A few months ago I wrote about Indra Sinha’s Booker-nominated novel Animal’s People, a fictionalized take on the 1984 Bhopal Union Carbide gas disaster.
In Animal’s People, several of the main characters embark on a hunger strike, including Zafar, the leading activist in the fictional town of Khaufpur. Now, a new development in Indra Sinha’s story, where his fiction is meeting his life: On June 10, Sinha began an indefinite hunger strike
(from his home in France) in solidarity with 9 other Bhopal activists in New Delhi, many of whom are victims of gas or water contamination. His action is part of a global fast to finally force the Indian government into action to bring US giant Dow Chemical to justice in India.
Two days after the Worldwide Hunger Strike Relay has begun, 60 people in India, the US, Europe and South America have already signed up online to participate. Of this number, nine have committed to indefinite fasts, including Indra Sinha.
In his piece “Why I’m Going on Hunger Strike for Bhopal” in The Guardian today, Sinha writes:
I have spent much of the last five years writing a novel in which victims of a chemical disaster caused by a rogue corporation are sold out by their own politicians, triggering a desperate hunger strike. Animal’s People is set in the fictional city of Khaufpur, but whatever success it has had, it owes to the inspiring courage and spirit of the Bhopalis, and the descriptions of the hunger strike were drawn directly from the experiences of my friends. … On their small stretch of pavement in Delhi, now battered by monsoon rain, nine [people] have sat down to begin an indefinite fast for justice. Among them are my old friend Sathyu and, grown up into a fine young man … How can I not join them? How can we all not support them?
More on the strike and how to get involved, below the fold, as well as a look at Dow Chemical’s ironic “Human Element” ad campaign. Global efforts to raise awareness and effect change have been building up since March when 50 Bhopalis undertook a 35-day padyatra to New Delhi to request a meeting with PM Manmohan Singh. With no meeting to date, it is hoped that this hunger fast will deny immunity to Dow Chemical and follow through on its rehabilitation schemes in Bhopal. [related article]
From the “International Hunger Strike Relay site:
Since February 20, 2008 – when 50 men, women and children set off on foot to cover the 500 miles from Bhopal to New Delhi – the Bhopalis have faced numerous hardships over more than one hundred days. They arrived in Delhi on 28 March and set up home on a small piece of footpath close to parliament. They’ve been arrested several times, including two times for protesting in front of the Prime Minister’s Residence. Finally, on June 2nd, the Prime Minister conveyed his “in principle” agreement to a Special Commission for rehabilitating Bhopal. But like past unfulfilled promises, no details nor timelines were provided, no proper health care or clean water were guaranteed. In the matter of the government’s neglected responsibilities as prosecutor of the criminal case still ongoing against the fugitive Dow/Carbide, there was silence. On June 9th, in desperation, 33 women and children and three men lay on the ground outside the PM’s offices. After arrest, several of them, including 6 and 11 year old minors, were beaten and verbally abused by police. This is the context we must react to now. In this important hour of our struggle for life, dignity and justice, we desperately need your solidarity and participation.
The site is set up for worldwide participants to join in the hunger fast, download a hungerstrike toolkit, add their personal statements, and keep a diary.
In San Francisco tomorrow, there will be a hunger strike solidarity protest from 10 am to 12 pm [details]
While all this is going on, it seems a bit creepy and ironic to catch a glimpse of Dow Chemical’s “Human Element” advertising campaign. You might have caught a two-spread ad in “The New Yorker” a few weeks ago or seen this ad.
Now, watch this interpretation of the same ad.
Ummmmm–the Indian Supreme Court did approve a (non-trivial) settlement with Union Carbide back in the late 80’s or early 90’s, didn’t it? It’s not immediately obvious why Dow, which subsequently purchased Union Carbide, isn’t allowed to rely on that settlement, particularly given such high-level approval.
I agree with Rob, the settlement was with UC which Dow subsequently purchased, although the settlement amount which according to wikipedia was $470 million only worked to about $2,200 per deceased.
hmmm. when you buy a company you inherit their liabilities no? now, if their was ongoing litigation, dow should be on the hook. was the settlement the final word? on the other hand, didn’t UC sell the bhopal unit to another company (i don’t know who) b/f selling themselves to dow? so dow might be twice removed. not sure what’s fair, but people usually go after big pockets instead of who is actually responsible.
given the publicity and dow’s holdings in india, best bet is to start a fund for the victims and i’m sure dow would agree to match any donations in return for legal immunity.
This current strike is against the GoI which promised them access to non polluted drinking water after a long hunger strike last year (pollutants have seeped into the ground water and people have no choice in the bastis but to drink that since borewells are the primary water source there), facilities for livelihood of affected victims, better medical facilities, etc. Since then GoI has done nothing – the MP Govt blames the central Govt and vice versa.
As for Dow, the clean up of the site was never done and the Bhopalis demand that Dow clean it up. Dow claims that they did not buy UCs liabilities and thus its not their responsibility. Cases are pending in court (both in India and the US). The pittance paid to the victims as settlement was a screwup by the spineless (and probably bribed) Govt, for a company that cares about the Human element – maybe Dow could step up.
The campaign runs a clinic called the Sambhavana clinic for the affected victims (including a lot of medicines made from herbs growns in their own garden), donations are always welcome.
They did inherit a lot of assets in terms of IP through whatever arrangement they did with UC.
Sometimes yes, sometimes no–this is a whole topic in and of itself–“successor liability.”
Good question, I’m not sure. I think it was mostly about personal compensation, so not, perhaps, as to environmental damage. But the details matter, and I simply don’t know them.
My recollection is that “bhopal unit” went bankrupt/merged into the gov’t (which owned a good stake in it); so, the “settlement” was with the US parent of the “bhopal unit” (re: whatever its responsibility, over and above that of the “bhopal unit”). And Dow later bought the US parent. Again, someone may know more details than I do.
The 1989 settlement quashed civil liabilities, not criminal. The Indian Supreme Court specifically ordered the criminal case against Union Carbide to be revived. Since 1992 Union Carbide has been refusing to appear to answer charges of culpable homicide and was declared an “absconder from justice”. Dow which owns 100% of Union Carbide and whose directors sit on Carbide’s board refuses to produce Carbide in court, saying it has no authority over Carbide. That much relates to the 1984 gas disaster.
The second and in a way much more terrifying disaster is the mass poisoning of the water supply by chemicals abandoned by Union Carbide in its Bhopal factory. The factory, which has to this day not been cleaned, remains full of lethal pesticides. Under the polluter pays principle, Carbide caused the pollution and is thus responsible for clean up. The Bhopalis maintain that in acquiring Carbide’s assets, Dow also acquired the liability. Unfortunately for Dow, this is also the view of the Indian law ministry.
It sounds as if you have come across only that part of the story which Dow and Union Carbide choose to talk about, they tend to be silent on the points I have mentioned above. Finally, the settlement of $470 million had to be divided between the 568,000 officially registered as injured by the Indian government. You can work out the sums. In practice most people got less than ¢500, prompting the now infamous comment by a Dow PR chief that “$500 is plenty good for an Indian”.
Rob and Umber, the 1989 settlement related only to the 1984 gas disaster and quashed civil liabilities, not criminal. The Indian Supreme Court specifically ordered the criminal case against Union Carbide to be revived. Since 1992 Union Carbide has been refusing to appear to answer charges of culpable homicide and was declared an “absconder from justice”. Dow which owns 100% of Union Carbide and whose directors sit on Carbide’s board refuses to produce Carbide in court, saying it has no authority over Carbide. That much relates to the 1984 gas disaster.
The second and in a way much more terrifying disaster is the mass poisoning of the water supply by chemicals abandoned by Union Carbide in its Bhopal factory. The factory, which has to this day not been cleaned, remains full of lethal pesticides. In surrounding areas people are sick and die early, children are being born damaged. This issue was not covered by the 1989 settlement as it was not known at the time. The factory as the source of the poisoning was the subject of speculation early on but not confirmed until the Greenpeace report of 1999, ten years after the settlement.
Under the polluter pays principle, Carbide caused the pollution and is thus responsible for clean up and compensation. The Bhopalis maintain that in acquiring Carbide’s assets, Dow also acquired the liability. Unfortunately for Dow, this is also the view of the Indian law ministry.
It sounds as if you have come across only that part of the story which Dow and Union Carbide choose to talk about, they tend to be silent on the points I have mentioned above. Finally, the settlement of $470 million had to be divided between the 568,000 officially registered as injured by the Indian government. You can work out the sums. In practice most people got less than ¢500, prompting the now infamous comment by a Dow PR chief that “$500 is plenty good for an Indian”.
Sorry to post twice. The second version is the one to read.
Thanks, Sam–we seem to have come to a consensus–the “real” issue now is Dow’s potential “successor liability” for the environmental damage/cleanup at the Bhopal plant. (The secondary issue is why the Indian S.Ct. approved a low per-person settlement back in ’89.) I would cert. agree that if someone poisons some people and the water supply, they’re not off the hook just by compensating the poisoned people! The tricky issue, I guess, is whether Carbide’s claims that it undertook “clean-up work at the site under the direction of Indian central and state government authorities” has any merit.
The scandalous settlement was the final word on Union Carbide’s CIVIL liabilities pertaining to the gas disaster, after it was ratified by a Supreme Court Review in 1991. The civil liabilities were only intended to provide some level of reparation to the affected. However there was also the question of criminal justice. The same Supreme Court review lifted a stay on pending CRIMINAL proceedings against Carbide which included charges of culpable homicide and criminal negligence. In choosing not to contest the Supreme Court review, Carbide’s lawyers implicitly accpeted revival of criminal proceedings. Those proceedings continue till date in the stark absence of the main accused, Union Carbide and Warren Anderson, who have been declared criminal absconders for failing to show when issued several summonses through Interpol.
The sale of Carbide’s Indian subsidiary, UCIL, was a direct consequence of its attempts to escape the sanction of the criminal proceedings. Carbide’s 51% stake in UCIL had been seized by the court due to its non-appearance. In the Supreme court, Carbide lawyer Sir Ian Percival pleaded that it be allowed to sell that stake in order to fund the building of a hospital that the Supreme Court Review had dictated it must do through its own coffers. Carbide’s holding in UCIL was no longer its own as it had forfeited ownership through being a fugitive. However, a pliant supreme court judge, Justice Ahmadi, allowed the sale against the express wishes of the criminal court, which deemed the sale of shares “malafide”. Ahmadi was later installed as chief trustee of the resulting hospital trust, which had duty of care over around $80 million.
The criminal case remained ongoing against Union Carbide Corporation, USA (UCC). As a result of no longer holding any assets in India, Carbide was notionally away scot-free. Until Dow came along, that is. Criminal proceedings in India were one of the liabilities staring Dow plain in the face when it prepared to take over Carbide. Dow chose not to notify either its shareholders or the securities and exchange commission about them. A shareholder civil action in New york attempted to stop the merger on these grounds but it was poorly funded and got thrown out on a technicality. Dow knew full well what it was buying into.
There were also civil proceedings resulting from the contamination, begun two years before the merger. The severe pollution from everyday operations (not from the disaster) had only come to full light after the settlement and were therefore not covered by that deal. Environmental problems in India, as in the US, fall under the aegis of the ‘polluter pays’ principle. Who, then, was the polluter?
UCC was majority owner of the Bhopal plant with a 51% stake. Majority ownership conferred managerial control. Through management control, Carbide was able to extract dividends, royalties and service fees from its Indian subsidiary, UCIL. Carbide’s control extended over UCIL’s board, budgets, marketing plans and the proprietary MIC technology in Bhopal. Technical control – realized through keeping the technology proprietary – extended over plant design, build, safety, training and operational practices. UCC also designed and supervised the waste disposal methods at the plant that dumped thousands of highly toxic process and waste chemicals into unlined pits. In the late 1980’s, UCC oversaw the “Bhopal site rehabilitation and assets recovery project” in Bhopal that conducted contamination tests of soil and water that caused 100% mortality to fish. Carbide chose to keep this to itself, even though thousands of people lived within yards of the site. It’s all here: http://www.bhopal.net/oldsite/poisonpapers.html
So you see, the certified criminal (absconder) and polluter is UCC, not any other entity. A crime does not evaporate because a company has a new owner. The mechanism to ensure this, built into corporate law, is known as ‘successor liability’. Dow bought UCC in its entireity in a form of deal known as a de facto merger. With a de factor merger – and moreso under Delaware law under which Dow is registered – the succeeding entity inherits all liabilities as well as assets. There’s no escaping this in law. But Dow has gambled that it can play a game of corporate veils in India, well away from its major assets. Unfortunately for Dow, the law is starting to take its course. In 2005 it was summoned to the criminal proceedings to explain why it wasn’t producing its wholly owned subsidiary in court. Instead of appearing, it hired a senior member of the Congress party to file a stay order that still stands. A few weeks ago, the Law Ministry issued its considered legal opinion on the question of successor liability. It concluded that, if there were any, they would have to be borne by Dow.
Actually Delaware courts have rejected the concept of de facto merger. I can’t speak for Indian law but in the US and most other jurisdictions if Dow just bought the assets, they are not subject to the liabilities of the seller.
I didn’t want to argue with “editor bhopal.net,” but yes, you are correct on both points! Thanks!
Think of it this way–if I own a car, and hit someone with it, and then sell the car, who should liability rest with? The new car-owner, or me, or both? Me only is a plausible answer! Again, I don’t know the details of the Dow acquisition of UC, but Ramnathkar is correc–it couldn’t have been “de facto merger.”
this is not a great analogy, because corporate liability and individual liability are very different. if you hit somebody with a car, no liability attaches to the car. if you commit malfeasance with a corporation, both the individual and the corporation are liable.
Right, but the point being, liability doesn’t attach to the car! So, if all Dow bought was the “car” and not the “corporation,” then we can see where the rule Ramnathkar references in #12 makes sense, no?
well, my latter point in the original comment was specifically that corporations are different legal entities than cars.
OK, but what did Dow buy, the “car” (i.e., most of the assets of UC) or the “corporation”? Comment #11’s attempt to invoke the “de facto merger doctrine” suggests the former (b/c that doctrine attempts to say something like an asset purchase is really (i.e., de facto) a merger (i.e., joinder of two corp. entities), in which case all I’m saying is that it wouldn’t be crazy for Dow not to be liable.
To be clear, I’m not defending Union Carbide a whit. I’m just saying that it may be wrong to go after Dow (as opposed to, perhaps, bankruptcy rules or limited liability rules, which might be the real culprits behind under-compensation to the Bhopal victims).
The car analogy is meant to suggest that there’s something good about liability not attaching to assets. Otherwise, once a car had hit someone, no one would want to buy it, which would be silly, b/c it would reduce the value of the car far too much given its real economic value. I.e., to preserve the alienability of assets, we might not attach liability to things as opposed to “people” (be they real or corporate–that’s where I’m not buying your “big difference” between individuals and corporations).
To paraphrase Magritte, when is a car not a corporation? When it is a corporation.
For a fuller analysis of the Delaware law implications of Dow’s merger with the corporation (the word car is in their, but it’s not in the right order) Union Carbide, have a look here: http://www.bhopal.net/opinions/archives/2008/03/veil_of_decepti.html
Inasmuch as de facto merger is an unnecessary concept for a party attempting to pierce the corporate veil under Delaware law. All that is required is a showing of fraud or wrong. See: http://www.bhopal.net/opinions/archives/2008/03/veil_of_decepti.html
Consider a fictional corporation whose only asset is a car has no liabilites ie Assets (Car) = Liabilities + Owners Equity (Shares). Assets (Car) = 0 + Owners Equity (Shares)
You could sell the asset, ‘the car’ for cash Assets (Cash) = 0 + Owners Equity and you are still left with a corporation whose only asset is Cash. The new car owner has no liabilities of the corporation here.
Or
You could sell the corporation as a going concern Assets (Car) = 0 + Equity (held by new owner, new directors appointed)and now you inherited any liabilities that may arise from the going concern.
It all depends on how the deal was structured, from my readings, I understand that Union Carbide is still a separate entity with its own board of directors which controls all the its liabilities. Dow Chemicals only bought out the assets of Union Carbide.
Yes, you nailed the point, Samir!!
Peculiar indeed, then, that Dow absorbed Union Carbide’s asbestos liabilities (in the US) to the tune of $2.3 billion, liabilities that, when they came to light, took a huge lump out of Dow’s share value. Or is it possible to pick and choose your inherited liabilities when buying a corporation? “Hmmm, I’ll take the asbestosis – they’re good American folk – but I think I’ll leave the dead Indians and that sullen looking judge on the shelf.”
Samir and Rob, please clarify something for me: are you simply arguing that it’s possible for a very serious crime to evaporate because a new owner comes along, or do you feel it’s morally desirable. I’m curious.
Yes, and I hope Union Carbide’s CEO never does get extradited to India or Dow will have the fag of having to replace its President for India, the Middle East and Africa. If the Indian courts take Union Carbide’s Business Vice President instead, then Dow would only have to find a suitable candidate for its President of Dow Asia & Pacific position. Totally separate companies. Hic.
Problem being that just buying assets is hardly fraud and piercing the corporate veil a very difficult thing to do. If UC sold its Bhopal assets to a shell entity to avoid liability then that would be a case to pierce the veil. A third party coming along and buying assets would not. That being said, under US law it depends on the form of the acquisition.
Can’t speak for them but if Dow bought the assets liability would still attach to UC not Dow. In terms of criminal sanctions, the UC execs and employees responsible for the violation of any laws will still be responsible. Don’t think anyone is arguing for a serious crime to evaporate.
Please look over the link I put up(http://www.bhopal.net/opinions/archives/2008/03/veil_of_decepti.html). It gives examples of the type of fraud or wrong Dow has undertaken vis a vis Carbide that would, hypothetically, suffice under Delaware law.
I already pointed out that Dow assumed Carbide’s liabilities in the US. You unquestioningly accept the hypertechnical legal distinction between Carbide and Dow. It’s a chinese wall. The UC execs are also Dow execs – either way, Dow personnel effectively have to represent UC in court. If the court imposes sanctions – punitive and restitutionary fines, for example – Dow’s share price takes the hit, as Carbide’s finances, as a wholly owned subsidiary, fall within Dow’s accounts. Check out the SEC filings. Carbide is Dow is Carbide.
UC is a wholly owned sub of Dow, for all purposes their assets and liabilities are consolidated. At the time of the merger the entity’s records were combined using pooling of interests where by the assets and liabilities of both the entities were combined into assets and liabilities of the new merged entity.
Samir, The shareholders equity also contains Retained earnings which is the undistributed net income after provision for any potential losses which may or may not have included the legal provision for the UC case.
Also once again, UC is a fully owned Sub and by that count Dow is fully responsible for UC’s liabilities that were pooled at the time of purchase.
Details here.
Actually no. Point was that if there was an asset deal, no liability would attach.
Per Umber Desi, the deal was a true merger, so different ball game. Wouldn’t dismss though difference between sub and parent as “hypertechnical”.
Right, if it really was a merger, then it falls under Samir’s second example, where indeed Dow would be on the hook for whatever Union Carbide had been–thanks for the factual clarification, Umber Desi.
unless they took those assets subject to liabilities on the individual assets themselves. so while this is not an issue where e.g. there was a statutory merger or the existence of a parent and wholly owned sub, it is possible to have liabilities that are attached to the assets and not the corporation. in some instances, the parties may agree for the purchaser not to assume those liabilities attached to the assets, but that is a case by case basis and not a per se characteristic of an asset deal.
That’s interesting. Could you clarify: would this sort of specific arrangement need to be described to the SEC prior to the merger?
Thanks in advance.
Well my maternal uncle lived in Bhopal while the tragedy happened and very lucky to have escaped death and impairment. I have been there only once in early 1990s. I find the behaviour of UCIL reprehensible. I was not aware of the American asbestos liabilities, and if Dow took those over they could easily have made concessions for Bhopal.
My earlier post was to illustrate the logic that Dow Chemicals used. The same logic was used by James Hardie in Australia to escape its asbestos liabilities until public (union ACTU mainly) / political pressure made it compensate asbestos victims to the tune of 4.5 billion AUD over 40 years. No criminal charges arose in this case. If you look at the amount paid and the time frame it was paid over. Its not on the US scale, Indian courts also don’t award US style (pain and suffering and other damages)compensation payouts but more like UK style (strict financial loss) compensation payouts, and that places 470 million or 2,200 USD in perspective.
Legally – Yes.
Yes it does, I was just giving an example of a fictional corporation whose only asset was a Car. I did not apply depreciation or even state the asset cost.
Samir – didn’t mean to cast aspersions, but I was getting annoyed the people contributing to the debate appeared to be straining to advocate Dow’s (very thinly elaborated) position on its relationship with Carbide while seemingly bypassing contrary evidence. I should have pointed to the SEC filings sooner.
Again, does anyone know whether any such hypothetical liability ‘waiver’ would necessarily have to be a part of submissions made to the SEC and the EU equivalent? I ask because Dow didn’t include the word Bhopal, or any kind of veiled reference to it, anywhere in any of its submissions.
The Bhopal Act (1985) bound the GoI to seek much more than strict financial loss from Carbide, but then that was when the case was being filed in New York, prior to Judge Keenan’s forum non conveniens call. It’s the reason that, when the settlment was reviewed in 1991, the GoI was instructed to make up any shortfall in the long term vis a vis rehabilitation and other issues. In the criminal proceedings, on the other hand, the court has the capacity to impose punitive and restitutionary fines that have no upper limit. They’re related to the wealth of the guilty and the magnitude of the crime.
Incidentally, UCIL officials are still part of the ongoing criminal proceedings but their charges have been reduced to negligence only, and are no longer subject to a madatory sentence if found guilty. The rationale behind the reduced charges was, in part, that the weight of responsibility lay with the parent. As the parent hasn’t showed up to plead for a reduction in its own charges, the culpable homicide charge still stands against both UCC and Warren Anderson.
On a side note, I find it breathtakingly arrogant of Dow to make its President for India (& middle east & africa) the CEO of Carbide when it just happens to be a criminal fugitive in India.
A
The terms of the merger agreement would have been made public through SEC filings. Given the apparent nature of the deal, a traditional merger, it would be hard to see how there would have been any disclaimer of liability.
More on Dow Chemical’s crimes around the world at http://www.thetruthaboutdow.org
According to reports in the business press at the time, Dow settled asbestosis class-action suits that had been filed against Union Carbide in Texas. This was with a year of completing the acquisition.