Several Liability Scenarios against Nuclear Plant Operator Loom, Professor Curtis Milhaupt Says

At Law School Panel on Legal and Policy Implications of Crisis, Milhaupt Predicts Japanese Government Will Have to Pay Most of the Costs of Disaster

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New York, April 19, 2011—As it continues to wrestle with the crisis at the Fukushima nuclear power plant, the utility that owns the crippled facility must still deal with the legal fallout from the disaster.
Curtis Milhaupt ’89, Director of the Center for Japanese Legal Studies, said there are several ways that the Tokyo Electric Power Co. (Tepco) or its directors could be on the hook for liability claims that some estimates have put at more than $130 billion.
Japanese law provides for strict and unlimited liability for a nuclear plant operator except for damages caused by a “grave natural disaster of exceptional character, which Milhaupt said would seem to apply here.
“To an American lawyer, if this doesn’t constitute a grave natural disaster, I don’t know what would,” said Milhaupt, an expert on Japanese law. “But very interestingly, several government officials came out shortly after the accident and said this exception does not apply.”
Even if Tepco were to claim the exception did apply, Milhaupt said that could create problems for the company. “The public anger at Tepco is so great that this may be a pyrrhic victory.”
Milhaupt, the Parker Professor of Comparative Corporate Law and Fuyo Professor of Japanese Law, said that suits may also be brought under Japanese corporate and securities laws. “One could imagine suits brought against Tepco by investors for misleading disclosure with respect to its crisis management systems,” said Milhaupt. He added that Tepco’s board of directors might also be sued for ignoring signs that its disaster prevention systems were woefully inadequate.
Milhaupt spoke as part of an April 6 panel at the Law School on the legal and policy implications of the Japanese crisis.
Yet as Milhaupt sees it, like the major U.S. banks during the recent financial meltdown, Tepco is too big to fail.
“Bankruptcy for Tepco is extremely unlikely. It’s too important a company for Japan and the impact on the other power companies would be too great,” Milhaupt said. “Whether through nationalization, or through capital injections, the bottom line is the Japanese government will have to support Tepco for years to come.”
Also on the panel was Michael Gerrard, the Andrew Sabin Professor of Professional Practice and director of the Center for Climate Change Law, who presented an overview of litigation over nuclear power in the U.S., particularly after the Three Mile Island accident in 1979.
Gerrard noted the Fukushima crisis will only complicate matters for U.S. nuclear plant operators and reignite a debate about how to dispose of spent fuel from the plants, especially after President Obama abandoned plans for a storage facility at Yucca Mountain in Nevada.
“The sensitivity about the spent fuel rods is much greater than it has been,” Gerrard said. “We now see (after Fukushima) they can really be a very serious problem, especially when they are not subjected to the same physical protections as the reactor core.”
The audience also heard from Masayoshi Arai, special advisor to the Ministry of Economy, Trade and Industry of Japan, who updated the situation in and around the plant. He said Japan was committed to a rigorous and intensive system of monitoring radioactivity and immediately releasing the results.
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