Note on… Bhopal, Frewen & corporate liability

September 16, 2010

A very interesting article by Justin Frewen, “The Lessons of Bhopal and BP” (September 5, 2010) is worth mentioning as it is relates to a note on international corporate liability published recently on the Law Notepad.

In 1984 as Frewen recalls, a major incident stroke Bhopal when a gas leak killed thousands of people and injured hundreds of thousands more.

As the author of the article perfectly summarises,

“This disaster had a devastating legacy on Bhopal. In addition to the immediate deaths and destruction of the environment, the surrounding soil and waters remain contaminated by Union Carbide’s chemical waste. This has given rise to genetic deformities, cancer and congenital health problems, as well as many painful premature fatalities. An Amnesty International report estimated that by 2004 the total death toll had risen to 22,000”.

Apart from a human disaster, a major aspect of the Bhopal leak indeed lies in the general inability of the local authorities to be properly compensated. By “properly compensated”, I essentially mean that the liability of Union Carbide, the parent company incorporated in the US, was never recognised in Courts. A reason for that is the general uncertainty witnessed in US Courts’ decisions towards recognising the liability of US firms for their actions abroad under ATS, also known as the ‘non-conveniens forum’ doctrine. As I previously wrote in the note on Sosa:

“The (US) court denied having jurisdiction over the case and dismissed it on the ground that Indian Courts would constitute the most appropriate forum because of their “superior position to construe and apply applicable Indian law and standards”, so that overall the “Choice of the United States as a forum would not be given the deference to which it would be entitle if this country were their home”

Justice therefore, was somehow rendered before the Indian Courts of justice. A paper by Amnesty International (‘First convictions for 1984 union carbide disaster in bhopal too little, too late’, 7 June 2010, available here) indeed reports that seven Indian nationals, were found guilty by the Bhopal Court of causing death by negligence. As Frewen adds, “a mere two-year prison sentence and $2,100 fine each—approximately the same as one might expect for having caused a car accident in India”.

Importantly however, those people are those who formerly worked for the Indian company Union Carbide India Ltd (UCIL), not for the US-based parent company. That being said, while Justin Frewen concludes by formulating that “the more culpable U.S. executives have so far completely evaded legal censure”, the question as to how the international liability of parent companies for the acts of their subsidiaries can be established must be also considered within an international legal perspective.

While Frewen mentions the “culpability” of US executives, the term indeed has a strong criminal connotation, which makes liability hard to establish under the law for the ‘mens rea’ also known as the ‘guilty mind’ factor implies that the intention of the US executives must be proved.

Furthermore, solving the issue is made even more difficult by the consideration that under the law, parent firms and affiliates remain distinct and autonomous entities, so that the affairs of an affiliate in theory are detached from those of the parent group. Unless the direct implication of US executive into the Bhopal disaster can be established, foreign liabilities might therefore be hard to establish.

Finally, while the recognition of international corporate liability is essentially restricted by jurisdictional limitations and the absence of an international court having authority to decide on such transnational issues, Frewen’s suggestion that “Nothing less than a transparent and easily enforceable framework of international sanctions and penalties will suffice to ensure that corporations are made accountable in the future, irrespective of their provenance or the location of industrial accidents” seems essential although sadly unlikely to happen. The absence of regulation over foreign direct investment matters indeed, is solely due to the incapacity of the international community to agree on such terms. Amongst others, the failure of the OECD MAI (Multilateral Agreement on Investments) originated from insufficient responsibilities imposed on international investors, by contrast with their increased rights. This however, might make the object of another note.

Justin Frewen, “The Lessons of Bhopal and BP” (September 5, 2010)

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