The following are possible outcomes from the litigation.
BP SETTLES ALL CASES AGAINST IT
BP has said it is keen to settle the claims ahead of the start of hearings. This could prevent some of the dirty laundry associated with the spill from being aired in a courtroom as well as spare BP and its partners lengthy and costly litigation.
The most likely scenario continues to be a settlement at least between BP and the federal and state governments, said David Uhlmann, a professor at the University of Michigan Law School and former chief of the justice department's environmental crimes section.
It does not serve the company's business interests to engage in a protracted legal battle over the Gulf oil spill.
BP has set aside $13 billion dollars to cover outstanding liabilities. However, uncertainty over the final cost is a much bigger drag on the oil company's valuation, suggesting it could justify paying much more to make the cases go away.
Analysts at Societe Generale have estimated the gap between BP's total provision and the hit to its market capitalisation as $33 billion.
Suggesting even more upside from settling the cases is the fact that Chevron Corp
But a settlement is complicated.
BP faces action from the government, individuals and businesses and is suing its contractors to make them contribute to the clean-up cost. It also believes its partners in the well, Anadarko Petroleum
The challenge right now is that there are so many issues, so many parties, and so many government agencies involved. Settlement talks could be derailed easily, Uhlmann said.
BP SETTLES WITH THE U.S. GOVERNMENT
BP sources told Reuters last month the company was in talks with the U.S. justice department about a possible settlement. The company has taken a provision of $3.5 billion to reflect amounts it expects to pay to cover civil penalties under the Clean Water Act.
It also faces liabilities for Natural Resources Damages but the company said it is unable to estimate these. BP has also said the Department of Justice (DoJ) is investigating possible criminal charges - 11 people died aboard the doomed Transocean rig - which could lead to additional penalties which the company has not assessed because it feels it is not guilty.
Most analysts and legal experts believe BP would have to pay much more than $3.5 billion to appease the government. Plus, there is a probe into possible suspicious trading of BP stock during the crisis.
BP's Clean Water Act provision assumes it is only liable for a fine of $1,100 per barrel spilt, and not the $4,300 per barrel it could face if found to be grossly negligent. The government has indicated it will push for the higher level of fine. With some 4.9 million barrels of oil estimated by the U.S. government to have gushed from the broken well, that could be between $5.4 billion and $21 billion.
Even if BP cannot settle with everybody, it makes sense to settle with the government, said Uhlmann. BP can negotiate with the government over the dollars per barrel and payment schedule, but the government will insist on using its estimate of how much oil was discharged from the well.
Analysts have forecast, on average, that BP will have to pay around $10 billion to settle the Clean Water Act fines. Plus, there is the ecological impact on endangered species and birds. Fines from that could be tens of millions of dollars, if not more.
Morgan Stanley estimates other liabilities will add $10-$15 billion onto the amount the company will have to pay the DoJ, although most other investment analysts have put the figure at under $5 billion.
With analysts predicting the government settlement will account for the lion's share of BP's remaining liabilities, the company could expect a meaningful share uplift from a $15 billion settlement -- especially if the amount was staggered over years, as was Exxon's $900 million settlement with the justice department regarding the Valdez spill.
On the other hand, the government would likely be keen to calibrate any settlement to a level that it expected would not prompt too big a share rise - something that could make it seem the Obama Administration let BP off lightly - and in an election year there will likely be close scrutiny to ensure environmental groups, one of Obama's key constituencies, are satisfied.
But BP will also be concerned about appearances and this may complicate a deal with the government.
BP's communications strategy since the spill has been to try and spread blame onto its contractors.
The government probes into the rig blast have held BP to be mostly to blame but have also criticised the role of driller Transocean
Also, under the law, its partners Anadarko and Mitsui, are potentially liable for fines.
BP might resist a deal whereby it was the only party paying fines, as this could make it appear the only negligent party. Meanwhile the other parties may feel they have a strong enough case to fight the government.
I just think open court generally is risky for a party that thinks it has considerable exposure, said Carl Tobias, a professor at the University of Richmond Law School in Virginia. So maybe it's better just to get the best settlement you can and also avoid the adverse publicity of the court situation. To some extent you also can better shield the bad information.
BP SETTLES WITH TRANSOCEAN, HALLIBURTON
BP has sued Transocean and Halliburton for up to the full cost of the spill, alleging negligence on their part. BP has not said how much it expects the companies to contribute and analysts do not predict it will receive much.
BP may be happy to accept a small payment from these companies, as this could at least be depicted as an admission of fault.
The contractors would be reluctant to agree any deal which appeared to make such an admission but eliminating uncertainty around the matter could also be a boost to their shares.
Also, a deal which BP could spin as an admission of shared blame on the part of its contractors, might make BP feel happier about being the only party that ends up paying fines to the DoJ.
SETTLEMENT WITH INDIVIDUALS AND BUSINESSES
BP faces large but unspecified claims from individuals and businesses which suffered losses due to the spill, and which feel they have not been adequately compensated by the $20 billion fund BP established to cover economic losses.
A steering committee was formed to represent the interests of such parties and big disagreements remain between BP and the claimants.
BP has a $6.1 billion provision to cover such claims but this excludes any amount for punitive damages, which some claimants are seeking and which BP says are not warranted.
The large number of claimants -- BP said it faces 600 civil lawsuits from people in states as far away as South Carolina and Kentucky -- may make a deal difficult to achieve.
On the other hand, BP has said it is prepared to litigate for the long haul in the face of what it considers unreasonable demands, and has pointed to the 20 years it took to wrap up lawsuits around the Exxon Valdez spill.
Plaintiffs could take the view that cash today is a lot more attractive than a larger potential payout in the distant future.
NO DEAL, CASE GOES TO COURT
The trial will be heard in three parts and, BP has told analysts, could run until late 2013, with actual fines and penalties not decided until 2014.
However, BP has made clear it will appeal any ruling it does not consider reasonable, and other parties are expected to do likewise. This suggests that a final decision by the courts on who has to pay, what, could be many years away.
A settlement could be achieved at any time. However, developments in the trial will influence the perceived strengths of either side, potentially pushing the sides further apart.
February 27 is not a drop dead date, particularly since the government does not have to present its claims first when the trial begins, said Uhlmann. The challenge once trial begins is that positions tend to harden and compromise becomes more difficult, which is essential for any settlement to occur.
(Editing by Mark Potter)