Suresh Keshavan
Contracts & Procurement | Supply Chain | Oil & Gas | Upstream & Downstream | Strategic Global Sourcing | Start-ups | Construction | EPC | EMC
About Me
A Supply Chain Professional with considerable managerial and leadership experience in the contracts, purchasing, supply chain, and capital projects of the oil and gas and construction industries. A pragmatic, laser-focused global supply chain and business transformation leader who transforms the capacities of people, processes, and systems to create efficiencies, boost profitability, and provide competitive advantage. I take satisfaction in having extensive understanding of the entire supply chain and I am a specialist in contract & procurement negotiation, inventory control, logistics, and warehousing. An influential and forward-thinking leader who creates collaboration among the key decision makers to achieve organisational buy-in empowers high performance teams, builds the trust of the executive management, and is constantly at the forefront of company innovations.I serve as the Chairman of Chartered Institute of Procurement & Supply (CIPS) India Branch which has its headquarters in the UK; the professional membership body which exists to improve the capability of the profession and support members who work in it through the provision of knowledge sharing, expertise and experience.
What are knock-for-knock indemnities?
A knock-for-knock clause is a reciprocal agreement to apportion liability for certain losses (usually, death or injury to personnel and damage to property) between contracting parties, supported by mutual indemnities. A knock-for-knock regime replaces the fault-based liability regime that would otherwise apply at law with the concept that ‘loss lies where it falls’. They are a common risk allocation mechanism in the offshore oil and gas industry utilised to provide certainty and prevent recourse against other parties.
What are the key features of a knock-for-knock clause?
Knock-for-knock clauses generally maintain the principle that damage and loss to property or personnel suffered by a party’s ‘group’ is borne by that party regardless of fault. The party’s group can be extended to include, in the case of the contractor, its various subcontractors and affiliates, or, in the case of the operator (the entity responsible for the operations relating to an oil and gas well or concession), its various other contractors and affiliates.
What are the benefits of knock-for-knock indemnities?
A knock-for-knock clause offers certainty and clarity to the parties and their insurers. It is an agreement between the parties to contract out of remedies to which they would otherwise be entitled and it clearly establishes where liability lies. Because there is no requirement to show cause, fault or blame there is less scope for dispute. This reduces the chance of litigation or arbitration and also promotes transparency.
Gross negligence and willful misconduct in the context of knock-for-knock clauses
Knock-for-knock clauses often make reference to ‘gross negligence’ and ‘willful misconduct’. They are used as exceptions to the clause and result in certain behavior being carved out from the mutual risk allocation regime. Care must be taken when using these terms.
Consequential loss in the context of knock-for-knock clauses
It is common in the offshore oil and gas industry for the knock-for-knock regime to cover ‘consequential loss’, where each party indemnifies and holds harmless the other party from its own consequential losses. Sometimes, the term ‘consequential loss’ is left undefined. On other occasions, the types of loss that fall within ‘consequential loss’ are extensively listed. Both approaches leave scope for dispute and, therefore, uncertainty. Which approach is preferable will depend on the circumstances.
Thanks & Regards
Suresh Keshavan - MCIPS Chartered
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