Talk on IMHH at Legal Innovation Day
18 Nov 2003 by Nick Brown, Head of IMHH legal subcommittee

Introduction

The IMHH Scheme has evolved from popular demand in the industry for clarity in allocation of liabilities and consequent avoidance of overlapping insurance of identical risks.

A committee was established under the auspices of LOGIC to review the issue and propose a solution. The committee has, through, a process of lengthy consultation with the industry, produced an industry mutual hold harmless deed (the "IMHH Deed"), allowing all offshore oil and gas industry contractors to sign up to a mutual hold harmless scheme (the "IMHH Scheme"). The IMHH Deed adopts mechanisms commonly used in the offshore oil and gas industry in the allocation of risk for personnel, property and consequential loss.

The Problem

On a production or drilling facility it is not unusual to have 25 to 50 contractors working alongside each other. Unless the Operator specifically provides to the contrary, or the contractors make specific arrangements with each other on a case by case basis, such contractors will be "third parties" to each other as there is no contractual arrangement between them.

Regrettably, injury and loss are frequent events in oil and gas operations though, fortunately, most are not of major proportions. These "third party" contractors will be liable to each other for any injury and loss they cause through their negligence. With the high frequency of incidents and the drive to take action through the courts the cost to the industry (including legal fees, loss adjuster fees and management time of all impacted parties) of resolving these claims is assessed to be enormous.

In addition to the financial penalty on the industry, there is the hidden cost of regular confrontation within the industry in contractual negotiations on liability and indemnity matters. The IMHH Scheme will not remove the risks but will allow them to be managed more effectively.

The Objectives

The primary objective of the IMHH Scheme is to address the contractual gap which traditionally exists between contractors working on the UKCS. For some time several Operators have implemented mutual hold harmless schemes as part of their normal contracting process, but these are tied to specific contracts for specific facilities. While this deals with a part of the problem it only accounts for a small proportion of the industry activity with many gaps remaining. It is also an exercise that is repeated with every contracting campaign.

The IMHH Scheme is not tied to a specific contract for services or to specific facilities (although it does not deal with work performed onshore). It is a scheme that is intended to underpin all offshore activity in the oil and gas industry. It will be a scheme that participants enter into once only for the long term (although there are limited rights of withdrawal and termination). Parties who are not members at the launch of the scheme will be able to join at any time. Ultimately the aim is to cover the entire contractor community.

The IMHH Scheme has been created to manage the risks inherent in the industry in a much more comprehensive and effective manner. Using the IMHH Scheme to manage and control these risks will in the long-term facilitate increased industry collaboration.

Participants

The IMHH Scheme is among contractors only. It is envisaged that approximately 100 contractors will be requested to sign up to the Scheme as core contractors to the Deed (see The Mechanism below).

An important factor in the success of the scheme is Operator support and promotion of the scheme. The ultimate target is total contractor participation but the IMHH Scheme will be a success if it obtains support from the majority of contractors regularly providing services to the offshore oil and gas industry.

The Mechanism

The first contractors will sign the IMHH Deed directly and all other contractors will be able to join the IMHH Scheme at any time after the initial phase by signing a Deed of Adherence, which effectively makes them Signatories to the initial IMHH Deed.

This allows contractors to sign up to the IMHH Scheme without the administrative costs of having to have the IMHH Deed re-executed every time.

You can view these documents from the Deed Menu Item.

Risks Being Managed

The principal liabilities addressed within the IMHH Deed are as follows:

1. Personal injury, sickness, disease or death.
2. Loss or damage to property.
3. Consequential loss (as defined in the IMHH Deed).

Risks being specifically excluded are:

1. Those concerning loss or damage to property or consequential loss arising out of (i) the carriage of goods by sea; (ii) the provision of Emergency Response and Rescue Vessel(s) or services associated with them; and (iii) Heavy Lift Vessel(s).
2. Any activities involving transport by air.

The IMHH Deed will not take precedence over existing contractual arrangements, nor over later contractual arrangements between participants. It operates between contractors where there is no other contractual arrangement in place between them, and contractors are also free to expressly apply the IMHH Deed, if they wish.

The Administrator

The IMHH Scheme will be owned and administered by LOGIC.

The Process

View a Presentation on the IMHH Process Flow: