Britain goes to bat for BP in Supreme Court brief

HOUSTON – The British government is asking the U.S. Supreme Court to show mercy on BP as the London oil company faces steep costs for the 2010 Gulf of Mexico oil spill.

It challenged U.S. court rulings that oil spill claimants don’t have to link financial damages directly to the Deepwater Horizon disaster to get paid out of BP’s 2012 multibillion-dollar pact with Gulf Coast residents and businesses.

BP, attorneys for the UK government said, “has gone to great lengths to restore the Gulf Coast, and to substantially and swiftly compensate those who were adversely affected by the Deepwater Horizon oil spill,” but “is now being required to pay large sums to others who were not injured by the spill.”

Claimants, U.S. courts have said, only have to pass certain tests, such as whether they had losses and resided in geographic zones along the Gulf Coast before and after the spill. Those decisions, the British government said, run against the shared legal tradition of the United States and the United Kingdom. 

“It is a venerable common-law principle that plaintiffs must prove all elements of their claims,” the British government said in a filing with the Supreme Court late last week. It said those prior rulings could deter other firms from taking responsibility for their actions – “to the detriment of all concerned.”

With $396.2 billion in revenue last year, BP is Britain’s second-largest company after Royal Dutch Shell, according to the Fortune Global 500.

Settlement disputes

BP for more than a year has been fighting legal battles over what it says is a misinterpretation of the settlement that has led to “hundreds of millions” in payments to claimants who weren’t affected by the spill. The company has asked for restitution for some settlement payments it said were tied to fictitious claims, and has asked the Supreme Court to review the settlement.

Earlier rulings in U.S. courts have determined that BP’s settlement established proof of loss as a key test for damage claims within certain geographic zones, and that “causation” — proving that financial losses were a direct result of the spill — isn’t a key factor. 

“If a business can show that it suffered a loss from some unrelated event, such as a fire that occurred a year before the spill, and the business alleges that the spill caused its loss,” then BP pays, the UK government said. Decisions affirming that interpretation of the settlement, it said, “raise grave international comity concerns by undermining confidence in the ‘vigorous and fair resolutions of disputes.’”

The Supreme Court, it said, should “articulate fair and uniform national rules that everyone – including international companies and foreign governments – may rely on in making investment and other decisions.”

Grossly negligent

The British government’s brief came late last week shortly after a federal judge ruled BP had been grossly negligent in the lead up to the oil spill, a decision that could mean it will face the maximum pollution fines for the disaster.

Under the Clean Water Act, those pollution fines could run up to $18 billion if U.S. District Judge Carl Barbier in New Orleans sides with U.S. prosecutors’ estimate of how much oil spilled into the ocean four years ago.

Barbier said BP bears two-thirds of the responsibility for the spill, while its contractors, Transocean and Halliburton, are 30 percent and 3 percent at fault, respectively. BP has said it strongly disagrees with the decision and will appeal.

Stock impact

Barbier’s decision likely took BP’s European investors by surprise, ultimately leading to a hit that day on its stock price, said Brian Youngberg, an analyst with Edward Jones. BP shares had dropped nearly 6 percent the day of Barbier’s ruling.

Youngberg added that BP’s stock value has been held back by uncertainty over BP’s liabilities for the oil spill and its large stake in Rosneft in Russia, because of recent international sanctions on energy firms and other Russian companies in the wake of increased tension between Russia and Ukraine. Still, there are hopeful signs for the company.

“BP pays a great dividend, so that will provide a floor for the stock price, and operationally they’ll do better this year,” he said.

The Supreme Court petition also came the same week BP asked a federal court in New Orleans to remove the settlement claims administrator, Patrick Juneau, a Louisiana attorney who was appointed to oversee the claims office that has so far paid out more than $4 billion to claimants.