Hidden under headlines of apparent freight delays, medicine stockpiling, food shortages and grounded planes, an understated effect of Brexit is slowly growing more urgent. While politicians scramble to resolve the more overt problems caused by a withdrawal from the bloc, they run the risk of forgetting the effect of Brexit on the UK and EU nuclear industry. For Brexit, as it is currently proposed, means a UK exit not only from the EU, but from the European Atomic Energy Community (commonly known as Euratom) as well.
The Good
Firstly, some good news. Currently, the European Commission is responsible for implementing nuclear safeguards within the EU, including the UK. Upon leaving the EU, the UK will be responsible for implementing its own nuclear safeguards program. As such, the UK has passed new legislation that passes this responsibility for nuclear safeguards to the UK Office for Nuclear Regulation (ONR) and has signed a new voluntary safeguards agreement with the International Atomic Energy Agency (IAEA) to replace the existing safeguards agreement through Euratom. In the event of a ‘no-deal Brexit,’ the new safeguards regime will snap into effect. In order to manage this new regime, the UK has devised a new State System of Accounting for and Control of Nuclear Material (SSAC) to be monitored and administrated by the existing Office of Nuclear Regulation (ONR), so as not be found lacking when it comes to responsible nuclear industry and development.
The Bad
That is about the end of the good news. The bad news is that an agreement negotiating the gentle, orderly separation of the UK from Euratom has yet to enter into force. While the issue was accounted for in Prime Minister Theresa May’s ‘Withdrawal Agreement’, when that deal failed to pass in Parliament it once again left the UK without provision for an organised exit from Euratom. The UK and EU agree on almost all aspects of this ‘nuclear exit’, the only issue is the larger Brexit debate that has ground progress to a resounding halt. Although Euratom is a separate entity to the EU and could be exited in a separate bill from any ‘deal’ on Brexit, political considerations have subsumed this pressing issue.
The Government tells us not to worry; that everything will be OK. Earlier this month, the Government updated its ‘Guidance on civil nuclear regulation if there’s no Brexit deal.’ In that Guidance, the Government reported that it “has now concluded all the replacement bilateral Nuclear Cooperation Agreements (NCAs) needed to ensure continuity of civil nuclear trade following Euratom Exit.” These include NCAs with the United States, Australia and Canada, along with existing NCAs with Japan, China, and Russia. But what about NCAs with the remaining 27 countries in the EU, where there will be no agreements once the UK leaves the EU?
The voluntary safeguards agreement that the Government signed with the IAEA signed last year is a prerequisite to reaching bilateral agreements but is not in itself a replacement for a bilateral agreement with the EU27 countries. There has been speculation that a set of government-to-government assurances may be enough to allow continued nuclear trade between the EU27 countries and the UK, but it is not clear how this would work or how the IAEA voluntary agreement could function effectively as an NCA. The Government has tried to address one aspect of this issue by developing a new import regime for nuclear material sourced from the EU, but this may turn out to be only half a plan. Currently, import licences are not required for imports of nuclear materials from EU countries, however, after Brexit, under the new regulations, importers will need to obtain an import licence for imports of relevant nuclear materials. This is all well and good on the UK side of things, but what about the exporting country’s export regulations? Let’s imagine for a minute that I am trying to get a licence to export nuclear material or components from Germany, for example. The German nuclear export regime is quite rigorous and getting export licences to non-EU countries can be difficult and time consuming. In the absence of a nuclear bilateral cooperation agreement between the EU and the UK, would an export licence even be issued by Germany once the UK is no longer a member of the EU? I don’t know, and I suspect that the UK Government doesn’t know either.
In its April update, the Government also correctly observed that under the Euratom arrangements, all nuclear material (i.e. fuel for reactors) in any EU country is legally “owned” by Euratom via the Euratom Supply Agency (ESA). The ESA is signatory to every contract for supply of nuclear fuel in the EU. Operators of nuclear plants don’t “own” the fuel, but they have the unlimited right to use and consume the material if they comply with obligations in the Euratom Treaty. The Government guidance went on to say that in the event of a no-deal Brexit, “Euratom ownership of special fissile material in the UK will end” and “operators’ legal title to this material and any associated rights will be unaffected by the UK’s withdrawal.” So according to the Government, (i) all nuclear fuel in the UK is owned by the EU, and (ii) Operators’ legal title to the material will be unaffected by Brexit. Both statements cannot be true. How exactly will this change of ownership take place? The Government has not provided any detail and has not considered the possibility that the EU countries may take a deliberately contrary view. Nuclear fuels supply contracts typically have a warranty of title, so this may be a particularly difficult egg to unscramble. If companies are planning on buying or selling nuclear material in the UK after a no-deal Brexit, they might want to wait until the title questions are clarified. These issues are far more nuanced and complex than the Government has admitted.
Another unaddressed issue that has been off the radar screen is re-transfers of nuclear material and components from the EU to the UK that were imported from a third country. Many exporting countries place limits on further re-transfers of exported nuclear materials and components that limit the receiving country’s ability to re-export the material to a third country. If country A wants to safeguard the movement of nuclear material that they have provided to country B, then they limit the re-transfer – the movement – of that material to other nations, dependent on existing cooperation agreements. For example, nuclear material and components that were imported into the EU from the United States under the Euratom-US bilateral nuclear cooperation agreement may currently be re-transferred anywhere in the EU (including the UK) without needing to gain consent for the re-transfer from the United States. From the United States’ perspective, the EU/Euratom bloc is effectively treated as a single country, as Euratom determines regulation across the entire area. Once the UK leaves Euratom, and thus will be classed as a third-party country outside of the EU bloc, such re-transfers will need to obtain the consent of the U.S. Government on a case-by-case basis. You can see where this could get complicated.
The Ugly
There is more. In its April update, mentioned above, the Government somewhat disingenuously assured us that, after Brexit, ESA “approval will no longer be required for fuel supply contracts agreed by UK-established operators, except where these involve an EU27-established operator. For EU27-established operators, Euratom Supply Agency procedures will continue to apply as currently.” The Government hasn’t provided any explanation of what exactly this means, or what constitutes a “EU27-established operator,” but I would note that EDF Energy, a subsidiary of Électricité de France, owns and operates 15 nuclear reactors at eight sites in the UK and current plans include building four new reactors in the UK. The 15 reactors currently operated by EDF comprise the entire UK nuclear fleet and supply about a quarter of the UK’s power, possibly meaning that the entire UK nuclear fleet fuel supply will continue to be controlled by Euratom after Brexit.
What next?
Perhaps the Government has plans to in place address all these issues, and all will be made clear in the next update. However, the lingering questions all serve to underscore the fact that a managed exit from Euratom is necessary in very much the same way as a larger managed exit from the EU – there are simply too many threads of regulation, legislation and trade that tie the UK to the EU for a deadline to sever them without a negative impact. Negotiating a deal to exit Euratom was included in Theresa May’s ‘Withdrawal Agreement’, but the Euratom exit has been held hostage to the greater Brexit deal. The logical solution is to treat exit from Euratom separately from the greater Brexit. All of the terms and conditions have already been agreed, and none of them appear to be controversial. The MP who tables a proposal to have a separate Euratom exit agreement would be making a first productive step towards an orderly Brexit.
The views expressed in this article are those of the author and do not necessarily represent the views of Nuclear Focus.
