June 10, 2010

Mediation in Deepwater?

By Paul Kirgis

This week, the Obama Administration sent a very forceful letter to BP demanding that BP document its process for paying claims resulting from the Deepwater Horizon disaster. In May, BP had announced that it was planning a mediation program to handle disputed claims, and that it would soon appoint an Independent Mediator. Apparently, no one has been named as of yet. The Administration’s letter asks BP, among many other things, to provide more information about that mediation program.

Here’s a bit from BP’s web page describing the mediation process:

 

In those cases in which a claimant and BP cannot agree on resolution of a claim, the claimant can seek review from the Independent Mediator. The Independent Mediator then will make an advisory decision on the claim.

  • If the claimant feels the advisory decision is unreasonable, he or she retains all rights under OPA either to seek reimbursement from the Oil Spill Liability Trust Fund or to file a claim in court.
  • If BP feels the advisory decision is unreasonable, the company may choose not to accept it, but the claimant then may use the Independent Mediator’s decision in claiming against the Oil Spill Liability Trust Fund or in a subsequent court action.

Note that the mediator is empowered to make an “advisory decision”, which may then be used by the claimant to seek payment from the Oil Spill Liability Trust Fund. BP is calling that mediation, but it seems more like a hybrid process, in which mediation can turn into advisory arbitration. Nancy Welsh found that bankruptcy courts also were not precise in their understanding of mediation, when she studied bankruptcy mediation for last fall’s ADR Meets Bankruptcy conference. Is this kind of hybrid process becoming more common in cases involving multiple claims against single funds? Is that something to be concerned about, or is this a natural evolution providing needed flexibility?

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