The Tsunami of March 2011 and the Subsequent Nuclear Incident at Fukushima: Who Compensates the Victims?

Abstract

The tsunami which took place on 2011.3.11 before the coast of Japan and the subsequent nuclear incident at the Fukushima nuclear power plant have shocked the world and raised many questions. One of the questions is to what extent victims of the tsunami and of the nuclear incident can receive adequate compensation. We focus on the compensation system for earthquakes in Japan and show that Japan relies on an interesting private-public partnership whereby earthquake insurance is added to fire insurance and supplemented with a government guarantee in the re-insurance scheme. Since the earthquake coverage is, however, limited substantial government aid is still provided as well which raises questions on the influence of this government compensation on incentives of victims to take preventive measures and to purchase insurance coverage. Interestingly Japan has a detailed system of risk differentiation, e.g., rewarding victims for choosing earthquake proof constructions. After a critical analysis of the earthquake system we move to the compensation for nuclear damage in Japan, showing that, strikingly, Japan has a system of unlimited liability. However, given limited liability of the nuclear operator liability may de facto still be limited and should therefore be supplemented with financial guarantees. These are provided by the Japan Atomic Energy Insurance Pool. In case the damage is caused by an uninsurable risk like a natural disaster insurance coverage does not intervene, but the liability of the operator is covered via an indemnity agreement with the government. The indemnity is not a subsidy (like in many other legal systems) but the operator has to pay a fee for the indemnity provided by government. Only when the nuclear incident would be caused by a natural disaster of an exceptional character would liability of the operator be excluded. We show that the government is reluctant to admit the 3.11 tsunami as such a “natural disaster of an exceptional character” and the liable operator (TEPCO) takes up his financial responsibility. However, even though the operator in Japan pays a fee for the indemnity agreement also the compensation regime for nuclear disasters in Japan has substantial subsidies. This is also made clear by the recent act which is supposed to deal with the damage caused by the Fukushima incident via a Nuclear Damage Compensation Facilitation Corporation. The damage to be paid via this corporation will be financed not only by the liable operator TEPCO, but also via financial interventions from other nuclear operators and via the government. We examine the way in which the nuclear liability regime in Japan has been applied to two well-known incidents, being the Tokai-mura incident of 1999 and of course the recent Fukushima incident of March 2011. Moreover, we examine how the compensation regime for earthquakes and nuclear incidents in Japan compares to international tendencies and developments in the US. We argue that there are important lessons to be learned from the Fukushima disaster. An important lesson can be related to the fact that many hold that the incident was due to a construction failure for which most likely not the operator (TEPCO) was liable (or at least not only), but the constructor General Electric. This raises important questions concerning the efficiency of the so-called channeling of liability to the nuclear operator (meaning that only the operator can be held liable, excluding all other parties from liability) as it is incorporated in the international conventions.