The Offshore Pollution Liability Association Ltd

About OPOL

The Agreement

Since the early 1970's there has been a very substantial increase in the exploration for, and production of, oil from sources beneath the seabed off North-West Europe. At the same time a greater awareness of the possibility of damage to the environment from such activities has developed throughout the world, and accordingly those engaged in offshore exploration and production are taking the greatest precautions to ensure that the risk of oil pollution is reduced to a minimum, and that the highest safety standards are observed. Nevertheless the possibility exists that an accident could occur, and the oil industry therefore developed an Agreement to ensure that, in the event of a spillage or escape of oil, claims for pollution damage are met and the cost of remedial measures reimbursed.

Under the Offshore Pollution Liability Agreement dated 4th September 1974 as amended from time to time, (referred to as OPOL), operating companies agree to accept liability for pollution damage and the cost of remedial measures with only certain exceptions, up to a maximum of US $250,000,000 per incident. Within this limit there may also be included the cost of remedial measures undertaken by the party to OPOL involved in the incident.

The parties have to establish financial responsibility to meet claims arising under OPOL by producing evidence of insurance from insurers with the financial credit strength rating required by the OPOL Rules, a guarantee from a company with financial or credit strength rating required by the OPOL Rules or by producing evidence that they qualify as a self-insurer by meeting the financial or credit strength rating required by the OPOL Rules. They also jointly agree that in the event of a default by one of the parties, each will contribute proportionally to meet claims.

The responsibility for meeting claims under OPOL rests solely with the operator. As in all joint ventures, the operator may wish to make its own arrangements as to financial responsibility with other participants (known as non-operators) in a venture, but these will not involve the submission to or scrutiny by OPOL of any financial documentation concerning non-operators.

OPOL initially applied to offshore facilities within the jurisdiction of the United Kingdom but was later extended to apply to such facilities within the jurisdiction of other countries as well, as described below.

OPOL is thus intended to achieve the following:

1. To provide an orderly means for the expeditious settlement of claims arising out of an escape or discharge of oil from offshore exploration and production operations.

2. To encourage immediate remedial action by the parties.

3. To ensure the financial responsibility of the parties to meet their obligations.

4. To provide a mechanism for ensuring that claims are met up to the maximum liability under OPOL.

5. To avoid complicated jurisdictional problems.

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