Yes and No. There is no piston in this design as you are used to seeing in the dry seal system.
In this design, the oil inside becomes the transmitter. If you remember the basics from physics class, liquids are basically non-compressible, As the exterior pressure increases against the flexible rubber seal it pushes the oil against the diaphragm thus increasing the chamber pressure just as if the water pressure was pressing directly against it. As long as there is no air bubbles to compress under pressure it works identical to the plastic piston in the dryseal systems.
In this case, the seal is torn and the oil has leaked out, water pressure is acting directly against the diaphragm and the 1st stage is thus acting like a normal unsealed unit.
If the seal was intact and functional, and the interior chamber was dry with only air filling the void (compressible as you remember) then there would be nothing to transmit the ambient pressure directly to the diaphragm and the unit would not function as intended.
I hope that answers your question.
