41. AWE is a 'Government-Owned Contractor-Operated' (GOCO) organisation, with MoD owning the sites and facilities but operations being performed by a contractor. Hunting-BRAE Ltd has been the contractor for the last seven years and has used the employees of AWE plc to manage and operate the site on a day to day basis. AWE plc is a company created by MoD; it employs most of the workforce on the AWE sites and is the repository of AWE's scientific and production expertise. For the purposes of the GOCO arrangement AWE plc became a subsidiary of Hunting BRAE, the latter holding all the shares in AWE plc with the exception of one special share retained by the Secretary of State for Defence.
42. Hunting BRAE Ltd's management contract expired on 31 March 2000 and accordingly its shares in AWE plc reverted to MoD at that time. MoD transferred the shares to the new management contractor and thus AWE plc became a wholly-owned subsidiary of AWEML as from 1 April 2000, apart from the special share.
43. Under the revised GOCO arrangement operating from 1 April 2000 AWEML is contracted to deliver results but compelled to sub-contract manufacture etc. to AWE plc, which operates the sites. AWEML is responsible for the supply of some management expertise through the recruitment of personnel who are formally directors of AWE plc and thus part of the licensed corporate body.
44. From 1.4.2000 the Chief Executive of AWE plc is required to attend the board meetings of AWEML and can thus contribute to any discussion that might directly or indirectly affect safety. Additionally there is an independent Director to the AWEML Board with specific responsibility for monitoring safety performance.
45. An important aspect of HSE's approach to the regulation of AWE was to gain confidence that the licensee had a robust safety management system and possessed a well structured and resourced organisation to manage the licensed sites.
46. A Safety Management Prospectus (SMP) can be regarded as that part of a licensee's safety case which deals with management issues; it describes the organisation of a licensee / licence applicant, its environmental, health and safety policy and its safety management system. The SMP provides assurances on various issues. The items that should be covered are indicated in HSE's publication: "Nuclear Site Licences - Notes for Applicants".
47. In view of the proposal that AWE plc should be the licensee but with management and financial expertise provided by directors recruited by AWEML, NII paid particular attention to the integrity of the licence applicant as a corporate body. Subsequently, the arrangements for implementation of the Prospectus and the commitment to it of the management and the workforce were reviewed through inspections undertaken by NII inspectors, with the following outcomes:
48. The Management Prospectus met the requirements identified in the "Notes for Applicants" guidance, subject to minor changes.
49. Licence condition 13 requires that a licensee should set up a senior level committee which should consider and advise on matters which affect the safe design, construction, commissioning, operation and decommissioning of the installations on the licensed site and any other matters relevant to safety. The committee must have members who are adequately qualified to perform this task and to provide a source of authoritative advice to the licensee. The committee, however, is purely advisory and must not be considered to have an executive function, but the HSE must be informed if the advice of the committee is not to be followed by the licensee.
50. The AWE plc Nuclear Safety Committee terms of reference and procedures are unchanged. Curriculum Vitae for the new NSC members were formally submitted to NII and, following consideration of the particulars, no objections were made on membership.
51. HSE should be satisfied before granting a licence that the applicant corporate body has the necessary financial resources to discharge the obligations and liabilities connected with having a nuclear site licence.
52. The sites and assets on them are the property of MoD. Changes to this asset base, including those related to safety, can only be made with MoD approval and are funded through MoD's Management and Operation Contract with AWE ML. Changes to the asset base, in this context, include the decommissioning of plant, equipment and facilities as well as the creation of new assets. As owner of the sites, MoD is responsible for the eventual decommissioning of the sites when that is considered appropriate. Such decommissioning would be undertaken under contracts placed and funded by MoD, who will also meet associated long-term liabilities.
53. AWE plc does bear the day to day running costs of AWE but these are recovered by AWE ML, which owns the shares of AWE plc (except for the golden share retained by MoD), by invoicing customers against contracts placed with them. MoD is virtually the sole customer, although there is a small amount of work carried out on a commercial basis.
54. MoD has obtained joint and several unlimited guarantees from the parent companies of AWE ML which underwrite all the liabilities of AWE ML, including all those relating to AWE plc. These parent companies are major defence contractors and are subject to MoD's normal scrutiny on financial health. In addition to this normal and general oversight, MoD runs special financial health checks whenever circumstances arise which render it prudent to do so. Through these arrangements MoD has confirmed that it will ensure that adequate funding is available to maintain safety.
55. In view of the assurances received from the Ministry of Defence HSE has not deemed it necessary to assess the financial arrangements of the prospective licensee in detail.
56. The MoD provided an assurance that as regards the funding level for decommissioning and waste management, the management contractor is committed to meeting all identified decommissioning and waste management requirements known at the point of bidding. To the extent that regulatory requirements imposed on AWE plc increase the commitment associated with decommissioning and waste management beyond that contemplated in the Contract, the associated additional costs would fall to MoD.
57. Under the NI Act s.19(1) licensees must ensure that sufficient funds are available to meet third party claims within the limits prescribed in the Act. This provision is not enforceable by HSE under the HSWA, but comes within the remit of the Department of Trade and Industry. However the licensee's ability to satisfy DTI in this respect is included in HSE's consideration of the licence application.
58. MoD has provided an indemnity for the AWE sites as an alternative to commercial insurance. The indemnity, effective from 1 April 2000, is in two parts in respect of nuclear risks:
59. The Department of Trade and Industry has confirmed that it is content with the indemnity provisions made for AWE plc by the Ministry of Defence.
60. The Environment Agency Act 1995 (EA Act)7 introduced a statutory obligation on HSE to consult the appropriate Environment Agency (EA) before granting or revoking a licence. HSE consulted the EA in relation to the licence applications for Aldermaston and Burghfield under the terms of the EA Act. The EA raised no objection to the granting of the new licences and the revocation of those being superseded. The EA also indicated its intention to issue to AWE plc new Authorisations under the Radioactive Substances Act 1993 for the disposal of radioactive wastes from Aldermaston and Burghfield and to revoke the Authorisations formerly held by Hunting-BRAE Ltd.