British oil major BP's plea to reconsider several payments made under the 2012 Gulf of Mexico disaster settlement programme has been approved by a US federal appeals court.
The decision will come as a relief to the company, which is trying to cut down its rising costs related to the oil spill.
The appeals court asked the district court to reexamine the settlement claims to determine whether they are genuine or not. It noted that the settlement would be invalid if unworthy people, or businesses, are compensated.
Federal judge Edith Clement also directed the lower court to halt payments on claims that do not meet stricter standards.
"There is no need to secure peace with those with whom one is not at war," Reuters quoted Clement as saying.
"The district court had no authority to approve the settlement of a class that included members that had not sustained losses at all, or had sustained losses unrelated to the oil spill, as BP alleges.
"If the administrator is interpreting the settlement to include such claimants, the settlement is unlawful."
The company earlier asked the court to halt payments until the claims administrator improves its handling of the settlement programme with better accounting and anti-fraud controls. It noted that the existing standards in the settlement programme is too generous and is paying people who were unaffected by the oil spill.
The troubled company has already failed twice in its attempt to halt settlement payments.
In July, US District Judge Carl Barbier rejected BP's request to halt payments as the claims programme was still being investigated by Freeh. The judge also ordered BP to pay $130m (£80.2bn, €95.6bn) in fees to the administrator.
BP renewed the request on 5 August as a fraud hotline, set up by the company, found "new evidence of more widespread and potentially systemic improprieties" in the claims programme.
The oil company claimed that it had discovered two lawyers who are tasked with reviewing appeals of disputed claims, are also partners at law firms that represent the applicants in the Court Supervised Settlement Programme.
BP said this is evidence of conflict of interest, but Barbier ruled that there was no "credible evidence of fraud" in the compensation process as claimed by the oil major.
An explosion on BP's Deepwater Horizon rig on 20 April 2010, which killed 11 workers, resulted in one of the worst environmental disasters in history. BP has since forked out $42.4bn in oil spill-related charges.
BP's costs are still mounting as it has taken a substantial hit in the running of the victims' settlement programme. This includes payments to court-appointed vendors and appeals panellists. It also has to bear administrative costs to process remaining claims from the Gulf Coast Claims Facility, a fund set up to pay claimants before the current settlement was reached.
The company originally expected the programme to cost $7.8bn, but recently it lifted its estimate to $9.6bn and said it could go higher due to excessive fees and false claims.