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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. 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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slide1

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 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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