What to Expect on the Convention on the Physical Protection of Nuclear Material, Its Entry into Force and its Amendment

Julissa Gozali

The history of nuclear energy dates back to the discovery of Uranium in 1789 by Martin Klaproth[1] which then developed from the science of atomic radiation, atomic change and nuclear fission from 1895 to 1945 and has since then grown into the technology we know today.

Nuclear technology is a two-sided coin, beneficial and dangerous. On the danger side, the technology can be used as a weapon; however, on the bright side, the technology helps in giving a solution as an alternative source of energy, and its reliance have increased.[2] Even so, the effects it has may be catastrophic when accidents or misuse happen, for example take the Fukushima Daiichi incident that happened in 2011 caused a major level-7 disaster.  

The usage of high impact technology requires legal instruments to regulate its security and safety. The dangers fortunately have already been anticipated since steps have been taken such as United Nations’ first resolution in 1946 on nuclear weapons; its goal is to eliminate atomic weapons and weapons of mass destruction. Keep in mind that there will always exist a flaw in legal instruments since nuclear technology is complex and change is yet to come. There are legal instruments that have been issued, the problem however is that some are binding and some are not.

Before moving to the details to nuclear related legal instruments, we take into mind there is the difference between nuclear security and nuclear safety. Taken from the International Atomic Energy Agency (IAEA), nuclear security is the prevention and detection of, and response to, theft, sabotage, unauthorized access, illegal transfer or other malicious acts involving nuclear material, other radioactive substances or their associated facilities.[3] ‘Safety’ on the other hand is the achievement of proper operating conditions, prevention of accidents and mitigation of accident consequences, resulting in protection of workers, the public and the environment from undue radiation hazards.[4]

Since the two definitions have different but interrelated meanings, the instruments on each concern have different legally binding nature. The security-related instruments that are binding under the IAEA are: Convention on the Physical Protection of Nuclear Material and the 2005 amendment, Safeguards Agreements between the Agency and States Required in Connection with the Treaty on the Non-Proliferation of Nuclear Weapons, Model Protocol Additional to Agreement(s) between State(s) and the Agency for the Application of Safeguards, Convention on Early Notification of a Nuclear Accident, Convention on Assistance in the Case of a Nuclear Accident or Radiological Emergency, Convention on Nuclear Safety, Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management.[5]

The UN have also adopted binding international instruments such as: United Nations Security Resolutions 1373 (2001) and 1540 (2004), Treaty on the Non-Proliferation of Nuclear Weapons (NPT) and International Convention for the Suppression of Terrorist Bombings (UNGA Resolution 59/290) (2005).[6] There also exist regional agreements and regional Non-Proliferation and Nuclear Weapons Free Zone Treaties such as Treaty of Tlatelolco and Treaty of Rarotonga.[7]

The instruments mentioned are based on the principles of nuclear law such as: safety, and the prevention principle in order to prevent damage and to minimize any effects resulting from misuse and accidents. Other nuclear law principles include security, responsibility, permission continuous control, compensation, sustainable development, compliance, independence, transparency and international co-operation.[8]

Concerning safety, the Convention on Nuclear Safety was adopted in Vienna on 17 June 1994 and entered into force on 24 October 1996.  The main aim is to maintain a high level of safety by setting international benchmarks. Its main target is to have committed participating States, which operates land-based nuclear power plants. The obligations mentioned in the convention include siting, design, construction, operation, the availability of adequate financial and human resources, the assessment and verification of safety quality assurance and emergency preparedness. There also exist obligations for “peer review” in which the parties are to submit reports on the implementation of their obligations.[9]

The next issue regarding nuclear security is absorbed through the Convention on the Physical Protection of Nuclear Material (CPPNM). It was signed in Vienna and New York on 3 March 1980, and is the only international legally binding instrument on physical protection of nuclear material. The obligations set in the convention concerns prevention, detection and punishment of offences relating to nuclear material. It was adopted on 26 October 1979 and entered into force on 8 February 1987. [10]

It is important to mention that the CPPNM is restricted to nuclear material used for peaceful purposes while in international nuclear transport.[11] The scope was limited since it does not cover nuclear facilities or nuclear material other than that in transportation.[12] Due to that matter, in 1999, a member of the contracting States called for the CPPNM to be amended. 

The amendment was also through concern of risks such as the invasion of nuclear by terrorists or risks of nuclear smuggling. The background itself originated by the events of 11 September 2001 which had promptly called the United Nations Security Council to adopt resolution 1373 as the “Counter Terrorism Code.”[13] The legal framework against nuclear terrorism was constituted by resolution 1540, which then reached out to the CPPNM (2005 amendment) and the International convention for the suppression of terrorist Bombings. 

The obligations binding to State parties by the resolution is to adopt and enforce appropriate effective laws which prohibit any non-state actor to manufacture, acquire, possess, develop, transport, transfer or use nuclear, chemical or biological weapons and their means of delivery.[14] Consequently, states are also required to “renew and fulfill their commitment to multilateral cooperation, in particular within the framework of the international Atomic Energy Agency, the organization for the prohibition of chemical weapons and the biological and toxin weapons convention.”[15]

Whilst in IAEA’s September 2001 sessions, the Board of Governors adopted a series of policy decisions and the Director General proposed measures that could be implemented without delay (Due to the events of 11 September 2001). Since then, this issue had been observed by the IAEA for the long run and has been a part of its initiatives.[16] Through the apprehension of transporting nuclear material across borders in an era of global terrorism, international cooperation has increased significantly. This also led to the necessary ratifications for the CPPNM amendment and finally entered into force on 8 May 2016. The big difference through the entry into force of the CPPNM amendment demands all contracting States to be obligated as a matter of international law to ensure that their respective national legislation implements the additional CPPNM amendment obligations. 

The obligations mentioned in the amendment covers mitigation on sabotage, cooperation and information sharing in relation to locate and recover stolen or smuggled nuclear material and of course to regulate punishment on the said offences.[17] Whenever there is an offence related to nuclear material, State parties shall in accordance with their national law, provide co-operation and assistance in the recovery and protection of such material to any state that so requests.[18] Keep in mind the purpose of the convention is to achieve world and effective physical protection of nuclear material and nuclear facilities both used as peaceful purposes.

With the CPPNM amendment’s entry into force the contracting States are required to:

–         Establish, implement and maintain an appropriate physical protection regime applicable to nuclear material and nuclear facilities under its jurisdiction, with the aim of protecting against theft, and other unlawful taking of nuclear material in use, storage and transport; [19]

–         Ensuring measures taken to locate any missing or stolen nuclear material, and take steps as mentioned in the convention when the material is located outside its territory. [20]

–         Protect nuclear material and facilities against sabotage and mitigate radiological consequences of sabotage.

–         Commitment in establishing a legal and regulatory framework to govern physical protection and establish competent authority for it.

–         Apply fundamental principles such as: Responsibility of the State, Responsibilities During International Transport, Legislative and Regulatory Framework, Competent Authority, Responsibility of the License Holders, Security Culture, Threat (current evaluation on threat), Graded Approach, Defence in Depth, Quality Assurance, Contingency Plans, Confidentiality.

–         Take appropriate steps of any theft, robbery nuclear material and in doing so, the parties concerned shall exchange information with each other and coordinate through agreed and diplomatic channels, render assistance and ensure the return of recovered nuclear material stolen or missing.

–         Take appropriate measures to protect the confidentiality of any information received by virtue of the provisions.

–         Request for extradition or for mutual legal assistance based on the said offence may not be refused on grounds concerning political offence or connected to it.

–         Ensure the prime responsibility for the implementation of physical protection of nuclear material or of nuclear facilities rests with the holders of the relevant licenses or of other authorizing documents.

–         Acquire emergency plans to respond to unauthorized removal of nuclear material or sabotage of nuclear facilities or nuclear material should be prepared and appropriately exercised by all license holders.

–         Undertake not to export or import nuclear materials or to allow transit through their territories of such materials unless they have received assurances that these materials will be protected during international transport in accordance with the aforementioned levels of protection determined by the CPPNM,[21]

–         Specified acts to be punishable in national law concerning nuclear material including unlawful possession, theft, embezzlement, unlawful transporting, as a threat, or transport of nuclear material theft, using or threatening to use nuclear material to cause harm and interfering with operations of nuclear facilities with the intent to cause harm.

It is true that states, which are parties to the CPPNM must follow the obligations set out in the CPPNM however, the process does not end there. States would then need to ratify the obligations towards their nuclear regulations, but this also means that it imposes obligation towards license holders (whether nuclear facility operators, nuclear material shippers or others). In order to comply with both this prime responsibility and the CPPNM amendment more broadly, license holders will need to[22]:

–         Review regulations on issuing licenses and nuclear security policy by working within license holder organizations; This also includes policies on unauthorized disclosure of information which could compromise the physical protection of nuclear material and nuclear facilities;[23]

–         Work with IAEA and other relevant regulators in order to review or make adaptations within the design, maintenance and improvement of systems of physical protection of nuclear material and nuclear facilities;[24]

–         Ensure the existence of several layers and methods of protection that must be overcome or circumnavigated by any adversary;[25]

–         If necessary, revise or develop, emergency procedures and arrangements;

–         Review, license and if necessary revise or develop, a positive, institutional nuclear security culture policy within license holder organizations; 

–         Work with regulators to ensure that the license holder’s arrangements satisfy the relevant CPPNM requirements.[26]

The CPPNM and its amendment have addressed the current ongoing issues in times of peace, not to mention whatsoever nuclear technology on weapons or in times of war, this is to be dealt by humanitarian law, but that also leaves a gap. Whether nuclear technology should be used as non-peaceful purposes or in a time of non-peace should be discussed at another time. 


[1]“Outline History of Nuclear Energy”, last modified March, 2014 http://www.world-nuclear.org/information-library/current-and-future-generation/outline-history-of-nuclear-energy.aspx

[2] Ben McRae “The Convention on Supplementary Compensation for Nuclear Damage: Catalyst for a Global Nuclear Liability Regime”, accessed on August 30, 2016. https://www.oecd-nea.org/law/nlb/nlb-79/017-035%20-%20Article%20Ben%20McRae.pdf

[3]“Meaning of (nuclear) Security”, accessed August 31, 2016, http://www-ns.iaea.org/standards/concepts-terms.asp

[4] “Meaning of (nuclear) Safety”, accessed August 31, 2016, http://www-ns.iaea.org/standards/concepts-terms.asp

[5] “The Binding IAEA security-related instruments are”, accessed August 31, 2016. http://www-ns.iaea.org/security/legal_instruments_list.asp?s=4&l=28

[6] “Other binding international and regional instruments which have been adopted under UN or other auspices are”, accessed August 31, 2016. http://www-ns.iaea.org/security/legal_instruments_list.asp?s=4&l=28

[7] International Nonproliferation Organizations and Regimes, Center for Nonproliferation Studies “South Pacific Nuclear-Free Zone Treaty (Treaty of Rarotonga),” last modified Mei 5, 2011, http://www.nti.org/media/pdfs/Treaty_of_Rarotonga_Text.pdf

[8] Stoiber, Carlton; Baer, Alec; Pelzer, Norbert; Tonhauser, Wolfram, Handbook on Nuclear Law, (Austria: IAEA, July 2003) page 5.

[9] “Convention on Nuclear Safety”, accessed August 25, 2016, https://www.iaea.org/publications/documents/treaties/convention-nuclear-safety

[10] “Convention on the Physical Protection of Nuclear Material”, accessed August 25, 2016, https://www.iaea.org/publications/documents/conventions/convention-physical-protection-nuclear-material

[11] “Convention on the Physical Protection of Nuclear Material”, article 2.1, accessed August 25, 2016, https://www.iaea.org/publications/documents/conventions/convention-physical-protection-nuclear-material

[12] Shearman & Sterling LLP “Amendment to the Convention on the Physical Protection of Nuclear Material Enters into Force”, last updated May 9, 2016, http://www.shearman.com/~/media/Files/NewsInsights/Publications/2016/05/Amendment-to-the-Convention-on-the-Physical-Protection-of-Nuclear-Material-Enters-Into-Force-PDF-050916.pdf

[13] Walter Gehr, “The Universal Legal Framework Against Nuclear Terrorism” Accessed August 10, 2016, https://www.oecd-nea.org/law/nlb/nlb-79/005-015%20-%20Article%20W.%20Gehr.pdf

[14] United Nations Security Council Resolution 1540, S/RES/1540 (28 April 2004), available from http://www.ipu.org/splz-e/civ1540/1540.pdf

[15] ibid 

[16] Shearman & Sterling LLP “Amendment to the Convention on the Physical Protection of Nuclear Material Enters into Force”, last updated May 9, 2016, http://www.shearman.com/~/media/Files/NewsInsights/Publications/2016/05/Amendment-to-the-Convention-on-the-Physical-Protection-of-Nuclear-Material-Enters-Into-Force-PDF-050916.pdf

[17] Mark Fitzpatrick, “Promoting Nuclear Safety and Nuclear Security in the Middle East Region”, last modified November, 2012, http://www.nonproliferation.eu/web/documents/backgroundpapers/fitzpatrick2.pdf

[18] Convention on the Physical Protection of Nuclear Material, Article 5, available in https://www.iaea.org/sites/default/files/infcirc274.pdf

[19] Amendent to Convention on the Physical Protection of Nuclear Material, 2005, Article 2A, available in https://www.iaea.org/sites/default/files/infcirc274r1m1.pdf

[20] ibid

[21] Amendent to Convention on the Physical Protection of Nuclear Material, 2005, Article 4, available in https://www.iaea.org/sites/default/files/infcirc274r1m1.pdf

[22] ibid 

[23] ibid

[24] ibid

[25] ibid

[26] ibid



Karaha Bodas Arbitration

The next topic I have recently stumbled upon is Karaha Bodas arbitration. It was hinted on me, and of course I find it interesting since it is related to state owned companies in Indonesia back in 1997-1998. This particular case is closely linked with Himpurna arbitration, since the parties are inter-related. The implementation of the award on the other hand will be discussed later on.


In 1994, Karaha Bodas entered into a joint operating contract (“JOC”) with Pertamina, and had also entered in an energy sales contract (“ESC”) with PLN. Both Pertamina and PLN are state owned companies; Pertamina being oil and gas whilst PLN being electricity. The contracts were meant for Karaha Bodas to first of all develop geothermal energy; later to build, own and operate electricity-generating facilities in which the energy produced was to be sold to PLN.

The Asian financial crisis of 1997 and 1998 caused chaos to the project. Due to these times, three Presidential decrees were issued which meant that both PLN and Pertamina could not perform their obligations. This resulted in postponement of Karaha Bodas’ (“Claimant”) investment. In order to gain relief from their loss, the Claimant with Himpurna took no time in delay by starting arbitral proceedings in the same year of 1998. The arbitral proceedings stated that both PLN and Pertamina had committed a breach of contract and that the Claimant wished for the termination of the contracts and demanded awards for the damages.

The next matter to be discussed is the damages payable. The Tribunal took in the concept of lucrum cessans and dammnum emergens by taking into consideration that both concepts are acceptable in the Indonesian law (in respect of the laws governing both contracts (ESC and JOC), the applicable law was found to be Indonesian law and no mention of international law).  The Claimant posted damages of USD 94,600,000 on capital investment recovery and USD 512,000,000 on lost profits. The number gained from lost profits included the projected cash flow of 30 years energy sales that also included an 8.5% discount. Next, the Claimant also sought for interests dating back from 10 January 1998, the date of suspension of its investment and also the issuing date of the final presidential decree.

Finally, discussing both matters, the Tribunal finds and awards Karaha Bodas USD 93,100,000 in relation to capital investment, cutting down USD 1,600,000 in respect of expenditures that had not been approved. In awarding lost profits, the tribunal fixed the amount to USD 150,000,000. In regard to the interest, the Tribunal agreed only to start the interest claim (lucrum cessans) from the date of the award with a rate of 4%. The Respondent is to pay two-thirds of the costs and expenses of the arbitration.

*This summary is a shorter version of the original case summary that was prepared in the course of research for S. Ripinsky with K. Williams, Damages in Investment Law (BIICL, 2008)

Mihaly International v. Sri Lanka

By: J. Gozali

Mihaly International v. Sri Lanka is a case subjected towards investment. The main argument revolves around the domicile of the Company and later towards the definition of “investment” itself.


The government of Sri Lanka (Respondent) wished for its power station to be constructed and operated by private enterprise on a build own transfer basis. Mihaly (Canada) in this case is interested as an exclusive investor to develop a 300 MW thermal power station with the objective of supplying power to the Ceylon Electricity Board (CEB).

Initially 25 groups were interested in the project, however only 5 were selected to enter into negotiations and Claimant was selected as recipient of the Letter of Intent (LOI). The LOI stated a number of principles and the negotiators were to proceed for the project leading to the signing of a contract by the end of the third quarter of 1993. The LOI explicitly states that it does not bind the parties, however it expressed the government shall use its best efforts to take all things necessary to execute the transactions. Later, a Letter of Agreement (LOA) was issued addressing the Mihaly’s (Canada) satisfaction towards the discussions and negotiations with the Respondent.

On July 29th 1999, the Centre received a request (registration) dated a week prior from Mihaly Corporation, established in the United States of America (Claimant) against the Democratic Socialist Republic of Sri Lanka. The dispute rose from the 20th September 1991 Treaty between the USA and Sri Lanka concerning Encouragement and Reciprocal Protection of Investment (BIT). Both USA and Sri Lanka are Parties to the ICSID Convention.

The initial session was held in London, on July 19th 2000, and then continued in Washington DC from April 30th to May 1st 2001. The Respondent’s objections were towards jurisdiction ratione personae and ratione materiae. Regarding ratione personae, the Respondent finds that the claim by Mihaly (Canada) was true, but since Canada was not a party to the ICSID Convention, therefore the case should be dismissed due to lack of jurisdiction. The lack of jurisdiction is due to non-fulfillment of nationality requirement under Article 25(2) of the ICSID Convention.

In their defense, Claimant argued that Mihaly International Corporation was organized under the laws of California, and since USA is a party to ICSID Convention therefore it fulfills the nationality requirement under article 25(2). Claimant also points out the fact that Mihaly International are regarded as partnership and assignment both in Canada and USA, therefore authorizing Mihaly International (USA) to act on behalf of Mihaly (Canada).

The Respondent rejected both theories of partnership and assignment since the personal nature of the transactions and negotiations happened between Respondent and Mihaly (Canada). There was no precluded assignment to Mihaly (USA) without the consent from Respondent.

To conclude both arguments, the Tribunal finds that the jurisdiction of ICSID is solely based on ICSID Convention and rules of general international law. In conclusion, jurisdiction of the Centre has been fulfilled through registration of both parties to the Centre in accordance with article 36 of the convention.

The Tribunal then evaluates the partnership between Mihaly (USA) and Mihaly (Canada) and finds that it has no separate juridical personality. If there exists a partnership, then it’s the capacity of the Claimant Mihaly (USA) to file a claim against the Respondent. The Claimant however in this case is Mihaly (USA), not Mihaly International or the National Partnership (USA & Canada). The assignment to Mihaly (USA) shall not complete the action in accordance to the convention since it would defeat the purpose of the convention. The Tribunal also concludes that if Mihaly (Canada) filed a claim against the Respondent it was defective before appearing in ICSID, since Canada is not a party to the convention.

The next consideration was the expenditure being considered as “investment” without a contract. Both parties failed to mention the precise definition of “investment” and pre-investment expenditures. The Claimant merely cited an opinion in which defines the expenditures during the development phase typically to 2-4 percent of the total cost. In response, the Respondent does not object the inclusion of development expenditures as investment costs, as long as there is an agreement or consent of the host government (Respondent). Claimant’s effort towards proving Respondent’s consent was through the LOI, LOA and the Letter of Extension (LOE). Through these documents, Claimant argues that consent was given based on the convention.

In reply, the Respondent took great care in the documentation relied by Claimant which points out discussions concerning exclusivity upon obligation for building, ownership and operation of the power station. Exclusivity however never in return created a contract. The operation of the SAEC (South Asia Electric Company as the distribution of the supplies of electricity) was dependent on the contract with Respondent, which is why Respondent would not regard expenditures as investment.

The Tribunal finds that all three letters (LOI, LOA and LOE) has no binding obligation on both parties. The Tribunal also finds that all three documents are not to be treated in any way as means of acceptance by the Host State (Respondent) and that the expenditures are not constituted as an investment within the scope of the convention.

Concerning the definition of “investment” for the purpose of ICSID, the tribunal must examine the current and past practice on the definition executed through USA-Sri Lanka BIT. The Tribunal finds that the definition of investment must be found within the conventional or customary law. In this case, Claimant did not point out any evidence of treaty interpretation or the Practice of States that gives out expenditures deemed as investment. The Tribunal also does not accept the meaning of “investment” in the unilateral or internal characterization of certain expenditures by the Claimant in preparation for a project of investment.

The Claimant made reference towards the BIT in which existing “investment” in must be “fair and equitable treatment” and subjected towards “full protection and security”. The Tribunal however finds that the Claimant has not given enough evidence for the said investment that is qualified for full protection and security.


The Tribunal decides in unanimity:

a)      In relation to the preliminary objection ratione personae: the objection must be dismissed.

b)      In relation to the preliminary objection ratione materiae that the objection is sustained in the absence of any proof of admission of an “investment”.

c)      The Tribunal in its powers to entertain the question submitted.


The Tribunal in further decides that the

a)      Costs of the proceedings such as fees and expenses of the arbitrators and the secretariat shall be shared by both parties equally.

b)      Each party bears its own costs and expenses towards legal fees for counsels and their respective costs of Legal fees for counsels for the preparation of the written and oral proceedings.

Individual opinions of Mr. David Suratgar:

Since under article 25(4) states could put investor on notice as to the type of disputes that they would be prepared to have submitted to the Centre and also to define the scope of their advance consent to the jurisdiction of ICSID by means of law or by Bilateral investment treaties such as the United States-Sri Lankan BIT.

In this case, Respondent was given an opportunity to adopt or to define the limited scope defining “investment” for the purpose of consent to the jurisdiction of the Centre. It gave a very general definition of investment for the purposes of the treaty.

(Mihaly International v. Sri Lanka taken from ICSID Reports volume 6, Crawford, James & Lee, Karen, 2004, Cambridge University Press, p. 308-326)