Subsea Sustainability

By Laura Petrie, Brodies LLP, January 2020.

This year, the Subsea UK 2020 Expo is focusing on ‘New Perspectives’, highlighting that subsea business is no longer simply the preserve of the oil and gas market but should be viewed as ‘underwater engineering’ for a range of industries including renewable projects, deep-sea mining, marine biology and oceanology, and also defence projects.

Where there is expansion, diversification and technological developments in the commercial aspects of a business, there is also a need to reassess the legal and contracting framework that supports such expansion, diversification and development to ensure that the overall business model remains suitable and sustainable.

Technological developments will always give rise to the creation of new or altered intellectual property rights. In the current climate of collaboration, it is not unusual for differing companies to work together to improve the technology available in the subsea market. It is vital that the parameters of such collaboration are clear from the outset as well as the sharing of any resulting improvements or income. Typically, this will be addressed by entering an initial confidentiality agreement to allow early discussions to progress, followed by a joint development and collaboration agreement and ultimately may also include some form of licensing and royalty arrangement. While these arrangements are not apparently complex, ensuring that all possible exposures and risks are addressed for each party requires careful consideration.

Subsea work for oil and gas projects is skilled work undertaken in a harsh environment with significant implications if problems occur. The oil and gas industry has developed the mutual hold harmless or ‘knock-for-knock’ regime to address this but where diversification takes subsea companies into other industries, such as defence or environmental study, the allocation of risk is done on a far more traditional basis with the service provider taking the lead on liability. Accordingly, it is vital that subsea businesses ensure that their liability and indemnity contractual provisions addresses risk the way they are anticipating, and insurance provisions and coverage are reflective of the risks being undertaken.

Moreover, while the theme of the work undertaken will remain largely similar there could be key differences in the ultimate deliverables and scope. This can have impacts on existing professional indemnity, product and third-party liability insurance. Similarly, a large number of patents and design rights are based on the application of subsea technology in the energy industry rather than general subsea use.

Where diversification gives rise to application of technology in other industries, a full review of existing intellectual property rights should be undertaken to ensure that protection is in place however the technology is used. Ongoing assessment of both insurance and intellectual property rights during any consideration of diversifying ensures that the anticipated protections still remain.

Taking the time to close out possible risks and liabilities in advance and getting the right advice and support helps to ensure that the subsea market will be a significant and sustainable business focus for many organisations.