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Mass damage cases in the energy industry: Rapid claims mechanisms. Michael Faure & Franziska Weber 4 th July 2014. Overview. Introduction Efficiency Criteria Case study: Assessing the GCCF Design Suggestions Conclusions. 1. Introduction. Case example: oil pollution

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Mass damage cases in the energy industry: Rapid claims mechanisms

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Mass damage cases in the energy industry rapid claims mechanisms

Mass damage cases in the energy industry:

Rapid claims mechanisms

Michael Faure & Franziska Weber

4th July 2014


Overview

Overview

  • Introduction

  • Efficiency Criteria

  • Case study: Assessing the GCCF

  • Design Suggestions

  • Conclusions


1 introduction

1. Introduction

Case example: oil pollution

 Compensation schemes for the aftermath of disasters

Central problem: lengthy mass litigation


2 efficiency criteria

2. Efficiency Criteria

Costsofaccidentlaw –

Calabresi‘sframework

  • Primary costs

  • Secondarycosts

  • Tertiarycosts


2 efficiency criteria1

2. Efficiency Criteria

Startingpoint:

  • Forms of alternative disputeresolution (ADR) workfaster and reduce follow-on damage

    • hencereduceprimarycosts

  • ADR ischeapertoadminister

     hencereducestertiarycosts

  • Consider: Incentives structureofstakeholdersin lawenforcement


2 efficiency criteria2

2. Efficiency Criteria:


2 efficiency criteria3

2. Efficiency Criteria

  • Victims‘ incentives

  • Court: substantial damage

    • cost: theduration?

    • Fewresources (egadvancepayments)

  • Relaxed (ADR) proceduralrulesinvitefrivolouslawsuits

  • Free-ridingless an issuewith individual damageclaims

  • Groupingclaimsreducescosts, RA, FR & mayallowforinformationtoentertheenforcementresponse

    • Additional problems?


2 efficiency criteria4

2. Efficiency Criteria

2. Enforcers‘ incentives

  • Capture playsmore in non-judicialstructures

    • Composition/financing/appeal

    • Whataboutthegrouprepresentatives?

      • Consider: errorcosts (spreading)

  • P/A problem in particularmasscases

  • Nofurtherdevelopmentofthelawwith ADR

    3. Administrative costs

  • Higher formasses; higher in court

     Fromtheoutset: ADR assumedtobelesscostlytoadminister


2 efficiency criteria5

2. Efficiency Criteria

Essential trade-off

  • Balancingspeed vs. thoroughnessoftheprocedure

  • Potential tortfeasorneedstobeincentivizedtotake optimal care

  • Ensuringcompensation

    = Design ADR in a waytouseitsadvantageswithoutfallingvictimtoitsflaws


3 case study assessing the the gulf coast claim facility gccf

3. Case study: Assessing theThe Gulf Coast Claim Facility (GCCF)

  • Case: DeepwaterHorizonOil Spill Accident

  • Private claimsfacility

  • A settlementstructureunder OPA

    • Claimanthastheoptiontofilewiththe GCCF or in court

    • Independent trustees & administrator

  • Paymentsmade: US$10.7 billion of available US$20 billion

  • Currentlyclosed: residual cases in court


3 the gccf analysis

3. The GCCF: Analysis

  • In essence: fast compensation at modest administrative costs

  • Potential toforestall follow-on damages

  • Easy forms, nolawyer, at victims‘ choice

    • Parallel courtproceedings

    • Frivolouscomplaints

  • Taking care ofindependence

    • Governingstructure

    • Involvingvictims in settinguptheprotocol (clear, predictablecriteria)

  • But?


3 the gccf outcome

3. The GCCF: Outcome

… A meaningfulsteptoachievethe

bestofbothworlds …


4 design suggestions speed versus accuracy

4. Design suggestions: “Speed versus accuracy“

  • Two-stepsystem: „time an issue vs. noissue“

  • Funds needtobeensured, preferablybytortfeasorhimself

  • Assessment ofclaims: tortlawcriteria

    • Standardizationofvarioustypesofpayments

    • Case-by-casebasis

    • Court: an option

  • Ensuredeterrencefunction

  • Consider potential opportunisticbehaviourofthevictims

    • setcleareligibilitycriteria

  • Roleforcourts: marginal review


5 conclusion

5. Conclusion

  • Importance of law enforcement

  • Necessity to provide speedy compensation (for a certain category of victims)

  • Need for an enforcement solution that incorporates „the best of both worlds“

    • More payments to victims that for the administration ….

  • Experimentation phase


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