Corporate Liability and Compensation Following the Deepwater Horizon Oil Spill: Is There a Need for an International Regime?

Abstract

The purpose of this article is to assess the effectiveness of the current fragmented legal framework regarding corporate liability and compensation following oil spills from offshore installations, in light of the Deepwater Horizon oil spill. It evaluates whether Deepwater Horizon has signalled the need to adopt a uniform international regime, which will regulate compensation and liability concerning oil spills from offshore oil installations. The first part of this article provides the factual background of the Deepwater Horizon oil spill, with an emphasis on the corporate liability and compensation issues that arose in this incident and the response by the U.S. Government. The second part evaluates the effectiveness of the current three-tiered system of compensation in the oil tanker industry, as well as the supplementary voluntary agreements thereto, and assesses whether this legal framework could be adopted to the regime governing oil spills from offshore oil installations. It notes the stark contrast between oil spills from oil tankers and oil spills from offshore oil installations, in that an oil tanker’s maximum storage capacity is known which makes the risk of potential spillage calculable. In contrast, it is impossible to make such a calculation for oil spills resulting from offshore oil installations since, although the storage capacity of the installation is defined when it is constructed, the amount of oil that can be spilled directly from the well drilled into the marine environment is unpredictable. The third part discusses the prospects for adopting an international civil liability and compensation regime governing oil spills from offshore installations, with reference to several international and regional attempts that have been made to establish an efficient regime and provides proposals for an efficient and effective international regime.