Huge civil damages claims looming from Fukushima disaster

“If the government nationalises TEPCO then they take on TEPCO’s debts, and if TEPCO remains private it will probably need government support for its obligations to pay damages, so whichever way you look at it the government will be taking on responsibility

Japan nuclear crisis to trigger huge civil damages claims | Reuters, Mon Apr 4, 2011 * TEPCO and government to handle claims* Hundreds of thousands of claims expected* Claims could top $130 bln in worst case – BofA-ML* Government likely to set up central compensation fund By Rachel Armstrong – Japan’s nuclear crisis is likely to lead to one of the country’s largest and most complex ever set of claims for civil damages, handing a huge bill to the fiscally strained government and debt-laden plant operator, Tokyo Electric Power Co .

Lawyers say the size of the claims could be the biggest in Japanese legal history and the lack of precedent for dealing with these incidents means it is still not clear how the claims will be handled.”Potentially, this could be one of the largest civil claims historically in Japan because of the number of people affected,” said George Gibson, a partner at law firm Norton Rose in Tokyo.

Most of the claims will be made under the country’s 1961 Act on Compensation for Nuclear Damage. Unlike the nuclear laws in the United States and most of the European Union, this places no cap on the total level of liability.

Analysts at Bank of America Merrill Lynch estimate that claims could top $130 billion if the crisis continues for two years. While this is their worst case scenario, the latest warnings that it could still take months to end radiation leaks plus the government’s probable desire to avoid publicly contesting a lot of claims means this may not be too far of the mark.

That cost is likely to be split between Tokyo Electric (TEPCO) and the Japanese government. While the law does allow for the operator to be exempted if an incident was caused by a grave natural disaster of an “exceptional” nature, lawyers say TEPCO will be under huge political pressure to absorb at least some of the cost…………..

TEPCO’s debt situation — it currently owes around $115 billion in debt compared to its equity valuation of around $35 billion — means the government will probably handle most of the claims to begin with.

“TEPCO can’t afford the scale of the damages facing it at one point in time so they will probably owe the payments to the compensation fund over a number of years,” said Saito at Nishimura & Asahi.

And this situation would be muddled further if the government were forced to step in and impose some form of nationalisation on the company.

RPT-Japan nuclear crisis to trigger huge civil damages claims | Reuters