Reference no: EM134039158

Assignment:

Answer the questions below regarding the case study:

Questions

1. India gained its independence from Great Britian in 1947. Like many developing countries with agrarian economies, independent India embarked on a long period of socialist and protectionist policies. How do you think this affected the investment climate in India? How do you think this defined the relationship between UCC and the Indian government to 1984?
2. Why do you think UCC might have chosen to produce agricultural pesticides in India rather than export those products to India from plants in developed countries?
3. Why did India require local management and control? What are the advantages and disadvantages of local management, and what problem does it present to the multinational?
4. Had the legal requirements in India concerning the handling of hazardous chemicals been less than those required in the United States, should UCC have ethically followed the higher U.S. standard?
5. Do you think that a parent corporation, like UCC in this case, should be financially liable for torts committed by its foreign subsidiary? Should the parent be protected by the limited liability of its corporate veil, or should a multinational firm with a "global purpose" be responsible under some theory of "single-enterprise" liability? How would this affect the attitude toward investment worldwide?

Case Study: In re Union Carbide Corporation Gas Plant Disaster at Bhopal

Background and Facts

Union Carbide Corporation (UCC) has been one of the largest chemical and industrial companies in the world, operating in dozens of countries. UCC's subsidiary in India, UCIL, had grown to fourteen plants, employing more than 9,000 Indian citizens, manufacturing a variety of products, including chemicals, plastics, batteries, fertilizers, and pesticides. UCIL was incorporated under the laws of India. Fifty-one percent of UCIL stock was owned by UCC, 24 percent by the government of India, and the balance by approximately 23,500 Indian citizens. The stock was publicly traded in India. In the 1970s, India issued a license to UCIL to produce pesticides at a plant to be built in Bhopal.

UCC provided the basic design for the plant, but India insisted that its own engineering firms and contractors build it. From 2972-1980, the construction was supervised by Indian engineers and many changes were made to the design. Labor and employment policies were set by the Indian government and the construction was managed and operated entirely by Indian citizens. The operations of the plant were regulated by more than two dozen Indian governmental agencies; however, enforcement of environmental, health, and safety standards by regulators was weak and ineffective. Maintenance procedures and record keeping at the plant were inadequate. In 1984, poisonous methyl isocyanate gas was released from the plant and blew into densely occupied parts of the city of Bhopal, resulting in the deaths of several thousand Indian citizens (estimates range from 2,000-10,000) and sever injuries to several hundred thousand others.

In April 1985, the Indian government filed a complaint in the federal courts in New York on behalf of the victims. UCC contended that the action should properly be heard in the courts of India. The district court agreed and dismissed the action.

Mansfield, Circuit Judge

The vital parts of the Bhopal plant, including its storage tank, monitoring instrumentation, and vent gas scrubber, were manufactured by Indians in India. Although some 40 UCIL employees were given some safety training at UCC's plant in West Virginia, they represented a small fraction of the Bhopal plant's employees. The vast majority of plant employees were selected and trained by UCIL in Bhopal. The manual for start-up of the Bhopal plant was prepared by Indians employed by UCIL.

In short, the plant has been constructed and managed by Indians in India. No Americans were employed at the pant at the time of the accident. In the five years from 1980 to 1984, although more that 1,000 Indians were employed at the plant, only one American was employed there and he left in 1982. No Americans visited the plant for more than one year prior to the accident, and during the five-year period before the accident the communications between the plant and the United States were almost nonexistent.

The vast majority of the material witnesses and documentary proof bearing on causation of and liability for the accident is located in India, not the United States, and would be more accessible to an Indian court than to a U.S. court. The records are almost entirely in Hindi or other Indian languages, understandable to an Indian court without translation. The witnesses for the most part do not speak English but Indian languages understood by an Indian court but not by an American court. These witnesses could be required to appear in an Indian court but not in a court of the United States.

The accident and all relevant events occurred in India. The victims, over 200,000 in number, are citizens of India and located there. The witnesses are almost entirely Indian citizens. The Union of India has a greater interest than does the United States in facilitating the trial and adjudication of the victims' claims.

India's interest is increased by the fact that it has for years treated UCIL as an Indian national, subjecting it to intensive regulations and governmental supervisions of the construction, development, and operation of the Bhopal plant, its emissions, water and air pollution, and safety precautions. Numerous Indian government officials have regularly conducted on-site inspections of the plant and approved its machinery and equipment, including its facilities for storage of the lethal methyl isocyanate gas that escaped and caused the disaster giving rise to the claims. Thus India has considered the plant to be an Indian one and the disaster to be an Indian problem. It therefore has a deep interest in ensuring compliance with its safety standards. Moreover, plaintiffs have conceded that in view of India's strong interest and its greater contacts with the plant, its operations, its employees, and the victims of the accident, the law of India, as the place where the tort occurred, will undoubtedly govern.

Decision. The district court's dismissal of the actions against UCC was upheld. The doctrine of forum non conveniens is a rule of law, stating that to further the administration of justice, where a case is properly heard in the courts of more that one country, it should be heard in the country with the greater interest in the outcome of the case, and where it is most convenient. In this case that is India.

Comment. In 1989, the Supreme Court of India approved a settlement fund of $470 million to compensate the victims of the disaster. The company has long maintained that the tragedy resulted from employee sabotage at the plant.