As matters stand, there is no global liability framework for operators of civil nuclear-powered ships. Without one, nuclear-powered vessels would be subject to national or even regional legislation, creating uncertainty as to levels of liability if things go wrong. In particular, lacking any regulatory framework that allows owners to limit their liability (as is the case for most commercial carriers, other than nuclear vessels), the risk they would be facing may potentially be limitless. 

Where any insurer is prepared to take on that potentially unlimited risk, the cost of insurance will increase to prohibitively high levels for vessel operators. 

This is a significant barrier to the uptake of nuclear-powered vessels in the civil maritime world. Commercial insurability is vital to encourage the advancement and adoption of nuclear-powered vessels at a critical time where the industry is trying to decarbonize, and quickly.

What needs to be done?

In 1962, the Convention on the Liability of Operators of Nuclear Ships (the “Convention”) was signed by a few countries, but was never ratified, so did not come into force.  Its purpose was to determine “certain uniform rules concerning the liability of operators of nuclear ships.” 

If the Convention had come into force as intended, it would have set out a strict liability regime, channelling all liability for nuclear damage to the ‘operator’ and serving to limit liability for ‘licensed’ operators only.

The Convention cannot now be ratified in its present form; we are now over 40 years on, and the world has changed. Work needs to be done, but it is not insurmountable. Issues to be addressed include:

• A revised definition of “nuclear damage” will need to be considered. The definition in the Convention does not include damage to the environment.
• The limit on liability refers to weight in gold, which will need to be updated.
• As to the liability cap itself, what is a reasonable limit? Who will bear liability? Will it be apportioned between parties/nations?
• Which states are likely to ratify the liability convention? What will be the implications for shipping routes for nuclear powered vessels if certain states do not ratify and sign up to the liability convention?  

Demand from the industry

The demand for nuclear powered vessels in the civil maritime industry certainly exists. There is increasing interest from shipping companies as well as energy users in the technology and oil and gas markets; Google became the first tech company to commission new nuclear power plants to provide energy for its data centres last year.  

The advantage of nuclear-powered vessels being able to sail at the intended service speed, as compared to some of the alternative fuels being considered, which would require slow steaming to reduce emissions, is a key incentive for shipping companies to invest in nuclear powered vessels.  

If the regulations can catch up and a liability framework can be put in place that will make nuclear commercially insurable, shipyards are likely to see a further significant increase of orders for nuclear powered vessels. Major shipyards in the Far East are already working on it as we speak. HD Korea Shipbuilding & Offshore Engineering Co, recently announced that it would invest up to US$ 206 billion to develop small modular reactor-powered ships by 2030. This came shortly after the parent company of HD Hyundai Heavy Industries Co unveiled its first nuclear-propelled container ship model. Jiangnan Shipyard (part of China State Shipbuilding Corporation) unveiled a design for a 24,000 TEU nuclear-powered container ship in December 2023, which has already received approval in principle from the DNV classification society. Other major yards such as Samsung Heavy Industries, Imabari Shipyards and others of similar standing, have announced significant investments in nuclear technology for the next generation of new buildings.

The desire to bring nuclear into the civil maritime industry was significant in 1962, but we fell at the critical hurdle of ratifying the Convention.  The demand has increased exponentially since then and steps now need to be taken to address the regulatory requirements to allow the industry to benefit from clean nuclear power, be that by way of international conventions or a number of bilateral or trilateral agreements.