Compensation for Economic Loss Following an Oil Spill Incident: Building a New Framework for Thailand Tidarat Sinlapariromsuk A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy University of Washington 2017 Reading Committee: Donsheng Zang, Chair William Rodgers Sanne Knudsen Usha Varanasi Program Authorized to Offer Degree: School of Law © Copyright 2017 Tidarat Sinlapapiromsuk University of Washington Abstract Compensation for Economic Loss Following an Oil Spill Incident: Building a New Framework for Thailand Tidarat Sinlapapiromsuk Chair of the Supervisory Committee: Associate Professor of Law Dongsheng Zang School of Law The Rayong Oil Spill of 2013 presents a useful example of the catastrophic consequences of a large oil spill in Thailand, consequences that can provide meaningful lessons for industry and government. Many local residents and businesses throughout the coastal communities in Rayong suffered economic loss largely due to damages to natural resources; however, under the existing legal regime, there is no effective comprehensive legal framework that directly and adequately regulates the compensation regimes that handle claims of economic-loss following an oil-spill incident. Equally, as an alternative to litigation, there is no adequate guidance for the regimes handling rapid compensation payments for such type of claims. In the aftermath of the Rayong Spill, the responsible bodies developed the out-of-court compensation program on the fly, struggling to find a proper way to respond to this unprecedented disaster—yet this response was so haphazard that it left some claimants without clear rights to compensation, or, conceivably, it even left them with unfair levels of compensation. This study examines and evaluates the limits and potential advantages of the U.S. Oil Pollution Act 1990 and the systems used by the Gulf Coast Claims Facility in order to identify and adapt a new, comprehensive legal framework for setting up a claims facility to handle oil-spill compensation payments in Thailand. With the Thai context in mind and in light of the U.S. approach, this study recommends a framework that (1) includes a statutory duty to establish a claims facility for oil spill compensation; (2) identifies a responsible agency to designate the responsible party; and (3) explicitly recognizes economic losses caused by an oil-spill regardless of ownership rights. Given the problem of transparency in Thailand, this dissertation also recommends creating a neutral body to supervise the compensation regime. It also makes concrete suggestions for how to design these future claims facilities to better respond to economic losses caused by oil spill incidents, including a structure that entails different phases, how to improve accuracy in how we calculate losses, how to set up an appeals process, among other considerations. Overall, the approach this dissertation recommends represents an innovative middle path that strives to find a better balance between the goals of efficiency and fairness, and it could also serve as a possible model for reevaluating economic loss compensation regimes, in general, including other types of industrial pollution beyond oil spill compensation. Keywords: Oil Spill, Economic Loss, Interim Payments, Scientific Uncertainty, Future Loss, Mass Claims Resolutions, Peace Premium, Efficiency, Fairness, Oil and Gas Industry Acknowledgements First, I would like to wholeheartedly express my deepest gratitude to my supervisor and the Committee Chair, Professor Dongsheng Zang (the Director of Asian Law Center) who has been a constant source of excellent guidance, patience, inspirational atmosphere, and tremendous support throughout my study for the past several years at UW School of Law. Without his guidance and persistent help this dissertation would not have been possible. I would like to also express my deepest appreciation to my reading committee members— Professor William Rodgers (Stimson Bullitt Endowed Professor of Environmental Law, Emeritus Professor of Law); Professor Sanne Knudsen (Stimson Bullitt Endowed Professor of Environmental Law, Associate Dean for Research & Faculty Development); Professor Usha Varanasi (the former director of NOAA’s Westcoast Center of Excellence for Ocean and Human Health); and my GSR, Professor Thomas Leschine (the former Director of the School of Marine and Environmental Affairs)—whose works, comments, advices and meaningful encouragement have inspired and demonstrated to me that concern for environmental justice does matter. It is beyond my expectation to have a chance and privilege to learn from this “dream-team” and highly distinguished committee members. In addition, I would like to express my special thanks to Professor Johnathan Eddy, Professor Elizabeth Baldwin, and Professor Peter R. Day (the principal of Mercer Island Arbitration Chambers International, LLC.) who have been kindly providing enormous support since my LL.M at UW Law School. I would like to also thank Professor Michael Townsend, Dr. Melissa Kane, and Professor Hilary Soderland for kind assistances and advices during my study at the PhD grogram. Also, I would like to thank the staff members of UW Law School and the Thai Office of Educational Affairs for their excellent services and kind advices throughout my study here at UW. I would not have been able to complete my study here in the U.S. without the opportunity and financial support from the Royal Thai Government Scholarship Program and Chulalongkorn University. In this regards, I would also like to express my deepest respect and gratefulness to Prof. Tithiphan Chuerboonchai, Prof.Dr. Sakda Thanitcul, and Prof.Dr. Nantawat Boramanand. In addition, I would also like to thank to all my friends and colleagues back in Thailand for all the kind support and encouragement—especially Prof. Tashmai Thongurai, Prof. Kanaphon Chanhom, Prof. Wirote Watinpongpun, Prof. Narongdech Srukhosit, and Prof. Angkanawadee Pinkaew for the meaningful help about my study at UW. I would like to also thank all my friends for encouragement and wonderful memories we have together in the U.S., including my LL.M and Ph.D. cohorts (Sipim, Dayoung, Juan, Ye, Andy&his wife, Bashir, Alex), all my friends at UW law school since my LL.M, as well as my good friends from other schools, for standing by me throughout this adventure. Special thanks go to Dr. Sipim Wiwatwattana and Huaxia who, as a good friend, always willing to help, especially for the technological part of my work. I wish I could write every name of all the meaningful people in my life down on this page, but even if I cannot practically do so, please know that “you have my heart”. Finally, with all my heart, I would like to thank my parents whose love, understanding, patience, encouragement and prays of day and night make me able to come this far and I can tell you, as always, that “I'm everything I am. Because you loved me.” Thank you. “Far and away the best prize that life has to offer is the chance to work hard at work worth doing” Theodore Roosevelt, Speech in New York, September 7, 1903 Dedication To my parents Table of Contents List of Figures…………………………..…………………………..…………………………..iii List of Tables……………………..…………………………..…………………………………iv Abbreviations…………………………..……………………..………………………………...v Chapter 1 Introduction…………………………..………..……………………………….…1 1.1 Background of the Study: The Story of Oil-Spill Compensation Regime in Rayong…………………………………………………………………………..2 1.2 The statement of the problem: The Inadequacies of the Existing Regime of Thai Laws…………………………………………………………..………….12 1.3 A Review of the US Approach: Where Lessons Can Be learned………………...20 1.4 Objective of the Study ……………………………………….…………………...27 1.5 Research Question and Hypothesis………………………………..……………...28 1.6 Methodology……………………………………………..…….…………………29 1.7 Scope and Structure…….………………………………………………………...30 1.8 Significance and Contribution……………………………………………………36 Chapter 2 A Comprehensive Approach to the Oil-Spill Compensation: The US experience………………………………………….…………………......38 2.1 Introduction……………………………………………………….………………..38 2.2 The Creation of GCCF ………………………………………………………….....39 2.3 The GCCF Compensation Structure………………………………………...……..53 2.4 The Three main problems of the GCCF operation………………...………………76 2.5 The Current Status of the GCCF……………………………………..……………94 2.6 Concluding Remarks……………………………………...………………….……95 i Chapter 3 Can the OPA regime be, at least in theory, defended? ……………………98 3.1 Introduction ……………………………………………………………….……98 3.2 Performance in terms of Cost-Efficiency Criteria…………………………..…101 3.3 Performance in terms of Compensation Offers and The Finality Function…...112 3.4 Can the OPA regime be, at least in theory, defended? ……………………….119 3.5 Striking at the Right Balance: The Need for Rebalancing the Design…….….139 3.6 Concluding Remarks…………………………………………………….....…141 Chapter 4 Building a New Framework for Thailand……………..………………….153 4.1 Introduction ……………………………………………………………...…...153 4.2 The Challenge of the Oil Spill Case and the Inadequacies of the Thai Legal Regimes…………………………………………………..155 4.3The Proposed Recommendations: The New Legal Framework……………...167 4.4 Suggested Design Considerations for future Claims Faculties Model………181 4.5 Concluding Remarks …….……………….……………….………………...193 Chapter 5 Conclusion…………………………………………………………………197 Bibliography…………………………………………………………………………...214 ii List of Figures Figure 1. ……………………………………………………….………………………….......1 Thailand Petroleum Concession Map Figure 2. ……………………………………………………………………………...…........3