Institutional analysis, allocation of liabilities and third-party enforcement via courts: The case of the Prestige oil spill

Abstract

Coase, 1960 [13] constituted a starting point to the New Institutional Economics and the new Law and Economics. In the new institutional approach, institutional rules and enforcement-mechanisms are considered as key elements to internalise spillover effects in a society with high transaction costs. This paper reviews the case of the Prestige oil spill and performs an institutional analysis on the implementation of rules and the assignment of responsibilities by the courts of justice from the new institutional approach. In November 2003, the sinking of the oil tanker Prestige off the coast of Galicia (Spain) provoked an oil spill that resulted in one of the worst maritime disasters of the 21st century. The ex-post assignment of responsibilities for the disaster was characterised by errors in the technical inspections of the oil tanker, the inadequate prevailing rules and the inability of the courts of justice to determine responsibilities, which gave rise to an imperfect institutional solution. In this case, the polluter did not have to pay in accordance with the high level of pollution. In particular, the Spanish justice system acquitted the accused from committing an environmental crime, and in the absence of a crime, there were no civil liabilities for the damage caused by the oil spill.