Court overturns ruling in tanker collision case

The Norwegian Court of Appeal recently overturned the decision of the Stavanger district court in a dispute arising from the 2006 collision of the shuttle tanker Navion Hispania and the floating storage and offloading unit (FSO) Njord B on the Njord field in the North Sea. A blackout on the shuttle tanker’s dynamic positioning system caused the collision.

The FSO’s hull and machinery insurers claimed in tort against several Teekay companies that owned and operated the shuttle tanker. Teekay in turn made an indemnity claim against Statoil ASA, upon whose instructions the shuttle tanker was operating at the Njord field.

Statoil had entered into agreements for the purchase of oil from most of the licensees, but was not itself a licensee on the Njord field when the incident occurred. The sales agreements were on FOB terms, which meant that Statoil had to arrange for transportation from the field. So the sales agreements included a number of clauses concerning transportation, and a standard clause excluding liability for indirect and consequential losses.

In respect of its general need for transportation of oil from several fields in the North Sea, Statoil had entered into a contract of affreightment (CoA) with Teekay for the use of its shuttle tankers, including the Navion Hispania. The CoA included a standard knock-for-knock clause.

The licensees filed a claim directly against Teekay in tort for the losses arising out of the collision. Teekay in turn claimed indemnity against Statoil under the knock-for-knock clause in the CoA. Teekay and Statoil argued that Teekay acted as a subcontractor for Statoil under the terms of the oil sales agreements, and that the limitation clause therein excluding liability for indirect and consequential losses also protected Teekay.

Both the district and the appeal court held that Teekay acted as a subcontractor and that the exclusion clause prevented the claim for indirect and consequential losses against Teekay. But unlike the district court, the appeal court found that Teekay had acted in a grossly negligent manner, and that it was therefore prevented from relying on the exclusion of liability clause.

This conclusion was surprising since gross negligence was not argued in detail during the hearing. In reaching its conclusion, the appeal court emphasised an internal incident report issued by Teekay a month after the incident. The report identified a number of defective procedures on board the shuttle tanker. The appeal court found that these amounted to a grossly negligent breach of a general duty of care, and to a breach of the specific terms of the sales agreements incorporating the exclusion clause.

In relation to Teekay’s claim against Statoil, the main legal issue was the application of the knock-for-knock clause in the CoA. This stated that Teekay as owners, and Statoil as charterers, would indemnify each other for all claims in respect of damage to their own personnel and property as well as indirect and consequential losses from parties in their groups, which were defined as ‘Owner’s Group’ and ‘Charterer’s Group’ respectively. The appeal court had to consider whether the licensees were included in the term ‘Charterer’s Group’. If they were, Statoil would be obliged to indemnify Teekay for the claim from the licensees.

The question of interpretation arose due to the fact that Statoil was a licensee on all fields covered by the CoA except the Njord field. While the definition of ‘Charterer’s Group’ included a reference to licensees, it was preceded by the word ‘its’. Teekay argued that the licensees on the Njord field were included in the term ‘its Licensees’, while Statoil argued that ‘its Licensees’ referred to licensees on fields where Statoil itself was a licensee and so could distribute costs and liabilities with the other licensees in the contractual arrangements among them. Teekay furthermore argued that the licensees were part of the ‘Charterer’s Group’ also because they were covered by the term ‘its Contractors’. Statoil disputed this.

Overturning the decision of the district court, the appeal court noted that the interpretation of the term ‘its Licensees’ must take into account the natural distribution of liability between the parties, including which party is able to prevent damage and take out insurance. The court held in favour of Statoil that the licensees would only be included in the ‘Charterer’s Group’ if Statoil was part of the licensee partnership, which was not the case here.

The appeal court further found that the licensees could not be considered ‘its Contractors’ since this term only applied to parties that Statoil had engaged to fulfil its duties under the oil sales agreements (this did not include the licensees since they were only the sellers of the oil). The appeal court concluded that the knock-for-knock clause in the CoA did not require Statoil to indemnify Teekay for the claim from the licensees. TST

*This article was authored by Gaute Gjelsten and Nina M. H. Hanevold of Wikborg Rein law offices, Oslo