An appeals court in New Orleans ruled the terms of a compensation agreement agreed by BP should be reviewed to help stem bogus or inflated claims for damage by businesses.
The decision could save BP, who have so far paid more than £30billion in fines, clean up costs and compensation, hundreds of millions.
BP said it was 'extremely pleased' by the Federal Appeals court decision.
Devastating: Oil giant BP has won a court battle
to limit the multi-million compensation payouts stemming from the oil
spill caused when the Deepwater Horizon drilling rig (above) exploded in
the Gulf of Mexico
A total disaster: Dispersant clotted oil and
fresh crude floating May 6, 2010, on the surface nine miles from the
Deepwater Horizon oil well spill in the Gulf of Mexico
The company say they have already paid out over £600m ($1bn) in phony claims.
They had set up a £10billionn compensation scheme after being found liable for the explosion on the Deepwater Horizon drilling rig in the Gulf of Mexico which claimed the lives of 11 people and released millions of gallons of oil into the sea.
Under pressure from the US Government they promised to reimburse all those who were affected by the worst oil spill in US history.
Tourism and the fishing industries suffered in many parts of the Gulf coast - but with so much money on offer they were deluged with bogus claims.
One of the most 'illogical and absurd' payouts according to BP was £16million to a rice mill in Louisiana that was 40 miles from the coast.
Fury: Activists wearing black face veils
carrying oil in tins marked with the BP logo at Tate Britain's annual
summer party where the oil giant was a sponsor in 2010
They had claimed the money citing loss of income but an investigation revealed they had reported higher revenue the year of the spill than in the previous three years.
Another bogus claim involved a Florida Keys based businessman who claimed £6million for loss of earnings due to the drop in tourists.
While parts of the Gulf of Mexico were affected by the spill the Florida Keys and south Florida were unaffected.
More than 100 people have been arrested across the U.S. for making false claims.
Under the original BP scheme any person or business in the US could file compensation claims for lost wages or other economic damages caused by the disaster.
The had to submit proof, such as income tax returns and other financial records as part of their claim.
But BP maintains many businesses falsified records to secure the payouts.
BP have been battling for months to get their original compensation offer overturned.
Deadly blast: Eleven rig workers were killed in the Deepwater Horizon disaster in the Gulf of Mexico
Lawyers for BP argued that the terms of existing settlement meant that people and businesses were being paid huge sums for false claims.
Judge Edith Brown Clement of the New Orleans Federal Appeal Court said BP and its shareholders should not be punished with 'hundreds of millions of dollars of unrecoverable awards' paid for dubious claims.
'There is no need to secure peace with those with whom one is not at war,' she said.
'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,' she added.
While the court victory will stop further bogus payouts it is unlikely BP will be able to recover the money already paid out.
The appeals court has now ordered Judge Barbier at the lower district court to review the wording of the deal in order to draw up a narrower set of definitions that will exclude unfair claims.
BP, which has made two previous, unsuccessful, attempts to halt compensation payments, said in a statement that 'it was extremely pleased with today's ruling'.
It added: 'It affirms what BP has been saying since the beginning: claimants should not be paid for fictitious or wholly non-existent losses.
'We are gratified that the systematic payment of such claims by the claims administrator must now come to an end.'
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