tends tobe more lenient towards the recovery of pure economic loss compared to German and otherCommon Law regimes.
284

285

Civ. 2e 14 November 1958, Gaz. Pal. 1959.1.31

286

Koziol, supra note 13, at 875

See generally Prepared by Christian von Bar, Principles of European L aw Ed. by
Study Group on a European Civil Code, NON -CONTRACTUAL LIABILITY ARISING OUTOF DAMAGE CAUSED TO ANOTHER (PEL LIAB. DAM) (.Oxford U.O., 2009) at 233 -4
287

190

It should also be noted that there is no common understanding of“pure economic loss” shared among all countries 288 . Lawyers in the U.K.,
Ireland, Scotland, Sweden and Finland define “pure economic loss” tobe loss unaccompanied by tangible damage to body or property. German,
Austrian and Portuguese lawyers define “pure economic loss” as loss
not due to the violation of absolute rights, and consequently exclude
some forms of losses that are typically included among pure economic
loss in other regimes. Lawyers in France, Belgium, Luxemburg, Spainand Hungary are unfamiliar with the very concept of “pure economicloss”.
While there is no single approach commonly adopted by all
countries regarding the same issue, it is a widely known fact that
German law has applied or expanded on contractual liability 289 and it
should be noted that English law has drawn on concepts such as“breach of duty” in negligence and “voluntary assumption of liability”.
These legal interpretations have enabled the recovery of pure economic
loss suffered by businesses as a result of misinformation provided to a
trade

partnerbyafinancial

institution

with

which

it hadnotransactions, as well as those suffered by victims of misinformation
provided by accountants and other experts to third parties 290 . However,
the general tendency is to limit the extent and scope of pure economic
loss to be compensated, in particular in terms of indirect damage.
The Principles of European Tort Law drafted by the EuropeanGroup on Tort Law (EGTL) provide in Article 2:102, paragraph 1 that
“The scope of protection of an interest depends on its nature; the higher
its value, the precision of its definition and its obviousness, the more
extensive is its protection.” Paragraph 2 stipulates that absolute rights
enjoy the most extensive protection; paragraph 3, that property rights,
including

those

in

intangible

property,aregrantedextensiveprotection; and paragraph 4, that “protection of pure economic

Ibid.
Christian von Bar, The Common European Law of Torts vol.2 (Japanese translation
by Atsumi Kubota) at p175288
289

Susanne Kalss, The Liability of Banks , in PURE ECONOMIC LOSS (Willem H. vanVoom, Helmut Koziol & Christian A. Witting eds., 2004) at 77. See also Koziol, supra note
13, at 872
290

191

interests or contractual relationships may be more limited in scope. In
such cases, due regard must be given especially to the proximity
between the actor and the endangered person, o r to the fact that theactor is aware of the fact that he will cause damage , even though hisinterests are naturally valued lower than those of the victim.”
The largest reason for excluding pure economic loss fromrecoverable damages due to negligent torts or for limiting the scope ofrecovery is understood to lie in the fact that it is extremely difficult todemarcatethelimitsofpureeconomic

loss

and

that

its

acknowledgement may induce a flood of claims for compensation (Flood
Gate Argument). This would be the equivalent of opening a can of worms(or Pandora’s box of claims), burdening persons who have committed a
tortious

act

with

unforeseeable

andunlimited

liability,andconsequently infringing upon an individual’s freedom of action 291292 .
Given that even under French law, where the concept of pure economic
loss is non-existent, the scope of its recovery is limited based on thetheory of directness in causal relationship ; and therefore, it isundeniable that there is indeed some common understanding among
different legal regimes.
Other views point out that comparison of the value of life, body,
health and property rights, including proprietary rights, and the valueof pure economic loss has also led to the limitation of its recovery 293 .

While the Flood Gate Argument is often understood to be based on concerns that the
courts will be flooded with claims, it more importantly addresses the possibility ofburdening the person who has committed a tortious act with unlimited liabilities with n odefinition of a cutoff date or scope of persons to be compensated.
In the U.S., a leading case, Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927)
ruled that pure economic loss, considered to be a form of indirect damage, cannot berecovered according to law of (negligent) torts. Judge Oliver Wendel Holms’ explicit
reasoning provided in the court decision has ruled all succeeding cases, which have denied
the recovery of pure economic loss unaccompanied by physical damage to a person’s bodyor property. This reasoning was furthered by Judge Benjamin Cardozo in Ultramares
Corp. c. Touche, 174 N.E. 441 (N.Y. 1931). Cardozo held that acknowledging liability
would expose the actor "to a liability in an indeterminate amount for an indeterminate
time to an indeterminate class," which having been likened to a nightmare, is often
referred to as “Cardozian nightmare.”
291

292

Kozoil, supra note 13, at 877

Cf. Christian Witting, Distinguishing Between Property Damage and Pure Economic
Loss in Negligence: Pe rsonality Thesis, 21 J. LEGAL STUD. 481 (2001).
293

192

e) Gulf of Mexico oil spill and pure economic loss: has the flood gate
been opened?
The 1989 oil spill caused by the massive oil tanker Exxon Valdez
which ran aground on a reef off the shore of Alaska aroused wide social
interest regarding whether or not causers of the oil s pill should be held
liable for the economic losses (pure economic loss) suffered by fisheriesbusinesses,

restaurants

servingseafood,andtourism

agencies(collectively, “accident-related victims”). The accident was followed bywhat is considered to be the largest marine oil spill in history – by far
larger in volume than the Exxon Valdez oil spill - which occurred in the
Gulf of Mexico in 2010. The oil spill was caused by the Deepwater
Horizon oil rig operated by an affiliate of BP, whose liability wasquestioned. The Deepwater Horizon oil spill was intensively discussed
in legal spheres, whether economic loss, including damages induced byharmfulrumors,sufferedbyaccident-related

victimswouldberecovered, and if so, that compensation amounts would be of an
unimaginable

scale 294 .

Legalproceedings

concerning

damagesresulting from the Deepwater Horizon oil spill are pointed in the
direction of acknowledging the recovery of pure economic loss, therefore
risking the opening of the “flood gate” debated in common law regimes.
The case will become a touchstone of whether the flood gate argument
did contain some reality or whether it had been fo unded on groundlessfear. Hence, it may serve as important reference when consideringbusiness damages resulting from nuclear accidents in Japan.
Negligent tort liability for damages caused by oil spills had beenrecognized in the event that tangible damage had been imposed uponbody or property, based on general maritime law 295 , which is governed
It has been reported that commercial fishing operations have been banned inapproximately one-third of U.S. territorial waters in the Gulf of Mexico, causing many
fishery operators to lose their source on i ncome. Furthermore, harmful rumors about
fishery products from these waters pushed down the number of tourists to the entire Gulf
of Mexico area, not limited to the area physically affected by the accident, thereby
reducing the income of workers engaged in the tourism industry. See Andrew Davis, Pure
294

Economic Loss Claims Under the Oil Pollution Act: Combining Policy and Congressional
Intent , 45 COLUMBIA J. OF LAW AND SOCIAL PROBLEMS 1 (2011), at 2 -4

In the U.K., where common law originated, general marit ime law has evolved as aregime of rules and principles separate from general common law and is not contained bycommon law. The U.S. general maritime law has been derived from that of the U.K.. See
Peter Crane, TORT LAW AND ECONOMIC INTERESTS (2d ed. Oxfo rd 1996), at 278
295

193

by rules and principles different from common law. Like common law,
it has not, in principle, recognized pure economic loss. However, somejurisdictions have adopted an exceptional rule to the general rule thatcommercial fishermen would be granted compensation for damages ongrounds that they utilize fishery resources for subsistence and rely onthem for income (“exclusionary rule for fishery operator s”) 296 . The
exclusionary rule for fishery operator s is varied among different
jurisdictions, where views are diversified regarding whether it should
be a requirement for the “fishery operator” to have managed fisheryresources, whether “fishery operators” would inclu de fishery brokers
and restaurants serving seafood and what would be included in losses
to be compensated 297 .
In response to the Exxon Valdez oil spill, the U.S. adopted the Oil
Pollution Act of 1990 (OPA) 298 , which prescribes the prevention of oil
spills and the compensation of damages resulting from oil pollution, as
well as the securing of safety and the comprehensive removal of oil andother hazardous substances. Lobbying activities by pressure groups
such as fishery organizations largely impacted the legislation of OPA.
Continuous debate on the compensation of damages resulting from oil
spillscaused

by

ships

have

led

to

the

conclusionofseveralinternational agreements. Such trends could also have influenc ed thepassing of the OPA.
OPA section 2702(b), paragraph (2), subparagraph (B) provides
that “damages for injury to, or economic losses resulting fromdestruction of, real or personal property” shall be recoverable by aclaimant who owns or leases that property, and subparagraph (C)Union Oil Co. v. Oppen, 501 F.2d 558 (9th Cir. 1974) is referred to as the precedent
recognizing “exclusionary rule for fishery operators.” However, in this case, the court
simply ruled that economic loss suffered by fishery operators d ue to reduced fish catches
are “reasonably foreseeable.”
296

Papers which study precedents in coastal states in the Gulf of Mexico and the Federal
circuit court in details include: Benjamin J. Steinberg & Dwayne Antonio Robinson,
297

Making BP’s Blood Curd-Le: Duty, Economic Loss, and the Potential CardozianNightmare after Curd v. Mosaic Fertilizer , 63 FLORIDA L. REV. 1245 (2011). See also
John C.P. Goldverg, LIABLITY FOR ECONOMIC LOSS IN CONNECTION WITH THE
DEEPWATER HORIZON SPILL, 18-22 (2010), available at http://nrs.harvard.edu/urn3:HUL.InstRepos:4595439
298

33U.S.C. §§2701-2761 (1990)

194

stipulates that “damages for loss of subsistence use of natural
resources […] shall be recoverable by any claimant who so uses natural
resources which have been injured, destroyed, or lost, without regard
to the ownership or management of the resources.” Subparagraph (E)of the same paragraph provides that “damages equal to the loss of
profits or impairment of earning capacity due to the injury, destruction,or loss of real property, personal property, or natural resources […]shall be recoverable by any claimant.” Subparagraph (B) is derived fromgeneral rules traditionally acknowledged under common law on thecompensationoftangible

damages,

whereassubparagraph(C),generally covering all claimants who use or make profits bas ed onnaturalresourcesforsubsistence

recognizes

the

core

concept

underlying exceptions for fishery operations related to pure economic
loss. Given that the Robins case 299 , a precedent addressing pureeconomic loss, had not been considered at all in the le gislation of
subparagraph (E) and that its application is only discussed in thecontext of precedents after the Robins case that have recognized theexclusionary rule for fishery operators 300 , it remains unclear as towhether the intention of the subparagraph to extensively recognize pureeconomic loss. The ambiguity of “damages equal to the loss of profits
or impairment of earning capacity due to the injury, destruction, or lossof real property, personal property, or natural resources,” especiallyrepresented by the phrase “due to” implies room for the compensationof even a wider scope of pure economic loss, extending beyond theexclusionary rule for fishery operators and risks unlimited expansionof the scope of recoverable damages 301 . Although the OPA created new
counts in place of those under general maritime law, it fails to reveal
to what extent it has amended general maritime law and leaves thequestion

299

open

as

to

which

precedents

should

be

taken

into

Robins Dry Dock & Repair Co. v. Flint, supra note 24

H.R. CONF. REP. NO. 653, 101st Cong., 2d Sess. 103. 103(1990), reprinted in 1990
U.S.C.C.A.N. 779, 781
300

Antonio J. Rodriquez & Paul A.C.Jaffe, The Oil Pollution Act of 1990, 15 TUL. MAR.
L. J 1 (1990), at 15. Some hold the extreme view that Section 2702(b)(2)(E) does not callfor the integration of economic loss and physical damage. See Goldberf, supra note 30, at
18-22
301

195

consideration. Therefore, the interpretation of Secti on 2702 (b),paragraph (2) has been fought in several court cases – in particular,
firstly whether pure economic loss could be recovered, and secondly, inthe event that pure economic loss is recoverable, which criteria should
be

apply

in

determining

the

scope

of

victims

that

can

claim

compensation. It should be noted that the OPA sets upper limits tocompensation amounts which should not exceed the sum of total
removal costs and 75 million dollars per claimant per accident forcoastal facilities excluding deep water ports or a total of 350 million
dollar per accident for all coastal facilities , including deep water
ports 302 .
A claim for recovery of damages under the OPA was filed in 1992
by a plaintiff who had suffered business losses due to river pollution
resulting from gasoline leakage from a ship collision in Michigan 303 .
The federal district court, citing the Robins case, ruled that damage, as
stipulated in OPA Section 2702(b), paragraph (2), subparagraph (E), isa “loss of profits or impairment of earning capacity from injury,
destruction or loss of real or personal property or natural resources”
but that the plaintiff had not claimed a “physical infringement ofproperty interests,” and hence dismissed the claim. The court decision
was in line with general maritime law, referring to the court ruling in
the Robins case as a precedent which excluded pure economic loss fromthe scope of recoverable damages with respect to the exclusionary rule
for fishery operators in mind. However, the ruling was succeeded by
new interpretations that Section 2702(b), paragraph (2), subparagraph(E) does not exclude pure economic loss from recoverable damages andthat holding the operator of the oil spill in question liable for thedamages would not impose excessive burden upon it 304305 . Nevertheless,

302

33 U.S.C. §2704(a)(3), et seq. (2004)

303

In re Cleveland Tankers, Inc., 791 F. Supp. 669 (E.D. Mich. 1992)

See eg. Taira Lynn Marin Ltd. No.5, LLC v. Jays Seafood, Inc., 444 F.3d 371 (5he Cir.
2006); Ballard Shipping Co. v. Beach Shessfish, 32 F3d 623 (1 st Cir. 1994(; Sekco Energy
Inc. v. M/V Margaret Chouest, 820 F. Supp. 1008 (E.D. La. 1993)
304

Goldberg, supra note 30, a 11-14 indicates, by presenting explicit examples, that
depending on the interpretation of OPA Section 2702(b), paragraph (2), subparag raph (E),an extremely broad and diversified scope of recoverable damages could be defined.
305

196

instead of unlimitedly recognizing compensation, the court has applieddifferent exemption clauses in order to deny the awarding of damage
compensation. 306 .
The Robins case ruled that an injured party may not recovereconomic loss damages unaccompanied by tangible damage but if thisrequirement were to be removed and liable parties of oil pollution were
to compensate for pure economic loss under the OPA, the determinationof the scope of recoverable damages will become a critical issue. Given
the definition provided in OPA Section 2701 that ”natural resources”
include “land, fish, wildlife, biota, air, water, ground water, drinking
water supplies,” which in effect implies that almost everything iscovered 307 , interpreting “due to” to simply represent a necessary
condition (as in “no A, no B”) then the economic loss resulting from“injury, destruction, or loss” could risk infinite expansion. However,few precedents relate to this point. Some precedents have introduced
the concepts of “proximate cause” or “direct cause” in their attempt todraw the bounds of recoverable damages 308 , but have failed to explicitly
define each concept, and hence, do not offer a compelling explanationof the context in which the scope of damage compensation wasdetermined. Furthermore, although claims for compensation under the
OPA require evidence of “real” loss of profits or impairment of earning
capacity, individuals and business operators who have been forced toevacuate as a result of an oil spill cannot be expected to provide
evidence of such “reality.” There are concerns that if the requirement
to present evidence is mitigated, the polluter would be held liable for agreater scope of damages 309 .
In re Settoon Towing, No. 07-1263, 2009 WL 4730971, at 3 (E.D. la Dec. 4, 2009)
recognized the claim for compensation for economic losses arousing from not being able
to approach the drilling site during removal activities after an oil spill, but indicated thatsuch claims might be deterred under federal maritime law.
306

307

Goldberg, supra note 30, at 19

Sekco Energy Inc. v. M/V Margaret Chouest, supra note 37 (Claims were dismissed on
grounds that the oil pollution was not a “proximate cause” of the plaintiff’s pure economicloss); Gatlin Oil Co. v. United States 168 F.3d 207 (4th Cir. 1999) (Claims for recovery ofdamages imposed upon the plaintiff’s property as a result of fire cause by volatile gas
from an oil leakage were dismissed on grounds that said damages were not a result of theoil leakage. The court ruling implied that the decision had been based on judgment of“direct cause.”)
308

309

Goldberg, supra note 30, at 15

197

The Deepwater Horizon oil spill occurred in the abovementioned
context, calling attention to how damages resulting from it would berecovered. On June 16, 2010, BP agreed with U.S. President Obama to
implement prompt and fair compensation for dama ges whose recovery
would be difficult to seek through legal action. For the purpose ofprompt and fair compensation, and seeking also to save potential costs
that would be required to address the large number of claims expected,
BP waived its liability cap granted under the OPA and established the
Gulf Coast Claims Facility (GCCF) as “an independent claims facility
for submission and resolution of claims of Individuals and Businesses
for costs and damages incurred as a result of the oil discharges due tothe Deepwater Horizon incident on April 20, 2010, 310 ” on the premisesthat it would not set any caps upon compensation payments.
BP paid out an initial facility of 20 billion dollars to the GCCF andpledged to provide an additional 20 billion dollars if neces sary 311 . A
neutral and independent claims administrator was appointed by BP toprocess claims and request the GCCF payment of compensation
awards 312 . The payment requests made to GCCF do not pursue theliability of BP; payments are instead determined pursuant to thecompensation

rules

and

procedures

established

by

the

claimsadministrator.
The compensation rules provide that eligible claimants areindividuals and businesses that have incurred damages, including
Removal and Clean Up Costs, Damage to Real or Pers onal Property, Lost
Earnings or Profits, Loss of Subsistence Use of Natural Resources, orPhysical Injury or Death, as a result of the oil spill. This is similar towhat is stipulated in OPA Section 2702(b) paragraph (2) 313 . However, it
is unclear how compensation awards have actually been determined,
perhaps inevitably due to the fact that settlements are inherently

310

Gulf Coast Claims Facility, http://www.gulfcoastclaimfacility.com/faq

Jonathan Weismann & Guy Chazan, BP Agrees to $20 billion Fun, WALL ST J. Jun
17, 2010 at 1: Press Release. BP. BP Forms Gulf of Mexico Oil Spill Escow Trust (Aug. 9,2010), available at www.bp.com/en/global/corporate/press/press -releases/bp-forms-gulf311

of-mexico-oil-spill-escrow-trust.html
312

Gulf Coast Claims Facility, supra note 43

313

Ibid.

198

privately negotiated. Filing a claim with the GCCF does not restrict theclaimant from filing a lawsuit to pursue BP’s legal responsibilities.
However, the claimant may only receive payment from the GCCF on
condition that the claimant will waiver its right to seek damages of BP
regarding the oil spill.
As the GCCF processed claims, thousands of individual claims
and hundreds of class actions were filed with the federal district
courts 314 . On August 10, 2010, the Judicial Panel on Multidistrict
Litigation issued a pretrial Transfer Order which effectively centralized
all federal lawsuits arising from the oil spill, with the exception ofcollateral-related lawsuits, in the U.S District Court for the Eastern
DistrictofLouisiana.

Judge

Barbiersoughtcollective

judicial

settlement by bundling all claims for economic loss and property
damages and ordered for settlement negotiations to be held among
concerned parties with Magistrate Judge Shushan serving as neutral
mediator. Tortious settlement negotiations were held on a frequentbasis in earnest until basic agreement was finally reached. On
December 21, 2012, Judge Barbier granted final approval of the
Economic and Property Damages Settlement Agreement and it was alsodecided that the GCCF’s compensation program would be incorporated
into the settlement compensation program.
An overview of the sections related to business damage in theorder issued by Judge Barbier is provided below:(i) Geographic and temporal bounds: Louisiana, Mississippi, Alabama,
and certain coastal counties in eastern Texas and western Florida,
as well as specified adjacent Gulf waters and bays. Class members
comprise individuals within the geographic area who have lived,
worked, or owned or leased property in the area between April 20,
2010, and April 16, 2012, and businesses which have conductedactivities in the area during that same time frame.
(ii) Categories of loss or damage: (1) specified types of economic loss forbusinesses and individuals, (2) specified types of real property

Michael L. Rustad and Thomas H. Koenig, Parens Patriae Litigation to Redress Social
Damages from the BP Oil Spill: The Latest Stage in the Evolution of Crimtorts; 29 UCLA
J. ENVITL. L & POL’Y 45 at 53, 72 (2011)
314

199

damage (coastal, wetlands, and real property sales damage), (3)Vessel of Opportunity Charter Payment, (4) Vessel Phys ical Damage,(5) Subsistence Damage, and (6) the Seafood Compensation Program.
However, the class definition also contains specific exclusions, forexample the Court and employees of BP. Other exclusions are basedon the substantive nature of the business, such as financial
institutions, certain types of funds, financial trusts, and otherfinancial vehicles, gaming industry, insurance entities, oil and gas
industry, defense contractors, and real estate developers). Also
excluded are certain defined governme nt organizations as well as
persons or entities who have released their claims through the GCCF.
(iii) Limits to compensation payments: With the exception of the
Seafood Compensation Program, there is no cap on the amounts that
may

be

paid

under

the

Settlement

Agreement.

The

Seafood

Compensation Program features a guaranteed $2.3 billion fund; i.e.,$2.3 billion will be distributed to claims in this fund. Many damage
categories are augmented by risk transfer premiums (“RTP”).
(iv) Calculation of compensation awards: The settlement is implemented
by the Deepwater Horizon Court Supervised Settlement Program(“Settlement Program”). The Settlement Program calculates awards
using public and transparent frameworks that apply standardized
formulasderivedfromgenerally

acceptedandcommonmethodologies. It uses a “before and after” method to calculate
economic loss suffered by business operators. Specifically, Step 1
provides compensation for the reduction in variable profit between
the Compensation Period and the Benchmark Period, and Step 2
provides compensation for increased profits that reasonably could
have been expected to be generated in 2010 but for the spill. The
Compensation Period in Step 1 is any period of three or moreconsecutive months from May through December 2010. For the
Benchmark Period, the class member may choose to use from theselected months from 2009, the average of the selected months in2008 and 2009, or the average of the selected months in 2007, 2008,
and 2009. Step 2 accounts for lost growth potentially due to the spill.
Up to a maximum of 12%, growth is calculated by considering an
200

assumed growth rate of 2% (General Adjustment Factor) and actual
growth reflected in historical revenue trends prior to the spill(Claimant-Specific Growth Factor).
(v) Overview of Settlement Program: The Settlement Program consistsof Court-appointed claims administrator and his staff of 25 people.
3,200 people are employed throughout the country.
(vi) Causation: Some business claimants must demonstrate that thespill caused their losses. In many other cases causation is presumed.
The documents required to support economic loss can be sufficiently
met by accounts and other documents that businesses keep in theordinary course of business.
Based on the abovementioned conditions for settlement, theconcerned

parties

implementation

reachedphase.

final

However,

agreement
theandambiguityofenteredthecriteria

forprocessing claims led to the awarding of large payments for non existent damages 315 , and concerns that the funds paid out by BP would
not be enough to cover all compensation payments. BP appealed to the
New Orleans appeals court in demand of a more explicitly defined
criteria for processing claims and temporary suspension of theimplementation of the settlement until they had been made explicit. On
October 2, 2013, the New Orleans appeals court ruled in favor of BP
and ordered the clarification of claim processing criteria and theirappropriate application 316 .
The reality of payouts for damages arising from Deepwater Horizon
oil spill imply that in the event that a framework does not conform to
the rule of excluding pure economic loss from the scope of recoverable
damages, it is important to set a cap on compensation payments inorder not to allow the liable party to be obligated to repay endless chainof claims. If a cap is not to be set and the scope of recoverable damages
is to be determined by judgment of the existence of a causal

A construction company located 200 miles inland from the coast was awarded 9.7
million dollars, which let it earn the highest p rofits in the company’s history in 2010
when the oil spill occurred.
See www.telegraph.co.uk/finance/newsbysector/epic/bpdot/10351827/BP -wins-victoryin-battle-to-cap-Gulf-oil-spill-settlements.html
3 1 6 Ibid.
315

201

relationship, based on “social convention” or “foreseeability,” thefactors of “geographic scope” and “temporal bounds” should be clearly
defined and the compensation awards for recoverable damages should
be strictly calculated. If this cannot be done, the funds required forcompensation will surge unlimitedly and the “flood gate” will be opened.
BP’s appeal and the Court’s temporary injunction imply that suchcircumstances are bound to happen. When a cap is set, payoutprocedures should be designed to be similar to bankruptcy proceduresin order to keep a “first come first se rve” system from hindering theprioritized recovery of damages suffered by those in high need ofprotection.
f) Environmental damage
Ifnaturalelements

constituting

theenvironment

such

as

atmosphere, water and soil are violated by human activity, the violator
is accountable for his action on the grounds of tort liability if there isan infringement upon a private individual’s rights o r legally protectedinterests. However, in the absence of any infringement upon the rights
or legally protected interests of a private individual, it becomes difficult
to recover the violated environment; and hence, the emergence of theconcept of “environmental damage” or “environmental liability.”
UnderJapan’s

Water

Pollution

Control

Law

and

the

Soil

Contamination Countermeasures Act, the polluter is held liable forclean-up, and must therefore bear the expenses. However, these laws
do not comprehensively enable the remedy of all environmental
damages and can only be applied when the environmental components
governed by the respective laws have been infringed upon. Furthermore,private individuals cannot directly file claims for the recovery ofenvironmental damages under these laws, as environmental elements
are public benefits and do not constitute private rights or interests.
Hence, the laws provide for action on the part of national and local
governments, instead of private individuals.
Leading overseas examples of liability for environmental damages
includethe

U.S.’sComprehensive

Environmental

Response,

Compensation, and Liability Act (CERCLA), commonly known as the202Superfund Act and Directive 2004/35/EC of the European Parliamentand of the Council of 21 April 2004 on environmental liability withregard to the prevention and remedying of environmental damage(“Environmental Liability Directive”) 317 . The OPA, as abovementioned,
also stipulates the liability for removal costs for environmental
pollution induced by oil spills. The following paragraph will provide an
overview of the Environmental Liability Directive 318 .
The Environmental Liability Directive obligates member countries
to legislate domestic laws in accordance with the Directive, pointing to
two basic rules: (i) an ecological damage 319 is legally relevant damage,but (ii) not legally relevant damage to the individual in the sense thateach citizen can claim reparation for it. Environmental impairments
may, depending on how it is viewed, also infri nge upon individual rights
to the environment. However, in the context of damage compensation(monetary compensation) law, environmental impairments are only
recoverable in their capacity as impairments of a legally protectedinterest of an individual. Therefore, recital number 14 to the Directive
which reads, “This Directive does not apply to cases of personal injury,
to damage to private property or to any economic loss and does notaffect any right regarding these types of damages ”, explicitly states that
only public authorities can claim compensation for ecological damage.
Incorporating this, Article 3(3) of the Directive specifies that “without
prejudice to relevant national legislation, this Directive shall not give
privateparties

a

right

of

compensationasaconsequenceofenvironmental damage or of an imminent threat of such damage. ” Basedon this, Article 8 only grants the right to seek recovery of costs tocompetent authorities, and not to private parties.
The Principles Of European Law: Non-Contractual Liability Arising
Refer to Niimi, Ikufumi (2012) Kankyo risk / songai to houteki sekinin (Environmental
risk/damage and legal responsibility). Kankyohoutaikei. Shouji Houmu p85317

German and French debates leading to the establishment of the EU directive are
introduced in Yoshimura, Ryoichi (2010) Kankyo songai no bai sho: Kankyo hogo ni okeru
koushi kyoudou no sokumen (Compensation for environmental damage: public -private
cooperation in environmental protection). Ritsumeikan Hougaku vol. 2010 5 -6 p1769318

The Environmental Liability Directive Article 2(1) defines envir onmental pollution to
be substantially impaired natural elements constituting the environment, such as air,water, soil, flora and fauna, and environmental liability to be the bearing of costs incurredin restoring the elements.
319

203

Out Of Damage Caused To Another (“ PEL Liab. Dam”), prepared by the
Study Group on a European Civil Code established under the leadershipof Christian von Bar states in Article 2:209 that environmental liability
as defined in the Environmental Liability Directive is one of private law
and that the polluter bears civil liability for damages (in terms ofpollution removal costs) payable to the concerned authorities who areresponsible for restoring the environment 320 .

4. Conclusion
It has been made clear through experiences of compensating fordamages resulting from oil spills in the U.S. that it is extremely difficult
todetermine

the

scope

of

recoverable

damages

based

on

the

“adequateness,” “proximity” or “directness” of causation instead of
adopting the concept under German tort law and common law to judge
whether compensation should be awarded depending on the characteror type of right or interest violated. The American experience has also
revealed that there are risks of impairi ng the liable party’s freedom ofaction as a result of being exposed to floods of claims for compensation.
The scope of compensation for nuclear damages in Japan are to be
determined according to whether or not adequate causation can be
acknowledged, but given the ambiguity of criteria for judging the“adequateness,” Japan is bound to make the same mistake s as the U.S..
Furthermore, the effects of tort liability and the details of liability
for damages imply limits in terms of remedying the damages sufferedby victims of a nuclear accident. Under the principle of monetary

Study Group on a Europea n Civil Code (2009) Non-Contractual Liability Arising Out
Of Damage Caused To Another, p529-30 (Oxford U Press) (“Pel Liab. Dam”). However,320

while environmental interests are considered legally protected public interests and not
private legally protected private interests, no explicit explanation is provided on how the
infringement of environmental interests can constitute “civil liability.” It states that thecritical point is that the prerequisites for a claim for damages and the defenses to it follow
private law rules, which is believed to mean no more than that environmental impairment
cases are addressed under the jurisdiction of civil courts. It could also be interpreted toinclude the idea that concerned authorities can claim compensation for damages w ithout
special legislation, but this would complicate explanation of the Environmental Liability
Directive’s order to member countries to transpose the Directive into domestic law.

204

compensation, the liable party i must recover in the form of money thelegal interests infringed by tortious actions , and damage is estimatedbased on market price. When there has been an infringement upon land,
the damage is represented by the costs required to restore the land ,and in the event that restoration is not possible or restoration costs
exceed the market value of the land (economic incapability), the market
value of the land is presumed to be the value of the damage. Whendamage has been imposed upon a house, the damage is represented by
the costs required to repair the house , and in the event that repair is
not possible or repair costs exceed the market value of the house(economic incapability), the market value of the house is presumed torepresent the value of the damage. Market value is used as the value ofdamage based on the reasoning that if the equiva lent can be procured
from the market for a certain price, then further costs should not be
spent restoration or repair. Therefore, under the principle of monetarycompensation, victimized residents of affected areas who seek torebuild their livelihood in a new location may not be able to live on thesame area of land as their original home if the market price of the newland is more expensive than that in affected areas. Also, houses will
only be evaluated as old housing and will never amount to enoughmoney to build a new house of the same floor area. Hence, tort law fails
to compensate the costs required to reinstate the livelihoods ofevacuees.
In order to make the reconstruction of livelihood a realistic option,a new law founded on a concept different from damage liability needs
to be legislated. A new legislation should be sought for the purpose ofreinstating the livelihood of victims of the nuclear accident, taking into
consideration existing laws such as the Land Expropriation Act , which
incorporates the recovery of the livelihood of parties whose land has
been expropriated.
Again, it is unlikely that the recovery of business loss and damage
inducedbyharmfulrumorsisassumed

under

tort

law.

The

compensation of such damages would infinitely extend the scope of tort
liability and impair the freedom of action, a fundamental right. If suchdamages were to be recovered under tort law, the bounds of liability
205must be clearly defined, but drawing limits to compensation amounts
based on adequate causation is, in reality, extremely challenging in a
major nuclear accident.
If tort law were to recover business loss, it would have to provide
compensation for such loss equal treatment as that provided fordamage induced upon body and property. This would not po se any
problems if the liable party possessed unlimited funds, but w hen theamount of compensation payments available is limited, the equal
treatment of business loss and damage s induced by harmful rumorsand damages caused by infringement of body and prop erty may lead tounjust results. This is because such procedures would ignore the given
order of priority among rights and legal interests, determined according
to their importance. A new legislation, not governed by tort law, should
be formulated in order to avoid such injustice and pursue the recoveryof damages in conformity with the priority of legally protected interests.
Not only is tort law incapable of recovering the costs required torestore the livelihoods of evacuees, it is not mandated to recon struct
the social infrastructure and communities which are indispensable insustaining life. Hence, new legislation, distinct from tort law, isstrongly called for in this context as well. Furthermore, because theenvironment is a public good, environmental impairment cannot be
addressed under tort law, which protects p rivate rights and interests;
and therefore the polluter cannot be naturally expected to shoulder
removal costs unless new laws are legislated. It should also be notedthat

additional

legislationisrequiredforthecompensationofenvironmental impairment.
<Court rulings regarding damages attributable to harmful rumors>[Case 1] Tokyo District Court, February 1, 2013 LEX/DB25510869(dismissal of appeal): Regarding claims for 22 million yen in property
damage and business damage on the grounds that merchandise (masks)
were returned and merchandise inventory could not be sold due toharmful rumors resulting from the accident at the Fukushima Daiichi
Nuclear Power Plant, the court ruled that given no submission of206

objective evidence such as tax return statements, profit and loss
statements and sales books, the occurrence of damages could not be
proved.
[Case 2] Tokyo District Court, January 21, 2013 LEX/DB25510198(partial acknowledgement; however, damages induced by harmful
rumors were not acknowledged): Regarding claims for 18 million yen
worth of lost profits due to disrepute caused by harmful rumors of
employees suddenly resigning from work, the court ruled that there was
no evidence to provide grounds to attribute decreased sales to harmful
rumors.
[Case 3] Yokohama District Court, July 27, 2006, Hanrei Jiho 1976-85,
Hanrei Times 1254-232 (partial acknowledgement): Regarding claims
for business damages caused by decreased

whitebait sales andcancellation of beach seining tours due to nationwide new s coverage of
dioxin emissions from the exhaust gas cleaning facility of a waste
incinerator that resulted from the improper connection of the facility’swater distribution pipe and rainwater pipe, the court ruled that there
was a link of adequate causation with business damages including
declined sales, based on considerations that although the news
coverage was inaccurate, most of the coverage was appropriate, that
dioxins of concentration levels exceeding environmental standards weredetected downstream of the rainwater path in which the dioxin leakage
occurred and these concentration levels were high enough to drive
consumers into refraining from purchases and hesitating to part icipate
in beach seining tours, that sales fell far below average sales after thenews coverage and thus the decline in sales was obvious, and that thedeclaration of safety made by the Ministry of the Environment on May
31 stated that “because a comparatively high concentration of dioxins
have

been

detected,

it

would

be

preferable

not

to

drink

it .”.

“Comparatively high concentration” refers to an approximately fivefold
concentration of environmental standards.

207

[Case 4] Tokyo District Court, April 19, 2006, Hanrei Jiho 1960-64(partial acknowledgement): Regarding claims for damages suffered by anatto

(fermented

soybeans)

manufacturing

company

whose

manufacturing plant was located within the in -house evacuation area,
due to a decrease in sales and the de terioration of employee morale andcorporate attractiveness caused by risk-related concerns which arose
among customers and retail stores as a result of the accident, the court
ruled that “although it is acknowledged that

there are no healthimpacts attributable to the release of radioactive substances andradiation in the in-house evacuation area covering a 10 kilometerradius of the site of the criticality accident and this has already been
covered in some newspapers at an earlier time; that from October 1 -5,
1999, immediately after the criticality accident, Ibaraki Prefecture
conducted studies on the safety level of agricultural, forestry andfisheries products, water quality and processed food , and announced
that no impacts from radiation and radioacti ve substances were found;that after October 6, the Government and the Japan Agricultural
Cooperative

Ibaraki-chuolaunched public

relation

campaigns

toannounce the safety of the area; given that nuclear accidents areaccompanied by invisible risks includ ing the release of radioactive
substances and radiation, that the criticality accident in question is agrave incident that caused casualties, and that it had been highly
publicized by the mass media promptly after the accident ( Thenewspaper article (exhibit A27) submitted as evidence featured thegraveness of the criticality accident far more extensively compared tothe article that covered its safety, and it can therefore be assumed thata strong impression of the accident’s graveness was communicated togeneral readers.), regardless of the post-accident confirmation of thesafety of processed food including the plaintiff’s products made in
Ibaraki Prefecture and the promotion of public relation campaigns tothat effect, it is a commonly acknowledgeable state of mind of retailstoreswhich

represent

consumersandconsumertrendstobedisinclined to purchase natto products of which the headquarter factory
located within the 10-klilometer radius in-house evacuation area islabelled as “manufacturer” and to try to avoid selling them; and that208

the decline in sales of natto products manufactured by the plaintiff
should be recognized as damages caused by the criticality accident inquestion to the extent that a link of adequate causation can be
acknowledged between the damages and the criticality accident inquestion.” Hence, damages attributable to harmful rumors wereacknowledged for a period of five months after the accident.
[Case 5] Tokyo District Court, February 28, 2006, Hanrei Times 1207116(main

lawsuitdismissed,

countersuit

claimspartially

acknowledged): Regarding a claim for damages suffered by a natto
manufacturer that manufactures 67 percent of its total sales at afactory located within the evacuation area of the Tokaimura criticality
accident, on the grounds that natto sales had declined due to harmful
rumors resulting from the accident, the court ruled that “althoughaccording to the authorized facts, it is obvious tha t the plaintiff’s natto
products have not been affected in any way by physical causes such asradiation in the criticality accident in question (and both parties are inagreement on this point), from the perspective of national livelihood, as
nuclear power became a common source of the energy supply,itbecame widely acknowledged that once nuclear accidents such as the
Chernobyl accident occurred the consequences would be widespreadand grave, and given the impacts of the Daigo Fukuryu Maru accident(an accident in which the Daigo Fukuryu Maru (Lucky Dragon 5) was
exposed to nuclear fallout from a hydrogen bomb test conducted on
Bikini Atoll in the Marshall Islands) and the atomic bombing experienceat the end of World War II, Japanese citizens tend to be, so to say, very
sensitive to nuclear issues, nuclear power and radiation, and therefore,
even though the criticality accident in question has not imposed any
physical effects on the products themselves, it can be easily imaginedthat consumers in general, based on the fact that the criticality
accident in question occurred in Ibaraki Prefecture, would be concernedthat not only vegetable and fisheries products produced in Ibaraki
Prefecture but also products manufactured or processed in theprefecture might be subject to grave risks of radioactive contamination
and would be disinclined to purchase the abovementioned products and209temporarily refrain from buying them in response to such concerns.”“It is acknowledgeable that damages attributable to harmful rum ors, interms of a decline in sales of the natto industry as a whole, had
occurred due to consumers refraining from purchasing natto products
as a result of the criticality accident in question, and therefore, it canbe said that to a certain extent there is a link of adequate causation
between the occurrence of the criticality accident in question and thedecline in sales in the natto industry as a whole damages.” “Considering
the consumers’ state of mind regarding the issue in question, as wellas the circumstances, including the actions taken by Ibaraki Prefecture,
the Government and the Accident Investigation Headquarters under the
Science and Technology Agency and the new s coverage regarding thedamage to natto products attributable to harmful rumors, even if theabovementioned declining trend in the plaintiff’s natto product sales isfound to continue, the period of time that consumers in general are
likely to repeatedly refrain from purchasing natto products including
those manufactured by the plaintiff, or the period of time that cangenerally acknowledged to be foreseeable, would appropriately be
acknowledged to be the period after Ibaraki Prefecture and theGovernment declared the safety of agricultural, liv estock and fisheries
products and processed food products, damages to natto products
attributable to harmful rumors became less of an issue in newspapers ,and explanations of the accident were lectured to local residents on
November 13 and 14 to the point in time when the appropriate timerequired for customers in general to fully understand the actual stateof the criticality accident in question is acknowledged to have passed,that is to say, from the occurrence of the criticality accident in question
until November 2009.” The court found that temporary payments had
been made in excess and ordered reimbursement.
[Case 6] Tokyo District Court, September 27, 2004, Hanrei Jiho 187634, Hanrei Times 1195-263 (dismissed): Regarding claims for damages
suffered by a housing developer on the grounds that land could not besold at the predetermined price because land prices declined due to theTokaimura criticality accident, the court ruled that there were no210

grounds to exclude pure economic loss and acknowledged that thecompany had closed the contract after lowering by more than 20
percent the sales price of the land which had been predetermined inAugust 2001, but found that “the land in question had already beenscheduled to be offered for sale at the time of t he criticality accident inquestion, and therefore, if the criticality accident in question raised
awareness among the residents of Tokaimura of the risks of radioactive
contamination on the land in question and of risks of the defendantcausing another similar accident, and the price of the land in question
declined as a result, the declining of prices could be referred to asdamages connected to the criticality accident in question with a link ofadequate causation, but if the criticality accident in ques tion renewed
their awareness of general risks generated from the very presence of a
nuclear facility instead of making them aware of risks arousing fromthe presence of the defendant, the Tokai Plant, and if this was maincause of the decline in prices, the risks generated from the very
presence of a nuclear facility did not change before and after thecriticality accident in question, and therefore, no link of adequate
causation can be found between the criticality accident in question andthe decline in prices of the land in question.” “Regarding the impactsof the criticality accident in question, according to the facts found topresent, including the affirmation of safety based on tests conductedby Ibaraki Prefecture and its announcement in October 1999 and therevocation of the defendant’s permit to process uranium fuel on March
28, 2000, even if the decline of land prices in Tokaimura, including theland in question, which occurred after the criticality accident inquestion,

could

be

attributed

in

part

to

risks

of

radioactive

contamination of the land in question as a result of the criticality
accident in question and to risks that the defendant might cause asimilar accident again, these concerns are found to have been dispelledby March 2001 when the land in question had been scheduled to be puton the market or by October when the land in question was actuallyoffered for sale.” “Even if the price of the land in question had been
influenced by any remaining effects of the criticality accident inquestion, it is assumed that such effects had aroused from renewed211

awareness of general risks generated from the very presence of a
nuclear facility, and therefore, the damages are not found to be linked
with adequate causation to the criticality accident in qu estion.”[Case 7] Mito District Court, June 24, 2003, Hanrei Jiho 1830-103(main lawsuit dismissed, countersuit claims partially acknowledged):
Regarding claims for damages suffered by a fisheries processing anddistributing company on the grounds that it was forced to incinerate
its products, which were rejected due to the Tokaimura criticality
accident, the court dismissed claims because there was no objective
evidence of rejection of products.
[Case 8] Kanazawa Branch Court, Nagoya High Court, May 17, 1989,
Hanrei Jiho 1322-99, Hanrei Times 705-108 (dismissal of appeal):
Regarding claims for damages suffered by fish market intermediaries
on the grounds that seafood sales dropped due to harmful rumors
resulting from the leakage of radioactive substances from Tsuruga
Nuclear Power Plant, the courts ruled that “the ar ea contaminated byradiation leakages due to this accident is limited to Urasoko Bay, andmoreover, radiation has been detected only in gulfweed, common
mussels, sea cucumbers and horned turban shells, and in no otherfisheries

products,

and

the

radiation

doses

detectedintheaforementioned products is low enough that the human body will not
be affected even if they are continuously eaten every day, and theaccident ultimately had little effect on edible fisheries products caught
in Tsuruga Bay; and therefore, it is appropriate to find the fisheries
products caught in Kanazawa which are handled by the plaintiffs had
naturally not been affected by the accident.” “The court finds that given
the announcement and news coverage of this accident, wholesalemarket in Nagoya, Tokyo, Osaka, Kyoto, Kobe, Kanazawa and Maizuru
consecutively instructed intermediaries to voluntarily refrain fromshipping fisheries products from Tsuruga and Fukui Prefecture from
April 19, 1981; and that despite the announcement on April 19 by
Tsuruga City based on analysis by the Fukui Prefectural Institute of
Public Health that fisheries products from Tsuruga Bay were safe,
212followed by an announcement by Fukui Prefecture on April 20, somewholesale markets outside Fukui Prefecture retained the voluntaryrefrain from shipping the

products in question ; and although the

Fukui Prefectural Fisheries Cooperative Association visited wholesalemarkets outside Fukui Prefecture to request that the voluntary refrains
be lifted on April 21 and wholesale markets outside Fukui Prefecture
were lifted their calls for voluntary refrains by April 23, a severe pricedecline and weak trade volume of fisheries products continued andJapanese inns and bed and breakfasts in tourist destinations in theentireTsuruga

Bay

area

were

seriously

impacted,

experiencing

successive cancellations during this period and even afterwards.” “Thecourt finds that the accident caused customers to refrain frompurchasing fisheries products from Tsuruga Bay , inducing impacts
caused by declining prices. However, it cannot find that customers werecaused to refrain from purchasing fisheries products from Kanazawa,
caught off the coast of Ishikawa Prefecture.” “ Given the severe pricedecline and weak trade volume of fisheries products from Tsuruga Bay
which occurred as a result of the announcement and media coverage ofthis accident, in the event that radiation leakage occurs in Urasoko Bay,located in Tsuruga Bay, it can be commonly acknowledged that theanxiety in consumer minds towards the possible risks would cause
them to want to avoid purchasing seafoo d caught in Tsuruga Bay, even
if the radiation leakage measurements were within a safe level and thisinformation was officially announced; and therefore, the damage
suffered by concerned parties as a result of decreased sales of fisheries
products from Tsuruga Bay should be considered damage connected toa certain limit by a link of adequate causation with the accident.”“Although a partial decline in sales - not necessarily an explicit effectof the accident – has been observed, when consumers in Tsuruga avoid
purchasing fish from Kanazawa, which is distant from Tsuruga andwhere radioactive contamination is completely unthinkable, and prefer
not to eat produce from regions even farther away, such a state of mind
is not commonly acknowledgeable, but is the result of consumers’
judgment based on emotions aroused by the accident which cannot befound to be a direct consequence of the accident. If compensation213

orders were to be given on the grounds of emotional concerns regarding
the safety of fisheries products from Kanazawa, then the decline in
consumption in Kanazawa would also have to be acknowledged which
would unnecessarily expand the scope of damages.” “Therefore, even if
the plaintiffs’ sales dropped after the accident in question, the result
has been derived by consumers’ individual states of mind, which are
extremely subjective states of mind that drive consumers not to eat
something that is safe; and therefore, it is unlikely that the same
circumstances will constantly lead to the same state, which wa s not ingeneral terms foreseeable. Hence, it is appropriate to say that there isno link of adequate causation between the marginal radioactive leakage
in Urasoko Bay which has no effect upon the human body andcustomers in Tsuruga refraining from purchas ing fisheries products
from Kanazawa.

214

Chapter 3 The Compensation Regime of the Nuclear
Compensation Law Based on Strict Liability and the
Ideal Remedy for Victims of a Nuclear Accident
Michitaro Urakawa
Professor, Faculty of Law, Waseda University

1.

Significance of the Nuclear Compensation Act in terms ofstrict and unlimited liability
The nuclear damage which arose at Tokyo Electric Power Company(TEPCO)’s Fukushima Daiichi Nuclear Power Plant (“nuclear damage
from the TEPCO Fukushima accident”) as a result of the Great East
Japan Earthquake of March 11, 2011 has been addressed using the Act
on Compensation for Nuclear Damages (Nuclear Compensation Act),
which stipulates strict and unlimited liability for nuclear damage in
Section 3 paragraph 1.
Strict liability in tort law coexists in conflict with negligenceliability. It is rooted in German law which incorporated strict (risk based) liability in its modern context 321 .

The German Act on the

In the discussions held at the Code Investigation Committee which was establishedduring the formulation of Japan’s Civil Code, committee member Yatsuka Hozumi
questioned the proposal of stipulating tort liability to be based on negligence, stating thatit might be problematic to apply the fault liability principle to danger ous businesses suchas railroad companies. In response, committee member Nobushige Hozumi (who had
drafted the tort law provisions) said, “there are many occasions when a certain businessor certain lifestyle may impose particular danger upon a third party […] considering thefact that this person is in a special situation compared to those who are living an ordinary
life, there may be instances when a business causes da mages it must compensate forregardless of the presence of intention or negligence, and we are not in the least opposed
to formulating a special law to impose such obligations and we expect such needs to occur.”( Shorthand records from Code Investigation Committee meeting no.5 (Shouhou houmu
kenkyuukai, 1984) p301). It would seem that the con tention that the principle of fault
liability was essential in order to secure the free activity of the individual and the conceptthat special laws governed by strict liability could be enacted outside of the Civil Code as
needed was derived from discussi ons in Germany when the German Civil Civil Code (BGB)
was formulated. (Refer to Urakawa, Michitaro, Mukashitsu songai baisho sekinin(Liability for damages base on strict liability) , Hoshino, Eiichi, Mimpo Kouza (Civil Code
Lecture 6) (Yuhikaku, 1985) p201 (footnote22). Japan has actually followed Germany’s
footsteps in legislating special laws based on strict liability in accordance with thedevelopment of dangerous technologies. Section 3 of the Automobile Liability Security
Act, which is based on strict liability has also drawn on Germany’s strict liability regime
for automobiles (Yoshino, Mamoru, Jibaihou no rippou katei (Legislation process of theAutomobile Liability Security Act) and Susumu, Yoshioka, Gendai songai baishouhou
kouza 3 (Modern liability law lecture 3) (Nihonhyouronsha, 1972) p3 -).
321

215

Peaceful Utilization of Atomic Energy and the Protection against its
Hazards (“Atomic Energy Act”) has switched from limited liability tounlimited liability, and therefore, it is useful to study the emergenceand evolution of strict liability in German law and to observe theimplications of the transition of the German Atomic Energy Act from alimited liability regime to an unlimited liability regime, in order toexplore the concept of strict and unlimited liability adopted in Japan’s
Nuclear Compensation Act 322 . Hence, the author would like to briefly
examinetheemergenceanddevelopmentofstrict(risk-based)

liability 323 in Germany and its alteration of the liability principle
underlying the German Atomic Energy Act.

(1)

Introduction of strict liability in German law
The origin of Germany’s strict liability regime dates back to 1838,

when it was still a federation of territories (Staatenbund) yet to beunified. Having welcomed an era of industrial revolution that wasdeveloping under a customs union, Prussia was facing politicalchallenges regarding the construction of a railway system. The leadersof Prussia wanted to introduce a railway system as a new means oftransport to support economic development. However they were met bypowerful parties reluctant about proactive government engagement in
unproved fields and by strong public resistance based on concerns overthe uncertain risks involved with new technology. Hence, in order toprotect victims, then Minister of Justice, Heinrich Gottlob von M ühler
proposed, in deviation from the conventional fault principle under tort
to hold the railway company which caused the damage fully liable theaccident-induced damage for which there was no negligence. With thesupport of Privy Council member and prominent jurist Friedrich C arl

The Nuclear Compensation Act was enacted in 1961, drawing upon the U.S.’s PriceAnderson Nuclear Industries Indemnity Act (“Price Anderson Act”) as was the case with
the German Atomic Energy Act which was leg islated in the same period. Although its
framework may have been derived from the Price Anderson Act, the Nuclear
Compensation Act’s limited liability scheme is considered to be more in line with Japan’s
existing legislations taking a limited liability app roach.
322

As there are many schemes in which negligence is not a prerequisite for liability,
unlimited liability in tort law is called risk -based liability (Gefahrdungshaftung), whichshall be referred to hereinunder as “unlimited liability” in accordance w ith common
Japanese use.
323

216

von Savigny, who sought to derive strict liability from receptum 324 of
Roman law, this concept was embedded into Article 25 of the PrussianRailroad Law, which became the world’s first legislation of strict
liability.
It can be understood from this histo rical background that theconcept of strict liability under tort law was aimed at allowing the
introduction and use of new technology. By freeing victims of therequirement

to

prove

negligenceandproviding

generous

indemnification in the event of an accident, the general public wasencouraged to accept new technologies with risks. Article 25 of thePrussian Railroad Law led to developments in Germany’s strict liability
regime which would provide a legal basis for emerging technologies andindustries which entailed risks.
The German approach to strict liability is an established concept.
Strict liability is liability for damage arising from “approved risk” andis understood not to require illegality. Hence, it is interpreted to be aliability regime that attributes the damages that occur, when risk
becomes reality, to parties which gain benefits from the technology andto facilities involved in the risk, as the use of technologies involving
risk and the operation of dangerous facilities cannot be abolished dueto their social benefits. It is a liability regime that possesses the two
indivisible factors of social acknowledgment of risk and the fairburdening of damages accompanying the materialization of risk.

(2)

Development of special statutes on strict liability inGermany
Although strict liability was adopted in Article 25 of the PrussianRailroad Law, German Civil Code (BGB) provisions on torts were
integrally compiled in accordance with the fault principle , due to the
influence of the Pandekten system which was then dominant, and strict
liability was adopted only in extremely exclusive provisions: for theliability for ownership or possession of animals and for the liability for

Receptum is a form of strict liability derived from Roman law where shipowners,
innkeepers and stablekeepers are liable for any damage to goods consigned or dep ositedby their customers,
324

217

wild animals. However, even the theory-oriented compilation of the Civil
Code failed to exclude principles other than the fault principle and had
to retain the above-mentioned exception as well as the Reich Liability
Law, an additional special law succeeding Article 25 of the PrussianRailroad Law. Therefore, a two-dimensional tort law regime wasestablished encompassing the fault principle governed by the Civil Codeand a new special law regime based on strict liability for the protectionof victims in order to promote public acceptance of dangerous facilities
and technologies.
Developed as an exception to the Civil Code, the strict liability law
regime necessitated the enactment of a number of new laws as newtechnologies were developed and introduced. Today, it comprises
liability

for

water

contamination,mine

pollution ,environmental

pollution, defective medical products and manufacturing defects, andfor damages occurring from the use of animals, railways, automobiles,
aircraft,electricity,gas,

steam,

nuclearpower,

andgenetic

engineering 325 .

(3)

Limits of liability under strict liability
Having been adopted in parallel with the development andintroduction of new technologies, (and though they commonly do not
require proof of negligence ), German special laws based on strict
liability are varied in terms of their require ments for exemption fromliability and for their effects, which depended on the political and social
context in which they were legislated. One of the diverse effects is limits
to the scope of liability (limitation of liability) on the part of the party
who caused the damage.
The German Atomic Energy Act had initially been based on limited
liability but was later transformed to an unlimited liability regime. The
following paragraphs are an overview of the background of theintroduction to German tort law of a limitation of liability scheme in astrict liability context.
Neither the strict liability clause on animals in the BGB nor the

E. Deutsche et al, Doitsu huhokouihou (German tort law) (translated by Michitaro
Urakawa). Nihonhyoronsha, 2008, P212 325

218

Prussian Railroad Law, Article 25, nor the origin of strict liability
legislation

nor

the

succeeding

Reich

Liability

Law 326

contained

provisions on limitation of liability.
The German Road Traffic Act (Straβenverkehrsgesetz), enacted in
1909, which stipulates strict liability for road traffic accidents was thefirst legislation of limitation of liability in the strict liabilit y regime ofGerman tort law.
The growing automobile industry, which was manufacturing an
emerging means of transport for the masses, and automobile societies,
comprising individuals who enjoyed driving and were strongly opposed
to having to bear strict liability, had much influence upon theformulation of the Road Traffic Act. Under such pressures, the strict
liability-oriented law was adopted only after much tortuous dialog. In
order to foster the growing automobile industry and make affordable
liability insurance available for automobile owners, a regime thatincorporated limitation of liability was required 327 . Consideration forindustrial development and opportunities to hedge liability risks borneby potential victimizers by means of insurance provided the grounds
for establishing limitation of liability. This limitation of liability waslater included in the existing Reich Liability Law on liability related torailroads and became a principle common among all special laws
stipulating strict liability. In a study of the strict (risk-based) liability
regime, Esser stated that “maximum liability amounts are very rigidly
set, but in this way are an expedient distribution factor in considerationof risk calculation for insurance and prevention of [the liable party’s]
economic collapse 328 .

(4)Liability for nuclear damages as unlimited liability
The German Atomic Energy Act (Atomgesetz) of 1959 was also astrict liability oriented legislation which had stipulated in Article 25

The Reich Liability Law initially did not contain a limitation of liability clause but
introduced on in 1923.
326

V. Gadow, O., Die Zähmung des Automobils durch die Gef ährdungshaftung, 2002,
S.122
327

Esser, J., Grundlagen und Entwicklung der Gef ährdungshaftung, 2.unveränd.Aufl.,
1969, S.107
328

219

and beyond limitation of liability, or a cap on liability amounts, without
acknowledgment of appeals of force majeure 329 . Drawing on the U.S.
Price Anderson Act, the law was amended to provide that nuclear
damages would be compensated by means of insurance burdened byownersofnuclearfacilities

and

by

government

compensation.

Combined with the conventional approach of incorporating limitationof liability in strict liability, the scope of liability on the part of facility
operators and the pooled compensation amounts became indivisible
under the German nuclear liability regime.
The German Atomic Energy Act was switched from a limited
liability

approachtoanunlimited

liability

amendment of its liability provisions in 1985 330 .

approach

upon

the

This amendment was

executed in line with the amendments made to the Paris Convention on
Third Party Liability in the Field of Nuclear Energy (“Paris Convention”)
and the Convention Supplementary to the Paris Convention of July
29,1960 ("Brussels Supplementary Convention").
The transition to unlimited liability is detailed in the explanatory
statement 331 that the safe use of nuclear power had been secured as aresult of technological developments 332 , it is no longer appropriate to
grant owners of nuclear facilities limitation of liability, or treatment
preferential to that of the owners of other large high-technology
facilities, and that some public interests will benefit from enhanced
protection under an unlimited liability regime. Hence, the change wasbased mainly on the idea that it was no longer necessary to grant
nuclear power producers the privilege of limited liability as it had
become a mature technology.
As a result of this amendment to the German Atomic Energy Act,
nuclear facility operators would have to sacrifice their own assets to

329

BGBl. 1985 I S. 814

330

BGBl. 1985 ) )I S. 1565

331

BT-Drucks. 10/2200,S5f

BT-Drucks. 10/2200,S.5.states that today, nuclear facilities can be referred to ascommon equipment using major technologies.” An advantage of an unlimited liability
regime is that whereas in a limited liability regime, maximum liability amounts must be
reviewed according to changes in the money value and economic envir onment, suchadjustments are not necessary.
332

220

compensate for damages exceeding the initial maximum amount, which
was the sum of the financial security of 500 million marks procured
through insurance and government compensation of up to double theamount pooled by facility operators, or 1 billion marks (equaling amaximum of 1 billion marks available to compensate for damages
occurring from nuclear accidents). It would be quite interesting to learn
what

those

involved intheamendment had

thought

about

its

consequences, but no explanation has been provided in the explanatory
statement of the law. However, an examination of the clauses alteredand inserted as well as comments by those who exercised theirinfluence in the amendment brings us to imagine that considerations
were made towards nuclear facility operators and that alternative
approaches were prepared.
Firstly, the amendment involved the inclusion of a new provision
to acknowledge, when appropriate, the appeal of force majeure for
exemption

fromunlimited

liability,

regardingthedomestic

implementation of the Paris Convention about which the German
government had reservations 333 . This allowed for the conventional
limitation of liability to the 1 billion marks (as of 1985) pooled, asGerman nuclear facility operators would not bear unlimited liability inthe event that a grave natural disaster of an exceptional character, an
insurrection or hostilities occur.
Secondly, the amended Section 35 of the German Atomic EnergyAct

stipulated

asfollows:

“(1)

Where

legal

liabilities

to

pay

compensation for damage resulting from an incident are expected to
exceedtheamountavailabletosatisfysuch

liabilities,

theirapportionment and the procedure to be observed in this context shallbe governed by an act or, pending such act, by statutory ordinance.(2)The statutory ordinance referred to in paragraph (1) above may only
make such provision for the apportionment of the sums availa ble tocover the legal liability to pay compensation for damage as is necessary
to avert hardships. Such statutory ordinance shall ensure thatsatisfaction of the claims of the injured persons as a whole shall not be

333

German Atomic Energy Act, Section 31, paragraph 1

221

unduly

prejudiced

by

the

satisfactionofindividual

claims.” 334

Therefore, in the event of a major occurrence requiring more thanavailable compensation amounts, comprised of the a sum of thefinancialsecurity

maintained

by

the

nuclear facility

operator,

including contribution of its assets, and government compensation, thenational government is obligated to make an intervention, therefore
ensuring Government involvement in apportionment and procedures 335 .

The 1985 German Atomic Energy Act, Section 35, entitled “Apportionment,” had been
included in the original 1959 German Atomic Energy Act as Section 37. It had beenrequired in the 1959 Atomic Energy Act, as well, to include a similar provision in orderto address damages exceeding the set amount (then 500 million marks) pooled forcompensation of damages. The explanatory statement of the law (BT -Drucks.3/759, S.40)
explains that “500 marks have been pooled per accident for the implementation of legal
liability for damages occurring from nuclear accidents. This amount has been set large
enough, that from all past experiences it would not be insufficient to cov er damages.
However, it is necessary to include a provision for extremely unlikely cases in which thisamount would not be able to satisfy all victims. However, events inducing such major
occurrences would be national catastrophes of a magnitude that we ca nnot be prepared
for as of now. [Therefore,] Enacting such provisions [when such events occur,] in
adaptation to special needs arousing from accidents would be more in line with the
purpose of the law. Furthermore, a commentary on the 1985 Atomic Energy Ac t (Haedrich,
H., Atomgesetz mit Pariser Atomhaftungs -Uberekommen, 1986, S.546) notes on Section
35 that “if in an individual case, the legally obligated compensation amount exceeds themonies pooled for nuclear compensation, […] a supplementary provision that stipulates aright of claim that shall not be compensated from a social state perspective should besought. This provision will not be bound by the requirements set in the liability
provisions.” Regardless of limited or unlimited liability, a situati on in which monies
pooled for the fulfillment of legal obligations to compensate for damages are exhausted,
was understood to be a national catastrophe (nationale Katastrophe), for which a special
legal response not limited to resolution within the framewo rk of conventional civil
liability had been assumed.
334

When Germany switched from limited liability regime to a unlimited liability regime,
Switzerland had already adopted an unlimited nuclear liability regime. The Swiss Act on
Nuclear Third Party Liability (Kernenergiehaftpflichtgesetz) includes one chapter on“major occurrences” and stipulates the following (the law was amended from its original
version after Switzerland’s accession to the Paris Convention, but the quotation will befrom the 2008 law as no major changes have been made.):Section 29 (Principles)(1) In the case of a major occurrence, the Federal Assembly may establish an indemnity
scheme by means of a Federal Order (Verordnung).
(2) A major occurrence has occurred if in the event of an accident there are grounds for
anticipating that the financial resources available for covering the damage will not
be sufficient to satisfy all claims, or that the injured parties are so great in numberthat normal procedures cannot be implemented.
(3) The Order shall determine the general principles for compensation of the injured
parties in order to ensure the equitable distribution of all available funds.
(4) The Order may include the following:a. Deviate from provision of this Law or other indemnity laws; consider th e principles
included in the Paris Convention and Brussels Supplementary Convention provisions
for the distribution of the compensation referred to in Section 8 and Section 15.
b. Predetermine that the Confederation shall pay additional contributions in re spectof damage not otherwise covered
335

222

Thirdly, Norbert Pelzer 336 , a prominent researcher in the nuclear
energy field who greatly influenced the amendment of the law proposed
an unlimited liability regime based on a compensation pool of 3 billion
marks 337 (which failed to include monies for compensation exceedingthat amount) in 1982. He explained that “a major occurrence which
exceeds 3 billion marks actually constitutes a national catastrophe thatcannot be resolved by civil liability means. In such cases, the social
state

principle

holds

the

government

responsibleforgivingconsideration to appropriate indemnification. This is interpreted to beapparent and does not require any explicit legal provision.” 338 Roman
Herzog 339 , President of the Federal Constitutional Court and later theseventh President of Germany, advocated the introduction of unlimited
liability in Germany’s nuclear liability scheme and stated at a nuclear
energy forum held in Munich in September 1984, “Let us just imaginec. Determine procedures for the implementation of the indemnity scheme and entrust
an independent body (Instanz) with the determined procedures. Appeals to theFederal Court against decision of this body shall be permi ssible.
(5) The Federal Council shall take any provisional measures that may be necessary.
Section 30 (Modification of insurance premiums; retrospective premiums)(1) Where a state of emergency is created by major occurrence, the Federal Council is
empowered to i ssue regulations to relating to private insurance on:a. the modification of the insurer’s liability;b. the levying of retrospective premiums on policy -holdersc. the deduction of such retrospective premiums from insurance payments(2) This power shall not extend to t he indemnification agreement to be concluded under
this Act.
Both German and Swiss law, both adopting an unlimited liability regime, havestipulated the Government’s obligation to intervene when it the compensation monies are
expected to be insufficient, and therefore imply proactive Government involvement not
restricted to ordinary liability rules. (Swiss law is particularly elaborate on this point.)
3 3 6 Norbert Pelzer was Professor at Göttingen University in 1985, when the Nuclear
Liability Act was amended. In 1982, before the amendment of the German Atomic Energy
Act, he wrote Bergrenze und unbegrenze Haftung im deutschen Atomrecht (Limited andunlimited liability in the German Atomic Energy Act) (Nomos, 1982), which discussed the
key issues of the amende d law. He participated in the First Japan -Germany Symposium
on Nuclear Law to deliver a presentation on the German Nuclear Liability Act. Refer toKanazawa, Yoshio. Nichi doku hikaku gensiryoku hou (Comparison of Nuclear Laws inGermany and Japan) (Yuhikaku, 1980) p991 German mark was the equivalent of approximately 100 Japanese yen under theforeign exchange rate of 1982.
337

338

Pelzer, aa0.,S.66f

A Professor of Constitutional Law at the Free University of Berlin, Roman Herzog
became a member of the Parliament representing the Christian Democrats. He had been
appointed judge at the Federal Constitutional Court in 1985, the year that amendments
were made to the German Atomic Energy Act. He was inaugurated the seventh Presidentof the German Federation in 1994.
339

223

for a moment that something which we will deem impossible, and which
each of us in his own way does his utmost to prevent, actually happens– a disaster [a catastrophic nuclear accident] which causes damages
exceeding the upper limit of 1 billion marks by ten or even twenty fold.
Can anyone really believe that in such a contingency somebody would
invoke Section 31 of the Atomic Law or even read it? The Federal
Parliament [Bundestag] would be convened, calling for the largest
possible 'unconventional and unbureaucratic' [not narrow-mindedly
sticking to rules] indemnification for all the damage suffered. Similaraction would be taken in the government, and not even the Minister ofFinance would protest; he would simply nod his head in sympathy.” 340
These statements imply that major occurrences which exceed thecapacity of private nuclear facility operators and cannot be recoveredby insurance and other financial security or mandatory government
compensation had been considered to lie beyond the sco pe of civil
liability, and that proactive government involvement unrestricted by theprovisions of the Atomic Energy Act had been assumed for suchoccurrences.

(5)

Differences between unlimited liability regimes in theGermanAtomicEnergy

Act

and

the

Japanese

NuclearCompensation Act
As mentioned, under the unlimited liability regime that was
introduced to the German Atomic Energy Law, when damages are
expected to exceed amounts available for compensation per the sum of
measuresassumedby

thenuclearfacility

operator,

includingcontribution of its assets, and government compensation, the national
government is to intervene pursuant to Section 35 paragraph 1 topromptly determine their apportionment and the procedure to beobserved in this context shall be governed by an act (or by statutory
ordinance

in

case

of

emergency).

Hence,

proactive

government

involvement has been made explicit in written law 341 . Furthermore, in
Herzog, R., Keynote Address to the Symposium on Third Party Liability and Insurance– Status and Prospects, Held in Munich from September 10 -14, 1984, P60
340

German Atomic Energy Act, Section 35, paragraph 2 provides that “ The statutory
ordinance referred to in para. (1) above may only make such provision for the
341

224

the event of a major occurrence, such as the TEPCO Fukushima
accident which caused damages that exceeded the assets and capacityof a private nuclear facility operator, the statements made by Pelzer
and Herzog and explanatory notes for German and Swiss legislation all
point out that even in countries with an unlimited liability regime, suchan occurrence would be considered a national catastrophe exceeding
the scope of civil liability and that proactive government involvement
not restricted to conventional liability provisions in the Atomic Energy
Act would be expected, from the perspective of recovering from such adisaster 342 .
In contrast, Japan’s Nuclear Compensation Act, in Section 16,
provides that “Where nuclear damages occur, the government shall givea nuclear operator (except the operator of a foreign nuclear ship) suchaid as is required for it to compensate the damages, when the actual
amount which it should pay for the nuclear damage pursuant to Section
3 exceeds the financial security amount, and when the government
deems it necessary in order to attain the objectives of this act.” Theprovision fails to make clear the timing and contents of government
compensation 343 .

Furthermore, faced with a real accident, in whichapportionment of the sums available to cover the legal liability to pay compensation fordamage as is necessary to avert hardships. Such statutory ordinance shall ensure thatsatisfaction of the claims of the injured persons as a whole shall not be unduly prejudicedby the satisfaction of individual claims.” The provision provides for prompt response toan emergency situation and its explanatory notes emphasize the importance of removingsocial fear by prompt response in the event of a major occurrence. Relating to the concepts
presented in this provision arouses large misgivings about the Japanese government’s
response to the TEPCO Fukushima accident for which compensation for damages toproperty have not yet progressed, because the Dispute Reconciliation Committee for
Nuclear Damage Compensation (“Reconciliation Committee”) discussed and formulated
general instructions based on adequa te causation regarding compensation for harmful
rumor-induced damages, indirect damages, before gaining a complete view of the damages,
and failed to provide compensation for the self -dependent livelihood of evacuees who losttheir land and homes due to ra dioactive contamination.
The Swiss Act on Nuclear Third Party Liability, Section 29, paragraph 4 stipulates
that in the event of a major occurrence, an independent body (Instanz) may be established.
An administrative body, instead of a special court, ma y entrusted with the determinationof compensation payments.
342

Pelzer, an advocate of unlimited liability in German law opinioned regarding Japan’sunlimited liability regime that “the provision stipulating Government intervention isextremely ambiguous and one cannot foresee with certainty whether the Government will
make payments and if so, how much it will provide. Additional Government payments are
dependent on what political implications a nuclear reactor accident will have.”
Pelzer,aaO.,S.62.
343

225

total damages are of a magnitude yet indeterminable and many
victimized parties are exposed to fears about their present and future
livelihoods, the government has not come forward to take the initiativein compensation for damages and has relegated administrative tasks
related to compensation to TEPCO, a private company. This diverges
from Germany’s approach to government involvement, derived fromconstitutional principles, in the event of a catastrophic nuclear
accident 344 .

2.

The Nuclear Compensation Act and its approach tocompensation for nuclear damages in the TEPCO Fukushima
accident
The

NuclearCompensation

Act,

which

stipulates

Japan’s

approach to liability for damages occurring from a nuclear accident,
establishes a strict liability regime which does not limit th e scope of
liability (unlimited liability) and provides, as a scheme to securecompensation, measures to be assumed by nuclear operators 345 . The
frameworkofthe

NuclearCompensation

Act

is

comparable

tocorresponding schemes in Germany and Switzerland which have also
adopted strict and unlimited liability.
However, as mentioned, Japan’s Nuclear Compensation Act isextremely ambiguous about if or how government intervention will bemade in the event of a nuclear accident, compared to correspondinglaws of Germany

and Switzerland which have included explicit

provisions. More than three years have passed since the occurrence of

Following the Chernobyl accident, Germany implemented compensation measures forGerman citizens pursuant to the German Atomic Energy Act, Section 38 (Government
compensation for damages occurring from nuclear accidents in countries which are notparties to the Paris Convention). Although Government compensation was a controversial
issue in this case, it can be acknowledged that the Government addressed compensation
for damages proactively, non-bureaucratically, promptly, and smoothly. Eich, W., The
Compensation of Damage in Germany Following the Chernobyl Accident, Workshop
Proceedings (OECD) Paris, F rance 26-28 November 2001, p89. National governments bear
the responsibility of resolving social fear in a major nuclear accident.
344

The following paragraphs have b een written on the premise that the exemption clauseof Section 3 is not applicable to the TEPCO Fukushima accident.
345

226

the TEPCO Fukushima accident, but the ambiguity has not been
resolved. We have yet to see the end of compensation for damages whicharose from the TEPCO Fukushima accident, and many evacuees
continue to have little choice but to live in provisional housing and are
unable to return to a stable life.

(1)

Status quo of compensation for damages
Compensation for damages arising from the TEPCO Fukushima

accident has been executed pursuant to Section 3 of the Nuclear
Compensation Act, which stipulates civil liability for nuclear accidents.
Hence,TEPCO,

solelybearingstrictandunlimited

liability,inaccordance with the principle of concentrating liability upon the
nuclear operator, has addressed individual claims for damages in linewith conventional compensation methods for tortious actions. The
criteria used in determining the scope of nuclear damages andestimating compensation payments are based on the “instructions
establishing the scale of the nuclear damage and other general
instructions to help operators reach voluntary settlements of […]disputes” (“General Instructions”) arising from compensation of nuclear
damage formulated by the Reconciliation Committee pursuant to
Section 18 of the Nuclear Compensation Act.
However,

under

the

current

nuclearcompensation

scheme,although the General Instructions determined by the Reconciliation
Committee would serve to enable the estimation of compensation
payments, negotiations on compensation cannot be taken forward
without the formulation of the General Instructions. Therefore, when
the number of victimized parties and categories of damages are massive,
estimating compensation payment with individual consideration forcircumstances unique to the victim would be too time consuming anddelays in finalization of individual payments

would impede theestimation of total nuclear damages due to the TEPCO Fukushima
accident. Hence, even with means to procure funds for compensation
now

available

with

the

formulation

of

the

NuclearDamageCompensation Facilitation Corporation Act ( Facilitation Corporation
Act), we cannot be sure about the viable end to the support for TEPCO
227

under the current scheme governed by unlimited liability and whether
or not there are limits to government support 346 .
In addition, it was only in March 2013, two years after the accident,
that individual and corporate claims for residential land, building andleasehold began to be accepted. However, compensation for property
damage such as that sustained by land and houses has not seen muchprogress. Despite reports that 49,000 households are entitled tocompensationforproperty

damage

347

,

only

8,200

cases

of

compensation for residential land and houses have been announced by
TEPCO as of October this year (2013) 348 . In comparison with damage
for mental anguish and incapacity to work which could be estimatedusing a simple formula based on criteria set in the General Instructions,compensation payments for property damage regarding residential landand buildings are complicated even when using the method provided in
the General Instructions. Furthermore, given that calculations must be
done separately for each piece of property and that rights issues must
be resolved, one cannot be certain as to when all procedures will beconcluded.

(2)

Compensation for major nuclear damage
If the bounds of a nuclear operator’s liability were limited, thenThe “Report on the Results of the Audit on the Status of Implementation ofGovernment Support Related to Compensation for Nuclear Damages Caused by Tokyo
Electric Power Co., Ltd.” published by the Board of Audit in October 2013 stated that
“Despite payment of a total of over 2 trillion 910 billion Yen as of September 27, 2013, in
relation to nuclear damages related to the nuclear accident o f 2011, there are no clear
forecasts of total compensation payments due to the character of the process ofdetermining individual payments through negotiation with victimized parties according
to individual circumstances. Furthermore, in the event contamin ation removal costs are
determined to be fully added to compensation payments, the scale of liabilities will befurther expanded. On the other hand, Government support for nuclear damage
compensation is expected to continue, and hence, funds provided via t he Facilitation Fundis also expected to increase. Therefore, an estimation of high certainty regarding the total
and timing of compensation payments should be made as promptly as possible in order toprovide precise prospects of the scale and timing of fi scal burden. This is an essential
requirement for gaining public understanding towards the support extended by theGovernment to TEPCO.” (p202)
346

347

Report by Fukushima Minpo, October 22, 2013

According to material distributed by TEPCO at the 35th Reconci liation Committee
meeting (Shin-35 Material 1-2), as of September 20, 2013, compensation payments
totalling 143.8 billion yen for damages to residential land and housing have been
completed for 8,200 households.
348

228

compensation would be implemented based on civil liability within thelimits of the financial security to be made available by nuclear facility
operators. In the event that major damage exceeding limits were tooccur, the government would provide adequate compensation to
victimized parties from the perspective of the party responsible formaking policy decisions to promote the peaceful use of nuclear power
and for ensuring human security 349 . On the other hand, if nuclear
operators were to bear unlimited liability, instead of limited liability,
the scope of funds to be used for compensation would be expanded toinclude not only the financial security maintained by nuclear operators
but also their general assets. However, this would mean that whenthese funds were exhausted there would be no additional funds
available for further compensation. Also, reasonable thinking brings us
to realize that unlimited compensation in correlation with unlimited
liability is in reality impossible, given the limited character ofresources 350 . However, when limited liability is chosen, the intention toprovide extensive relief is apparent. Hence, when t he funds available
for the compensation of damages have been exhausted, government
compensation must be implemented under the same principle as thatof limited liability.
Along these lines, in the event of major damage, such as thenuclear damage from the TEPCO Fukushima accident, government
involvement is inevitable even in an unlimited liability scheme. Given
the unlimited liability borne by the nuclear operator, the burden
assumed by the government in order to cover the amounts that thenuclear operator is unlikely to be able to compensate due to a shortageof funds will increase. However, in this case the government’s liability
to compensate (support) is not the equivalent of civil liability (similar
to liabilities in a joint guarantee) but more of a ch aracter that
supplements the liabilities of the nuclear operator. Hence, when the
Government compensation in such situation s are the equivalent of a country’s
functions in disaster relief and should not require explanation of the reasoning on which
it is founded.
349

Pelzer, an advocator or unlimited liability in the damage compensation scheme under
the German Atomic Energy Law, also referred to the impossibility of making available
unlimited compensation amounts in accordance with the liability in an unlimited liability
regime.
350229

government intervenes in providing compensation (support) for nuclear
damages, it must take into consideration not only the financial security
amount made available by the nuclear operator and its total assets but
also the appropriate amounts that it can contribute in terms of fiscal
burden. It must make an effort to realize prompt relief, in the context
of its responsibilities to indemnify the victimized parties and resolve
public fears, and to determine the scope and amount of compensation
payments

from

the

perspectiveof

distributive

justice(justitia

distributiva = to allocate to each victim that which is in accordancewith his needs), unbound to the civil liability princip le of adequate
causation regarding the scope of damages 351 .

(3)

A new compensation scheme for nuclear damages fromthe TEPCO Fukushima accident: Act for the Indemnificationof Damages from Nuclear Accidents (tentative title)
In terms of the nuclear damages from the TEPCO Fukushima
accident, it was apparent from the outset that the scale of the damages
was not of a magnitude recoverable using the financial security amountprovided for in the Nuclear Compensation Act and TEPCO’s assets.
Therefore, the Facilitation Corporation Act was enacted as “aid isrequired for the nuclear operator to compensate the damage, and‘support’ has been provided to TEPCO in the form of loans ”. However,the conventional civil law-oriented method of negotiating resolutions
betweenvictimized

partiesCompensation Act and

and

TEPCO

under

the

Nuclearthe Facilitation Corporation Act has, asmentioned, only stalled the progress of compensation procedures,
therefore impeding the protection of the victimized . Also, as thegovernment is only involved in indirectly providing compensation
payments and does not proactively and directly stand in the forefrontof compensation of victims, the nuclear operator has been solely
assuming the burden. Neither of the two purposes of the Nuclear
Compensation Act stipulated in Section 1, “to protect persons sufferingfrom nuclear damage and to contribute to the sound development ofGerman and Swiss response to depletion of compensation funds discussed in footnotes
334 and 335 should be referred to.
351

230

nuclear business” , can be achieved under such circumstances.
Hence, there is a need to fundame ntally improve the current
status.
A new compensation scheme could be contrived based on the
Pollution-Related Health Damage Indemnification scheme:i) Establish a Damage Indemnification Organization, as an independentadministrative corporation in order to implement an indemnification
schemeindependent

of

(but

concurrent

with)

the

current

compensation scheme based on civil liability under government
responsibility.
ii) Payments under the indemnification scheme shall be made pursuant
to criteria for indemnification (criteria based on civil liability).
Investigation of damage, determination of indemnification amounts
and payments shall be implemented by the Damage Indemnification
Organization. Appeals may be made against contentious decisions,and administrative court procedures may be taken.
iii) The government shall make all funds for indemnification payments
available.

After

all

payments

have

been

made,

the

DamageIndemnification Organization shall claim compensation payments
which should have been assumed by the nuclear operator pursuant
to Section 3 of the Nuclear Compensation Act.
iv) Victimized parties may file claims for damages with the nuclear
operator based on civil liability (Nuclear Compensation Act) and / orwith the Damage Indemnification Organization. A victimized party
who has chosen to seek indemnification of damages cannot executethe right of claim for compensation while indemnificati on procedures
areunderway.

A

victimized

party

who

has

alreadyclaimedcompensation and received payment from the nuclear operator
cannot claim indemnification for an overlapping scope of damages. If
a victimized party who has received indemnification paym ent shouldclaim that the damages suffered were larger than the amount received,
then the party may claim damage under the conventional damage
compensation scheme based on civil liability. When a victimized party
receives damages compensation payment based on civil liability after
receipt of indemnification payment, the overlapping categories ofdamages shall be offset as profits would be against losses.
231Chapter 4
Proposal of a Law for the Indemnificationof Nuclear Damages
Akio Morishima
Professor emeritus, Nagoya University
Kato, Nishida & Hasegawa Law Office

1. Issues regarding the current Nuclear Compensation Law
The damages resulting from the TEPCO Fukushima Daiichi
Nuclear Power Plant accident (“Fukushima accident”) have b een
compensated through the following procedures to present (c.f. Part II
Chapter 1) . On the premises that the Great East Japan Earthquake iscannot be identified as an “exceptionally grave natural disaster” asstipulated in the exceptional clause in Section 3 paragraph 1 of the Act
on Compensation for Nuclear Damage (“Nuclear Compensation Act”),
the Government established a Dispute Reconciliation Committee for
Nuclear Damage Compensation (“Reconciliation Committee”), whichhas published guidelines on the categories and scope of damages to becompensated by TEPCO. TEPCO established the Fukushima Nuclear
Compensation Office in Fukushima under the Fukushima Revitalization
Headquarters and deployed more than 10,000 employees to takereconciliation procedures forward according to the guidelines compiledby the Reconciliation Committee. Although compensation payments
have been made for approximately 1.9 million cases amounting to about
3 trillion Japanese yen (page 4 should be referred to for entire costs
incurred in addressing the aftermath of the TEPCO Fukushima
accident), a host of unresolved cases have accumulated and anincreasing number of actions have been brought to court. There arealso many people who have not claimed compensation for damages.
Hence, according to estimates (presented at the 77th Civil Law Society
Symposium “Earthquakes and Civil Law”) by Mr. Yoshihisa Nomi,
chairman of the Reconciliation Committee, compensation payments willamount to a minimum of 5 trillion Japanese yen and can reach up toas high as 10 trillion Japanese yen (c.f. page 4 footn ote 29). With noprospects of methods and effects of decontamination measures to be
implemented in radiation-contaminated areas including evacuation232

zones, it remains unclear how long residents w ill have to continue
evacuating. At present, future radioactive impacts on agriculture andfisheries, as well as health hazards, are yet to be known. On the other
hand, despite the adoption of a special legislation to be applied to the
TEPCO

Fukushimaaccident

regardingthethree-year

extinctive

prescription for damage compensation stipulated in Article 724 of the
Civil Code, the period of prescription is nearing termination. Hence thisissue requires immediate attention (c.f. page 1 10 and succeeding pages).
Under the current Nuclear Compensation Act, in the event of a
nuclear accident caused by a tremendous earthquake and tsunami, thefirst question is whether the exceptional clause of Section 3 isapplicable. Even if the issue were to be dismissed (if t he exceptionalclause was irrelevant), once radioactive substances are released as aresult of the accident, the contamination could become widespread andvarious types and forms of damages ranging from personal healthhazards to natural environment destru ction could occur over a long
period of time, depending on the amount of radioactive substances
released and on radiation dosage. As revealed in the recent accident,
the damages and amount of loss caused by a nuclear accident are
unpredictable. In terms of addressing claims for damage compensation,individual assessment of compensation payments for the various
damages suffered by tens of thousands of victims according to damage
compensation

rules under

the

Civil

Code

would entail

massiveprocedural costs (management costs, administrative costs). Not only
the enormous amount of human resources, costs and time devoted by
TEPCO to reconciliation, but also the anxiety and dissatisfactions of
the victims towards the time and effort required for reconciliation as
well as the uncertainty of the compensation process havegrown toolarge to be left in the current state. .
The damages imposed by the recent TEPCO Fukushima accident
was not limited to infringements on individual property rights or bodies
but also included damages and losses due to the deprivation of homecommunities from families who have no choice to leave their places ofwork and living. Such circumstances, as mentioned in Chapter 1, are
not assumed in tort compensation law, which stipulates the scope of233damages to be compensated by the persecutor to the victim in terms ofinfringements of a person’s individual rights or interests. While it isunknown whether such consequences had been foreseen at the time oflegislating the Nuclear Compensation Act, it had been debated that thedamages which would be incurred by a nuclear accident were
unpredictable. Hence, the government’s Special Subcommittee on
Nuclear Damage Compensation chaired by Sakae Wagatsuma, thenprofessor emeritus at the University of Tokyo, advocated the adoptionof strict liability on the part of operators and that government
compensation should be made in the event that the compensation
amounts exceed the amounts pooled by operators through private
insurances.

The

committee

also

proposed

a

fair

and

promptcompensation process (instead of a reconciliation process) assumed byanadministrative

Adjustmentcommittee

Committee).

(Nuclear

However,both

Damageideas

Indemnificationofgovernment

compensation and an administrative committee were denied in thelegislation process. Details are provided on this background in Part I,
Chapter 4.
The Nuclear Compensation Act has not altered the rules of damage
compensation except in Section 3 which stipulates a modification of
Article 709 of the Civil Code and imposes strict liability upon the
nuclear operator, and in Section 4 which channels all liability to the
nuclear operator. The guidelines formulated by the Reconciliation
Committee established pursuant to Section 18 correspond to the “draft
instructions establishing the scale of the nuclear damage and othergeneral instructions to help operators reach a volunt ary settlement of
the said dispute (a dispute arising from compensation of nuclear
damage).” Hence, the Reconciliation Committee is not given theauthority to establish new rules which ignore the compensation -related
rules acknowledged in judicial preceden ts and theories. Although theReconciliation Committee would seem to be making its best efforts torelieve victims of the damages imposed in the Fukushima accident,
padded compensation payments (for example, payments for pain andsuffering to voluntary evacuators from outside evacuation zones) havebeen made without firm grounds. These have been made in response to234

ad hoc claims made within the framework of the current Nuclear
Compensation Act, which is based on tort compensation law underwhich individuals sue individuals for individual damages. Inconsistent
guidelines

have

been

appliedalmostcoercively

to

take

the

reconciliation process forward, but the outlook for restoring the
livelihoods of victims from official evacuation zones remain unclear.
Hence, as said in Chapter 1, I am afraid that Professor Atiyah’s illusionthat justice is realized by making large compensation payments is
actually prevalent. On the other hand, communities which supported
entire livelihoods of victims before the accident cannot be restored
through individual compensation claims. However, if a community isrehabilitated, the livelihood of victims can be restored and future losses(damages) will be mitigated. Drawing on the experiences of the
Fukushima accident, a community perspe ctive should be embedded ina victim indemnification scheme for nuclear accidents, in addition to
the indemnification of infringements of victims’ personal rights andinterests.

2. The concept of a new nuclear damage indemnification
schemeThis chapter will consider a new indemnification scheme fornuclear damages, drawing on the experiences of the TEPCO Fukushima
accident and revisiting the fundamentals of Section1 of the Nuclear
Compensation Act which seeks to “contribute to the sound developmentof the nuclear business” as well as to “protect persons suffering from
nuclear damage.” Given great political controversy over whether toexpand, retain or reduce and abolish nuclear business, the discussion
herein will be focused on the victim protection scheme that will be
required in theevent a nuclear accident occurs wh en nuclear

operations are continued and not consider political decisions on
nuclear policy.
Acknowledging that a nuclear accident of the like should never be
repeated, a new nuclear indemnification scheme is proposed. It is an235

administrative indemnification scheme different from the current
Nuclear Compensation Act, which is based on tort compensation law.
Like tort compensation law, which seeks to individually redress
infringements to an individual’s rights and interests , it seeks toindemnify damages, but it takes a different approach regarding thedamages to be compensated and the assessment of damages, as well as
indemnification methods and procedures. The following framework i s
proposed to fairly and promptly address a diversity of claims for damage
compensation by a wide rangeof victims which are expected tocompile into vast amounts.

3. Compensation liability(1) Persons liable for compensation: The nuclear operator (A) who
caused the nuclear damages is primarily liable for the compensation to
be made. All other nuclear operators (B) are secondarily responsible,
followed by the national government (C). Details on how these parties
should assume responsibility will be undermentioned.
(2) Grounds for liability: The nuclear operator (A) who caused thedamages will bear strict liability for the damages. All nuclear operators(B), including nuclear operator (A), bearing indemnity liability will beobligated to make contributions for mutual assistance among operators.
Similar to the second tier of financial protection under the U.S. Price–
Anderson Act, explained in Part II, Chapter 5, which is a mutual
assistanceschemeamong

operators

who

are

obligatedtopay

retrospective insurance premiums (c.f. page 44), it would be a legal
obligation under the proposed mutual assistance scheme. It can be
distinguished from the “lockstep” general contributions under thecurrent Nuclear Damage Compensation Facilitation Co rporation Act(“Facilitation Corporation Act”) which fails to provide explicit legal
grounds for such contributions. Nuclear operators would be obligatedto pay a certain premium in private insurance for liability coverage(First Tier under the Price-Anderson Act), but if a nuclear accident
causes damages in excess of the amounts pooled, the mutual assistance236

scheme involving all nuclear operators (B) would be validated andnuclear operators would bear the retroactively assessed insurance
premiums. The Government (C) is thirdly liable for approving andpromotingnuclearoperation

with

high

risk

which

may

cause

unforeseeable damages, as a part of Japan’s advanced technology andenergy policies, determining the safety standards for the construction
and operation of nuclear reactor and the processing of nuclear fuel, andbeing fully responsible for regulating operation of reactors. Unlike otherindustries, the nuclear industry is strictly regulated by the Government
and must rigorously abide by national safety standards and regulations.
However, the recent accident occurred despite the reactors’ conformity
with national standards and regulations. If the Government had
implemented stringent regulations based on safety standards of anadequate level, the damages might not have been so massive. Given the
Government’s authority and obligation to prevent nuclear accidents, it
could be said that the Government and nuclear operators are equally
liable in a nuclear accident. However, under the proposed scheme, theGovernment

would

bear

complementary

liabilityforamounts

corresponding the third tier of the Price -Anderson Act. The word“complementary” is employed because the Government must provide
indemnities only when nuclear damages exceed the amounts available
in

the

first

and

secondtiers.

However,theGovernment’s

responsibilities do not end here. As undermentioned, the damages
imposed by a nuclear accident include many examples which diverge
from ordinary damage compensation cases (c.f. Part III Chapter 2). In
radiation-contaminated areas that have been officially designatedevacuation zones, the residents have been forced to evacu ate (restricted
habitation) and in some of these areas, decontamination measures are
being

taken.

The

guidelines

formulated

by

the

Reconciliation

Committee and Article 44 of the Act on Special Measures concerning
the Handling of Pollution by Radioactive Materials provide that suchdamages and decontamination costs should be compensated for under
the Nuclear Compensation Act. However, as explained in Part III
Chapter 2, such damages which are not accompanied by actual
infringements upon property rights or bodies have not been considered237

to be covered by damage compensation. Furthermore, the Governmentis fully involved with the designation of evacuation areas and thetermination of evacuation instructions. In designating evacuation zones
did

the

Government

rely

on

verifiedscientificstandards?

The

Government will surely consider the progress made in national andlocal rehabilitation plans as well as local radiation dosages upon lifting
habitation

restrictions.

The

Government(theMinistryoftheEnvironment) is also responsible for determining what level of radiation
dosage is required for decontamination and which decontamination
methods

are

to

be

employed.

IftheGovernment

shouldmakeinappropriate judgments, decontamination costs will surge (c.f. page 72
and succeeding pages). As the categories and scope of these damages
aresubject

togovernment

decisions,theGovernment

bears

responsibility for the appropriateness of these decisions. However, if
this Government responsibility is sought for as the liability under Act
Concerning State Liability for Compensation , it would be difficult toprove negligence and the illegality in the Government’s decision. As
undermentioned, under the new nuclear damage indemnification
scheme, both damages which have been covered and not compensated
under

the

conventional

compensation

law

shall

be

indemnified(compensated) as nuclear damages. Damages caused by evacuation anddecontamination would be appropriately shared by the Government andthe nuclear operator. The Government bears liability for the generationand expansion of costs through its involvement in evacuation anddecontamination. The Government, as a public institution, is also
responsible for administrating the nuclear indemnification scheme.

4. Administrative committee
The Government should establish an administrative committee(Nuclear Damage Indemnification Adjustment Committee) to address
the indemnification of damages imposed by a nuclear accident. The
committee

would

be

responsibleforconcerning the payment of indemnities.
238

administrative

procedures

Theadministrative

committee

would

operate

with

a

small

membership under ordinary circumstances to m anage the pooledamounts under the nuclear indemnification scheme, cooperate with
nuclear operators and the private insurance industry in compilinginformation on the indemnification of damages resulting from nuclear
accidents and deliberate rules regardin g indemnification. However,once an accident occurs, the committee is structurally rearranged to becapable of coping with claims for massive and diverse nuclear damages
and then investigates the status of nuclear damages and determinesthedamagecategories

tobecompensated aswell

as payment

classifications. Government payments would also be determined forparticular damage categories.
Although the administrative procedures will be assumed by theadministrative

committee,

it

would

be

efficient

to

have

pr ivate

insurance companies assist in the acknowledgment of damages. When
victims entitled to indemnities are widespread, the local government
should be commissioned with procedures including checking thequalificationsofrecipientsofindemnities

anddetermining

theindemnity amounts. This is because indemnity payments must be
executed promptly and efficiently.

5. Nuclear damages to be covered by indemnities
Drawing on the Fukushima accident, it would seem that for fairand prompt redress, damages should be categorized and indemnities
shouldbecalculated

with

a

standardized

formula

under

fixed

conditions. In the aftermath of the Fukushima accident, compensation
payments have been made for damages inducedby harmful rumors

and pure economic losses which are not usually compensated for andcan be problematic as discussed in Part III Chapter 2. Therefore theproposed nuclear indemnification act would acknowledge indemnities
for certain unconventional indirect damages based on a standa rdized
formula

with

an

upper

limit,

inadditiontodirectdamages(infringements on property rights and physical bodies), conventionally239

acknowledged without contention. For example, the business losses
suffered by an evacuee would be acknowledged, but ind emnities would
be calculated according to a standardized formula by taking into
consideration

variouscircumstances

includingtheprospectsof

employment and livelihood at their new address as well as local
circumstances. Damages from harmful rumors which are basically notgranted indemnities will be indemnified to a certain upper limit
accordingtodistanceandtemporalcircumstances.

Costs

of

decontamination should fundamentally be borne by the Government,
since decontamination constitutes a part of the G overnment policies forthe safety of local residents and environmental conservation and is not
originally covered by indemnity law. The damage categories to beindemnified under the proposed indemnification scheme should be
defined as “nuclear damages” as in the amended Paris Convention on
Third Party Liability in the Field of Nuclear Energy (“Paris Convention”)
and the amended Vienna Convention on Civil Liability for Nuclear
Damage (“Vienna Convention”). The administrative committee would
determine the details of the categories, the calculation methods forindemnities and upper limits with reference to cases of indemnities paid
under the Civil Code and insurance payments so that in the event of a
nuclear accident it can formulate more specific rules in acco rdance withthe status of the accident.
Victim relief may include not only monetary payments but also theprovision of livelihood support and community services when necessary.
However, such relief has its limits if in-kind benefits are to be provided
individually. The residents of Fukushima suf fered community losses
which cannot be fully recovered through payments in money andlivelihood support unless the community itself is rehabilitated.

It maybe possible to support community rehabilitation for the recovery ofmany evacuees as a part of the indemnification scheme once the stateof emergency has passed, but it would be difficult to expand theframework of a nuclear indemnification scheme. However, considering
the disastrous consequences imposed upon communities in nuclear
disasters,

theorganic

integrationofreliefprovided

under

an

indemnification scheme and a post-disaster rehabilitation plan could240

help embed the restoration of livelihood through indemnities in theprocess of community rehabilitation and bring relief measures closer towhat is desired by victims.

6. Relationship with tort compensation
A nuclear indemnification framework with a different approach todamages and indemnification procedures compared to conventional tort
compensation laws may pose questions of its relationship with damage
compensation claims under the Civil Code. Compensation claims fornuclear damages made under the Civil Code could be integrated into
the

new

nuclearindemnification

scheme,but

considering

thestandardization of payments and the provision of indemnities throughan administrative process, victims who are unsatisfied by the payments
receivedthroughthenewindemnification

schemecannotbediscouraged from bringing an action to the court. Therefore, a victim of
a nuclear accident may choose to bring an action against the nuclear
operator on the grounds of strict liability as stipulated in the new
nuclear indemnification act (New Nuclear Compensation Act) from thevery beginning, or he/she may choose to primarily request theadministrative committee indemnification as provided under the new
Nuclear Indemnification Act and take the case to court, bearing theburdenof

proof

regardingdamages,

when

the

indemnities

areunsatisfactory. In the latter case, the rulings of a civil law court could
contradict the judgment made by the administrative committee under
the new nuclear indemnification act as the new law would notnecessarily adopt the adequate causation theory of tort law. T hecompensation amounts awarded by the court would be paid in short ofindemnities already paid under the new indemnification scheme. With
both frameworks sharing the aim of recovering the losses suffered by
victims, payments made under one framework is re garded as having
been paid under the other framework as well.

241

7.

Exemption reasons
Howshouldthenewnuclearindemnification

act

address

exemption reasons? In light of the approach taken by the proposed
nuclear indemnification act to make indemnity payme nts based on
explicit requirements, exemptions should be entirely eliminated to
avoid the recent Government interpretation of “an exceptionally grave
natural disaster” to be something that is “unforeseeable by humans,”and hence have the Government maintain financial security (insurance).

8.

Strict and limited liability of nuclear operators and theGovernment’s indemnification
Although nuclear accidents occur very rarely, they can cause
extremely grave damages once they occur. As mentioned in Part III
Chapter 1, tort compensation law should ensure foreseeability on theperpetrator’s part while pursuing the relief of victims. How ever, thecurrent Nuclear Compensation Act deprives nuclear operators offoreseeability by imposing unlimited liability under strict liability.
Given opposition by the financial authorities at the time of its
legislation, Government responsibility for inde mnifying damages was
not included in the Nuclear Compensation Act. As elaborated in Part II,
overseas legislations stipulate Government involvement in some form,
such as providing indemnities when nuclear damages exceed a certain
amount. Prof. Urakawa’s discussions in Part III Chapter 3 should also
be referred to.
The proposed nuclear indemnification act would also impose strict
liability on the part of nuclear operators as in the current Nuclear
Compensation Act, but takes a different three -tier approach based on
the U.S. Price-Anderson Act (amended in 1988) in order to ensure
nuclear operators foreseeability. The first tier would consist of private
liability insurance and government measures to guarantee payments
for damages such as those caused by earthquakes which are notcovered by private insurance. When the damages caused by a nuclear242

accident exceed the amounts available in the first tier, it would be
supplemented by a second tier which provides a certain amount withan upper limit through a retroactive mutual assistance scheme among
nuclear operators. If damages cannot be covered by funds available in
the first and second tiers, Government indemnities would be provided.
(Under the Price-Anderson Act, the President would formulate agovernment indemnity plan.) The Government bears responsibility forproviding indemnities on the grounds already explained. Driving
electric companies into bankruptcy by making nuclear operators bear
unlimited liability, will not only impose merciless consequences upon
victims who would end up not being able to receive indemnities for thedamages suffered (refer to page 36 for statements by Hoshino) but also
bring

seriouseffectsonelectricity

consumers.

AlthoughtheGovernment does not have unlimited source of funds, should it not be
responsible for providing indemnities in the third tier for promoting
nuclear policy as national policy (refer to page 35 for historicalbackground of excluding government compensation from the current
Nuclear Compensation Act)? The exemption o f nuclear operators fromthe third tier is likely to arouse strong opposition in Japan, which has
conventionally taken the unlimited liability approach. Although thefinal decision should be made by political judgment, if the first andsecond tiers make available amounts that leave nuclear operators withbarely enough funds for their continuity, the third tier should beentirely covered by the Government, unless there is evidence ofnegligence on the part of the nuclear operator that caused the nuclear
accident. In other words, the limited liability of nuclear operators is
proposed herein on the premise that the first and second tiers provide
adequately

large

funds,

becausedriving

nuclearbankruptcy would not be in the interests of victims.

243

operators

intoToward the Establishment of a New
Compensation System for Nuclear
Damages（Project Leader: Akihiro Sawa）
November 2014
The 21st Century Public Policy InstituteKeidanren Kaikan 19th Floor,
1-3-2, Otemachi, Chiyoda, Tokyo 100-0004
TEL：+81-3-6741-0901
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