LIABILITY

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LIABILITY

• Spring 2007
• Faculty of Law, University of Oslo
• Research fellow Hanne Sofie Logstein
• (based on the material worked out by research
  fellow Anne Karin Nesdam)

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Liability Main Principles

• Main principles of Norwegian tort law
• Non-statutory/developed in case law
• Three conditions for damages
• Basis of liability
• Proximate cause (causality)
• Financial loss
• Three main grounds for liability
• Negligence
• Vicarious liability
• Strict liability

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Liability The liability regimes Overview (1)

• PA establishes four liability regimes dealing
  with the petroleum activities
• PA section 10-9 Vicarious liability
• PA chapter 7 Liability for petroleum pollution
  damage
• PA chapter 8 Compensation to the fishing
  industry
• PA section 5-4 Liability in the abandonment phase

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Liability The Liability Regimes Overview (2)

• PA is supplemented by
• The general rules of Norwegian tort law
• Non-statutory/developed in case law
• Main rule
• Liability occurs when negligence has been
  exercised
• Joint and several liability in case of several
  tortfeasors (wrongdoers)
• Strict liability for hazardous and dangerous
  activities

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Liability The Liability RegimesOverview (3)

• The liability regulation in the Maritime Act of
  24 June 1994 no 39
• Regulates tort issues related to
• ships and vessels, including those performing
  tasks in the petroleum activities
• mobile drilling platforms, except for pollution
  damage resulting from a leakage or discharge of
  petroleum during a drilling operation (MA section
  507)

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Liability The Liability Regimes Overview (4)

• The liability regulation in the Pollution Act
  (PoA) of 13 March 1981 no 6
• Regulates tort issues related to other forms of
  pollution damage than petroleum pollution damage

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Liability The Liability RegimesOverview (5)

• Focus of the lecture
• The special liability regimes of the PA
• Apply when third parties suffer damage
• Non-contractual liability
• Related liability regimes the MA
• Contractual liability
• Occurs when the third party and the licensee has
  a contractual relationship
• Contractual liability may deviate from Norwegian
  tort law
• The relationship between non-contractual and
  contractual liability

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The Liability Regimes of the PA the Common
Feature (1)

• The responsible party The licensee
• Exception
• PA section 5-4
• Although responsible, the licensee is not the
  main responsible party in the abandonment phase
• PA section 8-2
• Background three groups of reasons
• Organizational reasons
• Licences issued to a group of licensees
• The practical work Led by the operator and
  carried out by contractors and subcontractors
• Risk (theoretical) Dilution of the
  responsibilities of the licence group and its
  licensees
• Solution Overall responsibility for each
  licensee

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The Liability Regimes of the PA the Common
Feature (2)

• Organizational reasons, continued
• Section 10-6
• Each licensee shall ensure that anyone performing
  work for him complies with the PA and regulations
  and decisions passed pursuant to the PA
• Economic reasons
• The licensees have the main economic interest in
  the petroleum activities
• Practical reasons
• Able to acquire adequate insurance coverage
• Better bargaining position due to their financial
  strength

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Vicarious Liability (1)

• Legal basis PA section 10-9(1)
• Definition
• Liability for damage caused by a person legal
  or natural who performs work for the licensee
• Scope (1) The licensee is liable
• (1) for ANY DAMAGE related to the PETROLEUM
  ACTIVITIES
• (2) caused by ANYONE working or performing work
  or services for the licensee

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Vicarious Liability (2)

• Scope (2) Definitions
• Petroleum activity, cf. PA section 1-6 c)
• all activities connected to the development of
  petroleum fields on the NCS
• The activities may be divided into successive
  phases, i.e. exploration, exploration drilling,
  production and abandonment
• In each phase the term applies not only the core
  activities conducted offshore, but also related
  activities conducted on land (e.g. pipeline
  transport from offshore field to onshore
  terminal)

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Vicarious Liability (3)

• Scope (2) Definitions continued
• Damage
• Section 10-9 itself refers to damages on a
  general basis
• Scope limited by the liability regimes of PA
  chapters 7 and 8
• Anyone working/performing work
• Potential tortfeasors
• The licensees own employees
• also regulated by the general Act on torts
• Contractors, subcontractors and their employees
• the focus of section 10-9

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Vicarious Liability (4)

• Scope (2) Definitions continued
• Anyone working/performing work, continued
• Ordinary vicarious liability provisions under
  Norwegian tort law
• A direct contractual relationship (employment
  relationship) is required
• According to section 10-9
• Sufficient that the tortfeasor is a part of the
  hierarchy of entities performing work related to
  the relevant licence
• A employment relationship is not required
• Note In this respect more extensive than other
  forms of vicarious liability under Norwegian tort
  law

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Vicarious Liability (5)

• Scope (3) Liable to the same extent as the
  perpetrator and his employer
• Under ordinary Norwegian tort law
• The liability of the vicarious party is
  independent of the tortfeasors liability
• According to Section 10-9
• The licensees liability is independent of the
  type of liability incurred by the perpetrator
• Still The licensees liability equates the
  perpetrators/contractors liability
• Consequence The licensee can claim the same
  exemptions and limitations of liability as the
  perpetrator

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Vicarious Liability (6)

• Scope (4) Joint and several liability
• The contractor and the licensee are joint and
  severally liable towards the injured party
• Section 10-9 contains no channelling provisions
• I.e. the contractor is not shielded with regard
  to claims from the injured party
• I.e. the contactor is not shielded with regard to
  an indemnification claim from the licensee (no
  indemnification regulation)

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Liability Pollution Damage (1)

• Legal basis PA chapter 7
• Strict liability, cf. PA section 7-3(1)
• The licensee is liable regardless of fault
• No articulated vis major-exception
• Scope three key elements
• Functional scope
• Geographical scope
• Economic scope

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Liability Pollution Damage (2)

• Functional scope - PA section 7-3, cf 7-1
• Liable for pollution damage - PA section 7-3(1)
• Pollution damage - PA section 7-1
• Functional definition
• Damage or loss due to leakage or discharge of
  petroleum from an installation or well
• Costs of reasonable measures taken to prevent or
  remedy such damage or loss
• Does not specify neither the damage/losses nor
  the injured parties
• Exemption Lost fishing opportunities for
  fishermen

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Liability Pollution Damage (3)

• Geographical scope - PA section 7-2
• Deviates from PA section 1-4
• Focus on where the damage occurs, not where the
  damage stems from
• Applies to pollution damage that occurs within
  Norwegian jurisdiction, i.e.
• NCS
• Norwegian territorial waters
• Norwegian internal waters
• Norwegian territory
• Applies to sea areas outside Norwegian
  jurisdiction, provided damage/loss is sustained
  by Norwegian interests
• The location of the pollution source is
  irrelevant as regard to liability under chapter 7

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Liability Pollution Damage (4)

• Economic scope PA section 7-3
• In principle Unlimited liability
• Exemptions
• Legal basis for discretionary reduction of
  liability by the courts
• PA Section 7-3(3)
• In case of vis major and similar events
• Act on torts section 5-2
• If considered reasonable

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Liability Pollution Damage (5)

• Channelling provisions
• Work at two levels
• (1) the licence group PA section 7-3(2)
• Primarily Claims must be directed at the
  operator
• Alternatively Claims can be directed towards the
  other licensees provided the operator fails to
  cover the claim
• (2) other participants PA sections 7-4 and 7-5
• Shielded from
• a) liability claims by the injured party (section
  7-4)
• b) indemnification actions by the licensee
  (section 7-5)
• Exemption In cases of wilful misconduct or gross
  negligence from anyone in the organisation

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Liability the Fisheries (1)

• Legal basis PA chapter 8
• Regulates compensation
• to Norwegian fishermen
• for economic losses suffered due to the petroleum
  activities
• Background
• Conflict between the petroleum and the fishing
  activities on the NCS

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Liability the Fisheries (2)

• Compensation in three situations
• Occupation of traditional fishing fields, cf. PA
  section 8-2
• Pollution and waste from the petroleum
  activities, cf. PA section 8-3
• Damage caused by installations, cf. PA section
  8-5

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Liability the Fisheries (3)

• Occupation of fishing fields PA section 8-2
• Note Legal occupation
• Strict liability
• Conditions for liability
• the fishing activities are rendered impossible or
  substantially more difficult
• The responsible party
• the Norwegian State, which granted the licence
• Time limited liability
• 7 years from the initial occupation

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Liability the Fisheries (4)

• Pollution and waste PA section 8-3
• Strict and (in principle) unlimited liability
• Tortious occurrence
• Pollution, not including petroleum pollution
  damage
• E.g. chemicals and toxic substances
• Waste, e.g. various kinds of debris at the well
  site or along the sailing routes of supply
  vessels
• Typically incurred losses
• Time loss (special evidence requirements), catch
  loss or damage to fishing gear
• The responsible party
• The licensee
• However there is no channelling provisions
• Indemnification clause, cf. PA section 8-3(2)
• Joint and several liability due to identification
  problems, cf. PA section 8-4

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Liability the Fisheries (5)

• Loss caused by installations etc PA section 8-5
• Strict and (in principle) unlimited liability
• Relevant
• In cases of loss due to installations on the sea
  bed
• Situations characterised by the fact that
• the installation is intentionally placed on the
  sea bed
• for use in the petroleum activities
• by a (relatively) easily identifiable
  (responsible) party
• without representing such an obstacle that the
  fishermen have to relocate to another area
  entirely
• Typically incurred losses
• Loss of or damage to fishing gear
• Responsible party
• The licensee

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Liability the Fisheries (6)

• Settlement of claims under chapter 8 PA section
  8-6
• A three step procedure
• First step
• First instance handling by special commissions
• Second step
• Appeal to an administrative appeal body
• Third step
• Action before the ordinary courts (within two
  months after notification)

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Comparisons (1)

• Common features chapter 7 8 and section 10-9
• Type of liability Strict liability
• The responsible party The licensee
• Exemption
• Section 8-2 In case of occupation of fishing
  fields, the responsible party is the Norwegian
  State

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Comparisons (2)

• Common features chapter 7 8 and section 10-9
  (continued)
• Joint and several liability
• Section 10-9 No channelling provisions the
  licensee and the contractor joint and severally
  liable
• Section 7-3 and 7-4 the licensees in the licence
  group, but channelling provisions (operator
  first)
• Section 8-3, cf. 8-4 different licence groups/
  several fields

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Comparisons (3)

• Common features chapter 7 8 and section 10-9
  (continued)
• Indemnification provisions
• Section 10-9 No, the loss stays with the
  licensee provided no contractual regulation
• Section 7-5 Yes, towards other participants but
  only in cases of wilful misconduct or gross
  negligence
• Section 8-3(2) Yes, in case of pollution and
  waste from vessels (supply and support)

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Comparisons (4)

• Common features chapter 7 8 and section 10-9
  (continued)
• Functional scope Differs (obviously!)
• Section 10-9 general in scope, limited by
  chapter 7 and 8
• Chapter 7 Petroleum pollution damage (exclusive)
• Chapter 8 Compensation to Norwegian fishermen
  for damage due to petroleum related activities
  (exclusive)

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Comparisons (5)

• Common features chapter 7 8 and section 10-9
  (continued)
• Economic scope Unlimited liability
• Exemptions
• Section 10-9 equates the liability of the
  perpetrator
• Chapter 7 Discretionary reduction by courts
  section 7-3(3)
• Chapter 8 Time limited section 8-2

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Comparisons (6)

• Common features chapter 7 8 and section 10-9
  (continued)
• Geographical scope
• Within Norwegian jurisdiction, cf. PA section 1-4
• Exemption
• Section 7-2 Also sea areas outside Norwegian
  jurisdiction provided loss is sustained by
  Norwegian interests

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Liability the Abandonment Phase (1)

• Legal basis PA section 5-4, cf. 5-3
• PA section 5-3, cf. 5-1 Procedure with regard to
  the decommissioning of field installations
• Decommissioning plan by the licensee (5-1)
• Decision by the MPE (5-3)
• Choices Decommissioning, left at site, continued
  petroleum activities, other use
• Appointment of those responsible (licensee, owner
  and /or user) for the implementation
• Implementation
• If continued petroleum activities
• the ordinary liability rules apply

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Liability the Abandonment Phase (2)

• If discontinued petroleum activities, the
  liability provisions of PA section 5-4 apply
• Liability for negligence
• Unlimited liability
• Liable for Damages occurring during
  decommissioning, or, if the installation is left
  at the site, future damages
• Liable the responsible party pursuant to section
  5-3
• Joint and several liability
• No channelling or indemnification provisions

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Liability the Abandonment Phase (3)

• Characteristic regime features
• The liable party
• Not just the licensee
• Subject to case-by-case decisions by the MPE
• Number of responsible entities
• Joint and several liability
• No channelling provisions
• Claims may be directed against any of the
  responsible parties
• Deviates from the principle of strict liability

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Liability the Abandonment Phase (4)

• The relationship between the liability regimes
• Disposal prior to licence expiry
• Overlap, i.e. all liability regimes apply
• Chapter 7
• Chapter 8
• Section 10-9
• Disposal after licence expiry/other use
• Only the regime pursuant to section 5-4, cf.
  section 5-3, applies

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Liability Other Tort Law Regimes

• PA section 1-5
• Norwegian law (including rules on tort) apply to
  the petroleum activities
• Application of MA
• Ordinary vessels
• Mobile drilling platforms and similar
  installations
• MA section 507
• Chapters 3 (maritime liens), 7 (vicarious
  liability), 8 (collision) and 9 (limitation of
  liability) apply, with modifications.

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Liability Financial Security of Claims

• Guarantee
• The MPE may require a guarantee from the parent
  company of the licensee, cf. PA section 10-7
• Insurance
• The licensee has a duty to carry insurance, PR
  section 73