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the BP oil spill and retrospective legislation

28 May 2010

Efforts are continuing to contain the oil spill taking place in the Gulf of Mexico. Existing US law makes the parties responsible for an oil spill liable for clean-up costs, but limits to $75 million their exposure to other liabilities. But there is a move in Congress to raise that limit to $10 billion with the intention of applying this law retrospectively to BP.

Laws with retrospective effect are a classic example of a human rights abuse. Equally in a business situation, those seeking and providing insurance should be able to ascertain the costs risk arising. But in some cases the US Supreme Court has upheld such laws as constitutional. One rationale is that such laws are “regulatory” in nature rather than “punitive”. A similar trend for regulatory enforcement has developed in the UK recently with use of “non-criminal” sanctions, such as civil enforcement orders and penalties, which allow for the burden of proof to be lowered due to the “civil” nature of the enforcement.

So does  the US attempt to pass retrospective legislation amount to an abuse of Human Rights – or good economic sense?

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