Hanne Sofie Logstein, NIFS LIABILITY Spring 2007 Faculty of Law, University of Oslo Research fellow...

Hanne Sofie Logstein, NIFS

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)

Signature (unit, name, etc.)

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


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


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


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)


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


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


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


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


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



• 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)



• 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 licensee’s own employees » also regulated by the general Act on torts

– Contractors, subcontractors and their employees » the focus of section 10-9



• 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



• 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 tortfeasor’s

liability– According to Section 10-9:

• The licensee’s liability is independent of the type of liability incurred by the perpetrator

• Still: The licensee’s liability equates the perpetrator’s/contractor’s liability

• Consequence: The licensee can claim the same exemptions and limitations of liability as the perpetrator



• 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)


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



• 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



• 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



• 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



• 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


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



• 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



• 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



• 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



• 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



• 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)


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


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


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)


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)


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


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


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



• 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



• 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



• 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


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.


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

Hanne Sofie Logstein, NIFS LIABILITY Spring 2007 Faculty of Law, University of Oslo Research fellow...

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