Oil giant BP is struggling to contain the soaring costs of compensating businesses and individuals for the Deepwater oil spill it caused in the Gulf of Mexico in 2010. It is taking legal action against the administrator of the compensation fund in order to recover some of the money, insisting that the fund’s payout formula has been misinterpreted.
The fund will remain open for claims until next April. A judge will hear BP’s case on 8 July. BP has claimed that it could be “irreparably harmed” by spiralling payouts and there are fears that the dividend could be at risk. BP has set aside a total of $42.2bn in its accounts to cover the costs of the spill.
What the commentators said
For BP, read “British Pinata”, said Jonathan Guthrie in the FT. BP has ended up “showering” so much money on claimants that payments from this fund are on track to total $15.4bn, over twice the amount BP originally pencilled in.
The case hinges on how to interpret the term “business economic loss”, said Andrew Callus on Reuters.com. A key trigger for a claim in this context is being able to demonstrate lower revenues or higher expenses – or both – during or after the oil spill, compared to other periods. “Proof of a connection with the spill itself is not necessary in most cases.”
But if the terms of the settlement “are so wide you could sail a shrimping boat through them”, it’s BP’s fault, said Guthrie. It forgot the golden rule of litigation: “causation is key”. Remove that test and a claim is much more likely to succeed. It looks as though BP “signed up to an overgenerous settlement in the self-abasement of remorse”. Indeed, it did, said Seekingalpha.com, and it also neglected to “put a cap on it”. Now it is trying to “correct its costly mistake”.