December 9, 2011 1:33 am

US seeks to block Transocean protection move

The US Department of Justice has attacked an attempt by Transocean, the offshore drilling contractor, to protect itself against penalties arising from the Deepwater Horizon disaster last year, accusing the company of “wilful misconduct”.

The move suggests the US government will seek the maximum possible penalties against Transocean, and also possibly against BP, potentially implying fines and damages running into the tens of billions of dollars.

In a filing at the New Orleans court that will hear the case for damages against BP and other companies involved in the spill, the DoJ said: “At trial, the US respectfully believes it will establish that Transocean’s acts and omissions in this case amounted to wilful misconduct.”

The DoJ’s plan to establish wilful misconduct by Transocean implies it might try to do the same with BP, which was in overall charge of the disaster-hit Macondo project and has been more extensively criticised by US regulators.

The DoJ filing was made in response to a motion from Transocean for a summary judgment from the court that would compel BP to meet any damages, penalties and other costs faced by Transocean.

The contract signed for the Deepwater Horizon drilling rig, following standard industry practice, included a commitment by BP that it would “defend, release, protect, indemnify and hold harmless” Transocean against all costs “without limit and without regard to the cause or causes”.

Transocean was encouraged by a ruling from the court last month that BP could not use $750m of insurance taken out by Transocean to help cover the costs of the spill.

In his conclusion, Judge Carl Barbier argued that “Transocean did not assume the oil pollution risks pertaining to the Deepwater Horizon incident – BP did”.

However, in its filing, the US DoJ argued that a summary judgment before any evidence had been heard would be “premature” and argued that if Transocean were found to have acted with wilful misconduct, then the indemnity in its contract with BP would not cover any resulting liabilities.

It added that Transocean’s attempt to avoid civil penalties under the Clean Water Act should be rejected because it was contrary to public policy.

“A party may not take on responsibility for the safety of a sophisticated and potentially dangerous operation like Deepwater Horizon, engage in gross negligence and wilful misconduct, and then expect another party to pick up the tab when civil penalties are imposed,” it said.

“Tolerating indemnity in these circumstances would eviscerate Congress’s endorsement of stiff penalties under the CWA.”

The DoJ added: “Transocean seeks ... to avoid civil penalties regardless of who is at fault. However, just as equity demands [post-violation] that the wrongdoer pay penalties for causing harm, public policy demands that a pre-violation indemnification agreement is void, when its implementation would relieve the wrongdoer of the responsibility to pay civil penalties for its actions.”

Transocean and BP declined to comment. The case is scheduled to come to trial next February.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from and redistribute by email or post to the web.


Sign up for email briefings to stay up to date on topics you are interested in