Who will foot the bill to compensate Fukushima victims?

A woman who lost her family in the March 11 earthquake and tsunami prays in the city of Minamisoma in Fukushima prefecture.

Kai Ryssdal: The problems the Japanese power grid has been having since the earthquake and tsunami -- power shortages, mostly -- could get worse. Today, one of the country's big energy companies said it's going to take three nuclear reactors offline while it builds better defenses against tsunamis.

This week sometime the Japanese government's expected to release a plan for compensating victims of the Fukushima disaster. But there's little agreement on who, other than taxpayers, should help foot the bill. The company that owns the plant, Tepco, says it can't.

Curtis Milhaupt is an expert on Japanese law at Columbia Law School. Welcome to the program.

Curtis Milhaupt: Thank you very much.

Ryssdal: Seems to me we ought to start with Japanese law and what it says about Tepco's liability here.

Milhaupt: All right. Well, Japan has a nuclear damage compensation act, which provides for unlimited liability for the operator of a nuclear plant .But there is an exception where the damage has been caused by a "grave natural disaster of an exceptional character." Now Tepco seems to have quite a strong argument that the exception applies here and that they would not be liable. But from the early days of the crisis, the Japanese government has taken a very hard line on Tepco's liability. They've said repeatedly that the exception does not apply. And just last week, Chief Cabinet Secretary Yukio Edano reiterated that point and said there would be no cap on damages. So Tepco seems to be out of luck on that argument. Of course, they could try to litigate that point, but I think that's very unlikely.

Ryssdal: There is talk over there in the Japanese legislature of just, in essence, nationalizing Tepco -- wiping out the shareholders, firing all the executives, and doing what has been done here with General Motors and forcing it into bankruptcy, that kind of thing. I mean, do you see that happening at all?

Milhaupt: I think nationalization of Tepco is extremely unlikely. It's not obvious what bringing Tepco under government control would accomplish. The reactors at Fukushima need to be shut down permanently and Tepco needs to find a way to pay tens of billions of dollars in damages. I think what's much more likely is capital injections by the Japanese government and possibly coupled with some sort of management restructuring or some additional or new form of government oversight.

Ryssdal: Where, though, would the Japanese government get this capital to inject because they have an enormous debt load? They're already talking about tax increases to pay for some of clean up and some of the other things. I mean, where are they going to get the money?

Milhaupt: Well, governments have the ability to print money and I think the reality is that the Japanese government deficit will simply be increased to cover these costs. I think ultimately Tepco is too big to fail in the same way that some of the U.S. financial institutions were deemed to be too big to fail, and so the Japanese taxpayer is on the hook for this disaster.

Ryssdal: You know since we're talking about the financial crisis and the parallels, let me ask you this question then. We are still learning over here -- some would say we have not learned well enough -- the lessons of our financial crisis. Will anything change over there in terms of their power grid and these enormous power-generating companies so that the next time something happens in a country that sits in an enormous fault zone, there will be a different outcome?

Milhaupt: Well I would like to say that the answer is yes, but I'm skeptical. The Japanese government has stated very forcefully that nuclear power will remain a very important part of Japan's power policy. I think the problem in Japan -- as in the financial crisis -- is poor corporate governance and lax government oversight. Tepco has a 10 or more year history of safety problems and covering up those safety problems, so it makes one skeptical that there will be a complete new change of regime now. Although the scope of this disaster is such that it may bring about changes.

Ryssdal: Curtis Milhaupt is a professor of law at Columbia Law School. He's also an expert on the Japanese legal system. Professor, thanks a lot.

Milhaupt: Thank you for having me.

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