ML20207K152

Notice of Public Comment Re Std Review Plan on Foreign Ownership,Control or Domination. Requests Comments on Plan, Which Documents Procedures & Guidance to Be Used by Staff to Analyze Applications for Reactor Licenses,By 990401

ML20207K152
Person / Time
Issue date:	02/24/1999
From:	Vietticook A NRC OFFICE OF THE SECRETARY (SECY)
To:
References
FRN-64FR10166, RULE-PR-MISC NUDOCS 9903170063
Download: ML20207K152 (10)

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NUCLEAR REGULATORY COMMISSION '99 MAR -l P4 :11 Standard Review Plan on p-Foreign Ownership, Control, or Domination - r-AD.  ;

AGENCY: Nuclear Regulatory Commission.

ACTION: Standard Review Plan.

SUMMARY

The NRC is seeking public comment on a Standard Review Plan (SRP) on Foreign Ownership, Control, or Domination. The SRP docurnents procedures and guidance to be used by the staff to analyze applications for reactor licenses, or applications for the transfer of control of such licenses, with respect to the statutory bar contained in sections 103 and 104 of the Atomic Energy Act of 1954, as amended, against issuing a license to an entity that is owned, controlled, or dominated by foreign interests. Because the SRP describes internal agency procedures and is based on existing Commission guidance in this area, the SRP is being published for interim use. However, the Commission is inviting public comment on the SRP and is interested in possible improvements to it. Public comments will be considered in evaluating the NRC review process in this area.

6 p s l.d. I, /999 DATE: The public is invited to submit comments on the SRP by [30 day; frcr. date of pdh.%a). Comments received after this date will be considered if it is practical to do so, but ,j assurance of consideration cannot be given except as to comments received on or before this /

date. On the basis of the submitted comments, the Commission will determine whether to modify the SRP before issuing it in final form.

ADDRESS: Mail comments to: Secretary, U.S. Nuclear Regulatory Commission, Washington, k^

D.C. 20555, Attention: Rulemakings and Adjudications Staff. .1D 4 P't~ 5 f a 9903170063 990224 PDR PR MISC 64FR10166'PDR f ,m 3h4 'l

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Deliver comments to: 11555 Rockville Pike, Rockville, Maryland, between 7:45 a.m.

and 4:15 p.m., Federal workdays. j I

Examine copies of comments received at: The NRC Public Document Room,2120 L Street, N.W. (lower level), Washington, D.C.  !

FOR FURTHER INFORMATION CONTACT: Steven R. Hom, Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, D.C. 20555, telephone (301) 415-1537, e-mal' srh @ nrc. gov.

SUPPLEMENTARY INFORMATION: The SRP on Foreign Owrership, Control, or Domination, attached hereto, contains the review procedures to be used by the staff to evaluate applications against the prohibitions in sections 103d and 104d of the Atomic Energy Act against issuing i

reactor licenses to entities that the Commission "knows or has reason to believe" are owned, controlled, or dominated by foreign interests. The procedures expressly provide for requests for additionalinformation and consideration of a negation action plan if the information described in 10 C.F.R. 6 50.33(d) initially required to be provided in an application indicates that there may be some degree of foreign control of the applicarit. The SRP also sets forth substantive guidance consistent with existing Commission precedent on what may constitute foreign control. This SRP supersedes Section 111.3 of NUREG-1577, Standard Review Plan on l

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Power Recctor Licensee Financial Qualifications and Decommissioning Funding Assurance  !

(Draft Report for Comment) (containing review procedure regarding fomign ownership) in its  !

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Dated at Rockville, Maryland, tt.is AP day of February 1999.

L For the Nuclear Regulatory Commission. l l 1 I

f W " Y .tx L - D Annette L. Vietti-Cook, - i Secretary of the Commission. l l  :

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1 Standard Review Plan on i Foreign Ownership, Control and Domination i

1. AREAS OF REVIEW  ;

i 1.1 General i The NRC is issuing this Standard Review Plan (SRP) to describe the process it uses to review the issue of whether an applicant for a nuclear facility license under sections 103 or 1E ' +he i Atomic Energy Act of 1954, as amended (AEA or Act), is owned, controlled, or domi.iated cy an j alien, a foreign corporation or a foreign government. This SRP will be used as the basis for i such reviews in connection with license applications for new facilities, or applications for approval of direct or indirect transfers of facility licenses.

Where there are co-applicants, each intending to own an interest in a new facility as co-licensees, each applicant must be reviewed to determine whether it is owned, controlled, or dominated by an alien, foreign corporation or foreign government. If a co-licensee of an existing fecility o"!ns a partial interest in the facility and is transferring that interest, the acquirer must be re*~ to determine whether it is owned, controlled, or dominated by an ahen, j foreign cc 3. . aon or foreign government, j The foreign control determination is to be made with an orientation toward the common defense and security. However, this SRP does not address all matters relating to the determination of whether issuance of a license to a person would be inimical to the common defense and security.

This SRP reflects current NRC regulations and policy.

i 1.2 Relevant Statutorv And Reaulatory Provisions  !

l Sections 103d and 104d of the Act provide, in relevant part, that no license may be issued to:  !

any corporation or other entity if the Commission knows or has reason to believe it is owned, controlled, or dominated by an alien, l a foreign corporation, or a fow'en government. In any event, no license may be issued to any person within the United States if, in  ;

the opinion of the Con.inission, the issuance of a license to such person would be inimical to the common defense and security or ,

to the health and safety of the public.  !

(Section 103d also states that no license may be issued to an alien.) l Section 184 of the Act provides, in relevant part:

1 No license granted hereunder and no right to utilize or produce special nuclear material granted hereby shall be transferred, assigned or in any manner disposed of, either voluntarily or involuntarily, directly or indirectly, through transfer of control of any license to any person, unless the Commission shall, after securing full information, find that the transfer is in accordance with the provisions of this Act, and shall give its consent in writing. ,

l 10 CFR 9 50.33(d), in relevant part, provides:

Each application shall state: l l

(d)(1) If applicant is an individual, state citizenship. l 1

(2) If applicant is a partnership, state name, citizenship and l address of Sach partner and the principallocation where the l partnershir does business.

(3) If applicant is a corporation or an unincorporated association, j state:

(i) The state where it is incorporated or organized ano the principal location where it does business; (ii) The names, addresses and citizenship of its directors and of its principal officers; (iii) Whether it is owned, controlled, or dominated by an alien, a foreign corporation, or foreign government, and, if so, give details.

(4) If the applicant is acting as agent or representa;ive of another person in filing the application, identify the principal and furnish information required under this paragraph with respect to such principal.

10 CFR 9 50.38 provides:

Any person who is a citizen, national, or agent of a foreign country, or any corporation, or other entity which the Commission knows or has reason to believe is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government, shall be ineligiblo to apply for and obtain a license.

10 CFR 50.80 provides, in pertinent part:

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(a) No license for a production or utilization facility, or any right thereunder, shall be transferred, assigned, or in any manner L

disposed of, either voluntarily or involuntarily, directly or indirectly, through transfer of control of the license to any person, unless the Commission shall give its consent in writing.

(c) . . . [T]he Commission will approve an application for the transfer of a license,if the Commission determines:

(2) That the transfer of the license is othenvise consistent with applicable provisions of the law, regulations, and orders issued by the Commission pursuant thereto.

2. INFORMATION TO BE SUBMITTED BY APPLICANT 2.1 Information Reauired By Reaulation At the time the applicant submits its application for a license or for approval of the transfer of a license, the applicant must submit information sufficient to comply with 10 CFR S 50.33(d).

2.2 AdditionalInformation if the reviewer, based on the information required to be submitted by 10 C.F.R. Q 50.33(d), has reason to believe that the applicant may be owned, contrelled, or dominated by foreign interests, the reviewer should request and obtain the following additional information:

1. If the applicant's equity securities are of a class which is registered pursuant to the Securities Exchange Act of 1934, copies of all current Securities and Exchange Comn.ission Schedules 13D and 13G. which are required to be filed by owners of more than 5% of such a class with the Securities and Exchange Commission, the security issuer (app.icant), and the exchange on which the issuer's securities are traded.

2. Management positions held by non-U.S. citizens.

3. The ability of foreign entities to control the appointment of management personnel.

2.3 Neaation Act. ion Plan if applicable under Section 4.4 infra, the applicant should also submit a Negation Action Plan, which is described in detail in Section 4.4.

3. ACCEPTANCE CRITERIA 3.1 Basic Statutory and Reaulatorv Limitations 6-l

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License applications for nes "cilities or applications for approval of transfers of licenses required in the case of propou ' new ownership of existing facilities may involve foreign entities proposing to own all or part of a u Lior facility. Sections 103d and 104d of the AEA prohibit the NRC from issuing a license to an applicant if the NRC knows or has reason to believe that the applicant is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government (or is an alien, in the case of section 103d).

Likewise, under 10 CFR 50.38, Any person who is a citizen, national, or agent of a foreign country, or any corporation, or other entity which the Commission knows or has reason to believe is owned, controlled or dominated by an alien, a foreign corporation, or a foreign government, shall be ineligible to apply for and obtain a license.

3.2 Guidance On Acolyina Basic Limitations The Commission has not determined a specific threshold above which it would be conclusive that an applicant is controlled by foreign interests through ownership of a percet,tage of the applicant's stock. Percentages held of outstanding shares must be interpreted in light of all the information that bears on who in the corporate structure exercises control over what issues and what rights may be associated with certain types of shares. 1 An applicant is considered to be foreign owned, controlled, or dominated whenever a foreign interest has the " power," direct or indirect, whether or not exercised, to direct or decide matters affecting the management or operations of the applicant. The Commission has stated that the words " owned, controlled, or dominated" mean relationships where the will of one party is subjugated to the will of another. Genera / Electric Co.,3 AEC at 101. ,

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A foreign interest is defined as any foreign government, agency of a foreign government, or representative of a foreign goverr. ment; any form of business enterprise or legal entity organized, chartered, or incorporated under the laws of any country other that the U.S. or its possessions and trust territories; any person who is not a citizen or national of the U.S.; and l any U.S. interest effectively controlled by ona of the above foreign entities.

The Commission has stated that in context with the other provisions of Section 104d, the l

foreign control limitation should be given an orientation toward safeguarding the national defense and security. Thus, an applicant that may pose a risk to national security by reason of even limited foreign ownership would be ineligible for a license.

c l Even though a foreign entity contributes 50%, or more, of the costs of constructing a reactor,

! participates in the project review, is consulted on policy and cost issues, and is entitled to i designate personnel to design and cor struct the reactor, subject to the approval and direction of the non-foreign applicant, these facts alone do not require a finding that the applicant is under foreign control.

An applicant that is partially owned by a foreign entity, for example, partial ownership of 50% or greater, may still be eligible for a license if certain conditions are imposed, such as requiring 7-

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that officers and employees of the applicant responsible for special nuclear material must be U.S. citizens.

Where an applicant that is seeking to acquire a 100% interest in the facility is wholly owned by a U.S. company that is wholly owned by a foreign corporation, the applicant will not be eligible for a license, unless the Commission knows that the foreign parent's stock is "largely" owned by U.S. citizens. If the foreign parent's stock is owned by U.S. citizens, and certain conditions are imposed, such as requiring that only U.S. citizens within the applicant organization be responsible for special nuclear material, the applicant may still be eligible for a license, notwithstanding the foreign control limitation. If the applicant is seeking to acquire less than a 100% interest, further consideration is required.

4. REVIEW PROCEDURES 4.1 Threshold Review and Determination The reviewer should first analyze all of the information submitted by the applicant sufficient to comply with 10 C.F.R. Q 50.33(d), as well as other relevant information of which the reviewer is aware, to determine whether there is any reason to believe that the applicant is an alien or citizen, national, or agent of a foreign country, or an entity that is owned, controlled, or dominated by an alien, a foreign corporation, or foreign government. If there is no such reason to believe based on the foregoing information, no further review is required and the reviewer should proceed to make a recommendation regarding whether there is any foreign control obstacle to granting the application. On the other hand, if there is am; reason to believe that the applicant may be owned, controlled, or dominated by foreign intem its, the reviewer should request and obtain the additional infonaation specified in Section 2.2.

4.2 Suoniementary Review if it is necessary to obtain tha additional information specified in Section 2.2, the reviewer should consider the acceptance criteria above, and consult with the Office of the General Counsel on Commission precedent. Information related to the items listed below may be sought and may be taken into consideration in determining whether the applicant is foreign owned, controlled, or dominated. The fact that some of the below listed conditions may apply does not necessarily render the applicant ineligible for a license.

1. Whether any foreign interests have management positions such as directors, officers, or executive personnel in the applicant's organization.

2. Whether any foreign interest controls, or is in a position to control the election, appointment, or tenure of any of the applicant's directors, officers, or executive personnel. If the reviewer knows that a domestic corporation applicant is held in part by foreign stockholders, the percentage of outstanding voting stock so held should be quantified. However, recognizing that shares change hands rapidly in the international equity markets, the staff usually does not evaluate power reactor licensees to determine the degree to which foreign entities or individuals own relatively small numbers of shares

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! of the licensees' voting stock. The Commission has not determined a specific threshold above which it would be conclusive that an applicant is controlled by foreign interests.

3. Whether the applicant is indebted to foreign interests or has contractual or other agreements with foreign entities that may affect control of the applicant.

4. Whether the applicant has interlocking directors or officers with foreign corporations.

5. Whether the applicant has foreign involvement not otherwise covered by items 1-4 above.

4.3 Supplementary Determination After reviewing the additional information specified in Section 2.2, if the reviewer continues to conclude that the applicant may be an alien or owned, controlled, or dominated by foreign interests, or has some reason to believe that may be the case, the reviewer shall determine:

1. The nature and extent of foreign ownership, control, or domination, to include whether a foreign interest has a controlling or dominant minority position.

2. The source of foreign ownership, control, or domination, to include identification of immediate, intermediate, and ultimate parent organizations.

3. The type of actions, if any, that would be necessary to negate the effects of foreign ownership, control, or domination to a level consistent with the Atomic Energy Act and NRC regulations.

On the other hand,if the reviewer determines after reviewing the additionalinformation specified in Section 2.2 that there is no further reason to believe that the applicant is an alien or l owned, controlled, or dominated by a foreign person or entity, no additional review is necessary. l l

4.4 Neaation Action Plan if the reviewer continues to conclude following the Supplementary Determination that an applicant may be considered to be foreign owned, controlled, or dominated, or that additional action would be necessary to negate the foreign ownership, control, or domination, the applicant shall be promptly advised and requested to submit a negation action plan. When factors not related to ownership are present, the plan shall provide positive measures that assure that the foreign interest can be effectively denied control or domination. Examples of such measures that may be sufficient to negate foreign control or domination include:

1. . Modification or termination of loan agreements, contracts, and other understandings '

with foreign interests.

2. Diversification or reduction of foreign source income.

3. Demonstration of financial viability independent of foreign interests.

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4. Elimination or resolution of problem debt,

5. Assignment of specific oversight duties and responsibilities to board members.

6. Adoption of special board resolutions.

5. EVALUATION FINDINGS The reviewer should verify that sufficient information has been provided to satisfy the [

regulations and this Standard Review Plan. In consideration of the guidance of this Standard '

Review Plan, the reviewer should then drc.ft an analysis and recommendation, based on the applicable information specified in Sections 2 and 4 above, concerning whether the reviewer knows, or has reason to believe that the applicant is an alien, or is a corporation or other entity that is owned, controlled, or dominated by an alien, a foreign corporation, or foreign government, and whether there are conditions that should be imposed before granting the application so as to effectively deny foreign control of the applicant. ,

6. REFERENCES

1. Sections 103,104, and 184 of the Atomic Energy Act of 1954, as amonded (42 USC 2133, 2134, anJ ?.234).

2. Part 50 " Domestic Licensing of Production and Utilization Facilities" of Title 10 of the Code of Federal Reaulations (10 CFR Part 50).

3. GeneralElectric Co. and Southwest Atomic Energy Associates, Docket No. 50 231,3 AEC 99 (1966).

4. Letter from W. Dircks to J. MacMillan (Dec.17,1982) (Re: Babcock & Wilcox/McDermott).

5. Letter from N. Palladino to A. Simpson (Sept. 22,1983) w/ attachment (Re: Union Carbide /Cintichem).

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