The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025 (the “SHANTI Act” or “Act”), represents the most consequential restructuring of India’s nuclear sector since its inception. By repealing the state-monopolistic Atomic Energy Act, 1962, and the contentious Civil Liability for Nuclear Damage Act, 2010 (“CLND Act”), the legislation creates a new commercial model. The Act’s most significant impetus for cross-border technology transfer agreements is its triad of reforms, permitting private ownership of nuclear reactors, which creates a new market and demand for a supply chain, aligning India’s supplier liability regime with global norms, which de-risks participation for foreign technology vendors and establishing a new intellectual property framework that allows patents for peaceful nuclear inventions, which directly incentivizes technology licensing.

While these changes unlock a market previously frozen by legal and commercial impediments, they also introduce new complexities. Foreign participation is likely to be channeled through Indian-registered joint ventures, and the new patent regime is mediated by an ambiguous ‘sensitivity’ filter, creating fresh challenges for structuring technology transfer and license agreements. In this article, we analyze the legal and commercial implications of this transformed landscape for cross-border nuclear technology commerce.

The Pre-SHANTI Impasse: A Market Closed to Technology Transfer

Prior to the SHANTI Act, India’s legal framework erected formidable barriers to meaningful cross-border technology transfer for nuclear power generation. The ecosystem was commercially unattractive and legally hazardous for foreign technology providers for three primary reasons:

State Monopoly and Lack of a Market: The Atomic Energy Act, 1962, established an absolute state monopoly, permitting only government-owned entities like Nuclear Power Corporation of India Limited (“NPCIL”) to own and operate nuclear power plants. This created a monopsony where NPCIL was the sole customer for nuclear technology and equipment. Private Indian companies, barred from ownership, had no incentive to seek foreign technology or invest in building a sophisticated supply chain. Foreign vendors, in turn, faced a single, state-controlled gateway, limiting commercial opportunities and competitive dynamics.
Prohibitive and Uninsurable Supplier Liability: The CLND Act became the single greatest impediment to foreign participation following the 2008 Indo-U.S. Civil Nuclear Agreement. In a stark departure from international conventions which channel liability exclusively to the operator, Section 17(b) of the CLND Act granted operators a statutory right of recourse against suppliers for damages arising from equipment with patent or latent defects. This exposed foreign and domestic suppliers to indeterminate, uncapped, and uninsurable liability, effectively stalling multi-billion dollar projects with global vendors like GE, Westinghouse, and EDF.
Intellectual Property Black Hole: Section 4 of the Patents Act, 1970, read with the Atomic Energy Act, 1962, imposed a blanket prohibition on granting patents for any invention related to ‘atomic energy’. This removed the foundational legal tool for protecting and monetizing proprietary technology. Without patent protection, technology licensors had no effective legal recourse against infringement and no secure basis for structuring royalty-based license agreements, rendering the Indian market a black hole for nuclear IP.

Together, these factors created a closed, high-risk, and commercially sterile environment for the technology-intensive arrangements needed to build and operate nuclear power plants.

The SHANTI Act’s Impetus: Market Creation, De-Risking, and IP Incentivization

The SHANTI Act systematically dismantles these historical barriers, creating a viable commercial pathway for technology transfer and licensing agreements.

Market Creation through Private Participation and Supply Chain Development: The Act’s most fundamental change is the shift from a state monopoly to a regulated market. It permits licensed private companies and joint ventures to build, own, operate, and decommission nuclear power plants. This creates, for the first time, a demand-side pull for technology from a diverse set of private players who will need to access global best-in-class technology to compete.

While companies incorporated outside India are explicitly barred from being direct licensees, the Act paves the way for foreign participation through Indian-incorporated joint ventures. With a Foreign Direct Investment (FDI) cap of up to 49% anticipated under the automatic route, the JV model becomes the primary vehicle for foreign entry. This structure inherently fosters technology transfer, as foreign partners will contribute their technological expertise and IP as a core part of their equity contribution, while Indian partners manage local execution and regulatory compliance.

This private-sector-led expansion necessitates the creation of an entire supply chain ecosystem, from component manufacturing to high-tech engineering and construction (EPC) services. The law enables this by allowing private entities to obtain licenses for activities like fuel fabrication (up to a threshold), equipment manufacturing, and the import/export of nuclear-related technology and software. Early market signals, such as National Thermal Power Corporation’s pursuit of agreements with foreign entities and interest from major Indian conglomerates, indicate that this ecosystem is beginning to form.

De-Risking Agreements through a Modernized Liability Framework: Arguably the most critical reform for unlocking foreign technology is the overhaul of the liability regime. Section 16 of the SHANTI Act abolishes the statutory right of recourse against suppliers. An operator’s right of recourse is now restricted to two narrow circumstances: (a) where such a right is expressly provided for in a written contract, or (b) where the nuclear incident results from an individual’s act with intent to cause damage.

This move from statutory to contractual liability is a game-changer. It aligns India’s legal framework with international norms like the Convention on Supplementary Compensation (CSC). Foreign technology suppliers and their insurers can now quantify their maximum potential liability based on the negotiated terms of their contracts. The spectre of open-ended, uninsurable risk is eliminated, making India an investable market. This reform directly addresses the primary concern that had deterred global nuclear vendors for over a decade. Consequently, technology supply and license agreements will now feature intensely negotiated but commercially manageable clauses on warranties, indemnities, and limitations of liability.

Incentivizing Licensing through a New Intellectual Property Regime: The SHANTI Act performs another crucial pivot by amending the Patents Act, 1970, to move from a blanket prohibition to a ‘conditional permission’ model for nuclear inventions. Section 38 of the Act now permits the grant of patents for inventions relating to the ‘peaceful uses of nuclear energy and radiation’, subject to certain security-related exceptions.

This landmark change creates a direct commercial incentive for technology licensing. Foreign and domestic innovators can now secure patent protection in India for a wide range of non-strategic technologies, such as components for Small Modular Reactors (SMRs), advanced safety systems, radiation monitoring software, and applications in medicine and agriculture. This enables them to monetize their IP through royalty-bearing license agreements with Indian manufacturers and operators. For the new supply chain, this is vital, an Indian company can now legally license a foreign patent to manufacture a critical component locally, fostering an indigenous manufacturing base built on transferred technology.

Navigating New Legal and Commercial Complexities

While the SHANTI Act creates a powerful impetus for technology transfer, it also introduces a new set of legal and commercial challenges that must be navigated in structuring cross-border agreements.

The ‘Sensitivity’ Filter and Pre-Disclosure Duties in IP Licensing: The new patent regime comes with significant caveats. Section 38 of the Act empowers the Central Government to block a patent if it deems an invention ‘sensitive in nature or having national security implications’, a term the Act does not define. This introduces a major element of regulatory uncertainty for technology licensors, as an invention’s patentability hinges on executive discretion.

Furthermore, Section 38(5) imposes a novel pre-disclosure duty, requiring anyone who believes their invention relates to nuclear energy to inform the Central Government before disclosing it to any third party, including a potential commercial partner. This compliance step must be integrated into the earliest stages of commercial negotiations and non-disclosure agreements, potentially delaying or complicating technology transfer discussions by giving the state a ‘first look’ at the IP. License agreements will need to be drafted to mitigate these risks, potentially including clauses that adjust royalties or grant termination rights if a patent is denied on ‘sensitivity’ grounds.

Structuring JVs under a Calibrated Liberalisation Framework: The prohibition on direct foreign ownership means that technology transfer will predominantly occur within the framework of JVs. This will require sophisticated legal structuring to balance the interests of the parties. Foreign technology providers will seek robust protections for their core IP and governance rights to oversee its use, while the Indian partner, as the licensee, will bear the primary responsibility for regulatory compliance and operations. The JV agreement becomes the central document for allocating risks, defining IP usage rights, and establishing protocols for adhering to the SHANTI Act’s framework, especially the carve-out for ‘reserved activities’ (e.g., enrichment, reprocessing) which remain under exclusive government control.

Contractual Allocation of Risk in Technology Agreements: The move to a contractual liability regime for suppliers does not eliminate risk, but merely relocates it to the negotiating table. Indian operators, now facing graded but substantial liability caps (up to INR 3000 crore for large reactors), will use their commercial leverage to contractually pass down a portion of this risk to their technology and equipment suppliers. Technology transfer and supply agreements will become the battleground for negotiating the scope of warranties, performance guarantees, and liability caps, which will be fiercely contested and require careful alignment with available insurance products, such as those offered by the Indian Nuclear Insurance Pool (INIP).

The SHANTI Act is a tectonic shift in India’s nuclear policy, creating a commercially viable and legally predictable environment for cross-border technology transfer for the first time. By creating a private market, de-risking supplier participation, and introducing a patent regime for peaceful nuclear innovations, the Act provides a powerful, multi-pronged impetus for international technology vendors and Indian companies to forge partnerships.

However, the path forward is not without complexity. The legal architecture for this new era, balancing market liberalization with stringent sovereign control, demands sophisticated navigation. The success of technology transfer initiatives will depend on the careful structuring of joint ventures, the astute drafting of license agreements that account for the ambiguities of the new IP regime, and the commercial acumen to contractually allocate risks in a newly competitive market. The SHANTI Act has successfully shifted the central question for the global nuclear industry from ‘if’ it is possible to do business in India to ‘how’ that business will be structured.

Cross-Border Technology Transfer and Licensing Under India’s SHANTI Act, 2025: Catalyzing a Private-Led Nuclear Supply Chain Ecosystem