ON THE HORIZON 2026 | Beneath the Surface: Managing subsea infrastructure risk in offshore energy projects

As offshore wind capacity continues to grow, and cross-border interconnection deepens, the density of subsea infrastructure is increasing and, in turn, creates an increased exposure to risk. This broad exposure does not always map neatly onto a simple contractual risk allocation and protection.
This article considers the key risks facing specialised vessel owners and contractors working with and around subsea infrastructure, and the contractual strategies available to address and manage such risks.

Risk allocation in a multi-contract structure

A key consideration when it comes to subsea cables is how risk and liability is allocated. For vessel owners and operators, this is addressed within charterparties with the terms of those charters dealing with how the risk of loss or damage to subsea cables and other project infrastructure is distributed.

For the offshore energy sector, that risk allocation and distribution is typically allocated on a knock-for-knock basis.

At its simplest, the knock-for-knock regime provides a mutual allocation of risk between parties, where each party accepts and assumes risk and responsibility for its own property and personnel irrespective of fault. By way of example, under the charter for a cable laying or installation vessel, the owner will typically accept the risk of loss of or damage to the vessel or its equipment, whilst the charterer (often the EPCI contractor or project developer) will take the liability for any loss of or damage to the subsea cable and other installed project infrastructure.

However, during the construction of an offshore renewable energy project there are numerous participants including: the project developer, an EPCI contractor, multiple tiers of subcontractors, and specialist vessel providers. So, for the knock-for-knock regime to be truly effective, it is important for parties to try and align the various contractual forms throughout the chain. In practice, this means ensuring that the indemnity provisions under the head contract (likely an EPCI contract which may be governed by a FIDIC or LOGIC form or a bespoke EPC agreement) are consistent with the subcontracts and charters beneath it (whether on a SUPPLYTIME or other form).

Where back-to-back alignment is achieved, the knock-for-knock regime provide vessel owners and operators with certainty of the risk and liability that they have agreed to bear whilst also enabling them to procure the necessary insurances (e.g., H&M for the vessel and equipment, and P&I for third party liabilities). In the event of gaps and/or inconsistencies in the liability regimes, owners and operators may find themselves exposed to liabilities which are then not covered by their insurances or precludes them from being able to rely on indemnity obligations from other parties up or down the chain. It is therefore important to consider and mitigate these risks during negotiations.

Cable Crossing Agreements

The knock-for-knock regime discussed above provides for an allocation of risk during construction and relies on a contained environment of a defined contractual structure: identifiable contracting parties, reciprocal offshore activity and specialist vessels operating and interacting within defined operations. However, a growing area of risk for owners and operators now arises where they are being engaged to work on new projects which interact with, or are adjacent to, pre-existing subsea infrastructure.

As the density of subsea infrastructure increases with more export cables, inter-array cables, interconnectors and oil and gas pipelines occupying the seabed, what happens when new projects need to occupy the same space of existing subsea cables, or the seabed very near to it? For cable lay vessels, this may mean laying new cable across an existing cable or pipeline and for installation vessels this may involve positioning and/or anchoring in areas where cables may already be buried.

In these circumstances, the cable owner and follow-on project developer will typically enter into a crossing agreement to govern the terms on which the crossing is to be carried out. Whilst it is unlikely that a vessel owner or operator will be party to that agreement, the obligations and liabilities flowing from it are frequently passed down through the contractual chain.

A crossing agreement is a formal arrangement that allows a project to cross existing infrastructure while ensuring compliance with legal, safety and operational requirements. It can therefore be a critical document if any pre-existing subsea infrastructure is damaged during installation works by another project. It addresses a range of important matters, including the precise location and methodology of the crossing, the procedures for notification and coordination between the parties, liability for damage to the existing infrastructure during and after installation, insurance requirements, and the obligations of each party in respect of future maintenance and repair access.

It is therefore important for vessel owners or operators to understand during the negotiation of any charterparty how the risk of damage to existing infrastructure is being handled within the project. In these circumstances, the knock-for-knock arrangements may be approached quite differently to the traditional structure outlined above: for example, the charterer may seek to carve out crossing related liabilities from the standard knock-for-knock regime and insist on a fault-based regime instead which may have follow-on consequences for any insurance arrangements which may otherwise be in place and/or procured.

It is therefore recommended that vessel owners and/or operators attempt to request access to any crossing agreements as part of contractual due diligence and negotiations (or at least request a summary of the key liability and indemnity provisions) so that the charterparty can then include the necessary protections and measures required.

Third Party Risks

Despite best intentions, offshore renewable energy projects cannot be entirely contained within a contractual perimeter. Subsea cables are fixed infrastructure embedded in the seabed and exposed to a broad and often indeterminate range of third-party risks. Vessel owners and operators may find themselves on both sides of this exposure.

According to the International Cable Protection Committee (ICPC), there are approximately 150–200 accidental and unintentional subsea cable faults every year. The overwhelming majority of cable damage is caused by human activity, with fishing vessels the leading cause of accidental damage. Beyond fishing activity, subsea cables are exposed to damage from anchoring incidents by merchant shipping, adjacent construction and dredging activity and/or from operations of specialised offshore vessels.

The fundamental difficulty where third-party actors are involved in damage to subsea cables is the fact that there is often no direct contractual nexus with the cable owner, or operator whatsoever. A project’s internal knock-for-knock regime, however well drafted, governs risk only between contracting parties. Where a specialised installation vessel then causes damage to a subsea cable or other offshore infrastructure which belongs to a party with whom they have no contractual relationship, the vessel owner and/or operator may then face claims outside the protective framework of the project’s indemnity regime.

Where damage is caused by a vessel with no privity of contract with the cable owner, the cable owner must then pursue recovery through tortious claims, typically in negligence and through the vessel’s P&I Club.

For vessel owners and operators, this gives rise to evidential disputes over navigational conduct, causation, as well as jurisdictional complexity where the damaging vessel is flagged or registered in a different jurisdiction. Vessel owners and operators should therefore ensure that that their P&I cover is adequate to respond to such claims, and that their operational procedures (for example, route planning, anchor management and adherence to exclusion zones and protection notices) are robust and well documented so as to provide the necessary evidence and defence should a claim be made against them.

Concluding remarks

For vessel owners and operators engaged in offshore renewable energy projects, care and caution should be given to the expanding network of subsea cables and infrastructure when entering charterparties and/or subcontracts to ensure that the liability and indemnity regimes are reflective of the risk they are willing to bear and the necessary insurances are procured.

We have recently advised on a number of matters relating to subsea cables and with the continued rise in offshore installations and high-value subsea infrastructure, we expect to see an increase in incidents and claims in these areas. This makes it all the more important for parties to be well-advised both prior to and during construction and installation works so that potential risks and liabilities can be properly addressed and mitigated.