Potential and limits of out-of-court rapid claims settlement - a law and economics analysis

This article deals with compensation mechanisms for the aftermath of disasters. It claims that there is a necessity to speedily compensate victims of an accident, if this can prevent the occurrence of large societal follow-on damage. In reality this does not often happen. This article takes the entitlement to compensation as given, does not discuss substantive law matters regarding compensation, but deals with procedural aspects of how to actually get this compensation. The main obstacles to fast compensation may be found in lengthy mass litigation. Then again, civil litigation also entails economic advantages. There are law and economics arguments in favour of litigation versus alternative dispute resolution (ADR) solutions. After setting out the theoretical arguments, we discuss some American and European real-life examples of such rapid claims settlement mechanisms: the Gulf Coast Claims Facility (GCCF) and the Belgian compensation fund for technological accidents. The theoretical discussion, enriched by the illustration of the practical examples, will culminate in guidelines on how to set up a rapid claims settlement mechanism.