Deepwater Horizon spill: US court rules in favour of BP over settlement claims

BP is "extremely pleased" by a US court ruling that a planned payout to people affected by the Deepwater Horizon disaster could be too big because of false or exaggerated claims.

A divided three-judge panel from the Court of Appeal in New Orleans found that a former ruling misinterpreted the terms of multibillion-dollar settlement between BP and the claimants.

It sent the case back to US District Judge Carl Barbier, to be replaced with a "narrowly-tailored injunction that allows the time necessary for deliberate reconsideration of these significant issues".

The Deepwater Horizon disaster was the worst oil spill in US history. The explosion on the Gulf of Mexico rig in April 2010 killed 11 workers and led to millions of gallons of oil spilling into the sea.

Shortly after, BP agreed to create a $20 billion (£12.3 billion) compensation fund that was administered at first by the Gulf Coast Claims Facility, led by lawyer Kenneth Feinberg.

In the panel's majority opinion, announced yesterday, Judge Edith Brown Clement said BP has consistently argued that compensation formula covered "real economic losses, not artificial losses that appear only from the timing of cash flows".

She wrote: "The interests of individuals who may be reaping windfall recoveries because of an inappropriate interpretation of the Settlement Agreement and those who could never have recovered in individual suits for failure to show causation are not outweighed by the potential loss to a company and its public shareholders of hundreds of millions of dollars of unrecoverable awards."

She added that Judge Barbier had no authority to approve the settlement of a class that included members who - BP alleges - sustained losses unrelated to the spill and or did not suffer any losses at all.

"There is no need to secure peace with those with whom one is not at war," she went on.

While Judge Leslie Southwick agreed, Judge James Dennis partially dissented. He wrote: "Because BP has not satisfied its heavy burden of showing that a change in circumstances or law warranted the modifications it sought, the district court correctly affirmed the administrator's decision rejecting BP's argument and actions to modify the agreement."

BP spokesman Geoff Morrell said the company was "extremely pleased" with the ruling, which he said "affirms what BP has been saying since the beginning: claimants should not be paid for fictitious or wholly non-existent losses".

Lead plaintiffs' lawyers Steve Herman and Jim Roy said in a statement they were pleased that "the vast majority of class members will continue to be paid in a timely and expeditious manner".