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BP Wins Legal Battle to Plug Excessive Flows from Compensation Fund

Thursday, 16 January 2014

BP’s legal fight over the Gulf of Mexico oil spill always looked set to match the intensity of the engineering battle to plug the damaged oil well. The political hostility BP faced in the early days of the spill as a foreign company that had damaged US interests in US territory meant that the fallout for BP was always going to be painful.

A legal ray of light did shine at the end of 2013 for BP though, as a panel of US judges sitting in the 5th US Circuit Court of Appeals, ruled that the administrator of the BP compensation fund take a more restrictive approach to dishing out funds to compensation applicants.

BP’s Fight to Limit Compensation Pay-outs

In 2010 BP created a $20bn compensation fund administered by the Gulf Coast Claims Facility. That was later replaced in 2012 with a court supervised settlement programme under the direction of the court-appointed claims administrator Patrick Juneau.

In March 2013, BP took to the US courts to sue Patrick Juneau over the way pay-outs were being calculated and the basis upon which claims were being made. The oil giant argued that the original settlement was being misinterpreted in such a way that businesses that had not suffered actual losses but only apparent losses were being awarded compensation. It also claimed that thousands of fraudulent claims were also being made.

BP attempted to halt payments where only apparent losses were claimed but its case was rejected by district judge Judge Barbier and its claim against Juneau was dismissed.

However, a Federal court overruled Judge Barbier and called for an injunction to be made preventing further contentious pay-outs from being made until the interpretation of the original settlement was finally concluded. It also upheld the dismissal of BP’s claim against Juneau.

What the BP Appeal Legal Win Meant

The interpretation of the original settlement is still to be concluded in the US courts.

In the meantime, the 5th US Circuit Court of Appeals forced district judge Judge Barbier to issue an injunction so that only those that experienced actual injury traceable to the loss from the disaster receive compensation. Businesses that have experienced either losses unrelated to the spill or no actual loss at all will have to wait to find out the final interpretation of the original settlement to see if they can still make a valid claim.

For shareholders, the bottom line is that BP’s legal win could potentially save the company billions of dollars in pay-outs.

For more information about this case or for information about compensation claims contact Peter Gourri today by email or telephone 0207 611 4848.