The litigation arose from the Piper Alpha disaster of 6 July 1988 which resulted in the deaths of 167 men, injuries to 62 survivors and the total destruction of the platform by a series of explosions and fires.

Caledonia, its co-venturers and their insurers settled the fatal accident and personal injury claims arising from the disaster on a 'mid-Atlantic' formula, agreed within months of the disaster. They then began an action to enforce contractual indemnity agreements given by the 24 contractors concerned, which had employed 189 of the men killed or injured in the disaster. The trial of this action became the longest running civil trial in British legal history, lasting almost three and a half years. Lord Caplan gave his decision in September 1997, finding that the contractors were in principle obliged to indemnify Caledonia but upholding an argument raised late in the action by the contractors which raised a novel point in both Scots and English law.

In essence, this argument was that because Caledonia and its co-venturers had largely been indemnified by the insurers for the fatal accident and personal injury claims they had settled, it was not open to the insurers to pursue a subrogation action in Caledonia's name against the 24 indemnifying contractors, none of which was at fault in relation to the cause of the disaster. The contractors agreed that this was in fact a case of double-indemnity available to Caledonia and the insurer's only remedy was to pursue a contribution claim (for 50% of their claim) in their own name.

Caledonia and the insurers appealed this finding to four judges at the Inner House of the Court of Session which gave its judgement in their favour in December 1999. The contractors' appeal to the House of Lords was heard last November.

In the leading opinion of the Court, delivered last month, Lord Mackay said: 'Since there is no provision in the contract requiring the operator to have insurance, I cannot see any ground on which it can be said that the contractor's indemnity is limited to indemnifying the operator if, and to the extent that, the operator's insurer fails to do so.'

Caledonia and their insurers were advised in this litigation by Clyde & Co in London and Paull & Williamson in Edinburgh.

MJ Information No 16823