This thesis is concerned with civil liability for catastrophic incidents such as the BP Deepwater Horizon or Fukushima. Most civil liability regimes for potentially hazardous activities adopt design features, such as channelling and limiting the amount of liability. Channelling means that liability is assigned to a specific group of injurers and the liability of other potential defendants is excluded. The combination of channelling and financial limits may limit the overall compensation available to victims potentially resulting in undercompensation of victims. Depending on the jurisdiction, the remaining liability is left with the state or the victims.
This thesis argues that the ordinary structure of civil liability regimes consisting of a liability rule backed up by a financial security instrument, such as insurance, is insufficient to address hazardous activities that result in catastrophic damage if adequate compensation for victims is the policy goal. Instead it is necessary to provide a liability regime that provides compensation in a series of layers. A liability rule assigns liability to the injurers, determines the standard of liability and other modalities such as limitation in amount. The first compensation layer consists of a financial security instrument that ensures liability is covered through financial means. For hazardous activities with potentially catastrophic outcomes, it is essential that another additional layer enhances the overall financial capacity to compensate for an accident.
This thesis argues for the creation of a compensation fund financed by the group of potential injurers through a mechanism that reflects the risk contributed by each potential injurer. Compensation funds reduce reliance on financial aid from the state and avoid leaving the burden on the victims, while enhancing overall compensation capacity. There is only a limited body of literature on the topic of compensation funds. This thesis contributes to research on compensation funds through the study of existing compensation funds in the area of oil tanker pollution and nuclear accidents, and offers a theoretical analysis of funds. Compensation funds have the potential to make an important contribution to the efforts of adequately compensating victims and internalising costs. Thus, they should be an integral part of a civil liability regime for hazardous activities.