BP wins reprieve over Gulf of Mexico payouts

BP's Deepwater Horizon oil platform exploded in April 2010 resulting in the worst oil spill in US history

Oil giant BP's attempts to limit claims over the 2010 Gulf of Mexico oil spill have been given a boost after a US appeals court halted some payments.

A federal appeals court has asked a lower district court to take a fresh look at which claims are legitimate.

The higher court said that if businesses that did not suffer losses from the spill were compensated, the whole settlement could be invalid.

BP said it was "extremely pleased" with the ruling, which justified its fears.

The oil giant, which had agreed to pay compensation for the disaster, argued that the terms of existing settlement meant that people and businesses were being paid huge sums for false claims.

The appeals court has now ordered Judge Barbier at the lower district court to review the wording of the deal in order to draw up a narrower set of definitions that will exclude unfair claims.

BP had originally expected the payouts to total $7.8bn (£4.9bn). Earlier this year, the company said the payouts had reached $9.6bn, and in July BP warned that the trust fund set up to compensate victims was about to run out.

Judge Brown accepted that BP may be paying out hundreds of millions of dollars for dubious claims, money that it would be difficult for the company to recover.

"There is no need to secure peace with those with whom one is not at war," she said. "The district court had no authority to approve the settlement of a class that included members that had not sustained losses at all, or had sustained losses unrelated to the oil spill, as BP alleges.

"If the administrator is interpreting the settlement to include such claimants, the settlement is unlawful," she added.

BP has faced about $42.4bn in criminal and civil charges since the disaster aboard the Deepwater Horizon drilling rig, which triggered the worst offshore oil spill in US history.

The blast killed 11 workers and released an estimated four million barrels of oil into the gulf.

BP, which has made two previous, unsuccessful, attempts to halt compensation payments, said in a statement that "it was extremely pleased with today's ruling".

It added: "It affirms what BP has been saying since the beginning: claimants should not be paid for fictitious or wholly non-existent losses.

"We are gratified that the systematic payment of such claims by the claims administrator must now come to an end."