Union Carbide's Bhopal Plant

Abstract

“Just after midnight on December 3, 1984, methyl isocante gas began leaking from a Union Carbide plant in Bhopal, India (Hull & Kou, 1996)”. What legal questions did this case portray? With this paper we will shed some light on what happened in the aftermaths of this tragedy, and explain the happenings from an International Business law perspective.

On December 3, 1984, the Union Carbide India Ltd (UCIL) plant in Bhopal had a gas leak of a highly poisonous gas which led to the death of 3,800 people, and the injury of more than 100,000 people. UCIL was manufacturing fertilizer and needed the toxic gas methyl isocyanate (MIC). The plant produced this gas themselves, using Indian technology. With this method they had to store large amounts of chemicals, whereas they before had them delivered in smaller doses at a time. Other ways of making this gas were available, where storage was not necessary. The way the US plants and the Indian plant stored MIC differed; the US way was safer and therefore more expensive.

UCIL was a joint venture. The US firm Union Carbide Corporation (UCC) owned 51%; the rest was owned by the Indian government and Indian individuals. When the plant was built in 1973, the Indian government controlled and approved the plant’s design and construction and UCC assisted the Indian subsidiary in this phase. Many major changes took place after this, though, under complete control of the Indian management, controlled and approved by the Indian government. One of these changes was that UCIL started making MIC themselves. Materials and components used were produced in India by Indians.

The UCIL plant in Bhopal lacked safety devices that would warn workers on pressure building up in the tanks, which was standard in plants on American soil. The safety devices present had failed to function, giving the toxic gas free passage to the open air surrounding the city of Bhopal. At the time of the accident the Bhopal plant was completely managed and run by Indians with the last American worker to leave two years before the accident. According to Union Carbide Chairman and Chief Executive Warren M. Anderson; UCIL, “operated as a separate company”.

After the accident, the Government of India enacted the Bhopal Gas Leak Disaster Act that enabled the Government to act on behalf of the victims as the legal representative; the Union of India (UOI). Thereafter they sought compensation from the parent, UCC, in the US. When the trial started in US, UCC moved to dismiss the complaints on the grounds of forum non conveniens. The district court granted this motion and dismissed the lawsuit. UCC was given certain conditions. They had to agree to the jurisdiction of the Indian courts and accept their judgement. According to US standards, the settlement in a case like this would have been about $5 billion, this size of a settlement would surely have lead to a bankruptcy. When the case was brought up in the Indian court, the UOI lodged a $US 3.3 billion claim against UCC. In 1989, they came to an agreement on $470 million in settlement.

Given these facts about what happened in this case, this paper will consider three important factors that need to be evaluated when analyzing if this case was handled in an appropriate manner. US courts had jurisdiction over UCC, because it was a US corporation in the US. America was the only forum available. Forum non conveniens should not be used in this way to remove cases against US multinationals for behaviour abroad.

The UOI filed a complaint against UCC, because they argued that the accident was caused because of negligence by UCC. The complaint was filed in the US because only the US courts had jurisdiction over UCC. There are many facts to take into consideration in deciding UCC’s responsibility. The UCIL plant was operated as a separate entity, it was run entirely by Indians, the accident occurred in India and so on. It is important to remember though, that most of these facts count towards proving an answer to whether or not the accident was caused by UCC negligence. This will only be done after the place of where to hold the proceedings are found. In deciding where to hear the complaint, it initially needs to be considered who has jurisdiction. The accident occurred in India, but since UOI argues that UCC is responsible for the accident, we need to look at who has jurisdiction over UCC. India would have jurisdiction if UCC had a minimum contact with India. Since UCIL was operating as a separate entity, the only contact UCC had in India, at the time of the accident, was that they owned 51% of UCIL. This is not enough minimum contact for Indian courts to claim