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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 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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  1. Mass damage cases in the energy industry: Rapid claims mechanisms Michael Faure & Franziska Weber 4th July 2014
  2. Overview Introduction Efficiency Criteria Case study: Assessing the GCCF Design Suggestions Conclusions
  3. 1. Introduction Case example: oil pollution  Compensation schemes for the aftermath of disasters Central problem: lengthy mass litigation
  4. 2. Efficiency Criteria Costsofaccidentlaw – Calabresi‘sframework Primary costs Secondarycosts Tertiarycosts
  5. 2. Efficiency Criteria Startingpoint: Forms of alternative disputeresolution (ADR) workfaster and reduce follow-on damage hencereduceprimarycosts ADR ischeapertoadminister  hencereducestertiarycosts Consider: Incentives structureofstakeholdersin lawenforcement
  6. 2. Efficiency Criteria:
  7. 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?
  8. 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
  9. 2. Efficiency Criteria Essential trade-off Balancingspeed vs. thoroughnessoftheprocedure Potential tortfeasorneedstobeincentivizedtotake optimal care Ensuringcompensation = Design ADR in a waytouseitsadvantageswithoutfallingvictimtoitsflaws
  10. 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
  11. 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?
  12. 3. The GCCF: Outcome … A meaningfulsteptoachievethe bestofbothworlds …
  13. 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
  14. 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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