This chapter covers the establishment, contents and implementation of international environmental liability of the contractor. It argues that the polluter-pays principle applies, the contractor shall assume primary liability for environmental damage caused by DSM activities. However, unlike the existing civil liability treaties which endorse a standard of ‘strict liability’ of the operator, liability in DSM requires an element of ‘internationally wrongful act’ on the part of the contractor. As to the contents of liability, it argues that ecological restoration shall be the primary objective of liability. However, owing to the big unknowns of the deep sea, the practicability of restoration is very uncertain. Other forms of remediation, complementary restoration and compensation, are available. As to the implementation of liability, this chapter argues that the ‘traditional civil liability approach’ of a transnational nature is not suitable to the DSM context, and the parallel existence of implementation methods at both international and national levels weakens the international mechanism and places unnecessary burden on the sponsoring State. Incidentally, it argues that the Enterprise can assume liability independently and a State contractor cannot claim State immunity.

This chapter examines the rules that place limits on the negative externalities of international energy transactions. It begins with a discussion of certain rules which appear in the very instruments enabling and protecting the transaction (investment, trade and transit). The advantages and disadvantages of including these ‘special’ externality-relevant rules in such instruments are analysed in the light of some illustrations. Subsequently, it examines the ‘general’ externality-relevant rules, namely those laid down in instruments whose main purpose is not the organisation of international energy transactions but the regulation of their negative externalities. The discussion is organised in four steps based on whether the relevant rules focus on cost-internalisation, prevention, response or reparation.