The explosion and tragic loss of life on board the CIDADE DE SAO MATEUS and the recent fire on the PETROJARL KNARR are timely reminders of the considerable legal and regulatory issues faced by the owners, charterers, operators and insurers of FPSOs and other floating offshore units.

Amongst these issues is the question of whether or not FPSOs are subject to the laws and regulations that apply to “ships”. The consequences of this question being decided one way or another are potentially very significant. For instance, the main international maritime conventions that permit limitation of liability apply to “ships”. If an FPSO falls within that definition, its owners may be entitled to limit their liability in certain jurisdictions in the event of a serious casualty. Limitation would not, however, be available if an FPSO is not a “ship”.

Whilst there have been no significant recent developments on this point, there have been some interesting decisions concerning the definition of “ship”. In particular, the United States Supreme Court decided that a floating home was not a “vessel” under Federal maritime law, which meant that it could not be arrested. This decision, which contains a useful review of the relevant legal principles in that jurisdiction, has broader application and was more recently followed in a case concerning the sinking of a floating drydock.

Almost three years ago, HFW issued a detailed briefing on these issues, which was subsequently published in the International Oil & Gas Journal, which can be found here: http://www.hfw.com/FPSO-legal-and-regulatory-issues-Sept-2012.

Recent events highlight the need for all participants in offshore projects involving floating units to understand these complex legal issues and their potentially serious financial implications.