COMMISSION STAFF WORKING DOCUMENT Liability, Compensation and Financial Security for Offshore Accidents in the European Economic Area Accompanying the document Report from the Commission to the European Parliament and the Council on liability, compensation and financial security for offshore oil and gas operations pursuant to Article 39 of Directive 2013/30/EU
Date: 2015-09-14
Institutions: Directorate-General for Energy, European Commission
Subjects: EU Member State, environmental liability, extraction of oil, indemnification, industrial accident, man-made disaster, marine pollution, offshore oil structure, oil pollution, prevention of pollution

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 14.9.2015  SWD(2015) 167 final   COMMISSION STAFF WORKING DOCUMENT Liability, Compensation and Financial Security for Offshore Accidents in the European Economic Area Accompanying the document Report from the Commission to the European Parliament and the Council on liability, compensation and financial security for offshore oil and gas operations pursuant to Article 39 of Directive 2013/30/EU  {COM(2015) 422 final}  
 
 
PREFACE 

Directive 2013/30/EU (henceforth the Offshore Safety Directive or OSD) entered into force on 18 July 
2013.1  It  defines  the  elements  of  a  comprehensive  European  Union  wide  framework  for  preventing 
major accidents and limiting their consequences. 

However, at the time of drafting, the European Commission, Council and Parliament considered it was 
not feasible to incorporate into the OSD definitive measures in one critical area of this framework  – 
financial security, compensation, third-party liability and criminal liability for offshore accidents. 

The Commission has prepared this document to examine further these inter-related issues. It fulfils the 
obligations laid out in Article 39 of the OSD, which states: 

1. The Commission shall, by 31 December 2014, submit to the European Parliament 
and to the Council a report on the availability of financial security instruments, and 
on  the  handling  of  compensation  claims,  where  appropriate,  accompanied  by 
proposals. 

2. The Commission shall, by 19 July 2015, submit to the European Parliament and to 
the Council a report on its assessment of the effectiveness of  the liability regimes in 
the Union in respect of the damage caused by offshore oil and gas operations. That 
report  shall  include  an  assessment  of  the  appropriateness  of  broadening  liability 
provisions. The report shall be accompanied, where appropriate, by proposals. 

3.  The  Commission  shall  examine  the  appropriateness  of  bringing  certain  conduct 
leading to a major accident within the scope of Directive 2008/99/EC of the European 
Parliament  and  of  the  Council  of  19  November  2008  on  the  protection  of  the 
environment  through  criminal  law.2  The  Commission  shall,  by  31  December  2014, 
submit  a  report  on  its  findings  to  the  European  Parliament  and  the  Council, 
accompanied,  where  appropriate,  by  legislative  proposals,  subject  to  appropriate 
information being made available by Member States. 

It draws on studies performed for the Commission by the University of Maastricht,3 as well as Bio by 
Deloitte  and  Stevens  &  Bolton,  LLP.4  A  comprehensive  group  of  stakeholders  was  consulted  in  the 
preparation  of  these  studies,  as  well  as  in  a  stakeholder  roundtable  held  on  17  September  2014  to 
discuss the findings of the study by Bio and Stevens & Bolton. The University of Maastricht study was 
further  peer  reviewed  by  Peter  Cameron,  Professor  of  International  Energy  Law  and  Policy,  and 
Director of the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee. 

1 Directive 2013/30/EU of the European Parliament and the Council of 12 June 2013 on the safety of offshore oil 
and gas operations and amending Directive 2004/35/EC,  
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:178:0066:0106:EN:PDF. 
2 Directive 2008/99/EC of the European Parliament and of the Council of 19 November 2008 on the protection 
of the environment through criminal law,  
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:328:0028:0037:EN:PDF. 
3 De Smedt, et al. (2013), Civil Liability and Financial Security for Offshore Oil and Gas Activities, Maastricht 
European Institute for Transnational Legal Research - METRO, Maastricht University. 
4 BIO by Deloitte (2014), Civil liability, financial security and compensation claims for offshore oil and gas 
activities in the European Economic Area, Final Report prepared for European Commission – DG Energy. 

 
 
 
                                                            
TABLE OF CONTENTS 
Preface ........................................................................................................................................ 1 

Introduction ................................................................................................................................ 3 

Offshore accidents in perspective .......................................................................................... 3 

Why liability is important ...................................................................................................... 3 

Liability and the Offshore Safety Directive ........................................................................... 3 

Document outline ................................................................................................................... 3 

1  The Appropriateness of Criminal Liability for Offshore Accidents and Resulting Damage

3 

1.1  Conclusions ................................................................................................................. 3 

2  Liability Regime Effectiveness ........................................................................................... 3 

2.1  Civil liability for the Deepwater Horizon incident ...................................................... 3 

2.2  Civil liability for offshore accidents in the EEA ......................................................... 3 

2.3 

Industrial agreements ................................................................................................... 3 

2.4  Contractual agreements ............................................................................................... 3 

2.5  Economic loss and the floodgates issue ...................................................................... 3 

2.6 

2.7 

Strict liability and the negligence rule ......................................................................... 3 

Incentivizing precautionary measures among potential victims .................................. 3 

2.8  Liability and enterprise ................................................................................................ 3 

2.9  Beyond territorial waters ............................................................................................. 3 

2.10 

2.11 

Transboundary compensation: Jurisdiction and applicable law .............................. 3 

Conclusions .............................................................................................................. 3 

3  Financial Security Instruments and their Availability ........................................................ 3 

3.1  The financial security instruments available on the market ........................................ 3 

3.2  The financial security instruments accepted by authorities ......................................... 3 

3.3  Conclusions ................................................................................................................. 3 

4  Handling Compensation Claims ......................................................................................... 3 

4.1  Compensation schemes for offshore accidents in Norway .......................................... 3 

4.2  OPOL ........................................................................................................................... 3 

4.3  Civil rules of procedure ............................................................................................... 3 

4.4  Conclusions ................................................................................................................. 3 

Annex I.  Legal dispute over hypothetical oil spill claims under yhe US Oil Pollution Act ... 3 

Annex II. 

Criminal Liability for offshore safety breaches in selected Focal States ............. 3 

i.  Denmark .......................................................................................................................... 3 

3 

 
 
 
ii.  Norway ............................................................................................................................ 3 

iii.  UK ............................................................................................................................... 3 

Annex III.  Summaries  of  EEA  member  country  liability  regimes  applicable  to  offshore 
accidents 

3 

iv. 

Bulgaria ....................................................................................................................... 3 

v.  Croatia ............................................................................................................................. 3 

vi. 

Cyprus .......................................................................................................................... 3 

vii.  Denmark ...................................................................................................................... 3 

viii.  France .......................................................................................................................... 3 

ix.  Germany ...................................................................................................................... 3 

x.  Greece .............................................................................................................................. 3 

xi. 

Iceland ......................................................................................................................... 3 

xii. 

Ireland .......................................................................................................................... 3 

xiii. 

Italy .............................................................................................................................. 3 

xiv.  Latvia ........................................................................................................................... 3 

xv.  Lithuania ...................................................................................................................... 3 

xvi.  Malta ............................................................................................................................ 3 

xvii. 

The Netherlands ....................................................................................................... 3 

xviii.  Norway ..................................................................................................................... 3 

xix.  Poland .......................................................................................................................... 3 

xx. 

Portugal ........................................................................................................................ 3 

xxi.  Romania ....................................................................................................................... 3 

xxii. 

Spain ........................................................................................................................ 3 

xxiii.  United Kingdom ....................................................................................................... 3 

Annex IV.  Financial security instruments accepted by competent authorities in the 20 Focal 
States to cover third-party damage from offshore oil and gas activities .................................... 3 

i.  Bulgaria ........................................................................................................................... 3 

ii.  Croatia ............................................................................................................................. 3 

iii. 

Cyprus .......................................................................................................................... 3 

iv.  Denmark ...................................................................................................................... 3 

v.  France .............................................................................................................................. 3 

vi.  Germany ...................................................................................................................... 3 

vii.  Greece .......................................................................................................................... 3 

viii. 

Iceland ......................................................................................................................... 3 

4 

 
 
ix. 

Ireland .......................................................................................................................... 3 

x. 

Italy .................................................................................................................................. 3 

xi. 

Latvia ........................................................................................................................... 3 

xii.  Lithuania ...................................................................................................................... 3 

xiii.  Malta ............................................................................................................................ 3 

xiv.  Netherlands .................................................................................................................. 3 

xv.  Norway ........................................................................................................................ 3 

xvi.  Poland .......................................................................................................................... 3 

xvii. 

Portugal .................................................................................................................... 3 

xviii.  Romania ................................................................................................................... 3 

xix.  Spain ............................................................................................................................ 3 

xx.  United Kingdom .......................................................................................................... 3 

5 

 
 
 
 
 
INTRODUCTION 

Although offshore oil and gas operations take place in many European Economic Area (EEA) member 
countries, liability for civil damage from these operations is poorly understood. Also known as third 
party damage, or 'traditional damage' in the EU acquis,5 such damage may include bodily injury and 
property damage, as well as economic loss by commercial fisheries, the tourism sector or other coastal 
businesses.  

A public consultation by the Commission revealed that the expectations of the public, civil society and 
some authorities are high, but there is no coherent perspective on the kinds of claims that  would be 
permissible, nor how to manage such claims effectively in the case of major accidents  – particularly 
accidents that cross boundaries.6 

This document, and the Report to the European Parliament and Council it accompanies, aim to present 
an overview of these issues and propose ways in which the European Union (EU) could address any 
shortcomings that may exist in the current legal frameworks. 

Offshore accidents in perspective 

In recent years, major offshore incidents such as Deepwater Horizon and Montara have highlighted the 
need  to  tackle  a  handful  of  unresolved  issues  surrounding  civil  liability  and  compensation  for  such 
events. As well as raising questions such as whom to hold accountable, how and to what extent, these 
accidents have also flagged up more challenging problems. 

The  first  of  these  is  the  insolvency  problem.  The  2010  Deepwater  Horizon  disaster  showed  that 
offshore accidents could cost significantly more than previously thought, so much so that only the very 
largest companies would be able to cover the costs of the worst accidents. Not only were 11 lives and 
a state-of-the-art drilling rig lost, but nearly 5 million barrels of oil was also released into the Gulf of 
Mexico causing widespread environmental and economic damage.7 

Should the costs of responding to, and recovering from, an accident overwhelm the resources of the 
liable company in the EU, the effect would be a socialization of these costs to local communities, the 
State and other businesses dependent on the marine economy. This is a salient issue in the EU because 
as  technology  opens  access  to  new  resources  in  deeper  waters,  there  is  an  increasing  penetration  of 
smaller firms in the industry. 

The second problem raised is the transboundary problem. As well as being more costly to remediate, 
major  offshore  accidents  are  also  more  likely  to  have  a  large  geographical  footprint.  Indonesia's 
unsuccessful  legal  efforts  to  claim  compensation  for  damages  resulting  from  the  2009  Montara 

5 The legislation, legal acts and court decisions which together make up EU law. 
6 Commission staff working paper: Impact assessment accompanying the document 'Proposal for a regulation of 
the European Parliament and of the Council on safety of offshore oil and gas prospection, exploration and 
production activities', SEC(2011) 1292 final, http://ec.europa.eu/energy/oil/offshore/doc/ia_annexes_20122-
1292.pdf. 
7 Bureau of Ocean Energy Management, Regulation and Enforcement (2011) 'Report Regarding the Causes of 
the April 20, 2010 Macondo Well Blowout', US Department of the Interior, 
http://docs.lib.noaa.gov/noaa_documents/DWH_IR/reports/dwhfinal.pdf. 

6 

 
 
                                                            
blowout  on  the  Australian  Continental  Shelf8  demonstrate  the  tremendous  challenge  posed  by  the 
current lack of international law applicable to offshore accidents. 

Insofar  as  the  existing  international  legal  framework  makes  it  difficult  to  make  successful 
transboundary  damage  claims,  the  costs  of  offshore  accidents  are  further  externalized.  This  may 
adversely  influence  the  risk-related  decision  making  of  both  firms  and  licensing  authorities  for 
offshore  operations  close  to  marine  boundaries.  It  certainly  has  significant  implications  for  victims 
seeking compensation for offshore accidents originated in other jurisdictions. 

Why liability is important 

It is widely accepted that the costs of pollution should generally be borne by those who cause it and 
not others. This is the polluter-pays-principle, an important pillar of EU environmental law as well as 
numerous other international agreements. 

The  liability  regime  is  the  primary  means  through  which  the  polluter-pays-principle  is  applied.  It 
ensures that firms are held appropriately accountable for any damage they may cause in the course of 
doing  business.  It  also  incentivizes  them  to  adopt  measures  and  develop  practices  that  minimise  the 
risks  of  such  damage.  Through  this,  liability  can  be thought  of  as  a  system  for  inducing  people  and 
firms to behave in socially efficient ways – that is to say, ways that minimize the combined costs of 
injuries and the precautions taken to avoid injuries.  

Liability  plays  in  important  role  in  complementing  regulation  because  regulators  may  not  fully 
appreciate  some  risks  (which  liability  would  incentivise  industry  to  address)  and  industry  may  not 
fully appreciate others (which regulation would require industry to address). Moreover, regulation is 
necessary where external costs exist, as these prevent firms from taking all necessary steps to reduce 
accident  losses  efficiently.  Together,  regulation  and  liability  thereby  ensure  a  higher  level  of 
deterrence and are mutually reinforcing. 

Preventative benefits aside, the liability  regime is  also important in ensuring  that  injured parties can 
quickly recover damage costs, giving it an important restorative role following an accident. 

Finally, liability rules also reflect societal values. On the one hand, since it is the polluter who 'causes' 
the damage, fairness considerations entail that they should pay for this damage, not other members of 
society.  On  the  other,  societal  preferences  are  also  reflected  in  the  kinds  of  damage  that  are 
compensable  and  how  the  legal  system  discriminates  between  legitimate  and  illegitimate  claims. 
These safeguards help to ensure potentially liable parties also receive just treatment. 

Liability and the Offshore Safety Directive 

Member  States  are  currently  in  the  process  of  updating  their  national  legislative  frameworks  for 
offshore oil and gas operations to be in line with the Offshore Safety Directive (OSD). They have until 
19  July  2015  to  enact  the  provisions  of  the  Directive  in  national  legislation,  after  which  the  basic 
elements  of  a  comprehensive  EU-wide  framework  for  preventing  major  accidents  and  limiting  their 
consequences should be in place. 

8 The blowout lasted 74 days at estimated flow rates of 400 to 1,500 barrels per day. Borthwick (2010) ' Report 
of the Montara Commission of Inquiry', Commonwealth of Australia, 
http://www.industry.gov.au/resource/Documents/upstream-petroleum/approvals/Montara-Report.pdf. 

7 

 
 
                                                            
Whilst being primarily directed at the regulation and management of offshore risks, the OSD also puts 
in  place  several  measures  that  directly  or  indirectly  address  liability  and  compensation  for  offshore 
accidents. 

First,  Article  7  of  the  OSD  requires  licensees  to  be  directly  and  solely  financially  liable  for  the 
prevention  and  remediation  of  environmental  damage.  Together  with  Article  38,  which  extends  the 
Environmental  Liability  Directive9  (ELD)  to  Member  States'  continental  shelves,  this  effectively 
makes offshore licensees strictly liable for any environmental damage resulting from their operations. 

Environmental  liability  within  the  meaning  of  the  ELD  refers  to  liability  for  ecological  damage  to 
protected species and natural habitats, damage to water and damage to soil. Environmental liability is 
based  here  on  a  public,  administrative  liability  approach  where  the  affected  party  is  not  a  concrete 
natural or legal person but society as a whole due to the public and universal character of the effects of 
any  damage  to  shared  natural  resources.  The  role  of  the  claimant  is  fulfilled  by  public  authorities, 
whose  job  it  is  to  ensure  that  polluters  remedy  the  ecological  damage  they  cause.  It  is  therefore  the 
public authority which is entrusted with the representation of the environmental protection interest to 
ensure  that  the  liable  operator  is  identified,  the  causal  link  is  established,  the  remediation  plan  is 
established and approved, the necessary preventive action or remedial action is taken, etc. 

Secondly, Articles 4(1) to 4(3) put forward preconditions on licensing aimed at ensuring that licensees 
never find themselves technically or financially unable to deal with the consequences of their offshore 
operations. If effectively implemented and enforced, these exposure-based requirements will mitigate 
significantly the insolvency problem described in the Introduction. 

Thirdly,  Article  4(3)  requires  Member  States  to  "establish  procedures  for  ensuring  prompt  and 
adequate handling of compensation claims including in respect of compensation payments for trans-
boundary incidents" without prescribing in detail what those procedures might be. 

Finally,  that  same  article  also  obliges  Member  States  to  "facilitate  the  deployment  of  sustainable 
financial instruments and other arrangements," again without detailing how this should be done. 

Table 1: Types of liability applicable to offshore oil and gas operations and legislation in place in the EU10 
Type of liability 

Applicable legislation 
EU  law  (Environmental  Liability  Directive)  and 
national law 

Environmental 

Civil, 
'traditional' 

third  party  or 

Criminal 

Bodily harm 
Property damage 
Economic 
loss 

Consequential 
Pure 

National law 

National law 

We  therefore  see  that  whereas  the  OSD  contains  specific  provisions  for  liability  and  compensation-
related issues it does not put in place a comprehensive EU framework for liability. 

9 Directive 2004/35/CE of the European Parliament and of the Council of 21 April 2004 on environmental 
liability with regard to the prevention and remedying of environmental damage, http://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:32004L0035&from=EN. 
10 There are overlaps between environmental liability, as defined in the ELD, and civil or third party liability. 
This is because liability under the ELD extends from the damaged natural resources to the services these 
damaged natural resources provide to other natural resources or to the public. See Article 2(13). In addition, 
existing regimes of civil liability addressing pollution damage, in particular in specific sectors (e.g. maritime 
transport) which are linked to the offshore oil and gas industry, explicitly cover environmental damage and 
oblige operators to cover the costs of reinstatement of the environment as well as relevant preventive measures 

8 

 
 
                                                            
First, it does not deal with liability for civil damage – damage caused to natural or legal persons. The 
kinds of damage and loss in this broad category include bodily injury, property damage and economic 
loss.11 In the case of the latter, courts may make a further distinction between consequential economic 
loss, which is economic loss resulting from bodily injury or property damage, and pure economic loss, 
which is economic loss in the absence of bodily injury or property damage.  

Secondly, the OSD does not address criminal liability for offshore accidents, the potential penalties for 
which include fines and imprisonment, as well as other non-custodial punishments. Criminal liability 
refers to liability that arises out of committing a criminal act qualified as such by the law.  There is a 
fundamental difference between civil as well as environmental liability on the one hand and criminal 
liability on the other. Whereas the liability rules on the former result in penalties that are exclusively 
financial  and  aimed  at  compensating  and  remedying  damage  caused,12  criminal  liability  aims  at 
punishing wrongful conduct and penalties may include imprisonment as well as fines and other non-
custodial punishments. 

Document outline 

The remainder of this document addresses the principle outstanding issues around liability for offshore 
accidents. 

Chapter  1  presents  a  brief  discussion  of  the  possible  preventative  and  punitive  benefits  of  criminal 
liability for offshore accidents, as well as a description of Directive 2008/99/EC on the protection of 
the environment through criminal law. 

Chapter  2  presents  an  overview  and  analysis  of  civil  liability  regimes  for  offshore  accidents  in  the 
EEA – the focus of the current study – as well as the civil liability regime in the United States and the 
real-world civil damages awarded following the 2010 Deepwater Horizon disaster. 

Chapter 3 provides an overview of financial security instruments for managing offshore accident risk 
in the EEA and reviews the kinds of instruments accepted by authorities in the EEA member countries 
with offshore oil and gas activities (henceforth Focal States13). 

Finally, Chapter 4 looks at the compensation mechanisms for offshore accidents currently in place in 
the EEA, including the existing legislation which harmonizes the national conflict of law rules in cases 
of transboundary pollution. 

11 For example, the lost profits commercial fisheries, aquaculture, businesses in the tourism industry and other 
coastal commerce. 
12 With the exception of the so-called "punitive damages" in common law systems. 
13 Bulgaria, Croatia, Cyprus, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Latvia, Lithuania, 
Malta, the Netherlands, Norway, Poland, Portugal, Romania, Spain and the UK. 

9 

 
 
 
                                                            
1  THE  APPROPRIATENESS  OF  CRIMINAL  LIABILITY  FOR  OFFSHORE 

ACCIDENTS AND RESULTING DAMAGE 

Whilst offshore safety breaches already fall under the criminal code of many Focal States, neither the 
definition of the criminal offences nor the minimum type and level of sanctions are harmonized in the 
EU.  For  example,  although  the  laws  of  Denmark,  Norway  and  the  United  Kingdom  (UK)  contain 
provisions criminalizing certain compliance failures, these laws are widely divergent. More details can 
be found in Annex II of this document. 

Criminal liability for safety breaches could add a layer of deterrence beyond civil penalties, which can 
help  improve  protection  of  the  environment  and  the  compliance  with  safety  measures.  Accordingly, 
Article 39(3) of the OSD, tasks the Commission with assessing and reporting on the appropriateness of 
bringing  certain  conduct  leading  to  a  major  accident  within  the  scope  of  the  Environmental  Crime 
Directive14 (ECD). This report shall be accompanied, where appropriate, by legislative proposals. 

The European Court of Justice confirmed in 200515 that the Community had the competence to adopt 
criminal  law  measures  related  to  the  protection  of  the  environment  if  this  is  necessary  to  ensure  the 
efficient  implementation  of  its  environmental  policy.  Adopted  on  19  November  2008,  the  ECD  was 
the first EU Directive to contain provisions with regard to criminal liability. The ECD lays down a list 
of  environmental  offences  that  Member  States  must  consider  criminal  if  committed  intentionally  or 
with  serious  negligence.  The  Directive  refers  to  existing  EU  legal  instruments  on  environmental 
criminal  law  that  already  provide  for  prohibitions  (listed  in  the  Annexes  of  the  Directive).  In 
implementing  this  Directive  in  national  law,  Member  States  must  attach  criminal  sanctions  to  these 
existing prohibitions insofar as the conduct causes or is likely to cause death or serious injury to any 
person  or  substantial  damage  to  the  quality  of  air,  the  quality  of  soil  or  the  quality  of  water,  or  to 
animals or plants. 

Article 83(2) of the Treaty on the Functioning of the European Union, establishes the legal basis for 
creating minimum rules for the definition of criminal offences and sanctions in a particular EU policy 
area. This expressly enables EU legislators to adopt: "minimum rules with regard to the definition of 
criminal  offences  and  sanctions  in  the  area  concerned"  if  this  "proves  essential  to  ensure  effective 
implementation of a Union policy in an area which has been subject to harmonisation measures". 

The adoption of EU criminal law measures is therefore subject to the assessment of whether they are 
"essential" to achieving effective policy implementation. As such, the decision to include breaches of 
the OSD under the scope of the ECD can only follow a thorough necessity and proportionality test on 
whether criminal law measures would achieve the stated objective. 

As  stated  in  the  Commission's  communication  on  criminal  law,16  it  is  necessary  to  analyse  whether 
measures other than criminal law measures – for example, civil or administrative sanction regimes  – 
would  not  sufficiently  ensure  policy  implementation  and  whether  criminal  law  could  address  the 
problems  more  effectively.  This  will  require  a  thorough  analysis  in  an  impact  assessment  preceding 
any legislative proposal, including an assessment of whether Member States’ sanction regimes achieve 

14 Directive 2008/99/EC of the European Parliament and of the Council of 19 November 2008 on the protection 
of the environment through criminal law (text with EEA relevance), http://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:32008L0099&from=EN. 
15 Case C-176/03, Commission v. Council, judgment of 13 September 2005. 
16 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions: Towards an EU Criminal Policy: Ensuring the Effective 
Implementation of EU Policies through Criminal Law ', 20/09/2011, COM(2011) 573 final, 
http://ec.europa.eu/justice/criminal/files/act_en.pdf. 

10 

 
 
                                                            
the  desired  result,  as  well  as  difficulties  faced  by  national  authorities  implementing  EU  law  on  the 
ground. 

If  it  were  to  be  determined  in  the  future  that  OSD  in  its  present  form  cannot  sufficiently  ensure  the 
safety of offshore operations as intended and that it is essential to link its aims with criminal liability 
for  offshore  breaches,  such  liability  could  be  introduced  as  a  new  provision  in  the  OSD  through  an 
amendment of that Directive. It could also be introduced through a standalone new legal act. However, 
the most coherent way would be to harmonize criminal sanctions through the ECD. This would avoid 
creating  a  different  standard  for  criminal  sanctions  compared  to  the  one  established  by  the ECD  for 
many  environmental  offences.  It  is  why  Article  39(3)  of  the  OSD  foresees  the  criminalization  of 
offences under the OSD via an amendment of the ECD. 

1.1  Conclusions 

The  deadline  to  implement  the  OSD  in  national  law  is  19  July  2015.  At  this  point  in  time,  most 
Member States have not yet implemented the pertinent provisions of the OSD yet. It is therefore too 
early to properly assess whether the national legal provisions implementing the OSD are sufficiently 
effective and subsequently whether EU criminal law measures would be essential to ensure effective 
offshore  safety  in  the  Union  under  Article  83(2)  of  the  Treaty.  For  these  reasons,  the  Commission 
cannot yet provide a full report on the appropriateness of bringing certain conduct leading to a major 
accident within the scope of the ECD. 

11 

 
 
 
2  LIABILITY REGIME EFFECTIVENESS  

The significant civil damages awarded following the 2010 Deepwater Horizon disaster reflect both the 
widespread  damage  caused  and  the  liability  rules  in  place  in  the  United  States.  Whilst  no  offshore 
accidents on the scale of Deepwater Horizon have occurred in the EEA, the absence of large-scale case 
studies  limits  any  analysis  of  the  liability  regimes  applicable  to  offshore  accidents.  This  chapter 
therefore  opens  with  a  brief  description  of  civil  liability  for  the  Deepwater  Horizon  incident. 
Following this, the chapter provides a detailed overview and analysis of legal regimes for third-party 
damage for offshore accidents in the EEA, before closing with an evaluation of the 'effectiveness' of 
the liability regimes in place and the appropriateness of broadening liability provisions. 

As  liability  regimes  seek  to  balance  the  interests  of  different  parties  following  an  accident,  their 
'effectiveness' is inherently subjective to those parties. Nevertheless, liability has an important role to 
play in maximising the social benefit of business operations (see  Introduction), an important holistic 
measure  of  effectiveness  for  the  purposes  of  this  document.  There  are  two  additional  principles  that 
this document will also take into account when evaluating the effectiveness of liability regimes in the 
Focal  States:  The  degree  to  which  liability  rules  facilitate  access  to  justice  and  the  degree  to  which 
they uphold the polluter-pays-principle. These reflect important societal considerations and,  as such, 
are respectively set out in Articles 67(4) and 191(2) of the Treaty on the Functioning of the European 
Union. 

In line with the above, the following criteria will inform the analysis in this Chapter:  

  The standard of liability, whether strict or fault-based; 
  The extent to which the law provides for all legitimate claims; 
  The application of tort law to the continental shelf and exclusive economic zone; 
  The  clarity  in  the  wording  of  legislation  establishing  civil  liability  for  pollution  damage  or 

dangerous activities which apply to offshore oil and gas accidents; 

  How courts have tended to interpret and implement the relevant legal legislation;  
  How the legal framework balances the interests of different marine and coastal stakeholders; 

and 

  The impact of liability rules on business operations. 

2.1  Civil liability for the Deepwater Horizon incident 

The  purpose  of  this  Section  is  not  to  present  US  law  as  a  normative  'yardstick,'  but  as  contextual 
information. It is intended to help readers understand how the EEA liability laws addressed in Section 
2.2 of this document might translate into damages awarded in the case of a major accident. 

Three main bodies of law in the United States establish liability for civil damages from offshore oil 
and  gas  accidents:  state  common  law;  state  oil  pollution  legislation;  and  –  more  importantly  –  the 
federal  Oil  Pollution  Act  of  1990  (OPA)  and  Clean  Water  Act  (1972).17  Claims  under  one  body  of 
applicable law may not bar persons bringing claims under another. However, the application of state 
law may be displaced by federal law should there be a conflict between the two, in accordance with 
the  United  States  Constitution  Supremacy  Clause.  In  the  Deepwater  Horizon  litigation  the  Court 

17 Claims may also be compensable under general maritime law if they somehow involve a vessel or are 
significantly connected with a maritime activity. This was deemed to be the case in the Deepwater Horizon 
litigation, as 'Deepwater Horizon' was a Mobile Offshore Drilling Unit treated by the US courts as a 'vessel' to 
which admiralty jurisdiction applies. 

12 

 
 
                                                            
applied CWA and OPA, as well as general maritime law, to pronounce on the liability of the defendant 
parties.18 

Civil  liability  can  be  broken  up  into  three  main  categories:  Bodily  harm,  property  damage  and 
economic  loss.  Whereas  claims  for  bodily  injury  and  property  damage  can  be  made  under  State 
common law, the OPA lists several complementary categories of compensable damages likely to result 
from an oil spill. Notably, Section 2702(b) of the OPA provides for claims for environmental damage, 
as well as claims for “[d]amages equal to the loss of profits or impairment of earning capacity due to 
the  injury,  destruction,  or  loss  of  real  property,  personal  property,  or  natural  resources”.19  This 
includes  certain  claims  for  pure  economic  loss,  although  see  Annex  I  of  this  report  for  a  detailed 
discussion on exactly what sorts of claims would be covered, which has been the subject of a complex 
legal debate.20 Liability under the OPA is strict. 

The  OPA  has  a  $75  million  liability  cap  for  civil  claims  excluding  clean-up  costs,21  however  BP 
waived this following the 2010 Deepwater Horizon incident, pledging to pay for all legitimate claims. 
Although  there  is  still  significant  uncertainty  regarding  the  total  costs  of  the  incident,  the  total 
cumulative charges recognized by the company stood at $42.7 billion at the end of 2013 – a figure that 
includes all clean-up costs, criminal settlements and the $20 billion Deepwater Horizon Oil Spill Trust 
that was set aside for compensation.22 The Gulf Coast Claims Facility (GCCF) was one a mechanism 
for settling claims drawn from the Trust. In its April 13, 2012 status report, the GCCF reported that 
over 96% of the $6.3 billion it had paid out to December 30, 2011 were for "lost earnings or profits" 
i.e. economic loss.23 

Overall, as of June 2014, BP had paid around $11 billion in civil compensation through the following 
four processes. (N.B. this figure does not include clean-up costs and criminal settlements.) The latter 
two processes are ongoing: 

1.  Initial BP claims programme (5 May 2010 to 22 August 2010): $399 million 
2.  Claims paid by the GCCF (23 August 2010 to 4 June 2012): $6.67 billion 
3.  Claims under the economic and property loss settlement agreement: ongoing 
4.  Claims under the medical benefits settlement agreement: ongoing 

We  therefore  see  that  the  legal  framework  constituted  by  state  common  law,  state  oil  pollution 
legislation  and  the  federal  OPA  and  CWA  in  the  United  States  recognised  all  major  categories  of 
damage  from  the  Deepwater  Horizon  incident,  albeit  with  a  cap  on  liabilities  voluntarily  waived  by 

18 In re Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, 745 F.3d 157. 
2014 AMC 1600 (5th Cir. 2014). 
19 33 United States Code s 2702(a). The United States Code is available from: www.law.cornell.edu/uscode/text.  
20 John C.P. Goldberg, Liability for Economic Loss in Connection with the Deepwater Horizon Spill, vol. 30, 7 
(22 November 2010), available from http://nrs.harvard.edu/urn-3:HUL.InstRepos:4595438. See 17 for all 
seventeen hypothetical claims, as well as more background to the debate. 
21 This is currently under review. See US Department of the Interior, Bureau of Ocean Energy Management, 
Consumer Price Index Adjustments of the Oil Pollution Act of 1990 Limit of Liability for Offshore Facilities, 
Proposed Rule, 79 Federal Register 10,056 (24 February 2014); available at http://www.gpo.gov/fdsys/pkg/FR-
2014-03-19/html/2014-06047.htm  
22 BP plc (2014) Annual Report and Form 20-F 2013, p.40. 
23 BDO Consulting (2012), ' Independent Evaluation of the Gulf Coast Claims Facility Report Of Findings & 
Observations to the U.S. Department Of Justice', US Department Of Justice, 
http://www.justice.gov/iso/opa/resources/66520126611210351178.pdf. 

13 

 
 
                                                            
BP24.  As  well  as  significant  clean-up  costs  and  criminal  settlements,  the  widespread  pollution 
following  the  incident  therefore  also  led  to  substantial  civil  liabilities,  in  particular  claims  for 
economic loss. 

2.2  Civil liability for offshore accidents in the EEA 

Table 2 below presents an overview of the legal regimes applicable to offshore accidents in the Focal 
States.  It  is  based  on  the  findings  of  a  study  done  for  the  European  Commission  to  address  the 
subject.25 Annex I of this document provides a more detailed description of these findings. 

The  tort  law  of  the  Focal  States  examined  has  evolved  over  a  long  period  and  is  part  of  the 
jurisprudence  of  each  country.  It  is  not  possible  to  directly  compare  the  words  or  provisions  in  the 
Civil Code of one  Target State with the same words in the Civil Code of another and conclude that 
they have the same meaning. Courts construe the meaning of words and provisions in Civil Codes and 
similar  legislation  in  the  context  of  the  tort  law  of  that  Target  State.  This  has  especially  important 
implications where the tort law of a country recognises pure economic loss, as claims for lost income 
or other losses from an offshore oil and gas incident will often be subject to subtle legal distinctions on 
criteria such as 'directness' or 'foreseeability' in order to succeed.  

For this reason, Table 2 addresses not only the availability of economic loss in each Target State but 
also whether courts are likely to be liberal or conservative with respect to the award of such claims, 
where  such  information  is  available.  In  certain  cases,  the  table  also  specifically  states  whether 
compensation for loss of income due to physical damage to un-owned resources is available – crucial 
for compensation to the fishing and tourist industries, as well as other coastal businesses following an 
offshore accident. 

Bulgaria 

Table 2: Civil liability for offshore accidents in Focal States 
Bodily  injury  and 
property damage 
•  Recognised  under 
a), b) and c) 
•  Unclear  whether 
strict  or  fault-based 
under a) 
•  Fault-based  under 
b) and c) 

Applicable 
legislation 
a) 
Law 
Obligations 
Contracts 
b)  Environmental 
Protection 
Act 
(probably not) 
c)  Water  Act 
(probably not) 

on 
and 

Economic loss 

Further comments 

Unclear 

• 
whether 
recognised  or  not  under 
a), b) and c) 
•  If  recognised,  damage 
must  be  a  direct  and 
immediate consequence 

• Liability uncapped 
•  Burden  concerning 
proof of fault under a) is 
i.e. 
reversed 
the 
tortfeasor 
(wrongdoer) 
must  show  they  did  not 
act with fault 

24 The cap of BP's liability under OPA was deemed by the Court to be removed on account of BP's violation of 
an applicable federal regulation concerning the cementing of the well, namely 30 C.F.R. §250.420(a)(2). See 
supra 18. 
25 BIO by Deloitte (2014), Civil liability, financial security and compensation claims for offshore oil and gas 
activities in the European Economic Area, Final Report prepared for European Commission – DG Energy. 

14 

 
 
 
 
                                                            
Croatia 

Applicable 
legislation 
Civil  Obligations 
Act 

Bodily  injury  and 
property damage 
• Recognised 
•  Unclear  whether 
strict  or  fault-based 
(no  precedent  on 
courts 
whether 
consider 
offshore 
activities 
'dangerous') 

Cyprus 

of  Civil 

Law 
Wrongs  

• Recognised 
• Fault-based 

Denmark 

France 

for 

a)  Subsoil  Act 
(section 35) 
b)  Liability 
Damages Act 
c)  Environmental 
Damage 
Compensation 
Act (perhaps) 
a) Civil Code 
b) Mining Code 

•  Recognised  under 
a) and b) 
• Strict under a) and 
c) 
•  Fault-based  under 
b) 

• Recognised 
• Fault-based 

Germany 

Water 
Act 

a) Civil Code 
b) 
Resources 
(perhaps) 
c)  Environmental 
Liability 
Act 
(perhaps) 

•  Recognised  under 
a), b) and c) 
•  Fault-based  under 
a) 
• Strict under b) and 
c) 

15 

Economic loss 

Further comments 

• Liability uncapped 
•  Production  Sharing 
Agreement  includes  an 
hold 
indemnity 
harmless  agreement  for 
compensation  and  other 
losses to the State 

and 

• Liability uncapped 
•  Production  Sharing 
imposes 
Contract 
liability 
bodily 
for 
injury,  property  damage 
and, 
pure 
perhaps, 
economic loss 
•  Production  Sharing 
includes  an 
Contract 
for 
indemnity 
the 
compensation 
State 
• Liability uncapped 

to 

• Liability uncapped 

• A limit of liability may 
exist  under  a  tort  cause 
of  action  to  which  strict 
liability applies 

• Recognised  
• 'Liberal' regime* 
•  Unclear  whether  strict 
(no 
fault-based 
or 
precedent  on  whether 
courts  consider  offshore 
activities 'dangerous') 
•  Claimant  must  show 
likelihood  and  intention 
of  making  a  profit,  and 
from 
that 
pollution 
is 
offshore 
likely 
the 
damage suffered 
• Recognised 
• Fault-based 
• Persons must have also 
suffered 
to 
property  in  which  they 
had  a  legal  interest,  or 
bodily injury 

accidents 
cause 

damage 

to 

•  Recognised  under  a) 
and b) 
• Strict under a) and c) 
• Fault-based under b) 
•  Claimant  must  show 
that loss is direct and that 
defendant’s 
act  was 
likely to cause the loss 
• Recognised 
• Fault-based  
• 'Liberal' regime*  
pure 
for 
•  Claims 
economic 
from 
loss 
physical  damage  to  “un-
owned  resources”  in  the 
public 
domain 
recoverable* 
•  Recognised  by  a)  and 
b) 
• Fault-based under a) 
• Strict under b) 
• 'Conservative' regime*  
•  Claimant  must  show 
that loss is direct and that 
business was established 
pure 
•  Claims 
economic 
from 
physical  damage  to  “un-
owned  resources”  in  the 
not 
public 
recoverable* 

for 
loss 

domain 

 
 
 
 
Economic loss 

Further comments 

• Liability uncapped  
•  Draft  Model  Lease 
obliges  a  lessee,  under 
strict  liability,  to  ensure 
adequate  compensation 
for  bodily  injury  and 
property damage 

• Liability uncapped  
•  Model 
includes  an 
and 
hold 
agreement 
compensation 
State 
• Liability uncapped 

Licence 
indemnity 
harmless 
for 
the 

to 

• Liability uncapped 

• Liability uncapped 

if 

for 
loss 

• Recognised under a) 
• Fault-based 
• 'Liberal' regime*  
• Claimant must show the 
defendant  was  likely  to 
cause  the  harm  and  that 
their  act  affected  an 
interest  protected  by  the 
law 
pure 
•  Claims 
economic 
from 
physical  damage  to  “un-
owned  resources”  in  the 
public domain unsettled* 
•  Recognised  under  a) 
and perhaps b) 
• Strict under a) 
• Fault-based under b) 
•  Unclear  whether  a) 
recognises 
pure 
economic loss 
•  Pure  economic 
loss 
may  be  available,  but 
loss  was 
only 
the 
and 
foreseeable 
significant, and even if so 
the claimant would face a 
heavy 
burden 
establishing liability 
• Fault-based, if available 
• Recognised 
•  Unclear  whether  strict 
or 
(no 
fault-based 
precedent  on  whether 
courts  consider  offshore 
activities 'dangerous') 
pure 
•  Claims 
from 
economic 
physical  damage  to  “un-
owned  resources”  in  the 
public domain unsettled* 
• Recognised 
•  Unclear  whether  strict 
or 
(no 
fault-based 
precedent  on  whether 
courts  consider  offshore 
activities 'dangerous') 
•  Claimant  must  show 
that loss is direct 

for 
loss 

Greece 

Applicable 
legislation 
a) Civil Code 
b) Law 1650/86 

Bodily  injury  and 
property damage 
•  Recognised  under 
a) and b) 
• Fault-based 

Iceland 

a)  Hydrocarbons 
Law 
b)  Tort  Damages 
Act 

•  Recognised  under 
a) and b) 
• Strict under a) 
•  Fault-based  under 
b) 

Ireland 

a)  Civil  Liability 
Act 
b) Common law 

•  Recognised  under 
a) and b) 
• Fault-based 

Italy 

Civil Code 

Latvia 

Civil Code 

• Recognised 
•  Unclear  whether 
strict  or  fault-based 
(no  precedent  on 
courts 
whether 
consider 
offshore 
activities 
'dangerous') 

• Recognised 
•  Unclear  whether 
strict  or  fault-based 
(no  precedent  on 
courts 
whether 
offshore 
consider 
activities 
'dangerous') 

16 

 
 
 
Lithuania 

Applicable 
legislation 
a) Civil Code 
b) 
Environmental 
Protection 

Law 

on 

Malta 

Civil Code 

Bodily  injury  and 
property damage 
•  Recognised  under 
a) and b) 
•  Unclear  whether 
strict  or  fault-based 
(no 
under 
a) 
on 
precedent 
courts 
whether 
offshore 
consider 
activities 
'dangerous') 
•  Fault-based  under 
b) 
• Recognised 
• Fault-based 

Netherlands  Civil Code 

• Recognised 
• Strict 

Norway 

•  Recognised  under 
a), b), c) and d) 
• Strict under a), b), 
c) and d) 

a) Petroleum Act 
b)  Pollution  and 
Waste Act  
c) Act Relating to 
Compensation  in 
Certain 
Circumstances  
d) Svalbard Act 

Poland 

a) Civil Code  
b) Mining Law 

•  Bodily  injury  and 
property 
damage 
recognised under a) 
•  Property  damage 
recognised under b) 
•  Unclear  whether 
strict  or  fault-based 
(no 
under 
a) 
on 
precedent 
courts 
whether 
consider 
offshore 
activities 
'dangerous') 
• Strict under b) 

17 

Economic loss 

Further comments 

• Liability uncapped 

• Liability uncapped 
•  Model  Production 
Sharing 
Contact 
imposes liability for any 
loss  or  damage  suffered 
the 
by  or  done 
Government, 
the 
environment  or  to  third 
parties. 
• Liability uncapped 

to 
to 

on 

•  The 
liability  of  a 
be 
tortfeasor  may 
reduced  under  a)  and  c) 
the 
depending 
circumstances 
a 
pollution incident 
• Categories of available 
loss 
economic 
to 
fishermen 
explicitly 
stated in a) 
• Liability uncapped 

of 

• Recognised under a) 
•  Unclear  whether  strict 
or  fault-based  under  a) 
(no precedent on whether 
courts  consider  offshore 
activities 'dangerous') 
• Fault-based under b) 
•  Unclear  whether  pure 
economic 
is 
available 

loss 

• Recognised 
• Fault-based 
•  Claimant  must  show 
that loss is direct 

for 
loss 

• Recognised 
• Strict 
pure 
•  Claims 
from 
economic 
physical  damage  to  “un-
owned  resources”  in  the 
public domain unsettled* 
•  Recognised  under  a), 
b), c) and d) 
•  Strict  under  a),  b),  c) 
and d) 

•  Recognised  under  a), 
but only if there is a high 
probability  of  the  loss 
from the tort 
•  Unclear  whether  strict 
or  fault-based  under  a) 
(no precedent on whether 
courts  consider  offshore 
activities 'dangerous') 
• 'Conservative' regime*  
pure 
•  Claims 
economic 
from 
physical  damage  to  “un-
owned  resources”  in  the 
public 
not 
recoverable* 

for 
loss 

domain 

 
 
 
 
 
Portugal 

Applicable 
legislation 
a) Civil Code 
b)  Decree-Law 
No.  147/2008  (if 
applicable) 
c)  Law  11/87  (if 
applicable) 

Romania 

a) Petroleum Law 
b)  New  Civil 
Code 

Spain 

Civil Code 

Bodily  injury  and 
property damage 
•  Recognised  under 
a), b) and c) 
• Strict under b) and 
c) 
•  Unclear  whether 
(no 
c) 
applies 
on 
precedent 
courts 
whether 
consider 
offshore 
activities 
'particlarly 
dangerous') 
•  Recognised  under 
a) and b) 
•  Fault-based  under 
a) and b) 
• Recognised 
• Fault-based 

United 
Kingdom 

Common law 

• Recognised 
• Fault-based 

Economic loss 

Further comments 

• Liability uncapped 

• Recognised under a) 
• Fault-based 
•  Claimant  must  show 
that loss is direct 
• 'Conservative' regime*  
pure 
•  Claims 
economic 
from 
physical  damage  to  “un-
owned  resources”  in  the 
public 
not 
recoverable* 

for 
loss 

domain 

• Recognised under b) 
• Fault-based 
• 'Conservative' regime*  

• Liability uncapped 

• Liability uncapped 

• Liability uncapped 
•  Model  Clauses  for  a 
an 
licence 
indemnity 
third-
party claims to the State 

include 
for 

domain 

• Recognised 
• Fault-based 
• 
be 
Loss  must 
foreseeable,  certain  and 
adequately proven 
• 'Liberal' regime* 
pure 
for 
•  Claims 
economic 
from 
loss 
physical  damage  to  “un-
owned  resources”  in  the 
public 
not 
recoverable* 
• Recognised 
• Persons must  have also 
suffered 
to 
property  in  which  they 
had  a  legal  interest,  or 
bodily injury 
pure 
•  Claims 
economic 
from 
physical  damage  to  “un-
owned  resources”  in  the 
public 
not 
recoverable* 

for 
loss 

damage 

domain 

*  Francesco  Parisi,  Vernon  V.  Palmer  and  Mauro  Bussani,  The  Comparative  Law  and  Economics  of  Pure 
Economic Loss, International Review of Law and Economics 16, 22 (George Mason University School of Law, 
Law  and  Economics  Research  Paper  No.  05-12  and  University  of  Minnesota  Law  School,  Legal  Studies 
Research 
https://www.lider-
lab.sssup.it/lider/it/home/documenti/doc_download/42-the-comparative-law-and-economics-of-pure-economic-
loss-francesco-parisi-vernon-v-palmer-mauro-bussani.html  

available 

2006); 

07-18, 

Paper 

No. 

at 

2.3 

Industrial agreements 

Although  it  is  an  industry  mutual  agreement,  and  therefore  primarily  addressed  in  Chapter  3  of  this 
document,  the  Offshore  Pollution  Liability  Association  Ltd  (OPOL)  forms  an  important  part  of  any 
analysis of civil liability for offshore accidents in the EEA because it  requires its members to accept 
strict  liability  for  damage  and  loss  as  a  condition  of  membership.  The  scheme  is  open  to  offshore 
operators  in  many  Focal  States  and  is  a  prerequisite  of  licensing  in  the  United  Kingdom  (UK).  It 
therefore  complements  existing  liability  legislation  even  though  it  is  a  voluntary,  non-legislative 
scheme. 

18 

 
 
 
When established in 1975, OPOL was intended to be an interim measure until a Convention of Civil 
Liability for Oil Pollution Damage resulting from Exploration for and Exploitation of Seabed Mineral 
Resources came into effect. However, the regional convention has not entered into force and is highly 
unlikely to  do so due to  a disagreement concerning its provisions. OPOL  has therefore continued in 
existence. 

OPOL  is  not  a  fund.  Following  an  incident,  claims  are  not  made  directly  against  OPOL  itself,  but 
against  the  member  company  liable  for  damage  and  loss.  Member  companies  agree  to  compensate 
claimants  according  to  certain  terms  and  conditions  (see  paragraph  below)  up  to  a  limit  of  $125 
million  for  remediation  costs  and  $125  million  pollution  damage.26  In  return,  they  benefit  from  a 
guarantee that other companies in the scheme will pay for any liabilities they are financially unable to 
pay  for  themselves  up  to  the  aforementioned  financial  limits.  This  mutualisation  of  insolvency  risk 
helps  reduce  insurance  costs  and  reassure  regulators  and  the  public  of  the  financial  capacity  of 
offshore operators. The industry scheme may also have reduced the need for more stringent liability 
laws.  

The OPOL Liability Agreement27 sets out the terms and conditions under which the members shall pay 
compensation in the event of a spill of oil from an offshore facility. Under this, members accept strict 
liability for remediation costs incurred by public authorities as well as “pollution damage”, defined as 
“direct loss or damage… by contamination which results from a Discharge of Oil”. There are therefore 
obvious benefits in this scheme for claimants in the UK, where liability is fault-based under common 
law.  

The scheme also adds a layer of industry scrutiny of financial responsibility over and above the checks 
performed by public authorities. In order to join OPOL, companies must provide proof that they would 
be able to cover liabilities set out in the OPOL Liability Agreement (see Section 3.2). This reassures 
current members that they probably will not have to bear the costs of any damage the applicant might 
cause, cross subsidizing their risk and violating the polluter-pays-principle. 

Notwithstanding  these  benefits,  a  study  done  for  the  European  Commission28  found  concerns  that 
OPOL may suffer from certain limitations from the viewpoint of a claimant. These include: 

 

 

 

 

 

the fact liable operators decide whether claims made against them are covered by the scheme 
i.e.  whether  damage  is  “direct”  and  whether  a  claim  is  “reasonable,  quantifiable  and 
justifiable”; 
the  $250  million  cap  on  reimbursement  and  compensation  per  incident  that  OPOL  covers, 
which may not cover all damage and loss from the worst accidents; 
the  lack  of  cover  for  claims  for  compensation  as  a  result  of  a  discharge  or  release  of  gas, 
dispersants or any substance other than oil; 
the inability of a person, other than a governmental entity, to claim compensation for remedial 
measures; 
the one-year limitations period to file a claim; 

26 Funds may be redistributed between these two categories should any surplus remain. 
27 OPOL (2014) 'Offshore Pollution Liability Agreement ("OPOL") (amended in Extraordinary General Meeting 
on 28 October 2013 to take effect on 1 January 2014)', http://www.opol.org.uk/downloads/OPOL-Agreement-
01Jan14.pdf. 
28 For further details, see BIO by Deloitte (2014), Civil liability, financial security and compensation claims for 
offshore oil and gas activities in the European Economic Area, Final Report prepared for European Commission 
– DG Energy, pp. 152-159. 

19 

 
 
                                                            
 

 

the (perceived at least) requirement to enter into an arbitration agreement with the operator in 
order to file a claim under OPOL; 
the  lack  of  a  requirement  to  show  a  minimum  net  worth,  a  positive  net  income,  or  similar 
indications  that  a  member  of  OPOL  is  sufficiently  financially  secure  to  pay  claims  if  they 
arise. 

OPOL  does  not  bar  a  claimant  bringing  an  action  against  the  operator  (or  other  persons)  in  a  court. 
However, if the claimant does so, national law would apply and not the OPOL Liability Agreement. If 
the applicable jurisdiction placed a heavy burden on the claimant in establishing liability, there would 
be  a  strong  incentive  to  comply  with  the  procedures  set  out  by  OPOL  despite  the  shortcomings 
mentioned above. 

2.4  Contractual agreements 

Another way of complementing liability legislation is to impose more stringent liability rules through 
contractual agreements, an option that seems to have been chosen by Cyprus and Greece.  

The  Production  Sharing  Contract  for  Cyprus  appears  to  impose  strict  liability  for  bodily  injury  and 
property  damage  whereas  liability  under  the  Law  of  Civil  Wrongs  is  fault-based.  The  Contract 
provides that “[t]he Contractor shall indemnify and compensate any person, including the Republic [of 
Cyprus],  for  any  damage  or  loss  which  the  Contractor,  its  employees  or  subcontractors  and  their 
employees may cause to the person, the property or the rights of other persons, caused by or resulting 
from  Hydrocarbons  Operations,  including  any  environmental  damage”.  The  meaning  of  the  word 
“rights”  is  not  entirely  clear.  It  may  mean,  for  example,  the  right  to  occupy  or  to  use  property.  The 
Contract does not appear to provide liability for pure economic loss. 

Likewise,  the  Draft  Model  Lease  Agreement  for  Greece  provides  that  the  lessee  agrees  “to  take  all 
necessary and adequate steps… to ensure adequate compensation for injury to persons or damage to 
property  caused  by  the  effect  of  the  Petroleum  Operations”.  If  the  agreement  imposes  liability  on  a 
lessee, this liability does not appear to extend to pure economic loss. 

Under  the  Cypriot  and  Greek  contractual  agreements,  only  the  State  has  the  right  to  require  the 
licensee / lessee to carry out its obligations under the contract. Claimants do not have any rights under 
the contracts so would need to persuade the State to act on their behalf. The contractual provisions do 
not explicitly unpack the details of the type of claims that are covered. 

2.5  Economic loss and the floodgates issue 

Sections  2.2  to  2.4  above  show  that,  the  law  in  Focal  States  always  provides  for  claims  for  bodily 
injury and property damage from offshore accidents. They also show that liability for offshore oil and 
gas  accidents  is  almost  always  financially  uncapped  in  the  EEA.29  Apart  from  this,  however,  Focal 
States  handle  civil  liability  for  such  accidents  very  differently  and  there  is  sometimes  uncertainty 
surrounding how their legal systems would deal with the variety of civil claims that could result. The 
following sections in this Chapter describe and discuss these differences and uncertainties in greater 
detail. 

29 An exception to this general rule is Germany, in which a limit of liability may exist under a tort cause of action 
to which strict liability applies. 

20 

 
 
                                                            
An  important  finding  is  that  the  legal  regimes  of  Focal  States  handle  liability  for  economic  loss  in 
different  ways.  They  limit  economic  loss  claims  based  on  the  'directness'  of  the  loss  suffered30  to 
different degrees, or even exclude them outright in the absence of bodily harm or property damage (the 
exclusionary  rule).31  'Pure'  economic  losses  such  as  these  are  sometimes  deemed  too  remote  and 
speculative  to  be  laid  at  the  defendant’s  door.  It  is  important  to  note,  however,  that  all  Focal  states 
limit economic loss claims in some way. 

To  illustrate,  claimants  that  seem  unlikely  to  obtain  redress  in  certain  Focal  States  include  ferry 
companies and businesses that process fish affected by a ban on fishing. The economic losses suffered 
by such claimants may not arise directly from a spill, but the experience of Deepwater Horizon tells us 
that  they  can  still  comprise  a  sizeable  portion  of  the  damage  from  an  offshore  accident  on  rare 
occasions. This may affect the fishing and tourism industries in these Focal States, which comprise a 
great number of small and medium-sized enterprises (SMEs), as well as other sectors that rely on the 
good condition of the shared marine environment for their business. 

Text Box 1: Direct and remote damage 

Besides the exclusionary rule, the tort law Focal States recognises only 'direct' claims and not claims for 
damage and loss that are remote from the event causing the harm. For example, a court may consider that the 
income lost by a fisherman due to a fishing ban is direct because pollution directly affects the fish in the sea: 
there is no person between the fish and the fisherman to make the harm indirect. However, a court may 
consider that a claim for lost income by a seaside hotel is indirect because it results from the decisions of 
people that would have come to the hotel but for the oily beaches, i.e. there is a legal or natural person 
between the polluted beach and hotel that makes the claim more remote. 

Insofar  as  the  legislation  in  Focal  States  excessively  limits  economic  loss  claims,  it  creates 
externalities  and  disincentivizes  firms  from  taking  the  appropriate  steps  to  reduce  accident  losses. 
However, there are valid reasons for limiting liability for economic loss, in particular liability for pure 
economic loss.  

The court proceedings following the Deepwater Horizon incident show that oil spill claims litigation 
can be complex and that a practical balance needs to be struck between the need to compensate victims 
fully and the danger of inviting illegitimate claims. Setting well-defined and well-designed parameters 
is essential to achieving this. 

The  major  argument  against  the  recognition  of  pure  economic  loss  is  the  “floodgates”  issue:  If 
unlimited  liability  for  economic  loss  is  recognised,  the  floodgates  would  be  open  and  it  would  be 
impossible  to  prevent  the  payout  of  remote  claims  that  society  would  not  view  as  legitimate.  The 
difficulty  lies  in  the  fact  that  economic  losses  are  likely  to  be  serially  linked  to  one  another  in  an 
interdependent,  modern  economy.  It  is  therefore  necessary  to  set  reasonable  limits  to  the  extent  to 
which  the  more  remote  economic  impacts  of  an  accident  should  be  compensable  to  avoid  excessive 
liability and introduce certainty on levels of financial responsibility. 

Member  State  differences  on  economic  loss  often  extend  beyond  the  offshore  sector,  to  general  tort 
law. Whilst Member States handle economic loss claims differently, these differences often stem from 
well-established  legal  traditions  and  may  reflect  societal  preferences  on  how  to  resolve  grievances 

30 This is the case in Bulgaria, Croatia, Denmark, Germany, Greece, Iceland, Italy, Latvia, Lithuania, Malta, the 
Netherlands, Norway, Poland, Portugal, Romania, and Spain. 
31 This is the case in Cyprus and the UK. 

21 

 
 
 
                                                            
fairly.  These  factors  influence  the  kinds  of  claims  considered  legitimate  by  Member  State  justice 
systems,  as  well  as  the  principles  that  courts  use  to  differentiate  between  legitimate  claims  and 
ordinary risks faced by participants in the economy. 

2.6  Strict liability and the negligence rule 

Another  key  finding  is  that  offshore  accidents  mostly  fall  under  the  tort  law  of  Focal  States  and 
therefore the negligence rule usually applies.32 Here, claimants must prove negligence in order to win 
damages.33 Courts rule on whether the liable party breached a standard of care by weighing the risk of 
their activity against the cost and effectiveness of precautions to reduce this risk. As well as serving an 
important societal utility function, the negligence rule also reflects the moral position that recklessness 
should be more blameworthy than conduct with due care.34  

Where purpose-built legislation is in place, strict liability usually applies.35 Strict liability also applies 
under the Offshore Pollution Liability Association Ltd (OPOL), membership of which is a prerequisite 
for offshore operations in the UK (see Section 2.7). Under a strict liability rule, the polluter pays for 
the  damage  and  loss  his  conduct  causes  the  victim  regardless  of  whether  it  can  be  proved  he  was 
negligent. Strict liability makes it easier for a claimant to gain compensation, but it does not mean all 
claims will succeed. As a safeguard against excessive liability, claimants must still establish causation 
and damage. 

Strict liability may sometimes also apply under special sections of the Civil Code or common law that 
deal with so-called 'dangerous activities'. However, this document finds that there is almost always a 
lack of legal precedent that would clearly classify offshore operations as 'dangerous' where this is the 
case.36 

The literature suggests that strict liability may have a number of benefits when applied to offshore oil 
and  gas  operations.  As  information  about  offshore  accidents  can  be  scarce,  monitoring  problematic 
and damage diffuse, strict liability reduces the ability of firms to unduly benefit from the difficulty of 
establishing legal proof of negligence to avoid paying out for legitimate claims. Under the negligence 
rule,  the  burden  usually  falls  on  claimants  to  present  enough  information  to  prove  a  breach  of  the 
standard  of  care.  However,  information  relevant  to  this  –  the  frequency  of  accidents  or  the cost  and 
efficacy  of  countermeasures,  for  example  –  may  only  be  available  to  the  liable  party.  Furthermore, 
where  such  information  is  available,  interpreting  it  may  be  unfeasibly  complex,  particularly  when 
dealing  with  high-impact,  low-probability  events.  Strict  liability  therefore  removes  a  heavy  bias 
against offshore accident claimants.37 

32 This is the case in Bulgaria, Croatia, Cyprus, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, 
Malta, Poland, Portugal, Spain and the UK. Significant claims in Germany, Portugal and Romania are also likely 
fall under the tort law. Although offshore accidents fall under the tort law of the Netherlands, liability is strict. 
33 The exception to this is fault-based tort law in Bulgaria, where the tortfeasor bears the burden of showing that 
it did not act with fault. 
34 'Origin of the Modern Standard of Due Care in Negligence', Washington University Law Quarterly, 1976, 3, 
447-479. 
35 This is the case in Denmark, Iceland and Norway. Certain claims in Germany may also fall under purpose-
built legislation in which liability is strict. Although some claims may fall under purpose-built legislation in 
Bulgaria and Lithuania, liability is fault-based. 
36 This is the case in Croatia, Italy, Latvia, Lithuania, Poland and Portugal. 
37 'Origin of the Modern Standard of Due Care in Negligence', Washington University Law Quarterly, 1976, 3, 
447-479. 

22 

 
 
                                                            
Strict  liability  reduces  transaction  costs  following  an  offshore  accident.  It  does  this  by  speeding  up 
compensation as there is no need for legal proceedings to establish fault beforehand. Furthermore, it 
facilitates the quick settlement of lawsuits by reducing uncertainty about probable judgements. As the 
costs of accidents tend to rise steeply with time and major accidents may involve a large number of 
victims, all parties may share an interest in this.38 

Finally,  strict  liability  better  internalizes  accident  costs  and  helps  to  achieve  greater  efficiency. 
Although  the  negligence  rule  incentivizes  firms  to  exercise  the  standard  of  care  in  carrying  out  an 
activity, it does not lead these firms to moderate the level of this activity because this is not normally a 
part of determining negligence. This is a problem where adherence to the standard of due care does not 
fully  eliminate  the  possibility  of  accidents.39  Here,  uncompensated  damage  from  claims  in  which 
victims  are  unable  to  prove  negligence  becomes  an  external  cost,  leading  to  underdeterrence.  The 
higher  administrative  cost  of  establishing  negligence  compounds  this  by  discouraging  victims  from 
seeking redress.40 Holding a firm strictly liable for the injuries caused in producing a good could help 
ensure that accident costs are reflected in the price of that good. This, in turn, provides a price signal 
that  moderates  the  demand  for  more  dangerous  goods  and  encourages  consumers  to  select  safer 
alternatives. 

2.7 

Incentivizing precautionary measures among potential victims 

Liability  can  be  limited  in  several  ways.  As  well  as  the  negligence  rule,  exclusionary  rule  and 
directness  provisions,  all  discussed  above,  liability  may  also  be  financially  capped.  Liability  is 
generally uncapped in the Focal States. Only Germany applies a financial cap, and only under certain 
conditions.41 

No  matter  how  it  is  done,  however,  limiting  liability  for  offshore  accidents  encourages  potential 
victims to take precautions against the harms they could be exposed to. If this is cheap for them to do 
and effective, then the combined costs of accidents and precautions would decrease, which would be 
socially beneficial. However, while this may work for many kinds of accidents – road traffic accidents, 
for example – it seems less relevant for offshore accidents. There is little that many potential victims 
could reasonably do to reduce the economic impact of an oil spill. 

2.8  Liability and enterprise 

Although  subsidies  are  commonly  understood  as  the  direct  budgetary  support  of  governments,  the 
OECD  has  concluded  that  "there  is  no  universally  accepted  definition  of  a  subsidy"42  and  instead 
defines  subsidies  as  "any  measure  that  keeps  prices  for  consumers  below  market  levels,  or  for 
producers above market levels or that reduces costs for consumers and producers."43 

38 An alternative view is that strict liability can encourage illegitimate claims, thereby increasing transaction 
costs in weeding these out. Shavell, S. (2010) The Corrective Tax versus Liability as Solutions to the Problem of 
Harmful Externalities, Harvard Law and Economics Discussion Paper No. 671.  
39 Shavell, S. (1980) 'Strict Liability versus Negligence', Journal of Legal Studies, 9, 1-25. 
40 Calabresi, G. & Hirschoff, J. (1972) 'Toward a Test for Strict Liability in Torts', Yale Law Journal, 81, 6, 
1055-1085. 
41 See Table 2, the Civil Liability Convention and the Fund Convention, which impose liability for pollution 
damage from ships, as well as the US Oil Pollution Act described in Section 2.1. 
42 OECD (2006), 'Subsidy Reform and Sustainable Development: Economic, Environmental and Social Aspects', 
OECD Sustainable Development Series. 
43 OECD (1998), Improving the environment through reducing subsidies: Part 1. 

23 

 
 
                                                            
Viewed  in  this  light,  limiting  liability  for  offshore  accidents  can  be  seen  as  an  indirect  subsidy.  If 
occasional  accidents  are  a  normal  part  of  doing  business  for  offshore  oil  and  gas  firms  –  albeit  an 
unwelcome part – then a permissive liability regime effectively provides these firms with an  ex post 
payout following an accident as uncompensated victims bear some of the costs of their doing business. 
Risk is reallocated from the firm to society. 

On the one hand, because the 'orphan shares' of pollution damage represent external costs, they could 
diminish  social  welfare  in  the  same  way  any  arbitrary  tax  or  subsidy  would  (see  final  paragraph  of 
Section 2.6). 

On the other, liability can also be deliberately limited in spite of these concerns as a practical measure 
to  facilitate  enterprise.  The  general  concept  has  other  analogues  in  the  economy.  For  example, 
encouraging  enterprise  is  the  explicit  goal  of  the  limited  liability  business  structure.44  Although 
controversial  when 
is 
acknowledgement that the benefits of limiting potential losses faced by shareholders far outweigh the 
cost of a slightly higher risk of debt default.45 

the  widespread  acceptance  of 

introduced, 

initially 

liability 

limited 

The offshore sector's external benefits46 are numerous and include substantial tax revenues (see Text 
Box 2), employment, energy security and improving the trade balance. Given that the combined value 
of  these  benefits  may  be  very  significant,  the  state  could  seek  to  provide  some  level  of  public  risk 
funding  to  the  sector  as  a  Pigouvian  subsidy  –  a  subsidy  that  recognizes  the  external  benefits  an 
activity brings. Almost all economic activity produces some form of risk. Provided this subsidy does 
not result in significantly increased accident costs, then it could respect legitimate societal interests. 

Text Box 2: Effective rate of taxation on oil produced in the UK or UK Continental Shelf, 2012-201347 

The UK accounts for the largest levels of offshore oil production in the EU. Producers of oil in the UK or 
UK Continental Shelf were subject to corporation tax and supplementary charge to corporation tax, at 30% 
and 32% respectively for the financial year to 31 March 2013. In addition, depending on the date on which 
the government gave its initial consent to the development of a field, that producer may also be subject to 
petroleum revenue tax (PRT), at 50%. Combined, these taxes result in a government take of between 62% 
and 81% on the production value of oil, depending on whether the field was chargeable to the PRT or not. 

A  more  limited  liability  regime  will  lower  the  costs  of  doing  business  for  many  offshore  firms  by 
introducing greater certainty on levels of financial responsibility. It may also allow firms reduce the 
precautions necessary for risk-neutral operations and take out lower limits of indemnity, discounting 
insurance premiums (see Chapter 3). Reducing barriers to entry and increasing competition within the 
offshore sector will help to ensure the efficient development of oil and gas resources, along with any 
aggregate social benefits this brings. 

Nonetheless, there are numerous ways for the state to encourage enterprise and a full discussion of the 
relative  merits of doing  this through  the civil liability regime is beyond  the scope of this document. 
The  findings  presented  here  suggest  that  there  is  no  prima  facie  relationship  between  the  variety  of 

44 This protects owners' assets in the case of default by the company they invested in. Acceptance of this 
principle by businesses and governments was a vital factor in the development of equity finance, often credited 
with helping to drive the industrial revolution. 
45 Easterbrook, F. & Fischel, D, (1985) 'Limited Liability and the Corporation', University of Chicago Law 
Review, 52, pp 89-117. 
46 Benefits arising from any activity that do not accrue to the entities carrying out that activity. 
47 KPMG (2012) ' A Guide to UK Oil and Gas Taxation', www.kpmglaw.no/document-file275. 

24 

 
 
 
                                                            
 
civil  liability  regimes  in  place  and  the  health  of  the  oil  and  gas  industry  in  Focal  States.  If  such  a 
relationship  did  exist  –  i.e.  if  firms  operating  in  less  stringent  liability  regimes  benefitted  from  a 
competitive advantage over those in more stringent regimes – the absence of a level playing field for 
civil liability might raise EU competition questions. 

2.9  Beyond territorial waters 

Preliminary research for the European Commission48 did not locate laws to extend jurisdiction for the 
relevant  civil  legislation  for  offshore  accidents  to  the  Continental  Shelves  and  Exclusive  Economic 
Zones  in  certain  Focal  States.  This  raised  the  possibility  that  at  least  some  have  not  enacted  such 
legislation,  a  legal  loophole  that  may  hamper  redress  for  civil  damage  resulting  from  offshore 
activities in some Focal States. 

Nevertheless,  there  is  case  law  that  suggests  any  litigation  over  the  issue  would  be  resolved  in  a 
manner favourable to claimants. A landmark judgement of the International Court of Justice49 found 
that  a  coastal  State  has  rights  in  respect  of  the  area  of  the  continental  shelf  by  virtue  of  the  coastal 
State’s sovereignty over the land and by extension of that sovereignty in the form of the exercise of 
sovereign  rights  for  the  purposes  of  the  exploration  of  the  seabed  and  the  exploitation  of  its  natural 
resources. Any installations and devices on the continental shelf are therefore under the jurisdiction of 
the coastal State.50 

2.10  Transboundary compensation: Jurisdiction and applicable law 

The  sections  above  have  highlighted  that  there  are  sometimes  significant  differences  between  the 
liability  regimes  of  Focal  States.  As  offshore  accidents  can  have  a  large  geographical  footprint  and 
cross the waters of many countries, this raises the question of how claimants in countries outside of the 
country of the origin of the accident will be treated under the law. The following section looks at the 
legal framework for liability for transboundary damage resulting from offshore accidents. 

In any case of transboundary compensation, three interdependent questions of private international law 
must be resolved: 

1.  Jurisdiction: Which court/s should try the case?  
2.  Choice of law: What law/s should that court apply?  
3.  Foreign judgements: Will a judgment be recognised or enforced in another country? 

Whilst some of these issues are resolved by individual countries´ conflict of laws rules, many are the 
subject of international conventions.  

As  for  the  EU  Member  States,  the  Brussels  I  Regulation  on  jurisdiction  and  the  recognition  and 
enforcement  of  judgments51  and  the  Rome  II  Regulation  on  the  law  applicable  to  non-contractual 

48 BIO by Deloitte (2014), Civil liability, financial security and compensation claims for offshore oil and gas 
activities in the European Economic Area, Final Report prepared for European Commission – DG Energy. 
49 North Sea Continental Shelf (F.R.G. v. Den.; F.R.G. v. Neth.), 1969 I.C.J. 3 (Feb. 20) http://www.icj-
cij.org/docket/index.php?sum=295&code=cs2&p1=3&p2=3&case=52&k=cc&p3=5. 
50 See also Case C-37/00 Weber v Universal Ogden Services Ltd. [2002] ECR I-02013, http://eur-
lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:62000CJ0037&qid=1412947852756&from=EN. 
51 Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and 
enforcement of judgments in civil and commercial matters. OJ L 012 (16 January 2001), http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:012:0001:0023:en:PDF. 

25 

 
 
                                                            
obligations52 are two EU regulations that respectively determine the court having jurisdiction and the 
conflict of law rules in transboundary claims for third party damage. 

As regulations, Brussels I and Rome II are directly applicable. They can be invoked and relied upon in 
the national courts of the Member States bound by them and these courts must interpret them in line 
with  their  wording  and  purpose.  While  the  Brussels  I  Regulation  applies  to  all  the  Member  States 
(including Denmark, on the basis of a 2005 parallel agreement between the Union and Denmark53), the 
Rome II Regulation applies to all the Member States with the exception of Denmark. The rules of the 
Brussels  I  Regulation  have  been  extended  to  Switzerland,  Norway,  and  Iceland  on  the  basis  of  the 
2007 Lugano Convention54 on the same subject. It should be noted that the Brussels I Regulation and 
the Lugano Convention generally apply whenever the defendant in legal proceedings is domiciled in 
the EU/EEA; if the defendant is domiciled in a third State, national law applies. 

The general jurisdiction rule under the Brussels I Regulation (Article 2) of the Brussels I Regulation is 
that  civil  legal  proceedings  must  be  brought  before  the  courts  of  the  Member  State  where  the 
defendant  (e.g.  the  operator  of  the  installation)  is  domiciled.  In  addition,  Article  5  of  the  Brussels  I 
Regulation provides for alternative jurisdictional grounds: 

  Article 5(3) states that civil non-contractual or tort claims may be tried "in the courts for the 
place where the harmful event occurred or may occur". There is an extensive ECJ case law on 
the  meaning  of  'the  place  where  the  harmful  event  occurred  or  may  occur'  which  tends  to 
interpret this article in terms that are favourable to victims.55 Claimants/victims may choose to 
bring proceedings before the courts of the country where the damage originated or the courts 
of the country where the damage was sustained. In case the injured party sustained damage in 
multiple States, the courts of the place where the event giving rise to the damage occurred and 
the court of the State of the defendant's domicile have jurisdiction to hear the action regarding 
all damages caused by e.g. an oil spill, wherever such damages have occurred. The courts of 
the  place  where  the  damages  are  sustained,  on  the  other  hand,  only  have  jurisdiction  with 
regard to damage sustained in its own (the forum) State. 

  Under Article 5(4), if the civil claim for damages is brought on the basis of an act giving rise 
to  criminal  proceedings,  the  victims  could  also  bring  the  case  in  the  court  seised  of  those 
proceedings,  to  the  extent  that  the  court  has  jurisdiction  under  its  own  law  to  hear  civil 
proceedings.  

The court with jurisdiction will determine the law applicable to the dispute on the basis of the Rome II 
Regulation. Article 4 of the Rome II Regulation contains the general rule on applicable law regarding 
non-contractual  liability.  The  governing  law  will  be  the  law  of  the  country  in  which  the  damage 

52 Council Regulation (EC) No. 864/2007 on the law applicable to non-contractual obligations. OJ L 199/40 (31 
July 2007), http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32007R0864&rid=1. Non 
contractual law is the law which determines whether one who has suffered a damage can on that account demand 
reparation from another with whom there may be no other legal connection than the causation of damage itself. 
53 Agreement between the European Community and the Kingdom of Denmark on jurisdiction and the 
recognition and enforcement of judgments in civil and commercial matters, OJ L 299, 16.11.2005, http://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2005.299.01.0061.01.ENG. 
54 Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 
2007, 
http://ec.europa.eu/world/agreements/prepareCreateTreatiesWorkspace/treatiesGeneralData.do?redirect=true&tr
eatyId=7481. 
55 Case 21/76 Bier v Mines de Potasse d' Alsace [1976] ECR 1735, 
http://curia.europa.eu/juris/showPdf.jsf?text=&docid=89372&pageIndex=0&doclang=EN&mode=lst&dir=&occ
=first&part=1&cid=438806. 

26 

 
 
                                                            
occurs, irrespective of the country in which the event giving rise to the damage occurred. Article 7 of 
the Rome II regulation specifically addresses "environmental damage or damage sustained by persons 
or  property  as  a  result  of  such  damage".  According  to  this  article,  a  person  seeking  transboundary 
compensation for such damage within the EU can choose whether to base the claim on either the law 
of the country where the damage occurred or on the law of the country where the event giving rise to 
the damage took place. This law shall apply irrespective of whether it is the law of a Member State or 
of a third country. 

The  parties  to  a  dispute  may  also  agree  on  the  law  applicable  to  their  dispute,  subject  to  certain 
limitations and conditions contained in Article 14 of the Rome II Regulation. For example, unless they 
are both pursuing  a commercial activity, such an agreement  can only be entered  into  after the event 
giving rise to the damage and not before. 

The  Rome  II  Regulation  only  determines  which  national  law  shall  be  applied.  The  national  law 
designated by the conflict rule will then provide the answer to questions such as: what is the basis and 
extent  of  liability,  what  are  the  grounds  for  exemption  from  liability,  the  assessment  of  damage 
claimed, who are the persons entitled to compensation and what is the manner in which an obligation 
may  be  extinguished.  The  national  laws  of  Member  and  third  States  differ  on  these  matters.  The 
application of Rome II therefore means that, depending on where a lawsuit is brought, the courts of a 
Member State which apply the Rome II Regulation may apply a foreign law which differs from the 
law  applicable  in  their  own  country.  As  such,  courts  may  recognise  claims  for  pure  economic  loss 
even  if  in  their  own  country  such  loss would  not give  rise  to  compensation  or  the  level  or  scope  of 
compensation for pure economic loss may be different. The same would be true for the determination 
of the amount of recoverable damages, which may also differ depending on the applicable law.56 

Recital 25 of the regulation outlines the reasoning for giving the victim a unilateral choice between the 
two laws most closely linked to the damage:  

Article  174  of  the  Treaty,  which  provides  that  there  should  be  a  high  level  of 
protection  based  on  the  precautionary  principle  and  the  principle  that  preventive 
action should be taken, the principle of priority for corrective action at source and the 
principle that the polluter pays, fully justifies the use of the principle of discriminating 
in favour of the person sustaining the damage.  

Regarding  accidents  on  the  continental  shelves  or  exclusive  economic  zones  of  Member  States,  the 
ECJ case law seems to indicate that for the purposes of applying EU law, the territories of the Member 
States comprise their respective continental shelves and exclusive economic zones. In the context of an 
employment dispute, the ECJ held that: "work carried out on fixed or floating installations positioned 
on the continental shelf, in the context of the prospecting and/or exploitation of natural resources, is to 
be regarded as work carried out in the territory of that State for the purposes of applying EU law"57 
(see also Section 2.9). Therefore, it may be assumed that Member States' courts may have jurisdiction 
and  their  laws  may  apply  if  an  accident  occurred  on  their  respective  continental  shelve  or  in  their 
exclusive economic zone. 

56 See Wall v Mutuelle de Poitiers Assurances [2014] EWCA Civ 138, paragraph 17 (Court of Appeal) 
(England) (quoting Andrew Dickinson, The Rome II Regulation; A Commentary, paragraph 14.19 (Oxford 
University Press, 2009)); available from http://www.bailii.org/ew/cases/EWCA/Civ/2014/  
57 Case C-347/10 Salemink [2012], 
http://curia.europa.eu/juris/document/document.jsf?text=&docid=118001&pageIndex=0&doclang=EN&mode=l
st&dir=&occ=first&part=1&cid=439632. 

27 

 
 
                                                            
It is important to note that the Brussels I and Rome II Regulations ensure access to the Union courts 
and  determine  the  applicable  law  for  any  claimant  in  proceedings  pending  before  the  courts  in  the 
Union, irrespective of whether such claimant is from an EU Member State or from a third State. This 
means that, for example, Norwegian victims of an offshore accident which took place in the UK may 
launch claims for damages before the UK court (as the place where the event giving rise to the damage 
occurred).  The  UK  court  may  apply  Norwegian  liability  rules  (as  the  law  of  the  place  where  the 
damage  occurred).  At  the  same  time,  because  of  the  territorial  scope  of  application  of  the  Rome  II 
Regulation, victims located in the EU, while they have access to the Norwegian courts (pursuant to the 
Lugano Convention) may not have the same rights before Norwegian courts. For example, victims in 
the  UK  suffering  damage  as  a  result  of  an  offshore  accident  in  Norway  may  initiate  proceedings  in 
Norway  but  their  ability  to  invoke  the  liability  regime  of  the  UK  is  subject  to  the  conflict  of  law 
provisions applicable in Norway.  

The Brussels I and Rome II Regulations provide important avenues for settling conflicts of jurisdiction 
and conflicts of laws questions in the context of transboundary claims for damage caused by offshore 
accidents in a way that is favourable to victims, without introducing EU-wide liability legislation. One 
limitation, however, lies in the applicability of Rome II, which does not apply to Denmark or Norway 
–  two  countries  which  together  are  responsible  for  half  of  all  oil  and  gas  production  in  the  EEA. 
Although  Denmark  is  an  EU  Member  State,  it  does  not  generally  participate  in  EU  civil  justice 
matters.  

2.11  Conclusions 

Whereas  the  law  in  Focal  States  always  provides  for  claims  for  bodily  injury  and  property  damage 
from offshore accidents,  there are significant  differences regarding  the standard  of liability (strict or 
fault-based) and liability for economic loss. 

Civil  liability  for  offshore  accidents  in  most  Focal  States  is  limited  by  legal  proof  of  negligence, 
requirements  on  the  directness  of  economic  loss  suffered  and/or  an  outright  bar  on  the  payment  of 
compensation for economic loss in the absence of bodily injury or property damage (the "exclusionary 
rule"). Ambiguity in the relevant legal texts may also make some economic loss claims uncertain. 

In Denmark, France, Iceland and the Netherlands compensation for damage and loss, including pure 
economic loss, is available through either tort law or specific pollution legislation. Fewer limitations 
apply stemming from the need to establish proof of negligence or directness provisions. A degree of 
ambiguity in the relevant legal texts may, however, still make some economic loss claims uncertain. 

Norway has put in place comprehensive legislation to deal with civil liability for offshore pollution. 
This  imposes  strict  liability  for  bodily  injury,  property  damage  and  economic  loss,  including  pure 
economic  loss,  albeit  with  limitations  stemming  from  the  need  to  establish  that  the  economic  loss 
suffered was sufficiently direct. It also specifically states that “financial losses incurred by Norwegian 
fishermen as a result of the petroleum activities” are compensable. 

Whilst  UK  authorities  require  membership  of  OPOL,  there  are  questions  as  to  how  binding  and 
comprehensive  coverage  under  OPOL  may  be  in  practice.  Issues  include  the  fact  that  the  liable 
operators themselves decide whether claims made against them are valid and the current liability cap 
on compensation. 

Likewise, the reliance of Greece and Cyprus on contractual law to complement their Civil Codes has 
some drawbacks. Only the State has the right to require the licensee/lessee to carry out its obligations 

28 

 
 
under the contract. Claimants do not have any rights under the contracts, so would need to persuade 
the State to act on their behalf. Further, the contractual provisions do not specify  the type of claims 
that are covered. 

We therefore see that while the law in Focal States provides for claims for bodily injury and property 
damage  from  offshore  accidents,  there  are  differences  between  Focal  States  regarding  liability  for 
certain  kinds  of  more  remote  or  indirect  economic  loss.  This  has  implications  for  the  fishing  and 
tourism  industries,  as  well  as  other  sectors  that  rely  on  the  good  condition  of  the  shared  marine 
environment  for  doing  business.  Experience  has  shown  that  in  these  sectors,  which  include  many 
SMEs, could suffer significant economic loss in the event of a major offshore accident. 

Legal proof of negligence for bodily injury, property damage and economic loss is another area where 
Focal States differ from one another. Offshore accidents mostly fall under the tort law of Focal States 
and  therefore  the  negligence  rule  usually  applies.  Here,  claimants  must  prove  the  negligence  of 
wrongdoers (tortfeasors) in order to win damages and courts rule on whether the liable party breached 
a standard of care. The negligence rule helps to ensure negligent acts are penalized more severely, but 
it increases the burden that claimants face in establishing liability. 

Strict liability for accident damage and loss incentivises firms to carry out their operations with even 
greater  care.  Whilst  not  practicable  or  desirable  for  general  application,  strict  liability  may  have 
benefits  when  applied  to offshore  accidents  because  it  reduces  the  ability  of firms  to  unduly  benefit 
from the difficulty of establishing legal proof of negligence to avoid paying out for legitimate claims. 
In  addition,  it  reduces  the  transaction  costs  to  both  liable  parties  and  claimants  by  speeding  up 
compensation  –  essential  for  lowering  total  accident  costs  where  a  great  number  of  victims  are 
affected. 

The  Focal  States  thus  limit  civil  liability  for  offshore  accidents  in  different  ways  and  to  different 
degrees. Holding firms accountable for all damage and loss caused by offshore accidents – including 
pure economic loss, and damage and loss where claimants cannot prove negligence –facilitates access 
to  justice  for  victims.  It  incentivizes  firms  to  take  adequate  precautions  and  develop  safer  ways  of 
operating. It also helps ensure that offshore activities only take place if their benefits outweigh their 
risks. 

Notwithstanding  this,  there  are  good  grounds  for  limiting  liability  that  allow  a  principled 
understanding of how, and to what extent, it could be done in this context. 

First, oil spill claims litigation can be complex and a practical balance needs to be struck between the 
need  to  compensate  victims  and  preventing  the  payout  of  illegitimate  claims.  Economic  losses  are 
likely  to  be  serially  linked  to  one  another  in  the  economy  and  so  setting  well-defined  liability 
parameters  is  essential  to  preventing  excessive  liability  –  also  known  as  the  floodgates  issue  –  even 
though this may result in the exclusion of the most indirect, speculative claims. 

Limiting  liability  may  also  be  beneficial  if  it  brings  significant  benefits  to  enterprise  without 
effectively  resulting  in  increased  accident  costs.  Offshore  oil  and  gas  is  a  high-value  sector  that 
contributes  to  jobs,  tax  revenues,  energy  security  and  the  trade  balance,  each  of  which  can  be 
considered an external benefit. Introducing certainty on levels of financial responsibility will lower the 
costs of doing business for many offshore firms. Although it may also reduce the financial incentive 
for greater precautions, there have been no major offshore accidents in Europe for a number of years 
and the EU offshore industry operates under increasingly stringent regulations. 

29 

 
 
Whatever the pros and cons of the different liability regimes in Focal States, the Brussels I and Rome 
II regulations help safeguard the interests of claimants for accidents that originate in jurisdictions with 
less  stringent  civil  liability  rules  than  in  the  claimants'  jurisdiction.  They  help  ensure  that  both  the 
benefits  and  the  consequences  of  Member  State  choices  on  liability  fairly  accrue  to  these  Member 
States alone, which may reduce the impact of the current lack of a level playing field. 

30 

 
 
 
3  FINANCIAL SECURITY INSTRUMENTS AND THEIR AVAILABILITY 

The 2010 Deepwater Horizon disaster showed that worst offshore accidents can cost so much that only 
the  very  largest  companies  would  be  able  to  cover  their  costs.  This  raises  questions  about  whether 
financial security instruments exist to handle this risk. 

This  chapter  presents  an  overview  of  the  financial  security  instruments  available  for  offshore 
accidents, as well as a look at how public authorities could improve the provision and utility of such 
instruments.  For  the  purposes  of  this  document,  the  analysis  shall  include  all  forms  of  risk  pooling, 
including industry mutual schemes. While such schemes may not be traditional financial instruments 
per se, they provide the same kinds of risk management services offered by many financial products. 

From  the  operator's  point  of  view,  the  primary  function  of  a  financial  security  instrument  is  to 
redistribute  risk  so  that  the  costs  of  more  infrequently  occurring  major  accidents  are  spread  into 
smaller, more manageable payments and business can continue uninterrupted. From the point of view 
of victims, financial security instruments help ensure that compensation is available. Whilst financial 
security  instruments  may  also  reduce  risk  somewhat  –  for  example,  by  reallocating  it  to  less  risk-
averse entities, or by introducing an additional layer of mutual monitoring  – they cannot completely 
insulate companies from the risks they take.  

Viewed in this light, a major objective of this chapter is to address whether an 'adequate' market exists 
for the financial security instruments that oil and gas companies need to manage their operating risks. 
One relevant point here is the competitiveness of this market, so that products are available at prices 
close to the cost of the risk being insured. Another is the diversity of available products, as companies 
in the oil and gas sector have a broad range of needs that vary according to their size and activities. 
And  finally,  the  market  should  have  the  capacity  to  spread  the  risk  of  the  largest,  most  infrequent 
accidents in the sector. The presence of such a market is key to  ensuring that damage is remediated 
and an industry with many economic benefits remains healthy. 

However, there are limitations to the conclusions that can be drawn from the analysis presented in this 
Chapter.  Chapter  1  has  shown  that  liability  for  certain  losses  simply  does  not  exist  in  much  of  the 
EEA. It would make little sense for an oil and gas company to have financial security for a liability 
that does not exist in the jurisdiction in which it is operating. Likewise, it would make little sense for 
providers of financial security instruments to develop products to cover such a liability.  

3.1  The financial security instruments available on the market 

Companies in the oil and gas sector have a broad range of financial security needs that vary according 
to their size and activities. This section provides a broad overview of the options available to them for 
managing their exposure to liabilities from offshore accidents.58  

58 A more detailed examination can be found in De Smedt, et al. (2013), Civil Liability and Financial Security 
for Offshore Oil and Gas Activities, Maastricht European Institute for Transnational Legal Research - METRO, 
Maastricht University, pp. 173-282, and BIO by Deloitte (2014), Civil liability, financial security and 
compensation claims for offshore oil and gas activities in the European Economic Area, Final Report prepared 
for European Commission – DG Energy, pp.127-163. 

31 

 
 
                                                            
Text Box 3: First- and third-party financial instruments 

First-party financial security instruments: 
  Self-insurance (corporate net worth or other financial criteria); 
  Captives; and 
  Guarantee by a parent or other company. 

Insurance;  

Third-party financial security instruments: 
 
  Pools: (re)insurance pools; mutuals for industry sectors; government-sponsored pools; 
  Bonds: catastrophe (cat) bonds or other types of bonds by banks or sureties; and 
  Guarantees: letters of credit; trust funds; other types of bank guarantees. 

A distinction must be made between first- and third-party instruments and mechanisms, the differences 
in which are  described in  Text Box 3. Most businesses use  a combination  of traditional  instruments 
and  self-insurance  (purchasing  primary  and  excess  liability  insurance  in  the  international  marine 
insurance market). In addition, there are many interactions between these instruments, which have the 
benefit of spreading the risk among various players, thereby increasing the available capacity. Indeed, 
because liabilities from offshore oil and gas operations may run into billions of euros, there may be no 
single insurer willing to cover the entire risk exposure.  

Most major oil and gas companies rely on first-party instruments, such as self-insurance or a captive, 
because their balance sheets and asset bases are generally larger than those of the insurance companies 
from which they would obtain coverage. 

Self-insurance (in contrast to a captive, see below) is usually created by setting up a 'reserve fund' for 
unanticipated events (including accidental damage). This can be described as a relatively large savings 
account into which the self-insuring company deposits an amount of capital to serve as a financial base 
to call upon if an adverse event occurs. Self-insurance is usually chosen over traditional insurance if it 
allows  the  company  to  insure  itself  more  cheaply  that  obtaining  cover  on  the  commercial  insurance 
market, where insurers charge for the service they provide. 

If  a  company  is  sufficiently  large,  it  may  establish,  and  thus  obtain  insurance  from,  a  captive 
insurance company.59 Captives are an alternative to traditional commercial insurance, set up with the 
sole  function  of  financing  risk  for  their  parent  company,  its  operating  affiliates  and  sometimes  its 
partners.60 Specialist teams of brokers, sometimes from the major brokerage firms, may run a captive 
for a company. Captives may purchase  reinsurance to reduce the likelihood of having to pay a large 
obligation resulting from an insurance claim.61  

Most multinational oil companies have set up a captive (e.g. Total, Shell, ConocoPhillips). The level 
of insurance which can be provided by a captive is driven by the level of the captive’s capital/assets 
and any reinsurance arrangements. Joint captives also exist to cover more than one company. They are 
generally  established  to  cover  risks  for  which  it  is  difficult  to  obtain  cover  on  the  commercial 

59 BIO Intelligence Service (2009). Study on the Implementation Effectiveness of the Environmental Liability 
Directive (ELD) and related Financial Security Issues. Report for the European Commission (DG Environment). 
In collaboration with Stevens & Bolton LLP; available at 
http://ec.europa.eu/environment/enveco/others/pdf/implementation_efficiency.pdf  
60 Joint ventures, special purpose vehicles, and in some instances other project contractors may also be insured 
through captives. 
61 Reinsurance is the wholesale component of the insurance market, in which insurers sell their risk to other 
parties. Some majors, such as BP, do not reinsure risks out of their captive. 

32 

 
 
 
                                                            
insurance market. Jupiter, BP’s captive, holds assets in excess of $5 billion. It can provide insurance 
coverage of up to $1.5 billion on a per risk basis. 

The  reported  advantages  of  first-party  financial  security  options,  such  as  self-insurance  and  captive 
are: 

  The general financial insulation from market cycle swings in the insurance business; 
  The reduction of overall transactional costs of insurance; 
  Greater flexibilities for coverage; 
  Tax advantages (depending on the country); and 
 

Internationalisation of the knowledge associated with brokering insurance. 

In  addition,  regulation  in  a  specific  country  may  require  operators  to  take  out  insurance  coverage, 
making captives the only option for companies able and willing to self-insure. 

One final kind of first-party instrument available to larger companies, or companies with a large parent 
company or affiliate, are  financial tests and corporate guarantees. Authorities use these to gauge the 
financial strength of operators and licensees to ensure that public funds will not be required to remedy 
the environmental damage or other harm they cause.  

The financial test may include the following criteria: a minimum level of the regulated company’s net 
working  capital62  or  net  worth;63  a  minimum  ratio  of  its  current  assets  to  its  current  liabilities;  a 
minimum ratio of net income or tangible net worth to the estimated costs of complying with required 
works; a minimum rating for the company’s bonds by a recognised rating company; or the location of 
a substantial proportion of the company’s assets in the relevant jurisdiction. In all cases, it is likely that 
authorities will require data provided by the company relating to the above to be supported by a report 
from an independent auditor. 

A corporate guarantee enables a company with a large parent or other affiliated company to provide 
the above evidence regarding its parent or affiliate on its behalf. 

Companies that satisfy the financial test or corporate guarantee can do so at low cost because they do 
not  have  to  purchase  a  financial  security  mechanism  from  a  third  party.  The  competent  authority, 
however,  must  regularly  monitor  the  company’s  financial  position  to  ensure  its  continued  financial 
viability.  

Smaller cap companies, less able to handle offshore operating risks independently, are more likely to 
rely  on  third-party  financial  security  instruments,  such  as  insurance.  In  an  insurance  contract,  the 
insurer  accepts  a  fixed  payment,  or  premium,  from  the  insured  and  in  return  undertakes  to  make 
payments if certain events occur. Insurers may take on this risk because they are better able to spread it 
and are therefore less risk-averse and/or because they charge for their service (i.e. they pay out less in 
claims than the aggregated premiums they receive). 

A  wide  range  of  commercial  insurance  policies  is  available  to  companies  carrying  out  offshore 
exploration and production, including: 

62 The working capital is the company’s current assets minus its current liabilities. 
63 The net worth of a company is its total assets minus its total liabilities, that is, the equity of shareholders in the 
company. 

33 

 
 
                                                            
  Offshore  physical  damage,  which  provides  first-party  cover  to  an  insured  in  respect  of  its 

offshore facilities, equipment, pipelines and offshore loading; 

  Hull, machinery, which provides cover to Mobile Offshore Drilling Units; 
  Operator’s  Extra  Expense  (OEE)  or  Energy  Exploration  and  Development  (EED),  which  is 

described below; 

  Land  rigs  and  miscellaneous  property,  which  includes  contractor’s  equipment,  scientific  and 

sampling instruments, diving equipment and remotely operated vehicles; 

  Business interruption / loss of production income; 
  Public  /  general  liability  policies,  which  cover  third  party  risks  with  (in  many  jurisdictions) 

qualified or absolute exclusions for specified environmental liabilities; 

  Environmental insurance policies, which provide cover for bodily injury, property damage and 

clean-up costs from a pollution incident; and 

  Employers’ liability policies (and, where appropriate, workers’ compensation policies), which 
provide  cover  for  accidents  and  diseases  suffered  by  employees  resulting  from  their 
employment. 

An OEE or EED policy provides coverage for the risks arising from a blowout. It covers: a) control of 
well;  b)  redrilling/extra  expenses;  and  c)  seepage  and  pollution,  clean-up  and  contamination.  The 
standard  OEE  or  EED  policy  does  not  provide  cover  for  pure  economic  loss.  If  this  is  needed  to 
comply  with  the  OPA  or  OPOL,  it  must  be  purchased  through  additional  OPA  or  OPOL 
endorsements.64  Oil  companies  typically  purchase  cover  under  an  OEE  or  EED  policy  of  between 
$100 million and $300 million for offshore wells. 

Liability  insurance  in  the  offshore  oil  and  gas  industry  reportedly  tends  to  be  a  very  customised 
product. Commercial liability insurance will generally switch from a platform construction policy to 
an  operating  policy  once  construction  is  complete  (and  other  contractual  parameters  are  met).  The 
insurance policy that applies to most claims for compensation for offshore pollution65 is the Offshore 
Energy Package Policy, which includes a range of covers on top of OEE / EED.66 Oil companies that 
carry  out  offshore  exploration  and  development  drilling  typically  also  purchase  a  series  of  other 
policies not necessarily related to a specific platform, including corporate liability policies, to cover all 
their activities. Together, these make up a layered insurance programme. 

Insurance in the offshore oil and gas industry is generally provided by the subscription market due, in 
particular, to the size of the risk insured. As indicated above, a single (re)insurer does not underwrite a 
policy. Instead, a broker will broker the policy to many subscribers who each underwrite a specified 
portion  of  the  risk.  Liability  between  the  underwriters  to  a  subscription  policy  is  not  joint  and 
several;67 each underwriter is liable only for its proportion of the risk, as specified in the schedule to 
the policy. 

64 Other endorsements include: underground control of well; extended redrill and restoration; resultant plugging 
and abandonment; evacuation expenses; deliberate well firing; contingent joint ventures; turnkey wells; farmout 
wells; developmental drilling wells; various excess cover endorsements; and windstorm endorsement. 
65 Alternatively, an equivalent programme of coverage may apply. 
66 Physical damage (to the operator’s property); Pollution; Business interruption; Third party liability; 
Construction risk; Charterers’ liability; Windstorm; Crude oil storage; Political risk; Contingent OEE/EED. 
67 When two or more underwriters are responsible for covering a single case of injury or damage. 

34 

 
 
                                                            
Lloyd’s  is  the  leading  subscription  market68  for  (re)insurance  to  the  offshore  sector.  Clients  of  the 
products  sold  at  Lloyds  have  global  operations,  even  though  some  national  companies  may  operate 
only in one country. Lloyd’s sets general terms and conditions. It is dependent on reinsurance and only 
provides policies on an annual basis.  

The  subscription  market  therefore  provides  access  to  insurance  or  reinsurance  for  customers  and 
insurers. It allows for better diversification for both customers and (re)insurers, spreading risks over a 
larger population. However, (re)insurance pools – agreements under which each (re)insurer assumes 
a specified portion of risk – offer another way to achieve these same objectives.  

Both  the  subscription  market  and  (re)insurance  pools  ease  access  for  clients,  but  whereas  the 
subscription market is seen as better able to satisfy bespoke needs of clients, (re)insurance pools tend 
to be set up for new high value risks where the market might be unable to provide a solution. Here, 
expert  underwriting  skills  are  required  and  only  a  limited  number  of  underwriters  may  have  the 
requisite expertise.69 

Munich Re and Swiss Re are the largest reinsurance companies (“first tier”), but there are many other 
insurance  or  reinsurance  companies  (“second  tier”),  such  as  Hannover  Re.  These  reinsurance 
companies are engaged  in insurance as well, to a certain  extent.  In  most  reinsurance companies, the 
reinsurance cover operates under a one-year contract (as is also the case for insurance). Renegotiating 
contracts every year is a common practice in the insurance and reinsurance industry, and clients can 
almost always find a reinsurer for its risk, up to a certain limit and for a certain price.  

Although the capacity of reinsurers can be significant, very high limits of indemnity can be difficult to 
provide.  For  instance,  Hannover  Re  has  a  financial  cap  of  $150  million  per  occurrence,  both  for 
insurance and reinsurance. However, this still have fallen far short of the liabilities seen at Deepwater 
Horizon,  which  ran  into  tens  of  billions  of  dollars.  As  such,  following  the  incident,  Munich  Re 
developed  an  innovative  product  to  cover  such  losses  for  Gulf  of  Mexico  operators:  the  Sudden  Oil 
Spill  coverage  (SOSCover).  This  facility  –  a  joint  venture  between  Aon  Benfield,  Guy  Carpenter, 
Munich Re and Willis Re – would be able to generate substantial capacity for offshore-related risks, 
boasting  limits  of  $10-20  billion  for  companies  in  offshore  oil70  activities.  It  is  the  only  initiative 
offering this level of coverage for offshore operations, and therefore merits some description here. 

As  indicated  in  a  study  done  for  the  European  Commission,71  SOSCover  could  work  under  three 
different models:  

1.  a  consortium  of  insurers  and  reinsurers,  each  providing  uniform  prices  and  conditions  and 

2. 

fixed capacity; 
traditional  insurance  or  reinsurance  on  a  subscription  basis,  with  flexible  pricing,  conditions 
and limits; and 

3.  a pool for oil drilling companies with contributions reflecting market share. 

It is a hybrid of many of the financial security instruments described in this section. 

68 A place where insurance underwriters come together to sell insurance, mainly through specialised brokers. 
69 Ernst & Young (2014), ' Study on co(re)insurance pools and on ad-hoc co(re)insurance agreements on the 
subscription market: New Edition July 2014', Luxembourg: Publications Office of the European Union, 
http://ec.europa.eu/competition/sectors/financial_services/KD0414707ENN.pdf. 
70 Offshore gas activities are not included in SOSCover. 
71 De Smedt, et al. (2013), Civil Liability and Financial Security for Offshore Oil and Gas Activities, Maastricht 
European Institute for Transnational Legal Research - METRO, Maastricht University, pp. 266-271. 

35 

 
 
                                                            
Unlike traditional insurance coverage, SOSCover is a balance sheet protection product. Also unusual 
in the insurance world, it relies on parametric triggers and coverage may be seen as pay-as-you-go. It 
involves a scenario-based approach, which Munich Re claims makes risk more quantifiable. Munich 
Re  further  indicates  that  the  product  strictly  follows  liability  rules  and  therefore  is  very  close  to  a 
liability cover. Table 3 below summarises the main features of the product. 

Table 3: Main features of SOSCover developed by Munich Re72 
Scope of coverage 
Insured 

  Lessees  and  operators  of  federal  oil  and  gas  leases  (joint  venture),  represented  by 

operator, 100% scaling 

Insured activity 

  All highly exposed wells on US sea territory to be insured (Gulf of Mexico, California, 

Alaska) 

  Wild Cat  
  Exploration 
  Appraisal 
  Development 
  Production 
  Work-over  

Perils insured 

  Coverage  limited  to  oil  spills  /  releases  of  wells  (no  coverage  provided  for  vessels  and 

pipelines). 

Excluded events    Terrorism (potential inclusion of sub-limit of 10-20% for additional premium), war. 

  All kinds of Nat-Cat events (windstorm, meteorite impact, earthquake, seaquake, etc.) and 

consequential events (subsea landslide, mudslide, flood wave, tsunami etc.) 

  Gradual pollution and leakage 
  Computer attacks 
  Loss of GPS signal 

Cornerstones of coverage 

Losses covered 

  Liability arising out of oil spills of insured activity (defined drilling) : 

  Clean-up and removal costs  
  Natural resource damage 
  3rd Party Property damage 
  Bodily injury 
  Loss of profits and earning capacity of related industries 
  Revenues and Public Services 

Defence costs 

Limit 

Capacity 
requests 

Retention 

and 

Trigger 
indemnification 
period 

  Waiver of subrogation against the joint venture’s contractors 
  Defence costs are covered and part of the limit 
  No duty to defend 
  $10bn+ capacity, provided by an insurance consortium. 
  Limit is in place per well and per any event, but only once per year per well and with a 

double aggregate per insured. 

  Capacity providers need to commit their capacity for a period of 24 months (but with an 

annual right to cancel and a cancellation period of 15 months). 

  Renewal subject to annual review of risk adequate terms and conditions. 
  Attachment point of $1.5 billion 
  Cover will be pure excess cover, no follow form / no drop down etc. 
  Trigger: Occurrence 
  Date of loss: Date of event 
  Reporting: As soon as likely to involve the coverage 
  Sunset clause: New claims after 36 months are cut off 
  Risks attaching 

72 Source: Munich Re 

36 

 
 
                                                            
Claims  payment 
process 

  First part of the limit is $1.5 billion and will be paid into an escrow fund after the entire 

retention of $1.5 billion is funded by the insured (“Benefit Program”) 

  Pay-out of the limit’s other tranches (“Liability Program”) after 

A) parametric trigger (defined no of claimants) and 
B) exhaustion of the limit’s previous tranche 

Co-insurance 

Claims Service 

  Minimum of 10% co-insurance (of $10 billion), depending on the limit required 
  Possible role of the oil companies’ Captives both of retention and co-insurance 
  A fully integrated claims facility with a clear claims management strategy is available (on 

a fee basis) as part of the product 

In spite of its creativity, the SOSCover proposal has not met widespread interest. The product has not 
been  shelved,  although  Munich  Re  has  spoken  of  a  current  lack  of  demand  from  oil  companies. 
Munich  Re  indicated  that  it  could  develop  a  similar  product  for  Europe  within  3-6  months.  The 
reinsurer  estimates  that  a  minimum  cover  of  $5  billion  would  be  necessary  to  cover  European 
operations.  

Associations of similarly situated oil and gas companies that insure one another, offer another means 
for  companies  in  the  offshore  sector  to  spread  risk.  Members  pay  an  initial  premium  followed  by 
annual premiums. These mutual insurance associations may, in some cases, make a call on members 
for additional premiums if losses exceed the total funding held by the mutual. Mutualisation enhances 
insurance availability, expands the terms under which insurance is offered, diversifies risk and reduces 
the overall cost of insurance as policyholders of the company are also their owners/shareholders. 

Criteria on the acceptance of members of mutual pools tends to be stringent because all businesses in 
the pool underwrite the risks of other members according to their proportionate capacity in the pool. 
Thus, companies that do not meet the requisite standards of members of the pool are almost certain to 
be refused entry due to their higher potential for incurring losses payable by the pool. This adds a layer 
of  industry  mutual  monitoring  that  complements  the  regulatory  scrutiny  of  companies'  financial 
capacity at licensing. 

Perhaps  the  best  known  example  of  a  mutual  is  Protection  and  Indemnity  Clubs  ('P&I  Clubs')  for 
marine shipping risks.73 Thirteen P&I Clubs with worldwide activities have formed the International 
Group of P&I Clubs, whose main objective is to coordinate the operation and regulation of the Clubs’ 
Pooling Agreement. The Pooling Agreement provides a mechanism for sharing all claims in excess of 
US$  9  million  up  to,  currently,  approximately  US$  7.5  billion.  However,  mutuals  also  exist  in  the 
offshore  sector,  notably  Oil  Insurance  Ltd.  (OIL),  which  was  formed  in  1972,  and  the  Oil  Casualty 
Insurance Ltd. (OCIL), founded in 1986. Both OIL and OCIL have experienced considerable growth 
in the last few decades. OIL’s total assets have grown from $160,000 in 1972 to over $7bn in 2013. 
From 2002 to 2012, OCIL registered an increase in its number of worldwide shareholders from 75 to 
113, of which 12 are currently situated in Europe. 

Financial  security  for  offshore  liabilities  may  also  come  in  the  form  of  various  guarantees.  Trust 
funds administered by a trustee on behalf of a government authority may ensure that capital is readily 
available to compensate victims and remediate any accident damage caused by an operator or licensee. 
Letters  of  credit  from  a  financial  institution  may  serve  the  same  purpose,  provided  the  operator  or 
licensee it is issued on behalf of can provide the requisite collateral, as do bank guarantees to cover 
liabilities in the event the operator or licensee fails to do so in the first instance. 

73 A number of P&I Clubs have recently expanded into the offshore sector, providing a range of fixed-premium 
insurance products to offshore activities. 

37 

 
 
                                                            
Many stakeholders have highlighted that the traditional insurance market may not have the capacity to 
cover  the  greatest  offshore  risks  fully.  The  alternative  risk  transfer  (ART)  mechanisms  briefly 
described in the remainder of this section provide access to other sources of capacity and thus offer a 
further means for offshore companies to hedge operating risk. Essentially, ART mechanisms turn an 
insurance policy or reinsurance contract into a financial security that is then transferred to investors in 
the capital markets. This helps to expand the set of possible insurable risks and provide coverage that 
may  not  be  available  from  traditional  sources.  Additionally,  because  the  resources  of  the  capital 
markets  are  many  times  greater  than  those  of  insurers,  ART  solutions  can  also  greatly  increase 
capacity.  

Reinsurance  sidecars  are  special  purpose  vehicles  sponsored  by  reinsurers  to  provide  additional 
capacity;  they  access  capital  markets  directly  through  private  debt  and  equity  investment.  A  ceding 
reinsurer forms the sidecar and capital raised by the sidecar is held in a collateral trust for the benefit 
of that reinsurer. The ceding reinsurer then enters into a reinsurance contract with the sidecar, paying 
premiums to it for the reinsurance underwritten. The sidecar is usually owned by a holding company, 
which raises capital for the sidecar by issuing equity and/or debt. Private equity, hedge funds, insurers 
and reinsurers provide the capital for the typical sidecar. In fact, the growth of the sidecar market has 
been  significantly  driven  by  hedge  funds  seeking  attractive  non-traditional  sources  of  investment 
yield. 

Catastrophe (cat) bonds provide insurance companies with a closely related risk management option 
that leverages capital markets for insurance purposes. Funds raised from investors are used to establish 
a special purpose entity (SPE) or a special purpose reinsurer (SPR), which acts as the administrator of 
the  security  issuance.  The  SPE/SPR  then  issues  a  reinsurance  policy  to  the  insurer  or  corporation 
ceding the risk, which pays a premium to the SPE/SPR. Through an investment bank, investors receive 
bonds from the SPE/SPR with an agreed-on interest payment drawn from this premium.74 In the event 
of an accident, proceeds are released from the SPR/SPE to help the insurer pay claims; the release of 
funds  is  usually  proportional  to  the  size  of  the  accident  and  the  investors  are  not  fully  repaid.  If  no 
contingent event occurs, the principal is returned to the investors upon the expiration of the bonds. 

Like cat bonds, contingent capital leverages financial markets to protect an insuring company against 
perils while offering a profit to counterparties in these markets. Unlike cat bonds, however, contingent 
capital: a) is financed directly by the insuring company without an intermediary; b) spreads risk over 
time rather than transferring it; and c) finances a loss after the event has occurred.  

Similarly  to  a  put  option,75  a  contingent  capital  agreement  allows  an  insurer  to  issue  capital  (e.g. 
common  stock,  hybrid  capital,  or  debt)  to  a  financial  counterparty  at  a  predetermined  strike  price 
following the occurrence of a defined catastrophic event (for instance if the insurer’s stock price falls 
below the strike price following a windstorm of specified strength). In exchange for a fee, the insurer 
is  thus  assured  of  a  cash  infusion  at  its  time  of  greatest  need.  Considered  useful  in  financing  low-
frequency/high-severity exposures. the benefits of contingent capital include a low up-front option fee, 
balance sheet protection when it is most needed and access to financing with neither a corresponding 
increase in leverage nor a dilution of shareholders’ equity. 

We therefore see that there is broad variety of financial security products available to hedge oil and 
gas companies’ operating risk. Whilst not all the products discussed may be in widespread use by oil 

74 As well as any reinvestment earnings the SPE/SPR receives through a financial intermediary. 
75 Financial contracts that give the owner the right to sell a security at a predetermined price. 

38 

 
 
                                                            
and gas sector clients at this time, the marketplace notionally offers the depth and innovation to cater 
to all offshore operators under current legal liability obligations. It also allows oil and gas companies 
to  spread  their  risk  to  a  diversity  of  market  actors,  from  insurers  and  reinsurers,  to  financial  market 
actors such as private equity groups and hedge funds, as well as to other oil and gas companies. 

3.2  The financial security instruments accepted by authorities 

An  important  distinction  needs  to  be  made  between  (i)  financial  security  instruments  and/or 
mechanisms that may be available to licensees in EEA waters for third-party damage from offshore oil 
and  gas  activities  and  (ii)  those  that  are  acceptable  and  accepted  by  competent  authorities  in  the  20 
Focal States for compensation for such damage.  Table 4 below summarizes the latter. It is based on 
the findings of a study done for the European Commission to address the subject.76 Annex IV of this 
document provides a more detailed description of these findings. 

Iceland 

Ireland 

Legislative financial security requirement 

Table 4: Financial security instruments accepted by competent authorities to cover third-party damage from offshore 
oil and gas activities 
Target 
State 
Bulgaria 
Croatia 
Cyprus 
Denmark 
France 
Germany 
Greece 

Not specified but permit or concession agreement may require insurance 
Insurance 
Insurance 
Insurance 
Not specified 
Insurance 
Insurance 
Insurance,  performance  bond  or  other  type  of  financial  security  acceptable  to  the  competent 
authority 
Insurance,  with  competent  authority  having  discretion  not  to  require  financial  security,  or  to 
require another type of financial security 
Not specified 
Not specified but licences may require financial security 
Not specified but production sharing agreement may require financial security 
Model production sharing contract specifies insurance as a financial security instrument 

Italy 
Latvia 
Lithuania 
Malta 
Netherlands  Not specified; financial security is rarely imposed 
Norway 
Poland 
Portugal 
Romania 
Spain 
UK 

Insurance 
Type of financial security, and whether it is required, is decided on a case-by-case basis 
The concession contract specifies insurance for civil liabilities to the State and third parties 
Not specified but permits may require financial security 
Insurance 
Specified credit ratings, parent company guarantee, insurance, or a combination of them 

We  see  that  although  there  are  a  wide  range  of  financial  security  instruments  for  offshore operating 
risk  notionally  available  on  the  market,  the  majority  of  Focal  States  have  only  one  preferred 
mechanism  for  compensation  for  claims  for  traditional  damage  –  insurance.  Twelve  Focal  States 
specify insurance, of which nine do not specify any other type of financial security mechanism.77 This 
high  proportion  of  Focal  States  that  require  insurance  may  be  even  higher  because  the  model 
contractual agreements for six Focal States were not available for review.  

Regulators' focus on insurance as the preferred form of financial security for civil liabilities contrasts 
with  the  mechanisms  that  may  be  selected  to  meet  the  obligations  of  a  licence  or  contractual 

76 BIO by Deloitte (2014), Civil liability, financial security and compensation claims for offshore oil and gas 
activities in the European Economic Area, Final Report prepared for European Commission – DG Energy. 
77 Croatia, Cyprus, Denmark, Germany, Greece, Norway, and Spain. 

39 

 
 
                                                            
agreement.  The  most  common  financial  security  instruments  required  for  such  obligations  are  bank 
guarantees,  performance  bonds, 
if  appropriate,  parent  company  guarantees. 
Furthermore, applicants for licences usually have more than one instrument from which to choose. 

insurance  and, 

3.3  Conclusions 

There  is  broad  variety  of  financial  security  products  available  to  hedge  oil  and  gas  companies’ 
operating  risk.  Whilst  not  all  of  these  products  may  currently  be  in  widespread  use  by  the  offshore 
industry, the marketplace for them notionally offers the depth and  innovation to cater to all offshore 
operators. It also allows oil and gas companies to spread their risk to a diversity of market actors, from 
insurers and reinsurers, to financial market actors such as private equity groups and hedge funds, as 
well as to other oil and gas companies. 

In spite of this, there is currently a lack of uptake of financial security instruments to cover all damage 
from the most infrequent and costly offshore accidents. There could be several reasons for this, one of 
which has already been discussed in Chapter 1 of this Document: Liability for certain losses simply 
does not exist in much of the EEA, making such products unnecessary. 

In addition to this, regulators may not require appropriate levels of coverage. Coverage may be beyond 
individual  insurers'  capacities,  or  the  availability  of  reinsurance  on  the  market.  Alternatively,  where 
coverage  is  available,  insurers  and  the  offshore  industry  may  be  unable  to  agree  on  risk  levels  and 
therefore a price for these products, leading to their non-provision.  

However,  it  is  too  early  to  gauge  the  significance  the  abovementioned  barriers  because  most  EEA 
regulators  limit  what  forms  of  coverage  they  accept,  precluding  outright  the  provision  of  a  range  of 
innovative solutions. 

The  experience  of  implementing  the  Environmental  Liability  Directive  in  national  law  shows  that  a 
competitive market for insurance products  – pools, insurance, bonds, guarantees etc.  – takes time to 
develop following the introduction of new regulatory requirements.78 

78 Report from the Commission to the Council, the European Parliament, the European Economic and Social 
Committee and the Committee of the Regions under Article 14(2) of Directive 2004/35/CE on the environmental 
liability with regard to the prevention and remedying of environmental damage, 12/10/2010, COM(2010) 581 
final. 

40 

 
 
 
                                                            
4  HANDLING COMPENSATION CLAIMS 

This  chapter  presents  an  overview  of  the  legislative  and  non-legislative  compensation  schemes  for 
offshore  accidents  in  Focal  States.  Compensation  and  liability  are  strongly  linked.  Whereas  the 
liability  regimes  discussed  in  the  previous  chapter  provide  the  legal  framework  for  the  kinds  of 
damage  that  are  compensable,  the  compensation  regimes  covered  in  this  chapter  focus  on  how  this 
legal framework is practically implemented through rules and procedures. 

Major offshore accidents can affect a large number of people and stretch the resources of any scheme 
set  up  to  process  claims  and  provide  compensation  to  victims.  Insurers  have  vast  expertise  and 
experience in handling claims from accidents, including claims for manmade and natural catastrophes. 
Self-insured companies can also be expected to have a wealth of relevant knowledge in house. 

If a major offshore oil and gas incident were to occur in the waters of any of the Focal States, insurers 
and  liable  companies  would  therefore  be  likely  to  lead  the  compensation  process.79  However,  these 
players may not have the confidence of victims due to the perception that they have a direct financial 
interest in minimising payouts. For example, BP was criticised for its initial handling of claims from 
Deepwater Horizon, leading to the establishment of the GCCF. 

Without  an  adequate  compensation  regime  in  place  a  priori,  authorities  have  resorted  to  ad  hoc 
measures  when  faced  with  compensation  grievances  following  a  major  accident.  However,  these 
measures risk neither serving the best interests of victims nor balancing the legitimate interests of the 
liable party. Potentially lengthy and costly judicial channels of compensation are the alternative. It is 
therefore important that well thought through compensation mechanisms are put in place proactively 
before major accidents occur. 

There  may  be  several  relevant  criteria  for  offshore  accident  compensation  schemes,  centred  on 
fulfilling citizens' expectations to the greatest practicable degree. These may include the existence of 
an  independent  claim-handling  regime  which  legitimate  victims  of  offshore  accidents  can  have 
confidence in. 

Given that a major accident may cause damage and loss in more than one state, regimes should be able 
to  address  transboundary  claims  effectively  and  without  discriminating  between  claimants  from 
different EEA member countries. 

Adequate  levels  of  compensation  for  loss,  damage  or  disruption  is  also  relevant,  as  well  as  a  quick 
route  to  payment  that  bypasses  the  tort  system  where  it  would  result  in  significant  delays  to 
compensation. 

A  clear,  well-defined  and  accessible  procedure  for  registering  and  proceeding  with  claims  is  also 
important.  This  calls  for  detailed  and  actionable  guidelines  that  encompass  the  whole  process  of 
claims  management  (registration,  handling  and  settlement)  and  reduce  the  number  of  bureaucracies 
involved to the bare minimum. 

Regardless of where the accident took place, the best claims procedures would ensure that victims of 
offshore accidents have a clear idea of who is accountable for claims management at all times. Clarity 
over who bears the cost of administering the process is also desirable. 

79 The rules that courts follow for adjudicating civil lawsuits. 

41 

 
 
                                                            
Pre-defined  timing  obligations  on  the  claimant  and  the  liable  party  may  also  be  effective  in 
minimizing delay. 

Finally,  it  is  appropriate  that  victims  have  access  to  a  process  of  redress  if  there  are  failures  in  the 
system. 

The  presence  of  a  compensation  system  that  effectively  incorporates  these  features  to  the  greatest 
practicable degree would be in the societal interest as it minimises cost of damage, which tend to rise 
sharply  with  time  following  an  accident,  and  ensures  that  firms  cannot  unduly  benefit  from  legal 
process to minimize or delay the payout of legitimate damages. 

4.1  Compensation schemes for offshore accidents in Norway 

To date, Norway is the only EEA member country to establish a legislative compensation mechanism 
specifically  to  deal  with  offshore  accidents.  Chapters  7  and  8  of  its  Petroleum  Activities  Act  codify 
rules for managing claims and compensation to fishermen.  

Chapter  7  of  the  Act  establishes  special  procedures  for  expediting  and  aggregating  claims  for 
compensation.  It  explicitly  applies  to  transboundary  claims  from  Denmark,  Finland  and  Sweden,  as 
established  by  the  1974  Nordic  Environmental  Protection  Convention.80.  Section  7-7  provides  that, 
unless it is obviously unnecessary, the operator who caused the pollution damage shall make weekly 
public  announcements  in  the  “Norwegian  Gazette  (Norsk  Lysingsblad)  and  in  newspapers  and  other 
publications  which  are  generally  read  in  those  places  where  damage  is  caused,  or  is  presumed  to 
occur”.  The  announcements  will  include  the  identity  of  the  person  to  whom  the  claims  should  be 
submitted  and  the  deadline  for  their  submission.  The  Ministry  may  provide  for  a  shorter  limitations 
period than the prescribed period. Claims for pollution damage are brought in the court in the district 
in which petroleum was discharged or in which the damage was caused. The Ministry is authorised, 
however, to aggregate all the claims in a single court. 

Chapter  8  of  the  Petroleum  Act  specifically  provides  for  claims  for  compensation  by  “Norwegian 
fishermen”, defined as “persons registered in the registration list of fishermen and owners of vessels 
listed  in  the  registry  of  Norwegian  fishing  vessels  subject  to  registration  licence”  (Section  8-1). 
Section  8-3  provides  that  a  licensee  is  strictly  liable  for  financial  loss  suffered  by  Norwegian 
fishermen resulting from pollution and waste from petroleum activities. The financial loss includes: 

the reasonable cost of measures taken by fishermen to avert or limit the damage or loss; 

 
  any financial loss from such measures; 
  damage and inconvenience as a result of supply vessels and support vessel traffic; and 
 

relocation of the facility to or from the relevant fishing field. 

Claims  for  pollution  damage  from  offshore  oil  and  gas  operations  must  be  brought  under  the 
Norwegian Petroleum Act. If the Petroleum Act does not apply to a claim, the claim may be brought 
under the Pollution and Waste Act or the Act Relating to Compensation in Certain Circumstances, as 
applicable.  

The  Petroleum  Act  thus  establishes  several  legal  requirements  for  compensating  offshore  accidents, 
including some transboundary claims. It also recognises the interests of the fisheries industry and the 

80 Nordic Environmental Protection Convention (1974) 
http://www.ecolex.org/server2.php/libcat/docs/TRE/Full/En/TRE-000491.txt  

42 

 
 
                                                            
offshore  oil  and  gas  sector  and  has  established  a  liability  system  to  handle  potential  conflicts. 
However, the Act does not cover key issues, including equal opportunity for non-Nordic claimants to 
gain compensation. Nor does it specifically cater for claims by sectors other than the fishing industry. 

4.2  OPOL 

Although it is a non-legislative regime, OPOL outlines procedures aimed at expediting claims without 
the resort to court proceedings. The scheme's Guidelines for Claimants state that: 

OPOL  is  intended  to  encourage  prompt  remedial  action  by  operators  of  offshore 
facilities in the event of a spill. 

OPOL intends that all admissible claims associated with a spill should be settled in an 
orderly  and  expeditious  manner  without  recourse  to  the  Courts  and  avoiding 
complicated and lengthy jurisdictional problems. 81 

Clause V of the OPOL Liability Agreement82 specifies that claims must be made in the first instance to 
the liable operator, describing what information should be included in such claims. Clause VI specifies 
that  claimants  have  a  year  from  the  incident  to  make  their  claims  and  Clause  IX  stipulates  that 
arbitration shall be the sole means of settling disagreements. Part IV of the OPOL Rules (a separate 
document)  stipulates  that  claimants  should  address  the  organisation  if  the  liable  operator  fails  to 
compensate  their  initial  claim,  after  which  the  organisation  decides  whether  the  rest  of  its  members 
should chip in to guarantee these costs. 

As the UK requires membership of the scheme and membership satisfies Ireland's offshore licensing 
terms, OPOL could play an important role in accident compensation in these Focal States. However, 
the OPOL Liability Agreement only offers a basic outline of a claims procedure, which does not fully 
address the criteria for compensation schemes mentioned at the start of this chapter.  

OPOL  does  provide  a  clear  and  simple  claims  procedure,  and  clear  accountability  for  claims 
management  responsibility.  It  also  specifies  arbitration  under  the  Rules  of  Arbitration  of  the 
International Chamber of Commerce as a means for redress in the case of system failures. However, it 
does not explicitly address transboundary claims, nor does it oblige liable parties to deal with claims 
swiftly.  

Most crucially, OPOL does not provide an independent claim-handling mechanism. Instead, it makes 
the liable operator responsible for deciding whether claims against them qualify as “pollution damage” 
and  whether  these  claims  are  “reasonable,  quantifiable  and  justifiable”  under  the  OPOL  Liability 
Agreement  (see  Section  2.9).  Given  the  ambiguity  of  these  terms  and  the  inherently  conflicting 
interests of claimants and liable parties, the scheme may fall short of citizens' expectations. 

4.3  Civil rules of procedure 

In the absence of a purpose-built compensation scheme, claims for damage from an offshore oil and 
gas accident would proceed under tort law. Here, civil rules of procedure apply – the rules that courts 
follow when adjudicating civil lawsuits. 

81 OPOL (2014) 'Guidelines for Claimants', http://www.opol.org.uk/downloads/opol-guidelines-jan14.pdf. 
82 OPOL (2014) 'Offshore Pollution Liability Agreement ("OPOL") (amended in Extraordinary General Meeting 
on 28 October 2013 to take effect on 1 January 2014)', http://www.opol.org.uk/downloads/OPOL-Agreement-
01Jan14.pdf. 

43 

 
 
                                                            
Lawsuits  can  be  complex  legal  processes  at  all  stages,  from  the  commencement  of  action,  to  the 
discovery  and  presentation  of  evidence,  to  the  eventual  resolution  of  the  dispute  either  through  a 
negotiated settlement, arbitration or a trial. During this process, there is great scope for claimants and 
tortfeasors alike to challenge claims and appeal judgements made against them, meaning that cases of 
ordinary litigation can be expected to last for between six months (at the very least) and several years. 
This timescale can be even longer in 'big cases' – group litigation actions involving very large damage 
amounts. 

Oil  and  gas  industry  stakeholders  have  highlighted  that  many  EU  Member  States  have  recently 
adopted, or are debating, new legislation to simplify the recourse of claimants under the civil rules of 
procedure.  Notable  examples  include  collective  action  (class  action)  rules  in  Belgium,83  France,84 
Italy,85  Portugal,86  the  Netherlands87  and  the  UK.88  Furthermore,  the  Commission  adopted  a  non-
binding  Recommendation  in  2013  covering  collective  redress  in  the  areas  of  competition  claims, 
consumer protection, environmental protection and data privacy.89 

Nevertheless,  there  have  not  been  sweeping  changes  in  this  area  and  the  civil  rules  of  procedure  in 
Focal  States  could  be  streamlined  further  to  better  handle  large-scale  offshore  accidents.  Moreover, 
some of the national changes noted above focus on areas of the law that may only partially cover the 
mass claims expected following an offshore accident,90 or not be relevant.91 

A  one-size-fits-all  approach  to  compensation  has  its  limits.  In  particular,  whilst  the  civil  rules  of 
procedure help ensure a fair outcome in ordinary litigation, they may work against the large number of 
claimants  who  may  depend  on  swift  compensation  following  a  major  offshore  accident  for  their 
livelihoods. Purpose-built compensation schemes can be tailored to better address the specific forms of 
damage an offshore accident might cause and the needs of the sectors likely to be affected  – fishing 
and tourism, in particular. 

4.4  Conclusions 

There are two compensation mechanisms currently in place specifically for offshore accidents in the 
Focal States and they may not comprehensively address several key issues. 

83 Loi sur l’action en reparation collective/Wet over rechtsvordering tot collectief herstel, 17/02/2014, 
http://www.dekamer.be/FLWB/pdf/53/3300/53K3300005.pdf. 
84 Loi n° 2014-344 du 17 mars 2014 relative à la consommation, Journal Officiel, No 0065, page 5400, 
18/03/2014, 
http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000028738036&categorieLien=id. 
85 Article 2, Law no. 244, 24/12/2007, i.e., “Legge Finanziaria”, http://www.normattiva.it/uri-
res/N2Ls?urn:nir:stato:legge:2007-12-24;244!vig. 
86 International Comparative Legal Guide (2014), ' Portugal - Class and Group Actions 2014', 
http://www.iclg.co.uk/practice-areas/class-and-group-actions/class-&-group-actions-2014/portugal. 
87 Wet Collectieve Afwikkeling Massaschade, WCAM, 29.414, 
http://www.rijksoverheid.nl/onderwerpen/bescherming-van-consumenten/documenten-en-
publicaties/richtlijnen/2008/06/24/de-nederlandse-wet-collectieve-afwikkeling-massaschade.html. 
88 Consumer Rights Bill, http://services.parliament.uk/bills/2014-15/consumerrights.html. 
89 Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory 
collective redress mechanisms in the Member States concerning violations of rights granted under Union Law 
(2013/396/EU), http://eur-lex.europa.eu/legal-
content/EN/ALL/;ELX_SESSIONID=Qk0pJ7BXLLLzv3bDGqMYnyZKJrlQtxvVSsTc1kL289vZdcLcgX7H!20
63911593?uri=CELEX:32013H0396. 
90 The Belgian House of Representatives' new class action law will apply to personal injury claims only. 
91The UK Consumer Rights Bill or the Consumer Act in France. 

44 

 
 
                                                            
To  date,  only  Norway  has  established  a  legislative  compensation  mechanism  to  deal  with  offshore 
accidents.  Its  Petroleum  Activities  Act  codifies  rules  for  managing  aggregated  claims  and 
compensation  to  fishermen.  The  legislation  also  provides  for  transboundary  claims  from  Denmark, 
Finland and Sweden, as established by the Nordic Environmental Protection Convention.  

OPOL  also  outlines  procedures  aimed  at  expediting  claims,  albeit  without  the  resort  to  lengthy  and 
potentially costly court proceedings. Although it is a non-legislative claims regime, the UK requires 
OPOL  membership  for  offshore  operations  within  its  jurisdiction.  Membership  of  the  scheme  also 
satisfies Ireland's licensing terms for offshore operations. A key shortcoming of the scheme, however, 
is its designation of the liable operator as the decision maker as to whether claims under the agreement 
are applicable. 

In the absence of a purpose-built compensation scheme, claims for damage from an offshore oil and 
gas accident would proceed under tort law and cases can be expected to last for between six months 
and  several  years.  Whilst  many  EU  Member  States  have  recently  adopted,  or  are  debating,  new 
legislation  to simplify the recourse of  claimants under the civil  rules of procedure, the civil rules of 
procedure in Focal States could be streamlined further to better handle large-scale offshore accidents. 

Although there are few compensation schemes specifically for offshore accidents, the legal framework 
for transboundary compensation within the EEA may largely be in place. The 'Brussels I' and 'Rome 
II' regulations generally give victims of offshore accidents originated in the EU the right to try cases 
in,  and  select  the  laws  of,  either  the  country  in  which  the  damage  was  originated  or  the  country  in 
which the damage was sustained (see Section 2.10). 

45 

 
 
 
 
ANNEX I.  LEGAL  DISPUTE  OVER  HYPOTHETICAL  OIL  SPILL  CLAIMS  UNDER 

YHE US OIL POLLUTION ACT 

Section 2702(b) of the 1990 US Oil Pollution Act establishes liability for the following categories of 
damages: 

1.  "Damages  equal  to  the  loss  of  profits  or  impairment  of  earning  capacity  due  to  the  injury, 

destruction, or loss of real property, personal property, or natural resources; 

3. 

2.  damages  equal  to  net  losses  of  taxes,  royalties,  rents,  fees  or  net  profit  shares  by  a  political 
subdivision, a State or the federal Government due to the injury, destruction or loss of real or 
personal property or natural resources; 
the net  costs of a State or a political division  of a State in providing increased or additional 
public services as the result of an oil pollution incident; 
the  cost  of  restoring,  rehabilitating,  replacing  or  acquiring  the  equivalent  of  the  damaged 
natural resources; 

4. 

5.  compensation for the loss of the natural resources between the time of their injury and their 

restoration; 
the reasonable cost of assessing those damages; and 

6. 
7.  damages for loss of the subsistence use of a natural resource."92 

Two  eminent  and  distinguished  law  professors  have  hotly  debated  the  scope  of  pure  economic  loss 
provided  in  the  first  category,  concerning  lost  profits.  They  referred  to  the  following  seventeen 
hypothetical claims in their exchange: 

1.  A  commercial  fisherman,  who  relies  for  his  business  on  fisheries  in  the  Gulf  of  Mexico, 
claims lost profits because he is unable to fish for a period of time due to an oil spill polluting 
the waters in which he fishes. 

2.  A ship’s chandler (that is, a man whose business consists of supplying bait, tackle and other 
necessary supplies to, and maintaining and repairing vessels of, commercial fishermen claims 
lost profits because the oil spill prevented fishing by commercial fishermen. 

3.  The owner of a beachfront hotel in the Gulf area claims loss of business because tourists have 
decided to take their holidays at other locations. The oil has not reached the beachfront owned 
by the hotel and reserved for its guests but has been found in the immediate vicinity, including 
waters frequently used by the hotel’s guests and beaches routinely visited by them. 

4.  An  employee  of  the  beachfront  hotel  has  had  his  hours  reduced  by  25  per  cent,  with  a 
consequent loss of 25 per cent of his wages for a certain period because the managers of the 
hotel have reduced staff hours by 25 per cent. 

5.  The owner of a barge that hauls equipment and supplies up and down a small river that flows 
to the Gulf cannot operate the barge for a three-week period and thus loses profits, because oil 
from the spill has entered the river and threatened migratory birds, leading the authorities to 
close the river to boat traffic for that period to allow the oil to be cleaned up. 

6.  The  operator  of  a  dockside  restaurant  in  a  seaport  on  the  Gulf  claims  that  it  has  lost  profits 
because many of its regular customers (who are dockworkers, fishermen and other people with 
jobs connected to maritime commerce) have stopped frequenting the restaurant. 

92 United States Code s 2702(b). The order of damages has been changed from the OPA to emphasise the first 
category. 

46 

 
 
                                                            
7.  A  real  estate  agent  whose  listings  mainly  consist  of  beachfront  properties  in  an  area  of  the 
Gulf contaminated by the oil spill claims a loss of commissions because the spill has led the 
market for property sales and rentals to collapse. 

8.  A woodworker who owns a small furniture store in a town that relies on beach tourism for a 
major source of revenue claims loss of profits due to a decline in orders for furniture because 
some of the beaches are polluted by the oil spill. The shop is located three miles inland. 

9.  The  owner  of  a  beachfront  inn  located  on  the  Gulf  claims  loss  of  profits  due  to  cancelled 
reservations.  No  oil  from  the  spill  has  reached  within  100  miles  of  the  waters  or  stretch  of 
coastline on which the inn is located and there are no discernible adverse physical effects such 
as noxious odours. Government officials and scientists, however, have concluded that oil from 
the spill may reach the waters and beaches within a month. 

10.  The  owner  and  operator  of  a  fireworks  store  claims  loss  of  profits  due  to  reduced  tourist 
traffic. The store is located 150 miles from Gulf beaches on a main interstate highway leading 
to them. He claims that he relies on tourists travelling to and from the beaches for much of his 
business. 

11.  The operator of a tour boat that carries passengers  along  a scenic Gulf shoreline claims lost 
profits. No oil from the spill has threatened to, or has, come within 400 miles of the area in 
which the tours take place. The owner claims, however, that popular misimpressions about the 
scope of the spill have depressed tourism in the entire Gulf area, causing him to lose business. 
12.  The  owner  of  an  amusement  park  in  a  land-locked  area  of  central  Florida  claims  loss  of 
profits.  Many  visits  to  the  amusement  park  combine  a  trip  to  it  with  a  beach  holiday  on 
Florida’s Atlantic Coast. The Atlantic Coast is not threatened by the spill but the owner of the 
amusement park claims that consumer unease about travelling to Florida have led to the lost 
profits. 

13.  The  owner  and  operator  of  a  resort  in  Nevada  claims  lost  profits  due  to  cancellation  of  a 
convention by an association of Gulf-area fishermen, who have held its annual meeting at the 
resort  for  the  past  10  years.  The  resort  owner  claims  that  the  cancellation  is  due  to  the 
economic effects of the oil spill. 

14.  A  company,  incorporated  and  operated  in  Hartford,  Connecticut,  that  imports  snorkelling 
equipment  from  China claims loss of profits due to the spill because sales of the equipment 
have declined. 

15.  The operator of a seafood restaurant in Phoenix, Arizona, claims loss of profits due to general 
consumer fears about contaminated seafood caused by the oil spill. The seafood served by the 
restaurant is not from the Gulf. 

16.  The owner and independent franchisee of a petrol station in Boise, Idaho, which sells petrol 
produced by the oil company that caused the spill, claims lost income due to a boycott of the 
petrol station. The boycott was called by a local environmental group that demanded greater 
corporate accountability. 

17.  The  operator  of  a  catering  company  based  in  New  York  City,  where  the  oil  company  that 
caused the oil spill is located, claims lost revenues. Prior to the spill, a substantial portion of 
the profits of the company were generated by catering at the oil company’s headquarters. The 
catering was substantially reduced after the spill. 

Professor Goldberg, who prepared a report for the GCCF, concluded that the first category of damages 
authorises “recovery for any person who suffers economic loss because an oil spill has interfered with 
his or her ability to use property or resources that he or she has a particular right to put to commercial 

47 

 
 
that  should  be  covered.94  According 

use”.93 Professor Robertson considers that this interpretation is too narrow and bars a large number of 
claims 
to  Professor  Robertson,  Professor  Goldberg’s 
interpretation  of the provision would exclude claims 9  to 17 below and could  also exclude claims 6 
through  8,  thus  potentially  including  only  claims  1,  3  and  4.  In  contrast,  Professor  Robertson 
considered that his interpretation would include claims 1 through 5 and probably claims 6 through 10. 

93 John C.P. Goldberg, OPA and Economic Loss: A Reply to Professor Robertson, Mississippi College Law 
Review 203, 204 (2011) (citing John C.P. Goldberg, Liability for Economic Loss in Connection with the 
Deepwater Horizon Spill, vol. 30, 7 (22 November 2010), available from http://nrs.harvard.edu/urn-
3:HUL.InstRepos:4595438 reprinted in Mississippi College Law Review, vol. 30, 355 app. (2011)). 
94 David W. Robertson, Criteria for Recovery of Economic Loss Under the Oil Pollution Act of 1990, Texas 
Journal of Oil, Gas, and Energy Law, vol. 7, 241, 242 (2011); see also David W. Robertson, OPA and Economic 
Loss: A Response to Professor Goldberg, Mississippi College Law Review, vol. 30, 217 (2011). 

48 

 
 
 
                                                            
ANNEX II.  CRIMINAL  LIABILITY  FOR  OFFSHORE  SAFETY  BREACHES  IN 

SELECTED FOCAL STATES95 

i.  Denmark 

Part  10  of  the  Act  on  the  Use  of  the  Danish  Subsoil  contains  some  general  provisions  on  criminal 
liability. 

38.-(1) Any party 
(i)  carrying  on  the  activities  referred  to  in  sections  1(2)  and  17  without  a  licence 
issued by the Minister for Climate and Energy, 
(ii) transgressing the provisions of section 26(1) or failing to submit the samples and 
other information required according to section 34,  
(iii)  disregarding  enforcement  notices  issued  in  accordance  with  this  Act  or 
regulations  laid  down  in  pursuance  of  this  Act,  shall  be  punishable  by  a  fine  or 
imprisonment for a term of up to four months. 
(2)  Any  regulations  issued  in  pursuance  of  this  Act  may  include  penalty  provisions 
imposing a fine or imprisonment for a term of up to four months for any transgression 
of the provisions laid down in such regulations. 
(3) Companies, etc. (legal persons) may be held criminally liable in accordance with 
the provisions laid down in Part 5 of the Danish Criminal Code. 

Part IX of the Petroleum Safety Act (titled “Penalties”) specifies who can be held criminally liable for 
what type of acts, and what the sanctions are: 

70. (1)The licensee, owner of offshore installations under section 2(1)(i)(c), operating 
company, contractor, employer, company manager and offshore installation manager 
who do not take care to 
i)  identify  and  assess  the  risks  pursuant  to  section  5(1),  (3)  and  (4),  section  8(4), 
section  10(1),  section  11(2),  section  33(1)  and  (3),  section  34(1),  sections  35-36  or 
section 53, 
ii) supervise pursuant to section 6(1), section 7 second sentence, section 8(2) second 
sentence, section 10(2), section 19(3) or section 20(3), or 
iii) give instructions or training pursuant to section 7 first sentence, section 8(2) first 
sentence, section 9, first sentence, or section 10(3), second sentence, shall be fined or 
punished with imprisonment for up to one year. 

(2)  The  supervisor  or  employees  who  do  not  assist  in  identifying  and  assessing  the 
health  and  safety  risks  pursuant  to  section  12  or  13  shall  be  fined  or  punished  with 
imprisonment for up to one year. 

(3) Anyone who 
i) infringes section 5(2) and (5), section 8(1), (3) and (5), section 10(3) first sentence, 
and  (5),  section  11(1),  (3)  and  (4),  section  12(1)  second  sentence,  and  (2)  and  (3), 
section  13(1)  and  (2),  section  16,  section  18(1)-(5),  section  19(1)  and  (2),  section 
20(1)  and  (2),  sections  23-25,  sections  27-31,  section  33(2),  section  45(4),  section 
46(1) and (3), section 47 or section 50(1), 

95 Source: De Smedt, et al. (2013), Civil Liability and Financial Security for Offshore Oil and Gas Activities, 
Maastricht European Institute for Transnational Legal Research - METRO, Maastricht University. 

49 

 
 
                                                            
ii) has work carried out contrary to section 50(3), or section 51(1)-(3), is in charge of 
or supervises such work or 
iii) does not comply with orders pursuant to section 45(3), or section 64. 
shall be fined or punished with imprisonment for up to one year. 

(4)  The  maximum  imprisonment  is  two  years  if  the  infringement  has  been  made 
intentionally or by gross negligence. 

(5) In connection with meting out the penalty pursuant to subsection (3)(i), it shall, to 
the  extent  that  the  employer  and  the  operating  company  have  fulfilled  their 
obligations  pursuant  to  chapter  2  and  4,  be  regarded  as  aggravating  circumstances 
for  employees,  if  these  intentionally  or  by  gross  negligence  infringe  legislation 
requirements on  
i) the use of personal protective equipment, 
ii) the use of extraction facilities, 
iii) the use of protection equipment or safety precautions, 
iv) the use of justifiable working methods or 
v) crane and forklift certificates. 

(6) In connection with meting out the penalty pursuant to subsections (1)-(4)—outside 
the cases mentioned in subsection (5)—the following shall be regarded as aggravating 
circumstances: 
i) that the infringement has resulted in injury to life and health or caused danger of 
this, 
ii) that an order pursuant to section 64 has been previously made for the same thing 
or similar conditions, or 
iii) that in connection with the infringement a financial advantage has been obtained 
or intended to be obtained for the person himself or others. (7) It shall be regarded as 
a  special  aggravating  circumstances  if,  for  persons  under  the  age  of  18,  there  has 
been injury to life and health or if danger of this has been evoked, cf. subsection (6)(i). 

(8) If no profits are seized, which have been obtained by infringement, the meting out 
of the fine, including additional fine, shall take into special consideration the size of a 
financial advantage obtained or intended to be obtained. 

(9) The limitation period for criminal liability is five years for infringement of section 
18(1)-(5) and rules issued pursuant to section 18(6). 

(10)  Unless  a  higher  penalty  is  applicable  pursuant  to  other  legislation,  any person 
shall  be  fined  who  violates  the  provisions  in  Regulation  (EC)  No  336/2006  of  the 
European Parliament and of the Council of 15 February 2006 on the Implementation 
of  the  International  Safety  Management  Code  within  the  Community  and  repealing 
Council Regulation (EC) No 3051/95. 

71.  (1)The  individual  employer  shall  be  punishable  by  a  fine,  even  though  the 
infringement  cannot  be  considered  intentional  or  grossly  negligent,  cf.  however 
subsection (3), if the employer 
i) does not take care to identify and assess risks pursuant to section 10(1) or section 
35, 
ii) does not take care to supervise pursuant to section 10(2), 

50 

 
 
iii) has work carried out contrary to section 50(3) or section 51(1), or 
iv) does not comply with orders made pursuant to section 45(3) or section 64. 

(2)  A  condition  for  the  individual  employer  being  punishable  by  a  fine  pursuant  to 
subsection  (1)  above  is  that  one  or  more  persons  attached  to  the  company  or  the 
company  as  such  can  be  blamed  for  the  infringement.  No  imprisonment  shall  be 
determined in lieu of a fine. 

(3) To the extent that the employer has fulfilled his obligations pursuant to sections 10 
and 35, the employer cannot be punishable by a fine if employees infringe legislation 
requirements on 
i) the use of personal protective equipment, 
ii) the use of extraction facilities, 
iii) the use of protection equipment or safety precautions,  
iv) the use of justifiable working methods or 
v) crane and forklift certificates. 

72. In rules laid down pursuant to this Act, a penalty can be fixed in the form of a fine 
for 

(1) infringement of the rules and for lack of non-compliance of orders or prohibitions 
pursuant to the rules. Infringement of rules that put regulations into force, which are 
not written in Danish, cf. section 44, shall not be punishable. Furthermore, it can be 
determined  that  the  individual  employer,  who  infringes  provisions,  orders  or 
prohibitions as stated, shall be punishable by a fine, even though he cannot be blamed 
for  the  infringement  as  intentional  or  grossly  negligent.  Punishment  by  fine  is 
conditional  on  the  infringement  being  blamed  one  or  more  persons  attached  to  the 
company or the company as such. No imprisonment shall be determined in lieu of a 
fine  

(2)  Punishment  by  fine  pursuant  to  subsection  (1),  second  sentence,  and  section  71, 
cannot be imposed on company managers, cf. section 10(6). 

73.  Criminal  liability  may  be  imposed  on  limited  liability  companies,  etc.  (legal 
persons) pursuant to the rules set out in Part V of the Danish Criminal Code. Section 
71(3) is similarly applicable. 

ii.  Norway 

The Norwegian Petroleum Activities Act provides in Section 10-17 that: 

Wilful  or  negligent  violation  of  provisions  or  decisions  issued  in  or  pursuant to  this 
Act shall be punishable by fines or imprisonment for up to 3 months. In particularly 
aggravating  circumstances,  imprisonment  for  up  to  2  years  may  be  imposed. 
Complicity  is  punishable  in  the  same  way.  These  provisions  shall  not  apply  if  the 
violation is subject to a more severe penalty under any other statutory provision. 

iii.  UK 
There are several laws and regulations that have provisions related to the criminal liability for offshore 
activities in UK jurisdiction. 

51 

 
 
First, in Part II of the Petroleum Act 1998 (which is titled “Offshore activities”) section 10 provides 
that criminal law is applicable to waters including the territorial sea and the continental shelf.96 This 
Act  also  mentions  that  when  “a  body  corporate  is  guilty  of  an  offence  by  virtue  of  an  Order  in 
Council”, the “director, manager, secretary or other similar officer of the body corporate or any person 
who was purporting to act in any such capacity, he as well as the body corporate shall be guilty of that 
offence and shall be liable to be proceeded against and punished accordingly.”97  

In  addition,  the  Environmental  Protection  Act  1990  also  has  provisions  on  penalties  for  offences  of 
polluting controlled waters which concerns criminal liability for actions during the offshore activities. 
Section  145  of  the  Environmental  Protection  Act  1990  refers  to  the  Water  Act  1989  (penalties  for 
offences of polluting controlled waters or contravening consent conditions) and Control of Pollution 
Act 1974 (corresponding penalties for Scotland). The penalties are as follows:  

  on summary conviction, to imprisonment for a term not exceeding three months or to a fine 

not exceeding £20,000 or to both;  

  on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine 

or to both.  

Furthermore, the Offshore Chemicals  Regulations 2002 has in Regulation  18 provisions on criminal 
offences.  The  penalties  largely  reflect  the  provisions  in  Environmental  Protection  Act  1990,  and  the 
corporate  liability  is  in  line  with  that  under  Environmental  Protection  Act  1990.  In  addition,  the 
Offshore  Chemicals  Regulations  2002  also  defines  what  constitutes  an  offence.  The  relevant 
provisions in Regulation 18 are as follows: 

(1) Subject to paragraph (2), a person is guilty of an offence if he—  
(a)contravenes regulation 3(1);  
(b)fails to comply with the terms of a direction given under regulation 16(4);  
(c)fails to supply any information required to be supplied by virtue of regulation 3(3) 
or 15;  
(d)fails to supply any information required to be supplied by virtue of the terms of any 
permit granted under these Regulations;  
(e)knowingly  or  recklessly  makes  a  statement  which  he  knows  to  be  false  or 
misleading in a material particular where such a statement—  
(i)is  made  in  connection  with  or  for  the  purposes  of  any  permit  application  or  any 
application under regulations 10 or 11; or  
(ii)is made for the purposes of satisfying any requirement under these Regulations for 
the supply of information to the Secretary of State or an inspector appointed pursuant 
to regulation 16;  
(f)wilfully obstructs an inspector appointed under regulation 16; or  
(g)without  reasonable  excuse  fails  to  comply  with  a  requirement  imposed  in 
pursuance  of  regulation  16  or  prevents  another  person  from  complying  with  such  a 
requirement.  

(2) Where a person is charged with an offence under paragraph (1)(a) or (1)(b), it is a 
defence to prove that the contravention—  

96 Section 10 (7) of Petroleum Act 1998. 
97 Section 10 (4) of Petroleum Act 1998. 

52 

 
 
                                                            
(a)arose as a result of something which could not have been reasonably prevented by 
him; or  
(b)was due to something done as a matter of urgency for the purposes of securing the 
safety of any person.  

(3) A person guilty of an offence under this regulation shall on summary conviction be 
liable to a fine not exceeding the statutory maximum and on conviction on indictment 
to a fine. 

The  Offshore  Petroleum  Activities  (Oil  Pollution  Prevention  and  Control)  Regulations  2005  contain 
some provisions in Regulation 16 on Offences as well, which specifies the concept of an offence and 
prescribes penalties: 

(1) Subject to paragraphs (2) and (4), a person is guilty of an offence if he—  
(a)contravenes regulation 3(1);  
(b)fails to comply with the terms of an enforcement notice or a prohibition notice;  
(c)fails  to  supply  any  information  required  to  be  supplied  by  virtue  of  the  terms  or 
conditions of any permit granted under these Regulations;  
(d)fails to supply any information required to be supplied by virtue of regulation 3(4);  
(e)wilfully obstructs an inspector appointed under regulation 12;  
(f)without  reasonable  excuse,  fails  to  comply  with  a  requirement  imposed  in 
pursuance of regulation 12(3), or prevents another person from complying with such 
a requirement;  
(g)knowingly  or  recklessly  makes  a  statement  which  he  knows  to  be  false  or 
misleading in a material particular where such a statement—  
(i)is made in connection with, or for the purposes of, any application for a permit, the 
renewal of a permit, the variation of a permit or the assignment of a permit; or  
(ii)is made for the purposes of satisfying any requirement under these Regulations for 
the supply of information to the Secretary of State or an inspector appointed by her 
pursuant to regulation 12.  

(2) Where a  person is charged with an offence under paragraph (1)(a), (1)(b),(1)(c) 
or 1(d), it is a defence to prove that the contravention or failure—  
(a)arose as a result of something which could not reasonably have been prevented by 
him; or  
(b)subject to paragraph (3), was due to something done as a matter of urgency for the 
purpose of securing the safety of any person.  

(3) A  person  does  not  have  the  defence  provided  by  paragraph  (2)(b)  if  the  court  is 
satisfied—  
(a)that the thing done—  
(i)was not necessary for the purpose mentioned in that paragraph; and  
(ii)was not a reasonable step to take in the circumstances; or  
(b)that it was necessary for the purpose mentioned in that paragraph but the necessity 
was due to the fault of the defendant.  

(4) The discharge of oil into relevant waters in contravention of any one or more of 
the terms of or conditions attached to a permit shall not constitute an offence for the 
purpose of this regulation where the term or condition in question relates exclusively 
to one or more of the trading schemes.  

53 

 
 
(5) A person guilty of an offence under this regulation shall, on summary conviction, 
be  liable  to  a  fine  not  exceeding  the  statutory  maximum  and,  on  conviction  on 
indictment, to a fine. 

Moreover,  the  Environmental  Damage  (Prevention  and  Remediation)  Regulations  2009  also  has 
relevant provision in Regulation 34: 

(1) A person guilty of an offence under these Regulations is liable—  
(a)on  summary  conviction,  to  a  fine  not  exceeding  the  statutory  maximum  or  to 
imprisonment for a term not exceeding three months or both; or  
(b)on conviction on indictment, to a fine or to imprisonment for a term not exceeding 
two years or both.  

(2) Where a body corporate is guilty of an offence under these Regulations, and that 
offence  is  proved  to  have  been  committed  with  the  consent  or  connivance  of,  or  to 
have been attributable to any neglect on the part of—  
(a)any director, manager, secretary or other similar person of the body corporate, or  
(b)any person who was purporting to act in any such capacity,  
that person is guilty of the offence as well as the body corporate.  

(3) For  the  purposes  of  paragraph  (2),  “director”,  in  relation  to  a  body  corporate 
whose affairs are managed by its members, means a member of the body corporate. 

54 

 
 
 
 
ANNEX III. 

SUMMARIES  OF  EEA  MEMBER  COUNTRY  LIABILITY  REGIMES 
APPLICABLE TO OFFSHORE ACCIDENTS98 

i.  Bulgaria 

Liability for claims for compensation for bodily injury and property damage is imposed by the Law on 
Obligations and Contracts.  

Article 3(1) of the Maritime Space Act provides, in pertinent part, that “[d]amages, caused by an act of 
quasi delicti occurring in the … territorial sea, on the continental shelf and in the exclusive economic 
zone,  shall  be  subject  to  Bulgarian  legislation”.  The  term  “delicti”  is  derived  from  the  Latin  word 
“delictum” meaning “fault”. The application of tort law to offshore oil and gas operations may mean 
that only tort law based on fault applies. Or it may have a broader meaning to include tort law based 
on strict liability. This issue is, of course, only relevant if a provision of the Law on Obligations and 
Contracts  that  imposes  strict  liability  applies  to  a  claim  for  compensation  from  pollution  from  an 
offshore oil and gas incident. 

Even  if  only  liability  based  on  negligence  applies,  the  burden  is  on  the  tortfeasor  not  the  claimant. 
That is, the burden concerning proof of fault under the Law on Obligations and Contracts is reversed; 
the claimant is not required to prove fault; the tortfeasor has the burden of showing that it did not act 
with fault. 

It is unclear whether the Law on Obligations and Contracts imposes liability for pure economic loss. 
Article 45 provides, in pertinent part, that “[e]very person is obligated to redress the damage he has 
faultily caused to another person”. Article 51 provides, in pertinent part, that “[c]ompensation shall be 
due for all damages that are a direct and immediate consequence of the tort”. 

If the Law on Obligations and Contracts imposes liability for pure economic loss, liability thus applies 
only to damage that is “a direct and immediate consequence of the tort”. It may, therefore, be difficult 
for a claimant for compensation for harm caused by pollution from an offshore oil and gas incident to 
prove that the loss is a direct and immediate consequence of the incident. 

Article  170  of  the  Environmental  Protection  Act  provides  that  “any  person,  who  causes  damage  at 
fault  to  a  person  because  of  polluting  or  damaging  the  environment  shall  compensate  them”.  It  is 
unclear, however, whether the Environmental Protection Act imposes liability for pure economic loss, 
albeit fault-based if it does. Further, it appears that the Act does not apply to actions carried out on the 
continental shelf  and exclusive economic zone. In respect of State property, article 170  refers to the 
Minister of Environment and Water as the governmental authority with power to bring an action when 
harm  extends  over  the  territory  of  multiple  administrative  regimes.  Article  170  further  refers  to  the 
competent Regional Governor as the governmental authority with power to bring an action if the harm 
extends over multiple municipalities.  

Article  202  of  the  Water  Act  provides  that  a  person  who  causes  water  pollution  is  liable  for 
compensation for harm to other persons if the polluter is at fault. Article 3 of the Water Act, however, 
refers to surface water, groundwater, internal marine waters and the territorial sea; it does not refer to 
the continental shelf and the exclusive economic zone.  

98 Source: BIO by Deloitte (2014), Civil liability, financial security and compensation claims for offshore oil and 
gas activities in the European Economic Area, Final Report prepared for European Commission – DG Energy. 
Significantly more detailed descriptions of the applicable laws in each country can be found in the Annex of that 
report. 

55 

 
 
                                                            
In summary, Bulgarian law may impose liability for pure economic loss but, if it does so, a claimant 
would  have  to  show  that  its  loss  is  a  direct  and  immediate  consequence  of  the  incident.  Further,  if 
fault-based tort law applies, the tortfeasor bears the burden of showing that it did not act with fault. 

ii.  Croatia 

The Production Sharing Agreement for the first international offshore licensing round, launched on 2 
April 2014, provides an indemnity and a hold harmless agreement from the Contractor to Croatia for 
“any damage or loss which the Contractor, its employees or Sub-contractors and their employees may 
cause to the person, the property or the rights of other persons” from hydrocarbon operations. Further, 
the agreement requires a Contractor, among other things, to “take all necessary and adequate steps to 
…  ensure  payment  of  adequate  compensation  for  injury  to  persons  or  damage  to  property  caused 
consequent  to  Petroleum  Operations”,  to  control  and  clean  up  any  pollution  and,  if  necessary,  to 
reimburse the State for such costs. 

The  agreement  does  not  impose  liability  for  damage  or  loss  on  the  Contractor  itself;  it  is  limited  to 
liability as between the parties to the agreement, that is, the Contractor and the State. 

The law that imposes liability for compensation for bodily injury and property damage, as well as pure 
economic loss, is the Civil Obligations Act which imposes fault-based liability. If offshore oil and gas 
operations were to be considered to fall within the categories in the Act for a “dangerous thing” or a 
“dangerous  activity”,  strict  liability  would  apply.  It  is  unclear,  however,  whether  they  would  fall 
within this category. 

In respect of lost profits, a claimant would have to show “that in the due course of events, or according 
to special circumstances, there was a probability of making the profit and that he/she had the intention 
to  acquire  that  profit”.99  Further,  the  claimant  would  have  to  show  that  the  pollution  caused  by  an 
offshore oil and gas incident is, in general, likely to cause the damage that occurred.100 

There  has  been  no  major  pollution  case  in  Croatia  so  far  concerning  offshore  oil  and  gas  activities. 
Nonetheless, a RO-RO (Roll on/Roll off) vessel burned once between Italy and Croatia.101 There are 
no Protocols or special provisions under Croatian law for transboundary liability.102 

There  is  however,  a  Decree  on  the  main  technical  requirements  on  safety  and  security  of  offshore 
exploration  and  production  of  hydrocarbons  in  the  Republic  of  Croatia.  According  to  this  Decree,  a 
platform  is  considered  as  a  vessel  (technical  maritime  vessel).103  Therefore,  the  Civil  Liability 
Convention or Bunker Oil Convention could apply to it. In addition, some limitations within the Civil 
Liability Convention are linked to the tonnage for vessels, which is a difficult limitation to set in place 
for  such  activities.104  A  legal  expert  stated  that  there  was  no  knowledge  as  to  whether  or  not  this 
Decree  had  been  applied,  but  that  it  could  be  assumed  that  the  Decree  was  applicable  to  several 

99 See Marko Baretić and Dr. Saša Nikšić, Croatia, 88, 97 in Vernon Valentine Palmer and Mauro Bussani, Pure 
Economic Loss: New Horizons in Comparative Law (Routledge-Cavendish, 2009). 
100 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: The Ways to Recovery, Netherlands 
Comparative Law Association, Electronic Journal of Comparative Law, vol. 11(3), 46 (December 2007). 
101 See Maritime Information Centre, Vessel on fire at sea (4 February 2008); available at 
http://www.micportal.net/index.php?option=com_content&view=article&id=126%3Avessel-on-fire-at-
sea&Itemid=66  
102 Telephone interview with Miran Maćešić, Maćešić & Partners LLC, 10 April 2014. 
103 Article 3 of the Decree, available in Croatian at: http://www.azu.hr/wp-content/uploads/2014/03/Pravilnik.pdf  
104 See IMO raises compensation limits for oil pollution disasters (Legal Committee - 82nd session 16-20 
October 2000); available at http://www.imo.org/blast/mainframe.asp?topic_id=68&doc_id=514  

56 

 
 
                                                            
production platforms that produce gas in the north Adriatic (which are operated by the joint venture 
company of INA d.d., Agip SpA and alternatively Edison SpA).105 

In summary, liability exists under Croatian law for lost profits if a claimant shows the probability of 
making the profits and that he/she had the intention to acquire the profits. Further, the claimant would 
have to show that the pollution caused by an offshore oil and gas incident is, in general, likely to cause 
the loss of profits, or other damage that occurred. The claimant would probably also have to show that 
the  person  who  caused  the  lost  profits  was  at  fault.  Further,  the  Civil  Liability  Convention  or  the 
Bunker Oil Convention may apply to some incidents, depending on the nature of the offshore facility. 

iii.  Cyprus 
Claims for bodily injury and property damage may be brought under the common law, as set out in the 
Law  of  Civil  Wrongs,  as  amended  (Cap.  148).  The  Civil  Wrongs  Law  establishes  civil  liability  for 
negligence. It also imposes strict liability for some activities, none of which appears to be relevant to a 
claim for bodily injury and property damage from an offshore oil and gas incident. 

Cypriot law does not impose liability for pure economic loss. 

In addition to statutory liability, the Production Sharing  Contract, which is entered into by licensees 
for a production licence, provides for contractual liability as follows: 

“The Contractor shall indemnify and compensate any person, including the Republic [of Cyprus], for 
any  damage  or  loss  which  the  Contractor,  its  employees  or  subcontractors  and  their  employees  may 
cause  to  the  person,  the  property  or  the  rights  of  other  persons,  caused  by  or  resulting  from 
Hydrocarbons Operations, including any environmental damage”. 

It  is  unclear from  the  above  provision whether  the  Production  Sharing  Contract  imposes  contractual 
liability for pure economic loss as well as bodily injury and property damage. The provision imposes 
strict liability; no defences or exceptions are set out. 

The  Production  Sharing  Contract  also  requires  the  Contractor  to  indemnify  and  hold  harmless  the 
State. Unlike the indemnity provision set out above, this provision is limited to liability between the 
parties to the agreement, that is, the Contractor and the State. 

In summary, liability exists under Cypriot law for fault-based liability for bodily injury and property 
damage, but not for pure economic loss. Strict liability exists under the Production Sharing Contract 
for  compensation  to  “any  person”  including  the  State,  but  it  is  unclear  whether  liability  under  the 
contract covers pure economic loss. 

iv.  Denmark 
Section  35  of  the  Subsoil  Act  is  the  main  provision  that  imposes  liability  for  bodily  injury  and 
property damage (and economic loss) caused by the exploration for, and production of, hydrocarbons. 
Section 35(1) provides that “A licensee shall be liable to pay damages for any loss, damage or injury 
caused  by  the  activities  carried  on  under  the  licence,  even  though  such  loss,  damage  or  injury  was 
caused  accidentally”.  Persons  who  may  claim  compensation  include  the  licensee’s  employees  and 
contracting parties, as well as third parties. 

105 Telephone interview with Miran Maćešić, Maćešić & Partners LLC, 10 April 2014.  

57 

 
 
                                                            
The  Environmental  Damage  Compensation  Act  imposes  strict  liability  for  compensation  for  bodily 
injury,  property  damage  and  economic  loss  from  pollution  from  activities  and  facilities  listed  in  an 
Annex  to  the  Act.  The  activities  and  facilities  in  the  Annex  include,  among  other  things,  energy 
facilities and other facilities considered to have a high risk of causing pollution. Liability is subject to 
an  exception  for  force  majeure.  The  operator  of  an  offshore  oil  and  gas  facility  could  be  liable  for 
compensation  under  the  Act  provided,  of  course,  that  the  facility  is  concluded  to  be  included  in  the 
Annex. 

Under  Danish  civil  law,  pure  economic  loss  is  defined  by  the  same  rules  as  loss  that  results  from 
physical  damage  to  property or  bodily  injury.  That  is,  liability  for  pure  economic  loss  is  not  treated 
differently than liability for bodily injury or property damage. The main general source of law for pure 
economic  loss  is  case  law.  Three  elements  constitute  such  a  loss:  first  the  claimant  must  prove  he 
suffered  a  loss,  second  the  claimant  must  prove  that  the  loss  is  caused  by  an  act  or  omission  of  the 
defendant and third, there must be a causal link between the two. Such a link can be negligence by the 
tortfeasor or strict liability.106 In this respect, pure economic loss must not be too remotely connected 
to  the  tortfeasor’s  negligent  conduct.  Further,  the  claimant  must  have  been  directly  affected  by  the 
tortfeasor’s negligence.107 

Major obstacles to claims for pure economic loss could thus be encountered if a defendant asserts that 
the claim is too remote to be entitled to damages under Danish law. In practice, pure economic loss is 
more difficult to prove than bodily injury or property damage.108 The recovery of pure economic loss 
in the form of lost income due to pollution from an offshore oil and gas incident would appear to be 
unlikely.109 

In summary, the Subsoil Act imposes strict liability for bodily injury, property damage and economic 
loss  caused  by  an  offshore  oil  and  gas  incident.  The  Liability  for Damages  Act  imposes  fault-based 
liability  for  personal  injury  and  loss  of  dependency  from  an  offshore  oil  and  gas  incident.  The 
Environmental Damage Compensation Act, if it applies, imposes strict liability for claims for bodily 
injury, property damage and economic loss. In order to recover pure economic loss, a claimant must 
show that its loss is direct and that the defendant’s act was likely to cause the loss. 

v. 

France 

Liability for bodily injury, property damage and pure economic loss in France is governed by the Civil 
Code  which,  as  a  general  rule,  imposes  fault-based  liability.  Although  the  Civil  Code  has  some 
provisions that provide an exception from this general rule by imposing strict liability, none of them 
appear to apply to a claim from an offshore oil and gas incident. 

106 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss, New Horizons in Comparative Law 
283 (University of Texas at Austin, Studies in Foreign and Transnational Law) (Basil Markesinis and Jörg 
Fedtke, general editors, Routledge-Cavendish, 2009). 
107 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: New Horizons in Comparative Law, 
University of Texas at Austin, Studies in Foreign and Transnational Law (Basil Markesinis and Jörg Fedtke, 
general editors, Routledge-Cavendish, 2009). 
108 Bernhard Gomard, Recent Developments in the Danish Law of Tort, Stockholm Institute for Scandinavian 
Law 1957-2009. 
109 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: New Horizons in Comparative Law 
65-66 (University of Texas at Austin, Studies in Foreign and Transnational Law) (Basil Markesinis and Jörg 
Fedtke, general editors, Routledge-Cavendish, 2009) (considering that Danish courts would deny hypothetical 
claims for lost income suffered by cattle raisers and butchers from the closure of cattle and meat markets for 10 
days due to a person having negligently allowed infected cattle to escape). 

58 

 
 
                                                            
Article 1382 of the French Civil Code states that “[a]ny act whatever of man, which causes damage to 
another,  obliges  the  one  by  whose  fault  it  occurred,  to  compensate  it”.  Article  1383  states  that 
“[e]veryone is liable for the damage he causes not only by his intentional act, but also by his negligent 
conduct or by his imprudence”. Neither of these articles would “screen out recovery for pure economic 
loss”.110  French  law  may,  thus,  potentially  allow  claims  by,  among  others,  “marinas,  boat  suppliers, 
hotel operators, and commercial fisherman in the area [who] suffer severe economic loss” due to an 
offshore  oil  and  gas  incident.111  For  example,  in  one  case,  the  owner  of  a  café  who  lost  income 
because  he  lost  some  of  his  customers  due  to  the  pollution  of  a  nearby  river  was  awarded 
compensation.112 In another case, however, a claim by the State for loss of taxes due to unsold fishing 
licences did not succeed due to the uncertainty of the loss.113 

Article  L.155-3  of  the  Mining  Code  also  imposes  liability  on  the  explorer  or operator  or,  if  not,  the 
holder  of  the  mining  licence,  for  damage  caused  by  its  activities.  Such  liability  is  not  limited  to  the 
area for which the mining licence is granted or the time during which the licence is in effect. In case of 
a default by the holder, the State guarantees compensation for the damage (which is then subrogated to 
the rights of the victim against the responsible person). 

Compensation for pollution in France is not limited to persons who suffer lost income. In respect of 
pollution  from  the  Erika  oil  spill,  the  Paris  Tribunal  de  grande  instance  awarded  compensation  for 
environmental  damage  to  “’the  local  authorities  to  whom  the  law  grants  a  specific  competence  in 
matter of environment, conferring upon them a special responsibility in the protection, management, 
and preservation of a territory’”.114 The court also awarded compensation to the  Ligue de protection 
des  oiseaux,  an  environmental  NGO  that  had  taken  care  of  birds  affected  by  the  oil  spill.  One 
commentator remarked that compensation for such harm had been recognised before “but never with 
such high scale compensation”.115 

Although there is no established compensation scheme in France, in case of a “national disaster”, ad 
hoc compensation procedures may be created. AZF is an example of such a procedure.and Buncefield 

The  explosion  in  a  warehouse  that  stored  granular  ammonium  nitrate  at  the  AZF  chemical  plant  in 
Toulouse, France, on 21 September 2001, caused the deaths of 30 people (including 21 employees), 
injuries to over 4,500 people, and the destruction of 27,000 homes and other buildings. On 3 October 
2001,  the  French  Government  established  the  National  Disaster  Victim  Compensation  Committee 
(Comité National de Suivi pour la prise en charge des Victimes), led by the French Ministry of Justice. 
The  Committee  included  the  Grand  Paroisse  Group  (owner  of  the  chemical  plant),  governmental 

110 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: The Ways to Recovery, Netherlands 
Comparative Law Association, Electronic Journal of Comparative Law, vol. 11(3), 34 (December 2007); 
available at http://www.ejcl.org/113/article113-9.pdf  
111 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: The Ways to Recovery, Netherlands 
Comparative Law Association, Electronic Journal of Comparative Law, vol. 11(3), 38 (December 2007)(see 
page 13; analogising chemical spill to a hypothetical concerning a person who negligently allows infected cattle 
to escape, resulting in the Government ordering the closure of cattle and meat markets). 
112 Environmental Liability and Ecological Damage in European Law 487 (Monika Hinteregger, editor, 
Cambridge University Press, 2008)(citing Corr. Turnhout, 18 February 1992, unpublished, No. 498). 
113 Environmental Liability and Ecological Damage in European Law 487 (Monika Hinteregger, editor, 
Cambridge University Press, 2008)(citing Pol. Chimay, 14 August 1931, JJP, 1932, 378). 
114 See Olivier Moréteau, France: French Tort Law in the Light of European Harmonization, Journal of Civil 
Law Studies, vol. 6(2), 759, 788-89 (quoting TGI Paris, 16 January 2008, paragraph 3.1.2.2.2.3). 
115 See Olivier Moréteau, France: French Tort Law in the Light of European Harmonization, Journal of Civil 
Law Studies, vol. 6(2), 759, 789. 

59 

 
 
                                                            
authorities,  elected  officials  and  disaster-victim  associations.  On  31  October  2001,  an  agreement, 
called the National Disaster Compensation Convention, was signed. The agreement established special 
procedures to provide compensation to victims. The claims were managed by a team of 220 experts 
(including medical experts), 25 claims managers, and 10 lawyers. Over EUR 2 billion was eventually 
paid  out  in  compensation  for  claims  for  bodily  injury  and  property  damage;  16,000  people  were 
compensated  for  bodily  injuries  and  71,000  cases  (33,000  of  which  were  for  residences,  including 
private and local authority houses and flats) involved compensation for property damage. Other settled 
claims involved public, commercial buildings and vehicles. 

Notably, however, there were delays in a substantial part of the compensation payments as a result of 
their coverage by insurance.116  

vi.  Germany 
Liability  for  compensation  for  bodily  injury  and  property  damage  is  imposed  by  the  German  Civil 
Code. The standard of liability is fault-based. The Civil Code does not specifically impose liability for 
pure  economic  loss.  One  commentator  has  stated  that  a  person  in  the  fisheries  industry  would  not 
succeed  in  a  claim  unless,  according  to  an  exception,  its  business  was  an  “established  and  practised 
commercial  operation”  and  the  pollution  was  directly  intended  to  interfere  with  it.  The  same 
commentator considered that a person in the tourism industry would not be entitled to compensation 
because  the  damage  would  be  indirect.117  This  requirement,  thus,  means  that  many  claims  for  pure 
economic loss from an offshore oil and gas incident would not succeed. 

Strict liability for bodily injury and property damage is imposed by the Environmental Liability Act 
and the Water Resources Act. One commentator considers that persons in the fisheries industry should 
be able to claim lost profits under the Water Resources Act but that persons in  the tourism industry 
would probably be unable to claim because their losses would be regarded as indirect damage.118 

vii.  Greece 
The  environmental  protection  law  (Law  1650/86)  in  Greece  imposes  liability  for  bodily  injury  and 
property damage from water pollution (and other environmental damage). Article 29 provides that: 

“Whoever, whether a physical person or legal entity, causes pollution or other degradation to 
the environment, is liable for damage, unless he proves that the damage is due to an act of God or was 
the result of a third party’s culpable act”.119 

One commentator considered that a hypothetical claim by the owner of an outdoor recreation business 
that had organised rafting and canoeing tours on a river for 10 years for a total loss of profits for three 
years  during  which  time  the  river  could  not  be  used  for  white  water  canoeing  and  rafting  due  to 

116 See BIO Intelligence Service, Study to explore the feasibility of creating a fund to cover environmental 
liability and losses occurring from industrial accidents (2013), pp. 24-26 (Final Report prepared for European 
Commission DG Environment). 
117 See Environmental Liability and Ecological Damage in European Law 525 (Cambridge University Press, 
Monika Hinteregger, editor, 2008). 
118 See Environmental Liability and Ecological Damage in European Law 525 (Cambridge University Press, 
Monika Hinteregger, editor, 2008). 
119 Translation by Monika Hinteregger. Environmental Liability and Ecological Damage in European Law 284 
(Monika Hinteregger, editor, Cambridge University Press, 2008). 

60 

 
 
 
                                                            
pollution of a nearby river would succeed under Law 1650/86.120 By analogy, it appears that at least 
some claims for lost profits from pollution from an offshore oil and gas incident should also succeed. 

Liability  for  claims  for  bodily  injury  and  property  damage  is  also  imposed  by  the  Civil  Code.  The 
Civil  Code  may  also  impose  liability  for  pure  economic  loss  but,  if  so,  stringent  causation 
requirements would limit the number of successful claims. The claimant must show that the defendant 
was,  in  general,  likely  to  cause  the  harm  that  occurred  and  also  that  the  defendant’s  act  affected  an 
interest considered to be protected by the purpose of the law.121 It is, thus, unclear whether a claim for 
harm  for  pure  economic  loss  from  an  offshore  oil  and  gas  incident  would  succeed;  much  would 
depend  on  the  nature  and  circumstances  of  each  claim.  In  this  respect,  the  commentator  who 
considered  that  a  hypothetical  claim  under  article  29  of  Law  1650/86  for  lost  profits  by  an  outdoor 
recreational company, as described directly above, would succeed, also concluded that the claim for 
lost profits would succeed under the Civil Code.122 

The strict liability provisions of the Civil Code do not appear to be relevant to a claim from pollution 
from an offshore oil and gas incident.  

The  Draft  Model  Lease  Agreement  for  the  2012  open  round  requires  a  lessee  who  causes  harm  to 
ensure adequate compensation for claims for bodily injury and property damage. Article 12.2(b) of the 
Agreement provides as follows “[t]he Lessee undertakes for the purposes of this Agreement to take all 
necessary and adequate steps … to ensure adequate compensation for injury to persons or damage to 
property caused by the effect of the Petroleum Operations”.  

The obligation appears to be subject to strict liability, with no defences or exceptions. The agreement 
does not, however, specifically state that the lessee must pay compensation; instead, it states that the 
lessee must take all necessary steps to ensure adequate compensation. Liability under the agreement is, 
thus, not entirely clear. 

In  summary,  Greek  law  imposes  strict  liability  for  compensation  from  pollution,  subject  to  the 
defences  of  an  act  of  God  or  a  third  party’s  culpable  act.  Greek  law  recognises  claims  for  pure 
economic  loss  subject  to  the  claim  meeting  the  other  requisites  of  Greek  tort  law.  The  Draft  Model 
Lease Agreement may impose liability for bodily injury and property damage but this is not entirely 
clear. 

Iceland 

viii. 
Article 28 of the Hydrocarbons Act states that “[t]he holders of prospecting licenses or exploration and 
production  licenses  will  be  liable  for  damages  under  this  Act  for  any  loss  or  damage  caused  by 
hydrocarbon activity, including environmental damage, regardless of whether the loss or damage was 
caused  by  culpable  conduct  or  not”.  The  Hydrocarbons  Act  also  states  that  liability  under  other 
Icelandic laws also applies referring, in particular, to the Tort Damages Act.  

120 Environmental Liability and Ecological Damage in European Law 494 (Monika Hinteregger, editor, 
Cambridge University Press, 2008).  
121 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: The Ways to Recovery, Netherlands 
Comparative Law Association, Electronic Journal of Comparative Law, vol. 11(3), 45 (December 2007). 
122 Environmental Liability and Ecological Damage in European Law 494 (Monika Hinteregger, editor, 
Cambridge University Press, 2008). 

61 

 
 
                                                            
Further,  Section  18  of  the  Model  Licence  for  the  Second  Licensing  Round  (Model  Licence)123  also 
provides  that  the  provisions  imposing  liability  for  loss  or  damage  caused  by  a  hydrocarbon  activity 
under  article  28  of  the  Hydrocarbons  Act  “does  not  limit  the  right  to  damages  by  an  injured  party 
derived from general rules”. The Model Licence includes an indemnity and hold harmless agreement 
from the lessee to the State. 

Still further, article 7 of Act No. 33/2004 on marine and coastal antipollution measures provides that 
“[e]ach  and  every  one  causing  pollution  in  Iceland's  pollution  jurisdiction  [which  includes  the 
continental  shelf  and  the  exclusive  economic  zone]  is  liable  under  the  general  rules  of  damages  for 
damage attributable to the pollution”.  

The Tort Damages Act imposes fault-based for bodily injury and property damage and, perhaps pure 
economic loss. 

In  summary, liability  for  compensation  for  traditional  damage  from  an  offshore  oil  and gas  incident 
under Icelandic law is as follows: 

  The Hydrocarbons Act imposes strict liability for “any loss or damage caused by hydrocarbon 
activity,  including  environmental  damage”  but  it  is  not  clear  that  the  term  “loss  or  damage” 
includes compensation for pure economic loss; and 

  The Tort Claims Act imposes fault-based liability for bodily injury and property damage but it 

is unclear whether it also imposes liability for pure economic loss. 

Ireland 

ix. 
The  legislation  for  the  exploration  and  production  of  offshore  oil  and  gas  in  Ireland  does  not 
specifically  impose  liability  for  compensation  to  third  parties  who  suffer  bodily  injury  or  property 
damage from offshore oil and gas operations. Instead the Civil Liability Act, 1961 and common law 
apply,  both  of  which  are  mainly  fault-based  for  claims  for  compensation  of  the  type  that  would  be 
claimed for harm from pollution from an offshore oil and gas incident. 

As a general rule, liability for pure economic loss does not exist under Irish law. A court may award 
pure economic loss but only if the loss was foreseeable and significant.124 

One commentator considered that a hypothetical claim concerning the owner of an outdoor recreation 
business that had organised rafting and canoeing tours on a river for 10 years for a total loss of profits 
for three years during which the river could not be used for white water canoeing and rafting due to 
pollution  of  a  nearby  river  would  face  a  “heavy  burden  in  establishing  liability”.  The  commentator 
noted  that  the  court  could  rule  favourably  if  it  considered  that  the  polluter  should  reasonably  have 
foreseen that all the users of the river would be deprived of its use if it was polluted.125 By analogy, 
claims for lost profits from pollution from an offshore oil and gas incident are also likely to be difficult 
to establish. 

123 National Energy Authority, Model Licence for Exploration and Production of Hydrocarbons, Second 
Licensing Round on the Icelandic Continental Shelf (Model Licence). An English translation of the Model 
Licence is available from http://www.nea.is/2nd-licensing-round/legal-documents/  
124 See Environmental Liability and Ecological Damage in European Law 525 (Monika Hinteregger, editor, 
Cambridge University Press, 2008). 
125 Environmental Liability and Ecological Damage in European Law 494 (Monika Hinteregger, editor, 
Cambridge University Press, 2008).  

62 

 
 
                                                            
Ireland  does  not  have  a  procedure  for  handling  claims  for  compensation  although  if  it  accepts 
membership  of  OPOL  as  financial  security  (as  it  has  done  at  least  once  since  April  2010),  the 
compensation scheme under the Offshore Pollution Liability Association (OPOL) would apply.  

In  summary,  liability  for  pure  financial  loss  for  compensation  for  harm  from  pollution  from  an 
offshore oil and gas incident does not, as a general rule, exist under Irish law. Even if it does exist, 
pure economic loss is not generally recoverable. Fault would apply to claims for harm from pollution 
from an offshore oil and gas incident. 

x. 

Italy 

Liability for bodily injury and property damage is imposed by the Italian Civil Code. 

The  Civil  Code  does  not  include  a  general  definition  of  “damages”.  Article  2056,  however, 
specifically  includes  “damage  arising  from  loss  of  earnings”,  stating  that  it  “shall  be  equitably 
estimated  by  the  court  according  to  the  circumstances  of  the  case”.  A  claimant  would  need  to  be 
granted legal standing to bring the claim pursuant to article 2043 of the Civil Code.126 

As an exception to fault-based liability, the Civil Code imposes “Liability arising from the exercise of 
dangerous activities”. This provision could potentially impose strict liability for harm from pollution 
from  offshore  oil  and  gas  operations,  although  it  is  unclear  whether  such  operations  would  be 
considered to be “dangerous activities”. If not, fault-based liability would apply. 

Italian law recognises pure economic loss subject to a claim meeting the other requisites of Italian tort 
law.  An  Italian  court  has  awarded  damages  under  article  2043  to  a  hotel  that  lost  profits  from  a 
reduction in the number of visitors due to the presence of waste on a nearby beach. By analogy, the 
potential exists that Italian law may recognise claims for pure economic loss from an offshore oil and 
gas incident, not only for claims by commercial fisheries but also for claims by the tourism industry. 
This is not certain, however. 

xi.  Latvia 
The Latvian Civil Code imposes liability for bodily injury, property damage and economic loss. It is 
unlikely, however, that liability for pure economic loss would apply to harm from an offshore oil and 
gas incident due the requirement for the loss to be direct. 

It is unclear whether harm from pollution from an offshore oil and gas incident would be subject to 
strict  liability  under  the  Civil  Code.  If  the  strict  liability  provisions  did  not  apply,  the  standard  of 
liability would be fault-based. 

In summary, if Latvian law imposes liability for pure economic loss, such liability probably would not 
apply to claims for compensation for harm from pollution from an offshore oil and gas incident unless 
the loss was concluded to be direct. Liability may be fault-based. 

xii.  Lithuania 
The Lithuanian Civil Code imposes liability for bodily injury  and  property damage. The Civil Code 
may impose liability for pure economic loss provided that the loss is direct, but it is not clear whether 
the relevant provision refers to consequential economic loss rather than pure economic loss.  

126 See Environmental Liability and Ecological Damage in European Law 524 (Monika Hinteregger, editor, 
Cambridge University Press, 2008). 

63 

 
 
                                                            
In addition, the Law on Environmental Protection, Lithuania’s framework environmental law imposes 
liability for bodily injury, property damage and potentially pure economic loss. The Law applies to the 
continental shelf and exclusive economic zone as well as the territorial sea and inland areas. 

In summary, Lithuanian law may impose liability for pure economic loss if the loss is direct but this is 
uncertain. Lithuania’s framework environmental law may impose liability for pure economic loss but, 
again, this is uncertain. 

xiii.  Malta 
The Civil Code of Malta imposes liability for bodily injury and property damage.  

The Civil Code imposes liability for economic loss (material damages); article 1045(1) provides that 
the  damage  for  which  a  person  is  liable  is  “the  actual  loss  which  the  [defendant’s]  act  shall  have 
directly caused to the injured party”. This provision covers both damages actually incurred as well as 
future earnings. 

Liability  is  fault-based.  Malta  does  not  have  relevant  specific  legislation  that  imposes  liability  for 
dangerous activities. 

In summary, Maltese law imposes liability for pure economic loss, which must be direct. Liability is 
fault based.127 

xiv.  The Netherlands 
The  Civil  Code,  which  imposes  liability  for  bodily  injury,  property  damage  and  economic  loss,  is 
generally  fault-based.  However,  the  Code  includes  provisions  imposing  strict  liability  for  mining 
works, which applies to harm from pollution from an offshore oil and gas incident. 

The Dutch law of torts does not specifically state that pure economic loss is recoverable but neither 
does it state that it is not recoverable. Dutch courts decide whether to award pure economic loss on a 
case by case basis depending on the facts of each case. 

Lost  income  from  pollution  from  an  offshore  oil  and  gas  incident  appears  to  be  recoverable.  One 
commentator noted that “fishermen whose earning capacity had been adversely affected by an oil spill 
in  a  coastal  area  [had]  been  awarded  damages  as  compensation  for  individual  economic  losses  (i.e. 
loss of earning capacity)”.128 Another commentator also considered that damages could be awarded in 
the hypothetical case of a loss in revenue by a hotel located next to a lake that was not owned by the 
hotel  when  tourists  stayed  away  from  the  hotel  due  to  a  tortfeasor  having  polluted  the  lake.  The 
commentator stated that the Explanatory Memorandum on the rules regarding liability for dangerous 
substances suggested that damages could be recoverable in such a case.129  

127 Comments (and information) by Charles Galea, Continental Shelf Department, Office of the Director 
General, Malta (15 September 2014). 
128 See Environmental Liability and Ecological Damage in European Law 504 (Monika Hinteregger, editor, 
Cambridge University Press, 2008).  
129 J.M. Barendrecht, Pure Economic Loss in the Netherlands 115, 128, in Netherlands Reports to the Fifteenth 
International Congress of Comparative Law (E.H. Hondius, editor, Intersentia Rechtswetenschappen, 1998) 
(referring to pages 18-19 of the Explanatory Memorandum on the rules regarding liability for dangerous 
substances). 

64 

 
 
                                                            
In summary, Dutch law imposes liability for pure economic loss. A claim by fishermen for lost income 
from an oil spill has succeeded in the past. Claims by the tourism industry for lost income may also 
succeed. 

xv.  Norway 
Norway  has  a  well-developed  and  sophisticated  regime  for  compensating  persons  who  suffer  bodily 
injury, property damage and economic loss from offshore oil and gas operations. The Petroleum Act, 
which channels liability to the licensee, specifically includes pure economic loss.  

Further,  there  are  specific  provisions  for  claims  by  fishermen.  Section  8-3  of  the  Petroleum  Act 
provides that a licensee is strictly liable for financial loss suffered by Norwegian fishermen resulting 
from pollution and waste from petroleum activities. The financial loss includes: 

the reasonable cost of measures taken by the fishermen to avert or limit the damage or loss; 
any financial loss from such measures; 

 
 
  damage and inconvenience as a result of supply vessels and support vessel traffic; and 
 

relocation of the facility to or from the relevant fishing field. 

The licensee has a right of recourse against the person who actually caused the loss or the owner of a 
ship providing that the relevant conditions of liability have been satisfied. 

Claims  for  pollution  damage  from  offshore  oil  and  gas  operations  must  be  brought  under  the 
Petroleum Act. If the Petroleum Act does not apply  to a claim, the claim  may be brought under  the 
Pollution and Waste Act or the Act Relating to Compensation in Certain Circumstances, as applicable. 

The Petroleum  Act does  not apply  in Svalbard. Instead,  the Svalbard Act applies. That Act imposes 
strict liability “to pay compensation … for economic loss resulting from the environmental damage” 
caused by that person due to breaching provisions of the Act. 

In  summary,  Norway  has  a  highly  developed  liability  system  established  by  the  Petroleum  Act  for 
claims for compensation from offshore oil and gas incidents. Liability under the Act includes liability 
for pure economic loss. Further, liability is strict, it is channelled to licensees and claims from offshore 
oil and gas incidents must be brought under the Act if it applies. Legislation that applies to Svalbard 
also imposes liability for economic loss arising from an offshore oil and gas incident. 

Poland 

xvi. 
The Polish Mining Law, which applies to the exploration and production of hydrocarbons as well as 
other minerals, imposes liability for property damage; it does not impose liability for bodily injury and 
does not appear to impose liability for pure economic loss.  

The  Polish  Civil  Code  imposes  liability  for  bodily  injury  and  property  damage.  Liability  is  also 
imposed  for  pure  economic  loss  but  only  for  compensation  for  lost  profits  when  there  is  a  high 
probability  of  their  loss.  As  a  practical  matter,  therefore,  a  claimant  will  face  difficulty  in  proving 
entitlement to lost profits.  

Although the Civil Code appears to be liberal in respect of a cause of action for pure economic loss, 
Polish  courts  and  scholars  have  concluded  that  limitations  apply.  That  is,  article  361(1)  of  the  Civil 
Code  states  that  liability  applies  only  to  compensation  for  the  “normal  consequences”  of  an  act  or 
omission. Further, article 446 states that specified persons, usually relatives of a deceased, may claim 
compensation for their losses resulting  from the death  of the deceased.  In this  respect, Polish  courts 
and  scholars  consider  that  article  446  proves  that  there  is  an  opposite  rule  under  the  Civil  Code  to 

65 

 
 
which article 446 is an exception. That is, only the person directly injured by the act of a tortfeasor is 
entitled  to  claim  compensation.  Commentators  considered  that  the  application  of  either  or  both  of 
these  limitations  would  result  in  a  person  who  suffered  damage  for  lost  profits  from  a  hypothetical 
closure  of  cattle  and  meat  markets  due  to  the  tortfeasor’s  negligence  in  allowing  infected  cattle  to 
escape being unable to recover its loss.130 This hypothetical can be analogised to persons suffering lost 
income due to water pollution.131 

The strict liability provisions for dangerous activities in the Civil Code may apply to a claim for harm 
from offshore oil and gas operations but this is unclear. 

In  summary,  Polish  law  may  impose  liability  for  pure  economic  loss  but  only  if  there  is  a  high 
probability of the loss from the tort. Only persons who have suffered direct damage would be able to 
claim. Liability is probably fault-based but this is not clear. 

Portugal 

xvii. 
The Portuguese Civil Code imposes liability for bodily injury and property damage. Liability is fault-
based  because  the  strict  liability  provisions  do  not  appear  to  apply  to  claims  for  pollution  from 
offshore oil and gas operations. 

Article 564(2) of the Civil Code imposes liability for consequential losses that are “predictable”. Such 
losses could include lost profits from fisheries and tourism due to water pollution from an offshore oil 
and gas incident provided the economic losses are a direct consequence of the water pollution and are 
consequential,132 that is, consequential, not pure economic, loss. 

More crucially, one commentator considered that article 483 of the Civil Code could impose liability 
for pure economic loss in the form of lost profits by fishermen and owners of tourism facilities133 but 
not for the lost profits of the local distributor of drinks to tourism facilities.134  

In  Decree-Law  No.  147/2008,  which  implemented  the  ELD  into  national  law,  Portugal  introduced 
civil  liability  for  compensation  for  environmental  damage  (the  only  Member  State  to  do  so).  Strict 
liability  under  the  legislation  applies  to  operators  who  produce  oil,  in  particular,  the  holders  of  a 
licence to produce offshore oil. The legislation appears to impose liability for compensation for bodily 
injury and property damage but not pure economic loss. 

A  further  Portuguese  law,  Law  11/87,  may  impose  strict  liability  for  bodily  injury  and  property 
damage from pollution from offshore oil and gas operations if such operations are considered to be a 
“particularly dangerous activity”. 

130 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: The Ways to Recovery, Netherlands 
Comparative Law Association, Electronic Journal of Comparative Law, vol. 11(3), 66-67 (December 2007); 
available at http://www.ejcl.org/113/article113-9.pdf 
131 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: The Ways to Recovery, Netherlands 
Comparative Law Association, Electronic Journal of Comparative Law, vol. 11(3), 66-67 (December 2007)(see 
page 13; analogising chemical spill to a hypothetical concerning a person who negligently allows infected cattle 
to escape, resulting in the Government ordering the closure of cattle and meat markets). 
132 See Environmental Liability and Ecological Damage in European Law 525 (Monika Hinteregger, editor, 
Cambridge University Press, 2008). 
133 See Environmental Liability and Ecological Damage in European Law 525 (Cambridge University Press, 
Monika Hinteregger, editor, 2008). 
134 See Environmental Liability and Ecological Damage in European Law 552 (Cambridge University Press, 
Monika Hinteregger, editor, 2008). 

66 

 
 
                                                            
Further, the same commentator who commented on the Civil Code (above) considered that articles 22 
or 23 of Law No. 83/95 of 31 August 1995 impose liability on a hypothetical person who polluted a 
river in respect of a claim by the owner of an outdoor recreation business that had organised rafting 
and canoeing tours on a nearby river for 10 years for a total loss of profits for three years during which 
time  the  river  could  not  be  used  for  white  water  canoeing  and  rafting.135  By  analogy,  at  least  some 
claims for lost profits from pollution from an offshore oil and gas incident should also succeed. 

In summary, Portuguese law may impose liability for pure economic loss but only if the loss is direct. 
Law 11/87 and Law 83/95 may impose strict liability for bodily injury and property damage but this is 
unclear. 

xviii.  Romania 

The Romanian Petroleum Law states that the applicable law for “damages caused … to third parties 
arising from the conduct of petroleum operations” is “delictual fault civil responsibility”. That is, only 
fault-based liability applies; strict liability does not apply. 

The relevant law for torts for harm from an offshore oil and gas incident is the New Civil Code, which 
entered  into  force  on  1  October  2011.  The  New  Civil  Code  imposes  liability  for  bodily  injury  and 
property damage. claims for pure economic loss are recognised, but cover for them is limited due to 
the requirement to meet other requisites of Romanian tort law. 

Spain 

xix. 
The  Spanish  Civil  Code  imposes  liability  for  bodily  injury  and  property  damage.  The  strict  liability 
sections of the Civil Code would not apply to a claim for compensation from harm from an offshore 
oil and gas incident. 

A judgment by the Spanish Supreme Tribunal indicates difficulties that may be encountered in claims 
for property damage for shellfish from an oil spill. Following a spill of oil by the tanker Compostilla, 
in  the  port  of  La  Coruña  in  January  1972,  owners  of  a  mussel  farm  claimed  damages  due  to  their 
inability  to  sell  mussels  due  to  them  tasting  of  oil  from  oil  residues  on  the  seabed.  The  court  ruled 
against  the  claimants,  stating  that  they  should  have  destroyed  the  mussels  on  orders  of  the  local 
authorities instead of trying to place them on the market.136 

Spanish  law  does  not  specifically  recognise  pure  economic  loss.  Under  Spanish  law,  the  damage 
suffered  by  a  claimant  must  be  certain  and  adequately  proven  or  the  causal  link  between  the 
tortfeasor’s conduct and damage to the claimant must be established. As a result of this requirement, 
courts tend not to state that compensation for pure economic loss is not recoverable. Rather, they state 
that the claimant has not established damage or causation.  

If, therefore, a person in, say, the fisheries industry or the tourism industry, could show that economic 
losses suffered by him from pollution caused by an offshore oil and gas incident were “foreseeable” 

135 Environmental Liability and Ecological Damage in European Law 506 (Monika Hinteregger, editor, 
Cambridge University Press, 2008).  
136 See Environmental Liability and Ecological Damage in European Law 558 (Monika Hinteregger, editor, 
Cambridge University Press, 2008) (referring to STS 19.6.1980 [RJ 1980/2410]).  

67 

 
 
                                                            
and  could  also  meet  strict  requirements  of  Spanish  law,  that  person  could  recover.  Although  such 
recovery is possible in principle, it is not necessarily probable.137  

Claims by businesses in the fisheries and tourism industries following the oil spill by the Aegean Sea 
off  the  coast  of  Galicia  in  1992  indicate  that  such  claims  would  not  necessarily  succeed.  In  those 
claims,  which  would have  been  brought  under  Spanish  law  implementing  marine  Conventions  (and, 
thus, legislation that imposes liability for pure economic loss), the Court of Appeals held against the 
fishermen  and  other  maritime  workers,  concluding  that  they  had  relied  on  speculation  and  had  not 
sufficiently specified the negative effects of the spill and its economic consequences for them.138 

In  summary,  liability  for  pure  economic  loss  appears  to  be  imposed  by  Spanish  law  but  stringent 
criteria apply including a requirement  for a claimant to show that  its loss is foreseeable, certain  and 
adequately proven. 

xx.  United Kingdom 
Claims for bodily injury and property damage in the UK are mostly brought in negligence rather than 
under law that imposes strict liability. 

The  applicable  law  for  a  claim  for  compensation  for  traditional  damage  does  not  provide  for  pure 
economic loss. Claims by fishermen, persons in the tourism industry and other persons who suffered 
economic loss would not, therefore, be covered unless such persons had suffered damage to property 
in which they had a legal interest, or bodily injury.  

Even if a person suffered property damage or bodily injury from pollution from offshore oil and gas 
operations, consequential economic loss does not appear to be covered or, at the least, is limited. For 
example,  if  a  fish  farmer  suffered  property  damage  due  to  oil  pollution  to  some,  but  not  all,  of  the 
farmed fish, the loss of income from the inability to  sell unharmed fish seems highly unlikely to be 
covered because it is not consequential damage.  

OPOL  complements  UK  law  by  providing  for  compensation  for  “pollution  damage”  and  “remedial 
measures”,  with  costs  of  the  latter  being  limited  to  public  authorities.  Compensation  for  “pollution 
damage”  is  limited  to  damage  from  “oil”;  it  does  not  include  damage  from  other  chemicals  or 
dispersants. 

OPOL  also  provides  a  compensation  scheme.  Membership  of  OPOL  is  mandatory  for  licensees  of 
offshore oil and gas operations in the UK (see UK summary, section 1.1.2). 

In  summary,  the  relevant  liability  law  in  the  UK  is  fault-based  does  not  cover  pure  economic  loss. 
OPOL covers a broader range of claims from offshore oil and gas incidents under a strict liability rule. 

137 See Vernon Valentine Palmer and Mauro Bussani, Pure Economic Loss: The Ways to Recovery, Netherlands 
Comparative Law Association, Electronic Journal of Comparative Law, vol. 11(3), 41 (December 2007); 
available at http://www.ejcl.org/113/article113-9.pdf 
138 See Environmental Liability and Ecological Damage in European Law 516 (Monika Hinteregger, editor, 
Cambridge University Press, 2008). 

68 

 
 
 
 
 
                                                            
ANNEX IV.  FINANCIAL  SECURITY  INSTRUMENTS  ACCEPTED  BY  COMPETENT 
AUTHORITIES  IN  THE  20  FOCAL  STATES  TO  COVER  THIRD-PARTY 
DAMAGE FROM OFFSHORE OIL AND GAS ACTIVITIES 

i.  Bulgaria 

Neither  the  Bulgarian  Concessions  Act  nor  the  Underground  Resources  Act  sets  out  the  financial 
security  required  for  a  prospection  and  exploration  permit.  Any  financial  security  that  is  required  is 
specified by the permit itself. 

Two types of financial security are required for a concession agreement. They are: financial security 
for a candidate for a concession to cover its bid and financial security for the successful candidate to 
cover its obligations under the agreement itself. 

It is unclear whether the holder of a prospection and exploration permit, or a concession agreement, 
must have financial security for compensation for claims for bodily injury and property damage and, 
perhaps,  pure  financial  loss.  If  there  is  such  a  requirement,  which  is  not  specified  in  legislation,  the 
financial security instrument to cover it appears to be insurance. 

ii.  Croatia 

Three types of financial security apply to offshore oil and gas operations in Croatia: a bank guarantee 
to  accompany  a  bid  under  the  first  offshore  licensing  round;  an  irrevocable  and  unconditional  bank 
guarantee  /  performance  bond  for  carrying  out  the  works  programme  under  the  agreement;  and 
insurance for, among other things, bodily injury, property damage and other losses. 

Offshore  oil  and  gas  activities  are  highly  reliant  on  the  political  context.  Such  activities  bring  in 
money for the State and increase employment as well. Croatia is currently in the same situation that 
Greece or Spain were economically speaking and unemployment is quite high. It is therefore easier at 
the moment (June 2014) for foreign companies to get an exploration or production licence due to the 
need for foreign investment in Croatia. Rules are therefore more lenient than in some other States. In 
this respect, it is up to the Government and the applicant to negotiate entirely the contract for offshore 
oil and gas activities. 

iii.  Cyprus 
There are two requirements in Cyprus for financial security for offshore oil and gas operations under 
the  Hydrocarbon  (Prospection,  Exploration  and  Exploitation)  Law  of  2007  (No.  4(I)/2007):  an 
irrevocable  bank  guarantee  in  respect  of  carrying  out  the  works  programme  and  insurance  for 
compensation to third parties and damage to the environment. 

The  2012  Model  Contract  specifies  that  the  Minister  will  review  and,  if  satisfactory,  approve  the 
insurance policies for exclusions and will verify the financial capacity of insurers. 

iv.  Denmark 
The Model Licence requires a licensee to submit “security, possibly in the form of a parent company 
guaranty, in an amount and of a nature that is acceptable to the [Danish Energy Agency]”. This type of 
financial security is to ensure the licensee’s performance of its obligations under the licence. 

The licensee’s liability for damages for “any loss, damage or injury caused by the activities carried on 
under the licence”, as imposed by the Subsoil Act, must be covered by insurance, which must “provide 
reasonable coverage, in light of the risks involved in the operation of the business and the premiums to 
be paid”. 

69 

 
 
Insurance for companies is currently subject to consideration whether or not to change the amounts of 
insurance  for  financial  capacity.  Such changes  could  have  impacts  in  licensee  groups,  as  companies 
might have to pay higher amounts for insurance. One commentator stated that the OSD seems to make 
it more difficult to operate offshore oil and gas activities for smaller companies.  

v. 

France 

The  legislative  provisions  concerning  financial  security  for  mining  activities  in  France,  including 
offshore oil and gas operations, are lax. They are, however, being revised to be more stringent as part 
of the reform of the Mining Code. The financial security requirements in the current Code appear to 
apply  only  to  works  programmes  and  not  compensation  for  bodily  injury,  property  damage  or 
economic loss. 

vi.  Germany 
Germany requires applicants for offshore oil and gas operations to have evidence of financial security. 
The main financial security requirements are for the work programme, with the competent  authority 
reviewing  financial  capability  in  closer  detail  when  it  reviews  the  operating  plan  for  works  to  be 
carried  out  under  the  mining  permit.  The  financial  security  instrument  for  compensation  for  bodily 
injury,  property  damage  and  economic  loss  in  the  event  of  a  pollution  incident,  if  required,  is 
insurance. 

vii.  Greece 
The  Greek  Hydrocarbons  Law  and  the  Model  Agreement  set  out  detailed  provisions  for  financial 
security. The mandatory requirements mainly concern financial security for the works programme and 
obligations under the lease and exploration and exploitation licences.  

A  deposit  guarantee  or  insurance  is  also  required,  although  the  requirements  appear  to  relate  to 
environmental, rather than traditional, damage.  

In  addition,  insurance  in  accordance  with  “Good  Oilfield  Practices”,  is  required.  This  requirement 
appears to include insurance for compensation for harm from an offshore oil and gas incident.  

Further, social security insurance, which would apply to employees of persons responsible for harm to 
employees, is specifically required. 

Iceland 

viii. 
Holders  of  offshore  exploration  and  production  licences  in  Iceland  are  required  to  have  financial 
security  in  the  form  of  a  bank  guarantee.  If  the  licensee  has  a  parent  company,  a  parent  company 
guarantee, to cover obligations under the licence is required.  

In addition, the licensee must have insurance, performance bonds or other financial security acceptable 
to the competent authority for liability for any damage that may be caused by exploration, exploitation 
and production activities, or their non-performance, including environmental damage. The insurance, 
or  other  financial  security,  must  specifically  cover,  among  other  things,  pollution  damage  and  other 
liability to third parties as well as employees’ liability insurance 

Ireland 

ix. 
The Irish Petroleum and Other Minerals Development Act requires an applicant to post a performance 
bond or guarantee to carry out the work programme itself. As a practical matter, guarantees have been 
accepted but not a bond. 

70 

 
 
The financial security requirements for compensation for claims by third parties for bodily injury and 
property damage are minimal. The financial security specified for such claims is insurance, with the 
Minister  having  the  discretion  not  to  require  financial  security  or  to  accept  other  types  of  financial 
security  such  as  self-insurance.  Since  2010,  the  Minister  has  accepted  membership  of  OPOL  as 
financial security in respect of a shallow and a deep-water well by a smaller operator. 

x. 

Italy 

Italy requires applicants for exploration and production licences to be financially capable of carrying 
out  the  works  programme.  The  focus  is  on  financial  security  for  the  works  programme,  not 
compensation  for  claims  from  bodily  injury,  property  damage  and  economic  loss.  Italy  is,  however, 
reviewing  financial  security  requirements  as  part  of  the  implementation  of  the  OSD  with  a  view  to 
imposing more stringent requirements. 

xi.  Latvia 
The Latvian Law on Subterranean Depths does not include provisions that mandate financial security 
for  offshore  oil  and  gas  operations,  although  such  provisions  may  well  be  included  in  prospecting 
and/or exploration and production licences. 

xii.  Lithuania 
The Lithuanian Law on Subsoil does not include any requirements for financial security for offshore 
oil  and  gas  operations.  The  production  sharing  agreement,  which  accompanies  an  exploration  and 
production permit, is likely to include such provisions. 

xiii.  Malta 
The  Maltese  Petroleum  (Production)  Act  does  not  set  out  requirements  for  mandatory  financial 
security for offshore oil and gas operations in legislation. Instead, the requirements are set out in the 
Model Production Sharing Contract (2001) and the Model Exploration Study Agreement (2001). The 
model  agreements  are  available  on  request  to  the  Department  of  Transport  and  Infrastructure  by  oil 
companies that have shown an interest in entering into a licence. 

xiv.  Netherlands 
Neither  the  Dutch  Mining  Act  nor  any  other  legislation  imposes  mandatory  financial  security 
requirement  for  compensation  for  bodily  injury,  property  damage  and  economic  loss  involving 
offshore  oil  and  gas  operations.  The  financial  security  provisions  in  the  Mining  Act  relate  only  to 
financial  security  for  the  discharge  of  payments  and  obligations  under  a  licence.  Such  financial 
security is rarely imposed. 

xv.  Norway 
The JOA into which a licensee for offshore oil and gas operations in Norway must enter sets out the 
financial arrangements between the parties to it, the work programmes and insurance requirements.  

The  Norwegian  Petroleum  Act  requires  the  person  to  whom  a  licence  is  granted  to  “provide  such 
security  as  approved  by  the  Ministry  for  fulfilment  of  the  obligations,  which  the  licensee  has 
undertaken, as well as for possible liability in connection with the petroleum activities”. 

Financial  security  for  third-party  claims  for  compensation  for  bodily  injury,  property  damage  and 
economic loss is in the form of insurance. 

In  practice,  most  companies  (that  is,  subsidiaries  of  foreign  companies)  provide  parent  company 
guarantees for financial security for their obligations under the licence;  very few companies provide 

71 

 
 
other types of guarantees. However, such a guarantee is not required officially in the Norwegian texts; 
it is only very common in practice.  

Poland 

xvi. 
Mining concessions in Poland do not include a requirement for financial security. Instead, the system 
is flexible. The Polish Ministry of Environment considers applications on a case-by-case approach and 
may require a bank guarantee or collateral or other type of guarantee. 

Further,  there  are  no  other  obligations  that  provide  for  financial  security  in  respect  of  licences  for 
hydrocarbons except for a liquidation fund for mining to ensure the decommissioning of mines. The 
Ministry of Environment considers the financial standing of an applicant for a licence and its ability to 
finance the work programme during the licensing process, including any parent guarantees. 

Portugal 

xvii. 
Decree-Law  109/94  requires  applicants  who  bid  for  the  right  to  carry  out  prospecting,  exploration, 
development and production activities in Portugal to submit a programme for the proposed work that 
includes “an estimate of the respective costs and information on the sources of financing”. Entities that 
apply for a concession must post a provisional bond and, if a concession or licence is granted, must 
post a bond to cover obligations under the concession or licence.  

The Decree-Law does not require a bond or other financial security to be posted for compensation for 
bodily injury, property damage or economic loss caused by a pollution incident from offshore oil and 
gas operations. 

xviii.  Romania 

Neither  the  Romanian  Petroleum  Law  nor  the  Methodological  Rules  include  any  requirements  for 
financial  security.  The  competent  authority’s  website  states  that  a  bank  guarantee  is  required  for  a 
petroleum agreement, to cover the “timely performance of the minimum exploration program”. There 
is no indication of a requirement for financial security for a prospecting permit although this may be 
specified in the permit itself. Further, there is no legislative requirement for financial security to cover 
compensation  for  claims  for  bodily  injury,  property  damage  or  economic  loss  under  a  petroleum 
agreement. 

Spain 

xix. 
The  Spanish  Ministry  of  Industry,  Energy  and  Tourism  requires  financial  security  in  the  form  of  a 
guarantee  for  the  works  programme,  to  include  investment,  taxation,  social  security  and  restoration 
obligations,  as  well  as  obligations  arising  from  the  research  programme.  The  Ministry  also  requires 
civil liability insurance to cover possible damage or loss caused to people or property as a result of the 
oil and gas activities. 

xx.  United Kingdom 
Financial  security  is  required  in  the  UK  “to  discharge  any  liability  for  damage  attributable  to  the 
release or escape of Petroleum in the course of activities connected with the exercise of rights granted 
by the licence”. 

Prior to Deepwater Horizon, a person who carried out offshore oil and gas activities was required to 
have  financial  security  only  as  specified  under  OPOL.  Following  Deepwater  Horizon,  the  UK 
Government considered that the limit of liability of $250 million (EUR 182.57 million) under OPOL, 
even though it had been increased from $120 million (EUR 88.070 million), may not be sufficient to 
pay all claims arising from an offshore oil spill, in particular because financial security under OPOL 

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does  not  cover  the  cost  of  drilling  a  relief  well.  The  Department  of  Energy  &  Climate  Change 
(DECC), therefore, issued a short guidance note (DECC Guidance) concerning the financial security 
that  must  be  demonstrated  prior  to  consent  being  granted  for  exploration  and  appraisal  wells  on  the 
UK  continental  shelf.  The  financial  security  requirements  do  not  apply  only  to  harm  caused  by 
pollution. Other requirements include financial security for plugging and abandoning a well. 

The  DECC  Guidance  provides,  among  other  things,  that  “[t]he  level  of  financial  responsibility  that 
companies  need  to  demonstrate  for  any  particular  well  should  be  calculated  by  establishing  the 
combined cost of well control and cost of financial remediation and compensation from pollution”. 

The  DECC  Guidance  further  states  that  evidence  of  financial  responsibility  may  be  provided  by: 
“reliance on credit/financial strength rating of the operator or co-venturer; insurance; parent company 
guarantee/affiliate undertaking; and any combination of the above”. The Guidance does not specify the 
type of financial security that is specifically required for compensation for traditional damage. 

The  mechanisms  for  financial  security  under  OPOL  are  specified  credit  ratings  by  specified  credit 
rating  agencies,  a  parent  company  (or  other  company)  guarantee,  insurance  of  a  minimum  of  $250 
million (EUR 182.57 million), or a combination of the mechanisms. 

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