The internationalisation of liability regimes for offshore petroleum exploration and production

Abstract

The pollution caused by the explosion of the Deepwater Horizon oil rig in the Gulf of Mexico, and the Montara blowout in the Timor Sea, put the call for an international regulatory framework for oil pollution liability on the global agenda. Although international law regulates the prevention of offshore oil pollution and protection of the marine environment, certain activities do not fall inside the ambit of international regulations. For example, while new technology has made it possible for companies to drill to deeper depths and explore further away from the coastline, existing international conventions generally do not extend to liability for, and restoration of, damage caused by oil pollution from offshore installations. These issues are regulated by the national laws of the country that governs the continental shelf where the petroleum activities are conducted. Thus, from an international perspective, the legal regime is disperse and complex. The amount and complexity of claims arising from large-scale incidents has raised interest in creating a consistent international liability regime. This could be done through a multilateral treaty. Alternatively, the development and application of common principles across national and regional jurisdictions can lead to the increased internationalisation of liability regimes. This paper compares the laws of Australia, the USA and the UK to identify common principles for liability and environmental restoration. The authors argue that as the legal framework becomes internationalised, increasing pressure will be placed on companies to accept the highest standards of liability, rather than the lowest national standard.