Despite Fukushima and some high-profile national rejections of nuclear generation, it is becoming a primary policy option for a large number of countries – not just in Europe, but also Africa and the Middle East. China, in parallel to its drive on renewables, wants to build 100 reactors in the next 20 years.
The prospect of a substantial increase in the nuclear building programme is a welcome opportunity for manufacturers and suppliers to the sector. However, the pitfalls of the supply chain in heavily regulated sectors was brought to life by the case of Christopher Tappin, a freight forwarder and UK citizen accused of conspiring to export batteries for Hawk surface-to-air missiles from the US to Iran. Tappin denies the offences and is currently on bail awaiting trial in the US, having fought a long but unsuccessful legal battle through the UK courts to block his extradition. If found guilty, he could face a sentence of up to 35 years in jail.
Leaving aside the details, the case raises interesting questions about how those in the nuclear supply chain can supply the growing international market without falling foul of the highly complex export (and other) controls that countries apply.
The core requirement for provision of nuclear export controls arises from United Nations Security Council Resolution 1540. The resolution requires states to adopt and enforce appropriate effective export controls around acquiring, transporting, possessing, transferring or using nuclear materials. It also addresses the financing of prohibited activities. Operative Provision 3 of Resolution 1540 requires the establishment of a national regulatory body and measures to account for storage, transportation, protection, accounting, use, production and other measures concerning movement of nuclear materials.
There is significant scope for board members of companies within the supply chain to unwittingly land themselves in trouble by giving access to licence-controlled technology, equipment, data, source codes and such like to unauthorised persons.
In the UK, licensing controls are less severe because they apply to transfers intended to be used for weapons of mass destruction purposes (which includes nuclear weapons). In the US, these restrictions apply to a broader set of items but target foreign nationals only. To address this, licensee provisions will usually apply to disclosure of licensed information to any unauthorised persons within domestic borders. Similarly, to avoid exploitation of loopholes, licensing provisions will also cover routing of information through third parties and other mechanisms.
Another potential flashpoint concerns the requirement to gain consent from the appropriate licensing authority with respect to continually-evolving control lists – regulatory authorities generally prepare lists of goods, services and tangibles which are, or may be, subject to export controls. The use of control lists is complex because, and this is where the Tappin case springs to mind, many things listed have dual or multiple purpose applications and may be necessary for the development of peaceful technology in developing countries.
Against this backdrop, it is essential to have effective corporate governance measures in place.
Establishing a competent export control group is a key first step, with a brief to provide the board with compliance reports on a regular basis, monthly if possible. Executive and board members, who as the officers of the company may be the responsible parties, must also be trained and briefed on the UK commitment under Resolution 1540.
Moreover, all relevant information and knowledge must be kept up to date and all materials (tangible and intangible) checked against the relevant control lists. Effective record keeping is essential, so follow the Nuclear Safety Directorate guidance on management and record keeping in export controls issued in March 2009. And finally, where appropriate, liaise with the proper government departments.
Andrew Renton is partner in Bird & Bird’s International Energy and Utilities Sector Group
This article first appeared in Utility Week’s print edition of 20 July 2012.
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