By Tom Walters • Johanna Ohlman 

The developing field of floating offshore wind turbines (FOWTs) presents a myriad of opportunities and challenges. As the industry evolves and projects become larger, the liabilities associated with FOWTs will become paramount for owners and operators.

Owners and operators of FOWTs may face various types of claims, including physical loss, personal injury, and business interruption. These claims can arise from unintentional acts, such as natural disasters, collisions, and manufacturing defects, as well as intentional acts, such as sabotage, cyberattacks, and “gray zone” warfare. Each scenario presents unique challenges and requires specific insurance coverage and risk mitigation strategies.

The 1976 Convention on Limitation of Liability for Maritime Claims (LLMC) affords owners of ships transporting fixed offshore wind turbine components the right to limit their liability for third-party claims for loss or damage relating to their operation. This includes death, personal injury and property damage “occurring on board or in direct connection with the operation of a ship.” The definition of a “shipowner” includes a charterer, manager or operator.

Under English Law, the LLMC is implemented by Section 185 of the U.K. Merchant Shipping Act 1995 (MSA).  Section 313(1) of the MSA provides that “unless the context otherwise requires … ‘ship’ includes every description of vessel used in navigation.” The requirement for “use in navigation” has been the subject of case law, but there is no clear reason why a ship either remotely controlled or in autonomous operation may not fall within the MSA definition of a “ship” purely because it is unmanned. Further, the MSA extends certain provisions to “any ship whether seagoing or not” (paragraph two, Part II, Schedule 7 of the MSA).

Article 1 of the LLMC provides that shipowners and certain other parties interested in the operation of a “seagoing ship” may limit their liability for the claims set out in Article 2, subject to the terms of the LLMC.  If a claim falls within Article 2 of the LLMC, it is difficult to break limits in the U.K. 

Even if an FOWT is not a “ship” under English law, section 116 of the Railways and Transport Safety Act 2003 gives the secretary of state the power to apply certain shipping legislation to things “which are used, navigated or situated wholly or partly in or on water.”

In other jurisdictions, there is an increasing willingness to treat FOWTs as “ships.”  In 2020, an FOWT was registered with the Norwegian Ordinary Ship Register.  Shortly afterwards in 2021, the Marshall Islands allowed owners to register FOWTs. Singapore has also recently opened its doors to the registration of FOWTs.

There are also sound commercial reasons for allowing FOWTs to be registered as “ships”:

• Without the right to limit under the LLMC, the owners, insurers, and other FOWT stakeholders may be fully exposed to liabilities outside their control and which may exceed their capital value.
• If an FOWT is considered to be a “ship,” then mortgages and charges can be registered against the asset, making projects more “bankable.” It would also be possible to arrest the FOWT to secure a maritime claim.
• Certain tax and employment law obligations would also become relevant to FOWTs for those workers who regularly work offshore on the structures.

As the floating offshore wind industry continues to expand and assets increase in size, so will the potential liabilities facing owners and operators. The acceptance of FOWTs as ships could greatly reduce the risk exposure for owners and operators and would in turn potentially accelerate adoption of FOWTs in the offshore industry.

Tom Walters is a partner and Johanna Ohlman is an associate at HFW in London.