UPDATE 3-Appeals court says BP blast deal violates U.S. la7

(Adds U.S. attorney comment, details)

By Erwin Seba

HOUSTON, May 7 (Reuters) - A U.S. federal appeals court ruled on Wednesday that a plea bargain between prosecutors and BP Plc (BP.L: Quote, Profile, Research, Stock Buzz) violated the rights of victims of a deadly 2005 explosion at the company's giant Texas refinery.

The U.S. Fifth Circuit Court of Appeals sent the deal back to a federal court in Houston to decide if it should be thrown out because surviving victims of the explosion were not consulted until the deal had been struck between the U.S. Justice Department and BP's U.S. subsidiary.

"The victims do have reason to believe that their impact on the eventual sentence is substantially less where, as here, their input is received after the parties have reached a tentative deal," a three-judge panel from the Fifth Circuit wrote in an opinion accompanying the ruling.

U.S. Attorney Don DeGabrielle said the decision effectively affirmed the district court's initial acceptance of the proposed plea agreement.

"We are, however, disappointed by the appellate court's criticism of the government's good faith reliance upon a court's order approving our approach to meet our U.S. Crime Victims Rights Act obligations."

A federal judge in Houston approved keeping negotiations to a plea agreement from blast survivors to prevent the leak of a proposed guilty plea, which could have prevented BP from getting a fair trial if it ultimately rejected the deal.

In its opinion, the Fifth Circuit Court wrote the secret proceedings for a plea agreement "have no precedent, as far as we can determine."