* Indemnification needed for compensatory damages
* Punitive damages not covered
* Transocean rises 8.9 percent after ruling
By Tom Bergin
LONDON, Jan 27 Oil giant BP has
lost its attempt to shift over $15 billion of costs related to
the Gulf of Mexico oil spill onto contractor Transocean
, increasing the possibility BP may have to foot the
entire $42 billion clean up bill.
A U.S. federal judge on Thursday said BP must uphold a
clause in its contract with Transocean Ltd that would shield the
Swiss-based driller from compensatory damage claims related to
the 2010 disaster.
That means London-based BP may have to shoulder alone
compensation claims brought by the likes of fishermen and
hoteliers whose livelihoods were affected by largest offshore
oil spill in U.S. history.
However, U.S. District Judge Carl Barbier left open the
possibility that Transocean might still have to pay all or part
of any punitive damages and civil penalties imposed by
the U.S. government under the federal Clean Water Act.
Barbier, who oversees multistate litigation over the spill,
ruled that BP need not indemnify Transocean for these.
BP has estimated civil fines of around $3.5 billion related
to the spill, although maximum possible fines could top $20
billion if gross negligence was established on the part of BP or
BP has made no provision for punitive damages
because it says there is no legal basis for them. Barbier has
limited the cases in which claims for punitive damages can be
Thursday's decision means Transocean's potential liability
over the April 20, 2010 Deepwater Horizon drilling rig explosion
that caused 11 deaths, was "materially diminished" analysts at
UBS said in a research note.
BP had previously sought to shift the whole cost of the
disaster, currently estimated at around $42 billion, onto
Shares of Transocean rose 8.2 percent at 0856 GMT, while BP
shares fell 1.7 percent.
Transocean owned the rig, while BP owned a majority of the
Macondo well whose blowout led to the spill.
BP has said it would like to reach an out of court
settlement with Transocean but Barbier's ruling makes its
negotiating position weaker.
Both sides claimed victory over the ruling, which Transocean
spokesman Lou Colasuonno said "discredits BP's ongoing attempts
to evade both its contractual and financial obligations".
BP said the decision "holds Transocean financially
responsible for any punitive damages, fines and penalties
flowing from its own conduct.
"As we have said from the beginning, Transocean cannot avoid
its responsibility for this accident," spokesman Daren Beaudo
said in an emailed statement.
BP has already paid out $7 billion in claims to third
parties who have suffered losses and has an outstanding
provision of $8.2 billion for further claims and litigation,
suggesting third party claims are expected to top $15 billion.
However, plaintiffs lawyers say compensatory claims could
even end up totalling more than the $20 billion BP has set aside
in its gulf coast restoration fund.
Two U.S. government probes have put most of the blame for
the disaster on BP, suggesting BP is likely to face the largest
share of any fines levied.
The New Orleans-based judge has set a Feb. 27 start date for
a trial to apportion blame.
The case is In re: Oil Spill by the Oil Rig "Deepwater
Horizon" in the Gulf of Mexico, on April 20, 2010, U.S. District
Court, Eastern District of Louisiana, No. 10-md-02179.
(Writing by Tom Bergin; Additional reporting by Jonathan
Stempel; Editing by Jodie Ginsberg)