By now, you've probably heard that Transocean is trying to limit its liability in the oil spill to around $27 million, using a law dating from 1851. I've seen quite a bit of misinformation about this law. What does this law actually say? More after the jump.
Before we get into the nuts and bolts of the law, let's take a step back in time to when it passed. The clipper ship ruled the oceans. Steam power was great for riverboats, but hadn't made it to the big leagues. And every so often, a ship just disappeared. It wasn't necessarily due to any fault of the boat or crew--the ocean is a tough place.
"The sea is so large and my boat is so small"
Not surprisingly, ship owners and investors didn't really want to be on the hook for damages past their initial investment, so they were a bit reluctant to build large ships that had inherently higher liability. Enter Congress. The law basically says that if the vessel was seaworthy, then the owner can limit their liability to the value of the vessel after the accident. If the vessel is a total loss, then the value is zero and the owner can theoretically get off scot free.
You might have noticed the big "if" up there. If the vessel is seaworthy. Seaworthy is a big concept, and it runs from construction to maintenance to crew training and beyond. Because of a bunch of recent court decisions, proving that a vessel was unseaworthy tends to be fairly easy. I can tell you with 100% certainty that if a ship owner replaced a critical safety device with an ineffective training unit, that ship would not be considered seaworthy. However, I'm not sure how this would translate to a drilling rig's blowout preventer that sits on the seafloor.
I know there's a lot of outrage out there about Transocean's bid to limit their liability. Keep in mind that this is a standard practice in any maritime accident, just like the defendant in a lawsuit will always ask the judge to dismiss the case. It's a low-risk move that might pay off huge. But it's also extremely unlikely to succeed.
Full disclosure: I'm an engineer, not a lawyer. The company I work for does business with the major oil companies and their subcontractors, including working on this cleanup. However, I don't have any special insight into this particular accident. Everything I know comes from the media.