Case dismissed for isotope arbitration

Wednesday, 12 September 2012

A Canadian tribunal has dismissed a claim for arbitration from Nordion over the 2008 decision by Atomic Energy of Canada Ltd (AECL) to abandon two isotope production reactors before they began operation. Meanwhile, the OECD Nuclear Energy Agency sees no cause for optimism over molybdenum-99 supplies.

The MAPLE reactors reached criticality, but were never commissioned

The 10 MWth MAPLE reactors, built by AECL at Chalk River Laboratories, were intended to replace most of the radioisotope production at Canada's ageing NRU reactor, and could have supplied the entire global demand for molybdenum-99, iodine-131, iodine-125 and xenon-133. Originally scheduled to start up in 2000, the units had both achieved criticality by 2003 but major technical problems meant the commissioning process was never completed.

In May 2008 AECL decided to cancel the project after spending $680 million on the reactors. MDS had contracted AECL to build the reactors in 1996 under an agreement known as the Isotope Production Facilities Agreement (IPFA), and by 2005 had seen its investment in the project more than reach over $350 million. AECL's decision to drop the project prompted MDS, the parent of Canadian life sciences company MDS Nordion (now Nordion), to launch legal proceedings against AECL.

The tribunal has now reached a majority decision that Nordion's claim was precluded under the terms of an interim and long-term supply agreement (ILTSA) the company signed with AECL in 2006, under which Nordion was not entitled to a remedy for the unilateral termination by AECL of the construction of the MAPLE facilities. The arbitrators also dismissed AECL's counterclaim against Nordion, which claimed damages for breach of contract in the amount of $250 million and other relief.

Weak links in supply chain

The risk of long-term world shortages of molybdenum-99 over the next decade is still present even though current supply is sufficient to meet demand, according to the OECD Nuclear Energy Agency's latest update on the market for the radioisotope. Concerns about the uneconomic situation of the supply chain continue to dominate the outlook for new projects, the agency notes, but the long-term supply of the medically vital isotope could be reliable if the economic situation enabled projects currently in development to proceed.

The decision to abandon MAPLE has meant the continued operation of the NRU facility, which has been in operation since the 1950s and still produces some 40% of the world's supply of molybdenum-99 (the source of technetium-99 widely used for medical diagnosis) and cobalt-60 (for cancer treatment).

Nordion CEO Steve West said the company was disappointed with the tribunal's decision. "We began this process to protect the interests of patients, the nuclear medicine community, our customers and employees with the goal of obtaining a long-term, safe supply of medical isotopes," he said, adding that the company would "fully examine the implications of the decision and assess options for our future courses of action regarding this matter and long-term supply."

In a statement, AECL noted that it too would be "reviewing and analysing carefully all aspects of the decision to ensure a full understanding of the implications." Both companies are bound by confidentiality obligations relating to the arbitration process, including the details of the decision. The arbitrators have yet to decide on the issue of costs but Nordion warns that as the decision favours AECL, Nordion could be made responsible for a portion of AECL's costs which could be "material." The decision could also have an impact on an ongoing lawsuit betcween AECL and Nordion in the Ontario courts concerning the original IPFA, and may substantially reduce the $1.6 billion compensation Nordion is currently claiming.

Researched and written
by World Nuclear News