Transocean Steers Clear of BP Punitive Damages

By George Backwell September 4, 2014

Transocean Ltd. informs it has received a decision by the United States District Court for the Eastern District of Louisiana on phase one of litigation related to the April 20, 2010 Macondo well incident involving the Deepwater Horizon. Key findings in the Court's decision with respect to Transocean are as follows:

[Background:a US judge has ruled BP was "grossly negligent" in the lead-up to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. The ruling could potentially cost BP billions more in compensation payments.]

    •    Contractual indemnity: The Court found that BP's contractual agreement to indemnify Transocean for compensatory damages is valid and enforceable.
    •    Liability for punitive damages: The Court's finding that Transocean was not grossly negligent means that the company is not liable for punitive damages.
    •    BP's claims against Transocean: The Court ruled that BP's contractual agreement to release its own claims against Transocean is valid and enforceable. BP had assigned these claims to the Plaintiffs' Steering Committee ("PSC"), and the release bars the PSC from pursuing the claims.

Although the decision is subject to appeal, as written it effectively eliminates Transocean's financial risk arising from the below-surface discharge of oil at Macondo. Transocean's remaining financial risk is for above-surface discharge of pollutants, if any, occurring during the initial two days of the spill. Transocean believes any such pollution either caused no significant harm or is covered by BP's indemnity.

"This is a favorable and welcome ruling for Transocean, its employees, and all offshore drilling contractors, as the Court has again ratified the industry-standard allocation of liability between drilling contractors and the owners and operators of oil wells," said Steven Newman, President and Chief Executive Officer.

"As we remember the 11 men who died in this tragic accident, we appreciate the Court's observation that the Deepwater Horizon crew was attentive and serious and acted bravely in the face of chaotic circumstances, committing multiple heroic acts that saved many lives on April 20, 2010."