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)
Hanne Sofie Logstein, NIFS
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:
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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 Regimes
Overview (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 Regimes
Overview (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 licensee’s 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 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
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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)
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Geographical scope - PA section 7-2
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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 83
– 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)
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Pollution and waste – PA section 8-3
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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)
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Loss caused by installations etc – PA section 8-5
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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 73(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)
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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
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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
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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
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