The embattled administrator of the $20bn (£12.3bn) compensation fund for Gulf oil spill victims is not independent from BP and must stop telling potential claimants that he is, a US judge has ruled.
The ruling in New Orleans came hours after the fund tsar Ken Feinberg released details on how final payments would be determined.
US District Judge Carl Barbier said he was ordering BP, Mr Feinberg and any of their agents to change the way they communicated with people seeking money from the fund. Judge Barbier said Mr Feinberg must clearly disclose in all communications that he was acting for and on behalf of BP in fulfilling its obligations as the responsible party under the Oil Pollution Act.
The judge stopped short of ordering changes to a release form that people who accept final payments from the fund must sign. He asked lawyers to submit additional briefs to the court on that, as well as address the question of whether BP was complying fully with the law in the processing of claims.
"Full disclosure and transparency can ensure that the reality of the operation of a third party will be consistent with any publicity concerning that entity," Judge Barbier wrote.
"Full disclosure can also give protection to the responsible party from possible future legal attacks on the validity of the evaluation, payment, and release of claims."
Mr Feinberg was appointed last June by BP and the White House to oversee the claims fund. His Washington legal firm was paid nearly £525,000 a month for its work through the middle of January, and now Mr Feinberg is discussing with BP how much he should be paid going forward.
Judge Barbier said: "The court finds that BP has created a hybrid entity, rather than one that is fully independent of BP."
BP did not immediately respond to a request for comment. A Feinberg spokeswoman said the Gulf Coast Claims Facility would have no comment on the ruling and would move forward paying claims.
Lead lawyers in hundreds of claims filed over last year's Gulf Of Mexico rig explosion and massive oil spill had asked Judge Barbier to intervene in the communications between Mr Feinberg and fund claimants. The attorney generals in Mississippi and Louisiana have backed the motion and Florida joined in yesterday.
Among other things, they expressed concern with the requirement that people who accept final payments from the fund have to sign a release form giving up their right to sue any party deemed responsible for the disaster.
The lawyers have argued that those claimants should still be able to sue BP for punitive damages and other companies for compensatory and punitive damages.
Judge Barbier ordered all sides to issue additional briefs by February 11 addressing the question of "whether and how BP as the responsible party is fully complying with the mandates of OPA, for example, in the processing of claims for 'interim, short-term damages', or 'final damages', methodologies for evaluation of claims, and the release forms required of claimants".
Earlier yesterday, Mr Feinberg said the Gulf of Mexico should largely recover from BP's oil spill by the end of next year, and all final settlement offers to victims who lost revenue from the disaster will be based on that assessment.
He said the GCCF relied on experts to determine that a 30% recovery was likely in 2011 with full recovery in 2012. He noted, however, that oyster harvesting would take longer.
The fund was set up by BP to compensate people for lost revenue following the oil well blowout off Louisiana. It has so far paid about 3.3 billion dollars (£2bn) to 168,000 claimants, but many are still waiting for money and thousands of others claim they were shortchanged.
About half of the total 485,000 claims filed have been denied because of ineligibility or lack of documentation.