The Deepshits Horizon

Billion dollar fines, 300+ lawsuits, and Aziz Anari singing Fuck BP on national TV never helped anyone. Neither does a Senate committed to nailing your ass to any public outrage stake they can find. It's not easy having 40% being wiped off your share value. Let this be a lesson on how quickly titans can fall.

But BP will survive this, whether via a cash injection from the Middle East or on the tails of some argument being strung together for British government intervention. BP's assets are still worth a whopping $350 billion, with plenty to sell off to raise cash to pay for the aftermath of the spill if necessary. Moreover, it will take years to determine the true legal costs in any compensation claims: my guess is that we will have lost interest in this long before anything comes before a jury.

The public will forget. It's expensive to stay mad. Consider this anecdote from the LA Times. Rob Hudson, a 33-year-old unemployed construction worker, came to a BP station because its regular gasoline was as much as 30 cents a gallon cheaper than nearby gas stations. “I wish I could afford some outrage,” Hudson said as he pumped gas into his old Dodge Coronet. “That must be a good feeling.”

But this is worth remembering. Following the spill, more than 400 species in the area are now at risk. As of the beginning of July, 1,844 dead animals have been collected. Dolphins are blowing oil out through their holes. Oil is washing up on shores and thick, rubbery sheets of crude is spreading through the wetlands. Dispersants used by BP have been banned for their carcinogenic toxicity to marine life.

It is not sound to impose a burden for compensation more severe than was foreseeable under the law, no matter the crime. On the other hand, you don't have to be a bleeding heart environmentalist to be convinced that we cannot simply move on. With operations of this magnitude, there is a duty of care towards stakeholders and the environment that must enter into the very beginnings of corporate planning: one that is actionable, serious, and imposes an objective legal obligations on individual decision-makers which is an effective deterrent against corner-cutting, negligent or not. This is too important for regulators to not play hardball.

The most interesting thing I've come across lately is this campaign, calling for "ecocide" to be included in the Rome Statute as the 5th crime under the jurisdiction of the International Criminal Court. It's worth thinking about. There are a number of conceptual hurdles that need to be ironed out, but this is a good step in the right direction. We must change the way we think about foreseeability and responsibility.

The Right to a Jury of One’s Peers

I once heard a lawyer tell the story of how a case between Parmalat and Citigroup came before a jury in Hackensack, New Jersey for $2.2 billion. The chief concern of attorneys on both sides was how to tell the story of accounting fraud so that none of the jurors fell asleep. Perhaps this is a small-minded English lawyer’s view, but it is incredible to me that this case, SEC v Goldman Sachs, may  ultimately end up before a jury.

On the one hand, why should it not? The products and financial instruments are complex, but the idea of an undisclosed conflict of interest and misrepresentation are laymen concepts of contract formation that can be easily explained and applied. On the other hand, surely it’s not right to pretend that this is all there is to it. At some point there will need to be an explanation in court of the nature of this synthetic CDO, its use of derivatives, the duties of an underwriter, and the reasonable reliance and market practice of experienced, institutional investors. The simple concession here has to be that CDOs are new inventions: the issues of CDOs can be complicated, regulation is struggling, and case law is inadequate.

There were never very many satisfactory rules here. Insofar as it is cool that the media is explaining this case by analogy (“selling fire insurance to arsonists” or “an antiques dealer lying about the provenance, by not quality, of an old table”), how happy are we to have a jury potentially decide this case by analogy? Really think about this: are we trying to squeeze new structures into old concepts of understanding?

I don’t know the answer. The lawyer who told me the Citigroup v Parmalat story is now advocating for an international court of financial regulation. It’s a novel idea worth thinking about.