Japan nuclear crisis to trigger huge civil damages claims

* 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

SINGAPORE, April 4(Reuters) – 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.

Japan’s government expects the earthquake and tsunami to
cost up to $300 billion in material damage, but the ultimate
cost will be far bigger as economic activity shrinks due to
power shortages and compensation claims mount. [ID:nL3E7F10XI]

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.

“There is no precedent about the applicability of the
natural disaster exemption and I expect TEPCO shall still
probably be liable – maybe not for 100 percent of the damages
but they will probably still face say 40 to 60 percent of the
liability given their mismanagement in the weeks after the
earthquake,” said Koji Ishikawa, a partner at DLA Piper in
Tokyo.

HUGE SCOPE FOR CLAIMS

Lawyers say the sheer range of claims is also likely to be
huge.

A 1999 radiation leak at the country’s Tokaimura reactor is
the only precedent for claims made under Japan’s nuclear
liability law. Court cases arising from that accident indicated
that disruption to business and a loss of real estate value can
be claimed for if radiation damage is shown to be the direct
cause.

A report on that incident in 2000 indicated that
psychological damage, evacuation costs, bodily injury and
medical tests can also be grounds for compensation.

At present more than 163,000 people from the Fukushima area
are living in shelters making up one tranche of likely
claimants. Thousands more living a little further out from the
reactor may still though be able to claim for a loss in the
value of their real estate.

Farmers have already been promised compensation for their
damaged crops and all businesses based within the evacuation
zone should also be able to claim.

Some reputational damage to businesses and produce from the
region is also likely to be eligible, even though those sort of
claims are usually very difficult to prove under Japan’s civil
law.

“TEPCO and the Japanese government will compensate a lot of
the claims voluntarily and they even may compensate some damages
that