LIABILITY

1. 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)

2. Liability – Main Principles • Main principles of Norwegian tort law • Non-statutory/developed in case law • Some codified in the Tort Act • Three conditions for damages • Basis of liability • Proximate cause (causality) • Financial loss

3. Three main grounds/basis for liability: • Negligence • Strict liability • Vicarious liability • E.g. the employer’s liability for a employee's tortuous act“An employer is liable for damage or injury caused intentionally or negligently during an employee's performance of work or functions for the employer, taking into account weather the requirements which the aggrieved person can reasonably make to the activity or service, have been neglected. …”

4. Liability – The liability regimes Overview (1) • PA establishes four liability regimes dealing with the petroleum activities: • PA section 10-9; Vicarious liability, the licensee • 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

5. 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

6. 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)

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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)

13. 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

14. 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

15. 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

16. 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)

17. 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

18. 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

19. 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

20. 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

21. 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

22. Second-largest oil spill in Norwegian petroleum history • Statfjord A, 12 December 2007 • The ruptured loading hose led to 4400 cubic metres of crude oil being pumped into the sea. • Deficient designation of responsibilities, deficient understanding of risks and defects in the loading system design were among the underlying causes of the ruptured loading hose.

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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)