Modular Nuclear Reactors: Contracting, Regulatory Risks, and Dispute Avoidance in a Transforming Energy Sector

As countries transition away from carbon-intensive energy sources, Modular Nuclear Reactors (MNRs) which include Small Modular Reactors (SMRs), are emerging as a central feature of next-generation energy infrastructure. These compact, factory-fabricated systems promise enhanced safety, efficiency, and deployment flexibility, but these benefits do not come without challenges.

The legal and contractual frameworks supporting these projects are still maturing and this article outlines the critical considerations when contracting for MNR projects, focusing on interface risks and regulatory uncertainty.

What are Modular Nuclear Reactors?

In simple terms, MNRs are nuclear fission systems designed to be built in factories and delivered as prefabricated units to be assembled onsite. This modular approach contrasts with traditional large-scale nuclear power plants, which are constructed largely in situ.

MNRs can offer shorter construction times, standardised quality control, and scalability – qualities that are increasingly attractive to governments and private developers given how long (and expensive) traditional nuclear projects are.

SMRs are modular reactors that have a capacity of less than 300MW. These smaller reactors are proving to be popular for their perceived lower costs, enhanced safety features, and the ability to support clean energy goals. By way of example, the Rolls-Royce SMR was recently selected as the UK’s preferred bidder to partner with Great British Energy – Nuclear to develop small modular reactors.

1. Contracting for Modular Reactors: multi-party structures

MNR projects typically involve a broad consortium of stakeholders including technology developers, EPC contractors, module fabricators, governments, regulatory bodies, investors, insurers, and export credit agencies.

As each stakeholder fulfils a unique role within the project, there are a range of contracts, including Engineering, Procurement and Construction (EPC) Contracts (often split between factory and site installation activities), Technology Licensing Agreements, Operation & Maintenance (O&M) Agreements (typically covering decommissioning obligations), Power Purchase Agreements, and Government Support Agreements.

In our last article we considered interface risks from an EPC Contractor’s perspective.

Here, we consider three key interface risks across the project lifecycle – from design and manufacturing through delivery, construction, and commissioning:

• Modular delivery terms: One defining feature of MNR projects is the division between off site fabrication and on-site assembly. This introduces unique interface risks related to delivery logistics, modular handover protocols, and programme synchronisation. A clear delineation must be established between factory and site responsibilities, including which party owns risk for transport damage, module compatibility, and final assembly. Delivery timelines and integration milestones must be rigorously defined and contractually enforced as delays to the arrival of a module can cascade across multiple project phases.
• IP protections and technology transfer: MNRs often rely on proprietary reactor technologies and advanced manufacturing methods. As a result, intellectual property protections are a critical interface concern. This is especially true in international deployments, where host countries may require some level of technology transfer, triggering potential conflicts with export control regimes (e.g., ITAR or nuclear non-proliferation agreements). Legal and regulatory alignment must be ensured between the technology owner, licensees, and the end user. Safeguards must be in place to protect confidential design information while still enabling local assembly, operation, and maintenance.
• Performance warranties: Given that many MNR designs are still in early stages of commercialisation, long term operational data on matters such as capacity factor, thermal efficiency, fuel cycle behaviour, and long-term reliability is limited. Performance warranties from traditional nuclear plants may not be directly applicable. Rather, warranties for MNRs must be tailored to reflect the maturity level of the technology, the modular configuration, and the availability of operational data.

2. Regulatory risks in Modular Reactor projects

Despite the perceived advantages of MNRs, their unique construction methodology also introduces complex regulatory risks that must be proactively managed. While in situ nuclear projects are highly regulated at both domestic and international levels, MNRs introduce additional challenges:

• First-of-a-kind licensing: Traditional licensing processes are built around site-specific, custom-built plants, where each reactor is reviewed independently and in situ. MNRs, by contrast, aim to standardise design and enable replication across multiple sites, creating a mismatch with existing licensing models. Regulators may need to develop new review processes that accommodate design standardisation, off-site manufacturing, and serialised deployment. Similarly, many jurisdictions will lack a category of company license that allows a company to partake in the design, manufacture, or construction of products or facilities that are related to a MNR plant.
• Design certification and site licensing: Another layer of complexity arises from the potential decoupling of design certification and site licensing. In conventional projects, the design and site are reviewed together, with the safety case built around the specific characteristics of a given location. However, MNRs are often designed to be site-independent, with the same design deployed across a variety of locations. This MNR specific shift creates several regulatory complications:
  • Generic design approvals: MNR developers typically seek a generic design certification (GDC) – a pre-approved reactor design that can be used across multiple sites to avoid duplicative safety reviews across multiple sites. However, not all regulators offer such a pathway. For example, while regulators in the U.S., Canada, and the UK have developed design certification processes, Poland has not – yet is currently developing a framework in response to the planned deployment of the GE Hitachi BWRX-300 (a reactor technology that is being considered in the USA, Finland, Sweden and Estonia). Where planned projects are pushing regulators to evolve their processes in real time, this can lead to uncertainty around approval timelines.
  • Split regulatory jurisdiction: In countries where responsibilities for design certification and site licensing are held by different agencies – or where provincial/state and national regulators both have authority – coordinating the two processes can become a bureaucratic and legal challenge. This is especially true when reactor types differ significantly in fuel types and safety characteristics (e.g., Light Water Reactors (LWRs) vs. Heavy Water Reactors (HWRs), or molten salt reactors), each requiring specialised technical expertise and regulatory treatment. This will likely necessitate tailored environmental assessments, emergency preparedness plans, and public engagement strategies for each type of reactor and site.
  • Cross-compatibility of modules: If MNR projects involve integrating modules from different vendors (e.g., reactor module from one company, turbine or balance of plant from another), licensing authorities may face the added challenge of assessing the compatibility and interoperability of multiple certified components – a problem that does not typically arise in single-supplier, monolithic reactor builds.

Without clear mechanisms for coordinating design certification and site-specific approval, projects can encounter serious integration delays, redundancy in the safety review process and legal ambiguity around approvals.

The risk is even higher when deploying first-of-kind technologies in countries with little prior nuclear regulatory experience or where nuclear regulatory bodies are under-resourced.

Active regulatory engagement and adaptive contract terms are critical to navigating evolving compliance landscapes.

Final thoughts

MNRs – whether SMRs (such as the Rolls Royce SMR), microreactors, or advanced modular designs – have the potential to transform the energy sector. However, realising that potential requires carefully constructed legal frameworks, thoughtful risk allocation, and robust dispute avoidance measures.

With different reactor technologies (light water, heavy water, gas-cooled, etc.) introducing distinct regulatory and operational considerations, there is no one-size-fits-all approach. Stakeholders must tailor their contracts to reflect the specific reactor type, jurisdiction, and project structure.

We are here to support developers, investors, and governments throughout the nuclear project lifecycle – from early-stage development and contracting through licensing, financing, and dispute resolution.

If your organisation is involved in modular nuclear reactor projects, we welcome the opportunity to assist with strategic legal guidance.