Erika Verdict: Potential Implications on Upstream Industry

On Jan. 16, Judge Jean-Baptiste Parlos of the Paris Criminal Court ruled that Total, along with the tanker owner and manager and the Italian RINA classification firm, were guilty of negligence in the oil spill that occurred off the coast of Brittany after the Erika sunk in 1999. The four guilty parties have been ordered by the French court to pay 193 million euros in damages, among other fines.

In a statement released following the verdict, Total expressed that it was "disappointed" the court ruled against the company, "especially since the court has acknowledged that the actual cause of the sinking was beyond Total's control."

With 10 days to file an appeal, Total announced "there are numerous grounds for appealing the verdict."

"The court established that the sinking was caused by corrosion of the ship's structures and that this corrosion resulted from gross negligence of which Total could not have been aware," the company statement said.

Citing the company's inspection and vetting procedures that go beyond "standard industry practice," as well as its instantaneous response to the spill as positive actions the company had taken to both prevent and correct the spill, Total claimed that the ruling "could create confusion concerning the responsibilities of the player and have the contradictory effect of making shipping less safe."

Total's lawyer, Daniel Soulez-Lariviere, said yesterday that the ruling was "unfair."

Potential Upstream Implications
Texas-based, board-certified energy attorney John Holden of Jackson Walker LLP offered expert opinion to the affect this case may have on the upstream industry and where responsibility lies.

While he said that it's "a precedent more likely to be followed in the European Union and the North Sea," rather than the U.S. or other geographical regions, Holden stated that "you could not ignore the implications of this case if you are a user of those rigs."

Holden pointed to insurance costs rising because operators may be held more responsible than before for accidents caused by faulty rigs. He also revealed that fault is, in part, a question of control and knowledge, citing that operators most likely assume that products function properly and meet safety requirements.

He said that the question that the operator must ask is, "What caused the problem, was it foreseeable, and should they have acted otherwise?"

While the court case will most likely be appealed, and the verdict may be overturned, Holden said, "You have to take notice of this potential precedent."

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